UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2011
OR
[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from	to
Commission File Number: 001-11307-01

Freeport-McMoRan Copper & Gold Inc.

(Exact name of registrant as specified in its charter)

Delaware	74-2480931
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
333 North Central Avenue
Phoenix, Arizona	85004-2189
(Address of principal executive offices)	(Zip Code)
(602) 366-8100
(Registrant's telephone number, including area code)

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

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

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

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

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

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

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

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

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

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

The aggregate market value of common stock held by non-affiliates of the registrant was $39.9 billion on February 15, 2012, and $50.1 billion on June 30, 2011.

Common stock issued and outstanding was 948,358,926 shares on February 15, 2012, and 947,880,420 shares on June 30, 2011.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of our proxy statement for our 2012 annual meeting of stockholders are incorporated by reference into Part III (Items 10, 11, 12, 13 and 14) of this report.

FREEPORT-McMoRan COPPER & GOLD INC.

TABLE OF CONTENTS
	Page
Part I	1
Items 1. and 2. Business and Properties	1
Item 1A. Risk Factors	40
Item 1B. Unresolved Staff Comments	57
Item 3. Legal Proceedings	57
Item 4. Mine Safety Disclosures	59
Executive Officers of the Registrant	59
Part II	60
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities	60
Item 6. Selected Financial Data	62
Items 7. and 7A. Management’s Discussion and Analysis of Financial Condition and Results
of Operations and Quantitative and Qualitative Disclosures about Market Risk	66
Item 8. Financial Statements and Supplementary Data	115
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	178
Item 9A. Controls and Procedures	178
Item 9B. Other Information	178
Part III	178
Item 10. Directors, Executive Officers and Corporate Governance	178
Item 11. Executive Compensation	178
Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters	179
Item 13. Certain Relationships and Related Transactions, and Director Independence	179
Item 14. Principal Accounting Fees and Services	179
Part IV	180
Item 15. Exhibits, Financial Statement Schedules	180
Signatures	S-1
Index to Financial Statements	F-1
Exhibit Index	E-1

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PART I

Items 1. and 2. Business and Properties.

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

References to “we,” “us” and “our” refer to Freeport-McMoRan Copper & Gold Inc. (FCX) and its consolidated subsidiaries, including, except as otherwise stated, Phelps Dodge Corporation and its subsidiaries, which we acquired on March 19, 2007. In 2008, we changed Phelps Dodge Corporation’s legal name to Freeport-McMoRan Corporation (FMC). References to “Notes” refer to the Notes to Consolidated Financial Statements included herein (refer to Item 8), and references to “MD&A” refer to Management's Discussion and Analysis of Financial Condition and Results of Operations included herein (refer to Item 7).

GENERAL

We are a leading international mining company with headquarters in Phoenix, Arizona, and we were incorporated under the laws of the state of Delaware on November 10, 1987. We are one of the world’s largest copper, gold and molybdenum mining companies in terms of reserves and production. Our portfolio of assets includes the Grasberg minerals district in Indonesia, significant mining operations in North and South America, and the Tenke Fungurume minerals district in the Democratic Republic of Congo (DRC). The Grasberg minerals district contains the largest single recoverable copper reserve and the largest single gold reserve of any mine in the world based on the latest available reserve data provided by third-party industry consultants.

We have significant reserves, resources and future development opportunities within our portfolio of assets. At December 31, 2011, consolidated recoverable proven and probable reserves totaled 119.7 billion pounds of copper, 33.9 million ounces of gold, 3.42 billion pounds of molybdenum, 330.3 million ounces of silver and 0.86 billion pounds of cobalt. Approximately 34 percent of our copper reserves are in North America, 33 percent are in South America, 26 percent are in Indonesia and 7 percent are in Africa.  Approximately 95 percent of our gold reserves are in Indonesia, with our remaining gold reserves primarily in South America. Approximately 79 percent of our molybdenum reserves are in North America, with our remaining molybdenum reserves in South America. Refer to “Ore Reserves” for further discussion.

We currently operate seven copper mines in North America – Morenci, Bagdad, Safford, Sierrita and Miami in Arizona, and Tyrone and Chino in New Mexico. Certain of our North America copper mines (primarily Sierrita, Bagdad and Morenci) also produce molybdenum concentrates.

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

In Indonesia, PT Freeport Indonesia operates the mines in the Grasberg minerals district. In addition to copper, the Grasberg minerals district also produces significant quantities of gold and silver.

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

During 2011, 34 percent of our consolidated copper production was from North America, 35 percent from South America, 23 percent from Grasberg and 8 percent from Tenke. The Grasberg minerals district also accounted for 92 percent of our consolidated gold production for 2011. Refer to "Production Data" for further information.

We produce molybdenum at our Henderson molybdenum mine in Colorado. During 2011, 46 percent of our consolidated molybdenum production was from the Henderson molybdenum mine, 42 percent was produced at certain of our North America copper mines and 12 percent was produced at our Cerro Verde copper mine. Refer to "Production Data" for further information.

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The locations of our operating mines are shown on the map below. For information about our operating segments and financial data by geographic area refer to Note 17.

The diagram below shows our ownership interest in our operating mines at December 31, 2011.

(1) FCX's interest in TFM will be reduced to 56 percent after receiving the required government approval of the modifications to TFM's bylaws that reflect the agreement reached in December 2010 with the DRC government (refer to Note 14).

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COPPER, GOLD AND MOLYBDENUM

A brief discussion of our primary metals appears below. For further discussion of the markets and prices of these metals refer to MD&A.

Copper

Copper is an internationally traded commodity, and its prices are determined by the major metals exchanges – the London Metal Exchange (LME), New York Mercantile Exchange (COMEX) and Shanghai Futures Exchange (SHFE). Prices on these exchanges generally reflect the worldwide balance of copper supply and demand and can be volatile and cyclical. During 2011, LME spot copper prices ranged from $3.08 per pound to a record high of $4.60 per pound, averaged $4.00 per pound and closed at $3.43 per pound on December 30, 2011.

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

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

Gold

Gold is used for jewelry, coinage and bullion as well as various industrial and electronic applications. Gold can be readily sold on numerous markets throughout the world. Benchmark prices are generally based on London Bullion Market Association quotations. During 2011, London PM gold prices ranged from $1,319 per ounce to a record high of $1,895 per ounce, averaged $1,572 per ounce and closed at $1,575 per ounce on December 30, 2011.

Molybdenum

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

Construction steel	40	%
Stainless steel	20	%
Chemicals	14	%
Tool and high-speed steel	10	%
Cast iron	7	%
Molybdenum metal	5	%
Super alloys	4	%

Reference prices for molybdenum are available in several publications, including Metals Week, Ryan’s Notes and Metal Bulletin. During 2011, the weekly average price of molybdenum quoted by Metals Week ranged from $12.70 per pound to $17.88 per pound, averaged $15.49 per pound and was $13.35 per pound on December 30, 2011.

PRODUCTS AND SALES

FCX’s consolidated revenues for 2011 primarily included sales of copper (78 percent), gold (12 percent) and molybdenum (6 percent). PT Freeport Indonesia’s sales to PT Smelting (PT Freeport Indonesia's 25 percent owned copper smelter and refinery in Indonesia - refer to "Smelting Facilities" for further discussion) represented 11 percent of our consolidated revenues for 2011, 12 percent in 2010 and 13 percent in 2009. No other customer accounted for more than 10 percent of our consolidated revenues in any of the past three years.

Refer to Note 17 for a summary of our consolidated revenues and operating income by business segment and geographic area.

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Copper Products

We are one of the world’s leading producers of copper concentrate, cathode and continuous cast copper rod. During 2011, 51 percent of our mined copper was sold in concentrate, 26 percent as cathodes and 23 percent as rod (principally from our North America operations).

Our copper ores are generally processed either by smelting and refining or by solution extraction and electrowinning (SX/EW). Before being subject to the smelting and refining process, ore is crushed and treated to produce a copper concentrate with copper content of approximately 20 to 30 percent. Copper concentrate is then smelted (i.e., subjected to extreme heat) to produce copper anodes, which weigh between 800 and 900 pounds each and have an average copper content of 99.5 percent. The anodes are further treated by electrolytic refining to produce copper cathodes, which weigh between 100 and 350 pounds each and have an average copper content of 99.99 percent. Our copper cathodes are used as the raw material input for copper rod, brass mill products and for other uses. For ore subject to the SX/EW process, copper is extracted from the ore by dissolving it with a weak sulphuric acid solution. The copper content of the solution is increased in two additional solution-extraction stages and then the copper-bearing solution undergoes an electrowinning process to produce cathode that is 99.99 percent copper.

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

Copper Cathode.  We produce copper cathode at two electrolytic refineries (located in El Paso, Texas, and Huelva, Spain) and at 10 of our mines.  In North America, SX/EW cathode is produced from our Morenci, Bagdad, Safford, Sierrita, Miami, Tyrone and Chino mines; in South America from our Cerro Verde and El Abra mines; and from our Tenke mine in Africa. PT Smelting also produces copper cathode.

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

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

Copper Sales

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

South America.Production from our South America mines is sold as copper concentrate or copper cathode to third parties under U.S. dollar-denominated, annual and multi-year contracts. Our South America mines generally sell approximately 60 to 70 percent of their copper production in concentrate and the rest as cathode.  During 2011, 16 percent of our South America mines' copper concentrate was shipped to Atlantic Copper S.L. (Atlantic Copper - our wholly owned copper smelting and refining unit in Spain).

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

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

During 2011, 54 percent of PT Freeport Indonesia’s concentrate was sold to affiliated smelters, Atlantic Copper and PT Smelting.  A summary of PT Freeport Indonesia’s aggregate percentage concentrate sales to PT Smelting, Atlantic Copper and to third parties for the last three years follows:

	2011		2010		2009
PT Smelting	44	%	36	%	32	%
Atlantic Copper	10	%	21	%	18	%
Third parties	46	%	43	%	50	%
	100	%	100	%	100	%

Substantially all of PT Freeport Indonesia's concentrate sales contracts provide final copper pricing in a specified future month (generally one to four months from the shipment date) based primarily on quoted LME monthly average spot copper prices. Revenues from PT Freeport Indonesia's concentrate sales are recorded net of royalties and treatment and refining charges.  PT Freeport Indonesia's concentrate sales are also net of allowances for unrecoverable metals.

Africa.  TFM sells its production in the form of copper cathode under U.S. dollar-denominated contracts. Substantially all of TFM's cathode sales provide final copper pricing in the month after the shipment date based on quoted LME monthly average spot prices. Revenues from TFM's cathode sales are recorded net of royalties and also include adjustments for point-of-sale transportation costs that are negotiated in customer contracts.

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

Our copper mining operations provide Atlantic Copper with approximately 50 to 60 percent of its concentrate requirements at market prices. Following is a summary of Atlantic Copper's concentrate purchases from our copper mining operations and third parties for the last three years:

	2011			2010		2009
South America mining	30	%		25	%	35	%
Indonesia mining	17	%	a	28	%	25	%
Morenci mine	2	%		—	%	—	%
Third parties	51	%		47	%	40	%
	100	%		100	%	100	%

a. The decrease in 2011 primarily reflects the impact of labor disruptions and the temporary suspension of milling operations in fourth-quarter 2011 because of damage to PT Freeport Indonesia's concentrate and fuel pipelines (refer to MD&A for further discussion).

Gold Products and Sales

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

Molybdenum Products and Sales

We are the world’s largest producer of molybdenum and molybdenum-based chemicals. In addition to production from our Henderson molybdenum mine, we produce molybdenum concentrate at certain of our North America copper mines, and at our Cerro Verde copper mine in Peru.

The majority of our molybdenum concentrates are processed in our own conversion facilities. Technical-grade oxide is produced from molybdenum concentrates in Sierrita, Arizona; Fort Madison, Iowa; and Rotterdam, the Netherlands. Ferromolybdenum is produced from technical-grade oxide in Stowmarket, United Kingdom, through a metallothermic reduction process. High-quality molybdenum concentrates are converted into molybdenum

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chemicals at Fort Madison and Rotterdam. Molybdenum generally is priced based on the average Metals Week price for the month prior to the month of shipment.

Cobalt, Silver and Other Products and Sales

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

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

MINES

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

North America

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

Morenci

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

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

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

The Morenci operation consists of a 50,000 metric ton-per-day concentrator, that produces copper and molybdenum concentrates; a 68,000 metric ton-per-day crushed-ore leach pad and stacking system; a low-grade run-of-mine (ROM) leaching system; four SX plants; and three EW tank houses that produce copper cathode. Total EW tank house capacity is approximately 900 million pounds of copper per year. Morenci’s concentrate leach, direct-electrowinning facility was commissioned in third-quarter 2007 and processed copper concentrate until early 2009 when it was placed on care-and-maintenance status. The available mining fleet consists of 102 235-metric ton haul trucks loaded by 11 shovels with bucket sizes ranging from 42 to 55 cubic meters, which are capable of moving over 750,000 metric tons of material per day.

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After reducing rates at Morenci in late 2008 and early 2009 because of weak market conditions, during 2011, we completed the ramp up of Morenci's mining rates to 635,000 metric tons of ore per day and milling rates to approximately 50,000 metric tons of ore per day, resulting in increased copper production of approximately 125 million pounds of copper per year. We are also advancing a feasibility study to expand mining and milling capacity at Morenci to process additional sulfide ore identified through exploratory drilling (refer to “Development Projects and Exploration” for further discussion).

Morenci’s copper production, including our joint venture partner’s share, totaled 614 million pounds in 2011, 514 million pounds in 2010 and 504 million pounds in 2009. In 2011, Morenci also had molybdenum production, including our joint venture partner's share, totaling 2 million pounds.

Morenci is located in a desert environment with rainfall averaging 13 inches per year. The highest bench elevation is 2,000 meters above sea level and the ultimate pit bottom is expected to have an elevation of 840 meters above sea level. The Morenci operation encompasses approximately 56,732 acres, comprising 50,235 acres of patented mining claims and other fee lands, 6,002 acres of unpatented mining claims, and 495 acres of land held by state or federal permits, easements and rights-of-way.

The Morenci operation's electrical power is primarily sourced from Tucson Electric Power Company, Arizona Public Service Company and the Luna Energy facility in Deming, New Mexico (in which we own a one-third interest). Although we believe the Morenci operation has sufficient water sources to support current operations, we are a party to litigation that may impact our water rights claims or rights to continued use of currently available water supplies, which could adversely affect our water supply for the Morenci operation. Refer to Item 1A. "Risk Factors" and Item 3. “Legal Proceedings,” for further discussion.

Bagdad

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

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

The Bagdad operation consists of a 75,000 metric ton-per-day concentrator that produces copper and molybdenum concentrates, an SX/EW plant that can produce up to 25 million pounds per year of copper cathode from solution generated by low-grade stockpile leaching and a pressure leach plant to process molybdenum concentrates. The available mining fleet consists of 30 235-metric ton haul trucks loaded by five shovels with bucket sizes ranging from 40 to 56 cubic meters, which are capable of moving over 200,000 metric tons of material per day.

Bagdad’s production totaled 194 million pounds of copper and 10 million pounds of molybdenum in 2011, 203 million pounds of copper and 7 million pounds of molybdenum in 2010, and 225 million pounds of copper and 6 million pounds of molybdenum in 2009.

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

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

Safford

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

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

The property is a mine-for-leach project and produces copper cathodes. The operation consists of two open pits feeding a crushing facility with a capacity of 103,000 metric tons per day of crushed ore. The crushed ore is delivered to a single leach pad by a series of overland and portable conveyors. Leach solutions feed an SX/EW facility with a capacity of 240 million pounds of copper per year. The available mining fleet consists of 20 235-metric ton haul trucks loaded by four shovels with bucket sizes ranging from 31 to 34 cubic meters, which are capable of moving an average of approximately 225,000 metric tons of material per day.

During 2011, we completed construction of a sulphur burner at Safford, which is providing a more cost-effective source of sulphuric acid used in SX/EW operations and lower transportation costs.

Safford’s copper production totaled 151 million pounds in 2011, 143 million pounds in 2010 and 184 million pounds in 2009.

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

The Safford operation’s electrical power is primarily sourced from Tucson Electric Power Company, Arizona Public Service Company and the Luna Energy facility. Although we believe the Safford operation has sufficient water sources to support current operations, we are a party to litigation that may impact our water right claims or rights to continued use of currently available water supplies, which could adversely affect our water supply for the Safford operation. Refer to Item 1A. "Risk Factors" and Item 3. “Legal Proceedings,” for further discussion.

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Sierrita

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

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

The Sierrita operation includes a 102,000 metric ton-per-day concentrator that produces copper and molybdenum concentrates. Sierrita also produces copper from a ROM oxide-leaching system. Cathode copper is plated at the Twin Buttes EW facility, which has a design capacity of approximately 50 million pounds of copper per year. In 2004, a copper sulfate crystal plant began production, which has the capacity to produce 40 million pounds of copper sulfate per year. The Sierrita operation also has molybdenum facilities consisting of a leaching circuit, two molybdenum roasters and a packaging facility. The molybdenum facilities process molybdenum concentrate produced by Sierrita, from our other mines and from third-party sources. The available mining fleet consists of 25 235-metric ton haul trucks loaded by four shovels with bucket sizes ranging from 34 to 56 cubic meters, which are capable of moving an average of 200,000 metric tons of material per day.

Sierrita’s production totaled 177 million pounds of copper and 23 million pounds of molybdenum in 2011, 147 million pounds of copper and 18 million pounds of molybdenum in 2010, and 170 million pounds of copper and 19 million pounds of molybdenum in 2009.

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

Sierrita receives electrical power through long-term contracts with the Tucson Electric Power Company. Although we believe the Sierrita operation has sufficient water sources to support current operations, we are a party to litigation that may impact our water rights claims or rights to continued use of currently available water supplies, which could adversely affect our water supply for the Sierrita operation. Refer to Item 1A. "Risk Factors" and Item 3. “Legal Proceedings,” for further discussion.

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Miami

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

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

Since about 1915, the Miami mining operation had processed copper ore using both flotation and leaching technologies. Current operations include leaching with copper recovered (from solution) by the SX/EW process. The design capacity of the SX/EW plant is 200 million pounds of copper per year. The available mining fleet consists of 24 227-metric ton haul trucks loaded by 3 shovels with bucket sizes ranging from 31 to 34 cubic meters, which are capable of moving an average of approximately 155,000 metric tons of material per day.

Miami’s copper production totaled 66 million pounds in 2011, 18 million pounds in 2010 and 16 million pounds in 2009.

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

Miami receives electrical power through long-term contracts with the Salt River Project and natural gas through long-term contracts with El Paso Natural Gas as the transporter. Although we believe the Miami operation has sufficient water sources to support current operations, we are a party to litigation that may impact our water right claims or rights to continued use of currently available water supplies, which could adversely affect our water supply for the Miami operation. Refer to Item 1A. "Risk Factors" and Item 3. “Legal Proceedings,” for further discussion.

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Tyrone and Chino

Tyrone

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

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

Copper processing facilities consist of a SX/EW operation with a maximum capacity of 153 million pounds of copper cathodes per year. The available mining fleet consists of 20 240-metric ton haul trucks loaded by three shovels with bucket sizes ranging from 17 to 47 cubic meters, which are capable of moving an average of 136,000 metric tons of material per day.

Tyrone’s copper production totaled 76 million pounds in 2011, 82 million pounds in 2010 and 86 million pounds in 2009.

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

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

Chino

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

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

The Chino operation consists of a 39,000 metric ton-per-day concentrator that produces copper and molybdenum concentrates, and a 150 million pound-per-year SX/EW plant that produces copper cathode from solution generated by ROM leaching. The available mining fleet consists of 34 240-metric ton haul trucks loaded by four shovels with bucket sizes ranging from 42 to 48 cubic meters, which are capable of moving an average of 218,000 metric tons of material per day.

During 2011, we restarted mining and milling activities at the Chino mine, which were suspended in late 2008. Chino’s copper production totaled 69 million pounds in 2011 and is expected to increase to approximately 200 million pounds of copper per year by 2014. Chino's copper production totaled 34 million pounds in 2010 and 36 million pounds in 2009.

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Chino is located in a desert environment with rainfall averaging 16 inches per year. The highest bench elevation is 2,250 meters above sea level, and the ultimate pit bottom is expected to be 1,500 meters above sea level. The Chino operation encompasses approximately 118,623 acres comprising 113,221 acres of patented mining claims and other fee lands, and 5,402 acres of unpatented mining claims.

Chino receives power from the Luna Energy Facility and from the open market. We believe Chino has sufficient water resources to support current operations.

Henderson

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

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

The Henderson operation consists of a large block-cave underground mining complex feeding a concentrator with a current capacity of approximately 32,000 metric tons per day. Henderson has the capacity to produce approximately 40 million pounds of molybdenum per year. The majority of the molybdenum concentrate produced is shipped to our Fort Madison, Iowa, processing facility. The available underground mining equipment fleet consists of 13 nine-metric ton load-haul-dump (LHD) units and six 73-metric ton haul trucks, which deliver ore to a gyratory crusher feeding a series of three overland conveyors to the mill stockpiles.

Henderson’s molybdenum production totaled 38 million pounds in 2011, 40 million pounds in 2010 and 27 million pounds in 2009.

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

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

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

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Other North America Mines

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

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

Construction activities at the Climax molybdenum mine are substantially complete, and we expect to commence production during 2012. Production from the Climax molybdenum mine is expected to ramp up to a rate of 20 million pounds of molybdenum per year during 2013 and, depending on market conditions, may be increased to 30 million pounds of molybdenum per year. We intend to operate our Climax and Henderson molybdenum mines in a flexible manner to meet market requirements.

South America

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

Cerro Verde

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

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

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

Cerro Verde’s current operation consists of an open-pit copper mine, a 120,000 metric tons of ore per day concentrator and SX/EW leaching facilities. Leach copper production is derived from a 39,000 metric ton-per-day crushed leach facility and a ROM leach system. This leaching operation has a capacity of approximately 200 million pounds of copper per year. The available fleet consists of 32 230-metric ton haul trucks loaded by five shovels with bucket sizes ranging in size from 21 to 53 cubic meters, which are capable of moving an average of approximately 308,000 metric tons of material per day.

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Cerro Verde’s production totaled 647 million pounds of copper and 10 million pounds of molybdenum in 2011, 668 million pounds of copper and 7 million pounds of molybdenum in 2010, and 662 million pounds of copper and 2 million pounds of molybdenum in 2009.

Refer to “Development Projects and Exploration” for further discussion of the large-scale concentrator expansion project at Cerro Verde.

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

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

In 2011, Cerro Verde reached an agreement with the Regional Government of Arequipa, the National Government, Servicio de Agua Potable y Alcantarillado de Arequipa S.A. (SEDAPAR) and other local institutions to allow it to finance the engineering and construction of a wastewater treatment plant, should Cerro Verde proceed with plans for a large-scale concentrator expansion. Once Cerro Verde obtains a license for the treated water, it would be used to supplement its existing water supplies to support the potential concentrator expansion.

For further discussion of risks associated with the availability of water, see Item 1A. “Risk Factors.”

El Abra

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

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

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

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

The El Abra operation consists of an open-pit copper mine and an SX/EW facility with a capacity of 500 million pounds of copper cathode per year from a 115,000 metric ton-per-day crushed leach circuit and a similar-sized ROM leaching operation. The available fleet consists of 34 220-metric ton haul trucks loaded by four shovels with buckets ranging in size from 26 to 41 cubic meters, which are capable of moving an average of 223,000 metric tons of material per day.

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During 2011, we commenced production from El Abra’s newly commissioned stacking and leaching facilities to begin transitioning from production of oxide to sulfide ores. Production from the sulfide ore will approximate 300 million pounds of copper per year, replacing the depleting oxide copper production.

El Abra’s copper production totaled 274 million pounds in 2011, 320 million pounds in 2010 and 358 million pounds in 2009.

El Abra is located in a desert environment with rainfall averaging less than one inch per year and is in an active seismic zone. The highest bench elevation is 4,180 meters above sea level and the ultimate pit bottom is expected to be 3,410 meters above sea level. El Abra controls a total of 151,272 acres of mining claims covering the ore deposit, stockpiles, process plant, and water wellfield and pipeline. In addition, El Abra has acquired land surface rights for the road between the processing plant and the mine, the water wellfield, power transmission lines and for the water pipeline from the Salar de Ascotán.

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

Candelaria and Ojos del Salado

Candelaria

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

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

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

The Candelaria operation consists of an open-pit copper mine and a 6,000 metric ton-per-day underground copper mine, which is mined by sublevel stoping, feeding a 75,000 metric ton-per-day concentrator.  The available fleet consists of 46 225-metric ton haul trucks loaded by six shovels with bucket sizes ranging from 28 to 43 cubic meters, which are capable of moving 250,000 metric tons of material per day.

Candelaria’s production totaled 327 million pounds of copper and 85 thousand ounces of gold in 2011, 300 million pounds of copper and 76 thousand ounces of gold in 2010, and 296 million pounds of copper and 74 thousand ounces of gold in 2009.

Candelaria is located in a desert environment with rainfall averaging less than one inch per year and is in an active seismic zone. The highest bench elevation is 675 meters above sea level and the ultimate pit bottom is expected to

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be 32 meters below sea level. The Candelaria property encompasses approximately 13,390 acres, including approximately 125 acres for the port facility in Caldera. The remaining property consists of mineral rights owned by us in which the surface is not owned but controlled by us, which is consistent with Chilean law.

Candelaria receives electrical power through long-term contracts with Empresa Eléctrica Guacolda S.A., a local energy company. Candelaria’s water supply comes from well fields in the area of Tierra Amarilla and Copiapó that draw water from the Copiapó River aquifer. Because of rapid depletion of that aquifer in recent years, Candelaria is expanding its sources of water supply. During 2010, we completed construction of a pipeline to bring water from a nearby water treatment facility. We have also completed engineering and began construction for a desalination plant near the Pacific Ocean that will supply all of Candelaria’s longer term water needs. The plant is expected to be completed in early 2013. For further discussion of risks associated with the availability of water, see Item 1A. “Risk Factors.”

Ojos del Salado

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

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

The Ojos del Salado operation has a capacity of 3,800 metric tons per day of ore from the Santos underground mine and 4,000 metric tons of ore per day from the Alcaparrosa underground mine. The ore from both mines is mined by sublevel stoping since both the ore and enclosing rocks are competent. The broken ore is removed from the stopes using scoops and loaded into an available fleet of 26 28-metric ton trucks, which transport the ore to the surface. The ore from the Santos mine is hauled directly to the Ojos del Salado mill for processing, and the ore from the Alcaparrosa mine is reloaded into six 54-metric ton trucks and hauled seven miles to the Candelaria mill for processing. The Ojos del Salado concentrator has the capacity to produce over 30 million pounds of copper and 9,000 ounces of gold per year. Tailings from the Ojos del Salado mill are pumped to the Candelaria tailings facility for final deposition. The Candelaria facility has sufficient capacity for the remaining Ojos del Salado tailings.

Ojos del Salado’s production totaled 58 million pounds of copper and 16 thousand ounces of gold in 2011, 66 million pounds of copper and 17 thousand ounces of gold in 2010, and 74 million pounds of copper and 18 thousand ounces of gold in 2009.

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

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

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

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Indonesia

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

We have established certain unincorporated joint ventures with Rio Tinto plc (Rio Tinto). Under the joint venture arrangements, Rio Tinto has a 40 percent interest in PT Freeport Indonesia’s Contract of Work (COW) and the option to participate in 40 percent of any other future exploration projects in Papua, Indonesia. Refer to Note 2 for further discussion.

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

PT Freeport Indonesia’s original COW was entered into in 1967 and was replaced by a new COW in 1991. The initial term of the current COW expires in 2021, but can be extended for two 10-year periods subject to Indonesian government approval, which pursuant to the COW cannot be withheld or delayed unreasonably. The COW allows us to conduct exploration, mining and production activities in the 24,700-acre Block A area, which is where all of PT Freeport Indonesia’s proven and probable mineral reserves and current mining operations are located. Under the COW, PT Freeport Indonesia also conducts exploration activities in the Block B area. We expect the Block B area to be reduced to approximately 413,000 acres once the Department of Energy and Mineral Resources (DEMR) formally accepts PT Freeport Indonesia's relinquishment of approximately 89,000 acres. As further discussed in Note 14, PT Freeport Indonesia pays copper royalties under its COW, and has agreed to pay additional royalties to the Government of Indonesia that are not required under its COW. The additional royalties provide further support to the local governments and to the people of the Indonesian province of Papua. PT Freeport Indonesia’s share of the combined royalties totaled $137 million in 2011, $156 million in 2010 and $147 million in 2009.

PT Irja Eastern Minerals (Eastern Minerals), of which we own 100 percent, conducts exploration in Papua through a joint venture agreement under a separate COW. We expect Eastern Minerals' exploration area to be reduced to approximately 283,000 acres once the DEMR formally accepts Eastern Minerals' relinquishment of approximately

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164,000 acres.

Under a joint venture agreement through PT Nabire Bakti Mining (PTNBM), we conduct exploration activities under a separate COW in an area in three parcels contiguous to PT Freeport Indonesia’s Block B and one of Eastern Minerals’ blocks. We expect PTNBM's exploration area to be reduced to approximately 301,000 acres once the DEMR formally accepts PTNBM's relinquishment of approximately 192,000 acres.

In 2009, Indonesia enacted a new mining law, which will operate under a licensing system as opposed to the contract of work system that applies to PT Freeport Indonesia, Eastern Minerals and PTNBM. In 2011 and 2010, the Government of Indonesia promulgated regulations under the 2009 mining law and certain provisions that address existing contracts of work. The laws and regulations provide that contracts of work will continue to be honored until their expiration. However, the regulations attempt to apply certain provisions of the new law to existing contracts of work and may seek to apply the licensing system to any extension periods of contracts of work, even though our COW provides for two 10-year extension periods subject to Indonesian government approval, which pursuant to the COW cannot be withheld or delayed unreasonably. In February 2012, a new regulation was adopted that would require mining companies in Indonesia to process all minerals domestically and possibly ban export of concentrates and other unrefined minerals. PT Freeport Indonesia's existing COW includes specific provisions that define PT Freeport Indonesia's rights to export product and obligate it to develop domestic smelting facilities, if commercially feasible, or to contract with other domestic smelters on a market basis. In connection with the obligations under its COW, in 1995, PT Freeport Indonesia constructed the only copper smelter and refinery in Indonesia, which is owned and operated by PT Smelting.

In January 2012, the President of Indonesia issued a decree calling for the creation of a team to evaluate contracts of work for adjustment to the 2009 Mining Law, and accordingly, to take steps to assess and negotiate size of work areas, government revenues and domestic processing of minerals (refer to Item 1A. "Risk Factors" for further discussion). We intend to continue to work cooperatively with the Government of Indonesia to complete this review and to seek extension of the COW beyond 2021, as provided under the terms of the COW. The COW can only be modified by mutual agreement between PT Freeport Indonesia and the Government of Indonesia.

Grasberg Minerals District.  PT Freeport Indonesia operates in the remote highlands of the Sudirman Mountain Range in the province of Papua, Indonesia, which is on the western half of the island of New Guinea. We and our predecessors have been the only operator of exploration and mining activities in Block A since 1967. The Grasberg minerals district currently has three mines in operation: the Grasberg open pit, the Deep Ore Zone (DOZ) mine and the Big Gossan mine. We also have significant development projects in the Grasberg minerals district, which are discussed in more detail in “Development Projects and Exploration” and in MD&A.

PT Freeport Indonesia’s production, including our joint venture partner’s share, totaled 882 million pounds of copper and 1.4 million ounces of gold in 2011, 1.3 billion pounds of copper and 2.0 million ounces of gold in 2010 and 1.6 billion pounds of copper and 3.0 million ounces of gold in 2009.

Our principal source of power for all our Indonesian operations is a coal-fired power plant that we built in 1998. Diesel generators supply peaking and backup electrical power generating capacity. A combination of naturally occurring mountain streams and water derived from our underground operations provides water for our operations. Our Indonesian operations are in an active seismic zone and experience average annual rainfall of approximately 200 inches.

Grasberg Open Pit  

We began open-pit mining of the Grasberg ore body in 1990. Open-pit operations are expected to continue through mid-2016, at which time underground mining operations are scheduled to begin at our Grasberg Block Cave mine, which is currently in development.Production in the open-pit is currently at the 3,220- to 3,940- meter elevation level and totaled 42 million metric tons of ore in 2011, which provided approximately 70 percent of PT Freeport Indonesia's 2011 mill feed.

The current equipment fleet consists of over 500 units. The larger mining equipment directly associated with production includes an available fleet of 163 haul trucks with payloads ranging from approximately 215 metric tons to 330 metric tons and 18 shovels with bucket sizes ranging from 30 cubic meters to 42 cubic meters, which moved an average of 486,000 metric tons of material per day during 2011 and 701,000 metric tons per day in 2010. The decrease in 2011 primarily reflects the impact of labor disruptions and the temporary suspension of milling operations in fourth-quarter 2011 because of damage to the concentrate and fuel pipelines (refer to MD&A for

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further discussion).

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

DOZ mine

The DOZ ore body lies vertically below the now depleted Intermediate Ore Zone. We began production from the DOZ ore body in 1989 using open stope mining methods, but suspended production in 1991 in favor of production from the Grasberg deposit. Production resumed in September 2000 using the block-cave method. Production is at the 3,110-meter elevation level and totaled 19 million metric tons of ore in 2011. Production at the DOZ mine is expected to continue through 2019. Beginning in 2015, we plan to ramp up production at our Deep Mill Level Zone (DMLZ) block cave mine, which lies below the DOZ mine and is currently under development.

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

During 2011, we completed over 5,000 meters of development drifting in support of the block-cave mining method for the DOZ mine. The success of the development of the DOZ mine, one of the world’s largest underground mines, provides confidence in the future development of PT Freeport Indonesia’s large-scale undeveloped underground ore bodies.

Big Gossan mine

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

Production from the Big Gossan mine began in fourth-quarter 2010 and is designed to ramp up to 7,000 metric tons of ore per day by mid-2013, which will result in average annual aggregate incremental production of 125 million pounds of copper and 65,000 ounces of gold, with PT Freeport Indonesia receiving 60 percent of these amounts.

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

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

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

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

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Africa

TFM is organized under the laws of the DRC, and we currently own an effective 57.75 percent interest. The remaining ownership interests are held by Lundin Mining Corporation (Lundin) (currently an effective 24.75 percent interest) and La Générale des Carrières et des Mines (Gécamines), which is wholly owned by the Government of the DRC (currently a 17.5 percent non-dilutable interest).

TFM is entitled to mine in the DRC under an Amended and Restated Mining Convention (ARMC) with the Government of the DRC. The original Mining Convention was entered into in 1996 and was replaced with the ARMC in 2005. As further discussed in Note 14, in October 2010, the Government of the DRC concluded its review of TFM’s existing mining contracts and confirmed that they are in good standing. In connection with the review, TFM made several commitments that have been reflected in amendments to its mining contracts, which were signed by the parties in December 2010. In March 2011, the amendments were approved by a ministerial council, and a Presidential Decree, signed by the President and Prime Minister of the DRC, was issued in April 2011. After receiving the required government approval of the modifications to TFM's bylaws that reflect agreement with the Government of the DRC, our effective ownership interest in the project will be reduced to 56.0 percent, Lundin’s effective ownership interest will be reduced to 24.0 percent and Gécamines' ownership interest will increase to 20.0 percent (non-dilutable), prospectively.

TFM pays a royalty of 2 percent of net revenues under the ARMC, which totaled $24 million in 2011, $20 million in 2010 and $7 million in 2009.

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

Initial copper production commenced at the Tenke mine in late March 2009. Targeted copper production rates were achieved in September 2009 and the cobalt and sulphuric acid plants were commissioned in third-quarter 2009. Copper and cobalt are recovered through an agitation-leach plant. The milling facilities at the Tenke mine, which were designed to process ore at a rate of 8,000 metric tons of ore per day, have been performing above capacity, with mill throughput averaging 11,100 metric tons of ore per day in 2011. Mining rates have been increased to enable additional copper production from the initial project capacity of 250 million pounds of copper per year to ramp up to approximately 290 million pounds of copper per year. The current equipment fleet includes one 10-cubic meter mass excavator, two 12-cubic meter front-end loaders, eleven 7-cubic meter front-end loaders, six 91-metric ton haul trucks, 28 45-metric ton haul trucks, surface miners, production drills, sampling machines and crawler dozers.

Production from the Tenke mine totaled 281 million pounds of copper and 25 million pounds of cobalt in 2011, 265 million pounds of copper and 20 million pounds of cobalt in 2010 and 154 million pounds of copper in 2009.

We are undertaking a second phase of the project, which would include optimizing the current plant and increasing capacity (refer to “Development Projects and Exploration” for further discussion of the Tenke mill expansion project). We continue to engage in drilling activities, exploration analyses and metallurgical testing to evaluate the potential of the highly prospective Tenke Fungurume minerals district. These analyses are being incorporated into future

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plans to evaluate opportunities for expansion. Future expansions are subject to a number of factors, including economic and market conditions and the business and investment climate in the DRC.

The Tenke Fungurume minerals district is located in a tropical region; however, temperatures are moderated by its higher altitudes. Weather in this region is characterized by a dry season and a wet season, each lasting about six months with average rainfall of 47 inches per year. The highest bench elevation is expected to be 1,518 meters above sea level and the ultimate pit bottom is expected to be 1,110 meters above sea level. The Tenke Fungurume deposits are covered by six exploitation permits totaling 394,455 acres.

