United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
|
| | | | |
UNITED STATES☒ |
SECURITIES AND EXCHANGE COMMISSION |
Washington, D.C. 20549 |
|
FORM 10-Q |
|
(Mark One) |
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2022
OR
For the quarterly period ended September 30, 2017 | | | | | |
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: |
For the transition period from to
Commission file number: 001-11307-01
Freeport-McMoRan Inc.
(Exact name of registrant as specified in its charter)
|
| | | | | | | |
Delaware | | 74-2480931 |
(State or other jurisdiction of | | (I.R.S. Employer Identification No.) |
incorporation or organization) | | |
| | | | | | | | | | | | | | | | | | | | |
| |
333 North Central Avenue | | | | |
Phoenix AZ | | AZ | | | | 85004-2189 |
(Address of principal executive offices) | | | | (Zip Code) |
(602) 366-8100 |
(Registrant’s telephone number, including area 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 | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, par value $0.10 per share | FCX | The New York Stock Exchange |
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.☑ Yes ☐ No
þ Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, 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 o☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging“emerging growth company"company” in Rule 12b-2 of the Exchange Act.
|
| | | | | | | | | | |
Large accelerated filerþ | ☑ | | Accelerated filer¨ | ☐ |
Non-accelerated filer ¨(Do not check if a smaller reporting company) | ☐ | Smaller reporting company¨ | ☐ |
| | Emerging growth company¨ | | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
o☐ Yes þ☑ No
On October 31, 2017,July 29, 2022, there were issued and outstanding 1,447,590,6681,429,270,314 shares of the registrant’s common stock, par value $0.10 per share.
FREEPORT-McMoRan INC.
Freeport-McMoRan Inc.
TABLE OF CONTENTS
| |
Part I. | FINANCIAL INFORMATION |
Part I.FINANCIAL INFORMATION
Item 1.Financial Statements.
Freeport-McMoRan Inc.
CONSOLIDATED BALANCE SHEETS (Unaudited)
| | | | | | | | | | | |
| June 30, 2022 | | December 31, 2021 |
| (In millions) |
ASSETS | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 9,492 | | | $ | 8,068 | |
Trade accounts receivable | 977 | | | 1,168 | |
Income and other tax receivables | 435 | | | 574 | |
| | | |
Inventories: | | | |
Materials and supplies, net | 1,776 | | | 1,669 | |
Mill and leach stockpiles | 1,387 | | | 1,170 | |
Product | 1,507 | | | 1,658 | |
Other current assets | 608 | | | 523 | |
| | | |
Total current assets | 16,182 | | | 14,830 | |
Property, plant, equipment and mine development costs, net | 31,200 | | | 30,345 | |
| | | |
| | | |
Long-term mill and leach stockpiles | 1,230 | | | 1,387 | |
| | | |
Other assets | 1,501 | | | 1,460 | |
| | | |
Total assets | $ | 50,113 | | | $ | 48,022 | |
| | | |
LIABILITIES AND EQUITY | | | |
Current liabilities: | | | |
Accounts payable and accrued liabilities | $ | 3,853 | | | $ | 3,495 | |
Current portion of debt | 1,038 | | | 372 | |
Accrued income taxes | 507 | | | 1,541 | |
Current portion of environmental and asset retirement obligations | 317 | | | 264 | |
Dividends payable | 217 | | | 220 | |
| | | |
Total current liabilities | 5,932 | | | 5,892 | |
Long-term debt, less current portion | 10,054 | | | 9,078 | |
Deferred income taxes | 4,297 | | | 4,234 | |
Environmental and asset retirement obligations, less current portion | 4,170 | | | 4,116 | |
Other liabilities | 1,613 | | | 1,683 | |
| | | |
Total liabilities | 26,066 | | | 25,003 | |
| | | |
| | | |
| | | |
Equity: | | | |
Stockholders’ equity: | | | |
Common stock | 161 | | | 160 | |
Capital in excess of par value | 25,661 | | | 25,875 | |
Accumulated deficit | (5,008) | | | (7,375) | |
Accumulated other comprehensive loss | (386) | | | (388) | |
Common stock held in treasury | (5,539) | | | (4,292) | |
Total stockholders’ equity | 14,889 | | | 13,980 | |
Noncontrolling interests | 9,158 | | | 9,039 | |
Total equity | 24,047 | | | 23,019 | |
Total liabilities and equity | $ | 50,113 | | | $ | 48,022 | |
|
| | | | | | | |
| September 30, 2017 | | December 31, 2016 |
| (In millions) |
ASSETS | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 4,957 |
| | $ | 4,245 |
|
Trade accounts receivable | 1,024 |
| | 1,126 |
|
Income and other tax receivables | 522 |
| | 879 |
|
Inventories: | | | |
Materials and supplies, net | 1,276 |
| | 1,306 |
|
Mill and leach stockpiles | 1,393 |
| | 1,338 |
|
Product | 1,188 |
| | 998 |
|
Other current assets | 241 |
| | 199 |
|
Assets held for sale | 549 |
| | 344 |
|
Total current assets | 11,150 |
| | 10,435 |
|
Property, plant, equipment and mine development costs, net | 22,914 |
| | 23,219 |
|
Oil and gas properties, subject to amortization, less accumulated amortization and impairments | 20 |
| | 74 |
|
Long-term mill and leach stockpiles | 1,453 |
| | 1,633 |
|
Other assets | 1,790 |
| | 1,956 |
|
Total assets | $ | 37,327 |
| | $ | 37,317 |
|
| | | |
LIABILITIES AND EQUITY | | | |
Current liabilities: | | | |
Accounts payable and accrued liabilities | $ | 2,098 |
| | $ | 2,393 |
|
Current portion of debt | 2,215 |
| | 1,232 |
|
Accrued income taxes | 464 |
| | 66 |
|
Current portion of environmental and asset retirement obligations | 419 |
| | 369 |
|
Liabilities held for sale | 321 |
| | 205 |
|
Total current liabilities | 5,517 |
| | 4,265 |
|
Long-term debt, less current portion | 12,567 |
| | 14,795 |
|
Deferred income taxes | 3,771 |
| | 3,768 |
|
Environmental and asset retirement obligations, less current portion | 3,498 |
| | 3,487 |
|
Other liabilities | 1,744 |
| | 1,745 |
|
Total liabilities | 27,097 |
| | 28,060 |
|
| | | |
Equity: | | | |
Stockholders’ equity: | | | |
Common stock | 158 |
| | 157 |
|
Capital in excess of par value | 26,743 |
| | 26,690 |
|
Accumulated deficit | (15,763 | ) | | (16,540 | ) |
Accumulated other comprehensive loss | (443 | ) | | (548 | ) |
Common stock held in treasury | (3,722 | ) | | (3,708 | ) |
Total stockholders’ equity | 6,973 |
| | 6,051 |
|
Noncontrolling interests | 3,257 |
| | 3,206 |
|
Total equity | 10,230 |
| | 9,257 |
|
Total liabilities and equity | $ | 37,327 |
| | $ | 37,317 |
|
The accompanying notes are an integral part of these consolidated financial statements.
FREEPORT-McMoRan INC.Freeport-McMoRan Inc.
CONSOLIDATED STATEMENTS OF OPERATIONSINCOME (Unaudited)
|
| | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
| (In millions, except per share amounts) |
Revenues | $ | 4,310 |
| | $ | 3,877 |
| | $ | 11,362 |
| | $ | 10,453 |
|
Cost of sales: | | | | | | | |
Production and delivery | 2,802 |
| | 2,529 |
| | 7,497 |
| | 7,984 |
|
Depreciation, depletion and amortization | 418 |
| | 643 |
| | 1,257 |
| | 1,937 |
|
Impairment of oil and gas properties | — |
| | 239 |
| | — |
| | 4,317 |
|
Total cost of sales | 3,220 |
| | 3,411 |
| | 8,754 |
| | 14,238 |
|
Selling, general and administrative expenses | 106 |
| | 110 |
| | 366 |
| | 408 |
|
Mining exploration and research expenses | 27 |
| | 13 |
| | 61 |
| | 46 |
|
Environmental obligations and shutdown costs (credits) | 73 |
| | (3 | ) | | 81 |
| | 18 |
|
Net gain on sales of assets | (33 | ) | | (13 | ) | | (66 | ) | | (762 | ) |
Total costs and expenses | 3,393 |
| | 3,518 |
| | 9,196 |
| | 13,948 |
|
Operating income (loss) | 917 |
| | 359 |
| | 2,166 |
| | (3,495 | ) |
Interest expense, net | (304 | ) | | (187 | ) | | (633 | ) | | (574 | ) |
Net gain on exchanges and early extinguishment of debt | 11 |
| | 15 |
| | 8 |
| | 51 |
|
Other income (expense), net | 2 |
| | (10 | ) | | 36 |
| | 54 |
|
Income (loss) from continuing operations before income taxes and equity in affiliated companies’ net earnings | 626 |
| | 177 |
| | 1,577 |
| | (3,964 | ) |
(Provision for) benefit from income taxes | (387 | ) | | 114 |
| | (747 | ) | | (79 | ) |
Equity in affiliated companies’ net earnings | 3 |
| | 1 |
| | 6 |
| | 9 |
|
Net income (loss) from continuing operations | 242 |
| | 292 |
| | 836 |
| | (4,034 | ) |
Net income (loss) from discontinued operations | 3 |
| | (6 | ) | | 50 |
| | (191 | ) |
Net income (loss) | 245 |
| | 286 |
| | 886 |
| | (4,225 | ) |
Net loss (income) attributable to noncontrolling interests: | | | | | | | |
Continuing operations | 35 |
| | (37 | ) | | (106 | ) | | (146 | ) |
Discontinued operations | — |
| | (22 | ) | | (4 | ) | | (44 | ) |
Preferred dividends attributable to redeemable noncontrolling interest | — |
| | (10 | ) | | — |
| | (31 | ) |
Net income (loss) attributable to common stockholders | $ | 280 |
| | $ | 217 |
| | $ | 776 |
| | $ | (4,446 | ) |
| | | | | | | |
Basic and diluted net income (loss) per share attributable to common stockholders: | | | | | | | |
Continuing operations | $ | 0.19 |
| | $ | 0.18 |
| | $ | 0.50 |
| | $ | (3.27 | ) |
Discontinued operations | — |
| | (0.02 | ) | | 0.03 |
| | (0.18 | ) |
| $ | 0.19 |
| | $ | 0.16 |
| | $ | 0.53 |
| | $ | (3.45 | ) |
| | | | | | | |
Weighted-average common shares outstanding: | | | | | | | |
Basic | 1,448 |
| | 1,346 |
| | 1,447 |
| | 1,289 |
|
| | | | | | | |
Diluted | 1,454 |
| | 1,351 |
| | 1,453 |
| | 1,289 |
|
| | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, | | June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| (In millions, except per share amounts) |
Revenues | $ | 5,416 | | | $ | 5,748 | | | $ | 12,019 | | | $ | 10,598 | |
Cost of sales: | | | | | | | |
Production and delivery | 3,003 | | | 3,067 | | | 6,153 | | | 5,853 | |
Depreciation, depletion and amortization | 507 | | | 483 | | | 996 | | | 902 | |
| | | | | | | |
Metals inventory adjustments | 18 | | | — | | | 18 | | | 1 | |
Total cost of sales | 3,528 | | | 3,550 | | | 7,167 | | | 6,756 | |
Selling, general and administrative expenses | 100 | | | 87 | | | 215 | | | 187 | |
Mining exploration and research expenses | 25 | | | 14 | | | 49 | | | 21 | |
Environmental obligations and shutdown costs | 29 | | | 33 | | | 45 | | | 38 | |
Net gain on sales of assets | (2) | | | (3) | | | (2) | | | (3) | |
Total costs and expenses | 3,680 | | | 3,681 | | | 7,474 | | | 6,999 | |
Operating income | 1,736 | | | 2,067 | | | 4,545 | | | 3,599 | |
Interest expense, net | (156) | | | (148) | | | (283) | | | (293) | |
Net gain on early extinguishment of debt | 8 | | | — | | | 8 | | | — | |
| | | | | | | |
Other income, net | 11 | | | 9 | | | 42 | | | 20 | |
Income before income taxes and equity in affiliated companies’ net earnings | 1,599 | | | 1,928 | | | 4,312 | | | 3,326 | |
Provision for income taxes | (571) | | | (603) | | | (1,395) | | | (1,046) | |
Equity in affiliated companies’ net earnings | 10 | | | 6 | | | 25 | | | 4 | |
| | | | | | | |
| | | | | | | |
Net income | 1,038 | | | 1,331 | | | 2,942 | | | 2,284 | |
| | | | | | | |
Net income attributable to noncontrolling interests | (198) | | | (248) | | | (575) | | | (483) | |
| | | | | | | |
| | | | | | | |
Net income attributable to common stockholders | $ | 840 | | | $ | 1,083 | | | $ | 2,367 | | | $ | 1,801 | |
| | | | | | | |
| | | | | | | |
Net income per share attributable to common stockholders: | | | | | | | |
Basic | $ | 0.58 | | | $ | 0.74 | | | $ | 1.63 | | | $ | 1.23 | |
Diluted | $ | 0.57 | | | $ | 0.73 | | | $ | 1.61 | | | $ | 1.21 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Weighted-average shares of common stock outstanding: | | | | | | | |
Basic | 1,447 | | | 1,467 | | | 1,451 | | | 1,465 | |
Diluted | 1,457 | | | 1,483 | | | 1,463 | | | 1,480 | |
| | | | | | | |
Dividends declared per share of common stock | $ | 0.15 | | | $ | 0.075 | | | $ | 0.30 | | | $ | 0.15 | |
The accompanying notes are an integral part of these consolidated financial statements.
