Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX):

HIGHLIGHTS

• Net income applicable to common stock for second-quarter 2008 totaled $947 million, $2.25 per share, compared with $1.1 billion, $2.62 per share, for second-quarter 2007. Net income applicable to common stock for the first six months of 2008 totaled $2.1 billion, $4.89 per share, compared with $1.6 billion, $4.80 per share, for the first six months of 2007.
• Consolidated sales from mines for second-quarter 2008 totaled 942 million pounds of copper, 265 thousand ounces of gold and 20 million pounds of molybdenum, compared with 1.0 billion pounds of copper, 913 thousand ounces of gold and 15 million pounds of molybdenum for second-quarter 2007. As expected, copper and gold sales volumes were lower than the year-ago quarter because of mine sequencing at the Grasberg mine in Papua, Indonesia.
• Consolidated sales from mines are expected to approximate 4.1 billion pounds of copper, 1.4 million ounces of gold and 75 million pounds of molybdenum for the year 2008, including 1.0 billion pounds of copper, 315 thousand ounces of gold and 18 million pounds of molybdenum for third-quarter 2008. Second-half 2008 copper and gold sales are expected to approximate 2.2 billion pounds and 890 thousand ounces, approximately 400 million pounds and 350 thousand ounces higher than the first half of 2008.
• Operating cash flows totaled $1.0 billion, net of working capital uses of $765 million, for second-quarter 2008 and $1.6 billion, net of working capital uses of $2.1 billion, for the first six months of 2008. Assuming average prices of $3.75 per pound for copper, $900 per ounce for gold and $30 per pound for molybdenum for the remainder of 2008, operating cash flows in 2008 would approximate $6.0 billion, including approximately $4.4 billion for the second half of 2008. Each $0.20 per pound change in copper prices in the balance of the year would impact 2008 operating cash flows by approximately $300 million.
• Capital expenditures totaled $655 million for second-quarter 2008 and $1.2 billion for the first six months of 2008. Projected 2008 capital expenditures approximate $3.0 billion, including investments in development projects in the Americas and Indonesia, the Tenke Fungurume greenfield project in Africa and the project to restart the Climax molybdenum mine in Colorado.
• Total debt approximated $7.4 billion and consolidated cash was $1.6 billion at June 30, 2008.
• FCX’s Board of Directors authorized an increase in the common stock dividend from an annual rate of $1.75 per share to $2.00 per share and expanded the open market share purchase program to 30 million shares from the prior authorization of 20 million shares.

Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) reported second-quarter 2008 net income applicable to common stock of $947 million, $2.25 per share, compared with $1.1 billion, $2.62 per share, for the second quarter of 2007. For the six months ended June 30, 2008, FCX reported net income of $2.1 billion, $4.89 per share, compared with $1.6 billion, $4.80 per share, in the 2007 period. The results for the 2007 six-month period include the operations of Phelps Dodge beginning March 20, 2007.

James R. Moffett, Chairman of the Board, and Richard C. Adkerson, President and Chief Executive Officer, said, “We are progressing our efforts to develop our large mineral positions in the Americas, Africa and Indonesia to their full potential. The results of our efforts are encouraging and we expect success in expanding our reserves and adding to our growth pipeline. We continue to focus on maximizing current production volumes which is enabling us to generate significant cash flows to invest in attractive organic growth projects and provide cash returns to shareholders. Today's Board actions to increase our common stock dividend and expand our share purchase program reflect our financial strength and a positive outlook for our business and markets.”

OPERATIONS

Consolidated copper sales of 942 million pounds in the second quarter of 2008 were slightly above previous estimates of 930 million pounds reported on April 23, 2008, because of the timing of shipments. Second-quarter 2008 production volumes were slightly lower than forecast, principally in North America. Second-quarter 2008 consolidated copper sales were seven percent lower than the year-ago period when FCX was mining in a higher grade section of Grasberg, partly offset by higher production in North and South America.

Consolidated gold sales of 265 thousand ounces in second-quarter 2008 were higher than previous estimates of 225 thousand ounces because of mine sequencing at the Grasberg mine in Indonesia. As expected, consolidated gold sales in the second quarter of 2008 were significantly lower than the year ago period because of mining in a lower ore grade section of the Grasberg open pit. Consolidated molybdenum sales of 20 million pounds in the second quarter of 2008 approximated previous estimates of 18 million pounds.

For the year 2008, FCX projects sales to approximate 4.1 billion pounds of copper, 1.4 million ounces of gold and 75 million pounds of molybdenum. Copper sales are expected to be approximately 100 million pounds lower than previous estimates primarily because of delays in achieving full production at the new Safford mine and lower than expected production at Morenci. Efforts are under way to offset these shortfalls.

Consolidated unit net cash costs were $1.25 per pound in the second quarter of 2008. Cash costs have increased significantly in the last twelve months and additional cost escalation was experienced in the second quarter, principally for energy. The increase in second-quarter 2008 unit net cash costs compared with the year ago period also reflects lower volumes at Grasberg. The effect of increased input costs is expected to result in higher costs in 2008 than previous estimates. Assuming average prices of $3.75 per pound for copper, $900 per ounce for gold and $30 per pound for molybdenum for the remainder of 2008, unit net cash costs for the year 2008 would average approximately $1.10 per pound, compared with FCX’s April 23, 2008, estimate of $1.00 per pound. Because of higher volumes in the second half of 2008, principally from Grasberg, second-half unit net cash costs are expected to be lower than the first-half average. Unit net cash costs are expected to average approximately $1.06 per pound in the second half of 2008, including approximately $1.24 per pound in third-quarter 2008 and approximately $0.92 per pound in fourth-quarter 2008.