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

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

PRODUCTION DATA

	Years Ended December 31,
COPPER (millions of recoverable pounds)	2011		2010	2009	2008		2007a
(FCX’s net interest in %)
North America
Morenci (85%)b	522		437	428	626		687
Bagdad (100%)	194		203	225	227		202
Safford (100%)	151		143	184	133		1
Sierrita (100%)	177		147	170	188		150
Miami (100%)	66		18	16	19		20
Tyrone (100%)	76		82	86	76		50
Chino (100%)	69		34	36	155		190
Other (100%)	3		3	2	6		20
Total North America	1,258		1,067	1,147	1,430		1,320	c
South America
Cerro Verde (53.56%)	647		668	662	694		594
El Abra (51%)	274		320	358	366		366
Candelaria/Ojos del Salado (80%)	385		366	370	446		453
Total South America	1,306		1,354	1,390	1,506		1,413	c
Indonesia
Grasberg (90.64%)d	846		1,222	1,412	1,094		1,151
Africa
Tenke Fungurume (57.75%)	281		265	154	—		—
Consolidated	3,691		3,908	4,103	4,030		3,884
Less noncontrolling interests	710		766	754	693		653
Net	2,981		3,142	3,349	3,337		3,231
GOLD (thousands of recoverable ounces)
(FCX’s net interest in %)
North America (100%)b	10		7	4	14		15
South America (80%)	101		93	92	114		116
Indonesia (90.64%)d	1,272		1,786	2,568	1,163		2,198
Consolidated	1,383		1,886	2,664	1,291		2,329	c
Less noncontrolling interests	139		186	258	132		229
Net	1,244		1,700	2,406	1,159		2,100
MOLYBDENUM(millions of recoverable pounds)
(FCX’s net interest in %)
Henderson (100%)	38		40	27	40		39
North America copper mines (100%)	35	b	25	25	30	b	30	b
Cerro Verde (53.56%)	10		7	2	3		1
Consolidated	83		72	54	73		70	c
Less noncontrolling interest	5		3	1	1		—
Net	78		69	53	72		70

a. For comparative purposes, operating data for the year ended December 31, 2007, combines our historical data with FMC's pre-acquisition data. As the pre-acquisition data represents the results of operations under FMC management, such combined data is not necessarily indicative of what past results would have been under FCX management or of future operating results.

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

c. Includes FMC's pre-acquisition results of 258 million pounds of copper in North America, 259 million pounds of copper in South America, 21 thousand ounces of gold and 14 million pounds of molybdenum.

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

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SALES DATA

	Years Ended December 31,
COPPER (millions of recoverable pounds)	2011		2010		2009		2008		2007a
(FCX’s net interest in %)
North America
Morenci (85%)b	521		434		459		646		693
Bagdad (100%)	201		206		225		226		200
Safford (100%)	147		155		176		107		—
Sierrita (100%)	175		152		172		184		157
Miami (100%)	59		17		16		20		24
Tyrone (100%)	79		83		85		71		53
Chino (100%)	62		35		52		174		186
Other (100%)	3		3		2		6		19
Total North America	1,247		1,085		1,187		1,434		1,332		c
South America
Cerro Verde (53.56%)	657		654		667		701		587
El Abra (51%)	276		315		361		365		365
Candelaria/Ojos del Salado (80%)	389		366		366		455		447
Total South America	1,322		1,335		1,394		1,521		1,399		c
Indonesia
Grasberg (90.64%)d	846		1,214		1,400		1,111		1,131
Africa
Tenke Fungurume (57.75%)	283		262		130		—		—
Consolidated sales from mines	3,698		3,896		4,111		4,066		3,862
Less noncontrolling interests	717		756		746		699		647
Net	2,981		3,140		3,365		3,367		3,215
Consolidated sales from mines	3,698		3,896		4,111		4,066		3,862
Purchased copper	223		182		166		483		650
Total copper sales, including purchases	3,921		4,078		4,277		4,549		4,512
Average realized price per pound	$	3.86	$	3.59	$	2.60	$	2.69	$	3.22	e
GOLD(thousands of recoverable ounces)
(FCX’s net interest in %)
North America (100%)b	7		5		6		16		21
South America (80%)	101		93		90		116		114
Indonesia (90.64%)d	1,270		1,765		2,543		1,182		2,185
Consolidated sales from mines	1,378		1,863		2,639		1,314		2,320		c
Less noncontrolling interests	139		184		256		134		228
Net	1,239		1,679		2,383		1,180		2,092
Consolidated sales from mines	1,378		1,863		2,639		1,314		2,320
Purchased gold	1		1		1		2		6
Total gold sales, including purchases	1,379		1,864		2,640		1,316		2,326
Average realized price per ounce	$	1,583	$	1,271	$	993	$	861	$	682
MOLYBDENUM(millions of recoverable pounds)
Consolidated sales from mines	79		67		58		71		69		c
Less noncontrolling interests	4		3		1		1		—
Net	75		64		57		70		69
Consolidated sales from mines	79		67		58		71		69
Purchased molybdenum	—		2		6		8		9
Total molybdenum sales, including purchases	79		69		64		79		78
Average realized price per pound	$	16.98	$	16.47	$	12.36	$	30.55	$	25.87

a. For comparative purposes, operating data for the year ended December 31, 2007, combines our historical data with FMC's pre-acquisition data. As the pre-acquisition data represents the results of operations under FMC management, such combined data is not necessarily indicative of what past results would have been under FCX management or of future operating results.

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

c. Includes FMC pre-acquisition results of 283 million pounds of copper in North America, 222 million pounds of copper in South America, 18 thousand ounces of gold and 17 million pounds of molybdenum.

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

e. Before charges for hedging losses related to copper price protection programs, amount was $3.27 per pound.

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DEVELOPMENT PROJECTS AND EXPLORATION

We have increased production at several of our copper mines and have several projects and potential opportunities to expand production volumes, extend mine lives and develop large-scale underground ore bodies. Our near-term major development projects, which will require substantial additional capital investment, are presented below (refer to MD&A for further discussion of these projects, our other development projects and exploration activities).

Morenci. We are advancing a feasibility study at Morenci to process additional sulfide ore identified through exploratory drilling. This project would increase milling rates from the current level of 50,000 metric tons of ore per day to 115,000 metric tons of ore per day and targets incremental annual copper production of approximately 225 million pounds within a three-year timeframe. Completion of the feasibility study is expected in the first half of 2012.

Twin Buttes. In December 2009, we purchased the Twin Buttes copper mine, which ceased operations in 1994 and is adjacent to our Sierrita mine. The purchase provides significant synergies in the Sierrita minerals district, including the potential for expanded mining activities and access to material that can be used for Sierrita tailings and stockpile reclamation purposes. We are conducting drilling on the property and metallurgical studies to support a feasibility study expected to commence in 2012.

Cerro Verde. Plans for a large-scale concentrator at Cerro Verde continue to be advanced. The project will expand the concentrator facilities from the current level of 120,000 metric tons per day to 360,000 metric tons of ore per day, targeting incremental annual production of approximately 600 million pounds of copper and 15 million pounds of molybdenum beginning in 2016. An environmental impact assessment was filed in fourth-quarter 2011.

El Abra. We are engaged in pre-feasibility studies for a potential large-scale milling operation at El Abra to process additional sulfide material and to achieve higher recoveries. Exploration results at El Abra indicate the potential for a significant additional sulfide resource.

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

Tenke. We are undertaking a second phase of the project in the Tenke minerals district, which includes optimizing the current plant and increasing capacity. As part of the second phase, we plan to expand the mill rate to 14,000 metric tons of ore per day and to construct related processing facilities that would target the addition of approximately 150 million pounds of copper per year. The project, which includes mill upgrades, additional mining equipment and a new tankhouse and sulphuric acid plant expansion, is targeted for completion in 2013.

In addition to the near-term development projects in progress in the Grasberg minerals district, we also have an additional long-term underground mine development project in the Grasberg minerals district for the Kucing Liar ore body, which lies on the southern flank of and underneath the southern portion of the Grasberg open pit at the 2,605-meter elevation level. We expect to mine the Kucing Liar ore body using the block-cave method; aggregate capital cost estimates for development of the Kucing Liar ore body are projected to approximate $2 billion (which are expected to be made between 2019 and 2031). Additionally, our current mine development plans include approximately $3 billion of capital expenditures at our processing facilities to optimize the handling of underground ore types once the Grasberg open-pit operations cease (we expect substantially all of these expenditures to be made between 2016 and 2030).

Considering the long-term nature and large size of our development projects, actual costs and timing could differ materially from our estimates. We continue to review our mine development and processing plans to maximize the value of our reserves.

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SMELTING FACILITIES

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

The design capacity of the smelter is 290,000 metric tons of copper per year and the refinery currently has a capacity of 285,000 metric tons of copper per year. During 2011, Atlantic Copper treated 935,700 metric tons of concentrate and scrap and produced 253,000 metric tons of copper anodes and 247,400 metric tons of copper cathodes. During 2010, Atlantic Copper treated 980,700 metric tons of concentrate and scrap and produced 255,000 metric tons of copper anodes and 253,000 metric tons of copper cathodes.

In May 2011, Atlantic Copper successfully completed a scheduled 26-day maintenance turnaround.  Major maintenance turnarounds typically are expected to occur approximately every eight years for Atlantic Copper, with short-term maintenance turnarounds in the interim. The next long-term maintenance turnaround is scheduled for 2013.

During 2011, we made capital contributions of $202 million to Atlantic Copper; no capital contributions were made for the years 2005 through 2010. We loan funds to Atlantic Copper from time to time, and at December 31, 2011, these loans totaled $586 million.

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

PT Freeport Indonesia’s contract with PT Smelting provides for the supply of 100 percent of the copper concentrate requirements (subject to a minimum or maximum rate) necessary for PT Smelting to produce 205,000 metric tons of copper annually on a priority basis.  PT Freeport Indonesia also sells copper concentrate to PT Smelting (at market rates) for quantities in excess of 205,000 metric tons of copper annually.  Refer to Note 2 for further discussion of our investment in PT Smelting.

During 2011, PT Smelting treated 1,087,300 metric tons of concentrate and produced 276,200 metric tons of copper anodes and 274,900 metric tons of copper cathodes. During 2010, PT Smelting treated 1,034,800 metric tons of concentrate and produced 262,700 metric tons of copper anodes and 277,500 metric tons of copper cathodes.

In 2008, PT Smelting completed a scheduled 25-day maintenance turnaround. Major maintenance turnarounds typically are expected to occur approximately every four years for PT Smelting, with significantly shorter term maintenance turnarounds in the interim. The next major maintenance turnaround is scheduled for May 2012.

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

The Miami smelter processes copper concentrate primarily from our Arizona copper mines. Concentrate processed through the smelter totaled approximately 625,000 metric tons in each of 2011 and 2010. In addition, because sulphuric acid is a by-product of smelting concentrates, the Miami smelter is also the most significant source of sulphuric acid for our North America leaching operations.

Major maintenance turnarounds typically occur approximately every 14 months for the Miami smelter, with shorter term maintenance turnarounds in the interim.

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OTHER PROPERTIES AND INVESTMENTS

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

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

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

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

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

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

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

McMoRan Exploration Co. (MMR). In December 2010, we purchased 500,000 shares of MMR’s 5¾% Convertible Perpetual Preferred Stock for an aggregate purchase price of $500 million (refer to Note 6 for further discussion).  In connection with the purchase, we entered into a registration rights agreement and a stockholder agreement with MMR.

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

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

SOURCES AND AVAILABILITY OF RAW MATERIALS

Our copper mining operations require significant energy, principally diesel, electricity, coal and natural gas, most of which is obtained from third parties under long-term contracts. Energy represented approximately 21 percent of our 2011 consolidated copper production costs and included purchases of approximately 225 million gallons of diesel fuel; 6,475 gigawatt hours of electricity at our North America, South America and Africa copper mining operations (we generate all of our power at our Indonesia mining operation); 650 thousand metric tons of coal for our coal power plant in Indonesia; and 1 million MMBTU (million British thermal units) of natural gas at certain of our North America mines. For 2012, we estimate energy costs will approximate 23 percent of our consolidated copper production costs.

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Sulphuric acid is used in the SX/EW process and is produced as a by-product of the smelting process at our smelters and from our sulphur burners at the Safford and Tenke mines. Sulphuric acid needs in excess of the sulphuric acid produced by our operations are purchased from third parties as required.

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

COMPETITION

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

LABOR MATTERS

At December 31, 2011, we employed approximately 31,800 people (approximately 12,300 in Indonesia, 11,000 in North America, 4,800 in South America, 2,800 in Africa and 900 in Europe and other locations). Additionally, we have contractors that have personnel at many of our operations, including approximately 10,500 at our Grasbergminerals district, 11,500 at our South America mining operations, 3,900 at our Tenke Fungurume minerals district, 1,500 in North America and 400 at Atlantic Copper.

Employees represented by unions are listed below, with the approximate number of employees represented and the expiration date of the applicable union agreements. Refer to Item 1A. "Risk Factors" for further information on labor agreements.

Location	Number of Unions	Number of Union- Represented Employees	Expiration Date
PT Freeport Indonesia – Indonesia	1	8,712	September 2013
Tenke Fungurume – DRC	6	2,750	August 2013
Cerro Verde – Peru	1	1,407	August 2014
El Abra – Chile	2	925	December 2015
Candelaria – Chile	2	805	July 2013
Atlantic Copper – Spain	2	427	December 2011a
Chino – New Mexico	1	286	November 2014
Rotterdam – The Netherlands	2	48	March 2013
Bayway – New Jersey	1	43	April 2013
Aurex – Chile	1	39	December 2013
Stowmarket – United Kingdom	1	31	May 2014

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

ENVIRONMENTAL AND RECLAMATION MATTERS

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

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COMMUNITY AND HUMAN RIGHTS

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

• comprehensive job training programs

• basic education programs

• public health programs, including malaria control and HIV testing                                                                                             

• agricultural assistance programs

• small and medium enterprise development programs

• cultural preservation programs

• water and sewage treatment projects

• clean water access

• charitable donations

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

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

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

Additionally, during 2006, the Peruvian government announced that all mining companies operating in Peru would be required to make annual contributions to local development funds for a five-year period (covering the years 2006 through 2010) when copper prices exceeded certain levels that were adjusted annually. The contribution, which expired in 2010, was equal to 3.75 percent of after-tax profits and totaled $41 million in 2010 and $28 million in 2009. Refer to Note 14 for further discussion.

Indonesia. In 1996, PT Freeport Indonesia established the Freeport Partnership Fund for Community Development (the Partnership Fund), through which PT Freeport Indonesia has made available funding and technical assistance to support community development initiatives in the areas of health, education and economic development of the area. PT Freeport Indonesia has committed through 2016 to provide one percent of its annual revenue for the development of the local people in its area of operation through the Partnership Fund. Our share of contributions to the Partnership Fund totaled $50 million in 2011, $64 million in 2010 and $59 million in 2009.

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

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

PT Freeport Indonesia’s share of costs for its internal civilian security department totaled $37 million for 2011, $28

29

million for 2010 and $18 million for 2009.

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

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

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

PT Freeport Indonesia’s share of support costs for the government-provided security was $14 million for each of the years 2011 and 2010, and $10 million for 2009. This supplemental support consists of various infrastructure and other costs, such as food, housing, fuel, travel, vehicle repairs, allowances to cover incidental and administrative costs, and community assistance programs conducted by the military and police.

Refer to Item 1A. "Risk Factors" for further discussion of security risks in Indonesia.

Africa. TFM has committed to assist the communities living within its concession in the Katanga province of the DRC. Initiatives include an integrated malaria control program, construction and operational support for six elementary schools, as well as renovation and construction of an additional four schools, installation of over 70 clean water wells, a public sanitation (latrines and hand washing) program reaching over 2,000 households, a mobile clinic for rural villages, and economic development programs supporting micro-credit and development of local entrepreneurs, contractors, and farmers. We have also made significant investments in infrastructure in the region that will have lasting benefits to the country, including upgrading a portion of a national road and the regional power generation and transmission systems.

TFM has also committed to contribute 0.3 percent of net sales revenue from production to a community development fund to assist the local communities with development of local infrastructure and related services. This fund will be a platform to work jointly with the local government and community to further assist them to fulfill their local development plans, meet basic community needs and promote good governance. Community development fund contributions totaled $4 million in 2011, $3 million in 2010 and $1 million in 2009.

Security Matters. TFM maintains an unarmed internal security department. The national government also has assigned Mines Police to the TFM concession area. The Mines Police are a division of the Congolese National Police and are responsible for maintaining security in mining concessions throughout the DRC. TFM provides food, housing, monetary allowances and logistical support as well as direct payments to the government for the provision of the security assigned to the concession area. The total cost to TFM for this support, including in-kind support, totaled less than $1 million in each of the years 2011, 2010 and 2009.

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

30

ORE RESERVES

Recoverable proven and probable reserves summarized below and detailed on the following pages have been calculated as of December 31, 2011, in accordance with Industry Guide 7 as required by the Securities Exchange Act of 1934. Proven and probable reserves may not be comparable to similar information regarding mineral reserves disclosed in accordance with the guidance of other countries. Proven and probable reserves were determined by the use of mapping, drilling, sampling, assaying and evaluation methods generally applied in the mining industry, as more fully discussed below. The term “reserve,” as used in the reserve data presented here, means that part of a mineral deposit that can be economically and legally extracted or produced at the time of the reserve determination. The term “proven reserves” means reserves for which (1) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; (2) grade and/or quality are computed from the results of detailed sampling; and (3) the sites for inspection, sampling and measurements are spaced so closely and the geologic character is sufficiently defined that size, shape, depth and mineral content of reserves are well established. The term “probable reserves” means reserves for which quantity and grade are computed from information similar to that used for proven reserves but the sites for sampling are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity between points of observation.

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

Estimated recoverable proven and probable reserves at December 31, 2011, were determined using long-term average prices of $2.00 per pound for copper, $750 per ounce for gold, $10 per pound for molybdenum, $15 per ounce for silver and $10 per pound for cobalt. For the three-year period ended December 31, 2011, LME spot copper prices averaged $3.25 per pound, London PM gold prices averaged $1,245 per ounce, and the weekly average price of molybdenum quoted by Metals Week averaged $14.06 per pound. The recoverable proven and probable reserves presented in the table below represent the estimated metal quantities from which we expect to be paid after application of estimated metallurgical recovery rates and smelter recovery rates, where applicable. Recoverable reserves are the part of a mineral deposit that we estimate can be economically and legally extracted or produced at the time of the reserve determination.

	Recoverable Proven and Probable Reserves at December 31, 2011
	Coppera (billion pounds)	Gold (million ounces)	Molybdenum (billion pounds)	Silver (million ounces)	Cobalt (billion pounds)
North America	40.6	0.4	2.71	98.2	—
South America	39.1	1.3	0.71	113.4	—
Indonesia	31.6	32.2	—	118.7	—
Africa	8.4	—	—	—	0.86
Consolidated basisb	119.7	33.9	3.42	330.3	0.86
Net equity interestc	96.1	30.6	3.09	272.1	0.49

a. Recoverable copper reserves include 3.1 billion pounds in leach stockpiles and 1.3 billion pounds in mill stockpiles (refer to “Mill and Leach Stockpiles” for further discussion).

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

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

31

Recoverable Proven and Probable Reserves
Estimated at December 31, 2011
		Proven Reserves								Probable Reserves
			Average Ore Grade								Average Ore Grade
	Processing	Million	Copper	Gold		Moly	Silver	Cobalt		Million	Copper	Gold		Moly	Silver	Cobalt
	Method	metric tons	%	g/t		%	g/t	%		metric tons	%	g/t		%	g/t	%
North America
Morenci	Mill	443	0.48	—		0.025	—	—		5	0.48	—		0.022	—	—
	Crushed leach	594	0.58	—		—	—	—		9	0.45	—		—	—	—
	ROM leach	3,103	0.18	—		—	—	—		96	0.15	—		—	—	—
Bagdad	Mill	1,038	0.35	—	a	0.021	1.75	—		229	0.32	—	a	0.017	1.70	—
	ROM leach	218	0.12	—		—	—	—		144	0.11	—		—	—	—
Safford	Crushed leach	129	0.44	—		—	—	—		77	0.42	—		—	—	—
Sierrita	Mill	2,420	0.24	—	a	0.026	1.42	—		346	0.21	—	a	0.020	1.25	—
	ROM leach	7	0.20	—		—	—	—		4	0.22	—		—	—	—
Miami	ROM leach	50	0.49	—		—	—	—		10	0.38	—		—	—	—
Tyrone	ROM leach	141	0.30	—		—	—	—		7	0.19	—		—	—	—
Chino	Mill	110	0.59	0.04		0.011	0.48	—		69	0.55	0.03		0.006	0.44	—
	ROM leach	186	0.33	—		—	—	—		56	0.25	—		—	—	—
Henderson	Mill	118	—	—		0.174	—	—		3	—	—		0.171	—	—
Climax	Mill	75	—	—		0.189	—	—		112	—	—		0.137	—	—
Cobreb	ROM leach	71	0.40	—		—	—	—		2	0.23	—		—	—	—
		8,703	0.27	—	a	0.015	0.61	—		1,169	0.23	—	a	0.023	0.73	—
South America
Cerro Verde	Mill	888	0.41	—		0.016	1.75	—		2,864	0.39	—		0.015	1.64	—
	Crushed leach	91	0.52	—		—	—	—		55	0.45	—		—	—	—
	ROM leach	37	0.21	—		—	—	—		42	0.21	—		—	—	—
El Abra	Crushed leach	386	0.52	—		—	—	—		131	0.49	—		—	—	—
	ROM leach	218	0.32	—		—	—	—		146	0.27	—		—	—	—
Candelaria	Mill	317	0.57	0.13		—	2.05	—		22	0.64	0.16		—	2.25	—
Ojos del Salado	Mill	3	1.17	0.28		—	4.44	—		3	0.81	0.22		—	3.50	—
		1,940	0.45	0.02		0.007	1.14	—		3,263	0.39	—	a	0.013	1.46	—
Indonesia
Grasberg open pit	Mill	204	0.91	1.05		—	2.35	—		108	0.74	0.64		—	1.87	—
Deep Ore Zone	Mill	62	0.58	0.68		—	2.50	—		144	0.56	0.69		—	2.33	—
Big Gossan	Mill	14	2.34	1.14		—	15.41	—		42	2.12	0.91		—	12.80	—
Grasberg Block Caveb	Mill	335	1.21	1.04		—	3.46	—		684	0.88	0.64		—	3.29	—
Kucing Liarb	Mill	149	1.31	1.15		—	8.00	—		271	1.18	1.06		—	6.47	—
Deep Mill Level Zoneb	Mill	65	0.95	0.76		—	4.70	—		445	0.83	0.71		—	4.11	—
		829	1.10	1.01		—	4.22	—		1,694	0.91	0.73		—	4.08	—
Africa
Tenke Fungurume	Agitation leach	54	3.26	—		—	—	0.36		87	2.84	—		—	—	0.30
Total FCX - 100% Basis		11,526	0.38	0.08		0.013	0.96	—	a	6,213	0.53	0.20		0.011	2.01	—	a

a. Grade not shown because of rounding.

b. Undeveloped reserves that would require significant capital investment to bring into production.

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

• g/t – grams per metric ton

• Moly – Molybdenum

• ROM – Run of Mine

32

Recoverable Proven and Probable Reserves
Estimated at December 31, 2011
(continued)
			Average Ore Grade						Recoveriesa
		Proven and
		Probable
	Processing	Million	Copper	Gold		Moly	Silver	Cobalt	Copper	Gold	Moly	Silver	Cobalt
	Method	metric tons	%	g/t		%	g/t	%	%	%	%	%	%
North America
Morenci	Mill	448	0.48	—		0.025	—	—	79.1	—	38.9	—	—
	Crushed leach	603	0.58	—		—	—	—	77.8	—	—	—	—
	ROM leach	3,199	0.18	—		—	—	—	43.3	—	—	—	—
Bagdad	Mill	1,267	0.35	—	b	0.020	1.74	—	85.6	59.1	70.7	49.3	—
	ROM leach	362	0.12	—		—	—	—	25.4	—	—	—	—
Safford	Crushed leach	206	0.43	—		—	—	—	67.2	—	—	—	—
Sierrita	Mill	2,766	0.23	—	b	0.025	1.39	—	83.0	60.6	80.7	49.3	—
	ROM leach	11	0.21	—		—	—	—	52.7	—	—	—	—
Miami	ROM leach	60	0.47	—		—	—	—	60.5	—	—	—	—
Tyrone	ROM leach	148	0.29	—		—	—	—	61.1	—	—	—	—
Chino	Mill	179	0.57	0.04		0.009	0.47	—	78.7	78.0	41.8	78.5	—
	ROM leach	242	0.31	—		—	—	—	43.1	—	—	—	—
Henderson	Mill	121	—	—		0.174	—	—	—	—	85.4	—	—
Climax	Mill	187	—	—		0.158	—	—	—	—	88.8	—	—
Cobrec	ROM leach	73	0.39	—		—	—	—	50.7	—	—	—	—
		9,872
South America
Cerro Verde	Mill	3,752	0.39	—		0.015	1.67	—	86.0	—	54.4	44.9	—
	Crushed leach	146	0.50	—		—	—	—	79.8	—	—	—	—
	ROM leach	79	0.21	—		—	—	—	41.0	—	—	—	—
El Abra	Crushed leach	517	0.51	—		—	—	—	58.3	—	—	—	—
	ROM leach	364	0.30	—		—	—	—	24.0	—	—	—	—
Candelaria	Mill	339	0.58	0.13		—	2.06	—	89.2	71.9	—	76.3	—
Ojos del Salado	Mill	6	1.00	0.25		—	3.99	—	90.4	60.6	—	65.8	—
		5,203
Indonesia
Grasberg open pit	Mill	312	0.85	0.91		—	2.19	—	83.4	80.2	—	43.1	—
Deep Ore Zone	Mill	206	0.57	0.69		—	2.38	—	86.5	77.3	—	64.2	—
Big Gossan	Mill	56	2.18	0.97		—	13.44	—	91.6	65.0	—	63.8	—
Grasberg Block Cavec	Mill	1,019	0.98	0.77		—	3.34	—	84.3	64.9	—	57.9	—
Kucing Liarc	Mill	420	1.23	1.09		—	7.01	—	85.6	46.1	—	38.5	—
Deep Mill Level Zonec	Mill	510	0.85	0.72		—	4.19	—	87.0	79.3	—	64.7	—
		2,523
Africa
Tenke Fungurume	Agitation leach	141	3.00	—		—	—	0.32	86.3	—	—	—	75.2
Total FCX - 100% Basis		17,739

a. Recoveries are net of estimated mill and smelter losses.

b. Grade not shown because of rounding.

c. Undeveloped reserves that would require significant capital investment to bring into production.

33

Recoverable Proven and Probable Reserves
Estimated at December 31, 2011
(continued)
			Recoverable Reserves
			Copper		Gold	Moly		Silver	Cobalt
	FCX’s	Processing	billion		million	billion		million	billion
	Interest	Method	lbs.		ozs.	lbs.		ozs.	lbs.
North America
Morenci	85%	Mill	3.7		—	0.09		—	—
		Crushed leach	6.0		—	—		—	—
		ROM leach	5.4		—	—		—	—
Bagdad	100%	Mill	8.3		0.1	0.40		35.0	—
		ROM leach	0.3		—	—		—	—
Safford	100%	Crushed leach	1.3		—	—		—	—
Sierrita	100%	Mill	11.8		0.1	1.24		61.1	—
		ROM leach	—	a	—	—		—	—
Miami	100%	ROM leach	0.4		—	—		—	—
Tyrone	100%	ROM leach	0.6		—	—		—	—
Chino	100%	Mill	1.8		0.2	0.01		2.1	—
		ROM leach	0.7		—	—		—	—
Henderson	100%	Mill	—		—	0.40		—	—
Climax	100%	Mill	—		—	0.58		—	—
Cobre	100%	ROM leach	0.3		—	—		—	—
			40.6		0.4	2.72		98.2	—
Recoverable metal in stockpilesb			2.4		—	—	a	—	—
100% operations			43.0		0.4	2.72		98.2	—
Consolidatedc			40.6		0.4	2.71		98.2	—
Net equity interestd			40.6		0.4	2.71		98.2	—
South America
Cerro Verde	53.56%	Mill	28.0		—	0.69		90.2	—
		Crushed leach	1.3		—	—		—	—
		ROM leach	0.2		—	—		—	—
El Abra	51%	Crushed leach	3.4		—	—		—	—
		ROM leach	0.5		—	—		—	—
Candelaria	80%	Mill	3.8		1.0	—		17.1	—
Ojos del Salado	80%	Mill	0.1		0.1	—		0.5	—
			37.3		1.1	0.69		107.8	—
Recoverable metal in stockpilesb			1.8		0.2	0.02		5.6	—
100% operations			39.1		1.3	0.71		113.4	—
Consolidatedc			39.1		1.3	0.71		113.4	—
Net equity interestd			22.1		1.0	0.38		66.4	—
Indonesia
Grasberg open pit	e	Mill	4.9		7.3	—		9.5	—
Deep Ore Zone	e	Mill	2.2		3.5	—		10.1	—
Big Gossan	e	Mill	2.4		1.2	—		15.4	—
Grasberg Block Cave	e	Mill	18.7		16.3	—		63.3	—
Kucing Liar	e	Mill	9.7		6.8	—		36.5	—
Deep Mill Level Zone	e	Mill	8.3		9.3	—		44.4	—
100% operations			46.2		44.4	—		179.2	—
Consolidatedc			31.6		32.2	—		118.7	—
Net equity interestd			28.6		29.2	—		107.5	—
Africa
Tenke Fungurume	57.75%	Agitation leach	8.1		—	—		—	0.75
Recoverable metal in stockpilesb			0.3		—	—		—	0.11
100% operations			8.4		—	—		—	0.86
Consolidatedc			8.4		—	—		—	0.86
Net equity interestd			4.8		—	—		—	0.49
Total FCX –  100% basis			136.7		46.1	3.43		390.8	0.86
Total FCX –  Consolidated basisc			119.7		33.9	3.42		330.3	0.86
Total FCX –  Net equity interestd			96.1		30.6	3.09		272.1	0.49

a. Amounts not shown because of rounding.

b. Refer to "Mill and Leach Stockpiles" for additional information.

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

d. Net equity interest represents estimated consolidated basis metal quantities further reduced for noncontrolling interest ownership.

e. Our joint venture agreement with Rio Tinto provides that PT Freeport Indonesia will receive cash flow from specified annual amounts of copper, gold and silver through 2021, calculated by reference to its proven and probable reserves as of December 31, 1994, and 60 percent of all remaining cash flow.

34

In defining our open-pit reserves, we apply a “variable cutoff grade” strategy. The objective of this strategy is to maximize the net present value of our operations. We use a break-even cutoff grade to define the in-situ reserves for our underground ore bodies. The break-even cutoff grade is defined for a metric ton of ore as that equivalent copper grade, once produced and sold, that generates sufficient revenue to cover all operating and administrative costs associated with our production.

Our copper mines may contain other commercially recoverable metals, such as gold, molybdenum, silver and cobalt. We value all commercially recoverable metals in terms of a copper equivalent percentage to determine a single cutoff grade. Copper equivalent percentage is used to express the relative value of multi-metal ores in terms of one metal. The calculation expresses the relative value of the ore using estimates of contained metal quantities, metals prices as used for reserve determination, recovery rates, treatment charges and royalties. Our molybdenum properties use a molybdenum cutoff grade.

The table below shows the minimum cutoff grade by process for each of our existing ore bodies as of December 31, 2011:

	Copper Equivalent Cutoff Grade (Percent)			Molybdenum Cutoff Grade (Percent)
	Mill	Crushed or Agitation Leach	ROM Leach	Mill
North America
Morenci	0.25	0.19	0.03	N/A
Bagdad	0.20	N/A	0.01	N/A
Safford	N/A	0.12	N/A	N/A
Sierrita	0.18	N/A	0.09	N/A
Miami	N/A	N/A	0.05	N/A
Tyrone	N/A	N/A	0.05	N/A
Chino	0.20	N/A	0.08	N/A
Henderson	N/A	N/A	N/A	0.12
Climax	N/A	N/A	N/A	0.06
Cobre	N/A	N/A	0.17	N/A
South America
Cerro Verde	0.20	0.20	0.14	N/A
El Abra	N/A	0.16	0.06	N/A
Candelaria	0.23	N/A	N/A	N/A
Ojos del Salado	0.64	N/A	N/A	N/A
Indonesia
Grasberg open pit	0.25	N/A	N/A	N/A
Deep Ore Zone	0.62	N/A	N/A	N/A
Big Gossan	1.55	N/A	N/A	N/A
Grasberg Block Cave	0.58	N/A	N/A	N/A
Kucing Liar	0.68	N/A	N/A	N/A
Deep Mill Level Zone	0.62	N/A	N/A	N/A
Africa
Tenke Fungurume	N/A	1.11	N/A	N/A

35

Drill hole spacing data is used by mining professionals, such as geologists and geological engineers, in determining the suitability of data coverage (on a relative basis) in a given deposit type and mining method scenario so as to achieve a given level of confidence in the resource estimate. Drill hole spacing is only one of several criteria necessary to establish resource classification. Drilling programs are typically designed to achieve an optimum sample spacing to support the level of confidence in results that apply to a particular stage of development of a mineral deposit.

The following table sets forth the average drill hole spacing based on average sample distance or drill pattern spacing for proven and probable ore reserves by process type:

		Average Drill Hole Spacing (in Meters)
		Proven		Probable
	Mining Unit	Mill	Leach	Mill	Leach
North America
Morenci	Open Pit	86	86	122	122
Bagdad	Open Pit	86	86	122	122
Safford	Open Pit	N/A	86	N/A	122
Sierrita	Open Pit	73	37	120	75
Miami	Open Pit	N/A	61	N/A	91
Tyrone	Open Pit	N/A	86	N/A	86
Chino	Open Pit	43	86	86	122
Henderson	Block Cave	38	N/A	85	N/A
Climax	Open Pit	61	N/A	122	N/A
Cobre	Open Pit	N/A	61	N/A	91
South America
Cerro Verde	Open Pit	50	50	100	100
El Abra	Open Pit	N/A	75	N/A	120
Candelaria	Open Pit	35	N/A	70	N/A
Ojos del Salado	Sublevel Stoping	25	N/A	50	N/A
Indonesia
Grasberg	Open Pit	37	N/A	114	N/A
Deep Ore Zone	Block Cave	23	N/A	56	N/A
Big Gossan	Open Stope	12	N/A	39	N/A
Grasberg	Block Cave	32	N/A	97	N/A
Kucing Liar	Block Cave	39	N/A	107	N/A
Deep Mill Level Zone	Block Cave	21	N/A	84	N/A
Africa
Tenke Fungurume	Open Pit	N/A	50	N/A	100

36

Production Sequencing

The following chart illustrates our current plans for sequencing and producing our proven and probable reserves at each of our ore bodies and the years in which we currently expect production from each ore body. The chart also shows the term of PT Freeport Indonesia’s COW. Production volumes are typically lower in the first few years for each ore body as development activities are ongoing and as the mine ramps up to full production and production volumes may also be lower as the mine reaches the end of its life. The ultimate timing of the start of production from our undeveloped mines is dependent upon a number of factors, including the results of our exploration and development efforts, and may vary from the dates shown below. In addition, we develop our mine plans based on maximizing the net present value from the ore bodies. Significant additional capital expenditures will be required at many of these mines in order to achieve the life-of-mine plans reflected below.

Mill and Leach Stockpiles

Mill and leach stockpiles generally contain lower grade ores that have been extracted from the ore body and are available for copper recovery. For mill stockpiles, recovery is through milling, concentrating, smelting and refining or, alternatively, by concentrate leaching. For leach stockpiles, recovery is through exposure to acidic solutions that dissolve contained copper and deliver it in solution to extraction processing facilities.

Because it is generally impracticable to determine copper contained in mill and leach stockpiles by physical count, reasonable estimation methods are employed. The quantity of material delivered to mill and leach stockpiles is based on surveyed volumes of mined material and daily production records. Sampling and assaying of blasthole cuttings determine the estimated copper grades of material delivered to mill and leach stockpiles.

Expected copper recovery rates for mill stockpiles are determined by metallurgical testing. The recoverable copper in mill stockpiles, once entered into the production process, can be produced into copper concentrate almost immediately.

Expected copper recovery rates for leach stockpiles are determined using small-scale laboratory tests, small- to large-scale column testing (which simulates the production-scale process), historical trends and other factors, including mineralogy of the ore and rock type. Ultimate recovery of copper contained in leach stockpiles can vary

37

significantly from a low percentage to more than 90 percent depending on several variables, including type of copper recovery, mineralogy and particle size of the rock. For newly placed material on active stockpiles, as much as 70 percent of the copper ultimately recoverable may be extracted during the first year, and the remaining copper may be recovered over many years.

Processes and recovery rates are monitored continuously, and recovery rate estimates are adjusted periodically as additional information becomes available and as related technology changes. Following are our stockpiles and the estimated recoverable copper contained within those stockpiles as of December 31, 2011:

				Recoverable
	Millions of	Average	Recovery	Copper
	Metric Tons	Grade (%)	Rate (%)	(billion pounds)
Mill stockpiles
Cerro Verde	86	0.42	81.4	0.6
Candelaria	96	0.37	83.1	0.7
	182	0.39	82.3	1.3
Leach stockpiles
Morenci	4,957	0.25	1.9	0.5
Bagdad	427	0.27	2.7	0.1
Safford	114	0.44	23.1	0.3
Sierrita	649	0.15	12.4	0.3
Miami	460	0.38	2.0	0.1
Tyrone	1,029	0.28	2.4	0.1
Chino	1,602	0.26	11.4	1.0
Cerro Verde	411	0.53	2.6	0.1
El Abra	373	0.36	11.7	0.4
Tenke Fungurume	14	1.10	92.4	0.3
	10,036	0.27	5.2	3.2
Total FCX - 100% basis				4.5
Total FCX - Consolidated basisa				4.4
Total FCX - Net equity interestb				3.6

a. Consolidated basis represents estimated metal quantities after reduction for our joint venture partner’s interest in the Morenci mine in North America.

b. Net equity interest represents estimated consolidated basis metal quantities further reduced for noncontrolling interest ownership.