FREEPORT-McMoRan INC.Freeport-McMoRan Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, | | June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| (In millions) |
Net income | $ | 1,038 | | | $ | 1,331 | | | $ | 2,942 | | | $ | 2,284 | |
| | | | | | | |
Other comprehensive income, net of taxes: | | | | | | | |
| | | | | | | |
Defined benefit plans: | | | | | | | |
Actuarial losses arising during the period | — | | | — | | | — | | | (1) | |
Prior service costs arising during the period | — | | | — | | | (1) | | | — | |
Amortization of unrecognized amounts included in net periodic benefit costs | 2 | | | 4 | | | 4 | | | 8 | |
Foreign exchange losses | (1) | | | — | | | (1) | | | (1) | |
| | | | | | | |
| | | | | | | |
Other comprehensive income | 1 | | | 4 | | | 2 | | | 6 | |
| | | | | | | |
Total comprehensive income | 1,039 | | | 1,335 | | | 2,944 | | | 2,290 | |
Total comprehensive income attributable to noncontrolling interests | (198) | | | (248) | | | (575) | | | (482) | |
| | | | | | | |
Total comprehensive income attributable to common stockholders | $ | 841 | | | $ | 1,087 | | | $ | 2,369 | | | $ | 1,808 | |
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| | (In millions) |
Net income (loss) | | $ | 245 |
| | $ | 286 |
| | $ | 886 |
| | $ | (4,225 | ) |
| | | | | | | | |
Other comprehensive income, net of taxes: | | | | | | | | |
Unrealized gains on securities | | — |
| | 2 |
| | 2 |
| | 3 |
|
Defined benefit plans: | | | | | | | | |
Actuarial gains arising during the period, net of taxes of $48 million for the nine months ended September 30, 2017 | | — |
| | — |
| | 69 |
| | — |
|
Amortization or curtailment of unrecognized amounts included in net periodic benefit costs | | 12 |
| | 11 |
| | 42 |
| | 34 |
|
Foreign exchange gains (losses) | | 1 |
| | (1 | ) | | — |
| | (11 | ) |
Other comprehensive income | | 13 |
| | 12 |
| | 113 |
| | 26 |
|
| | | | | | | | |
Total comprehensive income (loss) | | 258 |
| | 298 |
| | 999 |
| | (4,199 | ) |
Total comprehensive loss (income) attributable to noncontrolling interests | | 35 |
| | (59 | ) | | (118 | ) | | (189 | ) |
Preferred dividends attributable to redeemable noncontrolling interest | | — |
| | (10 | ) | | — |
| | (31 | ) |
Total comprehensive income (loss) attributable to common stockholders | | $ | 293 |
| | $ | 229 |
| | $ | 881 |
| | $ | (4,419 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
FREEPORT-McMoRan INC.Freeport-McMoRan Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
| | | | | | | | | | | | | | |
| Six Months Ended | |
| June 30, | |
| 2022 | | 2021 | |
| (In millions) | |
Cash flow from operating activities: | | | | |
Net income | $ | 2,942 | | | $ | 2,284 | | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | |
Depreciation, depletion and amortization | 996 | | | 902 | | |
| | | | |
| | | | |
Metals inventory adjustments | 18 | | | 1 | | |
| | | | |
Net gain on sales of assets | (2) | | | (3) | | |
Stock-based compensation | 62 | | | 56 | | |
Net charges for environmental and asset retirement obligations, including accretion | 119 | | | 94 | | |
Payments for environmental and asset retirement obligations | (120) | | | (110) | | |
Net charges for defined pension and postretirement plans | 20 | | | 1 | | |
Pension plan contributions | (50) | | | (42) | | |
Net gain on early extinguishment of debt | (8) | | | — | | |
Deferred income taxes | 63 | | | 79 | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
Charges for Cerro Verde royalty dispute | — | | | 9 | | |
Payments for Cerro Verde royalty dispute | — | | | (65) | | |
Other, net | (17) | | | 77 | | |
Changes in working capital and other: | | | | |
Accounts receivable | 314 | | | (279) | | |
Inventories | (40) | | | (299) | | |
Other current assets | (99) | | | (12) | | |
Accounts payable and accrued liabilities | 185 | | | 272 | | |
Accrued income taxes and timing of other tax payments | (1,071) | | | 505 | | |
Net cash provided by operating activities | 3,312 | | | 3,470 | | |
| | | | |
Cash flow from investing activities: | | | | |
Capital expenditures: | | | | |
North America copper mines | (276) | | | (95) | | |
South America | (124) | | | (47) | | |
Indonesia mining | (759) | | | (576) | | |
Indonesia smelter projects | (344) | | | (48) | | |
Molybdenum mines | (9) | | | (3) | | |
| | | | |
Other | (74) | | | (34) | | |
Proceeds from sales of assets | 96 | | | 16 | | |
| | | | |
| | | | |
Loans to PT Smelting for expansion | (34) | | | — | | |
Acquisition of minority interest in PT Smelting | — | | | (33) | | |
Other, net | (6) | | | (13) | | |
Net cash used in investing activities | (1,530) | | | (833) | | |
| | | | |
Cash flow from financing activities: | | | | |
Proceeds from debt | 4,666 | | | 160 | | |
Repayments of debt | (2,993) | | | (179) | | |
| | | | |
| | | | |
| | | | |
Cash dividends and distributions paid: | | | | |
Common stock | (438) | | | (111) | | |
Noncontrolling interests | (513) | | | (93) | | |
Treasury stock purchases | (1,185) | | | — | | |
Contributions from noncontrolling interests | 94 | | | 88 | | |
Proceeds from exercised stock options | 106 | | | 184 | | |
Payments for withholding of employee taxes related to stock-based awards | (55) | | | (19) | | |
Debt financing costs and other, net | (33) | | | (1) | | |
Net cash (used in) provided by financing activities | (351) | | | 29 | | |
| | | | |
Net increase in cash, cash equivalents, restricted cash and restricted cash equivalents | 1,431 | | | 2,666 | | |
| | | | |
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of year | 8,314 | | | 3,903 | | |
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period | $ | 9,745 | | | $ | 6,569 | | |
|
| | | | | | | | |
| Nine Months Ended | |
| September 30, | |
| 2017 | | 2016 | |
| (In millions) | |
Cash flow from operating activities: | | | | |
Net income (loss) | $ | 886 |
| | $ | (4,225 | ) | |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | | |
Depreciation, depletion and amortization | 1,257 |
| | 2,017 |
| |
Net charges for Cerro Verde royalty dispute | 359 |
| | — |
| |
Payments for Cerro Verde royalty dispute | (32 | ) | | (20 | ) | |
Impairment of oil and gas properties | — |
| | 4,317 |
| |
Oil and gas non-cash drillship settlements/idle rig costs and other adjustments | (33 | ) | | 705 |
| |
Net gain on sales of assets | (66 | ) | | (762 | ) | |
Net charges for environmental and asset retirement obligations, including accretion | 196 |
| | 149 |
| |
Payments for environmental and asset retirement obligations | (85 | ) | | (190 | ) | |
Net charges for defined pension and postretirement plans | 95 |
| | 78 |
| |
Pension plan contributions | (152 | ) | | (44 | ) | |
Net gain on exchanges and early extinguishment of debt | (8 | ) | | (51 | ) | |
Deferred income taxes | 77 |
| | (22 | ) | |
(Gain) loss on disposal of discontinued operations | (41 | ) | | 182 |
| |
Decrease (increase) in long-term mill and leach stockpiles | 181 |
| | (84 | ) | |
Oil and gas contract settlement payments | (70 | ) | | — |
| |
Other, net | 59 |
| | 61 |
| |
Changes in working capital and other tax payments, excluding amounts from dispositions: | | | | |
Accounts receivable | 420 |
| | 257 |
| |
Inventories | (314 | ) | | 251 |
| |
Other current assets | (17 | ) | | (120 | ) | |
Accounts payable and accrued liabilities | (93 | ) | | (80 | ) | |
Accrued income taxes and changes in other tax payments | 399 |
| | 175 |
| |
Net cash provided by operating activities | 3,018 |
| | 2,594 |
| |
| | | | |
Cash flow from investing activities: | | | | |
Capital expenditures: | | | | |
North America copper mines | (106 | ) | | (87 | ) | |
South America | (65 | ) | | (332 | ) | |
Indonesia | (663 | ) | | (706 | ) | |
Molybdenum mines | (4 | ) | | (2 | ) | |
Other, including oil and gas operations | (182 | ) | | (1,182 | ) | |
Net proceeds from the sale of additional interest in Morenci | — |
| | 996 |
| |
Net proceeds from sales of other assets | 68 |
| | 410 |
| |
Other, net | (22 | ) | | 9 |
| |
Net cash used in investing activities | (974 | ) | | (894 | ) | |
| | | | |
Cash flow from financing activities: | | | | |
Proceeds from debt | 795 |
| | 3,463 |
| |
Repayments of debt | (1,991 | ) | | (4,539 | ) | |
Net proceeds from sale of common stock | — |
| | 442 |
| |
Cash dividends paid: | | | | |
Common stock | (2 | ) | | (5 | ) | |
Noncontrolling interests | (67 | ) | | (87 | ) | |
Stock-based awards net payments | (10 | ) | | (5 | ) | |
Debt financing costs and other, net | (12 | ) | | (17 | ) | |
Net cash used in financing activities | (1,287 | ) | | (748 | ) | |
| | | | |
Net increase in cash and cash equivalents | 757 |
| | 952 |
| |
Increase in cash and cash equivalents in assets held for sale | (45 | ) | | (43 | ) | |
Cash and cash equivalents at beginning of year | 4,245 |
| | 177 |
| |
Cash and cash equivalents at end of period | $ | 4,957 |
| | $ | 1,086 |
| |
The accompanying notes are an integral part of these consolidated financial statements.
FREEPORT-McMoRan INC.
CONSOLIDATED STATEMENT OF EQUITY (Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Stockholders’ Equity | | | | |
| Common Stock | | | | Accum-ulated Deficit | | Accumu- lated Other Compre- hensive Loss | | Common Stock Held in Treasury | | Total Stock-holders’ Equity | | | | |
| Number of Shares | | At Par Value | | Capital in Excess of Par Value | | | | Number of Shares | | At Cost | | | Non- controlling Interests | | Total Equity |
| | | | | | | | | |
| (In millions) |
Balance at December 31, 2016 | 1,574 |
| | $ | 157 |
| | $ | 26,690 |
| | $ | (16,540 | ) | | $ | (548 | ) | | 129 |
| | $ | (3,708 | ) | | $ | 6,051 |
| | $ | 3,206 |
| | $ | 9,257 |
|
Exercised and issued stock-based awards | 4 |
| | 1 |
| | 4 |
| | — |
| | — |
| | — |
| | — |
| | 5 |
| | — |
| | 5 |
|
Stock-based compensation | — |
| | — |
| | 49 |
| | — |
| | — |
| | — |
| | — |
| | 49 |
| | — |
| | 49 |
|
Tender of shares for stock-based awards | — |
| | — |
| | — |
| | — |
| | — |
| | 1 |
| | (14 | ) | | (14 | ) | | — |
| | (14 | ) |
Dividends | — |
| | — |
| | — |
| | 1 |
| | — |
| | — |
| | — |
| | 1 |
| | (67 | ) | | (66 | ) |
Net income attributable to common stockholders | — |
| | — |
| | — |
| | 776 |
| | — |
| | — |
| | — |
| | 776 |
| | — |
| | 776 |
|
Net income attributable to noncontrolling interests, including discontinued operations | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 110 |
| | 110 |
|
Other comprehensive income | — |
| | — |
| | — |
| | — |
| | 105 |
| | — |
| | — |
| | 105 |
| | 8 |
| | 113 |
|
Balance at September 30, 2017 | 1,578 |
| | $ | 158 |
| | $ | 26,743 |
| | $ | (15,763 | ) | | $ | (443 | ) | | 130 |
| | $ | (3,722 | ) | | $ | 6,973 |
| | $ | 3,257 |
| | $ | 10,230 |
|
The accompanying notes are an integral part of these consolidated financial statements.
Freeport-McMoRan Inc.
