Moody's assigns Freeport-McMoRan SGL-1 rating

The following statement was released by the rating agency.

NEW YORK, Aug 21 - Moody's Investors Service assigned a speculative grade liquidity rating of SGL-1 to Freeport-McMoRan Copper & Gold (FCX). FCX is a holding company whose business is conducted through two key operating subsidiaries, P.T. Freeport Indonesia (PTFI), which is 90.6% owned, and Atlantic Copper S.A., a 100%-owned copper smelting and refining company. FCX's liquidity rating reflects FCX's strong operating cash flow and cash position, which are more than ample to meet capital expenditures, debt repayments, and dividend requirements over the next 12 months.

FCX's external sources of committed liquidity are currently somewhat limited; FCX and PTFI have a $150 million interim bank credit facility, which the companies intend to replace with a syndicated facility. Moody's estimates FCX's pro-forma unrestricted cash position at June 30, 2003 to be $302 million (actual $740 million), after adjustment for the August 2003 redemption of the gold denominated preferred stock, Series 1, the $78 million purchase of Duke Energy Corporation's interest in P.T. Puncakjaya Power, and repayment of the balance of the 7.2% senior notes due 2026, not already tendered, which have an early payment election option in November 2003. With continued strong free cash flow generation in the second half of 2003, cash balances at year end 2003 should continue at a healthy level.

Although Moody's anticipates cash flow in 2004 to track below that of 2003, given lower gold production expectations, it is still expected to be sufficient to cover PTFI's cash interest payments, capital expenditures and taxes and provide free cash flow to FCX to meet its interest, tax and dividend requirements (common and preferred). Consequently, although there may be some uncertainty as to timing of a new bank credit facility being implemented, FCX's internal liquidity position is viewed as able to comfortably meet all near-term requirements. Moody's expectations are based upon a $0.70/lb copper price and $300/oz gold price. Although fluctuations in performance are likely on a quarter-to-quarter basis, due to mine sequencing, annual performance at the indicated production levels of 1.4 billion pounds of copper and 2.3 million ounces of gold should be achieved.

During 2003, FCX used a portion of the proceeds from its first quarter convertible and senior note offerings to repay outstandings under its bank credit facilities. FCX subsequently terminated the commitments of lenders in these facilities and established an interim $150 million facility, by amendment to the prior facilities, with JP Morgan. This interim facility continues to benefit from the same security and guarantee package as the prior revolver (substantively all assets of PTFI, a pledge of 50.1% of the outstanding stock of PTFI, a pledge of the stock of PT Indocopper Investama Indonesia owned by FCX, and a pledge of PTFI's Contract of Work), but also requires cash collateral of $100 million. In addition, the facility contains upstream and downstream guarantees between FCX and PTFI.

Financial covenants remain unchanged and FCX is comfortably in compliance with the financial covenants. The company intends to put in place a new syndicated facility, which is likely to contain the same security package as has historically been a part of the structure of FCX's and PTFI's bank facilities. While the totality of the security package pledged to bank lenders is a limiting factor in alternate liquidity sources available to FCX, continued good internal cash generation, maintenance of a solid cash position, and ongoing focus on debt reduction are mitigants. Any significant negative changes in the terms of a new revolver could have an impact on the liquidity rating. FCX has a B2 senior implied rating. Although FCX's rating technically is not constrained by Indonesia's country ceiling, Indonesian economic and political issues remain critical factors for FCX's rating due to its dependence on dividends from PTFI.

Headquartered in New Orleans, Louisiana, FCX had revenues of $1.9 billion in 2002.(*)