MINERALIZED MATERIAL

We hold various properties containing mineralized material that we believe could be brought into production should market conditions warrant. However, permitting and significant capital expenditures would be required before operations could commence at these properties. Mineralized material is a mineralized body that has been delineated by appropriately spaced drilling and/or underground sampling to support the reported tonnage and average metal grades. Such a deposit cannot qualify as recoverable proven and probable reserves until legal and economic feasibility are confirmed based upon a comprehensive evaluation of development costs, unit costs, grades, recoveries and other material factors. Estimated mineralized materials as presented on the following page were assessed using prices of $2.20 per pound for copper, $1,000 per ounce for gold and $12 per pound for molybdenum.

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Mineralized Material
Estimated at December 31, 2011
		Milling Material					Leaching Material		Total Mineralized Material
		Million					Million		Million
	FCX’s	metric	Copper	Gold		Moly	metric	Copper	metric	Copper	Gold		Moly
	Interest	tons	%	g/t		%	tons	%	tons	%	g/t		%
North America
Morenci	85%	508	0.37	—		0.018	1,893	0.22	2,401	0.26	—		0.004
Bagdada	100%	301	0.30	—	b	0.019	31	0.12	332	0.29	—	b	0.017
Safforda	100%	685	0.45	0.08		0.004	118	0.26	803	0.43	0.07		0.004
Sierritaa	100%	1,587	0.18	—	b	0.022	15	0.15	1,602	0.18	—	b	0.022
Miami	100%	—	—	—		—	27	0.47	27	0.47	—		—
Tyrone	100%	—	—	—		—	84	0.32	84	0.32	—		—
Chino	100%	177	0.45	—		0.013	179	0.32	356	0.39	—		0.006
Henderson	100%	158	—	—		0.148	—	—	158	—	—		0.148
Climax	100%	332	—	—		0.147	—	—	332	—	—		0.147
Cobre	100%	45	0.57	—		—	12	0.29	57	0.51	—		—
Ajoa	100%	915	0.33	0.06		0.007	—	—	915	0.33	0.06		0.007
Cochise/Bisbee	100%	—	—	—		—	280	0.44	280	0.44	—		—
Lone Star	100%	—	—	—		—	645	0.45	645	0.45	—		—
Sanchez	100%	—	—	—		—	178	0.29	178	0.29	—		—
Tohono	100%	220	0.70	—		—	261	0.65	481	0.67	—		—
Twin Buttesa	100%	595	0.40	—		0.026	59	0.21	654	0.38	—		0.024
South America
Cerro Verdea	53.56%	919	0.37	—		0.014	12	0.35	931	0.37	—		0.014
El Abra	51%	929	0.45	—		—	383	0.26	1,312	0.40	—		—
Candelariaa	80%	77	0.58	0.13		—	—	—	77	0.58	0.13		—
Indonesia
Grasberg minerals districta	54.38%c	2,386	0.62	0.57		—	—	—	2,386	0.62	0.57		—
Africa
Tenke Fungurumed	57.75%	83	3.44	—		—	22	2.81	105	3.31	—		—
Kisanfud	95%	55	2.32	—		—	50	3.00	105	2.64	—		—
Total FCX - 100% basis		9,972					4,249		14,221
Total FCX - Consolidated basise		8,941					3,965		12,906
Total FCX - Net equity interestf		7,872					3,759		11,631

a. Stated tonnage also includes silver at Bagdad (0.6 g/t), Safford (1.5 g/t), Sierrita (1.1 g/t), Ajo (0.9 g/t), Twin Buttes (2.3 g/t), Cerro Verde (1.6 g/t), Candelaria (1.9 g/t) and the Grasberg minerals district (3.5 g/t).

b. Amounts not shown because of rounding.

c. FCX's interest in the Grasberg minerals district reflects our 60 percent joint venture ownership further reduced by noncontrolling interest ownership.

d. Stated tonnage also includes cobalt at Tenke Fungurume (0.29 percent) and Kisanfu (1.08 percent).

e. Consolidated basis represents estimated mineralized materials after reduction for our joint venture partners' interest in the Morenci mine and the Grasberg minerals district.

f. Net equity interest represents estimated consolidated basis mineralized material further reduced for noncontrolling interest ownership.

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Item 1A. Risk Factors

This report contains “forward-looking statements” within the meaning of United States (U.S.) federal securities laws. Forward-looking statements are all statements other than statements of historical facts, such as statements regarding projected ore grades and milling rates, projected production and sales volumes, projected unit net cash costs, projected operating cash flows, projected capital expenditures, exploration efforts and results, the impact of deferred intercompany profits on earnings, liquidity, other financial commitments and tax rates, the impact of copper, gold molybdenum and cobalt price changes, availability of power, water, labor and equipment, reclamation and closure costs and plans, environmental liabilities and expenditures, litigation contingencies and results, dividend payments, potential prepayments of debt, reserve estimates, and anticipated political, economic and social conditions in our areas of operations. We undertake no obligation to update any forward-looking statements. Readers are cautioned that forward-looking statements are not guarantees of future performance and our actual results may differ materially from those anticipated, projected or assumed in the forward-looking statements. Important factors that could cause our actual results to differ materially from those anticipated in the forward-looking statements include the following.

Financial risks

Extended declines in the market prices of copper, gold and/or molybdenum could adversely affect our earnings and cash flows and, if sustained, could adversely affect our ability to repay debt. Fluctuations in the market prices of copper, gold or molybdenum can cause significant volatility in our financial performance and adversely affect the trading prices of our debt and equity securities.

Our financial results vary as a result of fluctuations in metal market prices, including copper, gold and molybdenum (for further information about the market prices of these commodities, refer to discussion below and in Item 7. “Management's Discussion and Analysis of Financial Condition and Results of Operations”). An extended decline in the market prices of these commodities could adversely affect our financial results, affect our ability to repay our debt and meet our other fixed obligations, and depress the trading prices of our common stock and of our publicly traded debt securities.

Additionally, if market prices for the metals we produce decline for a sustained period of time, we may have to revise our operating plans, including curtailing production, reducing operating costs and capital expenditures and discontinuing certain exploration and development programs. We may be unable to decrease our costs in an amount sufficient to offset reductions in revenues, and may incur losses.

Substantially all of our copper concentrate and cathode sales contracts provide final copper pricing in a specified future month (generally one to four months from the shipment date) based primarily on quoted London Metal Exchange (LME) monthly average spot copper prices. Accordingly, in times of rising copper prices, our revenues benefit from adjustments to the final pricing of provisionally priced sales pursuant to contracts entered into in prior periods; in times of falling copper prices, the opposite occurs.

Copper prices have fluctuated historically, with LME spot copper prices ranging from $1.38 to $4.60 per pound during the three years ended December 31, 2011. Copper prices are affected by numerous factors beyond our control, including:

• The strength of the U.S. economy and the economies of other industrialized and developing nations, including China, which has become the largest consumer of refined copper in the world;

• Available supplies of copper from mine production and inventories;

• Sales by holders and producers of copper;

• Demand for industrial products containing copper;

• Investment activity, including speculation, in copper as a commodity;

• The availability and cost of substitute materials; and

• Currency exchange fluctuations, including the relative strength or weakness of the U.S. dollar.

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Gold prices have also fluctuated historically, with the London PM gold price ranging from $810 to $1,895 per ounce during the three years ended December 31, 2011. Gold prices are affected by numerous factors beyond our control, including:

• The strength of the U.S. economy and the economies of other industrialized and developing nations, including China and India;

• Global or regional political or economic crises;

• The relative strength or weakness of the U.S. dollar and other currencies;

• Expectations with respect to the rate of inflation;

• Interest rates;

• Purchases and sales of gold by governments, central banks and other holders;

• Demand for jewelry containing gold; and

• Investment activity, including speculation, in gold as a commodity.

Molybdenum prices also fluctuate, with the Metals Week Molybdenum Dealer Oxide weekly average price ranging from $7.83 to $18.60 per pound during the three years ended December 31, 2011. Molybdenum prices are affected by numerous factors beyond our control, including:

• The worldwide balance of molybdenum demand and supply;

• Rates of global economic growth, especially construction and infrastructure activity that requires significant amounts of steel;

• The volume of molybdenum produced as a by-product of copper production;

• Inventory levels;

• Currency exchange fluctuations, including the relative strength or weakness of the U.S. dollar; and

• Production costs of U.S. and foreign competitors.

Under U.S. federal and state laws that require closure and reclamation plans for our mines, we generally are required to provide financial assurance sufficient to allow a third party to implement those plans if we are unable to do so. The U.S. Environmental Protection Agency (EPA) and state agencies may seek financial assurance for investigation and remediation actions under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) or equivalent state regulations.The failure to comply with these requirements could have a material adverse affect on us.

We are required by U.S. federal and state laws to provide financial assurance sufficient to allow a third party to implement approved closure and reclamation plans if we are unable to do so. These laws are complex and vary from jurisdiction to jurisdiction. The laws govern the determination of the scope and cost of the closure and reclamation obligations and the amount and forms of financial assurance.

EPA and state agencies may seek financial assurance for investigation and remediation actions under CERCLA or equivalent state regulations. In July 2009, EPA published a Priority Notice of Action identifying classes of facilities within the hardrock mining industry for which the agency will develop financial responsibility requirements concerning the degree and duration of risk associated with the production, transportation, treatment, storage or disposal of hazardous substances. In EPA's semi-annual regulatory agenda published on February 13, 2012, EPA indicated that it intends to propose regulations regarding hardrock mining financial responsibility in April 2013. It is uncertain how the new requirements, if promulgated, will affect the amount and form of our existing and future financial assurance obligations.

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The amount of financial assurance we are required to provide will vary with changes in laws, regulations and reclamation and closure requirements and cost estimates. As of December 31, 2011, our financial assurance obligations associated with closure and reclamation costs in New Mexico, Arizona and Colorado totaled $899 million, of which $565 million was in the form of parent company guarantees and financial capability demonstrations. Our ability to continue to provide financial assurance in the form of parent guarantees and financial capability demonstrations depends on our ability to meet financial tests. Certain of the ratios in these tests are significantly more rigorous for companies that do not have an investment grade rating from a state-approved ratings service. We are currently rated investment grade by Standard & Poor's Rating Services (S&P), Fitch Ratings and Moody's Investors Service (Moody's). If we fail to maintain our investment grade rating, we would be subject to these more rigorous tests, in which case the regulatory agencies may require us to provide alternative forms of financial assurance, such as letters of credit, surety bonds or collateral. Depending on our financial condition and market conditions, these other forms of financial assurance may be difficult or costly to provide. Issuance of letters of credit under our credit facilities would reduce our available liquidity. Failure to provide the required financial assurance could result in the closure of mines. As of December 31, 2011, we had limited financial assurance obligations associated with CERCLA-related remediation obligations, although EPA and certain states are currently considering increasing the use of financial assurance requirements for such obligations.For additional information, see the environmental risk factor “Mine closure regulations impose substantial costs on our operations.”

In July 2011, the Chilean senate passed legislation regulating mine closure, which establishes new requirements for closure plans and becomes effective in November 2012. Our Chilean operations will be required to update closure plans and provide financial assurance for these obligations. We cannot predict at this time the costs of these closure plans or the levels or forms of financial assurance that may be required.

In December 2010, the President of Indonesia issued a regulation regarding mine reclamation and closure, which requires a company to provide a mine closure guarantee in the form of a time deposit placed in a state-owned bank in Indonesia. In accordance with its Contract of Work (COW), PT Freeport Indonesia is working with the Department of Energy and Mineral Resources to review these requirements, including discussions of other options for the mine closure guarantee. In December 2009, PT Freeport Indonesia submitted its revised mine closure plan to the Department of Energy and Minerals Resources for review and has addressed comments received during the course of this review process.

Movements in foreign currency exchange rates could negatively affect our operating results.

The functional currency for most of our operations is the U.S. dollar. All of our revenues and a significant portion of our costs are denominated in U.S. dollars; however, some costs and certain asset and liability accounts are denominated in local currencies, including the Indonesian rupiah, Australian dollar, Chilean peso, Peruvian nuevo sol, euro and South African rand. Generally, our results are positively affected when the U.S. dollar strengthens in relation to those foreign currencies and adversely affected when the U.S. dollar weakens in relation to those foreign currencies. Refer to Item 7A. “Quantitative and Qualitative Disclosures about Market Risk” for a summary of the estimated impact of changes in foreign currency rates on our annual operating costs.

From time to time, we may implement currency hedges intended to reduce our exposure to changes in foreign currency exchange. However, our hedging strategies may not be successful, and any of our unhedged foreign exchange payments will continue to be subject to market fluctuations.

International risks

Our international operations are subject to political, social and geographic risks of doing business in foreign countries.

We are a global mining company with substantial assets located outside of the U.S. We conduct international mining operations in Indonesia, Peru, Chile and the Democratic Republic of Congo (DRC). Accordingly, in addition to the usual risks associated with conducting business in foreign countries, our business may be adversely affected by political, economic and social uncertainties in each of these countries. Such risks include:

• Renegotiation, cancellation or forced modification of existing contracts,

• Expropriation or nationalization of property,

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• Changes in a foreign country's laws, regulations and policies, including those relating to labor, taxation, royalties, divestment, imports, exports, trade regulations, currency and environmental matters,

• Political instability, bribery, extortion, corruption, civil strife, acts of war, guerrilla activities, insurrection and terrorism,

• Foreign exchange controls, and

• The risk of having to submit to the jurisdiction of a foreign court or arbitration panel or having to enforce the judgment of a foreign court or arbitration panel against a sovereign nation within its own territory.

Our insurance does not cover most losses caused by the above described risks. Accordingly, our exploration, development and production activities outside of the U.S. could be substantially affected by factors beyond our control, some of which could materially and adversely affect our financial position or results of operations.

In October 2010, PT Freeport Indonesia received an assessment from the Indonesian tax authorities for additional taxes of $106 million and interest of $52 million related to various audit exceptions for 2005. In November 2011, PT Freeport Indonesia received an assessment from the Indonesian tax authorities for additional taxes of $22 million and interest of $10 million related to various audit exceptions for 2006. PT Freeport Indonesia has paid $109 million for these disputed tax assessments and filed objections to these assessments because it believes it has properly paid all taxes. PT Freeport Indonesia is working with the Indonesian tax authorities to resolve these matters and expects to receive additional assessments from the Indonesian tax authorities for their audit of its 2007 tax return.

In December 2009, PT Freeport Indonesia was notified by the Large Taxpayer's Office of the Government of Indonesia of its view that PT Freeport Indonesia is obligated to pay value added taxes on certain goods imported after the year 2000. The amount of such taxes and related penalties under this view would be significant. PT Freeport Indonesia believes that, pursuant to the terms of its COW, it is only required to pay value added taxes on these types of goods imported after December 30, 2009. PT Freeport Indonesia has not received a formal assessment and is working with the applicable government authorities to resolve this matter.

SUNAT, the Peruvian national tax authority, has assessed mining royalties on materials processed by the Cerro Verde concentrator which commenced operations in late 2006. These assessments cover the period October 2006 to December 2007 and the years 2008 and 2009. SUNAT has issued rulings denying Cerro Verde's protest of the assessments. Cerro Verde has appealed these decisions and currently has three cases pending before the Peruvian Tax Tribunal. Cerro Verde is challenging these royalties because it believes its stability agreement provides an exemption for all minerals extracted from its mining concession, irrespective of the method used for processing those minerals. Although we believe our interpretation of the stability agreement is correct, if Cerro Verde is ultimately found responsible for these assessments, it will also be liable for interest, which accrues at rates that range from approximately 7 to 18 percent based on the year accrued and the currency in which the amounts would be payable. At December 31, 2011, the aggregate amount of the assessments, including interest and penalties, totaled $190 million. SUNAT may continue to assess mining royalties annually until this matter is resolved by the Peruvian Tax Tribunal.

Because our Grasberg minerals district is our most significant operating asset, our business may continue to be adversely affected by political, economic and social uncertainties and security risks in Indonesia.

Indonesia has faced political and social uncertainties, including separatist movements and civil and religious strife in a number of provinces. In particular, several separatist groups are opposing Indonesian rule over the province of Papua, where our Grasberg minerals district is located, and have sought political independence for the province. In response, Indonesia enacted regional autonomy laws, which became effective January 1, 2001. The manner in which those laws are being implemented and the degree of political and economic autonomy that they may bring to individual provinces, including Papua, are uncertain and are ongoing issues in Indonesian politics. In Papua, there have been sporadic attacks on civilians by separatists and sporadic but highly publicized conflicts between separatists and the Indonesian military. Social, economic and political instability in Papua could materially and adversely affect us if it results in damage to our property or interruption of our activities.

Maintaining a good working relationship with the Indonesian government is important to us because our mining operations there are among Indonesia's most significant business enterprises and are conducted pursuant to a COW with the Indonesian government. Partially because of their significance to Indonesia's economy, the

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environmentally sensitive area in which they are located, and the number of people employed, our operations are occasionally the subject of criticism in the Indonesian press and in political debates, and have been the target of protests and occasional violence.

Between July 2009 and February 2012, there were 32 shooting incidents in and around the Grasberg minerals district, including along the road leading to our mining and milling operations, which resulted in 15 fatalities and 56 injuries. Victims included PT Freeport Indonesia employees, contractors, members of law enforcement and civilians. The identity of the perpetrators is unknown as is the motivation for the shootings. The investigation of these matters is continuing. We have taken precautionary measures, including using secured convoys on the road. The Indonesian government has responded with additional security forces and expressed a commitment to protect the safety of the community and our operations. Prolonged limitations on access to the road could adversely affect operations at the mine. The safety of our workforce is a critical concern, and PT Freeport Indonesia is working cooperatively with the Government of Indonesia to address security issues.

During 2011, PT Freeport Indonesia was adversely affected by labor disruptions, including an eight-day work stoppage in July 2011 and an approximate three-month strike that concluded in December 2011. The strike involved civil unrest, transportation blockades, sabotage of important operating facilities and violence. Although a new labor agreement was reached in mid-December 2011, we are experiencing work interruptions in connection with our efforts to resume normal operations at PT Freeport Indonesia. PT Freeport Indonesia is complying with the terms of the new labor agreement with its union. Certain of the returning workers have engaged in acts of violence and intimidation against workers and supervisory personnel who did not participate in the strike. On February 23, 2012, the union indicated that it will engage in a work stoppage and we temporarily suspended operations to protect our employees and assets following the incidents of intimidation and threats within the workforce. We are working with union officials and government authorities to resolve the ongoing issues. Refer to Item 7. “Management's Discussion and Analysis of Financial Condition and Results of Operations” for further discussion.

Large numbers of illegal miners have continued to operate along the river used to transport the tailings from the mill to the lowlands in PT Freeport Indonesia's government-approved tailings management area. The illegal miners have periodically clashed with police who have attempted to move them away from our facilities. In 2006, the illegal miners temporarily blocked the road leading to the Grasberg mine and mill in protest, and PT Freeport Indonesia temporarily suspended mining and milling operations as a precautionary measure.

We cannot predict whether additional incidents will occur that could disrupt or suspend our Indonesian operations. If additional violence or other disruptive incidents occur, it could adversely affect our business and profitability in ways that we cannot predict at this time.

We do not expect to mine all of our ore reserves in Indonesia before the initial term of our COW expires.

PT Freeport Indonesia is entitled to mine in Indonesia under its COW with the Government of Indonesia. The initial term of the current COW expires in 2021, but can be extended for two 10-year periods subject to Indonesian government approval, which pursuant to the COW cannot be withheld or delayed unreasonably. Our proven and probable ore reserves in Indonesia reflect estimates of minerals that can be recovered through the end of 2041 and our current mine plan has been developed, and our operations are based on the assumption that we will receive the two 10-year extensions. As a result, we will not mine all of these ore reserves during the initial term of the current COW, and there can be no assurance that the Indonesian government will approve the extensions. Prior to the end of 2021, we expect to mine 31 percent of aggregate proven and probable recoverable ore at December 31, 2011, representing 37 percent of PT Freeport Indonesia's share of recoverable copper reserves and 49 percent of its share of recoverable gold reserves.

In 2009, Indonesia enacted a new mining law, which will operate under a licensing system as opposed to the contract of work system that applies to PT Freeport Indonesia. In 2011 and 2010, the Government of Indonesia promulgated regulations under the 2009 mining law and certain provisions address existing contracts of work. The laws and regulations provide that contracts of work will continue to be honored until their expiration. However, the regulations attempt to apply certain provisions of the new law to existing contracts and may seek to apply the licensing system to any extension periods of contracts of work, even though our COW provides for two 10-year extension periods subject to Indonesian government approval, which pursuant to the COW cannot be withheld or delayed unreasonably. In February 2012, a new regulation was adopted that would require mining companies in Indonesia to process all minerals domestically and possibly ban export of concentrates and other unrefined minerals. There are specific provisions included in PT Freeport Indonesia's existing COW that define its rights to

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export product and the obligation to develop domestic smelting capacity if commercially feasible, or to contract with other domestic smelters on a market basis. In connection with the obligations under its COW, in 1995, PT Freeport Indonesia constructed the only copper smelter and refinery in Indonesia, which is owned and operated by PT Smelting.

Our COWs in Indonesia are subject to termination if we do not comply with our contractual obligations, and if a dispute arises, we may have to submit to the jurisdiction of a foreign court or arbitration panel.

PT Freeport Indonesia's COW and other COWs in which we have an interest were entered into under Indonesia's 1967 Foreign Capital Investment Law, which provides guarantees of remittance rights and protection against nationalization. Our COWs can be terminated by the Government of Indonesia if we do not satisfy our contractual obligations, which include the payment of royalties and taxes to the government and the satisfaction of certain mining, environmental, safety and health requirements.

Certain forestry laws and designations as well as prevailing environmental laws and regulations may conflict with or overlap with the mining rights established under our COW. Although our COW grants to PT Freeport Indonesia the unencumbered right to operate in accordance with the COW, certain government agencies could seek to impose additional restrictions on PT Freeport Indonesia that could affect exploration and operating requirements.

At times, certain government officials and others in Indonesia have questioned the validity of contracts entered into by the Government of Indonesia prior to May 1998 (i.e., during the Suharto regime, which lasted over 30 years), including PT Freeport Indonesia's COW, which was signed in December 1991. We cannot provide assurance that the validity of, or our compliance with, the COWs will not be challenged for political or other reasons. PT Freeport Indonesia's COW and our other COWs require that disputes with the Indonesian government be submitted to international arbitration. Accordingly, if a dispute arises under the COWs, we face the risk of having to submit to the jurisdiction of a foreign court or arbitration panel, and if we prevail in such a dispute, we will face the additional risk of having to enforce the judgment of a foreign court or arbitration panel against Indonesia within its own territory.

Indonesian government officials have periodically undertaken reviews regarding our compliance with Indonesian environmental laws and regulations and the terms of the COWs. In January 2012, the President of Indonesia issued a decree calling for the creation of a team to evaluate contracts of work for adjustment to the 2009 Mining Law, and accordingly, to take steps to assess and negotiate size of work areas, government revenues, and domestic processing of minerals. The team includes 14 cabinet-level members representing 13 formal government institutions led by the Coordinating Minister of Economy and the Minister of Energy and Mineral Resources, with the Director General of Mineral and Coal as the Secretary. The team's assignment runs through December 2013 and the group is expected to provide progress reports to the President every six months. We intend to continue to work cooperatively with the Government of Indonesia to complete this review and to seek extension of the COW beyond 2021, as provided under the terms of the COW. The COW can only be modified by mutual agreement between PT Freeport Indonesia and the Government of Indonesia.

Any suspension of required activities under our COWs requires the consent of the Indonesian government.

Our COWs permit us to suspend certain contractually required activities, including exploration, for a period of one year by making a written request to the Indonesian government. These requests are subject to the approval of the Indonesian government and are renewable annually. If we do not request a suspension or are denied a suspension, then we are required to continue our activities under the COW or potentially be declared in default. Moreover, if a suspension continues for more than one year for reasons other than force majeure and the Indonesian government has not approved such continuation, then the government would be entitled to declare a default under the COW.

We previously suspended our field exploration activities outside of the Block A area of PT Freeport Indonesia's COW because of safety and security issues and regulatory uncertainty relating to a possible conflict between our mining and exploration rights in certain forest areas and an Indonesian Forestry law enacted in 1999 prohibiting open-pit mining in forest preservation areas. In 2001, we requested and received from the Government of Indonesia, formal temporary suspensions of our obligations under the COWs in all areas outside of Block A. Recent Indonesian legislation permits open-pit mining in the Block B area of PT Freeport Indonesia's COW, subject to certain requirements. Following an assessment of these requirements and a review of security issues, in 2007 we resumed exploration activities in certain prospective COW areas outside of Block A.

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The Tenke Fungurume minerals district is located in the Katanga province of the DRC, and may be adversely affected by political, economic and social instability in the DRC.

During 2009, we completed construction activities and commenced copper production at the Tenke Fungurume mine (the Tenke mine) located in the DRC. Since gaining independence in 1960, the DRC has undergone outbreaks of violence, changes in national leadership and financial crisis. These factors heighten the risk of abrupt changes in the national policy toward foreign investors, which in turn could result in unilateral modification of concessions or contracts, increased taxation, denial of permits or permit renewals or expropriation of assets. As part of a review of all mining contracts by the Ministry of Mines (the Ministry) in the DRC, in February 2008, we received notification that the Ministry wished to renegotiate several material provisions of Tenke Fungurume Mining S.A.R.L.'s (TFM) mining concessions. In October 2010, the Government of the DRC concluded its review of TFM's existing mining contracts and confirmed that they are in good standing. In connection with the review, TFM made several commitments that have been reflected in amendments to its mining contracts, which were signed by the parties in December 2010 (refer to Note 14 for further discussion). In March 2011, the amendments were approved by a ministerial council, and a Presidential Decree, signed by the President and Prime Minister of the DRC, was issued in April 2011. After receiving the required government approval of the modification to TFM's bylaws that reflect the agreement with the Government of the DRC, our effective ownership interest in the project will be reduced to 56.0 percent prospectively, compared to our current ownership interest of 57.75 percent.

In November 2011, the DRC held a general presidential election. On December 16, 2011, incumbent President Joseph Kabila was declared the winner of that election by the DRC Supreme Court. There has been widespread international and local criticism of the election and episodes of protests, some of which were accompanied by acts of violence.

In July 2009, TFM was advised that the Minister of Justice in the DRC authorized an inquiry regarding the alleged misappropriation of public funds in connection with securing labor and immigration authorizations and the payment of associated fees for the Tenke Fungurume project. Several government officials and three TFM employees were arrested. In October 2009, the three TFM employees were tried and acquitted. One government official, the head of immigration in the Katanga province, was sentenced to five years imprisonment on charges of embezzlement. The office of the Attorney General of the DRC filed a notice of appeal of the judgment, and the matter is pending at the Appellate Court.

In July 2009, TFM entered into a settlement agreement with DRC tax authorities in connection with an administrative audit regarding the payment of fees for work permits and visas for its foreign workers and subcontractors, including short-term workers. Pursuant to the agreement, which covers the period from January 2007 to the date of the settlement, TFM paid approximately $16 million in fees and penalties. The procedures associated with obtaining labor and immigration authorizations for short-term workers on a timely basis are not clearly established in the DRC, and TFM continues to work proactively and cooperatively with the government authorities to establish approved procedures for doing so consistent with its mining convention and local law. In connection with this matter, we notified the U.S. government enforcement authorities about our internal investigation of the immigration work permit and visa matter and the associated criminal case. We have received and responded to requests from U.S. government authorities related to the matter and to other requests for information about our compliance program.

Political, economic and social risks that are generally outside of our control and could adversely affect our business include:

• Political risks associated with the establishment and re-election of the present government;

• Cancellation or renegotiation of mining contracts by the government;

• Legal and regulatory uncertainties, governmental corruption and bribery;

• Royalty and tax increases or claims by governmental entities, including retroactive claims;

• Security risks due to the remote location in the southern DRC and violence in the northeastern provinces of the DRC;

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• Risk of loss of property due to expropriation or nationalization of property; and

• Risk of loss due to civil strife, acts of war, guerrilla activities, insurrection and terrorism.

Accordingly, the Tenke Fungurume minerals district and its future development projects may be substantially affected by factors beyond our control, any of which could adversely affect our operating results, interrupt our operations or result in a loss of all or part of our investment in the DRC.

Terrorist attacks and violence near our operations and throughout the world and the potential for additional future terrorist acts and violence have created economic and political uncertainties that could materially and adversely affect our business.

In July 2009, two suicide bombers set off explosions inside of the JW Marriott and Ritz-Carlton hotels in Jakarta, Indonesia, that killed nine people and injured 53 others. Two of our Indonesian-based executives were injured in the incident.

In July 2009, a small group of individuals created a disturbance on the road leading to our mining and milling operations at our Grasberg minerals district and vandalized vehicles and small buildings. There were no injuries. For more information about a series of shooting incidents near our Grasberg minerals district, refer to the risk factor “Because our Grasberg minerals district is our most significant operating asset, our business may continue to be adversely affected by political, economic and social uncertainties in Indonesia.”

In August 2002, three people were killed and 11 others were wounded in an ambush by a group of unidentified assailants on the road near Tembagapura, the mining town where the majority of PT Freeport Indonesia's personnel reside. The assailants shot at several vehicles transporting international contract teachers from our school in Tembagapura, their family members and other contractors to PT Freeport Indonesia. The U.S. Federal Bureau of Investigation (FBI) investigated the incident, which resulted in the U.S. indictment of an alleged operational commander of the Free Papua Movement/National Freedom Force. In January 2006, Indonesian police, accompanied by FBI agents, arrested the alleged operational commander and 11 other Papuans. In November 2006, verdicts and sentencing were announced for seven of those accused in the August 2002 shooting, including a life sentence for the confessed leader of the attack.

In October 2002, a bombing killed 202 people in the Indonesian province of Bali, which is 1,500 miles west of our mining and milling operations. Indonesian authorities arrested 35 people in connection with this bombing and 29 of those arrested have been tried and convicted. In August 2003, 12 people were killed and over 100 were injured by a car bomb detonated outside of the JW Marriott Hotel in Jakarta, Indonesia. In September 2004, 11 people were killed and over 200 injured by a car bomb detonated in front of the Australian embassy in Jakarta. In October 2005, three suicide bombers killed 19 people and wounded over 100 in Bali. The same international terrorist organizations are suspected in each of these incidents. In November 2005, Indonesian police raided a house in East Java that resulted in the death of other accused terrorists linked to the bombings discussed above. Our mining and milling operations were not interrupted by these incidents, but PT Freeport Indonesia's corporate office in Jakarta had to relocate for several months following the bombing in front of the Australian embassy. In addition to the Bali, JW Marriott Hotel and Australian embassy bombings, there have been anti-American demonstrations in certain sections of Indonesia reportedly led by radical Islamic activists.

No assurance can be given that additional terrorist incidents and acts of violence will not occur. If there were to be additional terrorist incidents or acts of violence, particularly at or near our operations, there could be no assurance that the occurrence of such events would not have a material adverse impact on our business and results of operations.

Operational risks

Our business is subject to operational risks that could adversely affect our business.

Mines by their nature are subject to many operational risks, some of which are outside of our control. These operational risks, which could adversely affect our business, operating results and cash flows, include the following:

• Earthquakes, floods and other natural disasters;

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• The occurrence of unusual weather or operating conditions and other force majeure events;

• The failure of equipment or processes to operate in accordance with specifications, design or expectations;

• Accidents;

• Wall failures and rock slides in our open-pit mines, and structural collapses in our underground mines;

• Problems associated with the construction and management of large impoundments containing tailings or other viscous or semi-solid materials, some of which also contain mineral and chemical contaminants, such as structural failures or leakages;

• Interruption of energy supply;

• Lower than expected ore grades or recovery rates;

• Metallurgical and other processing problems;

• Unanticipated ground and water conditions;

• Adverse claims to water rights, adverse outcomes of pending water adjudications and shortages of water to which we have rights;

• Adjacent land ownership or usage that results in constraints on current or future mine operations;

• Delays in the receipt of or failure to receive necessary government authorizations, approvals or permits;

• Delays in transportation and disruptions of supply routes;

• The inability to obtain satisfactory insurance coverage.

The failure to adequately manage these risks could result in significant personal injury, loss of life, property damage and damage to the environment, both in and around our areas of operations, as well as damage to production facilities and delays in or curtailments of production.

Labor unrest and activism could disrupt our operations and may adversely affect our business, financial condition, results of operations and prospects.

As further described in Items 1 and 2. “Business and Properties,” we are party to labor agreements with various unions that represent employees at our operations. Labor agreements are negotiated on a periodic basis, and the risk exists that labor agreements may not be renewed on reasonably satisfactory terms to us or at all. We cannot predict what issues may be raised by the collective bargaining units representing our employees and, if raised, whether negotiations concerning those issues will be concluded successfully. Our production and sales volumes could be significantly reduced and our business, financial condition and results of operations adversely affected by significant reductions in productivity or protracted work stoppages at one or more of our operations. Additionally, if we enter into a new labor agreement with any union that significantly increases our labor costs relative to our competitors, our ability to compete may be materially and adversely affected.

During 2011, PT Freeport Indonesia was adversely affected by labor disruptions, including an eight-day work stoppage in July 2011 and an approximate three-month strike that concluded in December 2011. The strike involved civil unrest, transportation blockades, sabotage of important operating facilities and violence. In mid-December 2011, the financial terms of a new two-year labor agreement for PT Freeport Indonesia were reached and the parties agreed that future wage negotiations would be based on living costs and the competitiveness of wages within Indonesia. Although a new labor agreement has been reached, we are experiencing work interruptions in connection with our efforts to resume normal operations at PT Freeport Indonesia. PT Freeport Indonesia is complying with the terms of the new labor agreement with its union. Certain of the returning workers have engaged in acts of violence and intimidation against workers and supervisory personnel who did not participate in the strike. On February 23, 2012, the union indicated that it will engage in a work stoppage and we temporarily

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suspended operations to protect our employees and assets following the incidents of intimidation and threats within the workforce. We are working with union officials and government authorities to resolve the ongoing issues. Refer to Item 7. “Management's Discussion and Analysis of Financial Condition and Results of Operations” for further discussion.

In fourth-quarter 2011, there was an approximate two-month labor strike at Cerro Verde during the negotiation of a new labor agreement. The strike did not have a significant impact on production, and a new three-year agreement with the union was reached in late December 2011.

If we do not successfully negotiate new collective bargaining agreements with our union workers, we may incur prolonged strikes and other work stoppages at our mining operations, which could adversely affect our business, financial condition and results of operations.

Our mining production depends on the availability of sufficient water supplies.

Our operations require significant quantities of water for mining, ore processing and related support facilities. Our operations in North and South America are in areas where water is scarce and competition among users for continuing access to water is significant. Continuous production at our mines depends on our ability to maintain our water rights and claims.

At our North America operations, our water rights give us only the right to use public waters for a statutorily defined beneficial use at a designated location. In Arizona, we are a participant in two active general stream adjudications in which, for over 30 years, the state of Arizona has been attempting to quantify and prioritize surface water claims for two of the state's largest river systems that affect four of our operating mines (Morenci, Safford, Sierrita and Miami). The legal precedent set in these proceedings may also affect our Bagdad mine. Groundwater has historically been treated separately from surface water under Arizona law, which has generally allowed land owners to pump at will, subject to the doctrine of reasonable use. However, court decisions in recent years have concluded that if groundwater pumping produces or affects surface water, then such pumping requires surface water rights and is subject to the general stream adjudications. The effort to define the boundaries between groundwater and surface water is currently the focus of one of those adjudications.

In Colorado, our surface water and groundwater rights are subject to adjudication and we are involved in legal proceedings to resolve disputes regarding priority of administration of rights, including priority of some of our rights for the Climax molybdenum mine. In New Mexico, our surface water and groundwater rights are fully licensed or have been fully adjudicated.

Water for our Cerro Verde mining operation comes from renewable sources through a series of storage reservoirs on the Rio Chili watershed that collect water primarily from seasonal precipitation. Due to occasional drought conditions and the possibility that climate change will reduce precipitation levels, temporary supply shortages are possible that could affect our current and planned Cerro Verde operations. Cerro Verde has been conducting water studies to assess opportunities for additional supplies to support current operations and potential future expansion projects. In 2011, Cerro Verde reached an agreement with the Regional Government of Arequipa, the National Government, Servicio de Agua Potable y Alcantarillado de Arequipa S.A. (SEDAPAR) and other local institutions to allow Cerro Verde to finance the engineering and construction of a wastewater treatment plant, should it proceed with plans for a large-scale concentrator expansion. Once Cerro Verde obtains a license for the treated water, it would be used to supplement its existing water supplies to support the potential concentrator expansion.

Water for our El Abra mining operation comes from the continued pumping of groundwater from the Salar de Ascotán aquifer. In 2010, El Abra obtained regulatory approval, subject to certain conditions, for the continued pumping of groundwater from the Salar de Ascotán aquifer for its sulfide processing plant, which began operations in 2011. We believe that El Abra has sufficient water rights to support current operations, however, a change to the sulfide ore project, such as increased production or mill processing, would require additional water beyond our sulfide groundwater pumping, which is permitted through 2021. El Abra is also conducting studies to assess the feasibility of constructing a desalination plant near the Pacific Ocean to treat seawater for possible increased sulfide ore production or mill processing.

Water for our Candelaria and Ojos del Salado mining operations is drawn from the Copiapó River aquifer. Because of rapid depletion of this aquifer in recent years, Candelaria is expanding its sources of water supply. During 2010, we completed construction of a pipeline to convey reclaimed water from a nearby water treatment facility to our

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Candelaria mine. We have also completed engineering and began construction for a desalination plant near the Pacific Ocean that will supply Candelaria's longer term water needs. The plant is expected to be completed in early 2013.