FREEPORT-McMoRan INC.CONSOLIDATED STATEMENTS OF EQUITY (Unaudited)
THREE MONTHS ENDED JUNE 30
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Stockholders’ Equity | | | | |
| Common Stock | | | | Accum-ulated Deficit | | Accumu- lated Other Compre- hensive Loss | | Common Stock Held in Treasury | | Total Stock-holders’ Equity | | | | |
| Number of Shares | | At Par Value | | Capital in Excess of Par Value | | | | Number of Shares | | At Cost | | | Non- controlling Interests | | Total Equity |
| | | | | | | | | |
| (In millions) |
Balance at March 31, 2022 | 1,612 | | | $ | 161 | | | $ | 25,835 | | | $ | (5,848) | | | $ | (387) | | | 160 | | | $ | (4,895) | | | $ | 14,866 | | | $ | 9,176 | | | $ | 24,042 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Exercised and issued stock-based awards | — | | | — | | | 5 | | | — | | | — | | | — | | | — | | | 5 | | | — | | | 5 | |
Stock-based compensation, including the tender of shares | — | | | — | | | 15 | | | — | | | — | | | — | | | — | | | 15 | | | (1) | | | 14 | |
Treasury stock purchases | — | | | — | | | — | | | — | | | — | | | 17 | | | (644) | | | (644) | | | — | | | (644) | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Dividends | — | | | — | | | (217) | | | — | | | — | | | — | | | — | | | (217) | | | (239) | | | (456) | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Contributions from noncontrolling interests | — | | | — | | | 23 | | | — | | | — | | | — | | | — | | | 23 | | | 24 | | | 47 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Net income attributable to common stockholders | — | | | — | | | — | | | 840 | | | — | | | — | | | — | | | 840 | | | — | | | 840 | |
Net income attributable to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 198 | | | 198 | |
Other comprehensive income | — | | | — | | | — | | | — | | | 1 | | | — | | | — | | | 1 | | | — | | | 1 | |
Balance at June 30, 2022 | 1,612 | | | $ | 161 | | | $ | 25,661 | | | $ | (5,008) | | | $ | (386) | | | 177 | | | $ | (5,539) | | | $ | 14,889 | | | $ | 9,158 | | | $ | 24,047 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Stockholders’ Equity | | | | |
| Common Stock | | | | Accum-ulated Deficit | | Accumu- lated Other Compre- hensive Loss | | Common Stock Held in Treasury | | Total Stock-holders’ Equity | | | | |
| Number of Shares | | At Par Value | | Capital in Excess of Par Value | | | | Number of Shares | | At Cost | | | Non- controlling Interests | | Total Equity |
| | | | | | | | | |
| (In millions) |
Balance at March 31, 2021 | 1,597 | | | $ | 160 | | | $ | 26,080 | | | $ | (10,963) | | | $ | (580) | | | 133 | | | $ | (3,777) | | | $ | 10,920 | | | $ | 8,653 | | | $ | 19,573 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Exercised and issued stock-based awards | 4 | | | — | | | 78 | | | — | | | — | | | — | | | — | | | 78 | | | — | | | 78 | |
Stock-based compensation, including the tender of shares | — | | | — | | | 14 | | | — | | | — | | | — | | | — | | | 14 | | | (1) | | | 13 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Dividends | — | | | — | | | (111) | | | — | | | — | | | — | | | — | | | (111) | | | — | | | (111) | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Contributions from noncontrolling interests | — | | | — | | | 23 | | | — | | | — | | | — | | | — | | | 23 | | | 24 | | | 47 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Net income attributable to common stockholders | — | | | — | | | — | | | 1,083 | | | — | | | — | | | — | | | 1,083 | | | — | | | 1,083 | |
Net income attributable to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 248 | | | 248 | |
Other comprehensive income | — | | | — | | | — | | | — | | | 4 | | | — | | | — | | | 4 | | | — | | | 4 | |
Balance at June 30, 2021 | 1,601 | | | $ | 160 | | | $ | 26,084 | | | $ | (9,880) | | | $ | (576) | | | 133 | | | $ | (3,777) | | | $ | 12,011 | | | $ | 8,924 | | | $ | 20,935 | |
Freeport-McMoRan Inc.
CONSOLIDATED STATEMENTS OF EQUITY (Unaudited) (continued)
SIX MONTHS ENDED JUNE 30
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Stockholders’ Equity | | | | |
| Common Stock | | | | Accum-ulated Deficit | | Accumu- lated Other Compre- hensive Loss | | Common Stock Held in Treasury | | Total Stock-holders’ Equity | | | | |
| Number of Shares | | At Par Value | | Capital in Excess of Par Value | | | | Number of Shares | | At Cost | | | Non- controlling Interests | | Total Equity |
| | | | | | | | | |
| (In millions) |
Balance at December 31, 2021 | 1,603 | | | $ | 160 | | | $ | 25,875 | | | $ | (7,375) | | | $ | (388) | | | 146 | | | $ | (4,292) | | | $ | 13,980 | | | $ | 9,039 | | | $ | 23,019 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Exercised and issued stock-based awards | 9 | | | 1 | | | 112 | | | — | | | — | | | — | | | — | | | 113 | | | — | | | 113 | |
Stock-based compensation, including the tender of shares | — | | | — | | | 63 | | | — | | | — | | | 2 | | | (62) | | | 1 | | | (11) | | | (10) | |
Treasury stock purchases | — | | | — | | | — | | | — | | | — | | | 29 | | | (1,185) | | | (1,185) | | | — | | | (1,185) | |
| | | | | | | | | | | | | | | | | | | |
Dividends | — | | | — | | | (435) | | | — | | | — | | | — | | | — | | | (435) | | | (493) | | | (928) | |
| | | | | | | | | | | | | | | | | | | |
Contributions from noncontrolling interests | — | | | — | | | 46 | | | — | | | — | | | — | | | — | | | 46 | | | 48 | | | 94 | |
Net income attributable to common stockholders | — | | | — | | | — | | | 2,367 | | | — | | | — | | | — | | | 2,367 | | | — | | | 2,367 | |
Net income attributable to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 575 | | | 575 | |
Other comprehensive income | — | | | — | | | — | | | — | | | 2 | | | — | | | — | | | 2 | | | — | | | 2 | |
Balance at June 30, 2022 | 1,612 | | | $ | 161 | | | $ | 25,661 | | | $ | (5,008) | | | $ | (386) | | | 177 | | | $ | (5,539) | | | $ | 14,889 | | | $ | 9,158 | | | $ | 24,047 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Stockholders’ Equity | | | | |
| Common Stock | | | | Accum-ulated Deficit | | Accumu- lated Other Compre- hensive Loss | | Common Stock Held in Treasury | | Total Stock-holders’ Equity | | | | |
| Number of Shares | | At Par Value | | Capital in Excess of Par Value | | | | Number of Shares | | At Cost | | | Non- controlling Interests | | Total Equity |
| | | | | | | | | |
| (In millions) |
Balance at December 31, 2020 | 1,590 | | | $ | 159 | | | $ | 26,037 | | | $ | (11,681) | | | $ | (583) | | | 132 | | | $ | (3,758) | | | $ | 10,174 | | | $ | 8,494 | | | $ | 18,668 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Exercised and issued stock-based awards | 11 | | | 1 | | | 183 | | | — | | | — | | | — | | | — | | | 184 | | | — | | | 184 | |
Stock-based compensation, including the tender of shares | — | | | — | | | 43 | | | — | | | — | | | 1 | | | (19) | | | 24 | | | (4) | | | 20 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Dividends | — | | | — | | | (222) | | | — | | | — | | | — | | | — | | | (222) | | | (93) | | | (315) | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Contributions from noncontrolling interests | — | | | — | | | 43 | | | — | | | — | | | — | | | — | | | 43 | | | 45 | | | 88 | |
| | | | | | | | | | | | | | | | | | | |
Net income attributable to common stockholders | — | | | — | | | — | | | 1,801 | | | — | | | — | | | — | | | 1,801 | | | — | | | 1,801 | |
Net income attributable to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 483 | | | 483 | |
Other comprehensive income (loss) | — | | | — | | | — | | | — | | | 7 | | | — | | | — | | | 7 | | | (1) | | | 6 | |
Balance at June 30, 2021 | 1,601 | | | $ | 160 | | | $ | 26,084 | | | $ | (9,880) | | | $ | (576) | | | 133 | | | $ | (3,777) | | | $ | 12,011 | | | $ | 8,924 | | | $ | 20,935 | |
| | | | | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
Freeport-McMoRan Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE 1. GENERAL INFORMATION
The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all information and disclosures required by generally accepted accounting principles (GAAP) in the United States (U.S.). Therefore, this information should be read in conjunction with Freeport-McMoRan Inc.’s (FCX) consolidated financial statements and notes contained in its annual report on Form 10-K for the year ended December 31, 2016.2021 (2021 Form 10-K). The information furnished herein reflects all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim periods reported. With the exception of the accounting for discontinued operations, assets held for sale, the remeasurement of a pension plan and charges related to a continuing royalty dispute with respect to historical periods at FCX’s mine in Peru, allAll such adjustments are, in the opinion of management, of a normal recurring nature. As a result of FCX’s sale of its interest in TF Holdings Limited (TFHL), FCX has reported TFHL as discontinued operations for all periods presented in the unaudited consolidated financial statements (refer to Note 2). Operating results for the nine-monthsix-month period ended SeptemberJune 30, 2017,2022, are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.2022.
Indonesia Mining. As a resultSale of the first-quarter 2017 regulatory restrictions and uncertainties regarding long-term investment stability, PT Freeport Indonesia (PT-FI) took actions to adjust its cost structure, reduce its workforce and slow investments in its underground development projects and new smelter. These actions included workforce reductions through furlough and voluntary retirement programs. Following the furlough and voluntary retirement programs, a significant number of employees and contractors elected to participate in an illegal strike action beginning in May 2017, and were subsequently deemed to have voluntarily resigned under existing laws and regulations. As a result, PT-FI recorded charges to operating income for employee severance and related costs totaling $9 million for third-quarter 2017 and $113 million for the first nine months of 2017.
Additionally, because of the significant reduction in workforce, PT-FI was required to remeasure its pension assets and pension benefit obligation as of June 30, 2017. The discount rate and rate of compensation increase used for the June 30, 2017, remeasurement were 7.50 percent and 4.00 percent, respectively, compared to the December 31, 2016, discount rate of 8.25 percent and the rate of compensation increase of 8.00 percent. The expected long-term rate of return on the plan assets was unchanged (7.75 percent). The remeasurement and curtailment resulted in the projected benefit obligation declining by $145 million and plan assets declining by $21 million.Investments. In addition, PT-FI recognized a curtailment loss of $4 million in second-quarter 2017 and for the first nine months of 2017. As of September 30, 2017, the funded status of PT-FI’s pension plan was a net asset of $36 million (included in other assets in the consolidated balance sheet), compared with a net liability of $90 million (included in other liabilities in the consolidated balance sheet) as of December 31, 2016.
Oil and Gas Properties. During 2016, FCX Oil & Gas LLC (FM O&G, a wholly owned subsidiary of FCX) determined the carrying values of certain of its unevaluated properties were impaired. During the first nine months of 2016, FM O&G transferred $3.2 billion of costs (including $3.1 billion in first-quarter 2016) associated with unevaluated properties to the full cost pool, mostly reflecting impairment of the carrying values of unevaluated properties. The transfer of unevaluated properties to the full cost pool, along with the impact of the reduction in twelve-month historical prices and reserve revisions in 2016 caused net capitalized costs to exceed the related ceiling test limitation under full cost accounting rules. As a result, FM O&G recognized impairment charges of $239 million in third-quarter 2016 and $4.3 billion for the first nine months of 2016. Refer to Note 1 of FCX’s annual report on Form 10-K for the year ended December 31, 2016, for further discussion.
NOTE 2. DISPOSITIONS
TF2022, Koboltti Chemicals Holdings Limited - Discontinued Operations.FCX hada70 percent interest in TFHL, which owns 80 percent of Tenke Fungurume Mining S.A. (TFM or Tenke) located in the Democratic Republic of Congo (DRC). On November 16, 2016, FCX completed the sale of its interest in TFHL to China Molybdenum Co., Ltd. (CMOC) for $2.65 billion in cash (before closing adjustments) and contingent consideration of up to $120 million in cash, consisting of $60 million if the average copper price exceeds $3.50 per pound and $60 million if the average cobalt price exceeds $20 per pound, both during calendar years 2018 and 2019. The contingent consideration is considered a derivative, and at September 30, 2017, the related fair value of $58 million was recorded in other assets on the consolidated balance sheets. During the first nine months of 2017, the fair value of the contingent consideration derivative increased by $45 million ($3 million in third-quarter 2017), primarily resulting from higher cobalt prices, and was recorded in net income (loss) from discontinued operations.
In accordance with accounting guidance, FCX has reported the results of operations of TFHL as discontinued operations in the consolidated statements of operations. The consolidated statements of cash flows are reported on a combined basis without separately presenting discontinued operations.
