Exhibit 10.7




Exhibit
10.7




DATED
17 DECEMBER 2004













(1)
UNDERWRITERS SUBSCRIBING TO CERTAIN POLICIES REINSURING THE ORIGINAL POLICY


 




 

-
and -

 




 

(2)
FREEPORT-MCMORAN INSURANCE COMPANY LIMITED

 




 

-
and -

 




 

(3)
FM SERVICES COMPANY AND FREEPORT-MCMORAN COPPER AND GOLD INC


 




 




 














	 	
       

      SETTLEMENT

      AGREEMENT

      
	 















 







 

 

 




THIS
Settlement Agreement ("Agreement") is made
on 17
December 2004 




 

BETWEEN


 

(1) UNDERWRITERS
SUBSCRIBING to certain all risk policies identified in Schedule A reinsuring the
Original Policy
(hereinafter altogether referred to as "Reinsurers")

 

AND

 

(2)
FREEPORT-MCMORAN INSURANCE COMPANY LIMITED ("FMICL")

 




 

AND

 

(3)
 FM
SERVICES COMPANY AND FREEPORT-MCMORAN COPPER AND GOLD INC and/or owned,
controlled, associated, affiliated, joint venture, or any subsidiary companies
or corporations (hereinafter altogether referred to as
"FCX")

 




 

(jointly
"the Parties")

 

WHEREAS

 


	
      (A)
	
      FMICL
      a wholly owned captive insurance company of FCX based in Bermuda, issued
      an all risks first party policy of insurance to FCX, referred to as the
      Original Policy and bearing a policy number FMI-1001-03 (hereafter the
      "Original Policy"). 




 


	
      (B)
	
      Reinsurers
      reinsure FMICL under certain all risks policies described in Schedule A
      ("the
      Reinsurance Policies") in respect of FMICL's liability to FCX under the
      Original Policy.




 


	
      (C)
	
      On
      9 October 2003 and 11 December 2003, slope failures ("the Failures")
      occurred at the
      south wall of the Grasberg open pit mine situated in Tembagapura, Papua
      Indonesia.




 


	
      (D)
	
      As
      a result of the Failures, FCX has asserted that there is coverage for the
      loss under the Original Policy and FMICL has submitted a claim under the
      Reinsurance Policies.




 


	
      (E)
	
      There
      is a dispute between Reinsurers and FMICL/FCX as to the nature of the loss
      or losses, the facts surrounding the Failures, the amount and/or extent of
      any loss suffered by FMICL/FCX as a result of the Failures and the
      application of policy provisions.




 


	
      (F)
	
      The
      Parties now wish to settle all disputes and differences between them as a
      compromise and without admission on any matter in dispute on the following
      terms:




 

IT
IS AGREED in
consideration of the matters set out in this Agreement that:

 


	1.  	
      PAYMENT 




 


	1.1  	
      Reinsurers
      shall pay to FMICL the amount of US$125 million (ONE HUNDRED AND TWENTY
      FIVE MILLION DOLLARS) in full and final settlement of all or any claim(s)
      under the Reinsurance Policies arising from or in any way connected with
      the Failures.




 


	1.2  	
      The
      amount of US$125 million referred to in paragraph 1.1
  is:




 


	1.2.1  	
      inclusive
      of the interim payment of US$20 million (TWENTY MILLION DOLLARS)
      previously paid by Reinsurers to FMICL/FCX;




 


	1.2.2  	
      inclusive
      of interest;




 


	1.2.3  	
      net
      of the self-insured retention under the Reinsurance
    Policies.




 


	1.3  	
      Reinsurers
      shall each pay their respective share of the balance due of US$105 million
      (ONE HUNDRED AND FIVE MILLION DOLLARS) in the proportions set out in the
      Schedule by no later than 11 am on 21 January 2005 New York time.
      Reinsurers intend to use reasonable commercial efforts to pay such amounts
      if possible before December 31, 2004. All such payments shall be made by
      wire transfer to: 




 

Bank
Name:        JP MorganChase Bank

Bank
Location:    New York, NY

Bank
Routing:      021000021

Account
Name:    PT Freeport Indonesia

Account
#           
910-2-668804





	2.  	
      SEVERAL
      LIABILITY




 

For the
avoidance of any doubt, Reinsurers' obligation to pay the sum referred to in
paragraph 1 is several and in accordance with their respective participation
under the Reinsurance Policies as set out in the Schedule A.

 



 



	3.  	
      RELEASE
      




 


	3.1  	
      This
      Agreement is in full and final settlement of all and any causes of action
      which the Parties may have against any other howsoever arising from the
      Failures, including matters which are not yet contemplated by a Party
      either because of their factual knowledge or because of the status of the
      law.