Although we believe each operation has sufficient water rights and claims to cover current operational demands, we cannot predict the potential outcome of pending or future legal proceedings on our water rights, claims and uses. The loss of some or all water rights for any of our mines, or physical shortages of water to which we have rights, could require us to curtail or close mining operations and could prevent us from pursuing expansion opportunities.

Increased production costs could reduce our profitability and cash flow.

Our copper mining operations require significant energy, principally diesel, electricity, coal and natural gas. For the year 2011, energy represented approximately 21 percent of our consolidated copper production costs. An inability to procure sufficient energy at reasonable prices could adversely affect our profits, cash flow and growth opportunities.

Our consolidated copper production costs are also affected by the prices of commodities we consume or use in our operations, such as sulphuric acid, grinding media, steel, reagents, liners, tires, explosives and diluents. The prices of such commodities are influenced by supply and demand trends affecting the mining industry in general and other factors outside our control and such prices are at times subject to volatile movements. Increases in the cost of these commodities could make our operations less profitable. Increases in the costs of commodities that we consume or use may also significantly affect the capital costs of new projects.

In addition to the usual risks encountered in the mining industry, our Indonesia operations involve additional risks because they are located on unusually difficult terrain in a very remote area.

The Grasberg minerals district is located in steep mountainous terrain in a remote area of Indonesia. Because of these conditions, we have had to overcome special engineering difficulties and develop extensive infrastructure facilities. In addition, the area receives considerable rainfall, which has led to periodic floods and mudslides. The mine site is also in an active seismic area and has experienced earth tremors from time to time. Our insurance may not sufficiently cover an unexpected natural or operating disaster.

In October 2003, a slippage of material occurred in a section of the Grasberg open pit, resulting in eight fatalities. In December 2003, a debris flow involving a relatively small amount of loose material occurred in the same section of the open pit resulting in only minor property damage. The events caused us to alter our short-term mine sequencing plans; normal production activities resumed in second-quarter 2004.

In March 2006, a mud/topsoil slide involving approximately 75,000 metric tons of material occurred from a mountain ridge above service facilities supporting PT Freeport Indonesia's mining facilities. Three contract workers were fatally injured in the event. The material damaged a mess hall and an adjacent area. As a result of investigations by PT Freeport Indonesia and the Indonesian Department of Energy and Mineral Resources, we conducted geotechnical studies to identify and address any potential hazards to workers and facilities from slides. The existing early warning system for potential slides, based upon rainfall and other factors, has also been expanded.

In September 2008, a small scale failure encompassing approximately 75,000 metric tons of material occurred at our Grasberg open pit. There were no injuries or property damage. The event caused a delay in our access to the high-grade section of the open pit and, as a result, a portion of the metal expected to be mined in the second half of 2008 was deferred to future periods.

In April 2011, two PT Freeport Indonesia employees died in an accident when a portion of the Deep Ore Zone (DOZ) mine experienced an uncontrolled muck flow. The area was temporarily shut down during the investigation of the accident.

No assurance can be given that similar events will not occur in the future.

In addition to the usual risks encountered in the mining industry, our Africa mining operation involves additional risks because it is located in a remote area of the DRC.

The Tenke Fungurume minerals district is located in a remote area of the DRC and is subject to additional challenges, including:

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• Severely limited infrastructure, including road, bridge and rail access that is in disrepair and receives minimal maintenance;

• Limited and possibly unreliable energy supply from antiquated equipment and from power distribution corridors that are not maintained;

• Challenges in obtaining experienced personnel;

• Security risks; and

• Limited health care in an area plagued by disease and other potential endemic health issues, including malaria and cholera.

Additionally, due to limited rail access, we currently truck a significant portion of the production from the Tenke mine approximately 1,900 miles to ports in South Africa. The Tenke Fungurume minerals district and its future development may be substantially affected by factors beyond our control, which could adversely affect their contribution to our operating results and increase the cost of future development.

The volume and grade of ore reserves that we recover and our rate of production may be more or less than anticipated.

Our ore reserve amounts are determined in accordance with Industry Guide 7 as required by the Securities Exchange Age of 1934, and are estimates of the mineral deposits that can be economically and legally extracted or produced at the time of the reserve determination. The determination of reserves involves numerous uncertainties with respect to the ultimate geology of the ore bodies, including quantities, grades and recovery rates, and estimates may change as new data becomes available. Estimating the quantity and grade of reserves requires us to determine the size, shape and depth or our ore bodies by analyzing geological data, such as samplings of drill holes, tunnels and other underground workings. In addition to the geology of our mines, assumptions are required to determine the economic feasibility of mining these reserves, including estimates of future commodity prices and demand, the mining methods we use and the related costs incurred to develop and mine our reserves. A sustained decrease in commodity prices may result in a reduction in economically recoverable ore reserves. These factors may result in variations in the volumes of mineral reserves that we report from period to period.

There are also uncertainties inherent in estimating quantities of ore reserves and copper recovered from mill and leach stockpiles. The quantity of copper delivered to mill and leach stockpiles is based on surveyed volumes of mined material and daily production records. Sampling and assaying of blasthole cuttings determine the estimated copper grade contained in the material delivered to the mill and leach stockpiles. Processes and recovery rates are monitored regularly, and recovery rate estimates are adjusted periodically as additional information becomes available and as related technology changes. Accordingly, the volume and grade of ore reserves recovered, rates of production and copper recovered from stockpiles may be less than anticipated.

We must continually replace reserves depleted by production. Our exploration activities may not result in additional discoveries.

Our ability to replenish our ore reserves is important to our long-term viability. Produced ore reserves must be replaced by further delineation of existing ore bodies or by locating new deposits in order to maintain production levels over the long term. Exploration is highly speculative in nature. Our exploration projects involve many risks, require substantial expenditures and may not result in the discovery of sufficient additional mineral deposits that can be mined profitably. Once a site with mineralization is discovered, it may take several years from the initial phases of drilling until production is possible, during which time the economic feasibility of production may change. Substantial expenditures are required to establish recoverable proven and probable reserves and to construct mining and processing facilities. As a result, there is no assurance that current or future exploration programs will be successful. There is a risk that depletion of reserves will not be offset by discoveries or acquisitions.

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Development projects are inherently risky and may require more capital than anticipated, which could adversely affect our business.

There are many risks and uncertainties inherent in all development projects. The economic feasibility of development projects is based on many factors, including the accuracy of estimated reserves, metallurgical recoveries, capital and operating costs and estimated future prices of the relevant minerals. The capital expenditures and time required to develop new mines or other projects are considerable, and changes in costs or construction schedules can adversely affect project economics. Moreover, underground mining is generally more expensive than surface mining as a result of higher capital costs, including costs for modern mining equipment and construction of extensive ventilation systems. Therefore, it is possible that actual costs and economic returns may differ materially from our estimates. Refer to Item 7. “Management's Discussion and Analysis of Financial Condition and Results of Operations” for further discussion of our current development projects.

New development projects have no operating history upon which to base estimates of future cash flow. These development projects also require the successful completion of feasibility studies, acquisition of governmental permits, acquisition of land, power and water, and ensuring that appropriate community infrastructure is developed by third parties to support such projects. It is possible that we could fail to obtain the government approvals necessary for the operation of a project, in which case, the project may not proceed, either on its original timing or at all. It is not unusual for new mining operations to experience unexpected problems during the start-up phase, resulting in delays in producing revenue and increases in capital expenditures.

The development of underground mines is subject to additional risks, including the following:

• Unanticipated geologic, geotechnical and hydrogeologic conditions;

• Challenges related to hiring and training personnel required for underground mining activities;

• Larger than expected dilution of ore associated with block caving and stoping mining methods; and

• Unanticipated delays in the development of major access and supporting infrastructure due to engineering changes, late delivery of critical components and longer than planned construction periods.

Some of these risks could result in delays to production startup and a loss or reduction in minable tons. There can be no assurance that the occurrence of such events or conditions would not have a material adverse impact on our business and results of operations.

Environmental risks

Our domestic and international operations are subject to complex and evolving environmental laws and regulations, and compliance with environmental and regulatory requirements involves significant costs.

Our mining operations and exploration activities, both in the U.S. and elsewhere, are subject to extensive laws and regulations governing exploration, development, production, occupational health, mine safety, toxic substances, waste disposal, protection and remediation of the environment, protection of endangered and protected species, and other related matters. Compliance with these laws and regulations imposes substantial costs, which we expect will continue to increase over time because of increased regulatory oversight, adoption of increasingly stringent environmental standards, and increased demand for remediation services leading to shortages of equipment, supplies and labor, as well as other factors. Recent examples of these trends include EPA's June 2010, promulgation of a new sulphur dioxide ambient air standard and EPA's efforts to curtail the exemption of mining operations from waste management regulation under the Federal Resource Conservation and Recovery Act. These and other such actions could have a significant impact on our operational compliance and closure costs.

In addition to compliance with environmental regulation at our operating sites, we incur significant costs for remediating environmental conditions on properties that have not been operated in many years.

Freeport-McMoRan Corporation (FMC, formerly Phelps Dodge Corporation), and many of its affiliates and predecessor companies have been involved in mining, milling, and manufacturing in the U.S. for more than a century. Activities that occurred in the late 19th century and the 20th century prior to the advent of modern environmental laws were not subject to environmental regulation and were conducted before American industrial

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companies understood the long-term effects of their operations on the surrounding environment. With the passage of CERCLA in 1980, companies like FMC became legally responsible for environmental remediation on properties previously owned or operated by them, irrespective of when the damage to the environment occurred or who caused it. That liability is often shared on a joint and several basis with all other owners and operators, meaning that each owner or operator of the property is fully responsible for the clean-up, although in many cases some or all of the other historical owners or operators no longer exist, do not have the financial ability to respond or cannot be found. As a result, because of our acquisition of FMC in 2007, many of the subsidiary companies we now own are responsible for a wide variety of environmental remediation projects throughout the U.S., and we expect to spend substantial sums annually for many years to address these remediation issues. We are also subject to claims where the release of hazardous substances is alleged to have damaged natural resources. At December 31, 2011, we had more than 100 active remediation projects in the U.S. in 27 states.

At December 31, 2011, we had $1.5 billion recorded in our consolidated balance sheet for environmental obligations attributed to CERCLA or analogous state programs and for estimated future costs associated with environmental matters at closed facilities or closed portions of certain operating facilities. Our environmental obligation estimates are primarily based upon:

• Our knowledge and beliefs about complex scientific and historical facts and circumstances that in many cases involve events that occurred many decades ago;

• Our beliefs and assumptions regarding the nature, extent and duration of remediation activities that we will be required to undertake and the estimated costs of those remediation activities, which are subject to varying interpretations; and

• Our beliefs regarding the requirements that are imposed on us by existing laws and regulations and, in some cases, the expected clarification of uncertain regulatory requirements that could materially affect our environmental obligation estimates.

Significant adjustments to these estimates are likely to occur in the future as additional information becomes available. The actual environmental costs ultimately may exceed our current and future accruals for these costs, and any such changes could be material.

Refer to Note 13 for further discussion of our environmental obligations.

During 2011, we incurred environmental capital expenditures and other environmental costs (including our joint venture partners' shares) to comply with applicable environmental laws and regulations that affect our operations of $387 million, compared with $372 million in 2010 and $289 million in 2009. For 2012, we expect to incur approximately $636 million of aggregate environmental capital expenditures and other environmental costs. The timing and amounts of estimated payments could change as a result of changes in regulatory requirements, changes in scope and costs of reclamation activities, and as actual spending occurs.

An adverse ruling in one or more pending legal proceedings involving environmental matters could have a material adverse effect on us.

As described in Note 13, we are a defendant in numerous, and in some cases significant, litigation matters involving alleged environmental contamination, alleged environmental toxic torts and complex interpretations of environmental regulations. An adverse ruling in one or more of those matters could have a material adverse effect on our results of operations, financial condition and cash flow.

Our Indonesia mining operations create difficult and costly environmental challenges, and future changes in environmental laws, or unanticipated environmental impacts from those operations, could require us to incur increased costs.

Mining operations on the scale of our Indonesia operations involve significant environmental risks and challenges. Our primary challenge is to dispose of the large amount of crushed and ground rock material, called tailings, that results from the process by which we physically separate the copper-, gold- and silver-bearing materials from the ore that we mine. Our tailings management plan, which has been approved by the Indonesian government, uses the river system near our mine to transport the tailings to an engineered area in the lowlands where the tailings and natural sediments are managed in a deposition area. Lateral levees have been constructed to help contain the

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footprint of the tailings and to limit their impact in the lowlands.

Another major environmental challenge is managing overburden, which is the rock that must be moved aside in the mining process to reach the ore. In the presence of air, water and naturally occurring bacteria, some overburden can generate acid rock drainage, or acidic water containing dissolved metals which, if not properly managed, can adversely affect the environment.

From time to time, certain Indonesian government officials have raised questions with respect to our tailings and overburden management plans, including a suggestion that we implement a pipeline system rather than our river transport system for tailings management and disposition. Because our Indonesia mining operations are remotely located in steep mountainous terrain and in an active seismic area, a pipeline system would be costly, difficult to construct and maintain, and more prone to catastrophic failure, and could therefore involve significant potentially adverse environmental issues. Based on our own studies and others conducted by third parties, we do not believe that a pipeline system is necessary or practical.

In connection with obtaining our environmental approvals from the Indonesian government, we committed to perform a one-time environmental risk assessment on the impacts of our tailings management plan. We completed this extensive environmental risk assessment with more than 90 scientific studies conducted over four years and submitted it to the Indonesian government in December 2002. We developed the risk assessment study using internationally recognized methods with input from an independent review panel, which included representatives from the Indonesian government, academia and non-governmental organizations. The risks identified during this process were in line with our impact projections of the tailings management program contained in our environmental approval documents.

Since 2005, PT Freeport Indonesia has participated in the Government of Indonesia's PROPER (Program for Pollution Control, Evaluation and Rating) program. In November 2011, the Indonesian Ministry of Environment announced the latest results of its PROPER environmental management audit, but did not provide a rating for PT Freeport Indonesia because of the strike and security conditions that existed during 2011.  In 2010, the Indonesia Ministry of Environment issued a Blue rating acknowledging PT Freeport Indonesia's environmental management practices as being in compliance with the laws and regulations in Indonesia.

Mine closure regulations impose substantial costs on our operations.

Our U.S. operations are subject to various federal and state permitting requirements that include mine closure and mined-land reclamation obligations. These requirements are complex and vary depending upon the jurisdiction. The laws govern the determination of the scope and cost of the closure and reclamation obligations and the amount and forms of financial assurance sufficient to allow a third party to meet the obligations of those plans if we are unable to do so. In general, our U.S. mines are required to review estimated closure and reclamation costs on either a periodic basis or at the time of significant permit modifications and post increasing amounts of financial assurance as required. It is uncertain how potential EPA requirements for financial assurance will affect the timing of periodic closure cost reviews or the scope of closure activities.

Our international mines are also subject to various mine closure and mined-land reclamation laws. In July 2011, the Chilean senate passed legislation relating to mine closure, which establishes new requirements for closure plans and becomes effective in November 2012. As a result, our Chilean operations will be required to update closure plans and provide financial assurance for these obligations. We cannot predict at this time the costs of these closure plans or the levels or forms of financial assurance that may be required.

At December 31, 2011, we had asset retirement obligations (AROs) of $921 million recorded in our consolidated balance sheet. ARO cost estimates may increase or decrease significantly in the future as a result of changes in closure or financial assurance regulations, changes in engineering designs and technology, permit modifications or updates, changes in mine plans, inflation or other factors and as actual reclamation spending occurs. Refer to Note 13 for further discussion.

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Regulation of greenhouse gas emissions and climate change issues may increase our costs and adversely affect our operations and markets.

Many scientists believe that emissions from the combustion of carbon-based fuels contribute to greenhouse effects and, therefore, potentially contribute to climate change. In 2011, our worldwide total greenhouse gas emissions, measured as carbon dioxide equivalent emissions, were approximately 10 million metric tons, divided between direct (54 percent) and indirect (46 percent) emissions. Most of our direct emissions are from fuel combustion in haul trucks, followed by the combustion of fuels to provide energy for roasting, smelting and other processes. Indirect emissions are generally the emissions of outside providers from whom we purchase electricity for use in our operations. Approximately 56 percent of our direct emissions are in Indonesia, 28 percent in North America and 10 percent in South America. Approximately 58 percent of our indirect emissions are in North America and 40 percent in South America.

A number of governments have introduced or are contemplating regulatory initiatives designed to control and reduce greenhouse gas emissions. In the U.S. several of these regulatory changes are being challenged at both the federal and state levels. In September 2009, the EPA issued final regulations requiring monitoring and reporting of greenhouse gas emissions in specified circumstances. Those regulations became effective in 2010. Our Miami smelter and El Paso refinery have reported their emissions under this program. In June 2010, the EPA issued final regulations under the Clean Air Act for the control of greenhouse gases from new large stationary sources and major modifications to existing large stationary sources. Certain of our operations, including the Miami smelter, could be materially affected by these regulations, as these regulations and anticipated EPA regulations covering large fossil fuel fired power plants may materially increase energy costs at our operations. Several states have initiated action on their own or as part of regional organizations, such as the Western Climate Initiative, to limit greenhouse gas emissions. The U.S. may also become a party to international agreements to reduce greenhouse gas emissions, which could lead to new regulations affecting our U.S. operations. The December 1997 Kyoto Protocol established greenhouse gas emission targets for developed countries that ratified the Protocol. Although the U.S. has not ratified the Kyoto Protocol, which expires in December 2012, the U.S. continues to participate in global climate summits that may lead to an agreement in the future.

Since 2006, we have participated in the Carbon Disclosure Project, which is a voluntary initiative that promotes standardized reporting of greenhouse gas emissions and reduction efforts. In 2009, we formed a multi-departmental greenhouse gas task force to pursue ways to improve the energy efficiency of our operations and reduce greenhouse gas emissions, including evaluating potential reductions in emissions from our haul trucks. However, because of longer and steeper mining hauls as our open pits expand and deepen, and increases in use of electricity as we increase production capacity, we expect increases in our total greenhouse gas emissions.

From a medium and long-term perspective, we are likely to experience increased costs relating to our greenhouse gas emissions as a result of regulatory initiatives in the U.S. and other countries in which we operate. In addition, the cost of electricity that we purchase from others may increase if our suppliers incur increased costs from the regulation of their greenhouse gas emissions. We cannot predict the magnitude of any increased costs at this time, given the wide scope of potential regulatory changes in the many countries in which we operate.

The potential physical impacts of climate change on our operations are highly uncertain, and would vary by operation based on particular geographic circumstances. These may include changes in rainfall patterns, water shortages, changing sea levels, changing storm patterns and intensities, and changing temperatures. These effects may adversely impact the cost, production and financial performance of our operations.

Our operating, inactive and historical U.S. mining sites and facilities may be subject to future regulation of radioactive materials that are commonly associated with, or result from, our mining operations.

Federal and state agencies have considered proposing new regulations to characterize, regulate and remediate potential workplace exposures and environmental impacts of radioactive materials commonly associated with mining operations. For example, the EPA could promulgate rules to regulate technologically enhanced naturally occurring radioactive materials (TENORM) and their impacts at mining operations. In addition, several states are promulgating groundwater quality compliance and remediation standards for radioactive materials, including uranium. Radioactive materials can be associated with copper mineral deposits, including both our current and discontinued operations. Accordingly, our copper operations may generate, concentrate or release radioactive materials that may subject our operations to new and increased regulation. The impact of such future regulation on our operating, closure, reclamation, and remediation costs is uncertain.

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Other risks

If market prices for our commodities decline, the carrying values of inventories and long-lived assets may be impaired, which could require charges to operating income that could be material.

Declines in the market price of copper, among other factors, could cause us to record lower of cost or market (LCM) inventory adjustments and could also result in a write-down of the carrying value of long-lived assets, which would potentially have a material adverse impact on our results of operations and stockholders' equity, but would have no effect on cash flows.

During fourth-quarter 2008, we concluded that the then-current economic environment and significant declines in copper and molybdenum prices represented significant adverse changes in our business requiring us to evaluate our long-lived assets and goodwill for impairment. As a result, we recorded significant impairment and LCM inventory charges. Refer to Item 6. "Selected Financial Data" for a summary of these charges.

Unanticipated litigation or negative developments in pending litigation could have a material adverse effect on our results of operations and financial condition.

We are a party to the litigation described in Note 13 and in Item 3. “Legal Proceedings” and a number of other litigation matters, including asbestos exposure cases, disputes over the allocation of environmental remediation obligations at Superfund and other sites, disputes over water rights and disputes with regulatory authorities. The outcome of litigation is inherently uncertain and adverse developments or outcomes can result in significant monetary damages, penalties or injunctive relief against us, limitations on our property rights, or regulatory interpretations that increase our operating costs. If any of these disputes results in a substantial monetary judgment against us or an adverse legal interpretation is settled on unfavorable terms, or otherwise affects our operations, it could have a material adverse effect on our operating results and financial condition.

We depend on our senior management team and other key employees, and the loss of any of these employees could adversely affect our business.

Our success depends in part on our ability to attract, retain and motivate senior management and other key employees. Achieving this objective may be difficult because of many factors, including fluctuations in global economic and industry conditions, competitors' hiring practices, cost reduction activities, and the effectiveness of our compensation programs. Competition for qualified personnel can be very intense. We must continue to recruit, retain and motivate senior management and other key employees to maintain our current business and support our future projects. A loss of such personnel could prevent us from capitalizing on business opportunities, and our operating results could be adversely affected.

Our holding company structure may impact your ability to receive dividends.

We are a holding company with no material assets other than the capital stock of our subsidiaries. As a result, our ability to repay our indebtedness and pay dividends is dependent on the generation of cash flow by our subsidiaries and their ability to make such cash available to us, by dividend, loan, debt repayment or otherwise. Our subsidiaries do not have any obligation to make funds available to us to repay our indebtedness or pay dividends. Dividends from subsidiaries that are not wholly owned are shared with other equity owners. In addition, cash at our international operations is subject to foreign withholding taxes upon repatriation into the U.S.

In addition, our subsidiaries may not be able to, or be permitted to, make distributions to enable us to repay our indebtedness or pay dividends. Each of our subsidiaries is a distinct legal entity and, under certain circumstances, legal and contractual restrictions, as well as the financial condition and operating requirements of our subsidiaries, may limit our ability to obtain cash from our subsidiaries. Our rights to participate in any distribution of our subsidiaries' assets upon their liquidation, reorganization or insolvency would generally be subject to the prior claims of the subsidiaries' creditors, including any trade creditors.

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Anti-takeover provisions in our charter documents and Delaware law may make an acquisition of us more difficult.

Anti-takeover provisions in our charter documents and Delaware law may make an acquisition of us more difficult. These provisions:

• Authorize our board of directors to issue preferred stock without stockholder approval and to designate the rights, preferences and privileges of each class; if issued, such preferred stock would increase the number of outstanding shares of our capital stock and could include terms that may deter an acquisition of us;

• Establish advance notice requirements for nominations to the board of directors or for proposals that can be presented at stockholder meetings;

• Limit removal of directors for cause only;

• Limit who may call stockholder meetings; and

• Require the approval of the holders of two thirds of our outstanding common stock to enter into certain business combination transactions, subject to certain exceptions, including if the consideration to be received by our common stockholders in the transaction is deemed to be a fair price.

These provisions may discourage potential takeover attempts, discourage bids for our common stock at a premium over market price or adversely affect the market price of, and the voting and other rights of the holders of, our common stock. These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors other than the candidates nominated by our board of directors.

In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which may prohibit large stockholders from consummating a merger with, or acquisition of, us.

These provisions may deter an acquisition of us that might otherwise be attractive to stockholders.

Item 1B.  Unresolved Staff Comments.

Not applicable.

Item 3. Legal Proceedings.

We are involved in numerous legal proceedings that arise in the ordinary course of our business or are associated with environmental issues arising from legacy operations conducted over the years by Freeport-McMoRan Corporation (FMC - formerly Phelps Dodge Corporation) and its affiliates. We are also involved periodically in other reviews, investigations and proceedings by government agencies, some of which may result in adverse judgments, settlements, fines, penalties, injunctions or other relief. Management does not believe, based on currently available information, that the outcome of any legal proceeding will have a material adverse effect on our financial condition; although individual outcomes could be material to our operating results for a particular period, depending on the nature and magnitude of the outcome and the operating results for the period. Below is a discussion of our water rights legal proceedings. Refer to Note 13 for discussion of our other legal proceedings.

Water Rights

Our operations in the western United States (U.S.) require water for mining, ore processing and related support facilities. Continuous operation of our mines is dependent on our ability to maintain our water rights and claims and the continuing physical availability of the water supplies. In the arid western U.S., water rights are often contested, and disputes over water rights are generally time-consuming, expensive and not necessarily dispositive unless they resolve actual and potential claims. The loss of a water right or continued use of a currently available water supply, in whole or in part, could have a material adverse effect on our mining operations.

Each western state has its own set of complex laws governing the withdrawal and use of groundwater and surface water, which are the sources of water supply for our operations. In Arizona, a landowner has the right to pump

57

groundwater beneath his property and put it to reasonable and beneficial use. Surface water in Arizona is subject to the doctrine of prior appropriation (first in time, first in right) and permits a holder of water rights to use surface water for a statutorily defined beneficial use at a designated location. In Arizona, potential claims are difficult to resolve, because it is difficult to identify and join all potentially interested parties in a single legal proceeding. Global efforts to settle contested water rights in an entire watershed, which are referred to as “adjudications,” are complex, multi-party judicial proceedings that can take decades to complete, but are designed to resolve all actual and potential claims. Two water rights adjudications have been initiated in Arizona in order to quantify and prioritize all surface water claims in two of the state's river systems that could impact four of our operating mines (Morenci, Safford, Sierrita and Miami). Any precedents set in these legal proceedings may also affect our Bagdad mine. These adjudications have been under way for many years, and we cannot predict when they will be concluded or how the many conflicting claims will be resolved.

In Re the General Adjudication of All Rights to Use Water in the Little Colorado Water System and Sources, Apache County, Superior Court, No. 6417, filed on or about February 17, 1978. The principal parties, in addition to us, include: the state of Arizona; the Salt River Project; the Arizona Public Service Company; the Navajo Nation, the Hopi Indian Tribe; the San Juan Southern Paiute Tribe; and the U.S. on behalf of those tribes, on its own behalf, and on behalf of the White Mountain Apache Tribe.

In Re The General Adjudication of All Rights to Use Water in the Gila River System and Sources,

Maricopa County, Superior Court, Cause Nos. W-1 (Salt), W-2 (Verde), W-3 (Upper Gila), and W-4 (San Pedro). This case was originally initiated in 1974 with the filing of a petition with the Arizona State Land Department and was consolidated and transferred to the Maricopa County Superior Court in 1981. The principal parties, in addition to us, include: the state of Arizona; the Gila Valley Irrigation District; the Franklin Irrigation District; the San Carlos Irrigation and Drainage District; the Salt River Project; the San Carlos Apache Tribe; the Gila River Indian Community (GRIC); and the U.S. on behalf of those Tribes, on its own behalf, and on behalf of the White Mountain Apache Tribe, the Fort McDowell Mohave-Apache Indian Community, the Salt River Pima-Maricopa Indian Community, and the Payson Community of Yavapai Apache Indians.

The last significant decision of the Maricopa County Superior Court in the Gila River adjudication was issued in 2005 and directed the Arizona Department of Water Resources (ADWR) to prepare detailed recommendations regarding the delineation of the “sub-flow” zone of the San Pedro River basin, a tributary of the Gila River, which is the subsurface area adjacent to the river where the court may find that it is connected to the surface water such that pumping may reduce surface flows.  Although we have minimal interests in the San Pedro River basin, a decision that re-characterizes groundwater in that basin as surface water will set a precedent for other river systems in Arizona that could have material implications for many commercial, industrial, municipal and agricultural users of groundwater, including our Arizona operations.

ADWR's recommendations were objected to by numerous parties on both sides of the issue, and a three-day hearing was held in late January 2012, at which various parties provided testimony and oral argument regarding the strengths and weaknesses of ADWR's technical approach to characterizing underground flows as groundwater or surface water. Given the legal and technical complexity of this adjudication, its long history, and its long-term legal and political implications, it is difficult to predict the timing or the outcome of this issue or of the overall adjudication.

Prior to January 1, 1983, various Indian tribes filed suits in the U.S. District Court in Arizona claiming superior rights to water being used by many other water users, including us, and claiming damages for prior use in derogation of their allegedly superior rights. These federal proceedings have been stayed pending the Arizona Superior Court adjudications.

In 1998, we and several other parties entered into a water rights settlement agreement with GRIC, one of the largest claimants in the adjudication, that was later included in a comprehensive water rights settlement under the Arizona Water Settlements Act of 2004. The GRIC settlement is subject to contingencies, and the comprehensive settlement has been challenged by other parties. If we are unable to resolve the contingencies in the GRIC settlement and defeat the third-party challenges, our water rights in the Gila River watershed could be diminished, and our operations at Morenci, Safford, Sierrita and Miami could be adversely affected.

United States v. Gila Valley Irrigation District, United States District Court, District of Arizona, was initiated in 1925 by the U.S. to settle conflicting claims to water rights in portions of the Gila River watershed. A decree settling the claims of various parties was entered in 1935, after we were dismissed from the case without prejudice. In 1988, the GRIC intervened, challenging uses of water in the Gila River watershed, which may affect our ability to divert

58

water from Eagle Creek, Chase Creek or the San Francisco River for operation of our Morenci mine, pursuant to decreed rights and an agreement between us and the Gila Valley Irrigation District. Our Morenci operations also purchased farm lands with water rights in 1997, 1998 and 2008 that could be affected by the outcome of this proceeding. Impairment of our water claims in the Gila River watershed could adversely affect the operations of our Morenci and Safford mines.

Item 4. Mine Safety Disclosures.

The safety and health of all employees is our highest priority. Management believes that safety and health considerations are integral to, and compatible with, all other functions in the organization and that proper safety and health management will enhance production and reduce costs. Our approach towards the health and safety of our workforce is to continuously improve performance through implementing robust management systems and providing adequate training, safety incentive and occupational health programs.

Our objective is zero work place injuries and occupational illnesses. We measure progress toward achieving our objective against regularly established benchmarks, including measuring company-wide Total Recordable Incident Rates (TRIR). During 2011, our TRIR (including contractors) was 0.61 per 200,000 man-hours worked, compared to the preliminary metal mining sector industry average reported by the U.S. Mine Safety and Health Administration (MSHA) for 2011 of 2.29 per 200,000 man-hours worked. Our TRIR (including contractors) was 0.65 per 200,000 man-hours worked in 2010 and 0.74 per 200,000 man-hours worked in 2009, compared to MSHA’s metal mining sector industry average of 2.53 per 200,000 man-hours worked in 2010 and 2.61 per 200,000 man-hours worked in 2009.

Refer to Exhibit 95.1 for mine safety disclosures required in accordance with Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Executive Officers of the Registrant.

Certain information as of February 15, 2012, about our executive officers is set forth in the following table and accompanying text:

Name	Age	Position or Office
James R. Moffett	73	Chairman of the Board
Richard C. Adkerson	65	Director, President and Chief Executive Officer
Michael J. Arnold	59	Executive Vice President and Chief Administrative Officer
Kathleen L. Quirk	48	Executive Vice President, Chief Financial Officer and Treasurer

James R. Moffett has served as Chairman of the Board since May 1992. Mr. Moffett previously served as the Chief Executive Officer from July 1995 until December 2003. He has also served as Co-Chairman of the Board of McMoRan Exploration Co. (MMR) since September 1998, and President and Chief Executive Officer since May 2010.

Richard C. Adkerson has served as President since January 2008 and also from April 1997 to March 2007, Chief Executive Officer since December 2003 and a director since October 2006. Mr. Adkerson previously served as Chief Financial Officer from October 2000 to December 2003. Mr. Adkerson has also served as Co-Chairman of the Board of MMR since September 1998.

Michael J. Arnold has served as Executive Vice President since March 2007 andChief Administrative Officer since December 2003.

Kathleen L. Quirk has served as Executive Vice President since March 2007, Chief Financial Officer since December 2003 and Treasurer since February 2000. Ms. Quirk previously served as Senior Vice President from December 2003 to March 2007. Ms. Quirk has also served as the Senior Vice President of MMR since April 2002 and as Treasurer since January 2000.

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PART II

Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Unregistered Sales of Equity Securities

None.

Common Stock

Our common shares trade on the New York Stock Exchange (NYSE) under the symbol “FCX.” The FCX share price is reported daily in the financial press under “FMCG” in most listings of NYSE securities. The table below shows the NYSE composite tape common share price ranges during 2011 and 2010:

	2011		2010
	High	Low	High	Low
First Quarter	$61.35	$46.20	$45.28	$33.02
Second Quarter	58.75	46.06	44.15	29.12
Third Quarter	56.78	30.37	43.96	28.36
Fourth Quarter	43.50	28.85	60.39	43.19

At February 15, 2012, there were 16,432 holders of record of our common stock.

Common Stock Dividends

After suspending dividends in late 2008, the Board of Directors (The Board) reinstated a cash dividend on our common stock in October 2009 at an annual rate of $0.30 per share ($0.075 per share quarterly). The Board authorized increases in the cash dividend to an annual rate of $0.60 per share ($0.15 per share quarterly) in April 2010, and $1.00 per share ($0.25 per share quarterly) in October 2010. The Board also authorized supplemental common stock dividends of $0.50 per share paid in December 2010 and June 2011. Below is a summary of common stock cash dividends paid in 2011 and 2010:

	2011
	Per Share Amount	Record Date	Payment Date
First Quarter	$0.25	01/15/2011	02/01/2011
Second Quarter	0.25	04/15/2011	05/01/2011
Supplemental Dividend	0.50	05/15/2011	06/01/2011
Third Quarter	0.25	07/15/2011	08/01/2011
Fourth Quarter	0.25	10/15/2011	11/01/2011

	2010
	Per Share Amount	Record Date	Payment Date
First Quarter	$0.075	01/15/2010	02/01/2010
Second Quarter	0.075	04/15/2010	05/01/2010
Third Quarter	0.15	07/15/2010	08/01/2010
Fourth Quarter	0.15	10/15/2010	11/01/2010
Supplemental Dividend	0.50	12/20/2010	12/30/2010

In February 2012, the Board authorized an increase in the cash dividend on our common stock to an annual rate of $1.25 per share ($0.3125 per share quarterly). Dividends are paid quarterly as declared by the Board with the initial quarterly dividend of $0.3125 per share expected to be paid in May 2012. The declaration of dividends is at the discretion of our Board and will depend on our financial results, cash requirements, future prospects and other factors deemed relevant by the Board.

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Issuer Purchases of Equity Securities

The following table sets forth information with respect to shares of FCX common stock purchased by us during the three months ended December 31, 2011:

Period	(a) Total Number of Shares Purchaseda	(b) Average Price Paid Per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programsb	(d) Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programsb
October 1-31, 2011	—	$	—	—	23,685,500
November 1-30, 2011	—	—		—	23,685,500
December 1-31, 2011	—	—		—	23,685,500
Total	—	—		—	23,685,500

a. Consists of shares repurchased under FCX's applicable stock incentive plans to satisfy tax obligations on restricted stock awards and to cover the cost of option exercises.

b. On July 21, 2008, the Board of Directors approved an increase in our open-market share purchase program for up to 30 million shares. The program does not have an expiration date.

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Item 6. Selected Financial Data.

FREEPORT-McMoRan COPPER & GOLD INC.

SELECTED FINANCIAL AND OPERATING DATA

	Years Ended December 31,
	2011			2010			2009			2008				2007		a
FCX CONSOLIDATED FINANCIAL DATA	(In Millions, Except Per Share Amounts)
Revenues	$	20,880		$	18,982		$	15,040		$	17,796			$	16,939	b
Operating income (loss)	9,140		c	9,068			6,503		d,e	(12,710		)	d,e,f	6,555		b,f
Income (loss) from continuing operations	5,747			5,544			3,534			(10,450		)		3,733
Net income (loss)	5,747			5,544			3,534			(10,450		)		3,779
Net income (loss) attributable to FCX common stockholders	4,560		c,g,h	4,273		h	2,527		d,e,h	(11,341		)	d,e,f,h	2,769		b,f,h
Basic net income (loss) per share attributable to FCX common stockholders:
Continuing operations	$	4.81		$	4.67		$	3.05		$	(14.86	)		$	4.01
Discontinued operations	—			—			—			—				0.05
Basic net income (loss)	$	4.81		$	4.67		$	3.05		$	(14.86	)		$	4.06
Basic weighted-average common shares outstanding	947			915			829			763				682
Diluted net income (loss) per share attributable to FCX common stockholders:
Continuing operations	$	4.78		$	4.57		$	2.93		$	(14.86	)		$	3.70
Discontinued operations	—			—			—			—				0.05
Diluted net income (loss)	$	4.78	c,g,h	$	4.57	h	$	2.93	d,e,h	$	(14.86	)	d,e,f,h	$	3.75	b,f,h
Diluted weighted-average common shares outstanding	955			949			938			763				794
Dividends declared per share of common stock	$	1.50		$	1.125		$	0.075		$	0.6875			$	0.6875
At December 31:
Cash and cash equivalents	$	4,822		$	3,738		$	2,656		$	872			$	1,626
Property, plant, equipment and development costs, net	18,449			16,785			16,195			16,002				25,715
Goodwill	—			—			—			—				6,105
Total assets	32,070			29,386			25,996			23,353				40,661
Total debt, including current portion	3,537			4,755			6,346			7,351				7,211
Total FCX stockholders’ equity	15,642			12,504			9,119			5,773				18,234

The selected consolidated financial data shown above is derived from our audited consolidated financial statements. These historical results are not necessarily indicative of results that you can expect for any future period. You should read this data in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and our Consolidated Financial Statements and Notes thereto contained in this annual report.

a. Includes the results of Freeport-McMoRan Corporation (FMC, formerly Phelps Dodge Corporation) beginning March 20, 2007.

b. Includes charges totaling $175 million ($106 million to net income attributable to common stockholders or $0.13 per share) for mark-to-market accounting adjustments on the 2007 copper price protection program assumed in the acquisition of FMC.

c. Includes charges totaling $116 million ($50 million to net income attributable to common stock, or $0.05 per share) primarily associated with bonuses for new labor agreements and other employee costs at PT Freeport Indonesia, Cerro Verde and El Abra.

d. Includes charges totaling $23 million ($18 million to net income attributable to common stockholders or $0.02 per share) associated with restructuring charges in 2009 and $17.0 billion ($12.7 billion to net loss attributable to common stockholders or $16.60 per share) associated with impairment and restructuring charges in 2008.

e. Includes charges for lower of cost or market inventory adjustments totaling $19 million ($15 million to net income attributable to common stockholders or $0.02 per share) in 2009 and $782 million ($479 million to net loss attributable to common stockholders or $0.63 per share) in 2008.

f. Includes purchase accounting impacts related to the acquisition of FMC totaling $1.0 billion ($622 million to net loss attributable to common stockholders or $0.82 per share) in 2008 and $1.3 billion ($793 million to net income attributable to common stockholders or $1.00 per share) in 2007.

g. Includes additional taxes of $49 million ($0.05 per share) associated with Peru's new mining tax and royalty regime.

h. Includes net losses on early extinguishment and conversion of debt totaling $60 million ($0.06 per share) in 2011, $71 million ($0.07 per share) in 2010, $43 million ($0.04 per share) in 2009, $5 million ($0.01 per share) in 2008, and $132 million ($0.17 per share) in 2007; 2008 also includes charges totaling $22 million ($0.03 per share) associated with privately negotiated transactions to induce conversion of a portion of our 5½% Convertible Perpetual Preferred Stock into FCX common stock.