Net income (loss) from discontinued operations in the consolidated statements of operations consists of the following (in millions):
|
| | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended | |
| September 30, | | September 30, | |
| 2017 | | 2016 | | 2017 | | 2016 | |
Revenues | $ | — |
| | $ | 261 |
| a | $ | 13 |
| a | $ | 819 |
| a |
Costs and expenses: | | | | | | | | |
Production and delivery costs | — |
| | 248 |
| | — |
| | 730 |
| |
Depreciation, depletion and amortization | — |
|
| — |
| | — |
| | 80 |
| |
Interest expense allocated from parent | — |
| | 12 |
| b | — |
| | 33 |
| b |
Other costs and expenses, net | — |
| | 4 |
| | — |
| | 10 |
| |
Income (loss) before income taxes and net gain (loss) on disposal | — |
| | (3 | ) | | 13 |
| | (34 | ) | |
Net gain (loss) on disposal | 3 |
| c | (5 | ) | d | 41 |
| c | (182 | ) | d |
Net income (loss) before income taxes | 3 |
| | (8 | ) | | 54 |
| | (216 | ) | |
Benefit from (provision for) income taxes | — |
| | 2 |
| | (4 | ) | | 25 |
| |
Net income (loss) from discontinued operations | $ | 3 |
| | $ | (6 | ) | | $ | 50 |
| | $ | (191 | ) | |
| |
a. | In accordance with accounting guidance, amounts are net of (eliminations) recognition of intercompany sales totaling $(53) million in third-quarter 2016, $13 million for the first nine months of 2017 and $(125) million for the first nine months of 2016. |
| |
b. | In accordance with accounting guidance, interest associated with FCX’s term loan that was required to be repaid as a result of the sale of TFHL has been allocated to discontinued operations. |
| |
c. | Includes a gain of $3 million in third-quarter 2017 and $45 million for the first nine months of 2017 associated with the change in the fair value of contingent consideration. |
| |
d. | In accordance with accounting guidance, an estimated loss on disposal was recorded and adjusted through closing of the transaction in November 2016. |
Cash flows from discontinued operations included in the consolidated statements of cash flows for the nine months ended September 30, 2016, follow (in millions): |
| | | | |
Net cash provided by operating activities | | $ | 213 |
|
Net cash used in investing activities | | (71 | ) |
Net cash used in financing activities | | (103 | ) |
Increase in cash and cash equivalents in assets held for sale | | $ | 39 |
|
Oil and Gas Operations.On July 31, 2017, FM O&G sold certain property interests in the Gulf of Mexico Shelf for cash consideration of $62 million, before closing adjustments, with an effective date of April 1, 2017. On March 17, 2017, FM O&G sold property interests in the Madden area in central Wyoming for cash consideration of $17.5 million, before closing adjustments. Under the full cost accounting rules, the sales resulted in the recognition of gains of $33 million in third-quarter 2017 and $49 million for the first nine months of 2017 because the reserves associated with these properties were significant to the full cost pool.
On June 17, 2016, FM O&G sold certain oil and gas royalty interests for cash consideration of $102 million, before closing adjustments. In addition, on July 25, 2016, FM O&G sold its Haynesville shale assets for cash consideration of $87 million, before closing adjustments. Under the full cost accounting rules, the proceeds from these transactions were recorded as a reduction to capitalized oil and gas properties, with no gain or loss recognition for the first nine months of 2016 because the reserves were not significant to the full cost pool.
Morenci. On May 31, 2016, FCX sold a 13 percent undivided interest in its Morenci unincorporated joint venture to SMM Morenci, Inc. for $1.0 billion in cash. FCX recorded a $576 million gain for the first nine months of 2016 and used losses to offset cash taxes on the transaction. A portion of the proceeds from the transaction was used to repay borrowings under FCX's unsecured bank term loan and revolving credit facility. As a result of the transaction, the unincorporated joint venture is owned 72 percent by FCX, 15 percent by Sumitomo Metal Mining Arizona, Inc. and 13 percent by SMM Morenci, Inc.
Timok. On May 2, 2016, Freeport Minerals Corporation (FMC)(KCHL), a wholly owned56-percent-owned subsidiary of FCX, sold an interest in the Timok exploration project in Serbia to Global Reservoir Minerals Inc. (now known as Nevsun Resources, Ltd.) for consideration of $135 million in cash and contingent consideration of up to $107 million payable to FCX in stages upon achievement of defined development milestones. As a result of this transaction, FCX recorded a gain of $133 million for the first nine months of 2016, and no amounts were recorded for contingent consideration under the loss recovery approach.
Assets Held for Sale. Freeport Cobalt includes the large-scale cobalt refinery in Kokkola, Finland, and the related sales and marketing business, in which FCX owns an effective 56 percent interest. Kisanfu is a copper and cobalt exploration project, located near Tenke, in which FCX holds a 100 percent interest. As a resultall of the shares it owned in Jervois Global Limited for proceeds of $60 million. The shares were received in connection with the 2021 sale of TFHL, KCHL's remaining cobalt business.
Subsequent Events. FCX expects to sell its interest in Freeport Cobaltevaluated events after June 30, 2022, and Kisanfu, andthrough the assets and liabilities of Freeport Cobalt and Kisanfu are classified as held for sale indate the consolidated balance sheets. During the first nine months of 2017, a favorable adjustment of $13 million was recordedfinancial statements were issued, and determined any events and transactions occurring during this period that would require recognition or disclosure are appropriately addressed in net gain on sales of assets in thethese consolidated statements of operations associated with the estimated fair value less costs to sell for the Kisanfu exploration project. The adjustment was limited to the reduction in the carrying value when the Kisanfu exploration project was initially classified as held for sale in November 2016.financial statements.
NOTE 3.2. EARNINGS PER SHARE
FCX calculates its basic net income (loss) per share of common stock under the two-class method and calculates its diluted net income (loss) per share of common stock using the more dilutive of the two-class method or the treasury-stock method. Basic net income (loss) per share of common stock was computed by dividing net income (loss) attributable to common stockholders (after deducting accumulated dividends and undistributed earnings to participating securities) by the weighted-average shares of common stock outstanding during the period. Diluted net income (loss) per share of common stock was calculated by including the basic weighted-average shares of common stock outstanding adjusted for the effects of all potential dilutive shares of common stock, unless their effect would be anti-dilutive.antidilutive.
Reconciliations of net income (loss) and weighted-average shares of common stock outstanding for purposes of calculating basic and diluted net income (loss) per share follow (in millions, except per share amounts):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended | |
| June 30, | | June 30, | |
| 2022 | | 2021 | | 2022 | | 2021 | |
Net income | $ | 1,038 | | | $ | 1,331 | | | $ | 2,942 | | | $ | 2,284 | | |
Net income attributable to noncontrolling interests | (198) | | | (248) | | | (575) | | | (483) | | |
| | | | | | | | |
Undistributed dividends and earnings allocated to participating securities | (4) | | | (4) | | | (5) | | | (4) | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Net income attributable to common stockholders | $ | 836 | | | $ | 1,079 | | | $ | 2,362 | | | $ | 1,797 | | |
| | | | | | | | |
| | | | | | | | |
Basic weighted-average shares of common stock outstanding | 1,447 | | | 1,467 | | | 1,451 | | | 1,465 | | |
Add shares issuable upon exercise or vesting of dilutive stock options and restricted stock units (RSUs) | 10 | | | 16 | | | 12 | | | 15 | | |
Diluted weighted-average shares of common stock outstanding | 1,457 | | | 1,483 | | | 1,463 | | | 1,480 | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Basic net income per share attributable to common stockholders | $ | 0.58 | | | $ | 0.74 | | | $ | 1.63 | | | $ | 1.23 | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Diluted net income per share attributable to common stockholders | $ | 0.57 | | | $ | 0.73 | | | $ | 1.61 | | | $ | 1.21 | | |
|
| | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended | |
| September 30, | | September 30, | |
| 2017 | | 2016 | | 2017 | | 2016 | |
Net income (loss) from continuing operations | $ | 242 |
| | $ | 292 |
| | $ | 836 |
| | $ | (4,034 | ) | |
Net loss (income) from continuing operations attributable to noncontrolling interests | 35 |
| | (37 | ) | | (106 | ) | | (146 | ) | |
Preferred dividends on redeemable noncontrolling interest | — |
| | (10 | ) | | — |
| | (31 | ) | |
Undistributed earnings allocated to participating securities | (3 | ) | | (3 | ) | | (3 | ) | | (3 | ) | |
Net income (loss) from continuing operations attributable to common stockholders | $ | 274 |
| | $ | 242 |
| | $ | 727 |
| | $ | (4,214 | ) | |
| | | | | | | | |
Net income (loss) from discontinued operations | $ | 3 |
| | $ | (6 | ) | | $ | 50 |
| | $ | (191 | ) | |
Net income from discontinued operations attributable to noncontrolling interests | — |
| | (22 | ) | | (4 | ) | | (44 | ) | |
Net income (loss) from discontinued operations attributable to common stockholders | $ | 3 |
| | $ | (28 | ) | | $ | 46 |
| | $ | (235 | ) | |
| | | | | | | | |
| | | | | | | | |
Net income (loss) attributable to common stockholders | $ | 277 |
| | $ | 214 |
| | $ | 773 |
| | $ | (4,449 | ) | |
| | | | | | | | |
| | | | | | | | |
Basic weighted-average shares of common stock outstanding | 1,448 |
| | 1,346 |
| | 1,447 |
| | 1,289 |
| |
Add shares issuable upon exercise or vesting of dilutive stock options and restricted stock units | 6 |
| | 5 |
| | 6 |
| | — |
| a |
Diluted weighted-average shares of common stock outstanding | 1,454 |
| | 1,351 |
| | 1,453 |
| | 1,289 |
| |
| | | | | | | | |
Basic and diluted net income (loss) per share attributable to common stockholders: | | | | | | | | |
Continuing operations | $ | 0.19 |
| | $ | 0.18 |
| | $ | 0.50 |
| | $ | (3.27 | ) | |
Discontinued operations | — |
| | (0.02 | ) | | 0.03 |
| | (0.18 | ) | |
| $ | 0.19 |
| | $ | 0.16 |
| | $ | 0.53 |
| | $ | (3.45 | ) | |
| | | | | | | | |
| |
a. | Excludes 12 million shares of common stock for the first nine months of 2016 associated with outstanding stock options with exercise prices less than the average market price of FCX’s common stock and restricted stock units that were anti-dilutive. |
Outstanding stock options with exercise prices greater than the average market price of FCX’s common stock during the period are excluded from the computation of diluted net income (loss) per share of common stock. Stock options for 38 millionThere were no shares of common stock were excluded for third-quarter 2017, 46in second-quarter 2022. Excluded shares of common stock totaled 4 million for third-quarter 2016, 42shares in second-quarter 2021, 1 million shares for the first ninesix months of 20172022 and 467 million shares for the first ninesix months of 2016.
2021.
NOTE 4.3. INVENTORIES, INCLUDING LONG-TERM MILL AND LEACH STOCKPILES
The components of inventories follow (in millions):
| | | | | | | | | | | | | | |
| June 30, 2022 | | December 31, 2021 | |
Current inventories: | | | | |
Total materials and supplies, neta | $ | 1,776 | | | $ | 1,669 | | |
| | | | |
Mill stockpiles | $ | 196 | | | $ | 193 | | |
Leach stockpiles | 1,191 | | | 977 | | |
Total current mill and leach stockpiles | $ | 1,387 | | | $ | 1,170 | | |
| | | | |
Raw materials (primarily concentrate) | $ | 436 | | | $ | 536 | | |
Work-in-process | 155 | | | 195 | | |
Finished goods | 916 | | | 927 | | |
Total product | $ | 1,507 | | | $ | 1,658 | | |
| | | | |
Long-term inventories: | | | | |
Mill stockpiles | $ | 201 | | | $ | 226 | | |
Leach stockpiles | 1,029 | | | 1,161 | | |
Total long-term mill and leach stockpilesb | $ | 1,230 | | | $ | 1,387 | | |
|
| | | | | | | | |
| September 30, 2017 | | December 31, 2016 | |
Current inventories: | | | | |
Total materials and supplies, neta | $ | 1,276 |
| | $ | 1,306 |
| |
| | | | |
Mill stockpiles | $ | 336 |
| | $ | 259 |
| |
Leach stockpiles | 1,057 |
| | 1,079 |
| |
Total current mill and leach stockpiles | $ | 1,393 |
| | $ | 1,338 |
| |
| | | | |
Raw materials (primarily concentrate) | $ | 285 |
| | $ | 255 |
| |
Work-in-process | 154 |
| | 114 |
| |
Finished goods | 749 |
| | 629 |
| |
Total product inventories | $ | 1,188 |
| | $ | 998 |
| |
| | | | |
Long-term inventories: | | | | |
Mill stockpiles | $ | 346 |
| | $ | 487 |
| |
Leach stockpiles | 1,107 |
| | 1,146 |
| |
Total long-term mill and leach stockpilesb | $ | 1,453 |
| | $ | 1,633 |
| |
| |
a. | Materials and supplies inventory was net of obsolescence reserves totaling $31 million at September 30, 2017, and $29 million at December 31, 2016. |
| |
b. | Estimated metals in stockpiles not expected to be recovered within the next 12 months. |
a.Materials and supplies inventory was net of obsolescence reserves totaling $39 million at June 30, 2022, and $36 million at December 31, 2021.
b.Estimated metals in stockpiles not expected to be recovered within the next 12 months.
FCX recorded metals inventory adjustments totaling $18 million in the second quarter and first six months of 2022, associated with a stockpile write-off at Cerro Verde ($9 million) and net realizable value adjustments related to lower market prices for copper ($9 million). Refer to Note 9 for metals inventory adjustments by business segment.
El Abra Stockpile Recoveries. As discussed in FCX’s 2021 Form 10-K, processes and recovery rates for mill and leach stockpiles are monitored regularly, and recovery rate estimates are adjusted periodically as additional information becomes available and as related technology changes. Adjustments to recovery rates will typically result in a future impact to the value of the material removed from the stockpiles at a revised weighted-average cost per pound of recoverable copper.