For the first six months of 2008, approximately 50 percent of FCX’s copper was sold in concentrate, 30 percent as rod (principally from North American operations) and 20 percent as cathodes. Under the long-established structure of sales agreements prevalent in the industry, substantially all of FCX’s concentrate sales contracts and most of its cathode sales contracts are provisionally priced at the time of shipment. The provisional prices are finalized in a specified future period (generally one to four months from the shipment date) based on quoted LME or COMEX prices. The sales subject to final pricing are generally settled in a subsequent month or quarter. Because a significant portion of FCX’s concentrate and cathode sales in any quarterly period usually remain subject to final pricing, the quarter-end forward price is a major determinant of recorded revenues and the average recorded realized price for copper for the period.

LME copper prices averaged $3.83 per pound during the second quarter of 2008, compared with FCX’s recorded prices of $3.85 per pound. The applicable forward copper price at the end of the quarter was $3.88 per pound. Approximately half of FCX’s consolidated copper sales during the second quarter were provisionally priced at the time of shipment and are subject to final pricing later in 2008.

At June 30, 2008, FCX had copper sales of 369 million pounds of copper (net of minority interests) priced at an average of $3.88 per pound, subject to final pricing over the next several months. Each $0.05 change in the price realized from the June 30, 2008, price would result in an approximate $11 million effect on FCX’s 2008 net income. The LME closing spot price for copper on July 21, 2008, was $3.79 per pound.

At March 31, 2008, 362 million pounds of copper (net of minority interests) were provisionally priced at $3.82 per pound. Adjustments to these prior period copper sales increased consolidated revenues by $5 million ($3 million to net income or $0.01 per share), compared with an increase of $188 million ($95 million to net income or $0.21 per share) in second-quarter 2007. Additionally, adjustments to prior year copper sales in the first six months of 2008 resulted in an increase in consolidated revenues of $267 million ($126 million to net income or $0.28 per share), compared with an increase of $90 million ($43 million to net income or $0.12 per share) in the first six months of 2007.

North American Mining. FCX operates seven open-pit copper mining complexes in North America (Morenci, Bagdad, Sierrita, Safford and Miami in Arizona and Chino and Tyrone in New Mexico) and conducts molybdenum mining operations at the Henderson underground mine in Colorado. By-product molybdenum is primarily produced at Sierrita and Bagdad. FCX is the world’s largest producer of molybdenum. FCX is engaged in a project to restart the Climax open-pit molybdenum mine in Colorado. All of these mining operations are wholly owned, except for Morenci. FCX records its 85 percent joint venture interest in Morenci using the proportionate consolidation method. The North American copper mining operations are operated in an integrated fashion and have long-lived reserves with significant additional development potential.

Consolidated copper sales in North America totaled 347 million pounds in the second quarter of 2008, slightly above the second-quarter 2007 sales resulting from the commencement of production at the recently commissioned Safford mine and higher production at Sierrita, partly offset by lower Morenci production.

In the second quarter of 2008, consolidated molybdenum sales from the Henderson and by-product mines totaled 20 million pounds, five million pounds higher than second-quarter 2007 primarily because of improved market conditions.

Approximately 85 percent of FCX’s expected 2008 molybdenum production is committed for sale throughout the world pursuant to annual or quarterly agreements based primarily on prevailing market prices one month prior to the time of sale. For 2009, 90 percent of sales is expected to be priced at approximate prevailing market prices. The Metals Week Dealer Oxide closing price for molybdenum on July 21, 2008, was $33.75 per pound.

For the year 2008, FCX expects sales from North American operations to approximate 1.4 billion pounds of copper and 75 million pounds of molybdenum, compared with 1.3 billion pounds of copper and 69 million pounds of molybdenum for pro forma year 2007.

Unit Net Cash Costs for North American Copper Mines. The following table summarizes unit net cash costs at the North American copper mines.

North America unit net cash costs were higher in the 2008 periods as compared with the 2007 periods primarily because of increases in energy, labor, sulfuric acid and other input costs, and increases in mining rates and lower grades at Morenci, combined with higher unit costs at Safford as the mine ramps up to full production rates.

Assuming an average copper price of $3.75 per pound and an average molybdenum price of $30 per pound for the remainder of 2008 and achievement of current 2008 sales estimates, FCX estimates that its 2008 average unit net cash costs, including molybdenum credits, for its North American copper mines would approximate $1.29 per pound of copper. Unit net cash costs for 2008 would change by approximately $0.02 per pound for each $2 per pound change in the average price of molybdenum for the remainder of 2008.

Unit Net Cash Costs for Henderson Molybdenum Mine. Second-quarter 2008 unit net cash costs of $4.96 per pound of molybdenum at the Henderson molybdenum mine were higher, compared with unit net cash costs of $4.38 per pound for second-quarter 2007, primarily because of higher input costs, including labor, maintenance, supplies and energy. Assuming achievement of current 2008 sales estimates, FCX estimates 2008 average unit net cash costs for its Henderson mine at approximately $5.00 per pound of molybdenum.

South American Mining. FCX operates four copper mines in South America – Cerro Verde in Peru and Candelaria, Ojos del Salado and El Abra in Chile. These operations are consolidated in FCX’s financial statements, with outside ownership reported as minority interests.

FCX owns a 53.56 percent interest in Cerro Verde, an open-pit mine producing both electrowon copper cathodes and copper and molybdenum concentrates. FCX owns 80 percent of the Candelaria and Ojos del Salado mining complexes, which include the Candelaria open-pit and underground mines and the Ojos del Salado underground mines. These mines use common processing facilities to produce copper concentrates. FCX owns a 51 percent interest in El Abra, an open-pit mine producing electrowon copper cathodes.