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FREEPORT-McMoRan COPPER & GOLD INC.

SELECTED FINANCIAL AND OPERATING DATA (Continued)

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

	Years Ended December 31,
	2011		2010		2009		2008		2007		a
FCX CONSOLIDATED MINING OPERATING DATA
Copper (recoverable)
Production (millions of pounds)	3,691		3,908		4,103		4,030		3,884
Production (thousands of metric tons)	1,674		1,773		1,861		1,828		1,762
Sales, excluding purchases (millions of pounds)	3,698		3,896		4,111		4,066		3,862
Sales, excluding purchases (thousands of metric tons)	1,678		1,767		1,865		1,844		1,752
Average realized price per pound	$	3.86	$	3.59	$	2.60	$	2.69	$	3.22	b
Gold (thousands of recoverable ounces)
Production	1,383		1,886		2,664		1,291		2,329
Sales, excluding purchases	1,378		1,863		2,639		1,314		2,320
Average realized price per ounce	$	1,583	$	1,271	$	993	$	861	$	682
Molybdenum (millions of recoverable pounds)
Production	83		72		54		73		70
Sales, excluding purchases	79		67		58		71		69
Average realized price per pound	$	16.98	$	16.47	$	12.36	$	30.55	$	25.87
NORTH AMERICA COPPER MINES
Operating Data, Net of Joint Venture Interest
Copper (recoverable)
Production (millions of pounds)	1,258		1,067		1,147		1,430		1,320
Production (thousands of metric tons)	571		484		520		649		599
Sales, excluding purchases (millions of pounds)	1,247		1,085		1,187		1,434		1,332
Sales, excluding purchases (thousands of metric tons)	566		492		538		650		604
Average realized price per pound	$	3.99	$	3.42	$	2.38	$	3.07	$	3.10	b
Molybdenum (millions of recoverable pounds)
Production	35		25		25		30		30
100% Operating Data
Solution extraction/electrowinning (SX/EW) operations
Leach ore placed in stockpiles (metric tons per day)	888,300		648,800		589,400		1,095,200		798,200
Average copper ore grade (percent)	0.24		0.24		0.29		0.22		0.23
Copper production (millions of recoverable pounds)	801		746		859		943		940
Mill operations
Ore milled (metric tons per day)	222,800		189,200		169,900		249,600		223,800
Average ore grade (percent):
Copper	0.38		0.32		0.33		0.40		0.35
Molybdenum	0.03		0.03		0.02		0.02		0.02
Copper recovery rate (percent)	83.1		83.0		86.0		82.9		84.5
Production (millions of recoverable pounds):
Copper	549		398		364		599		501
Molybdenum	35		25		25		30		30
SOUTH AMERICA MINING
Copper (recoverable)
Production (millions of pounds)	1,306		1,354		1,390		1,506		1,413
Production (thousands of metric tons)	592		614		631		683		641
Sales (millions of pounds)	1,322		1,335		1,394		1,521		1,399
Sales (thousands of metric tons)	600		606		632		690		635
Average realized price per pound	$	3.77	$	3.68	$	2.70	$	2.57	$	3.25
Gold (thousands of recoverable ounces)
Production	101		93		92		114		116
Sales	101		93		90		116		114
Average realized price per ounce	$	1,580	$	1,263	$	982	$	853	$	683
Molybdenum (millions of recoverable pounds)
Production	10		7		2		3		1
SX/EW operations
Leach ore placed in stockpiles (metric tons per day)	245,200		268,800		258,200		279,700		289,100
Average copper ore grade (percent)	0.50		0.41		0.45		0.45		0.43
Copper production (millions of recoverable pounds)	439		504		565		560		569

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	Years Ended December 31,
	2011		2010		2009		2008		2007		a
SOUTH AMERICA MINING (continued)
Mill operations
Ore milled (metric tons per day)	189,200		188,800		181,300		181,400		167,900
Average ore grade:
Copper (percent)	0.66		0.65		0.66		0.75		0.74
Gold (grams per metric ton)	0.12		0.10		0.10		0.13		0.13
Molybdenum (percent)	0.02		0.02		0.02		0.02		0.02
Copper recovery rate (percent)	89.6		90.0		88.9		89.2		87.1
Production (recoverable):
Copper (millions of pounds)	867		850		825		946		844
Gold (thousands of ounces)	101		93		92		114		116
Molybdenum (millions of pounds)	10		7		2		3		1
INDONESIA MINING
Operating Data, Net of Joint Venture Interest
Copper (recoverable)
Production (millions of pounds)	846		1,222		1,412		1,094		1,151
Production (thousands of metric tons)	384		554		640		496		522
Sales (millions of pounds)	846		1,214		1,400		1,111		1,131
Sales (thousands of metric tons)	384		551		635		504		513
Average realized price per pound	$	3.85	$	3.69	$	2.65	$	2.36	$	3.32
Gold (thousands of recoverable ounces)
Production	1,272		1,786		2,568		1,163		2,198
Sales	1,270		1,765		2,543		1,182		2,185
Average realized price per ounce	$	1,583	$	1,271	$	994	$	861	$	681
100% Operating Data
Ore milled (metric tons per day)	166,100		230,200		238,300		192,900		212,600
Average ore grade:
Copper (percent)	0.79		0.85		0.98		0.83		0.82
Gold (grams per metric ton)	0.93		0.90		1.30		0.66		1.24
Recovery rates (percent):
Copper	88.3		88.9		90.6		90.1		90.5
Gold	81.2		81.7		83.7		79.9		86.2
Production (recoverable):
Copper (millions of pounds)	882		1,330		1,641		1,109		1,211
Gold (thousands of ounces)	1,444		1,964		2,984		1,163		2,608
AFRICA MININGc
Copper (recoverable)
Production (millions of pounds)	281		265		154		N/A		N/A
Production (thousands of metric tons)	127		120		70		N/A		N/A
Sales (millions of pounds)	283		262		130		N/A		N/A
Sales (thousands of metric tons)	128		119		59		N/A		N/A
Average realized price per pound	$	3.74	$	3.45	$	2.85	N/A		N/A
Cobalt (millions of contained pounds)
Production	25		20		N/A		N/A		N/A
Sales	25		20		N/A		N/A		N/A
Average realized price per pound	$	9.99	$	10.95	N/A		N/A		N/A
Ore milled (metric tons per day)	11,100		10,300		7,300		N/A		N/A
Average ore grade (percent):
Copper	3.41		3.51		3.69		N/A		N/A
Cobalt	0.40		0.40		N/A		N/A		N/A
Copper recovery rate (percent)	92.5		91.4		92.1		N/A		N/A
MOLYBDENUM OPERATIONS
Molybdenum sales, excluding purchases (millions of pounds)d	79		67		58		71		69
Average realized price per pound	$	16.98	$	16.47	$	12.36	$	30.55	$	25.87
Henderson molybdenum mine
Ore milled (metric tons per day)	22,300		22,900		14,900		24,100		24,000
Average molybdenum ore grade (percent)	0.24		0.25		0.25		0.23		0.23
Molybdenum production (millions of recoverable pounds)	38		40		27		40		39

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

b. Before charges for hedging losses related to copper price protection programs, amounts were $3.27 per pound (FCX consolidated) and $3.25 per pound (North America copper mines).

c. Results for 2009 represent mining operations that began production in March 2009.

d. Includes sales of molybdenum produced at our North and South America copper mines.

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Ratio of Earnings to Fixed Charges

For the ratio of earnings to fixed charges calculation, earnings consist of income (loss) from continuing operations before income taxes, noncontrolling interests in consolidated subsidiaries, equity in affiliated companies’ net earnings, cumulative effect of accounting changes and fixed charges. Fixed charges include interest and that portion of rent deemed representative of interest. For the ratio of earnings to fixed charges and preferred stock dividends calculation, we assumed that our preferred stock dividend requirements were equal to the pre-tax earnings that would be required to cover those dividend requirements. We computed those pre-tax earnings using the effective tax rate for each year. Our ratio of earnings to fixed charges was as follows for the years presented:

	Years Ended December 31,
	2011	2010	2009	2008	2007
Ratio of earnings to fixed charges	20.7x	16.3x	9.3x	-a	9.9x
Ratio of earnings to fixed charges
and preferred stock dividends	20.7x	13.9x	6.1x	-b	6.6x

a. As a result of the loss recorded in 2008, the ratio coverage was less than 1:1. We would have needed to generate additional earnings of $13.4 billion to achieve coverage of 1:1 in 2008.

b. As a result of the loss recorded in 2008, the ratio coverage was less than 1:1. We would have needed to generate additional earnings of $13.8 billion to achieve coverage of 1:1 in 2008.

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Items 7. and 7A.  Management's Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures About Market Risk.

OVERVIEW

In Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures About Market Risk, “we,” “us” and “our” refer to Freeport-McMoRan Copper & Gold Inc. (FCX) and its consolidated subsidiaries. The results of operations reported and summarized below are not necessarily indicative of future operating results (refer to “Cautionary Statement” for further discussion). References to “Notes” are Notes included in our Notes to Consolidated Financial Statements. Throughout Management's Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures About Market Risk all references to earnings or losses per share are on a diluted basis, unless otherwise noted.

We are one of the world’s largest copper, gold and molybdenum mining companies in terms of reserves and production. Our portfolio of assets includes the Grasberg minerals district in Indonesia, significant mining operations in North and South America, and the Tenke Fungurume (Tenke) minerals district in the Democratic Republic of Congo (DRC). The Grasberg minerals district contains the largest single recoverable copper reserve and the largest single gold reserve of any mine in the world based on the latest available reserve data provided by third-party industry consultants. We also operate Atlantic Copper, our wholly owned copper smelting and refining unit in Spain.

We have significant reserves, resources and future development opportunities within our portfolio of assets. At December 31, 2011, our estimated consolidated recoverable proven and probable reserves totaled 119.7 billion pounds of copper, 33.9 million ounces of gold and 3.42 billion pounds of molybdenum, which were determined using long-term average prices of $2.00 per pound for copper, $750 per ounce for gold and $10 per pound for molybdenum. We have added significant reserves in recent years and drilling activities conducted at our existing mines during 2011 indicated the potential for significant reserve additions in future periods. Refer to “Critical Accounting Estimates – Mineral Reserves” for further discussion.

During 2011, 34 percent of our consolidated copper production was from North America, 35 percent from South America, 23 percent from Indonesia and 8 percent from Africa. More specifically, copper production from the Grasberg, Morenci and Cerro Verde mines totaled 55 percent of our consolidated copper production in 2011. We also produce gold, primarily at the Grasberg minerals district in Indonesia, which accounted for 92 percent of our consolidated gold production for 2011. For 2011, 46 percent of our consolidated molybdenum production was from the Henderson molybdenum mine, 42 percent was produced at certain of our North America copper mines and 12 percent was produced at our Cerro Verde mine. Refer to “Operations” for further discussion of our mining operations.

We have increased production at several of our copper mines and are undertaking major development projects, including the development of the underground ore bodies at Grasberg, an expansion at Tenke Fungurume and a concentrator expansion at Cerro Verde. Studies are also under way to evaluate a major mill project at El Abra and various mill projects to process significant sulfide ore in North America. The advancement of these studies is designed to position us to invest in production growth within our existing portfolio of assets. Refer to “Operations” for further discussion of our current operating and development activities.

Our results for the year 2011, compared with 2010, primarily reflected higher realized copper and gold prices, partially offset by lower copper and gold sales volumes (refer to “Consolidated Results” for further discussion of our consolidated financial results for the years ended December 31, 2011, 2010 and 2009).

Our 2011 results also reflect the impact of labor disruptions at PT Freeport Indonesia. PT Freeport Indonesia's milling operations were temporarily suspended during fourth-quarter 2011 because of damage to concentrate and fuel pipelines resulting from civil unrest that occurred during the strike by union workers. The financial terms of a new two-year labor agreement for PT Freeport Indonesia's workers were reached in mid-December 2011. Repairs to the damaged pipelines are substantially complete, and PT Freeport Indonesia has begun ramping up production. PT Freeport Indonesia is working cooperatively with the Government of Indonesia to address security issues. Maintaining security is a requirement of returning to normal operations. Although a new labor agreement has been reached, we are experiencing work interruptions in connection with our efforts to resume normal operations at PT Freeport Indonesia. PT Freeport Indonesia is complying with the terms of the new labor agreement with its union. Certain of the returning workers have engaged in acts of violence and intimidation against workers and supervisory

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personnel who did not participate in the strike. On February 23, 2012, the union indicated that it will engage in a work stoppage and we temporarily suspended operations to protect our employees and assets following the incidents of intimidation and threats within the workforce. We are working with union officials and government authorities to resolve the ongoing issues. The work interruptions and temporary suspension of operations at PT Freeport Indonesia may impact our ability to achieve projected sales volumes, unit net cash costs and operating cash flows in 2012. PT Freeport Indonesia's projected sales volumes of 930 million pounds of copper and 1.1 million ounces of gold for the year 2012 (which includes 210 million pounds of copper and 400 thousand ounces of gold in first-quarter 2012) are under review. Refer to "Consolidated Results" and "Operations - Indonesia Mining" for further discussion of the impacts from the labor disruptions.

At December 31, 2011, we had $4.8 billion in consolidated cash and $3.5 billion in long-term debt. During 2011, we repaid $1.2 billion in debt, including the April 2011 redemption of $1.1 billion of outstanding 8.25% Senior Notes. In February 2012, we sold $3.0 billion in senior notes in three tranches and announced our intent to redeem the remaining $3.0 billion of our 8.375% Senior Notes. We expect to record a loss on early extinguishment of debt of $168 million ($147 million to net income attributable to common stockholders) in first-quarter 2012 in connection with the redemption of our 8.375% Senior Notes. Refer to "Capital Resources and Liquidity - Financing Activities" and to Notes 9 and 20 for further discussion of these transactions.

During 2011 we paid common stock dividends totaling $1.4 billion, which included $474 million in supplemental dividends. In February 2012, our Board of Directors authorized an increase in the cash dividend on our common stock to an annual rate of $1.25 per share ($0.3125 per share quarterly). Refer to "Capital Resources and Liquidity - Financing Activities" for further discussion.

At current copper prices we expect to produce substantial operating cash flows in 2012, and plan to focus on using our cash to invest in our development projects and return cash to shareholders through common stock dividends and/or share repurchases.

OUTLOOK

We view the long-term outlook for our business positively, supported by limitations on supplies of copper and by the requirements for copper in the world’s economy. We will continue to adjust our operating strategy as market conditions change. Our financial results can vary as a result of fluctuations in market prices for copper, gold and molybdenum. World market prices for these commodities have fluctuated historically and are affected by numerous factors beyond our control. Because we cannot control the price of our products, the key measures that management focuses on in operating our business are sales volumes, unit net cash costs and operating cash flow. Discussion of the outlook for each of these measures follows.

Sales Volumes.  Following are our projected consolidated sales volumes for 2012 and actual consolidated sales volumes for 2011:

	2012		2011
	(Projected)		(Actual)
Copper (millions of recoverable pounds):
North America copper mines	1,320		1,247
South America mining	1,275		1,322
Indonesia mining	930		846
Africa mining	290		283
	3,815		3,698
Gold (thousands of recoverable ounces):
Indonesia mining	1,135		1,270
South America mining	100		101
North America copper mines	N/A	a	7
	1,235		1,378
Molybdenum (millions of recoverable pounds)b	80		79

a. Gold sales volumes are not projected for our North America copper mines.

b. Includes sales of molybdenum produced at our North and South America copper mines.

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Our projected 2012 copper sales volumes are expected to be higher, compared with 2011, primarily because of higher production from North America and Indonesia, partly offset by slightly lower production in South America. Gold sales in 2012 are projected to be lower than 2011 sales because of mine sequencing in Indonesia. Molybdenum sales in 2012 are expected to be similar to 2011, with higher production from primary molybdenum mines, offset by lower production from our North and South America copper mines. The achievement of projected 2012 sales volumes depends on a number of factors, including the timing of restoring normal operations at Grasberg following the extended disruption in 2011 and because of recent work interruptions and the temporary suspension of operations, achievement of targeted mining rates, the successful operation of production facilities, the impact of weather conditions and other factors.

Unit Net Cash Costs.  Assuming average prices of $1,600 per ounce of gold and $13 per pound of molybdenum for 2012, and achievement of current projected 2012 sales volume and cost estimates, we estimate our consolidated unit net cash costs (net of by-product credits) for our copper mining operations would average approximately $1.38 per pound in 2012. Consolidated unit net cash costs in 2012 are expected to be higher than consolidated unit net cash costs of $1.01 per pound of copper in 2011 because of higher labor, energy and other inputs, and lower by-product credits, partly offset by higher copper volumes. Quarterly unit net cash costs vary with fluctuations in sales volumes and average realized prices for gold and molybdenum.The impact of price changes in 2012 on consolidated unit net cash costs would approximate $0.015 per pound for each $50 per ounce change in the average price of gold and $0.02 for each $2 per pound change in the average price of molybdenum. Refer to “Consolidated Results – Production and Delivery Costs” for further discussion of consolidated production and delivery costs.

Operating Cash Flows.  Our operating cash flows vary with prices realized from copper, gold and molybdenum sales, our sales volumes, production costs, income taxes and other working capital changes and other factors. Based on projected consolidated sales volumes and unit net cash costs for 2012, and assuming average prices of $3.50 per pound of copper, $1,600 per ounce of gold and $13 per pound of molybdenum in 2012, consolidated operating cash flows are estimated to approximate $4.7 billion in 2012, net of an estimated $0.8 billion for working capital requirements. Projected operating cash flows for the year 2012 also reflect estimated taxes of $2.1 billion (refer to “Consolidated Results – Provision for Income Taxes” for discussion of our projected annual consolidated effective tax rate for 2012). The impact of price changes in 2012 on operating cash flows would approximate $300 million for each $0.10 per pound change in the average price of copper, $50 million for each $50 per ounce change in the average price of gold and $90 million for each $2 per pound change in the average price of molybdenum.

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COPPER, GOLD AND MOLYBDENUM MARKETS

World prices for copper, gold and molybdenum can fluctuate significantly. During the period from January 2002 through January 2012, the London Metal Exchange (LME) spot copper price varied from a low of $0.64 per pound in 2002 to a record high of $4.60 per pound in February 2011; the London gold price fluctuated from a low of $278 per ounce in 2002 to a record high of $1,895 per ounce in September 2011; and the Metals Week Molybdenum Dealer Oxide weekly average price ranged from a low of $2.40 per pound in 2002 to a high of $39.25 per pound in 2005. Copper, gold and molybdenum prices are affected by numerous factors beyond our control as described further in our “Risk Factors” contained in Part I, Item 1A of our Form 10-K for the year ended December 31, 2011.

*  Excludes Shanghai stocks, producer, consumer and merchant stocks.

This graph presents LME spot copper prices and reported stocks of copper at the LME and the New York Mercantile Exchange (COMEX) from January 2002 through January 2012. From 2006 through most of 2008, limited supplies, combined with growing demand from China and other emerging economies, resulted in high copper prices and low levels of inventories. In late 2008, slowing consumption, turmoil in the U.S. financial markets and concerns about the global economy led to a sharp decline in copper prices, which reached a low of $1.26 per pound in December 2008. Copper prices have since improved from the 2008 lows, attributable to a combination of strong demand from emerging markets and limitations on available supply. During 2011, LME spot copper prices ranged from $3.08 per pound to $4.60 per pound, averaged $4.00 per pound and closed at $3.43 per pound on December 30, 2011. Combined LME and COMEX inventories rose somewhat in 2011, compared to year-end 2010 levels, primarily as a result of reduced Chinese imports.

We believe the underlying fundamentals of the copper business remain positive, supported by the significant role of copper in the global economy, limited supplies from existing mines and the absence of significant new development projects. Future copper prices are expected to be volatile and are likely to be influenced by demand from China (which represented approximately 40 percent of global consumption in 2011), economic activity in the U.S. and other industrialized countries, the timing of the development of new supplies of copper and production levels of mines and copper smelters. The LME spot copper price closed at $3.81 per pound on February 15, 2012.

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This graph presents London PM gold prices from January 2002 through January 2012. During 2011, gold prices were volatile ranging from $1,319 per ounce to a record high of $1,895 per ounce, averaging $1,572 per ounce and closing at $1,575 per ounce on December 30, 2011. We believe the outlook for gold remains positive, supported by continued macroeconomic uncertainty and elevated sovereign debt levels. Gold prices closed at $1,726 per ounce on February 15, 2012.

This graph presents the Metals Week Molybdenum Dealer Oxide weekly average price from January 2002 through January 2012. In late 2008, molybdenum prices declined significantly as a result of the financial market turmoil and a decline in demand; however, molybdenum prices have since increased, which we believe is supported by

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improved economic conditions and resulting demand increases. During 2011, the weekly average price of molybdenum ranged from $12.70 per pound to $17.88 per pound, averaged $15.49 per pound and was $13.35 per pound on December 30, 2011. The Metals Week Molybdenum Dealer Oxide weekly average price was $14.50 per pound on February 15, 2012.

CRITICAL ACCOUNTING ESTIMATES

Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on our consolidated financial statements, which have been prepared in conformity with generally accepted accounting principles (GAAP) in the United States (U.S.). The preparation of these statements requires that we make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. We base these estimates on historical experience and on assumptions that we consider reasonable under the circumstances; however, reported results could differ from those based on the current estimates under different assumptions or conditions. The areas requiring the use of management’s estimates are also discussed in Note 1 under the subheading “Use of Estimates.” Management has reviewed the following discussion of its development and selection of critical accounting estimates with the Audit Committee of our Board of Directors.

Mineral Reserves. Recoverable proven and probable reserves are the part of a mineral deposit that can be economically and legally extracted or produced at the time of the reserve determination. The determination of reserves involves numerous uncertainties with respect to the ultimate geology of the ore bodies, including quantities, grades and recovery rates. Estimating the quantity and grade of reserves requires us to determine the size, shape and depth of our ore bodies by analyzing geological data, such as samplings of drill holes, tunnels and other underground workings. In addition to the geology of our mines, assumptions are required to determine the economic feasibility of mining these reserves, including estimates of future commodity prices and demand, the mining methods we use and the related costs incurred to develop and mine our reserves. Our estimates of recoverable proven and probable reserves are prepared by and are the responsibility of our employees. A majority of these estimates have been reviewed and verified by independent experts in mining, geology and reserve determination.

At December 31, 2011, our consolidated recoverable proven and probable reserves included 119.7 billion pounds of copper, 33.9 million ounces of gold and 3.42 billion pounds of molybdenum, which were determined using long-

term average prices of $2.00 per pound for copper, $750 per ounce for gold and $10.00 per pound for molybdenum. The following table summarizes changes in our estimated consolidated recoverable proven and probable copper, gold and molybdenum reserves during 2011 and 2010:

	Copper (billion pounds)		Gold (million ounces)	Molybdenum (billion pounds)
Consolidated reserves at December 31, 2009	104.2		37.2	2.59
Net additions/revisions	20.2		0.2	0.87
Production	(3.9	)	(1.9)	(0.07)
Consolidated reserves at December 31, 2010	120.5		35.5	3.39
Net additions/revisions	2.9		(0.2)	0.11
Production	(3.7	)	(1.4)	(0.08)
Consolidated reserves at December 31, 2011	119.7		33.9	3.42

Refer to Note 18 for further information regarding estimated recoverable proven and probable reserves.

As discussed in Note 1, we depreciate our life-of-mine mining and milling assets and values assigned to proven and probable reserves using the unit-of-production (UOP) method based on our estimated recoverable proven and probable reserves, and also have other assets that are depreciated on a straight-line basis over their estimated useful lives. Because the economic assumptions used to estimate reserves change from period to period and additional geological data is generated during the course of operations, estimates of reserves may change, which could have a significant impact on our results of operations, including changes to prospective depreciation rates and asset carrying values. Based on projected copper sales volumes for 2012, if estimated copper reserves at our mines were 10 percent higher at December 31, 2011, we estimate that our annual depreciation, depletion and amortization expense for 2012 would decrease by $38 million ($20 million to net income attributable to common stockholders), and a 10 percent decrease in copper reserves would increase depreciation, depletion and amortization expense by $46 million ($24 million to net income attributable to common stockholders). We perform

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annual assessments of our existing assets in connection with the review of mine operating and development plans. If it is determined that assigned asset lives do not reflect the expected remaining period of benefit, any change could affect prospective depreciation rates.

As discussed below and in Note 1, we review and evaluate our long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amount of such assets may not be recoverable, and changes to our estimates of recoverable proven and probable reserves could have an impact on our assessment of asset recoverability.

Recoverable Copper. We record, as inventory, applicable costs for copper contained in mill and leach stockpiles that are expected to be processed in the future based on proven processing technologies. Mill and leach stockpiles are evaluated periodically to ensure that they are stated at the lower of cost or market. Accounting for recoverable copper from mill and leach stockpiles represents a critical accounting estimate because (i) it is generally impracticable to determine copper contained in mill and leach stockpiles by physical count, which requires management to employ reasonable estimation methods and (ii) recovery rates from leach stockpiles can vary significantly. The quantity of material delivered to mill and leach stockpiles is based on surveyed volumes of mined material and daily production records. Sampling and assaying of blasthole cuttings determine the estimated copper grade contained in the material delivered to the mill and leach stockpiles.

Expected copper recovery rates for mill stockpiles are determined by metallurgical testing. The recoverable copper in mill stockpiles, once entered into the production process, can be produced into copper concentrate almost immediately.

Expected copper recovery rates for leach stockpiles are determined using small-scale laboratory tests, small- to large-scale column testing (which simulates the production-scale process), historical trends and other factors,

including mineralogy of the ore and rock type. Ultimate recovery of copper contained in leach stockpiles can vary significantly from a low percentage to more than 90 percent depending on several variables, including type of copper recovery, mineralogy and particle size of the rock. For newly placed material on active stockpiles, as much as 70 percent of the copper ultimately recoverable may be extracted during the first year, and the remaining copper may be recovered over many years.

Processes and recovery rates are monitored regularly, and recovery rate estimates are adjusted periodically as additional information becomes available and as related technology changes. At December 31, 2011, estimated consolidated recoverable copper was 3.1 billion pounds in leach stockpiles (with a carrying value of $2.4 billion) and 1.3 billion pounds in mill stockpiles (with a carrying value of $604 million).

Environmental Obligations. Our mining, exploration, production and historical operating activities are subject to stringent laws and regulations governing the protection of the environment, and compliance with those laws requires significant expenditures. Environmental expenditures for closed facilities and closed portions of operating facilities are expensed or capitalized depending upon their future economic benefits. The guidance provided by U.S. GAAP requires that liabilities for contingencies be recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Refer to Note 1 for discussion of our accounting policy for environmental expenditures.

Accounting for environmental obligations represents a critical accounting estimate because changes to environmental laws and regulations and/or circumstances affecting our operations could result in significant changes to our estimates, which could have a significant impact on our results of operations. We review changes in facts and circumstances associated with our environmental and reclamation obligations at least quarterly. Judgments and estimates are based upon available facts, existing technology, presently enacted laws and regulations, remediation experience, whether or not we are a potentially responsible party (PRP), the ability of other PRPs to pay their allocated portions and take into consideration reasonably possible outcomes. Our cost estimates can change substantially as additional information becomes available regarding the nature or extent of site contamination, updated cost assumptions (including increases and decreases to cost estimates and changes in the anticipated scope and timing of remediation activities), required remediation methods and actions by or against governmental agencies or private parties.

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At December 31, 2011, environmental obligations recorded in our consolidated balance sheets totaled approximately $1.5 billion, which reflect obligations for environmental liabilities attributed to the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) or analogous state programs and for estimated future costs associated with environmental matters at closed facilities and closed portions of certain operating facilities.

Following is a summary of changes in our estimated environmental obligations for the years ended December 31 (in millions):

	2011			2010			2009
Balance at beginning of year	$	1,422		$	1,464		$	1,401
Accretion expensea	88			97			102
Additions	132			19			40
Reductions	(68		)	—			(3		)
Spending	(121		)	(158		)	(76		)
Balance at end of year	$	1,453		$	1,422		$	1,464

a. Represents accretion of the fair value of environmental obligations assumed in the acquisition of Freeport-McMoRan Corporation (FMC, formerly Phelps Dodge Corporation), which were determined on a discounted cash flow basis.

Refer to Note 13 for further discussion of environmental obligations.

Reclamation and Closure Costs. Reclamation is an ongoing activity that occurs throughout the life of a mine. We record the fair value of our estimated asset retirement obligations (AROs) associated with tangible long-lived assets in the period incurred. Fair value is measured as the present value of cash flow estimates after considering inflation and then applying a market risk premium. Our cost estimates are reflected on a third-party cost basis and comply with our legal obligation to retire tangible long-lived assets in the period incurred. These cost estimates may differ from financial assurance cost estimates for reclamation activities because of a variety of factors, including obtaining updated cost estimates for reclamation activities, the timing of reclamation activities, changes in scope and the exclusion of certain costs not considered reclamation and closure costs. Refer to Note 1 for further discussion of our accounting policy for reclamation and closure costs.

Generally, ARO activities are specified by regulations or in permits issued by the relevant governing authority, and management judgment is required to estimate the extent and timing of expenditures based on life-of-mine planning. Accounting for reclamation and closure costs represents a critical accounting estimate because (i) we will not incur most of these costs for a number of years, requiring us to make estimates over a long period, (ii) reclamation and closure laws and regulations could change in the future and/or circumstances affecting our operations could change, either of which could result in significant changes to our current plans, (iii) calculating the fair value of our AROs requires management to estimate projected cash flows, make long-term assumptions about inflation rates, determine our credit-adjusted, risk-free interest rates and determine market risk premiums that are appropriate for our operations and (iv) given the magnitude of our estimated reclamation and closure costs, changes in any or all of these estimates could have a significant impact on our results of operations.

At least annually, we review our ARO estimates for changes in the projected timing of certain reclamation costs, changes in cost estimates and additional AROs incurred during the period. Following is a summary of changes in our AROs for the years ended December 31 (in millions):

	2011				2010				2009
Balance at beginning of year	$	856			$	731			$	712
Liabilities incurred	9				5				12
Revisions to cash flow estimates	48			a	105			a	(17		)
Accretion expense	58				54				52
Spending	(49		)		(38		)		(28		)
Foreign currency translation adjustment	(1		)		(1		)		—
Balance at end of year	$	921			$	856			$	731

a. During 2011 and 2010 the revisions to cash flow estimates primarily related to increased costs of near-term closure activities at our Chino mine. Additionally, accelerated timing of closure activities at the Chino mine resulted in revisions to cash flow estimates during 2010.

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Refer to Note 13 for further discussion of reclamation and closure costs.

Deferred Taxes. In preparing our annual consolidated financial statements, we estimate the actual amount of taxes currently payable or receivable as well as deferred tax assets and liabilities attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which these temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates or laws is recognized in income in the period in which such changes are enacted.

A valuation allowance is provided for those deferred tax assets for which it is more likely than not that the related benefits will not be realized. In determining the amount of the valuation allowance, we consider estimated future taxable income as well as feasible tax planning strategies in each jurisdiction. If we determine that we will not realize all or a portion of our deferred tax assets, we will increase our valuation allowance. Conversely, if we determine that we will ultimately be able to realize all or a portion of the related benefits for which a valuation allowance has been provided, all or a portion of the related valuation allowance will be reduced.

Our valuation allowances totaled $2.4 billion at December 31, 2011, and $2.2 billion at December 31, 2010, and covered all of our U.S. foreign tax credit carryforwards, and a portion of our foreign net operating loss carryforwards, U.S. state net operating loss carryforwards and U.S. minimum tax credit carryforwards. These valuation allowances include $80 million at December 31, 2011, and $59 million at December 31, 2010, for tax benefits that, if recognized, would be credited directly to other comprehensive income. The $167 million increase in the valuation allowance during 2011 was primarily the result of an increase in foreign tax credit carryforwards, partially offset by a decrease in minimum tax credit carryforwards.

Refer to Note 12 for further discussion.

Impairment of Assets. We evaluate our long-lived assets (to be held and used) for impairment when events or changes in circumstances indicate that the related carrying amount of such assets may not be recoverable. In evaluating our long-lived assets for recoverability, estimates of after-tax undiscounted future cash flows of our individual mining operations are used, with impairment losses measured by reference to fair value. As quoted market prices are unavailable for our individual mining operations, fair value is determined through the use of discounted estimated future cash flows. The estimated cash flows used to assess recoverability of our long-lived assets and measure fair value of our mining operations are derived from current business plans, which are developed using near-term price forecasts reflective of the current price environment and management's projections for long-term average metal prices. In addition to near and long-term metal price assumptions, other key assumptions include commodity-based and other input costs; proven and probable reserves, including the timing and cost to develop and produce the reserves; and the use of appropriate escalation and discount rates.

Because the cash flows used to assess recoverability of our long-lived assets and measure fair value of our mining operations require us to make several estimates and assumptions that are subject to risk and uncertainty, changes in these estimates and assumptions could result in the impairment of our long-lived asset values. Events that could result in impairment of our long-lived assets include, but are not limited to, decreases in future metal prices, decreases in estimated recoverable proven and probable reserves and any event that might otherwise have a material adverse effect on mine site production levels or costs.

We did not record asset impairment charges during the three years ended December 31, 2011.

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CONSOLIDATED RESULTS

	Years Ended December 31,
	2011			2010			2009
Financial Data (in millions, except per share amounts)
Revenuesa,b	$	20,880		$	18,982		$	15,040
Operating incomeb,c	9,140		d	9,068			6,503
Net income attributable to FCX common stockholders	4,560		d,e,f	4,273		e	2,527		e
Diluted net income per share attributable to FCX
common stockholders	$	4.78	d,e,f	$	4.57	e	$	2.93	e
Diluted weighted-average common shares outstanding	955			949			938
Mining Operating Data
Copper (recoverable)
Production (millions of pounds)	3,691			3,908			4,103
Sales, excluding purchases (millions of pounds)	3,698			3,896			4,111
Average realized price per pound	$	3.86		$	3.59		$	2.60
Site production and delivery costs per poundg	$	1.72		$	1.40		$	1.12
Unit net cash costs per poundg	$	1.01		$	0.79		$	0.55
Gold (recoverable)
Production (thousands of ounces)	1,383			1,886			2,664
Sales, excluding purchases (thousands of ounces)	1,378			1,863			2,639
Average realized price per ounce	$	1,583		$	1,271		$	993
Molybdenum (recoverable)
Production (millions of pounds)	83			72			54
Sales, excluding purchases (millions of pounds)	79			67			58
Average realized price per pound	$	16.98		$	16.47		$	12.36

a. Includes the impact of adjustments to provisionally priced concentrate and cathode sales recognized in prior years. Refer to “Revenues” and “Disclosures About Market Risks – Commodity Price Risk” for further discussion.

b. Refer to Note 17 for a summary of revenues and operating income by business segment.

c. We defer recognizing profits on intercompany sales until final sales to third parties occur. Refer to "Operations - Atlantic Copper Smelting & Refining" for a summary of net impacts from changes in these deferrals.

d. Includes charges totaling $116 million ($50 million to net income attributable to common stock or $0.05 per share) primarily associated with bonuses for new labor agreements and other employee costs at PT Freeport Indonesia, Cerro Verde and El Abra.

e. Includes net losses on early extinguishment and conversions of debt totaling $60 million ($0.06 per share) in 2011 associated with the redemption of our $1.1 billion outstanding 8.25% Senior Notes and open-market purchases of Senior Notes, $71 million ($0.07 per share) in 2010 associated with the redemption of our $1.0 billion Senior Floating Rate Notes and open-market purchases of Senior Notes, and $43 million ($0.04 per share) in 2009 associated with the redemption and open-market purchases of Senior Notes. Refer to Note 9 for further discussion.

f. Includes additional taxes of $49 million ($0.05 per share) associated with Peru's new mining tax and royalty regime. Refer to "Provision for Income Taxes" for further discussion.

g. Reflects per pound weighted average production and delivery costs and unit net cash costs (net of by-product credits) for all copper mines, excluding net noncash and other costs. The 2009 period excludes the results of Africa mining as start-up activities were still under way. For reconciliations of the per pound costs by operating division to production and delivery costs applicable to sales reported in our consolidated financial statements, refer to “Operations – Unit Net Cash Costs” and to “Product Revenues and Production Costs.”