 


	3.2  	
      Except
      for the enforcement of the obligations under this Agreement, FMICL, FCX,
      and Reinsurers do hereby irrevocably and unconditionally release, waive
      and withdraw any and all claims, defences, demands, actions, agreements,
      causes of action, obligations, right of reimbursement or repayment,
      expenses, attorneys’ fees, damages, or liabilities, whether arising in
      contract, tort, law, equity or otherwise, in common law or statute,
      whether now known or unknown, suspected or unsuspected, and whether or not
      concealed or hidden, past, existing, potential, or future, that have in
      the past, now are, or in the future may be made against or by Reinsurers,
      FMICL or FCX with respect to the Failures,
including:




 


	3.2.1  	
      any
      claim regarding any payment made or not made by the Reinsurers;
      




 


	3.2.2  	
      any
      disputes among FMICL/FCX and the Reinsurers as to the cause of the
      Failures or the applicability of the Original Policy and/or Reinsurance
      Policies to the Failures; 




 


	3.2.3  	
      any
      disclosure or failure to disclose information relating to the Failures as
      to the Original Policy or Reinsurance Policies by any Party or any agent
      of any Party.




 


	3.3  	
      Each
      Party expressly assumes the risk that acts, omissions, matters, causes or
      things may have occurred which it does not know or does not suspect to
      exist. Each Party hereby waives the terms and provisions of any statute,
      rule or doctrine of law which either (i) narrowly construes releases
      purporting by their terms to release claims in whole or in part based
      upon, arising from, or related to such acts, omissions, matters, causes or
      things or, (ii) which restricts or prohibits the releasing of such
      claims.




 


	4.  	
      COSTS




 

The
Parties agree to pay their own costs relating to the matter subject to this
Agreement.

 


	5.  	
      CONFIDENTIALITY
      CLAUSES 




 

The
Parties agree to keep all the circumstances surrounding this settlement and the
terms strictly confidential other than the final settlement amount, but nothing
in this Agreement shall prevent either party from disclosing
information:

 


	5.1  	
      insofar
      as may be necessary for the purposes of the implementation of this
      Agreement;




 


	5.2  	
      insofar
      as they may be bound to do so under compulsion of law and/or where
      required to do so by regulatory agencies and/or to their professional
      advisors where reasonably necessary for the performance of their
      professional services including but not limited to their lawyers,
      accountants, auditors and actuaries; to their parent and/or holding
      companies and/or associated companies and/or past or present shareholders
      and/or the reinsurers of such shareholders and/or any agents retained by
      these entities as may be reasonably
necessary;




 


	5.3  	
      to
      their reinsurers and their reinsurers' parent and/or holding companies
      and/or associated companies and/or past or present shareholders and/or any
      agents retained by these entities as may be reasonably
      necessary;




 


	5.4  	
      to
      persons or entities with rights to revenues from the operations of the
      Grasberg Mine as may be reasonably necessary.





 


	6.  	
      GOVERNING
      LAW




 

This
Agreement shall be governed by and construed in accordance with English law and
any dispute or claim arising out of this Agreement shall be referred for
resolution to the courts of England and Wales.

 


	7.  	
      NOTICES




 

All
notices or correspondence arising out of this Agreement will be deemed served or
sent and received if sent by fax or pre-paid first class post to the Parties'
addresses as follows:

 


 

For and
on behalf of Reinsurers:

 

DLA

3 Noble
Street

London
EC2V 7EE

Attention:
Charles Gordon/Ling Ong

Fax: +44
(0) 20 7796 6932




 

For and
on behalf of FMICL:

 

FMICL

c/o
Conyers, Dill & Pearman

P.O. Box
HM 666

Clarendon
House

Church
Street

Hamilton
HMCX Bermuda 




with a
copy to 




FMICL

c/o
Freeport-McMoRan Copper & Gold Inc.

1615
Poydras Street

New
Orleans, LA  70112

Attention: 
General Counsel

Fax: 
(504) 582-1833

 

For and
on behalf of FCX:

 

Freeport-McMoRan
Copper & Gold Inc.

1615
Poydras Street

New
Orleans, LA  70112

Attention: 
General Counsel

Fax: 
(504) 582-1833

 





	8.  	
      GENERAL




 


	8.1  	
      Headings
      in this Agreement are inserted for convenience only and shall not affect
      the construction of the Agreement.




 


	8.2  	
      The
      various provisions and sub-provisions of the Agreement are severable and
      if any provision or other identifiable part is held to be unenforceable by
      any court of competent jurisdiction then such unenforceability shall not
      affect the enforceability of the remaining provisions or identifiable
      parts of the Agreement.




 


	8.3  	
      The
      Agreement may be executed in any number of counterparts which when
      executed and delivered shall be an original but all of which when taken
      together shall constitute a single
instrument.




 


	8.4  	
      All
      references to Reinsurers, FMICL or FCX shall include any successor in
      title or assignee.




 


	8.5  	
      All
      references to Reinsurers, FMICL or FCX shall include any
      subsidiaries.




 


	8.6  	
      The
      Parties each acknowledge that this Agreement represents the entire
      agreement between them, or any of them, regarding its subject matter and
      that they are not relying on any representation or commitment made by any
      of the others in entering into it, otherwise than as set out in this
      Agreement




 


	8.7  	
      Other
      than as expressly provided elsewhere in the Agreement no variation of the
      Agreement or any other documents in the agreed form shall be valid unless
      in writing and signed by or on behalf of each of the parties to the
      Agreement.