Following an analysis of recent recovery data and column testing results, El Abra revised its estimated recovery rate assumptions for specific ore types expected to be processed from its existing leach stockpile. The revised estimates resulted in a 135 million pound reduction in future estimated recoverable copper from this leach stockpile which is being phased out. This revision had an unfavorable impact on El Abra’s costs but did not have a significant impact on consolidated site production and delivery costs in second-quarter 2022 or the first six months of 2022.
NOTE 5.4. INCOME TAXES
Geographic sources of FCX’s provision for income taxes follow (in millions):
| | | | | | | | | | | | | | |
| Six Months Ended | |
| June 30, | |
| 2022 | | 2021 | |
U.S. operations | $ | (5) | |
| $ | (4) | | |
International operations | (1,390) | | | (1,042) | | |
Total | $ | (1,395) | | | $ | (1,046) | |
|
FCX’s consolidated effective income tax rate was 32 percent for the first six months of 2022 and 31 percent for the first six months of 2021. Variations in the relative proportions of jurisdictional income result in fluctuations to FCX’s consolidated effective income tax rate. FCX’s consolidated effectiveBecause of its U.S. tax position, FCX does not record a financial statement impact for income tax rate was 47 percent foror losses generated in the first nine months of 2017 and (2) percent for first nine months of 2016. Geographic sources of FCX’s (provision for) benefit from income taxes follow (in millions):U.S.
|
| | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended | |
| September 30, | | September 30, | |
| 2017 | | 2016 | | 2017 | | 2016 | |
U.S. operationsa | $ | 2 |
| | $ | 331 |
| | $ | 24 |
| | $ | 293 |
| |
International operations | (389 | ) | b | (217 | ) | | (771 | ) | b | (372 | ) | |
Total | $ | (387 | ) | | $ | 114 |
| | $ | (747 | ) | | $ | (79 | ) | |
| |
a. | Includes net tax (charges) credits of $(10) million for third-quarter 2017 and $21 million for the first nine months of 2017 associated with alternative minimum tax credit carryforwards. The third quarter and first nine months of 2016 include net tax credits of $332 million and $290 million, respectively, associated with alternative minimum tax credits, changes to valuation allowances and net operating loss carryback claims. |
| |
b. | Includes net charges of $2 million associated with the Cerro Verde mining royalties dispute, consisting of tax charges of $127 million for disputed royalties and other related mining taxes for the period October 2011 through the year 2013 (when royalties were determined based on operating income), mostly offset by a tax benefit of $125 million associated with disputed royalties and other related mining taxes for the period December 2006 through the year 2013. |
As a result of the unfavorable Peruvian Supreme Court ruling on the Cerro Verde royalty dispute, FCX recorded pre-tax charges of $357 million to income from continuing operations and $2 million of net tax expense for the first nine months of 2017. FCX’s consolidated effective income tax rate was 39 percent for the first nine months of 2017 excluding these charges.
As a result of the impairment to U.S. oil and gas properties, FCX recorded tax charges of $1.6 billion for the first nine months of 2016 to establish a valuation allowance primarily against U.S. federal and state deferred tax assets that will not generate a future benefit. FCX’s consolidated effective income tax rate was 32 percent for the first nine months of 2016 excluding these tax charges.
NOTE 6.5. DEBT AND EQUITY
The components of debt follow (in millions):
| | | | | | | | | | | | | | |
| | June 30, 2022 | | December 31, 2021 |
| | | | |
| | | | |
| | | | |
Senior notes and debentures: | | | | |
Issued by FCX | | $ | 7,697 | | | $ | 8,268 | |
Issued by PT-FI | | 2,976 | | | — | |
Issued by Freeport Minerals Corporation | | 355 | | | 355 | |
PT-FI Term Loan | | — | | | 432 | |
| | | | |
Cerro Verde Term Loan | | — | | | 325 | |
Other | | 64 | | | 70 | |
Total debt | | 11,092 | | | 9,450 | |
Less current portion of debt | | (1,038) | | | (372) | |
Long-term debt | | $ | 10,054 | | | $ | 9,078 | |
|
| | | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
Senior notes and debentures: | | | | |
Issued by FCX | | $ | 12,811 |
| | $ | 13,745 |
|
Issued by FMC | | 358 |
| | 359 |
|
Issued by Freeport-McMoRan Oil & Gas LLC (FM O&G LLC) | | 122 |
| | 267 |
|
Cerro Verde credit facility | | 1,486 |
| | 1,390 |
|
Cerro Verde shareholder loans | | — |
| | 261 |
|
Other | | 5 |
| | 5 |
|
Total debta | | 14,782 |
| | 16,027 |
|
Less current portion of debt | | (2,215 | ) | | (1,232 | ) |
Long-term debt | | $ | 12,567 |
| | $ | 14,795 |
|
| |
a. | Includes additions for unamortized fair value adjustments totaling $131 million at September 30, 2017 ($179 million at December 31, 2016), and is net of reductions for unamortized net discounts and unamortized debt issuance costs totaling $92 million at September 30, 2017 ($100 million at December 31, 2016). |
FCX Revolving Credit Facility. At SeptemberJune 30, 2017, there were2022, FCX had no borrowings outstanding and $36$8 million in letters of credit issued under FCX’sits unsecured revolving credit facility, resulting in availability of approximately $3.5$3.5 billion,, of which approximately $1.5$1.5 billion could be used for additional letters of credit. Availability under FCX’s revolving credit facility consists of $3.3 billion maturing April 2024 and $0.2 billion maturing April 2023. At June 30, 2022, FCX was in compliance with its revolving credit facility covenants.
Senior Notes Issued by FCX. In March 2017, FCX’s 2.15% Senior Notes matured, and the $500 million outstanding principal balance was repaid.
Cerro Verde Credit Facility and Shareholder Loans. Facility. In June 2017,second-quarter 2022, Cerro Verde’sVerde entered into a new $350 million, five-year, unsecured revolving credit facility was amended to increaseand repaid the commitment by $225$325 million to $1.5 billion, modify the amortization schedule and to extend the maturity date to outstanding balance of its term loan. At June 19, 2022. The amended30, 2022, Cerro Verde had no borrowings outstanding under its revolving credit facility amortizes and wasin four installments,compliance with $225 million due on December 31, 2020, $225 million due on June 30, 2021, $525 million due on December 31, 2021, and the remaining balance due on the maturity date of June 19, 2022. All other terms, including the interest rates, remain the same. The interest rate on Cerro Verde'sits revolving credit facility was 3.14 percent at September 30, 2017. Cerro Verdecovenants.
Senior Notes issued by PT-FI. In April 2022, PT-FI completed the sale of $3.0 billion aggregate principal amount of unsecured senior notes, consisting of $750 million of 4.763% Senior Notes due 2027, $1.5 billion of 5.315% Senior Notes due 2032 and $750 million of 6.200% Senior Notes due 2052. PT-FI used $0.6 billion of the net proceeds from its amended credit facility plus available cash to repay the borrowings under its term loan and expects to use the remaining net proceeds to finance its smelter projects.
PT-FI Credit Facility. In second-quarter 2022, PT-FI amended its five-year, unsecured revolving credit facility to, among other things, increase the availability to $1.3 billion. At June 30, 2022, PT-FI had no borrowings under its revolving credit facility and was in compliance with its revolving credit facility covenants.
As noted above, in second-quarter 2022, PT-FI repaid the principal balance of the term loan portion of its shareholder loans in June 2017. Refer to Note 8credit facility, which cannot be redrawn, and recorded a loss on early extinguishment of FCX’s annual report on Form 10-K for the year ended December 31, 2016, for further discussion.debt of $10 million.
Exchanges and Early ExtinguishmentPurchases of Debt. During third-quarter 2017,Senior Notes. Insecond-quarter 2022, FCX redeemedpurchased certain of its senior notes in full certain senior notes.open-market transactions. A summary of these early debt extinguishments follows (in millions):follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| Principal Amount | | Discounts/Deferred Issuance Costs | | Book Value | | Redemption Value | | Gain/(Loss) |
| | | | | | | | | |
5.00% Senior Note due 2027 | $ | 85 | | | $ | 1 | | | $ | 84 | | | $ | 85 | | | $ | (1) | |
4.125% Senior Note due 2028 | 90 | | | 1 | | | 89 | | | 85 | | | 4 | |
4.375% Senior Note due 2028 | 106 | | | 1 | | | 105 | | | 102 | | | 3 | |
5.25% Senior Note due 2029 | 85 | | | 1 | | | 84 | | | 82 | | | 2 | |
4.25% Senior Note due 2030 | 17 | | | — | | | 17 | | | 16 | | | 1 | |
4.625% Senior Note due 2030 | 66 | | | 1 | | | 65 | | | 62 | | | 3 | |
5.40% Senior Note due 2034 | 15 | | | — | | | 15 | | | 15 | | | — | |
5.450% Senior Note due 2043 | 118 | | | 1 | | | 117 | | | 111 | | | 6 | |
| $ | 582 | | | $ | 6 | | | $ | 576 | | | $ | 558 | | | $ | 18 | |
|
| | | | | | | | | | | | | | | | | | | |
| Principal Amount | | Net Adjustments | | Book Value | | Redemption Value | | Gain |
FCX 6.125% Senior Notes due 2019 | $ | 179 |
| | $ | 5 |
| | $ | 184 |
| | $ | 182 |
| | $ | 2 |
|
FM O&G 6.125% Senior Notes due 2019 | 58 |
| | 2 |
| | 60 |
| | 59 |
| | 1 |
|
FCX 6.625% Senior Notes due 2021 | 228 |
| | 12 |
| | 240 |
| | 234 |
| | 6 |
|
FM O&G 6.625% Senior Notes due 2021 | 33 |
| | 2 |
| | 35 |
| | 34 |
| | 1 |
|
FM O&G 6.75% Senior Notes due 2022 | 45 |
| | 2 |
| | 47 |
| | 46 |
| | 1 |
|
| $ | 543 |
| | $ | 23 |
| | $ | 566 |
| | $ | 555 |
| | $ | 11 |
|
Partially offsetting the $11From July 1, 2022, through August 5, 2022, FCX purchased an additional $291 million gain on early extinguishmentaggregate principal amount of certain senior notes was a net loss of $3 million, primarily associated with the modification of Cerro Verde’s credit facility in second-quarter 2017.
During the second and third quarters of 2016, FCX redeemed certainits senior notes in exchangeopen-market transactions, for its common stock, which resulted in gainsa total redemption value of $15$273 million.
Interest Expense, Net. Consolidated interest costs (before capitalization) totaled $189 million in third-quarter 2016 and $54second-quarter 2022, $165 million in second-quarter 2021, $342 million for the first ninesix months of 2016. Partially offsetting the gains were $3 million in losses, primarily associated with the modification of FCX’s revolving credit facility in first-quarter 2016. Refer to Notes 82022 and 10 of FCX’s annual report on Form 10-K for the year ended December 31, 2016, for further discussion.
Interest Expense, Net. Consolidated interest costs from continuing operations (before capitalization and excluding $141 million of interest expense associated with disputed Cerro Verde royalties recorded in third-quarter 2017) totaled $196 million in third-quarter 2017, $211 million in third-quarter 2016, $583$325 million for the first ninesix months of 2017 and $647 million2021. The increase in consolidated interest costs (before capitalization) for the first nine months of 2016. 2022 periods is primarily related to the senior notes issued by PT-FI in April 2022.
Capitalized interest added to property, plant, equipment and mine development costs, net, totaled $33 million in third-quarter 2017, $24second-quarter 2022, $17 million in third-quarter 2016, $91second-quarter 2021, $59 million for the first ninesix months of 20172022 and $66$32 million for the first ninesix months of 2016. Capitalized2021. The increase in capitalized interest addedcosts for the 2022 periods resulted from increased construction and development projects in process.
Share Repurchase Program and Dividends. In second-quarter 2022, FCX acquired 17.1 million shares of its common stock under its share repurchase program for a total cost of $645 million ($37.66 average cost per share). For the first six months of 2022, FCX acquired 29.4 million shares of its common stock under its share repurchase program for a total cost of $1.2 billion ($40.32 average cost per share).
In July 2022, FCX’s Board of Directors (Board) authorized an increase in the share repurchase program from up to oil$3.0 billion to up to $5.0 billion. Through August 5, 2022, FCX has acquired 47.9 million shares of its common stock for a total cost of $1.8 billion ($38.35 average cost per share), and gas properties not$3.2 billion remains available for repurchases under the program.
On June 22, 2022, FCX declared quarterly cash dividends totaling $0.15 per share ($0.075 per share base dividend and $0.075 per share variable dividend) on its common stock, which were paid on August 1, 2022, to common stockholders of record as of July 15, 2022.
The declaration and payment of dividends (base or variable) and timing and amount of any share repurchases is at the discretion of the Board and management, respectively, and is subject to amortization totaled $7 million fora number of factors, including maintaining FCX’s net debt target, capital availability, FCX’s financial results, cash requirements, business prospects, global economic conditions, changes in laws, contractual restrictions and other factors deemed relevant by FCX’s Board or management, as applicable. FCX’s share repurchase program may be modified, increased, suspended or terminated at any time at the first nine monthsBoard’s discretion.
NOTE 7.6. FINANCIAL INSTRUMENTS
FCX does not purchase, hold or sell derivative financial instruments unless there is an existing asset or obligation, or it anticipates a future activity that is likely to occur and will result in exposure to market risks, which FCX intends to offset or mitigate. FCX does not enter into any derivative financial instruments for speculative purposes but has entered into derivative financial instruments in limited instances to achieve specific objectives. These objectives principally relate to managing risks associated with commodity price changes, foreign currency exchange rates and interest rates.