Revenues

Consolidated revenues totaled $20.9 billion in 2011, compared with $19.0 billion in 2010 and $15.0 billion in 2009, and include the sale of copper concentrates, copper cathodes, copper rod, gold, molybdenum and other metals by our North and South America copper mines, the sale of copper concentrates (which also contain significant quantities of gold and silver) by our Indonesia mining operations, the sale of copper cathodes and cobalt hydroxide by our Africa mining operations, the sale of molybdenum in various forms by our Molybdenum operations, and the sale of copper cathodes, copper anodes, and gold in anodes and slimes by Atlantic Copper. Our mining revenues for 2011 include sales of copper (78 percent), gold (12 percent) and molybdenum (6 percent).

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Following is a summary of year-to-year changes in our consolidated revenues (in millions):

	2011			2010
Consolidated revenues – prior year	$	18,982		$	15,040
Higher (lower) price realizations from mining operations:
Copper	999			3,779
Gold	430			517
Molybdenum	39			273
Silver	121			44
Cobalt	(24		)	—
(Lower) higher sales volumes from mining operations:
Copper	(711		)	(563		)
Gold	(616		)	(771		)
Molybdenum	206			105
Silver	27			(15		)
Cobalt	59			195
Unfavorable impacts of net adjustments for prior year
provisionally priced sales	(4		)	(155		)
Higher purchased copper, net of lower purchased molybdenum	258			188
Higher Atlantic Copper revenues	493			599
Other, including intercompany eliminations	621			(254		)
Consolidated revenues – current year	$	20,880		$	18,982

Price Realizations

Our consolidated revenues can vary significantly as a result of fluctuations in the market prices of copper, gold, molybdenum, silver and cobalt. Realized copper prices averaged $3.86 per pound in 2011, $3.59 per pound in 2010 and $2.60 per pound in 2009. Realized gold prices averaged $1,583 per ounce in 2011, $1,271 per ounce in 2010 and $993 per ounce in 2009. Realized molybdenum prices averaged $16.98 per pound in 2011, $16.47 per pound in 2010 and $12.36 per pound in 2009.

Sales Volumes

2011 Compared with 2010. Consolidated sales volumes totaled 3.7 billion pounds of copper, 1.4 million ounces of gold and 79 million pounds of molybdenum in 2011, compared with 3.9 billion pounds of copper, 1.9 million ounces of gold and 67 million pounds of molybdenum in 2010. Lower consolidated copper sales volumes in 2011 primarily reflect lower sales volumes in Indonesia, partly offset by higher sales volumes in North America. Lower consolidated gold sales volumes in 2011 primarily reflect lower Grasberg production. Sales of copper and gold in 2011 were adversely affected by labor disruptions and the temporary suspension of milling operations at PT Freeport Indonesia from damage to the concentrate and fuel pipelines. The estimated impact of the labor and pipeline disruptions totaled 235 million pounds of copper and 275 thousand ounces of gold in 2011. Higher consolidated molybdenum sales volumes in 2011 primarily reflected improved demand. Refer to “Operations” for further discussion of sales volumes at our operating divisions.

2010 Compared with 2009. Consolidated sales volumes totaled 3.9 billion pounds of copper, 1.9 million ounces of gold and 67 million pounds of molybdenum in 2010, compared with 4.1 billion pounds of copper, 2.6 million ounces of gold and 58 million pounds of molybdenum in 2009. Lower consolidated copper sales volumes in 2010 primarily resulted from lower ore grades at Grasberg and lower volumes at our North America copper mines, partly offset by additional volumes provided by our Tenke mine in Africa. Lower consolidated gold sales volumes in 2010 primarily reflected lower ore grades at Grasberg from planned mine sequencing. Higher consolidated molybdenum sales volumes in 2010 reflected improved demand.

Provisionally Priced Sales

Substantially all of our copper concentrate and cathode sales contracts provide final copper pricing in a specified future month (generally one to four months from the shipment date) based primarily on quoted LME monthly average spot copper prices (refer to “Disclosures About Market Risks – Commodity Price Risk” for further discussion). Adjustments to the December 31, 2010, provisionally priced copper sales resulted in unfavorable impacts to consolidated revenues of $12 million ($5 million to net income attributable to common stockholders or $0.01 per share) in 2011. Adjustments to the December 31, 2009, provisionally priced copper sales resulted in unfavorable impacts to consolidated revenues of $24 million ($10 million to net income attributable to common stockholders or $0.01 per share) in 2010. Adjustments to the December 31, 2008, provisionally priced copper sales

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resulted in favorable impacts to consolidated revenues of $132 million ($61 million to net income attributable to common stockholders or $0.07 per share) in 2009.

The year 2011 also reflected unfavorable impacts of $13 million from adjustments to December 31, 2010, provisionally priced gold sales.

Purchased Copper and Molybdenum

From time to time we purchase copper cathode for processing by our Rod & Refining segment when production from our North America copper mines does not meet customer demand. The increases in purchased copper in 2011 and 2010, compared with prior years, resulted from higher customer demand and higher copper prices. We also purchase molybdenum concentrates when customer demand requires it. Partly offsetting increases in purchased copper were decreases in purchased molybdenum in 2011 and 2010, compared with prior years.

Atlantic Copper Revenues

The increases in Atlantic Copper’s revenues in 2011 and 2010, compared with prior years, primarily reflected higher copper and gold revenues associated with higher copper and gold prices.

Production and Delivery Costs

2011 Compared with 2010

Consolidated production and delivery costs totaled $9.9 billion in 2011, compared with $8.3 billion in 2010. Higher production and delivery costs for 2011 primarily reflect increased mining and milling activities in North America, higher input costs at our mining operations, higher costs of concentrate purchases at Atlantic Copper associated with higher copper and gold prices and higher costs of copper cathode purchases in North America associated with higher copper prices.

Consolidated unit site production and delivery costs for our copper mining operations averaged $1.72 per pound of copper in 2011, compared with $1.40 per pound of copper in 2010. Higher site production and delivery costs in 2011 primarily reflected lower copper sales volumes in Indonesia and increased mining and input costs in North and South America and Africa. Consolidated unit net cash costs in 2011 also included $116 million ($0.03 per pound) primarily related to bonuses for new labor agreements and other employee costs in Indonesia and South America.  Refer to “Operations – Unit Net Cash Costs” for further discussion of unit net cash costs associated with our operating divisions, and to “Product Revenues and Production Costs” for reconciliations of per pound costs by operating division to production and delivery costs applicable to sales reported in our consolidated financial statements.

Our copper mining operations require significant energy, principally diesel, electricity, coal and natural gas. Energy costs approximated 21 percent of our consolidated copper production costs in 2011, and included purchases of approximately 225 million gallons of diesel fuel; 6,475 gigawatt hours of electricity at our North America, South America and Africa copper mining operations (we generate all of our power at our Indonesia mining operation); 650 thousand metric tons of coal for our coal power plant in Indonesia; and 1 million MMBTU (million British thermal units) of natural gas at certain of our North America mines. For 2012, we estimate energy costs will approximate 23 percent of our consolidated copper production costs.

2010 Compared with 2009

Consolidated production and delivery costs totaled $8.3 billion in 2010, compared with $7.0 billion in 2009. Higher production and delivery costs for 2010 primarily reflect higher input costs at our mining operations and higher costs of concentrate purchases at Atlantic Copper associated with higher copper prices.

Depreciation, Depletion and Amortization

Consolidated depreciation, depletion and amortization expense totaled $1.0 billion in 2011, 2010 and 2009. Depreciation will vary under the UOP method as a result of increases and decreases in sales volumes and the related UOP rates at our mining operations.

Selling, General and Administrative Expenses

Consolidated selling, general and administrative expenses totaled $415 million in 2011, $381 million in 2010 and $321 million in 2009. Higher selling, general and administrative expenses in 2011, compared with 2010, primarily reflected higher charitable contributions. Approximately half of the increase in selling, general and administrative expenses in 2010, compared with 2009, reflected higher stock-based compensation and other incentive compensation costs related to improved financial performance.

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Exploration and Research Expenses

Consolidated exploration and research expenses totaled $271 million in 2011, $143 million in 2010 and $90 million in 2009. We are conducting exploration activities near our existing mines with a focus on opportunities to expand reserves that will support additional future production capacity in the large mineral districts where we currently operate. Exploration results indicate opportunities for significant future potential reserve additions in North and South America and in the Tenke minerals district. The drilling data in North America continue to indicate the potential for expanded sulfide production.

For 2012, exploration and research expenditures are being increased to an estimated $330 million, including approximately $275 million for exploration. Exploration activities will continue to focus primarily on the potential for future reserve additions in our existing minerals districts.

Environmental Obligations and Shutdown Costs

Environmental obligations costs reflect net revisions to our long-term environmental obligations, which will vary from period to period because of changes to environmental laws and regulations and/or circumstances affecting our operations and could result in significant changes in our estimates (refer to "Critical Accounting Estimates - Environmental Obligations" for further discussion). Shutdown costs include care and maintenance costs and any litigation, remediation, or related expenditures associated with closed facilities or operations.

Environmental obligations and shutdown costs totaled $134 million in 2011, $19 million in 2010 and $106 million in 2009 (which also included net restructuring charges of $23 million in 2009). Refer to Note 13 for further discussion of environmental obligations and litigation matters associated with closed facilities or operations.

Interest Expense, Net

Consolidated interest expense (before capitalization) totaled $421 million in 2011, $528 million in 2010 and $664 million in 2009. Lower interest expense primarily reflected the impact of debt repayments during 2011, 2010 and 2009 (refer to Note 9 for discussion of debt repayments).

Capitalized interest is primarily related to our development projects and totaled $109 million in 2011, $66 million in 2010 and $78 million in 2009. Refer to "Operations" for further discussion of current development projects.

Losses on Early Extinguishment of Debt

During 2011, we recorded losses on early extinguishment of debt totaling $68 million ($60 million to net income attributable to common stockholders or $0.06 per share) associated with the redemption of our 8.25% Senior Notes, the revolving credit facilities that were replaced in March 2011 and open-market purchases of our 9.50% Senior Notes.

During 2010, we recorded losses on early extinguishment of debt totaling $81 million ($71 million to net income attributable to common stockholders or $0.07 per share) associated with the redemption of our Senior Floating Rate Notes and open-market purchases of our 8.25%, 8.375% and 9.50% Senior Notes.

During 2009, we recorded losses on early extinguishment of debt totaling $48 million ($43 million to net income attributable to common stockholders or $0.04 per share) associated with the redemption of our 6.875% Senior Notes and open-market purchases of our 8.25%, 8.375% and 8¾% Senior Notes.

Refer to Note 9 for further discussion of these transactions.

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Provision for Income Taxes

Following is a summary of the approximate amounts in the calculation of our consolidated provision for income taxes for 2011 and 2010 (in millions, except percentages):

	Year Ended December 31, 2011							Year Ended December 31, 2010
	Incomea		Effective Tax Rate	Income Tax Provision				Income (Loss)a			Effective Tax Rate	Income Tax (Provision) Benefit
U.S.	$	2,112	23%	$	(478	)		$	1,307		19%	$	(244	)
South America	3,017		36%	(1,075		)	b	2,995			33%	(999		)
Indonesia	2,923		43%	(1,256		)		4,069			42%	(1,709		)
Africa	357		34%	(120		)		395			30%	(118		)
Eliminations and other	409		N/A	(158		)		(254		)	N/A	87
Consolidated FCX	$	8,818	35%	$	(3,087	)		$	8,512		35%	$	(2,983	)

a. Represents income (loss) by geographic location before income taxes and equity in affiliated companies’ net earnings.

b. On September 29, 2011, Peru enacted its new mining tax and royalty regime. Under the new regime, companies that do not have stability agreements will be subject to a revised royalty and a special mining tax. Cerro Verde operates under a stability agreement and therefore, is not subject to the revised royalty and special mining tax until its stability agreement expires on December 31, 2013. The Peruvian government has also created a special mining burden that companies with stability agreements can elect to pay. The special mining burden is levied on profits and is based on a sliding scale of 4 to 13 percent, with a maximum effective rate of 8.79 percent. Cerro Verde will elect to pay this special mining burden during the remaining term of its stability agreement. As a result, Cerro Verde recognized additional current and deferred tax expense of $53 million ($49 million net of noncontrolling interests) in 2011. The deferred portion of this accrual relates primarily to the assets recorded in connection with the 2007 acquisition of FMC.

Our estimated consolidated effective tax rate for 2012 will vary with commodity price changes and the mix of income from international and U.S. operations. Assuming average prices of $3.50 per pound for copper, $1,600 per ounce for gold, $13 per pound for molybdenum and current sales volume and cost estimates, we estimate our annual consolidated effective tax rate will approximate 34 percent.

Following is a summary of the approximate amounts in the calculation of our consolidated provision for income taxes for 2009 (in millions, except percentages):

	Year Ended December 31, 2009
	Income (Loss)a			Effective Tax Rate		Income Tax (Provision) Benefit
U.S.	$	98		36%		$	(35	)	b
South America	2,010			32%		(650		)
Indonesia	4,000			42%		(1,697		)
Africa	(60		)	25%		15
Eliminations and other	(232		)	N/A		60
Consolidated FCX	$	5,816		40%	c	$	(2,307	)

a. Represents income (loss) by geographic location before income taxes and equity in affiliated companies’ net earnings.

b. Includes a favorable adjustment totaling $43 million resulting from completion of a review of U.S. deferred income tax accounts.

c. The difference between our consolidated effective income tax rate of 40 percent and the U.S. federal statutory rate of 35 percent primarily was attributable to the high proportion of income earned in Indonesia, which was taxed at an effective tax rate of 42 percent.

Refer to Note 12 for further discussion of income taxes.

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OPERATIONS

North America Copper Mines

We currently operate seven copper mines in North America – Morenci, Bagdad, Safford, Sierrita and Miami in Arizona, and Tyrone and Chino in New Mexico. All of these mining operations are wholly owned, except for Morenci, an unincorporated joint venture, in which we own an 85 percent undivided interest.

The North America copper mines include open-pit mining, sulfide ore concentrating, leaching and solution extraction/electrowinning (SX/EW) operations. Molybdenum concentrate is also produced by certain of our North America copper mines (primarily Sierrita, Bagdad and Morenci). A majority of the copper produced at our North America copper mines is cast into copper rod by our Rod & Refining operations. The remainder of our North America copper sales is primarily in the form of copper cathode or copper concentrate.

Operating and Development Activities. During 2011 and 2010, we increased production at our North America copper mines, which had been curtailed in late 2008 because of weak market conditions. Further discussion of the development projects at our North America copper mines is presented below. We also have a number of opportunities to invest in additional production capacity at several of our North America copper mines. Exploration results in recent years indicate the potential for additional sulfide development in North America.

Morenci Mine Ramp-up and Mill Restart. During second-quarter 2011, we completed the ramp up of Morenci's mining rates to 635,000 metric tons of ore per day and milling rates to approximately 50,000 metric tons of ore per day, resulting in increased copper production of approximately 125 million pounds of copper per year.

We are advancing a feasibility study to expand mining and milling capacity at Morenci to process additional sulfide ore identified through exploratory drilling. This project, which would require significant investment, would increase milling rates from the current level of 50,000 metric tons of ore per day to approximately 115,000 metric tons of ore per day and target incremental annual copper production of approximately 225 million pounds. Completion of the feasibility study is expected in the first half of 2012.

Chino Restart. During 2011, mining and milling activities were restarted at the Chino mine. Production at Chino, which totaled 69 million pounds of copper in 2011, is expected to increase to approximately 200 million pounds of copper per year by 2014. Costs for the project associated with equipment and mill refurbishment are expected to approximate $175 million. Project costs of $105 million have been incurred as of December 31, 2011.

Miami Restart. The ramp up of mining activities at the Miami mine is complete. Production at Miami totaled 66 million pounds of copper in 2011, and is expected to be similar in 2012.

Safford Sulphur Burner. During 2011, we completed construction of the $150 million sulphur burner project at the Safford mine, which is providing a more cost-effective source of sulphuric acid used in SX/EW operations and lower transportation costs.

Twin Buttes. In December 2009, we purchased the Twin Buttes copper mine, which ceased operations in 1994, and is adjacent to our Sierrita mine. The purchase provides significant synergies in the Sierrita minerals district, including the potential for expanded mining activities and access to material that can be used for Sierrita tailings and stockpile reclamation purposes. We are conducting drilling on the property and metallurgical studies to support a feasibility study expected to commence in 2012.

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Operating Data. Following is summary operating data for the North America copper mines for the years ended December 31.

	2011		2010		2009
Operating Data, Net of Joint Venture Interest
Copper (millions of recoverable pounds)
Production	1,258		1,067		1,147
Sales, excluding purchases	1,247		1,085		1,187
Average realized price per pound	$	3.99	$	3.42	$	2.38
Molybdenum (millions of recoverable pounds)
Productiona	35		25		25
100% Operating Data
SX/EW operations
Leach ore placed in stockpiles (metric tons per day)	888,300		648,800		589,400
Average copper ore grade (percent)	0.24		0.24		0.29
Copper production (millions of recoverable pounds)	801		746		859
Mill operations
Ore milled (metric tons per day)	222,800		189,200		169,900
Average ore grade (percent):
Copper	0.38		0.32		0.33
Molybdenum	0.03		0.03		0.02
Copper recovery rate (percent)	83.1		83.0		86.0
Production (millions of recoverable pounds):
Copper	549		398		364
Molybdenum	35		25		25

a. Reflects molybdenum production from certain of our North America copper mines. Sales of molybdenum are reflected in the Molybdenum division.

2011 Compared with 2010

Copper sales volumes from our North America copper mines increased to 1.2 billion pounds in 2011, compared with 1.1 billion pounds in 2010, primarily reflecting increased production at the Morenci, Miami and Chino mines.

Copper sales volumes from our North America copper mines are expected to approximate 1.3 billion pounds in 2012. Molybdenum production from our North America copper mines is expected to approximate 30 million pounds in 2012.

2010 Compared with 2009

Copper sales volumes from our North America copper mines decreased to 1.1 billion pounds in 2010, compared with 1.2 billion pounds in 2009, primarily because of anticipated lower ore grades at Safford and Sierrita, lower mill throughput because of unscheduled crusher maintenance at Bagdad and mill maintenance at Sierrita.

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Unit Net Cash Costs. Unit net cash costs per pound of copper is a measure intended to provide investors with information about the cash-generating capacity of our mining operations expressed on a basis relating to the primary metal product for our respective operations. We use this measure for the same purpose and for monitoring operating performance by our mining operations. This information differs from measures of performance determined in accordance with U.S. GAAP and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. This measure is presented by other mining companies, although our measure may not be comparable to similarly titled measures reported by other companies.

Gross Profit per Pound of Copper and Molybdenum

The following tables summarize unit net cash costs and gross profit per pound at the North America copper mines for the years ended December 31. Refer to “Product Revenues and Production Costs” for an explanation of the “by-product” and “co-product” methods and a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in our consolidated financial statements.

	2011									2010
	By-			Co-Product Method						By-			Co-Product Method
	Product Method			Copper			Molyb- denuma			Product Method			Copper			Molyb- denuma
Revenues, excluding adjustments	$	3.99		$	3.99		$	15.72		$	3.42		$	3.42		$	15.60
Site production and delivery, before net noncash
and other costs shown below	1.78			1.60			6.86			1.50			1.35			7.95
By-product creditsa	(0.48		)	—			—			(0.35		)	—			—
Treatment charges	0.11			0.10			—			0.09			0.09			—
Unit net cash costs	1.41			1.70			6.86			1.24			1.44			7.95
Depreciation, depletion and amortization	0.21			0.20			0.39			0.24			0.22			0.54
Noncash and other costs, net	0.07			0.07			0.05			0.12			0.12			0.01
Total unit costs	1.69			1.97			7.30			1.60			1.78			8.50
Revenue adjustments	—			—			—			—			—			—
Idle facility and other non-inventoriable costs	(0.06		)	(0.06		)	(0.04		)	(0.08		)	(0.08		)	(0.02		)
Gross profit per pound	$	2.24		$	1.96		$	8.38		$	1.74		$	1.56		$	7.08
Copper sales (millions of recoverable pounds)	1,244			1,244						1,082			1,082
Molybdenum sales (millions of recoverable pounds)b							35									25

a. Molybdenum credits and revenues reflect volumes produced at market-based pricing and also include tolling revenues at Sierrita.

b. Reflects molybdenum produced by certain of our North America copper mines.

Unit net cash costs (net of by-product credits) for our North America copper mines increased to $1.41 per pound of copper in 2011, compared with $1.24 per pound in 2010, primarily reflecting higher site production and delivery costs ($0.28 per pound) resulting from increased mining and milling activities and higher input costs. Partly offsetting higher site production and delivery costs were higher molybdenum credits ($0.13 per pound) primarily resulting from higher molybdenum volumes.

Our operating North America copper mines have varying cost structures because of differences in ore grades and characteristics, processing costs, by-products and other factors. During 2011, average unit net cash costs for the North America copper mines ranged from a net cost of $0.41 per pound to $1.97 per pound at the individual mines and averaged $1.41 per pound. Assuming achievement of current sales volume and cost estimates and an average price of $13 per pound of molybdenum for 2012, we estimate that average unit net cash costs (net of by-product credits) for our North America copper mines would approximate $1.67 per pound of copper in 2012. North America's average unit net cash costs for 2012 would change by approximately $0.04 per pound for each $2 per pound change in the average price of molybdenum during 2012. Higher projected unit net cash costs in 2012, compared with 2011, primarily reflect higher mining and milling rates and lower by-product credits associated with lower molybdenum grades and prices, partly offset by higher projected copper volumes.

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	2010									2009
	By-			Co-Product Method						By-			Co-Product Method
	Product Method			Copper			Molyb- denuma			Product Method			Copper			Molyb- denuma
Revenues, excluding adjustments	$	3.42		$	3.42		$	15.60		$	2.38		$	2.38		$	10.96
Site production and delivery, before net noncash
and other costs shown below	1.50			1.35			7.95			1.25			1.15			5.67
By-product creditsa	(0.35		)	—			—			(0.23		)	—			—
Treatment charges	0.09			0.09			—			0.09			0.09			—
Unit net cash costs	1.24			1.44			7.95			1.11			1.24			5.67
Depreciation, depletion and amortization	0.24			0.22			0.54			0.22			0.21			0.40
Noncash and other costs, net	0.12			0.12			0.01			0.11			0.11			0.07
Total unit costs	1.60			1.78			8.50			1.44			1.56			6.14
Revenue adjustments	—			—			—			0.08			0.08			—
Idle facility and other non-inventoriable costs	(0.08		)	(0.08		)	(0.02		)	(0.08		)	(0.08		)	—
Gross profit per pound	$	1.74		$	1.56		$	7.08		$	0.94		$	0.82		$	4.82
Copper sales (millions of recoverable pounds)	1,082			1,082						1,185			1,185
Molybdenum sales (millions of recoverable pounds)b							25									25

a. Molybdenum credits and revenues reflect volumes produced at market-based pricing and also include tolling revenues at Sierrita.

b. Reflects molybdenum produced by certain of our North America copper mines.

Unit net cash costs (net of by-product credits) for our North America copper mines increased to $1.24 per pound of copper in 2010, compared with $1.11 per pound in 2009, primarily reflecting higher site production and delivery costs ($0.25 per pound) associated with higher input costs and increased mining and milling activities at certain mines. Partly offsetting these higher costs were higher molybdenum credits ($0.12 per pound) primarily resulting from higher molybdenum prices.

Some of our U.S. copper rod customers request a fixed market price instead of the COMEX average price in the month of shipment. We hedge this price exposure in a manner that allows us to receive market prices in the month of shipment while the customer pays the fixed price they requested. Because these contracts previously did not meet the criteria to qualify for hedge accounting, revenue adjustments in 2009 reflected unrealized gains on these copper derivative contracts (refer to Note 15 for further discussion).

South America Mining

We operate four copper mines in South America – Cerro Verde in Peru, and El Abra, Candelaria and Ojos del Salado in Chile. We own a 53.56 percent interest in Cerro Verde, a 51 percent interest in El Abra and an 80 percent interest in both Candelaria and Ojos del Salado.

South America mining includes open-pit and underground mining, sulfide ore concentrating, leaching and SX/EW operations. Production from our South America mines is sold as copper concentrate or copper cathode under long-term contracts. Our South America mines ship a portion of their copper concentrate inventories to Atlantic Copper, an affiliated smelter. In addition to copper, the Cerro Verde mine also produces molybdenum concentrates, and the Candelaria and Ojos del Salado mines also produce gold and silver.

Operating and Development Activities.

El Abra Sulfide. During 2011, we commenced production from El Abra's newly commissioned stacking and leaching facilities to transition from production of oxide to sulfide ores. Production from the sulfide ore will approximate 300 million pounds of copper per year, replacing the depleting oxide copper production. The aggregate capital investment for this project is expected to total $725 million through 2015, of which approximately $580 million is for the initial phase of the project that is expected to be completed in first-quarter 2012. Project costs of $513 million have been incurred as of December 31, 2011 ($152 million during 2011).

We are also engaged in pre-feasibility studies for a potential large-scale milling operation at El Abra to process additional sulfide material and to achieve higher recoveries. Exploration results at El Abra indicate the potential for a significant sulfide resource. Exploration activities are continuing.

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Cerro Verde Expansion. At Cerro Verde, plans for a large-scale concentrator expansion continue to be advanced. The approximate $4 billion project would expand the concentrator facilities from 120,000 metric tons of ore per day to 360,000 metric tons of ore per day and provide incremental annual production of approximately 600 million pounds of copper and 15 million pounds of molybdenum beginning in 2016. An environmental impact assessment was filed in fourth-quarter 2011.

An agreement has been reached with the Regional Government of Arequipa, the National Government, Servicio de Agua Potable y Alcantarillado de Arequipa S. A (SEDAPAR) and other local institutions to allow Cerro Verde to finance the engineering and construction of a wastewater treatment plant for Arequipa, should Cerro Verde proceed with the expansion. Once Cerro Verde obtains a license for the treated water, it would be used to supplement existing water supplies to support the potential concentrator expansion.

Candelaria Water. As part of our overall strategy to supply water to the Candelaria mine, we completed construction of a pipeline to bring water from a nearby water treatment facility. In addition, we have completed engineering and began construction for a desalination plant that will supply Candelaria’s longer term water needs. The plant is expected to be completed in early 2013 at a capital investment of approximately $300 million. Project costs of $126 million have been incurred as of December 31, 2011 ($120 million during 2011).

Other Matters. In fourth-quarter 2011, there was an approximate two-month labor strike at Cerro Verde during the negotiation of a new labor agreement. The strike did not have a significant impact on production, and a new three-year agreement with the union was reached in late December 2011. Also during fourth-quarter 2011, El Abra negotiated a new four-year labor agreement with its union, which will replace the agreement scheduled to expire in July 2012. In December 2011, bonuses totaling $50 million were paid to employees at Cerro Verde and El Abra pursuant to the new labor agreements.

Operating Data. Following is summary operating data for the South America mining operations for the years ended December 31.

	2011		2010		2009
Copper (millions of recoverable pounds)
Production	1,306		1,354		1,390
Sales	1,322		1,335		1,394
Average realized price per pound	$	3.77	$	3.68	$	2.70
Gold (thousands of recoverable ounces)
Production	101		93		92
Sales	101		93		90
Average realized price per ounce	$	1,580	$	1,263	$	982
Molybdenum (millions of recoverable pounds)
Productiona	10		7		2
SX/EW operations
Leach ore placed in stockpiles (metric tons per day)	245,200		268,800		258,200
Average copper ore grade (percent)	0.50		0.41		0.45
Copper production (millions of recoverable pounds)	439		504		565
Mill operations
Ore milled (metric tons per day)	189,200		188,800		181,300
Average ore grade:
Copper (percent)	0.66		0.65		0.66
Gold (grams per metric ton)	0.12		0.10		0.10
Molybdenum (percent)	0.02		0.02		0.02
Copper recovery rate (percent)	89.6		90.0		88.9
Production (recoverable):
Copper (millions of pounds)	867		850		825
Gold (thousands of ounces)	101		93		92
Molybdenum (millions of pounds)	10		7		2

a. Reflects molybdenum production from at Cerro Verde mine. Sales of molybdenum are reflected in the Molybdenum division.

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2011 Compared with 2010

Copper sales volumes from our South America mining operations totaled 1.3 billion pounds in 2011 and 2010, primarily reflecting lower mining rates at El Abra as it transitions from oxide to sulfide ores, partially offset by higher ore grades at Candelaria.

Consolidated sales volumes from our South America mines are expected to approximate 1.3 billion pounds of copper and 100 thousand ounces of gold in 2012, slightly lower than 2011 sales. Lower projected ore grades at Cerro Verde and Candelaria in 2012 are expected to be partly offset by higher production at El Abra. Molybdenum production from Cerro Verde is expected to approximate 10 million pounds in 2012.

2010 Compared with 2009

Copper sales volumes from our South America mining operations decreased to 1.3 billion pounds in 2010, compared with 1.4 billion in 2009, primarily reflecting anticipated lower ore grades at El Abra.

Unit Net Cash Costs. Unit net cash costs per pound of copper is a measure intended to provide investors with information about the cash-generating capacity of our mining operations expressed on a basis relating to the primary metal product for our respective operations. We use this measure for the same purpose and for monitoring operating performance by our mining operations. This information differs from measures of performance determined in accordance with U.S. GAAP and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. This measure is presented by other mining companies, although our measure may not be comparable to similarly titled measures reported by other companies.

Gross Profit per Pound of Copper

The following tables summarize unit net cash costs and gross profit per pound at our South America mining operations for the years ended December 31. These tables reflect unit net cash costs per pound of copper under the by-product and co-product methods as our South America mining operations also had small amounts of molybdenum, gold and silver sales. Refer to “Product Revenues and Production Costs” for an explanation of the “by-product” and “co-product” methods and a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in our consolidated financial statements.

	2011							2010
	By-Product Method				Co-Product Method			By-Product Method			Co-Product Method
Revenues, excluding adjustments	$	3.77			$	3.77		$	3.68		$	3.68
Site production and delivery, before net noncash
and other costs shown below	1.38			a	1.27			1.21			1.14
By-product credits	(0.35		)		—			(0.21		)	—
Treatment charges	0.17				0.17			0.15			0.15
Unit net cash costs	1.20				1.44			1.15			1.29
Depreciation, depletion and amortization	0.20				0.18			0.19			0.18
Noncash and other costs, net	0.02				0.02			0.01			0.01
Total unit costs	1.42				1.64			1.35			1.48
Revenue adjustments, primarily for pricing on
prior period open sales	0.01				—			(0.01		)	(0.01		)
Other non-inventoriable costs	(0.04		)		(0.03		)	(0.04		)	(0.04		)
Gross profit per pound	$	2.32			$	2.10		$	2.28		$	2.15
Copper sales (millions of recoverable pounds)	1,322				1,322			1,335			1,335

a. Includes impacts of $50 million ($0.04 per pound) associated with bonuses paid at Cerro Verde and El Abra pursuant to the new labor agreements.

Unit net cash costs (net of by-product credits) for our South America mining operations increased to $1.20 per pound of copper in 2011, compared with $1.15 per pound in 2010, primarily reflecting higher site production and delivery costs ($0.17 per pound) associated with higher input costs and the impact of bonuses paid pursuant to new labor agreements, partially offset by higher gold, molybdenum and silver credits ($0.14 per pound).

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Our South America mines have varying cost structures because of differences in ore grades and characteristics, processing costs, by-products and other factors. During 2011, unit net cash costs for the South America mines ranged from $0.93 per pound to $1.67 per pound at the individual mines and averaged $1.20 per pound. Assuming achievement of current sales volume and cost estimates and average prices of $1,600 per ounce of gold and $13 per pound of molybdenum in 2012, we estimate that average unit net cash costs (net of by-product credits) for our South America mining operations would approximate $1.41 per pound of copper in 2012. Higher projected unit net cash costs in 2012, compared with 2011, primarily reflect increases in input costs, including labor and energy, lower by-product credits and slightly lower projected volumes.

	2010						2009
	By-Product Method			Co-Product Method			By-Product Method			Co-Product Method
Revenues, excluding adjustments	$	3.68		$	3.68		$	2.70		$	2.70
Site production and delivery, before net noncash
and other costs shown below	1.21			1.14			1.08			1.02
By-product credits	(0.21		)	—			(0.11		)	—
Treatment charges	0.15			0.15			0.15			0.15
Unit net cash costs	1.15			1.29			1.12			1.17
Depreciation, depletion and amortization	0.19			0.18			0.20			0.19
Noncash and other costs, net	0.01			0.01			0.02			0.02
Total unit costs	1.35			1.48			1.34			1.38
Revenue adjustments, primarily for pricing on
prior period open sales	(0.01		)	(0.01		)	0.08			0.08
Other non-inventoriable costs	(0.04		)	(0.04		)	(0.02		)	(0.02		)
Gross profit per pound	$	2.28		$	2.15		$	1.42		$	1.38
Copper sales (millions of recoverable pounds)	1,335			1,335			1,394			1,394

Unit net cash costs (net of by-product credits) for our South America mining operations increased to $1.15 per pound of copper in 2010, compared with $1.12 per pound in 2009, primarily reflecting higher site production and delivery costs ($0.13 per pound) associated with higher input costs and the impact of higher copper prices on profit sharing programs. Partly offsetting higher site production and delivery costs were higher molybdenum, gold and silver credits ($0.10 per pound) associated with higher molybdenum volumes and prices and higher gold prices.

Indonesia Mining

Indonesia mining includes PT Freeport Indonesia’s Grasberg minerals district. We own 90.64 percent of PT Freeport Indonesia, including 9.36 percent through our wholly owned subsidiary, PT Indocopper Investama.

PT Freeport Indonesia produces copper concentrates, which contain significant quantities of gold and silver. Substantially all of PT Freeport Indonesia’s copper concentrates are sold under long-term contracts, of which approximately one-half is sold to affiliated smelters, Atlantic Copper and PT Smelting (PT Freeport Indonesia’s 25-percent owned copper smelter and refinery in Indonesia - refer to Note 2 for further discussion), and the remainder to other customers.

Refer to Note 2 for further discussion of our joint ventures with Rio Tinto plc and to Note 14 for further discussion of PT Freeport Indonesia's Contract of Work with the Government of Indonesia. Refer to "Risk Factors" contained in Part I, Item 1A of our annual report on Form 10-K for the year ended December 31, 2011, for discussion of risks associated with operations in Indonesia.

Development Activities. We have several projects in progress in the Grasberg minerals district, primarily related to the development of the large-scale, high-grade underground ore bodies located beneath and nearby the Grasberg open pit. In aggregate, these underground ore bodies are expected to ramp up to approximately 240,000 metric tons of ore per day following the currently anticipated transition from the Grasberg open pit in 2016. Over the next five years, aggregate capital spending on these projects is expected to average $700 million per year ($550 million per year net to PT Freeport Indonesia). Considering the long-term nature and large size of these projects, actual costs could differ materially from these estimates.

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The following provides additional information on these projects, including the continued development of the Common Infrastructure project, the Grasberg Block Cave and Big Gossan underground mines and development of the Deep Mill Level Zone (DMLZ) ore body, that lies below the Deep Ore Zone (DOZ) underground mine.

Common Infrastructure and Underground Mines. In 2004, PT Freeport Indonesia commenced its Common Infrastructure project to provide access to its large undeveloped underground ore bodies located in the Grasberg minerals district through a tunnel system located approximately 400 meters deeper than its existing underground tunnel system. In addition to providing access to our underground ore bodies, the tunnel system will enable PT Freeport Indonesia to conduct future exploration in prospective areas associated with currently identified ore bodies. The tunnel system was completed to the Big Gossan terminal and the Big Gossan mine has been brought into production. We have also advanced development of both the DMLZ and Grasberg spurs, and have completed the tunneling required to reach these underground ore bodies.

The Grasberg Block Cave underground mine accounts for over one-third of our reserves in Indonesia. Production at the Grasberg Block Cave mine is currently scheduled to commence at the end of mining the Grasberg open pit, which is currently expected to continue until mid-2016. The timing of the transition to underground Grasberg Block Cave mine development will continue to be assessed. Targeted production rates once the Grasberg Block Cave mining operation reaches full capacity are expected to approximate 160,000 metric tons of ore per day.

Aggregate mine development capital for the Grasberg Block Cave mine and associated Common Infrastructure is expected to approximate $4.2 billion (incurred from 2008 to 2021), with PT Freeport Indonesia’s share totaling approximately $3.8 billion. Aggregate project costs totaling $569 million have been incurred through December 31, 2011 ($309 million during 2011).

Big Gossan. The Big Gossan underground mine is a high-grade deposit located near PT Freeport Indonesia’s existing milling complex. The Big Gossan mine is being developed as an open-stope mine with backfill consisting of mill tailings and cement, an established mining methodology. Production, which began in fourth-quarter 2010, is designed to ramp up to 7,000 metric tons of ore per day by mid-2013 (equal to average annual aggregate incremental production of 125 million pounds of copper and 65,000 ounces of gold, with PT Freeport Indonesia receiving 60 percent of these amounts). The aggregate capital investment for this project is currently estimated at approximately $550 million, with PT Freeport Indonesia’s share totaling approximately $518 million. Aggregate project costs of $494 million have been incurred through December 31, 2011 ($50 million during 2011).