 


	8.8  	
      A
      person who is not a Party to this Agreement shall have no right under the
      Contracts (Rights of Third Parties) Act 1999 to enforce any term of this
      Agreement. This clause does not affect any right or remedy of any person
      which exists or is available otherwise than pursuant to that
      Act.




 
















/s/ P.
Thourot      17/12/04

..................................................................Date..................................




Name: P.
Thourot

             

Duly
authorised for and on behalf of : Scor
















/s/ C. U.
Schramm     17/12/04

..................................................................Date..................................




Name: C.
U. Schramm




Duly
authorised for and on behalf of : Hiscox Syndicate 33
















/s/ Robin
Easton     17/12/04

..................................................................Date..................................




Name:
Robin Easton




Duly
authorised for and on behalf of : Ascot Syndicate 1414, Wellington Syndicate
2020 and Talbot Syndicate 1183
















/s/ Keith
Lewis      17/12/04

..................................................................Date..................................




Name:
Keith Lewis




Duly
authorised for and on behalf of : Swiss Reinsurance Company
















/signed/       17/12/04

..................................................................Date..................................




Name:





Duly
authorised for and on behalf of : Munich American Risk Partners













 










/s/ Denis
H. Smith     12/30/04




..................................................................Date..................................




Name:
Denis H. Smith




Duly
authorised for and on behalf of : Zurich American 













/s/ R.
Leonce      17/12/04

..................................................................Date..................................




Name: R.
Leonce




Duly
authorised for and on behalf of : Zurich Specialities Limited,
London
















/s/
Jean-Pierre Kervella     31 Dec.
2004

..................................................................Date..................................




Name:
Jean-Pierre Kervella




Duly
authorised for and on behalf of : Partner Re, Paris
















/signed/       12/30/04

..................................................................Date..................................




Name:





Duly
authorised for and on behalf of : Allied World Assurance Company
(Bermuda)



 





/s/ Peter
Bell      22 Dec.
2004

..................................................................Date..................................




Name:
Peter Bell




Duly
authorised for and on behalf of : Everest Reinsurance (Bermuda)
















/s/
Joffrey L. Kaser     12-22-04

..................................................................Date..................................




Name:
Joffrey L. Kaser




Duly
authorised for and on behalf of : Endurance Specialty Insurance
(Bermuda)
















/s/
Anthony Battle     December
17, 2004

..................................................................Date..................................




Name:
Anthony Battle




Duly
authorised for and on behalf of : National Union Fire Insurance Co. of
Pittsburgh, PA



 

 


 








/s/
Richard C. Adkerson     17
December 2004

..................................................................Date..................................




Name:
Richard C. Adkerson




Duly
authorised for and on behalf of : FMICL
















/s/
Richard C. Adkerson     17
December 2004

..................................................................Date..................................




Name:
Richard C. Adkerson

Duly
authorised for and on behalf of : FCX












 

 

 



SCHEDULE
A




Reinsurance
Policies shall mean the following




EL
0300428

EL
0300420

EL
0300533

P000564/002

IM834249808

FP234917A

001093002

STA
71351




Any other
reinsurance policy subscribing to the layer of indemnity of US$275m each and
every loss combined single limit physical damage/business interruption excess of
the self insured retention of US$10m physical damage, 15 days business
interruption subject to minimum of US$25m and a maximum of US$40m each and every
loss combined single limit physical damage/business interruption 




"Reinsurers"
shall mean the following Syndicates/Companies with the following
participations:


 


	
      Scor,
      Paris
	
      -
	
      20.0000%

	
      Hiscox
      Syndicate 33
	
      -
	
      10.0000%

	
      Swiss
      Reinsurance Company
	
      -
	
      10.0000%

	
      Munich
      American Risk Partners
	
      -
	
      10.0000%

	
      Ascot
      Syndicate 1414
	
      -
	
      9.0000%

	
      Zurich
      American
	
      -
	
      9.0000%

	
      Partner
      Re, Paris
	
      -
	
      8.0000%

	
      Wellington
      Syndicate 2020
	
      -
	
      7.5000%

	
      Allied
      World Assurance Company (Bermuda)
	
      -
	
      6.0000%

	
      Zurich
      Specialities, London
	
      -
	
      3.0000%

	
      Everest
      Reinsurance (Bermuda) 
	
      -
	
      2.6820%

	
      Endurance
      Specialty Insurance (Bermuda)
	
      -
	
      1.8180%

	
      National
      Union Fire Insurance Company of Pittsburgh, PA
	
      -
	
      1.5000%

	
      Talbot
      Syndicate 1183 
	
      -
	
      1.5000%