Commodity Contracts. From time to time, FCX has entered into derivative contracts to hedge the market risk associated with fluctuations in the prices of commodities it purchases and sells. Derivative financial instruments used by FCX to manage its risks do not contain credit risk-related contingent provisions. As of September 30, 2017, and December 31, 2016, FCX had no price protection contracts relating to its mine production.
A discussion of FCX’s derivative contracts and programs follows.follows:
Derivatives Designated as Hedging Instruments – Fair Value Hedges
Copper Futures and Swap Contracts. Some of FCX’s U.S. copper rod and cathode customers request a fixed market price instead of the Commodity Exchange Inc. (COMEX) average copper price in the month of shipment. FCX hedges this price exposure in a manner that allows it to receive the COMEX average price in the month of shipment while the customers pay the fixed price they requested. FCX accomplishes this by entering into copper futures or swap contracts. Hedging gains or losses from these copper futures and swap contracts are recorded in revenues. FCX did not have any significant gains or losses resulting from hedge ineffectiveness during the nine-monthsix-month periods ended SeptemberJune 30, 20172022 and 2016.2021. At SeptemberJune 30, 2017,2022, FCX held copper futures and swap contracts that qualified for hedge accounting for 46103 million pounds at an average contract price of $2.83$4.36 per pound, with maturities through June 2019.March 2024.
A summary of (losses) gains (losses) recognized in revenues for derivative financial instruments related to commodity contracts that are designated and qualify as fair value hedge transactions, along with the unrealized gains (losses)including on the related hedged item follows (in millions): | | | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Six Months Ended |
| September 30, | | September 30, | | June 30, | | June 30, |
| 2017 | | 2016 | | 2017 | | 2016 | | 2022 | | 2021 | | 2022 | | 2021 |
Copper futures and swap contracts: | | | | | | | | Copper futures and swap contracts: | | | | | | | |
Unrealized gains (losses): | | | | | | | | |
Unrealized (losses) gains: | | Unrealized (losses) gains: | | | | |
Derivative financial instruments | $ | — |
| | $ | 1 |
| | $ | (1 | ) | | $ | 11 |
| Derivative financial instruments | $ | (89) | | | $ | (11) | | | $ | (78) | | | $ | (8) | |
Hedged item – firm sales commitments | — |
| | (1 | ) | | 1 |
| | (11 | ) | Hedged item – firm sales commitments | 89 | | | 11 | | | 78 | | | 8 | |
| | | | | | | | |
Realized gains (losses): | | | | | | | | |
Realized (losses) gains: | | Realized (losses) gains: | | | | |
Matured derivative financial instruments | 12 |
| | — |
| | 21 |
| | (8 | ) | Matured derivative financial instruments | (12) | | | 28 | | | 2 | | | 52 | |
Derivatives Not Designated as Hedging Instruments
Embedded Derivatives. As described in Note 1 to FCX’s annual report on Form 10-K for the year ended December 31, 2016, under “Revenue Recognition,” certain Certain FCX copper concentrate, copper cathode and gold sales contracts provide for provisional pricing primarily based on the London Metal Exchange (LME) copper price or the COMEX copper price and the London Bullion Market Association (London) gold price at the time of shipment as specified in the contract. Similarly, FCX purchasesreceives market prices based on prices in the specified future month, which results in price fluctuations recorded in revenues until the date of settlement. FCX records revenues and invoices customers at the time of shipment based on then-current LME or COMEX copper underprices and the London gold prices as specified in the contracts, which results in an embedded derivative (i.e., a pricing mechanism that provide for provisional pricing.is finalized after the time of delivery) that is required to be bifurcated from the host contract. The host contract is the sale of the metals contained in the concentrate or cathode at the then-current LME or COMEX copper price, and the London gold price. FCX applies the normal purchases and normal sales scope exception in accordance with derivatives and hedge accounting guidance to the host contract in its concentrate or cathode sales agreements since thethese contracts do not allow for net settlement and always result in physical delivery. Sales and purchases with a provisional sales price contain anThe embedded derivative (i.e.,does not qualify for hedge accounting and is adjusted to fair value through earnings each period, using the price settlement mechanism is settled after the time of delivery) that is required to be bifurcated from the host contract. The host contract is the sale or purchase of the metals contained in the concentrate or cathode at the then-currentperiod-end LME or COMEX copper price orforward prices and the adjusted London gold price as defined inprices, until the contract.date of final pricing. Similarly, FCX purchases copper under contracts that provide for provisional pricing. Mark-to-market price fluctuations from these embedded derivatives related to continuing operations are recorded through the settlement date and are reflected in revenues for sales contracts and in cost of sales as production and delivery costsinventory for purchase contracts. Mark-to-market price fluctuations associated with embedded derivatives for discontinued operations, which were minimal, are included in discontinued operations for all periods presented in these financial statements.
A summary of FCX’s embedded derivatives at SeptemberJune 30, 2017,2022, follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Open Positions | | Average Price Per Unit | | Maturities Through |
| | Contract | | Market | |
Embedded derivatives in provisional sales contracts: | | | | | | | |
Copper (millions of pounds) | 703 | | | $ | 4.41 | | | $ | 3.75 | | | December 2022 |
Gold (thousands of ounces) | 236 | | | 1,848 | | | 1,821 | | | October 2022 |
Embedded derivatives in provisional purchase contracts: | | | | | | | |
Copper (millions of pounds) | 59 | | | 4.39 | | | 3.75 | | | October 2022 |
| | | | | | | |
|
| | | | | | | | | | | | |
| Open Positions | | Average Price Per Unit | | Maturities Through |
| | Contract | | Market | |
Embedded derivatives in provisional sales contracts: | | | | | | | |
Copper (millions of pounds) | 546 |
| | $ | 2.84 |
| | $ | 2.93 |
| | February 2018 |
Gold (thousands of ounces) | 194 |
| | 1,318 |
| | 1,287 |
| | December 2017 |
Embedded derivatives in provisional purchase contracts: | | | | | | | |
Copper (millions of pounds) | 155 |
| | 2.83 |
| | 2.93 |
| | January 2018 |
Copper Forward Contracts. Atlantic Copper, FCX’s wholly owned smelting and refining unit in Spain, enters into copper forward contracts designed to hedge its copper price risk whenever its physical purchases and sales pricing periods do not match. These economic hedge transactions are intended to hedge against changes in copper prices, with the mark-to-market hedging gains or losses recorded in cost of sales.production and delivery costs. At SeptemberJune 30, 2017,2022, Atlantic Copper held net copper forward purchasesales contracts for 534 million pounds at an average contract price of $2.95$4.06 per pound, with maturities through October 2017.August 2022.
Summary of Gains (Losses). Gains. A summary of the realized and unrealized (losses) gains (losses) recognized in operating income (loss) for commodity contracts that do not qualify as hedge transactions, including embedded derivatives, follows (in millions): |
| | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Embedded derivatives in provisional copper and gold | | | | | | | |
sales contractsa | $ | 137 |
| | $ | 12 |
| | $ | 297 |
| | $ | 88 |
|
Copper forward contractsb | (9 | ) | | (1 | ) | | (14 | ) | | 4 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| June 30, | | June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Embedded derivatives in provisional sales contracts:a | | | | | | | |
Copper | $ | (720) | | | $ | 118 | | | $ | (502) | | | $ | 325 | |
Gold and other metals | (33) | | | 15 | | | (11) | | | (13) | |
Copper forward contractsb | 22 | | | (5) | | | 26 | | | (13) | |
| | | | | | | |
| | | | | | | |
| |
a. | Amounts recorded in revenues. |
| |
b. | Amounts recorded in cost of sales as production and delivery costs. |
a.Amounts recorded in revenues.
b.Amounts recorded in cost of sales as production and delivery costs.
Unsettled Derivative Financial Instruments
A summary of the fair values of unsettled commodity derivative financial instruments follows (in millions):
| | | | | | | | | | | | | | |
| | June 30, 2022 | | December 31, 2021 |
Commodity Derivative Assets: | | | | |
Derivatives designated as hedging instruments: | | | | |
Copper futures and swap contracts | | $ | — | | | $ | 12 | |
Derivatives not designated as hedging instruments: | | | | |
Embedded derivatives in provisional sales/purchase contracts | | 38 | | | 64 | |
Copper forward contracts | | 15 | | | 1 | |
Total derivative assets | | $ | 53 | | | $ | 77 | |
| | | | |
Commodity Derivative Liabilities: | | | | |
Derivatives designated as hedging instruments: | | | | |
Copper futures and swap contracts | | $ | 66 | | | $ | — | |
Derivatives not designated as hedging instruments: | | | | |
Embedded derivatives in provisional sales/purchase contracts | | $ | 476 | | | $ | 27 | |
| | | | |
| | | | |
Copper forward contracts | | 4 | | | 1 | |
Total derivative liabilities | | $ | 546 | | | $ | 28 | |
|
| | | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
Commodity Derivative Assets: | | | | |
Derivatives designated as hedging instruments: | | | | |
Copper futures and swap contracts | | $ | 7 |
| | $ | 9 |
|
Derivatives not designated as hedging instruments: | | | | |
Embedded derivatives in provisional copper and gold | | | | |
sales/purchase contracts | | 74 |
| | 137 |
|
Total derivative assets | | $ | 81 |
| | $ | 146 |
|
| | | | |
Commodity Derivative Liabilities: | | | | |
Derivatives designated as hedging instruments: | | | | |
Copper futures and swap contracts | | $ | 2 |
| | $ | 2 |
|
Derivatives not designated as hedging instruments: | | | | |
Embedded derivatives in provisional copper and gold | | | | |
sales/purchase contracts | | 46 |
| | 56 |
|
Total derivative liabilities | | $ | 48 |
| | $ | 58 |
|
FCX’s commodity contracts have netting arrangements with counterparties with which the right of offset exists, and it is FCX’s policy to generally offset balances by counterpartycontract on its balance sheet. FCX’s embedded derivatives on provisional sales/purchase contracts are netted with the corresponding outstanding receivable/payable balances.
A summary of these unsettled commodity contracts that are offset in the balance sheets follows (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Assets | | Liabilities |
| | June 30, 2022 | | December 31, 2021 | | June 30, 2022 | | December 31, 2021 |
| | | | | | | | |
Gross amounts recognized: | | | | | | | | |
Embedded derivatives in provisional | | | | | | | | |
sales/purchase contracts | | $ | 38 | | | $ | 64 | | | $ | 476 | | | $ | 27 | |
| | | | | | | | |
Copper derivatives | | 15 | | | 13 | | | 70 | | | 1 | |
| | 53 | | | 77 | | | 546 | | | 28 | |
| | | | | | | | |
Less gross amounts of offset: | | | | | | | | |
Embedded derivatives in provisional | | | | | | | | |
sales/purchase contracts | | — | | | 3 | | | — | | | 3 | |
| | | | | | | | |
Copper derivatives | | 4 | | | 1 | | | 4 | | | 1 | |
| | 4 | | | 4 | | | 4 | | | 4 | |
| | | | | | | | |
Net amounts presented in balance sheet: | | | | | | | | |
Embedded derivatives in provisional | | | | | | | | |
sales/purchase contracts | | 38 | | | 61 | | | 476 | | | 24 | |
| | | | | | | | |
Copper derivatives | | 11 | | | 12 | | | 66 | | | — | |
| | $ | 49 | | | $ | 73 | | | $ | 542 | | | $ | 24 | |
| | | | | | | | |
Balance sheet classification: | | | | | | | | |
Trade accounts receivable | | $ | 6 | | | $ | 51 | | | $ | 231 | | | $ | 14 | |
Other current assets | | 11 | | | 12 | | | — | | | — | |
| | | | | | | | |
| | | | | | | | |
Accounts payable and accrued liabilities | | 32 | | | 10 | | | 308 | | | 10 | |
Other liabilities | | — | | | — | | | 3 | | | — | |
| | $ | 49 | | | $ | 73 | | | $ | 542 | | | $ | 24 | |
|
| | | | | | | | | | | | | | | | |
| | Assets | | Liabilities |
| | September 30, 2017 | | December 31, 2016 | | September 30, 2017 | | December 31, 2016 |
| | | | | | | | |
Gross amounts recognized: | | | | | | | | |
Commodity contracts: | | | | | | | | |
Embedded derivatives in provisional | | | | | | | | |
sales/purchase contracts | | $ | 74 |
| | $ | 137 |
| | $ | 46 |
| | $ | 56 |
|
Copper derivatives | | 7 |
| | 9 |
| | 2 |
| | 2 |
|
| | 81 |
| | 146 |
| | 48 |
| | 58 |
|
| | | | | | | | |
Less gross amounts of offset: | | | | | | | | |
Commodity contracts: | | | | | | | | |
Embedded derivatives in provisional | | | | | | | | |
sales/purchase contracts | | 1 |
| | 12 |
| | 1 |
| | 12 |
|
Copper derivatives | | 2 |
| | 2 |
| | 2 |
| | 2 |
|
| | 3 |
| | 14 |
| | 3 |
| | 14 |
|
| | | | | | | | |
Net amounts presented in balance sheet: | | | | | | | | |
Commodity contracts: | | | | | | | | |
Embedded derivatives in provisional | | | | | | | | |
sales/purchase contracts | | 73 |
| | 125 |
| | 45 |
| | 44 |
|
Copper derivatives | | 5 |
| | 7 |
| | — |
| | — |
|
| | $ | 78 |
| | $ | 132 |
| | $ | 45 |
| | $ | 44 |
|
| | | | | | | | |
Balance sheet classification: | | | | | | | | |
Trade accounts receivable | | $ | 69 |
| | $ | 119 |
| | $ | 24 |
| | $ | 13 |
|
Other current assets | | 5 |
| | 7 |
| | — |
| | — |
|
Accounts payable and accrued liabilities | | 4 |
| | 6 |
| | 21 |
| | 31 |
|
| | $ | 78 |
| | $ | 132 |
| | $ | 45 |
| | $ | 44 |
|
Credit Risk. FCX is exposed to credit loss when financial institutions with which it has entered into derivative transactions (commodity, foreign exchange and interest rate swaps) are unable to pay. To minimize the risk of such losses, FCX uses counterparties that meet certain credit requirements and periodically reviews the creditworthiness of these counterparties. FCX does not anticipate that any of the counterparties it deals with will default on their obligations. As of SeptemberJune 30, 2017,2022, the maximum amount of credit exposure associated with derivative transactions was $78$53 million.