DMLZ. The DMLZ ore body lies below the DOZ mine at the 2,590-meter elevation and represents the downward continuation of mineralization in the Ertsberg East Skarn system and neighboring Ertsberg porphyry. We plan to mine the ore body using a block-cave method with production beginning in 2015, near completion of mining at the DOZ mine. Drilling efforts continue to determine the extent of this ore body. We continue to develop the Common Infrastructure project and tunnels from mill level. In 2009, we completed a portion of the spur to the DMLZ mine and reached the edge of the DMLZ terminal and development continued on terminal infrastructure and mine access in 2011. Aggregate mine development capital costs for the DMLZ are expected to approximate $2.2 billion (incurred from 2009 to 2020), with PT Freeport Indonesia’s share totaling approximately $1.3 billion. Aggregate project costs totaling $269 million have been incurred through December 31, 2011 ($166 million during 2011). Targeted production rates once the DMLZ mining operation reaches full capacity are expected to approximate 80,000 metric tons of ore per day.

Other Matters. During 2011, PT Freeport Indonesia was adversely affected by labor disruptions, including the eight-day work stoppage in July 2011 and the approximate three-month strike that concluded in December 2011. Additionally, PT Freeport Indonesia's milling operations were temporarily suspended during fourth-quarter 2011 because of damage to concentrate and fuel pipelines resulting from civil unrest that occurred during the strike. Repairs to the damaged pipelines are substantially complete, and PT Freeport Indonesia has begun ramping up production. PT Freeport Indonesia is working cooperatively with the Government of Indonesia to address security issues. Maintaining security is a requirement of returning to normal operations. Although a new labor agreement has been reached, we are experiencing work interruptions in connection with our efforts to resume normal operations at PT Freeport Indonesia. PT Freeport Indonesia is complying with the terms of the new labor agreement with its union. Certain of the returning workers have engaged in acts of violence and intimidation against workers and supervisory personnel who did not participate in the strike. On February 23, 2012, the union indicated that it will engage in a work stoppage and we temporarily suspended operations to protect our employees and assets following the incidents of intimidation and threats within the workforce. We are working with union officials and government authorities to resolve the ongoing issues. The work interruptions and temporary suspension of

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operations at PT Freeport Indonesia may impact our ability to achieve projected sales volumes, unit net cash costs and operating cash flows in 2012.

In mid-December 2011, the financial terms of a new two-year labor agreement for PT Freeport Indonesia were reached. Pursuant to the terms, PT Freeport Indonesia agreed to increase base wages by 24 percent in the first year and 13 percent in the second year (equivalent to a 40 percent increase over two-years on a compound basis). PT Freeport Indonesia also paid a bonus equivalent to three months of base wages and agreed to provide other benefits, including enhancements to housing allowances, educational assistance and retirement savings plans. The parties also agreed that future wage negotiations would be based on living costs and the competitiveness of wages within Indonesia. The impact of the terms agreed to in PT Freeport Indonesia's new labor agreement, including the bonuses and other strike-related employee costs, totaled approximately $66 million for 2011.

Between July 2009 and February 2012, there were 32 shooting incidents in and around the Grasberg minerals district, including along the road leading to our mining and milling operations, which resulted in 15 fatalities and 56 injuries. The investigation of these matters is continuing. We have taken precautionary measures, including limiting use of the road to secured convoys. The Indonesian government has responded with additional security forces and expressed a commitment to protect the safety of the community and our operations. Prolonged limitations on access to the road could adversely affect operations at the mine. The safety of our workforce is a critical concern, and PT Freeport Indonesia is working cooperatively with the Government of Indonesia to address security issues.

Operating Data. Following is summary operating data for our Indonesia mining operations for the years ended December 31.

	2011		2010		2009
Operating Data, Net of Joint Venture Interest
Copper (millions of recoverable pounds)
Production	846		1,222		1,412
Sales	846		1,214		1,400
Average realized price per pound	$	3.85	$	3.69	$	2.65
Gold (thousands of recoverable ounces)
Production	1,272		1,786		2,568
Sales	1,270		1,765		2,543
Average realized price per ounce	$	1,583	$	1,271	$	994
100% Operating Data
Ore milled (metric tons per day):a
Grasberg open pit	112,900		149,800		166,300
DOZ underground mine	51,700		79,600		72,000
Big Gossan underground mine	1,500		800		—
Total	166,100		230,200		238,300
Average ore grade:
Copper (percent)	0.79		0.85		0.98
Gold (grams per metric ton)	0.93		0.90		1.30
Recovery rates (percent):
Copper	88.3		88.9		90.6
Gold	81.2		81.7		83.7
Production (recoverable):
Copper (millions of pounds)	882		1,330		1,641
Gold (thousands of ounces)	1,444		1,964		2,984

a. Amounts represent the approximate average daily throughput processed at PT Freeport Indonesia’s mill facilities from each producing mine.

2011 Compared with 2010

Sales volumes from our Indonesia mining operations declined to 846 million pounds of copper and 1.3 million ounces of gold in 2011, compared with 1.2 billion pounds of copper and 1.8 million ounces of gold in 2010. Lower copper and gold sales volumes in 2011 primarily reflect the impact of labor-related disruptions and the temporary

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suspension of milling operations in fourth-quarter 2011 because of damage to the concentrate and fuel pipelines. The estimated impact of the labor and pipeline disruptions (net to PT Freeport Indonesia), including the eight-day strike in July 2011, totaled approximately 235 million pounds of copper and approximately 275 thousand ounces of gold.

At the Grasberg open pit, the sequencing of mining areas with varying ore grades also causes fluctuations in the timing of ore production resulting in varying quarterly and annual sales of copper and gold. Consolidated sales volumes from our Indonesia mining operations are expected to approximate 930 million pounds of copper and 1.1 million ounces of gold for 2012. Gold sales in 2012 are projected to be lower than in 2011 because of mining in a lower grade section of the Grasberg open pit in 2012. Indonesia's projected sales volumes for the year 2012 (which includes 210 million pounds of copper and 400 thousand ounces of gold in first-quarter 2012) are under review. The achievement of projected 2012 sales volumes depends on a number of factors, including the timing of restoring full operations at Grasberg following the extended disruption in 2011 and because of recent work interruptions and the temporary suspension of operations.

2010 Compared with 2009

Sales volumes from our Indonesia mining operations decreased to 1.2 billion pounds of copper and 1.8 million ounces of gold in 2010, compared with 1.4 billion pounds of copper and 2.5 million ounces of gold in 2009. Lower copper and gold sales volumes in 2010 primarily reflected mining in a lower grade section of the Grasberg open pit during the first half of 2010.

Unit Net Cash Costs. Unit net cash costs per pound of copper is a measure intended to provide investors with information about the cash-generating capacity of our mining operations expressed on a basis relating to the primary metal product for our respective operations. We use this measure for the same purpose and for monitoring operating performance by our mining operations. This information differs from measures of performance determined in accordance with U.S. GAAP and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. This measure is presented by other mining companies, although our measure may not be comparable to similarly titled measures reported by other companies.

Gross Profit per Pound of Copper/per Ounce of Gold

The following tables summarize the unit net cash costs (credits) and gross profit per pound of copper and per ounce of gold at our Indonesia mining operations for the years ended December 31. Refer to “Production Revenues and Production Costs” for an explanation of “by-product” and “co-product” methods and a reconciliation of unit net cash costs (credits) per pound to production and delivery costs applicable to sales reported in our consolidated financial statements.

	2011										2010
	By-				Co-Product Method						By-			Co-Product Method
	Product Method				Copper			Gold			Product Method			Copper			Gold
Revenues, excluding adjustments	$	3.85			$	3.85		$	1,583		$	3.69		$	3.69		$	1,271
Site production and delivery, before net noncash
and other costs shown below	2.21			a	1.34			551			1.53			1.01			347
Gold and silver credits	(2.47		)		—			—			(1.92		)	—			—
Treatment charges	0.19				0.11			46			0.22			0.15			50
Royalty on metals	0.16				0.10			41			0.13			0.08			29
Unit net cash costs (credits)	0.09				1.55			638			(0.04		)	1.24			426
Depreciation and amortization	0.25				0.16			63			0.21			0.14			48
Noncash and other costs, net	0.04				0.02			10			0.04			0.02			9
Total unit costs	0.38				1.73			711			0.21			1.40			483
Revenue adjustments, primarily for pricing on
prior period open sales	(0.01		)		(0.01		)	(13		)	(0.01		)	(0.01		)	1
Gross profit per pound/ounce	$	3.46			$	2.11		$	859		$	3.47		$	2.28		$	789
Copper sales (millions of recoverable pounds)	846				846						1,214			1,214
Gold sales (thousands of recoverable ounces)								1,270									1,765

a. Includes impacts of $66 million ($0.08 per pound) associated with bonuses and other strike-related costs.

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Unit net cash costs (net of gold and silver credits) for our Indonesia mining operations averaged $0.09 per pound of copper in 2011, compared with a net credit of $0.04 per pound in 2010. Higher unit net cash costs primarily reflected higher site production and delivery costs ($0.68 per pound) primarily from lower copper sales volumes and the impact of bonuses and other strike-related costs, partially offset by higher gold and silver credits ($0.55 per pound).

Treatment charges vary with the volume of metals sold and the price of copper, and royalties vary with the volume of metals sold and the prices of copper and gold.

Assuming achievement of current sales volume and cost estimates, and an average gold price of $1,600 per ounce for 2012, we estimate that average unit net cash costs for Indonesia (net of gold and silver credits) would approximate $0.98 per pound of copper for the year 2012. Indonesia's unit net cash costs for 2012 would change by $0.06 per pound for each $50 per ounce change in the average price of gold during 2012. Higher projected unit net cash costs in 2012, compared with 2011, primarily reflect higher input costs, including labor and energy, and lower by-product credits, partly offset by higher projected copper volumes. Quarterly unit net cash costs are expected to vary significantly with variations in quarterly metal sales volumes.

	2010								2009
	By-			Co-Product Method					By-			Co-Product Method
	Product Method			Copper			Gold		Product Method			Copper		Gold
Revenues, excluding adjustments	$	3.69		$	3.69		$	1,271	$	2.65		$	2.65	$	994
Site production and delivery, before net noncash
and other costs shown below	1.53			1.01			347		1.05			0.62		232
Gold and silver credits	(1.92		)	—			—		(1.86		)	—		—
Treatment charges	0.22			0.15			50		0.22			0.13		49
Royalty on metals	0.13			0.08			29		0.10			0.06		23
Unit net cash (credits) costs	(0.04		)	1.24			426		(0.49		)	0.81		304
Depreciation and amortization	0.21			0.14			48		0.20			0.11		43
Noncash and other costs, net	0.04			0.02			9		0.03			0.02		6
Total unit costs (credits)	0.21			1.40			483		(0.26		)	0.94		353
Revenue adjustments, primarily for pricing on
prior period open sales	(0.01		)	(0.01		)	1		0.04			0.04		2
Gross profit per pound/ounce	$	3.47		$	2.28		$	789	$	2.95		$	1.75	$	643
Copper sales (millions of recoverable pounds)	1,214			1,214					1,400			1,400
Gold sales (thousands of recoverable ounces)							1,765							2,543

Unit net cash costs (net of gold and silver credits) increased to a net credit of $0.04 per pound of copper in 2010, compared with a net credit of $0.49 per pound in 2009, reflecting higher site production and delivery costs ($0.48 per pound) primarily associated with lower copper sales volumes, higher input costs (including materials, labor and energy), higher maintenance and support costs and higher cost sharing under joint venture arrangements. Partly offsetting higher site production and delivery costs were higher gold and silver credits ($0.06 per pound) associated with higher gold prices.

Africa Mining

Africa mining consists of the Tenke copper and cobalt mining concessions in the Katanga province of the DRC. The Tenke mine includes surface mining, leaching and SX/EW operations. Copper production from the Tenke mine is sold as copper cathode. In addition to copper, the Tenke mine produces cobalt hydroxide. All Africa mining operations are conducted by Tenke Fungurume Mining S.A.R.L. (TFM).

In October 2010, the Government of the DRC concluded its review of TFM’s existing mining contracts and confirmed that they are in good standing. In connection with the review, TFM made several commitments that have been reflected in amendments to its mining contracts, which were signed by the parties in December 2010 (refer to Note 14 for further discussion). In March 2011, the amendments were approved by a ministerial council; and a Presidential Decree, signed by the President and Prime Minister of the DRC, was issued in April 2011. After receiving the required government approval of the modifications to TFM's bylaws that reflect the agreement with the Government of the DRC, our effective ownership interest in the project will be reduced to 56.0 percent prospectively, compared to our current ownership interest of 57.75 percent.

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Operating and Development Activities. Our initial investment in the project approximated $2 billion, and we have received loan repayments of approximately $700 million through December 31, 2011.

The milling facilities at Tenke, which were designed to process ore at a rate of 8,000 metric tons of ore per day, continue to perform above capacity, with throughput averaging 11,100 metric tons of ore per day in 2011. Mining rates have been increased to enable additional copper production from the initial project capacity of 250 million pounds of copper per year to ramp up to approximately 290 million pounds of copper per year.

We are undertaking a second phase of the project, which would include optimizing the current plant and increasing capacity. As part of the second phase, we are expanding the mill rate to 14,000 metric tons of ore per day and are constructing related processing facilities that would target the addition of approximately 150 million pounds of copper per year. The approximate $850 million project, which includes mill upgrades, additional mining equipment and a new tank house and sulphuric acid plant expansion, is targeted for completion in 2013. The second phase of the project will be funded with cash generated from operations, and where additional funds are required, we will fund 70 percent and Lundin Mining Corporation will fund 30 percent.

We continue to engage in drilling activities, exploration analyses and metallurgical testing to evaluate the potential of the highly prospective minerals district at Tenke. These analyses are being incorporated in future plans to evaluate opportunities for expansion. Future expansions are subject to a number of factors, including economic and market conditions and the business and investment climate in the DRC.

Operating Data. Following is summary operating data for our Africa mining operations for the years ended December 31.

	2011		2010		2009		a
Copper (millions of recoverable pounds)
Production	281		265		154
Sales	283		262		130
Average realized price per poundb	$	3.74	$	3.45	$	2.85
Cobalt (millions of recoverable pounds)
Production	25		20		N/A		c
Sales	25		20		N/A		c
Average realized price per pound	$	9.99	$	10.95	N/A		c
Ore milled (metric tons per day)	11,100		10,300		7,300
Average ore grade (percent):
Copper	3.41		3.51		3.69
Cobalt	0.40		0.40		N/A		c
Copper recovery rate (percent)	92.5		91.4		92.1

a. Results for 2009 represent mining operations that began production in March 2009.

b. Includes adjustments for point-of-sale transportation costs as negotiated in customer contracts.

c. Comparative results for the 2009 periods have not been included as start-up activities were still under way.

2011 Compared with 2010

Copper sales volumes from our Africa mining operations increased to 283 million pounds of copper in 2011, compared with 262 million pounds of copper in 2010, primarily reflecting higher production in 2011.

Consolidated sales volumes from our Africa mining operations are expected to approximate 290 million pounds of copper and 25 million pounds of cobalt in 2012.

2010 Compared with 2009

Copper sales volumes from our Africa mining operations increased to 262 million pounds of copper in 2010, compared with 130 million pounds of copper in 2009, reflecting higher operating rates and a full year of production in 2010.

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Unit Net Cash Costs. Unit net cash costs per pound of copper is a measure intended to provide investors with information about the cash-generating capacity of our mining operations expressed on a basis relating to the primary metal product for our respective operations. We use this measure for the same purpose and for monitoring operating performance by our mining operations. This information differs from measures of performance determined in accordance with U.S. GAAP and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. This measure is presented by other mining companies, although our measure may not be comparable to similarly titled measures reported by other companies.

Gross Profit per Pound of Copper and Cobalt

The following table summarizes the unit net cash costs and gross profit per pound of copper and cobalt at our Africa mining operations for the years ended December 31. Comparative information for the 2009 period has not been included as start-up activities were still under way. Refer to “Production Revenues and Production Costs” for an explanation of “by-product” and “co-product” methods and a reconciliation of unit net cash costs to production and delivery costs applicable to sales reported in our consolidated financial statements.

	2011									2010
	By-Product			Co-Product Method						By-Product			Co-Product Method
	Method			Copper			Cobalt			Method			Copper			Cobalt
Revenues, excluding adjustmentsa	$	3.74		$	3.74		$	9.99		$	3.45		$	3.45		$	10.95
Site production and delivery, before net noncash
and other costs shown below	1.57			1.39			5.58			1.40			1.23			5.78
Cobalt creditsb	(0.58		)	—			—			(0.58		)	—			—
Royalty on metals	0.08			0.07			0.16			0.08			0.06			0.19
Unit net cash costs	1.07			1.46			5.74			0.90			1.29			5.97
Depreciation, depletion and amortization	0.50			0.42			0.78			0.49			0.41			1.03
Noncash and other costs, net	0.16			0.14			0.25			0.11			0.10			0.23
Total unit costs	1.73			2.02			6.77			1.50			1.80			7.23
Revenue adjustments, primarily for pricing on
prior period open sales	—			—			0.06			—			—			0.18
Other non-inventoriable costs	(0.04		)	(0.04		)	(0.07		)	(0.08		)	(0.07		)	(0.16		)
Gross profit per pound	$	1.97		$	1.68		$	3.21		$	1.87		$	1.58		$	3.74
Copper sales (millions of recoverable pounds)	283			283						262			262
Cobalt sales (millions of contained pounds)							25									20

a. Includes adjustments for point-of-sale transportation costs as negotiated in customer contracts.

b. Net of cobalt downstream processing and freight costs.

Unit net cash costs (net of cobalt credits) for our Africa mining operations of $1.07 per pound of copper in 2011 were higher than unit net cash costs of $0.90 per pound of copper in 2010 reflecting higher site production and delivery costs ($0.17 per pound) mostly associated with increased mining and milling activity and higher input costs.

Assuming achievement of current sales volume and cost estimates and an average cobalt price of $12 per pound for 2012, we estimate that average unit net cash costs (net of cobalt credits) would approximate $1.13 per pound of copper in 2012. Higher projected unit net cash costs in 2012, compared with 2011, primarily reflect lower cobalt credits, partly offset by higher projected copper volumes. Africa's unit net cash costs for 2012 would change by $0.11 per pound for each $2 per pound change in the average price of cobalt during 2012.

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Molybdenum

We are an integrated producer of molybdenum, with mining, sulfide ore concentrating, roasting and processing facilities that produce high-purity, molybdenum-based chemicals, molybdenum metal powder and metallurgical products, which are sold to customers around the world. Our molybdenum operations include the wholly owned Henderson molybdenum mine in Colorado and related conversion facilities. The Henderson underground mine produces high-purity, chemical-grade molybdenum concentrates, which are typically further processed into value-added molybdenum chemical products. The Molybdenum operations also include the wholly owned Climax molybdenum mine in Colorado (refer to further discussion below); a sales company that purchases and sells molybdenum from our Henderson mine and from certain of our North and South America mines that produce molybdenum; and related conversion facilities that, at times, roast and/or process material on a toll basis for third-parties. Toll arrangements require the tolling customer to deliver appropriate molybdenum-bearing material to our facilities for processing into a product that is returned to the customer, who pays us for processing their material into the specified products.

Development Activities. Construction activities at the Climax molybdenum mine are substantially complete, and we plan to commence production during 2012. Production from the Climax mine is expected to ramp up to a rate of 20 million pounds of molybdenum per year during 2013 and, depending on market conditions, may be increased to 30 million pounds of molybdenum per year. We intend to operate our Climax and Henderson molybdenum mines in a flexible manner to meet market requirements. The cost of the initial phase of the project, most of which have been incurred (including $388 million in 2011), approximates $700 million.

Operating Data. Following is summary operating data for the Molybdenum operations for the years ended December 31.

	2011		2010		2009
Molybdenum (millions of recoverable pounds)
Productiona	38		40		27
Sales, excluding purchasesb	79		67		58
Average realized price per pound	$	16.98	$	16.47	$	12.36
Henderson molybdenum mine
Ore milled (metric tons per day)	22,300		22,900		14,900
Average molybdenum ore grade (percent)	0.24		0.25		0.25
Molybdenum production (millions of recoverable pounds)	38		40		27

a. Reflects production at the Henderson molybdenum mine.

b. Includes sales of molybdenum produced at our North and South America mines.

2011 Compared with 2010

Consolidated molybdenum sales volumes increased to 79 million pounds in 2011, compared with 67 million pounds for 2010, primarily reflecting improved demand. For the year 2012, we expect molybdenum sales volumes to approximate 80 million pounds, of which approximately 40 million pounds represents production from our North and South America copper mines.

2010 Compared with 2009

As a result of improved market conditions, Henderson operated at approximately 90 percent capacity during 2010, compared with 60 percent capacity during most of 2009. Molybdenum sales volumes increased to 67 million pounds in 2010, compared with 58 million pounds in 2009, reflecting improved demand in the chemicals sector.

Unit Net Cash Costs. Unit net cash costs per pound of molybdenum is a measure intended to provide investors with information about the cash-generating capacity of our mining operations expressed on a basis relating to the primary metal product for our respective operations. We use this measure for the same purpose and for monitoring operating performance by our mining operations. This information differs from measures of performance determined in accordance with U.S. GAAP and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. This measure is presented by other mining companies, although our measure may not be comparable to similarly titled measures reported by other companies.

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Gross Profit per Pound of Molybdenum

The following table summarizes the unit net cash costs and gross profit per pound of molybdenum at our Henderson molybdenum mine for the years ended December 31. Refer to “Product Revenues and Production Costs” for a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in our consolidated financial statements.

	2011		2010		2009
Revenues, excluding adjustments	$	16.42	$	15.89	$	12.78
Site production and delivery, before net noncash
and other costs shown below	5.46		4.82		5.43
Treatment charges and other	0.88		1.08		1.09
Unit net cash costs	6.34		5.90		6.52
Depreciation, depletion and amortization	0.96		0.83		0.98
Noncash and other costs, net	0.04		0.03		0.04
Total unit costs	7.34		6.76		7.54
Gross profit per pounda	$	9.08	$	9.13	$	5.24
Molybdenum sales (millions of recoverable pounds)b	38		40		27

a. Gross profit reflects sales of Henderson products based on volumes produced at market-based pricing. On a consolidated basis, the Molybdenum division includes profits on sales as they are made to third parties and realizations based on actual contract terms. As a result, the actual gross profit realized will differ from the amounts reported in this table.

b. Reflects molybdenum produced by the Henderson molybdenum mine.

Henderson’s unit net cash costs were $6.34 per pound of molybdenum in 2011, $5.90 per pound in 2010 and $6.52 per pound in 2009. Henderson's unit net cash costs in 2011 primarily reflect lower volumes and higher input costs, including labor and materials. Henderson’s unit net cash costs in 2010 benefited from higher production volumes, partly offset by higher mining costs.

Assuming achievement of current sales volume and cost estimates, we estimate unit net cash costs for Henderson would approximate $7.00 per pound of molybdenum in 2012.

Atlantic Copper Smelting & Refining

Atlantic Copper, our wholly owned subsidiary located in Spain, smelts and refines copper concentrates and markets refined copper and precious metals in slimes. During 2011, Atlantic Copper purchased approximately 17 percent of its concentrate requirements from our Indonesia mining operation and approximately 30 percent from our South America mining operations. Through this form of downstream integration, we are assured placement of a significant portion of our concentrate production.

Smelting and refining charges consist of a base rate and, in certain contracts, price participation based on copper prices. Treatment charges for smelting and refining copper concentrates represent a cost to our Indonesia and our South America mining operations, and income to Atlantic Copper and PT Smelting, PT Freeport Indonesia's 25 percent owned smelter and refinery. Thus, higher treatment and refining charges benefit our smelter operations and adversely affect our mining operations in Indonesia and South America (our North America copper mines are not significantly affected by changes in treatment and refining charges because these operations are largely integrated with our Miami smelter located in Arizona).

In May 2011, Atlantic Copper successfully completed a scheduled 26-day maintenance turnaround, which had a $30 million impact on production and delivery costs in 2011. Atlantic Copper's major maintenance turnarounds typically occur approximately every eight years, with short-term maintenance turnarounds in the interim.

Atlantic Copper had operating losses of $69 million in 2011, $37 million in 2010, and $56 million in 2009. The decline in Atlantic Copper’s operating results in 2011, compared with 2010, primarily reflects the impact of the May 2011 scheduled maintenance turnaround, lower gold credits and currency exchange rate impacts. Atlantic Copper's operating results in 2010, compared with 2009, primarily reflected higher sulphuric acid and gold revenues associated with higher prices.

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We defer recognizing profits on sales from our Indonesia and South America mining operations to Atlantic Copper and on 25 percent of Indonesia mining sales to PT Smelting until final sales to third parties occur. Our net deferred profits on our Indonesia and South America mining operations concentrate inventories at Atlantic Copper and PT Smelting to be recognized in future periods’ net income after taxes and noncontrolling interests totaled $42 million at December 31, 2011. Changes in these deferrals attributable to variability in intercompany volumes resulted in a net increase to net income attributable to common stockholders of $139 million ($0.15 per share) in 2011, compared with net reductions of $67 million ($0.07 per share) in 2010 and net additions of $21 million ($0.02 per share) in 2009. Quarterly variations in ore grades, the timing of intercompany shipments and changes in product prices will result in variability in our net deferred profits and quarterly earnings. Additionally, as PT Freeport Indonesia's operations return to full operating rates, we expect to defer a significant amount of PT Freeport Indonesia's profit on intercompany sales until sales to third parties occur.

CAPITAL RESOURCES AND LIQUIDITY

Our operating cash flows vary with prices realized from copper, gold and molybdenum sales, our sales volumes, production costs, income taxes and other working capital changes and other factors. Strong operating performance and favorable copper and gold prices have enabled us to enhance our financial and liquidity position, reduce debt and pay cash dividends to shareholders, while pursuing future growth opportunities. We view the long-term outlook for our business positively, supported by limitations on supplies of copper and by the requirements for copper in the world’s economy, and will continue to adjust our operating strategy as market conditions change.

Cash and Cash Equivalents

At December 31, 2011, we had consolidated cash and cash equivalents of $4.8 billion. The following table reflects the U.S. and international components of consolidated cash and cash equivalents at December 31, 2011 and 2010 (in billions):

	2011			2010
Cash at domestic companiesa	$	2.4		$	1.9
Cash at international operations	2.4			1.8
Total consolidated cash and cash equivalents	4.8			3.7
Less: Noncontrolling interests’ share	(0.8		)	(0.4		)
Cash, net of noncontrolling interests’ share	4.0			3.3
Less: Withholding taxes and other	(0.1		)	(0.2		)
Net cash available	$	3.9		$	3.1

a. Includes cash at our parent company and North America operations.

Cash held at our international operations is generally used to support our foreign operations' capital expenditures, operating expenses, working capital or other cash needs. At December 31, 2011, management believed that sufficient liquidity was available in the U.S. With the exception of TFM, we have not elected to permanently reinvest earnings from our foreign subsidiaries, and we have recorded deferred tax liabilities for foreign earnings that are available to be repatriated to the U.S. From time to time, our foreign subsidiaries distribute earnings to the U.S. through dividends which are subject to applicable withholding taxes and noncontrolling interests' share.

Operating Activities

Our operating cash flows vary with prices realized from copper, gold and molybdenum sales, our sales volumes, production costs, income taxes and other working capital changes and other factors. During 2011, we generated operating cash flows totaling $6.6 billion, net of $461 million for working capital uses. Operating cash flows in 2010 totaled $6.3 billion, net of $834 million for working capital uses. Operating cash flows in 2009 totaled $4.4 billion, net of $770 million for working capital uses, which included approximately $600 million related to settlement of final pricing with customers on 2008 provisionally priced copper sales. Higher operating cash flows for 2011 and 2010, compared with prior years, primarily reflected higher copper and gold price realizations.

Based on current mine plans and subject to future copper, gold and molybdenum prices, we expect estimated operating cash flows for the year 2012 plus available cash to be greater than our budgeted capital expenditures, expected debt payments, dividends, noncontrolling interest distributions and other cash requirements. Refer to “Outlook” for further discussion of projected 2012 operating cash flows.

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Investing Activities

Capital Expenditures. Capital expenditures, including capitalized interest, totaled $2.5 billion in 2011 (including $1.4 billion for major projects), $1.4 billion in 2010 (including $0.7 billion for major projects) and $1.6 billion in 2009 (including $1.0 billion for major projects and the Twin Buttes property acquisition). The increase in capital expenditures in 2011, compared with 2010, primarily reflected higher capital spending for construction on the Climax molybdenum mine, the underground development projects at Grasberg and the expansion at Tenke. The decrease in capital expenditures in 2010, compared with 2009, primarily reflected lower capital spending for the initial Tenke development project for which construction activities were substantially complete by mid-2009, partly offset by higher spending associated with underground development projects at Grasberg and the sulfide ore project at El Abra.

Capital expenditures for the year 2012 are expected to approximate $4.0 billion (including $2.4 billion for major projects), primarily associated with underground development activities at Grasberg, the expansion at Tenke Fungurume and the concentrator expansion at Cerro Verde. We are also considering additional investments at several of our sites. Capital spending plans will continue to be reviewed and adjusted in response to changes in market conditions and other factors. Refer to “Operations” for further discussion.

Investment in McMoRan Exploration Co. (MMR). In December 2010, we completed the purchase of 500,000 shares of MMR’s 5¾% Convertible Perpetual Preferred Stock (the Preferred Stock) for an aggregate purchase price of $500 million. Dividends received in 2011 were recorded as a return of investment because of MMR's reported losses. Refer to Note 6 for further discussion. 

Financing Activities

Debt and Equity Transactions. Total debt approximated $3.5 billion at December 31, 2011, $4.8 billion at December 31, 2010, and $6.3 billion at December 31, 2009.

During 2011, we redeemed the remaining $1.1 billion of our outstanding 8.25% Senior Notes. In addition, we made open-market purchases of $35 million of our 9.5% Senior Notes and repaid the remaining $84 million of our 8.75% Senior Notes. During 2010, we redeemed all of our $1 billion Senior Floating Rate Notes, and also made open-market purchases of $565 million of our senior notes. During 2009, we redeemed $340 million of our 6.875% Senior Notes, and also made open-market purchases of $387 million of our senior notes. Refer to Note 9 for further discussion of these debt repayment transactions.

Since January 1, 2009, we have repaid approximately $3.8 billion of our outstanding debt resulting in estimated annual interest savings of $260 million based on current interest rates.

In February 2012, we sold $3.0 billion in senior notes in three tranches and announced our intent to redeem the remaining $3.0 billion of our 8.375% Senior Notes (refer to Note 20 for further discussion). We estimate annual interest savings associated with the refinancing to approximate $160 million.

On March 30, 2011, we entered into a new senior unsecured revolving credit facility, which replaced the revolving credit facilities that were scheduled to expire on March 19, 2012. This revolving credit facility is available until March 30, 2016, in an aggregate principal amount of $1.5 billion, with $500 million available to PT Freeport Indonesia. At December 31, 2011, we had no borrowings and $44 million of letters of credit issued under the facilities, resulting in availability of approximately $1.5 billion ($956 million of which could be used for additional letters of credit). The revolving credit facility contains covenants that are typical for investment-grade companies, including limitations on liens and subsidiary debt. The credit facility also includes financial ratios governing maximum total leverage and minimum interest coverage.

In February 2009, we completed a public offering of 53.6 million shares of our common stock at an average price of $14.00 per share, which generated gross proceeds of $750 million (net proceeds of approximately $740 million after fees and expenses), which were used for general corporate purposes.

We have an open-market share purchase program for up to 30 million shares, of which 23.7 million shares remain available. There have been no purchases since 2008. The timing of future purchases of our common stock is dependent on many factors, including our operating results; cash flows and financial position; copper, gold and molybdenum prices; the price of our common shares; and general economic and market conditions.

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Dividends. Common stock dividends paid totaled $1.4 billion in 2011 and $885 million in 2010. There were no common stock dividends paid in 2009.

After suspending dividends in late 2008, the Board reinstated a cash dividend on our common stock in October 2009 at an annual rate of $0.30 per share ($0.075 per share quarterly). The Board authorized increases in the annual cash dividend to an annual rate of $0.60 per share ($0.15 per share quarterly) in April 2010 and $1.00 per share ($0.25 per share quarterly) in October 2010. The Board also authorized supplemental common stock dividends of $0.50 per share paid in December 2010 and June 2011.

In February 2012, the Board authorized an increase in the cash dividend on our common stock to an annual rate of $1.25 per share ($0.3125 per share quarterly). Dividends are paid quarterly as declared by the Board with the initial quarterly dividend of $0.3125 per share expected to be paid in May 2012. The declaration of dividends is at the discretion of the Board and will depend upon our financial results, cash requirements, future prospects and other factors deemed relevant by the Board. The Board will continue to review our financial policy on an ongoing basis. Based on outstanding common shares of 948 million at December 31, 2011, and the current dividend rate, our estimated regular common stock dividend for 2012 approximates $1.1 billion.

During 2010, our 6¾% Mandatory Convertible Preferred Stock converted into 78.9 million shares of our common stock, and in 2009, we redeemed our 5½% Convertible Perpetual Preferred Stock in exchange for 35.8 million shares of our common stock (refer to Note 11 for further discussion). As a result of these transactions, we no longer have requirements to pay preferred stock dividends. Preferred stock dividends paid totaled $95 million in 2010 representing dividends on our 6¾% Mandatory Convertible Preferred Stock and $229 million in 2009 representing dividends on our 5½% Convertible Perpetual Preferred Stock and 6¾% Mandatory Convertible Preferred Stock.

Cash dividends and distributions paid to noncontrolling interests totaled $391 million in 2011, $816 million in 2010 and $535 million in 2009, reflecting dividends and distributions paid to the noncontrolling interest owners of PT Freeport Indonesia and our South America mines.

CONTRACTUAL OBLIGATIONS

We have contractual and other long-term obligations, including debt maturities, which we expect to fund with available cash, projected operating cash flows, availability under our revolving credit facilities or future financing transactions, if necessary. A summary of these various obligations at December 31, 2011, follows (in millions):

	Total		2012		2013 to 2014		2015 to 2016		Thereafter
Reclamation and environmental obligationsa	$	4,975	$	236	$	360	$	272	$	4,107
Debt maturities	3,537		4		—		—		3,533
Scheduled interest payment obligationsb	1,974		285		571		572		546
Take-or-pay contractsc	2,085		1,338		397		113		237
Operating lease obligations	200		24		33		27		116
Atlantic Copper obligation to insurance companyd	49		9		18		19		3
PT Freeport Indonesia mine closure and reclamation funde	17		2		1		1		13
Totalf	$	12,837	$	1,898	$	1,380	$	1,004	$	8,555

a. Represents estimated cash payments, on an undiscounted and unescalated basis, associated with reclamation and environmental activities. The timing and the amount of these payments could change as a result of changes in regulatory requirements, changes in scope and costs of reclamation activities and as actual spending occurs. Refer to Note 13 for additional discussion of environmental and reclamation matters.

b. Scheduled interest payment obligations were calculated using stated coupon rates for fixed-rate debt and interest rates applicable at December 31, 2011, for variable-rate debt. As discussed in Note 20, in February 2012, we sold $3.0 billion in Senior Notes and announced our intent to redeem the remaining $3.0 billion of our 8.375% Senior Notes. We estimate annual interest savings associated with the refinancing to approximate $160 million.

c. Represents contractual obligations for purchases of goods or services that are defined by us as agreements that are enforceable and legally binding and that specify all significant terms. Take-or-pay contracts primarily comprise the procurement of copper concentrates and cathodes ($1.1 billion), electricity ($338 million), transportation services ($293 million) and oxygen ($128 million). Some of our take-or-pay contracts are settled based on the prevailing market rate for the service or commodity purchased, and in some cases, the amount of the actual obligation may change over time because of market conditions. Obligations for copper concentrates and cathodes provide for deliveries of specified volumes, at market-based prices, primarily to Atlantic Copper and the North America copper mines. Electricity obligations are primarily for

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contractual minimum demand at the South America and Tenke mines. Transportation obligations are primarily for South America contracted ocean freight and for North America rail freight. Oxygen obligations provide for deliveries of specified volumes, at fixed prices, primarily to Atlantic Copper.

d. In August 2002, Atlantic Copper complied with Spanish legislation by agreeing to fund 7.2 million euros annually for 15 years to an approved insurance company for an estimated 72 million euro contractual obligation to supplement amounts paid to certain retired employees. Atlantic Copper had $39 million recorded for this obligation at December 31, 2011.

e. Represents PT Freeport Indonesia’s commitments to contribute amounts to a cash fund designed to accumulate at least $100 million, including interest, by the end of our Indonesia mining activities to be used for mine closure and reclamation.

f. This table excludes certain other obligations in our consolidated balance sheets, including estimated funding for pension obligations as the funding may vary from year-to-year based on changes in the fair value of plan assets and actuarial assumptions, and accrued liabilities totaling $128 million that relate to unrecognized tax benefits where the timing of settlement is not determinable. This table also excludes purchase orders for the purchase of inventory and other goods and services, as purchase orders typically represent authorizations to purchase rather than binding agreements.

In addition to our debt maturities and other contractual obligations, we have other commitments, which we expect to fund with available cash, projected operating cash flows, available credit facilities or future financing transactions, if necessary. These include (i) PT Freeport Indonesia’s commitment to provide one percent of its annual revenue for the development of the local people in its area of operations through the Freeport Partnership Fund for Community Development, (ii) TFM's commitment to provide 0.3 percent of its annual revenue for the development of the local people in its area of operations and (iii) other commercial commitments, including standby letters of credit, surety bonds and guarantees. Refer to Notes 13 and 14 for further discussion.

CONTINGENCIES

Environmental

The cost of complying with environmental laws is a fundamental and substantial cost of our business. At December 31, 2011, we had $1.5 billion recorded in our consolidated balance sheets for environmental obligations attributed to CERCLA or analogous state programs and for estimated future costs associated with environmental matters at closed facilities and closed portions of certain operating facilities. Refer to Note 13 for further information about environmental regulation, including significant environmental matters.

During 2011, we incurred environmental capital expenditures and other environmental costs (including our joint venture partners’ shares) of $387 million for programs to comply with applicable environmental laws and regulations that affect our operations, compared to $372 million in 2010 and $289 million in 2009. The increase in environmental costs in 2011 and 2010, compared with 2009, primarily related to the settlement of environmental legal matters (see Note 13 for further discussion). For 2012, we expect to incur approximately $636 million of aggregate environmental capital expenditures and other environmental costs, which are part of our overall 2012 operating budget. The increase compared with 2011 primarily relates to higher spending for ongoing environmental remediation activities and higher environmental capital expenditures. The timing and amount of estimated payments could change as a result of changes in regulatory requirements, changes in scope and costs of reclamation activities, and as actual spending occurs.

Asset Retirement Obligations

We recognize AROs as liabilities when incurred, with the initial measurement at fair value. These liabilities, which are initially estimated based on discounted cash flow estimates, are accreted to full value over time through charges to income. Reclamation costs for future disturbances are recorded as an ARO in the period of disturbance. Our cost estimates are reflected on a third-party cost basis and comply with our legal obligation to retire tangible, long-lived assets. At December 31, 2011, we had $921 million recorded in our consolidated balance sheets for AROs. Spending on AROs totaled $49 million in 2011, $38 million in 2010 and $28 million in 2009. For 2012, we expect to incur approximately $31 million for aggregate ARO payments. Refer to Note 13 for further discussion of reclamation and closure costs.

Litigation and Other Contingencies

Refer to Note 13 for further discussion of contingencies associated with legal proceedings and other matters.

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DISCLOSURES ABOUT MARKET RISKS

Commodity Price Risk

Our consolidated revenues include the sale of copper concentrates, copper cathodes, copper rod, gold, molybdenum and other metals by our North and South America mines, the sale of copper concentrates (which also contain significant quantities of gold and silver) by our Indonesia mining operations, the sale of copper cathodes and cobalt hydroxide by our Africa mining operations, the sale of molybdenum in various forms by our Molybdenum operations, and the sale of copper cathodes, copper anodes and gold in anodes and slimes by Atlantic Copper. Our financial results can vary significantly as a result of fluctuations in the market prices of copper, gold, molybdenum, silver and cobalt. World market prices for these commodities have fluctuated historically and are affected by numerous factors beyond our control. Because we cannot control the price of our products, the key measures that management focuses on in operating our business are sales volumes, unit net cash costs and operating cash flow. Refer to “Outlook” for further discussion of projected sales volumes, unit net cash costs and operating cash flows for 2012.

For 2011, 51 percent of our mined copper was sold in concentrate, 26 percent as cathodes and 23 percent as rod (principally from our North America copper mines). Substantially all of our copper concentrate and cathode sales contracts provide final copper pricing in a specified future month (generally one to four months from the shipment date) based primarily on quoted LME monthly average spot copper prices. We receive market prices based on prices in the specified future period, which results in price fluctuations recorded through revenues until the date of settlement. We record revenues and invoice customers at the time of shipment based on then-current LME prices, which results in an embedded derivative on our provisionally priced concentrate and cathode sales that is adjusted to fair value through earnings each period, using the period-end forward prices, until the date of final pricing. To the extent final prices are higher or lower than what was recorded on a provisional basis, an increase or decrease to revenues is recorded each reporting period until the date of final pricing. Accordingly, in times of rising copper prices, our revenues benefit from adjustments to the final pricing of provisionally priced sales pursuant to contracts entered into in prior periods; in times of falling copper prices, the opposite occurs.

At December 31, 2010, we had provisionally priced copper sales at our copper mining operations, primarily South America and Indonesia, totaling 417 million pounds of copper (net of intercompany sales and noncontrolling interests) recorded at an average of $4.36 per pound. Adjustments to the December 31, 2010, provisionally priced copper sales unfavorably impacted consolidated revenues by $12 million ($5 million to net income attributable to common stockholders or $0.01 per share) in 2011, compared with adjustments to the December 31, 2009, provisionally priced copper sales that unfavorably impacted consolidated revenues by $24 million ($10 million to net income attributable to common stockholders or $0.01 per share) in 2010, and adjustments to the December 31, 2008, provisionally priced copper sales that favorably impacted consolidated revenues by $132 million ($61 million to net income attributable to common stockholders or $0.07 per share) in 2009.

At December 31, 2011, we had provisionally priced copper sales at our copper mining operations, primarily South America and Indonesia, totaling 252 million pounds of copper (net of intercompany sales and noncontrolling interests) recorded at an average price of $3.44 per pound, subject to final pricing over the next several months. We estimate that each $0.05 change in the price realized from the December 31, 2011, provisional price recorded would have a net impact on our 2012 consolidated revenues of approximately $18 million ($9 million to net income attributable to common stockholders). The LME spot copper price closed at $3.81 per pound on February 15, 2012.

On limited past occasions, in response to market conditions, we have entered into copper and gold price protection contracts for a portion of our expected future mine production to mitigate the risk of adverse price fluctuations. We do not currently intend to enter into similar hedging programs in the future.

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Foreign Currency Exchange Risk

The functional currency for most of our operations is the U.S. dollar. All of our revenues and a significant portion of our costs are denominated in U.S. dollars; however, some costs and certain asset and liability accounts are denominated in local currencies, including the Indonesian rupiah, Australian dollar, Chilean peso, Peruvian nuevo sol, euro and South African rand. Generally, our results are positively affected when the U.S. dollar strengthens in relation to those foreign currencies and adversely affected when the U.S. dollar weakens in relation to those foreign currencies. Following is a summary of estimated annual payments and the impact of changes in foreign currency rates on our annual operating costs:

	Exchange Rate per $1 at December 31,			Estimated Annual Payments			10% Change in Exchange Rate (in millions)b
	2011	2010	2009	(in local currency)	(in millions)a		Increase			Decrease
Indonesia
Rupiah	9,060	8,990	9,420	3.9 trillion	$	430	$	(39	)	$	48
Australian dollar	0.98	0.98	1.12	250 million	$	255	$	(23	)	$	28
South America
Chilean peso	519	468	506	260 billion	$	501	$	(46	)	$	56
Peruvian nuevo sol	2.70	2.81	2.89	360 million	$	134	$	(12	)	$	15
Atlantic Copper
Euro	0.77	0.75	0.69	130 million	$	168	$	(15	)	$	19
Africa
South African rand	8.12	6.65	7.42	840 million	$	103	$	(9	)	$	11

a. Based on December 31, 2011, exchange rates.

b. Reflects the estimated impact on annual operating costs assuming a 10 percent increase or decrease in the exchange rate reported at December 31, 2011.

Interest Rate Risk

At December 31, 2011, we had total debt of $3.5 billion, of which approximately 5 percent was variable-rate debt with interest rates based on LIBOR or the Euro Interbank Offered Rate (EURIBOR). The table below presents average interest rates for our scheduled maturities of principal for our outstanding debt and the related fair values at December 31, 2011 (in millions, except percentages):

	2012				2013				2014				2015		2016		Thereafter			Fair Value
Fixed-rate debt	$	—		a	$	—		a	$	—		a	$	—	$	—	$	3,372		$	3,632
Average interest rate	7.2		%		6.7		%		6.7		%		N/A		N/A		8.3		%	8.3		%
Variable-rate debt	$	4			$	—			$	—			$	—	$	—	$	161		$	165
Average interest rate	—		%	b	N/A				N/A				N/A		N/A		4.3		%	4.2		%

a. Less than $1 million.

b. Less than 0.01%.

NEW ACCOUNTING STANDARDS

We do not expect the provisions of recently issued accounting standards to have a significant impact on our future financial statements and disclosures.

OFF-BALANCE SHEET ARRANGEMENTS

Refer to Note 14 for discussion of off-balance sheet arrangements.

100

PRODUCT REVENUES AND PRODUCTION COSTS

Unit net cash costs per pound of copper and molybdenum are measures intended to provide investors with information about the cash-generating capacity of our mining operations expressed on a basis relating to the primary metal product for the respective operations. We use this measure for the same purpose and for monitoring operating performance by our mining operations. This information differs from measures of performance determined in accordance with U.S. GAAP and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. This measure is presented by other metals mining companies, although our measure may not be comparable to similarly titled measures reported by other companies.

We present gross profit per pound of copper in the following tables using both a “by-product” method and a “co-product” method. We use the by-product method in our presentation of gross profit per pound of copper because (i) the majority of our revenues are copper revenues, (ii) we mine ore, which contains copper, gold, molybdenum and other metals, (iii) it is not possible to specifically assign all of our costs to revenues from the copper, gold, molybdenum and other metals we produce, (iv) it is the method used to compare mining operations in certain industry publications and (v) it is the method used by our management and the Board to monitor operations. In the co-product method presentation below, shared costs are allocated to the different products based on their relative revenue values, which will vary to the extent our metals sales volumes and realized prices change.

We show adjustments for prior period open sales as separate line items. Because these adjustments do not result from current period sales, we have reflected these separately from revenues on current period sales. Noncash and other costs consist of items such as stock-based compensation costs, write-offs of equipment and/or unusual charges. They are removed from site production and delivery costs in the calculation of unit net cash costs. As discussed above, gold, molybdenum and other metal revenues at copper mines are reflected as credits against site production and delivery costs in the by-product method. Following are presentations under both the by-product and co-product methods together with reconciliations to amounts reported in our consolidated financial statements.

101

North America Copper Mines Product Revenues and Production Costs

Year Ended December 31, 2011
(In millions)	By-Product			Co-Product Method
	Method			Copper			Molybdenuma			Otherb		Total
Revenues, excluding adjustments	$	4,968		$	4,968		$	546		$	111	$	5,625
Site production and delivery, before net noncash
and other costs shown below	2,213			1,987			238			46		2,271
By-product creditsa	(599		)	—			—			—		—
Treatment charges	138			132			—			6		138
Net cash costs	1,752			2,119			238			52		2,409
Depreciation, depletion and amortization	264			247			13			4		264
Noncash and other costs, net	84			81			2			1		84
Total costs	2,100			2,447			253			57		2,757
Revenue adjustments	(1		)	(1		)	—			—		(1		)
Idle facility and other non-inventoriable costs	(82		)	(80		)	(2		)	—		(82		)
Gross profit	$	2,785		$	2,440		$	291		$	54	$	2,785
Reconciliation to Amounts Reported
							Depreciation,
				Production			Depletion and
	Revenues			and Delivery			Amortization
Totals presented above	$	5,625		$	2,271		$	264
Treatment charges	N/A			138			N/A
Net noncash and other costs	N/A			84			N/A
Revenue adjustments	(1		)	N/A			N/A
Idle facility and other non-inventoriable costs	N/A			82			N/A
Eliminations and other	9			54			15
North America copper mines	5,633			2,629			279
South America mining	5,258			1,905			258
Indonesia mining	5,046			1,902			215
Africa mining	1,289			591			140
Molybdenum	1,424			1,036			60
Rod & Refining	5,549			5,527			8
Atlantic Copper Smelting & Refining	2,984			2,991			40
Corporate, other & eliminations	(6,303		)	(6,683		)	22
As reported in FCX’s consolidated financial statements	$	20,880		$	9,898		$	1,022

a. Molybdenum credits and revenues reflect volumes produced at market-based pricing and also include tolling revenues at Sierrita.

b. Includes gold and silver product revenues and production costs.

102

North America Copper Mines Product Revenues and Production Costs (continued)

Year Ended December 31, 2010
(In millions)	By-Product			Co-Product Method
	Method			Copper			Molybdenuma			Otherb		Total
Revenues, excluding adjustments	$	3,702		$	3,702		$	383		$	58	$	4,143
Site production and delivery, before net noncash
and other costs shown below	1,621			1,456			195			29		1,680
By-product creditsa	(382		)	—			—			—		—
Treatment charges	105			102			—			3		105
Net cash costs	1,344			1,558			195			32		1,785
Depreciation, depletion and amortization	256			241			13			2		256
Noncash and other costs, net	131			131			—			—		131
Total costs	1,731			1,930			208			34		2,172
Revenue adjustments	(2		)	(2		)	—			—		(2		)
Idle facility and other non-inventoriable costs	(87		)	(86		)	(1		)	—		(87		)
Gross profit	$	1,882		$	1,684		$	174		$	24	$	1,882
Reconciliation to Amounts Reported
							Depreciation,
				Production			Depletion and
	Revenues			and Delivery			Amortization
Totals presented above	$	4,143		$	1,680		$	256
Treatment charges	N/A			105			N/A
Net noncash and other costs	N/A			131			N/A
Revenue adjustments	(2		)	N/A			N/A
Idle facility and other non-inventoriable costs	N/A			87			N/A
Eliminations and other	32			49			17
North America copper mines	4,173			2,052			273
South America mining	4,991			1,678			250
Indonesia mining	6,377			1,904			257
Africa mining	1,106			488			128
Molybdenum	1,205			784			51
Rod & Refining	4,470			4,442			8
Atlantic Copper Smelting & Refining	2,491			2,470			38
Corporate, other & eliminations	(5,831		)	(5,483		)	31
As reported in FCX’s consolidated financial statements	$	18,982		$	8,335		$	1,036

a. Molybdenum credits and revenues reflect volumes produced at market-based pricing and also include tolling revenues at Sierrita.

b. Includes gold and silver product revenues and production costs.

103

North America Copper Mines Product Revenues and Production Costs (continued)

Year Ended December 31, 2009
(In millions)	By-Product			Co-Product Method
	Method			Copper				Molybdenuma		Otherb		Total
Revenues, excluding adjustments	$	2,823		$	2,823			$	274	$	45	$	3,142
Site production and delivery, before net noncash
and other costs shown below	1,483			1,364				142		22		1,528
By-product creditsa	(274		)	—				—		—		—
Treatment charges	102			100				—		2		102
Net cash costs	1,311			1,464				142		24		1,630
Depreciation, depletion and amortization	264			251				10		3		264
Noncash and other costs, net	129			127				2		—		129
Total costs	1,704			1,842				154		27		2,023
Revenue adjustments	92			92				—		—		92
Idle facility and other non-inventoriable costs	(100		)	(100		)		—		—		(100		)
Gross profit	$	1,111		$	973			$	120	$	18	$	1,111
Reconciliation to Amounts Reported
								Depreciation,
				Production				Depletion and
	Revenues			and Delivery				Amortization
Totals presented above	$	3,142		$	1,528			$	264
Treatment charges	N/A			102				N/A
Net noncash and other costs	N/A			129				N/A
Revenue adjustments	92			N/A				N/A
Idle facility and other non-inventoriable costs	N/A			100				N/A
Eliminations and other	30			52				16
North America copper mines	3,264			1,911				280
South America mining	3,839			1,563				275
Indonesia mining	5,908			1,505				275
Africa mining	389			315				66
Molybdenum	847			660			c	49
Rod & Refining	3,356			3,336				8
Atlantic Copper Smelting & Refining	1,892			1,895				36
Corporate, other & eliminations	(4,455		)	(4,179		)		25
As reported in FCX’s consolidated financial statements	$	15,040		$	7,006		c	$	1,014

a. Molybdenum credits and revenues reflect volumes produced at market-based pricing and also include tolling revenues at Sierrita.

b. Includes gold and silver product revenues and production costs.

c. Includes lower of cost or market (LCM) molybdenum inventory adjustments of $19 million.

104

South America Mining Product Revenues and Production Costs

Year Ended December 31, 2011
(In millions)	By-Product				Co-Product Method
	Method				Copper			Other				Total
Revenues, excluding adjustments	$	4,989			$	4,989		$	477		a	$	5,466
Site production and delivery, before net noncash
and other costs shown below	1,826			b	1,679			172				1,851
By-product credits	(452		)		—			—				—
Treatment charges	219				219			—				219
Net cash costs	1,593				1,898			172				2,070
Depreciation, depletion and amortization	258				242			16				258
Noncash and other costs, net	23				21			2				23
Total costs	1,874				2,161			190				2,351
Revenue adjustments, primarily for pricing on prior
period open sales	15				(4		)	19				15
Other non-inventoriable costs	(59		)		(54		)	(5		)		(59		)
Gross profit	$	3,071			$	2,770		$	301			$	3,071
Reconciliation to Amounts Reported
								Depreciation,
					Production			Depletion and
	Revenues				and Delivery			Amortization
Totals presented above	$	5,466			$	1,851		$	258
Treatment charges	(219		)		N/A			N/A
Net noncash and other costs	N/A				23			N/A
Revenue adjustments, primarily for pricing on prior
period open sales	15				N/A			N/A
Other non-inventoriable costs	N/A				59			N/A
Eliminations and other	(4		)		(28		)	—
South America mining	5,258				1,905			258
North America copper mines	5,633				2,629			279
Indonesia mining	5,046				1,902			215
Africa mining	1,289				591			140
Molybdenum	1,424				1,036			60
Rod & Refining	5,549				5,527			8
Atlantic Copper Smelting & Refining	2,984				2,991			40
Corporate, other & eliminations	(6,303		)		(6,683		)	22
As reported in FCX’s consolidated financial statements	$	20,880			$	9,898		$	1,022

a. Includes gold sales of 101 thousand ounces ($1,580 per ounce average realized price) and silver sales of 3.2 million ounces ($36.81 per ounce average realized price); also includes molybdenum sales of 10 million pounds ($13.78 per pound average realized price), which reflects molybdenum produced by Cerro Verde at market-based pricing.

b. Includes $50 million for bonuses paid at Cerro Verde and El Abra pursuant to the new labor agreements.

105

South America Mining Product Revenues and Production Costs (continued)

Year Ended December 31, 2010
(In millions)	By-Product			Co-Product Method
	Method			Copper			Other				Total
Revenues, excluding adjustments	$	4,911		$	4,911		$	299		a	$	5,210
Site production and delivery, before net noncash
and other costs shown below	1,613			1,521			110				1,631
By-product credits	(281		)	—			—				—
Treatment charges	207			207			—				207
Net cash costs	1,539			1,728			110				1,838
Depreciation, depletion and amortization	249			237			12				249
Noncash and other costs, net	19			18			1				19
Total costs	1,807			1,983			123				2,106
Revenue adjustments, primarily for pricing on prior
period open sales	(14		)	(14		)	—				(14		)
Other non-inventoriable costs	(44		)	(40		)	(4		)		(44		)
Gross profit	$	3,046		$	2,874		$	172			$	3,046
Reconciliation to Amounts Reported
							Depreciation,
				Production			Depletion and
	Revenues			and Delivery			Amortization
Totals presented above	$	5,210		$	1,631		$	249
Treatment charges	(207		)	N/A			N/A
Net noncash and other costs	N/A			19			N/A
Revenue adjustments, primarily for pricing on prior
period open sales	(14		)	N/A			N/A
Other non-inventoriable costs	N/A			44			N/A
Eliminations and other	2			(16		)	1
South America mining	4,991			1,678			250
North America copper mines	4,173			2,052			273
Indonesia mining	6,377			1,904			257
Africa mining	1,106			488			128
Molybdenum	1,205			784			51
Rod & Refining	4,470			4,442			8
Atlantic Copper Smelting & Refining	2,491			2,470			38
Corporate, other & eliminations	(5,831		)	(5,483		)	31
As reported in FCX’s consolidated financial statements	$	18,982		$	8,335		$	1,036

a. Includes gold sales of 93 thousand ounces ($1,263 per ounce average realized price) and silver sales of 2.7 million ounces ($20.53 per ounce average realized price); also includes molybdenum sales of 7 million pounds ($14.12 per pound average realized price), which reflects molybdenum produced by Cerro Verde at market-based pricing.

106

South America Mining Product Revenues and Production Costs (continued)

Year Ended December 31, 2009
(In millions)	By-Product			Co-Product Method
	Method			Copper				Other				Total
Revenues, excluding adjustments	$	3,768		$	3,768			$	167		a	$	3,935
Site production and delivery, before net noncash
and other costs shown below	1,512			1,429				91				1,520
By-product credits	(159		)	—				—				—
Treatment charges	206			206				—				206
Net cash costs	1,559			1,635				91				1,726
Depreciation, depletion and amortization	275			267				8				275
Noncash and other costs, net	28			28				—				28
Total costs	1,862			1,930				99				2,029
Revenue adjustments, primarily for pricing on prior
period open sales	109			109				—				109
Other non-inventoriable costs	(31		)	(26		)		(5		)		(31		)
Gross profit	$	1,984		$	1,921			$	63			$	1,984
Reconciliation to Amounts Reported
								Depreciation,
				Production				Depletion and
	Revenues			and Delivery				Amortization
Totals presented above	$	3,935		$	1,520			$	275
Treatment charges	(206		)	N/A				N/A
Net noncash and other costs	N/A			28				N/A
Revenue adjustments, primarily for pricing on prior
period open sales	109			N/A				N/A
Other non-inventoriable costs	N/A			31				N/A
Eliminations and other	1			(16		)		—
South America mining	3,839			1,563				275
North America copper mines	3,264			1,911				280
Indonesia mining	5,908			1,505				275
Africa mining	389			315				66
Molybdenum	847			660			b	49
Rod & Refining	3,356			3,336				8
Atlantic Copper Smelting & Refining	1,892			1,895				36
Corporate, other & eliminations	(4,455		)	(4,179		)		25
As reported in FCX’s consolidated financial statements	$	15,040		$	7,006		b	$	1,014

a. Includes gold sales of 90 thousand ounces ($982 per ounce average realized price) and silver sales of 3.0 million ounces ($14.88 per ounce average realized price); also includes molybdenum sales of 2 million pounds ($7.74 per pound average realized price), which reflects molybdenum produced by Cerro Verde at market-based pricing.

b. Includes LCM molybdenum inventory adjustments of $19 million.

107

Indonesia Mining Product Revenues and Production Costs

Year Ended December 31, 2011
(In millions)	By-Product				Co-Product Method
	Method				Copper			Gold			Silver			Total
Revenues, excluding adjustments	$	3,261			$	3,261		$	2,011		$	97	a	$	5,369
Site production and delivery, before net noncash
and other costs shown below	1,869			b	1,135			700			34			1,869
Gold and silver credits	(2,090		)		—			—			—			—
Treatment charges	156				95			58			3			156
Royalty on metals	137				83			52			2			137
Net cash costs	72				1,313			810			39			2,162
Depreciation and amortization	215				131			80			4			215
Noncash and other costs, net	33				20			12			1			33
Total costs	320				1,464			902			44			2,410
Revenue adjustments, primarily for pricing on prior
period open sales	(12		)		(12		)	(18		)	—			(30		)
Gross profit	$	2,929			$	1,785		$	1,091		$	53		$	2,929
Reconciliation to Amounts Reported
								Depreciation,
					Production			Depletion and
	Revenues				and Delivery			Amortization
Totals presented above	$	5,369			$	1,869		$	215
Treatment charges	(156		)		N/A			N/A
Royalty on metals	(137		)		N/A			N/A
Net noncash and other costs	N/A				33			N/A
Revenue adjustments, primarily for pricing on prior
period open sales	(30		)		N/A			N/A
Indonesia mining	5,046				1,902			215
North America copper mines	5,633				2,629			279
South America mining	5,258				1,905			258
Africa mining	1,289				591			140
Molybdenum	1,424				1,036			60
Rod & Refining	5,549				5,527			8
Atlantic Copper Smelting & Refining	2,984				2,991			40
Corporate, other & eliminations	(6,303		)		(6,683		)	22
As reported in FCX’s consolidated financial statements	$	20,880			$	9,898		$	1,022

a. Includes silver sales of 2.7 million ounces ($36.18 per ounce average realized price).

b. Includes $66 million associated with bonuses and other strike-related costs.

108

Indonesia Mining Product Revenues and Production Costs (continued)

Year Ended December 31, 2010
(In millions)	By-Product			Co-Product Method
	Method			Copper			Gold		Silver			Total
Revenues, excluding adjustments	$	4,475		$	4,475		$	2,243	$	90	a	$	6,808
Site production and delivery, before net noncash
and other costs shown below	1,856			1,220			612		24			1,856
Gold and silver credits	(2,334		)	—			—		—			—
Treatment charges	270			178			89		3			270
Royalty on metals	156			102			51		3			156
Net cash (credits) costs	(52		)	1,500			752		30			2,282
Depreciation and amortization	257			169			85		3			257
Noncash and other costs, net	48			31			16		1			48
Total costs	253			1,700			853		34			2,587
Revenue adjustments, primarily for pricing on prior
period open sales	(6		)	(6		)	1		—			(5		)
Gross profit	$	4,216		$	2,769		$	1,391	$	56		$	4,216
Reconciliation to Amounts Reported
							Depreciation,
				Production			Depletion and
	Revenues			and Delivery			Amortization
Totals presented above	$	6,808		$	1,856		$	257
Treatment charges	(270		)	N/A			N/A
Royalty on metals	(156		)	N/A			N/A
Net noncash and other costs	N/A			48			N/A
Revenue adjustments, primarily for pricing on prior
period open sales	(5		)	N/A			N/A
Indonesia mining	6,377			1,904			257
North America copper mines	4,173			2,052			273
South America mining	4,991			1,678			250
Africa mining	1,106			488			128
Molybdenum	1,205			784			51
Rod & Refining	4,470			4,442			8
Atlantic Copper Smelting & Refining	2,491			2,470			38
Corporate, other & eliminations	(5,831		)	(5,483		)	31
As reported in FCX’s consolidated financial statements	$	18,982		$	8,335		$	1,036

a. Includes silver sales of 4.1 million ounces ($21.99 per ounce average realized price).

109

Indonesia Mining Product Revenues and Production Costs (continued)

Year Ended December 31, 2009
(In millions)	By-Product			Co-Product Method
	Method			Copper				Gold		Silver			Total
Revenues, excluding adjustments	$	3,708		$	3,708			$	2,527	$	73	a	$	6,308
Site production and delivery, before net noncash
and other costs shown below	1,468			862				589		17			1,468
Gold and silver credits	(2,606		)	—				—		—			—
Treatment charges	312			183				125		4			312
Royalty on metals	147			86				59		2			147
Net cash (credits) costs	(679		)	1,131				773		23			1,927
Depreciation and amortization	275			162				110		3			275
Noncash and other costs, net	37			22				15		—			37
Total (credits) costs	(367		)	1,315				898		26			2,239
Revenue adjustments, primarily for pricing on prior
period open sales	53			53				5		1			59
Gross profit	$	4,128		$	2,446			$	1,634	$	48		$	4,128
Reconciliation to Amounts Reported
								Depreciation,
				Production				Depletion and
	Revenues			and Delivery				Amortization
Totals presented above	$	6,308		$	1,468			$	275
Treatment charges	(312		)	N/A				N/A
Royalty on metals	(147		)	N/A				N/A
Net noncash and other costs	N/A			37				N/A
Revenue adjustments, primarily for pricing on prior
period open sales	59			N/A				N/A
Indonesia mining	5,908			1,505				275
North America copper mines	3,264			1,911				280
South America mining	3,839			1,563				275
Africa mining	389			315				66
Molybdenum	847			660			b	49
Rod & Refining	3,356			3,336				8
Atlantic Copper Smelting & Refining	1,892			1,895				36
Corporate, other & eliminations	(4,455		)	(4,179		)		25
As reported in FCX’s consolidated financial statements	$	15,040		$	7,006		b	$	1,014

a. Includes silver sales of 4.9 million ounces ($14.94 per ounce average realized price).

b. Includes LCM molybdenum inventory adjustments of $19 million.

110

Africa Mining Product Revenues and Production Costs

Year Ended December 31, 2011
(In millions)	By-Product			Co-Product Method
	Method			Copper			Cobalt			Total
Revenues, excluding adjustmentsa	$	1,059		$	1,059		$	253		$	1,312
Site production and delivery, before net noncash
and other costs shown below	444			393			141			534
Cobalt creditsb	(165		)	—			—			—
Royalty on metals	24			20			4			24
Net cash costs	303			413			145			558
Depreciation, depletion and amortization	140			120			20			140
Noncash and other costs, net	45			39			6			45
Total costs	488			572			171			743
Revenue adjustments, primarily for pricing on prior
period open sales	(1		)	(1		)	2			1
Other non-inventoriable costs	(12		)	(10		)	(2		)	(12		)
Gross profit	$	558		$	476		$	82		$	558
Reconciliation to Amounts Reported
							Depreciation,
				Production			Depletion and
	Revenues			and Delivery			Amortization
Totals presented above	$	1,312		$	534		$	140
Royalty on metals	(24		)	N/A			N/A
Net noncash and other costs	N/A			45			N/A
Revenue adjustments, primarily for pricing on prior
period open sales	1			N/A			N/A
Other non-inventoriable costs	N/A			12			N/A
Africa mining	1,289			591			140
North America copper mines	5,633			2,629			279
South America mining	5,258			1,905			258
Indonesia mining	5,046			1,902			215
Molybdenum	1,424			1,036			60
Rod & Refining	5,549			5,527			8
Atlantic Copper Smelting & Refining	2,984			2,991			40
Corporate, other & eliminations	(6,303		)	(6,683		)	22
As reported in FCX’s consolidated financial statements	$	20,880		$	9,898		$	1,022

a. Includes adjustments for point-of-sale transportation costs as negotiated in customer contracts.

b. Net of cobalt downstream processing and freight costs.

111

Africa Mining Product Revenues and Production Costs (continued)

Year Ended December 31, 2010
(In millions)	By-Product			Co-Product Method
	Method			Copper			Cobalt			Total
Revenues, excluding adjustmentsa	$	904		$	904		$	218		$	1,122
Site production and delivery, before net noncash
and other costs shown below	366			323			115			438
Cobalt creditsb	(150		)	—			—			—
Royalty on metals	20			16			4			20
Net cash costs	236			339			119			458
Depreciation, depletion and amortization	128			107			21			128
Noncash and other costs, net	30			26			4			30
Total costs	394			472			144			616
Revenue adjustments, primarily for pricing on prior
period open sales	—			—			4			4
Other non-inventoriable costs	(20		)	(17		)	(3		)	(20		)
Gross profit	$	490		$	415		$	75		$	490
Reconciliation to Amounts Reported
							Depreciation,
				Production			Depletion and
	Revenues			and Delivery			Amortization
Totals presented above	$	1,122		$	438		$	128
Royalty on metals	(20		)	N/A			N/A
Net noncash and other costs	N/A			30			N/A
Revenue adjustments, primarily for pricing on prior
period open sales	4			N/A			N/A
Other non-inventoriable costs	N/A			20			N/A
Africa mining	1,106			488			128
North America copper mines	4,173			2,052			273
South America mining	4,991			1,678			250
Indonesia mining	6,377			1,904			257
Molybdenum	1,205			784			51
Rod & Refining	4,470			4,442			8
Atlantic Copper Smelting & Refining	2,491			2,470			38
Corporate, other & eliminations	(5,831		)	(5,483		)	31
As reported in FCX’s consolidated financial statements	$	18,982		$	8,335		$	1,036

a. Includes adjustments for point-of-sale transportation costs as negotiated in customer contracts.

b. Net of cobalt downstream processing and freight costs.

112

Henderson Molybdenum Mine Product Revenues and Production Costs

	Years Ended December 31,
(In millions)	2011			2010				2009		a
Revenues, excluding adjustments	$	628		$	637			$	347
Site production and delivery, before net noncash
and other costs shown below	209			193				148
Treatment charges and other	33			43				30
Net cash costs	242			236				178
Depreciation, depletion and amortization	37			34				26
Noncash and other costs, net	2			1				1
Total costs	281			271				205
Gross profitb	$	347		$	366			$	142
Reconciliation to Amounts Reported				Production				Depreciation,
				and				Depletion and
Year Ended December 31, 2011	Revenues			Delivery				Amortization
Totals presented above	$	628		$	209			$	37
Treatment charges and other	(33		)	N/A				N/A
Net noncash and other costs	N/A			2				N/A
Henderson mine	595			211				37
Other molybdenum operations and eliminationsc	829			825				23
Molybdenum	1,424			1,036				60
North America copper mines	5,633			2,629				279
South America mining	5,258			1,905				258
Indonesia mining	5,046			1,902				215
Africa mining	1,289			591				140
Rod & Refining	5,549			5,527				8
Atlantic Copper Smelting & Refining	2,984			2,991				40
Corporate, other & eliminations	(6,303		)	(6,683		)		22
As reported in FCX’s consolidated financial statements	$	20,880		$	9,898			$	1,022
Year Ended December 31, 2010
Totals presented above	$	637		$	193			$	34
Treatment charges and other	(43		)	N/A				N/A
Net noncash and other costs	N/A			1				N/A
Henderson mine	594			194				34
Other molybdenum operations and eliminationsc	611			590				17
Molybdenum	1,205			784				51
North America copper mines	4,173			2,052				273
South America mining	4,991			1,678				250
Indonesia mining	6,377			1,904				257
Africa mining	1,106			488				128
Rod & Refining	4,470			4,442				8
Atlantic Copper Smelting & Refining	2,491			2,470				38
Corporate, other & eliminations	(5,831		)	(5,483		)		31
As reported in FCX’s consolidated financial statements	$	18,982		$	8,335			$	1,036
Year Ended December 31, 2009
Totals presented above	$	347		$	148			$	26
Treatment charges and other	(30		)	N/A				N/A
Net noncash and other costs	N/A			1				N/A
Henderson mine	317			149				26
Other molybdenum operations and eliminationsc	530			511			d	23
Molybdenum	847			660				49
North America copper mines	3,264			1,911				280
South America mining	3,839			1,563				275
Indonesia mining	5,908			1,505				275
Africa mining	389			315				66
Rod & Refining	3,356			3,336				8
Atlantic Copper Smelting & Refining	1,892			1,895				36
Corporate, other & eliminations	(4,455		)	(4,179		)		25
As reported in FCX’s consolidated financial statements	$	15,040		$	7,006		d	$	1,014

113

a. Revenues and costs were adjusted to include freight and downstream conversion costs in net cash costs; gross profit was not affected by these adjustments.

b. Gross profit reflects sales of Henderson products based on volumes produced at market-based pricing. On a consolidated basis, the Molybdenum division includes profits on sales as they are made to third parties and realizations based on actual contract terms. As a result, the actual gross profit realized will differ from the amounts reported in this table.

c. Primarily includes amounts associated with the molybdenum sales company, which includes sales of molybdenum produced at our North and South America copper mines.

d. Includes LCM molybdenum inventory adjustments of $19 million.

CAUTIONARY STATEMENT

Our discussion and analysis contains forward-looking statements in which we discuss factors we believe may affect our future performance.  Forward-looking statements are all statements other than statements of historical facts, such as those statements regarding projected ore grades and milling rates, projected production and sales volumes, projected unit net cash costs, projected operating cash flows, projected capital expenditures, exploration efforts and results, mine production and development plans, the impact of deferred intercompany profits on earnings, liquidity, other financial commitments and tax rates, the impact of copper, gold, molybdenum and cobalt price changes, reserve estimates, potential prepayments of debt, future dividend payments and potential share purchases.  The words “anticipates,” “may,” “can,” “plans,” “believes,” “estimates,” “expects,” “projects,” “intends,” “likely,” “will,” “should,” “to be,” and any similar expressions are intended to identify those assertions as forward-looking statements.  The declaration of dividends is at the discretion of our Board of Directors and will depend on our financial results, cash requirements, future prospects, and other factors deemed relevant by the Board.

We caution readers that forward-looking statements are not guarantees of future performance and our actual results may differ materially from those anticipated, projected or assumed in the forward-looking statements.  Important factors that can cause our actual results to differ materially from those anticipated in the forward-looking statements include commodity prices, mine sequencing, production rates, industry risks, regulatory changes, political risks, the potential effects of violence in Indonesia, the resolution of administrative disputes in the DRC, weather- and climate-related risks, labor relations, environmental risks, litigation results, currency translation risks and other factors described in more detail under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2011, filed with the SEC.

Investors are cautioned that many of the assumptions on which our forward-looking statements are based are likely to change after our forward-looking statements are made, including for example commodity prices, which we cannot control, and production volumes and costs, some aspects of which we may or may not be able to control. Further, we may make changes to our business plans that could or will affect our results. We caution investors that we do not intend to update our forward-looking statements more frequently than quarterly notwithstanding any changes in our assumptions, changes in our business plans, our actual experience, or other changes, and we undertake no obligation to update any forward-looking statements.

114

Item 8. Financial Statements and Supplementary Data.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Freeport-McMoRan Copper & Gold Inc.’s (the Company’s) management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

• Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the Company’s assets;

• Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

• Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management, including our principal executive officer and principal financial officer, assessed the effectiveness of our internal control over financial reporting as of the end of the fiscal year covered by this annual report on Form 10-K. In making this assessment, our management used the criteria set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our management’s assessment, management concluded that, as of December 31, 2011, our Company’s internal control over financial reporting is effective based on the COSO criteria.

Ernst & Young LLP, an independent registered public accounting firm, who audited the Company’s consolidated financial statements included in this Form 10-K, has issued an attestation report on the Company’s internal control over financial reporting, which is included herein.

/s/ Richard C. Adkerson	/s/ Kathleen L. Quirk
Richard C. Adkerson	Kathleen L. Quirk
President and Chief Executive Officer	Executive Vice President,
	Chief Financial Officer and Treasurer

115

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF

FREEPORT-McMoRan COPPER & GOLD INC.

We have audited Freeport-McMoRan Copper & Gold Inc.’s internal control over financial reporting as of December 31, 2011, based on criteria established inInternal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Freeport-McMoRan Copper & Gold Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Freeport-McMoRan Copper & Gold Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Freeport-McMoRan Copper & Gold Inc. as of December 31, 2011 and 2010 and the related consolidated statements of income, equity and cash flows for each of the three years in the period ended December 31, 2011, and our report dated February 27, 2012 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Phoenix, Arizona

February 27, 2012

116

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF

FREEPORT-McMoRan COPPER & GOLD INC.

We have audited the accompanying consolidated balance sheets of Freeport-McMoRan Copper & Gold Inc. as of December 31, 2011 and 2010