Other Financial Instruments. Other financial instruments include cash and cash equivalents, restricted cash, restricted cash equivalents, accounts receivable, restricted cash, investment securities, legally restricted funds, accounts payable and accrued liabilities, accrued income taxes, dividends payable and long-term debt. The carrying value for cash and cash equivalents (which included time deposits of $1.9 billion at September 30, 2017, and $64 million at December 31, 2016), accounts receivable, restricted cash, and accounts payable and accruedthese financial instruments classified as current assets or liabilities approximates fair value because of their short-term nature and generally negligible credit losses (referlosses. Refer to Note 87 for the fair values of investment securities, legally restricted funds and long-term debt).debt.
In addition, as of SeptemberJune 30, 2017,2022, FCX has contingent consideration assets related to the sales of certain 2016 asset salesoil and gas properties (refer to Note 87 for the related fair valuevalues).
Cash, Cash Equivalents, Restricted Cash and to Note 2Restricted Cash Equivalents. The following table provides a reconciliation of FCX’s annual report on Form 10-K fortotal cash, cash equivalents, restricted cash and restricted cash equivalents presented in the year endedconsolidated statements of cash flows (in millions):
| | | | | | | | | | | | | | |
| | June 30, 2022 | | December 31, 2021 |
Balance sheet components: | | | | |
Cash and cash equivalentsa | | $ | 9,492 | | | $ | 8,068 | |
Restricted cash and restricted cash equivalents included in: | | | | |
Other current assets | | 119 | | | 114 | |
Other assets | | 134 | | | 132 | |
Total cash, cash equivalents, restricted cash and restricted cash equivalents presented in the consolidated statements of cash flows | | $ | 9,745 | | | $ | 8,314 | |
a.Includes time deposits of $0.2 billion at each of June 30, 2022, and December 31, 2016, for further discussion of these instruments).2021.
NOTE 8.7. FAIR VALUE MEASUREMENT
Fair value accounting guidance includes a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). FCX recognizes transfers between levels at the end of the reporting period. FCX did not have any significant transfers in or out of Level 1, 2 or 3 for third-quarter 2017.during second-quarter 2022.
FCX’s financial instruments are recorded on the consolidated balance sheets at fair value except for contingent consideration associated with the sale of the Deepwater Gulf of Mexico (GOM) oil and gas properties (which was recorded under the loss recovery approach) and debt. A summary of the carrying amount and fair value of FCX’s financial instruments (including those measured at net asset value (NAV) as a practical expedient), other than cash and cash equivalents, accounts receivable, restricted cash, andrestricted cash equivalents, accounts receivable, accounts payable and accrued liabilities, accrued income taxes and dividends payable (refer to Note 7)6) follows (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At June 30, 2022 |
| Carrying | | Fair Value |
| Amount | | Total | | NAV | | Level 1 | | Level 2 | | Level 3 |
Assets | | | | | | | | | | | |
Investment securities:a,b | | | | | | | | | | | |
U.S. core fixed income fund | $ | 26 | | | $ | 26 | | | $ | 26 | | | $ | — | | | $ | — | | | $ | — | |
Equity securities | 5 | | | 5 | | | — | | | 5 | | | — | | | — | |
| | | | | | | | | | | |
Total | 31 | | | 31 | | | 26 | | | 5 | | | — | | | — | |
| | | | | | | | | | | |
Legally restricted funds:a | | | | | | | | | | | |
U.S. core fixed income fund | 56 | | | 56 | | | 56 | | | — | | | — | | | — | |
Government bonds and notes | 39 | | | 39 | | | — | | | — | | | 39 | | | — | |
Corporate bonds | 36 | | | 36 | | | — | | | — | | | 36 | | | — | |
Government mortgage-backed securities | 28 | | | 28 | | | — | | | — | | | 28 | | | — | |
Asset-backed securities | 16 | | | 16 | | | — | | | — | | | 16 | | | — | |
Money market funds | 8 | | | 8 | | | — | | | 8 | | | — | | | — | |
Collateralized mortgage-backed securities | 3 | | | 3 | | | — | | | — | | | 3 | | | — | |
| | | | | | | | | | | |
Total | 186 | | | 186 | | | 56 | | | 8 | | | 122 | | | — | |
| | | | | | | | | | | |
Derivatives:c | | | | | | | | | | | |
Embedded derivatives in provisional sales/purchase contracts in a gross asset position | 38 | | | 38 | | | — | | | — | | | 38 | | | — | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Copper forward contracts | 15 | | | 15 | | | — | | | 8 | | | 7 | | | — | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Total | 53 | | | 53 | | | — | | | 8 | | | 45 | | | — | |
| | | | | | | | | | | |
Contingent consideration for the sale of the | | | | | | | | | | | |
Deepwater GOM oil and gas propertiesa | 79 | | | 67 | | | — | | | — | | | — | | | 67 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Liabilities | | | | | | | | | | | |
Derivatives:c | | | | | | | | | | | |
Embedded derivatives in provisional sales/purchase contracts in a gross liability position | 476 | | | 476 | | | — | | | — | | | 476 | | | — | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Copper futures and swap contracts | 66 | | | 66 | | | — | | | 61 | | | 5 | | | — | |
Copper forward contracts | 4 | | | 4 | | | — | | | 3 | | | 1 | | | — | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Total | 546 | | | 546 | | | — | | | 64 | | | 482 | | | — | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Long-term debt, including current portiond | 11,092 | | | 10,601 | | | — | | | — | | | 10,601 | | | — | |
| | | | | | | | | | | |
| | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| At September 30, 2017 |
| Carrying | | Fair Value |
| Amount | | Total | | NAV | | Level 1 | | Level 2 | | Level 3 |
Assets | | | | | | | | | | | |
Investment securities:a,b | | | | | | | | | | | |
U.S. core fixed income fund | $ | 25 |
| | $ | 25 |
| | $ | 25 |
| | $ | — |
| | $ | — |
| | $ | — |
|
Money market funds | 21 |
| | 21 |
| | — |
| | 21 |
| | — |
| | — |
|
Equity securities | 6 |
| | 6 |
| | — |
| | 6 |
| | — |
| | — |
|
Total | 52 |
| | 52 |
| | 25 |
| | 27 |
| | — |
| | — |
|
| | | | | | | | | | | |
Legally restricted funds:a | | | | | | | | | | | |
U.S. core fixed income fund | 55 |
| | 55 |
| | 55 |
| | — |
| | — |
| | — |
|
Government bonds and notes | 38 |
| | 38 |
| | — |
| | — |
| | 38 |
| | — |
|
Corporate bonds | 30 |
| | 30 |
| | — |
| | — |
| | 30 |
| | — |
|
Government mortgage-backed securities | 25 |
| | 25 |
| | — |
| | — |
| | 25 |
| | — |
|
Money market funds | 18 |
| | 18 |
| | — |
| | 18 |
| | — |
| | — |
|
Asset-backed securities | 14 |
| | 14 |
| | — |
| | — |
| | 14 |
| | — |
|
Collateralized mortgage-backed securities | 8 |
| | 8 |
| | — |
| | — |
| | 8 |
| | — |
|
Municipal bonds | 1 |
| | 1 |
| | — |
| | — |
| | 1 |
| | — |
|
Total | 189 |
| | 189 |
| | 55 |
| | 18 |
| | 116 |
| | — |
|
| | | | | | | | | | | |
Derivatives: | | | | | | | | | | | |
Embedded derivatives in provisional sales/ | | | | | | | | | | | |
purchase contracts in a gross asset positionc | 74 |
| | 74 |
| | — |
| | — |
| | 74 |
| | — |
|
Copper futures and swap contractsc | 7 |
| | 7 |
| | — |
| | 5 |
| | 2 |
| | — |
|
Contingent consideration for the sales of TFHL | | | | | | | | | | | |
and onshore California oil and gas propertiesa | 80 |
| | 80 |
| | — |
| | — |
| | 80 |
| | — |
|
Total | 161 |
| | 161 |
| | — |
| | 5 |
| | 156 |
| | — |
|
| | | | | | | | | | | |
Contingent consideration for the sale of the | | | | | | | | | | | |
Deepwater GOM oil and gas propertiesa | 150 |
| | 138 |
| | — |
| | — |
| | — |
| | 138 |
|
| | | | | | | | | | | |
Total assets | | | $ | 540 |
| | $ | 80 |
| | $ | 50 |
| | $ | 272 |
| | $ | 138 |
|
| | | | | | | | | | | |
Liabilities | | | | | | | | | | | |
Derivatives:c | | | | | | | | | | | |
Embedded derivatives in provisional sales/ | | | | | | | | | | | |
purchase contracts in a gross liability position | 46 |
| | $ | 46 |
| | $ | — |
| | $ | — |
| | $ | 46 |
| | $ | — |
|
Copper futures and swap contracts | 2 |
| | 2 |
| | — |
| | 1 |
| | 1 |
| | — |
|
Total | 48 |
| | 48 |
| | — |
| | 1 |
| | 47 |
| | — |
|
| | | | | | | | | | | |
Long-term debt, including current portiond | 14,782 |
| | 14,735 |
| | — |
| | — |
| | 14,735 |
| | — |
|
| | | | | | | | | | | |
Total liabilities | | | $ | 14,783 |
| | $ | — |
| | $ | 1 |
| | $ | 14,782 |
| | $ | — |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At December 31, 2021 |
| Carrying | | Fair Value |
| Amount | | Total | | NAV | | Level 1 | | Level 2 | | Level 3 |
Assets | | | | | | | | | | | |
Investment securities:a,b | | | | | | | | | | | |
Equity securities | $ | 50 | | | $ | 50 | | | $ | — | | | $ | 50 | | | $ | — | | | $ | — | |
U.S. core fixed income fund | 29 | | | 29 | | | 29 | | | — | | | — | | | — | |
| | | | | | | | | | | |
Total | 79 | | | 79 | | | 29 | | | 50 | | | — | | | — | |
| | | | | | | | | | | |
Legally restricted funds:a | | | | | | | | | | | |
U.S. core fixed income fund | 64 | | | 64 | | | 64 | | | — | | | — | | | — | |
Government bonds and notes | 53 | | | 53 | | | — | | | — | | | 53 | | | — | |
Corporate bonds | 45 | | | 45 | | | — | | | — | | | 45 | | | — | |
Government mortgage-backed securities | 20 | | | 20 | | | — | | | — | | | 20 | | | — | |
Asset-backed securities | 18 | | | 18 | | | — | | | — | | | 18 | | | — | |
Money market funds | 8 | | | 8 | | | — | | | 8 | | | — | | | — | |
| | | | | | | | | | | |
Municipal bonds | 1 | | | 1 | | | — | | | — | | | 1 | | | — | |
Total | 209 | | | 209 | | | 64 | | | 8 | | | 137 | | | — | |
| | | | | | | | | | | |
Derivatives:c | | | | | | | | | | | |
Embedded derivatives in provisional sales/purchase contracts in a gross asset position | 64 | | | 64 | | | — | | | — | | | 64 | | | — | |
Copper futures and swap contracts | 12 | | | 12 | | | — | | | 9 | | | 3 | | | — | |
Copper forward contracts | 1 | | | 1 | | | — | | | 1 | | | — | | | — | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Total | 77 | | | 77 | | | — | | | 10 | | | 67 | | | — | |
| | | | | | | | | | | |
Contingent consideration for the sale of the | | | | | | | | | | | |
Deepwater GOM oil and gas propertiesa | 90 | | | 81 | | | — | | | — | | | — | | | 81 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Liabilities | | | | | | | | | | | |
Derivatives:c | | | | | | | | | | | |
Embedded derivatives in provisional sales/purchase contracts in a gross liability position | 27 | | | 27 | | | — | | | — | | | 27 | | | — | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Copper forward contracts | 1 | | | 1 | | | — | | | 1 | | | — | | | — | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Total | 28 | | | 28 | | | — | | | 1 | | | 27 | | | — | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Long-term debt, including current portiond | 9,450 | | | 10,630 | | | — | | | — | | | 10,630 | | | — | |
| | | | | | | | | | | |
| | | | | | | | | | | |
a.Current portion included in other current assets and long-term portion included in other assets. |
| | | | | | | | | | | | | | | | | | | | | | | |
| At December 31, 2016 |
| Carrying | | Fair Value |
| Amount | | Total | | NAV | | Level 1 | | Level 2 | | Level 3 |
Assets | | | | | | | | | | | |
Investment securities:a,b | | | | | | | | | | | |
U.S. core fixed income fund | $ | 23 |
| | $ | 23 |
| | $ | 23 |
| | $ | — |
| | $ | — |
| | $ | — |
|
Money market funds | 22 |
| | 22 |
| | — |
| | 22 |
| | — |
| | — |
|
Equity securities | 5 |
| | 5 |
| | — |
| | 5 |
| | — |
| | — |
|
Total | 50 |
| | 50 |
| | 23 |
| | 27 |
| | — |
| | — |
|
| | | | | | | | | | | |
Legally restricted funds:a | | | | | | | | | | | |
U.S. core fixed income fund | 53 |
| | 53 |
| | 53 |
| | — |
| | — |
| | — |
|
Government bonds and notes | 36 |
| | 36 |
| | — |
| | — |
| | 36 |
| | — |
|
Corporate bonds | 32 |
| | 32 |
| | — |
| | — |
| | 32 |
| | — |
|
Government mortgage-backed securities | 25 |
| | 25 |
| | — |
| | — |
| | 25 |
| | — |
|
Asset-backed securities | 16 |
| | 16 |
| | — |
| | — |
| | 16 |
| | — |
|
Money market funds | 12 |
| | 12 |
| | — |
| | 12 |
| | — |
| | — |
|
Collateralized mortgage-backed securities | 8 |
| | 8 |
| | — |
| | — |
| | 8 |
| | — |
|
Municipal bonds | 1 |
| | 1 |
| | — |
| | — |
| | 1 |
| | — |
|
Total | 183 |
| | 183 |
| | 53 |
| | 12 |
| | 118 |
| | — |
|
| | | | | | | | | | | |
Derivatives: | | | | | | | | | | | |
Embedded derivatives in provisional sales/ | | | | | | | | | | | |
purchase contracts in a gross asset positionc | 137 |
| | 137 |
| | — |
| | — |
| | 137 |
| | — |
|
Copper futures and swap contractsc | 9 |
| | 9 |
| | — |
| | 8 |
| | 1 |
| | — |
|
Contingent consideration for the sales of TFHL | | | | | | | | | | | |
and onshore California oil and gas propertiesa | 46 |
| | 46 |
| | — |
| | — |
| | 46 |
| | — |
|
Total | 192 |
| | 192 |
| | — |
| | 8 |
| | 184 |
| | — |
|
| | | | | | | | | | | |
Contingent consideration for the sale of the | | | | | | | | | | | |
Deepwater GOM oil and gas propertiesa | 150 |
| | 135 |
| | — |
| | — |
| | — |
| | 135 |
|
| | | | | | | | | | | |
Total assets | | | $ | 560 |
| | $ | 76 |
| | $ | 47 |
| | $ | 302 |
| | $ | 135 |
|
| | | | | | | | | | | |
Liabilities | | | | | | | | | | | |
Derivatives:c | | | | | | | | | | | |
Embedded derivatives in provisional sales/ | | | | | | | | | | | |
purchase contracts in a gross liability position | 56 |
| | $ | 56 |
| | $ | — |
| | $ | — |
| | $ | 56 |
| | $ | — |
|
Copper futures and swap contracts | 2 |
| | 2 |
| | — |
| | 2 |
| | — |
| | — |
|
Total | 58 |
| | 58 |
| | — |
| | 2 |
| | 56 |
| | — |
|
| | | | | | | | | | | |
Contingent payments for the settlements of | | | | | | | | | | | |
drilling rig contractse | 23 |
| | 23 |
| | — |
| | — |
| | 23 |
| | — |
|
| | | | | | | | | | | |
Long-term debt, including current portiond | 16,027 |
| | 15,196 |
| | — |
| | — |
| | 15,196 |
| | — |
|
| | | | | | | | | | | |
Total liabilities | | | $ | 15,277 |
| | $ | — |
| | $ | 2 |
| | $ | 15,275 |
| | $ | — |
|
| |
a. | Current portion included in other current assets and long-term portion included in other assets. |
| |
b. | Excludes time deposits (which approximated fair value) included in (i) other current assets of $41 million at September 30, 2017, and $28 million at December 31, 2016, and (ii) other assets of $122 million at both September 30, 2017, and December 31, 2016, primarily associated with an assurance bond to support PT-FI’s commitment for smelter development in Indonesia. |
| |
c. | Refer to Note 7 for further discussion and balance sheet classifications. |
| |
d. | Recorded at cost except for debt assumed in acquisitions, which were recorded at fair value at the respective acquisition dates. |
| |
e. | Included in accounts payable and accrued liabilities. |
b.Excludes time deposits (which approximated fair value) included in (i) other current assets of $119 million at June 30, 2022, and $114 million at December 31, 2021, and (ii) other assets of $134 million at June 30, 2022, and $132 million at December 31, 2021, primarily associated with an assurance bond to support PT-FI’s commitment for additional domestic smelter development in Indonesia and PT-FI’s closure and reclamation guarantees.
c.Refer to Note 6 for further discussion and balance sheet classifications.
d.Recorded at cost except for debt assumed in acquisitions, which are recorded at fair value at the respective acquisition dates.
Valuation Techniques. Equity securities are valued at the closing price reported on the active market on which the individual securities are traded and, as such, are classified within Level 1 of the fair value hierarchy.
The U.S. core fixed income fund is valued at net asset value (NAV).NAV. The fund strategy seeks total return consisting of income and capital appreciation primarily by investing in a broad range of investment-grade debt securities, including U.S. government obligations, corporate bonds, mortgage-backed securities, asset-backed securities and money market instruments. There are no restrictions on redemptions (which are usually within one business day of notice).
Money market funds are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets.
Equity securities are valued at the closing price reported on the active market on which the individual securities are traded and, as such, are classified within Level 1 of the fair value hierarchy.
Fixed income securities (government securities, corporate bonds, asset-backed securities, collateralized mortgage-backed securities and municipal bonds) are valued using a bid-evaluation price or a mid-evaluation price. A bid-evaluation price is an estimated price at which a dealer would pay for a security. A mid-evaluation price is the average of the estimated price at which a dealer would sell a security and the estimated price at which a dealer would pay for a security. These evaluations are based on quoted prices, if available, or models that use observable inputs and, as such, are classified within Level 2 of the fair value hierarchy.
Money market funds are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets.
FCX’s embedded derivatives on provisional copper concentrate, copper cathode and gold purchases and sales are valued using only quoted monthly LME or COMEX copper forward prices and the adjusted London gold forward priceprices at each reporting date based on the month of maturity (refer to Note 76 for further discussion); however, FCX’s contracts themselves are not traded on an exchange. As a result, these derivatives are classified within Level 2 of the fair value hierarchy.
FCX’s derivative financial instruments for copper futures and swap contracts and copper forward contracts that are traded on the respective exchanges are classified within Level 1 of the fair value hierarchy because they are valued using quoted monthly COMEX or LME prices at each reporting date based on the month of maturity (refer to Note 76 for further discussion). Certain of these contracts are traded on the over-the-counter market and are classified within Level 2 of the fair value hierarchy based on COMEX and LME forward prices.
The fair value of contingent consideration for the sales of TFHL and onshore California oil and gas properties is calculated based on average commodity price forecasts through applicable maturity dates using a Monte Carlo simulation model. The models use various observable inputs, including Brent crude oil forward prices, historical copper and cobalt prices, volatilities, discount rates and settlement terms. As a result, these contingent consideration assets are classified within Level 2 of the fair value hierarchy.
The fair value of contingent consideration for theIn December 2016, FCX’s sale of its Deepwater GOM oil and gas properties included up to $150 million in contingent consideration that was recorded at the total amount under the loss recovery approach. The contingent consideration is being received over time as cash flows are realized from a third-party production handling agreement for an offshore platform, with the related payments commencing in third-quarter 2018. The contingent consideration included in (i) other current assets totaled $20 million at June 30, 2022, and December 31, 2021, and (ii) other assets totaled $59 million at June 30, 2022, and $70 million at December 31, 2021. The fair value of this contingent consideration was calculated based on a discounted cash flow model using inputs that include third-party reserve estimates for reserves, production rates and production timing, and discount rates. Because significant inputs are not observable in the market, the contingent consideration is classified within Level 3 of the fair value hierarchy.
The December 31, 2016, fair value of contingent payments for the settlements of drilling rig contracts was calculated based on the average price forecasts of West Texas Intermediate (WTI) crude oil over the 12-month period ending June 30, 2017, using a mean-reverting model. The model used various observable inputs, including WTI crude oil forward prices, volatilities, discount rate and settlement terms. As a result, these contingent payments were classified within Level 2 of the fair value hierarchy. The contingency period for FM O&G’s drilling rig contract settlements ended June 30, 2017, and no additional amounts were paid.
Long-term debt, including current portion, is primarily valued using available market quotes and, as such, is classified within Level 2 of the fair value hierarchy.
The techniques described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while FCX believes its valuation techniques are appropriate and consistent with other market participants, the use of different techniques or assumptions to determine fair value of certain financial instruments could result in a different fair value measurement at the reporting date. There have been no changes in the techniques used at SeptemberJune 30, 2017,2022, as compared towith those techniques used at December 31, 2016.2021.
A summary of the changes in the fair value of FCX’s Level 3 instrument, contingent consideration for the sale of the Deepwater GOM oil and gas properties, during the first ninesix months of 20172022 follows (in millions):
| | | | | | | | | | | | |
| | | | | | |
Fair value at January 1, 2022 | $ | 81 | | | | | | |
Net unrealized loss related to assets still held at the end of the period | (3) | | | | | | |
Settlements | (11) | | | | | | |
Fair value at June 30, 2022 | $ | 67 | | | | | | |
|
| | | | |
Fair value at January 1, 2017 | $ | 135 |
| |
Net unrealized gain related to assets still held at the end of the period | 3 |
| |
Fair value at September 30, 2017 | $ | 138 |
| |
NOTE 9.8. CONTINGENCIES AND COMMITMENTS
EnvironmentalAsset Retirement Obligations (ARO)
Historical Smelter Sites — BoroughArizona Environmental and Reclamation Programs.FCX’s Arizona operations are subject to regulatory oversight by the Arizona Department of Carteret
As reported in Note 12Environmental Quality (ADEQ). ADEQ has adopted regulations for its aquifer protection permit (APP) program that require permits for, among other things, certain facilities, activities and structures used for mining, leaching, concentrating and smelting, and require compliance with aquifer water quality standards during operations and closure. An application for an APP requires a proposed closure strategy that will meet applicable groundwater protection requirements following cessation of FCX’s annual report on Form 10-K for the year ended December 31, 2016, from 1920 until 1986, United States Metal Refining Company (USMR),operations and an indirect wholly owned subsidiary of Cyprus Amax Minerals Company, owned and operated a copper smelter and refinery in the Borough of Carteret, New Jersey, on the banksestimate of the Arthur Kill (a narrow waterway that separates New Jersey from Staten Island). Asimplementation cost, with a resultmore detailed closure plan required at the time operations cease. A permit applicant must demonstrate its financial ability to meet the closure costs approved by ADEQ. Closure costs for facilities covered by APPs are required to be updated approximately every six years and financial assurance mechanisms are required to be updated every two years. During the first six months of recent off-site soil sampling in public and private areas near the former smelter, FCX2022, FCX’s Bagdad mine increased its ARO liability and asset retirement cost asset by $62 million, associated environmental obligationwith its updated closure plan that was submitted to ADEQ for known and potential off-site environmental remediation by recording a $59 million chargeapproval. Morenci is also preparing an update to operating income in third-quarter 2017. Additional samplingits closure plan for submission to ADEQ, which is ongoing and couldexpected to result in additional adjustments to the related environmental remediation obligation.increased costs that could be significant. FCX will continue updating its closure plans and closure cost estimates at other Arizona sites, and any such updates may also result in increased costs that could be significant.
Uranium Mining Sites
Litigation
During third-quarter 2017, thereThere were no significant updates to previously reported legal proceedings included in Note 12 of FCX’s annual report on2021 Form 10-K, forother than the year ended December 31, 2016.matter discussed below.
TaxAsbestos and Talc Claims. As previously disclosed, in 2021, Imerys obtained an injunction temporarily staying approximately 950 talc-related lawsuits against Cyprus Amax Minerals Company (CAMC), an indirect wholly owned subsidiary of FCX, and Cyprus Mines Corporation (Cyprus Mines), a wholly owned subsidiary of CAMC, which has been extended through at least January 2023. The interim stay is a component of the global settlement but there can be no assurance that the bankruptcy court will continue to impose the interim stay. Mediation to resolve open issues in the Imerys and Cyprus Mines bankruptcy cases is ongoing and expected to continue through 2022.
Other Matters
Cerro Verde Royalty Dispute
As reported in FCX’s annual report on Form 10-K forSmelter Development Progress. On January 7, 2021, the year ended December 31, 2016, and as subsequently updated in Note 9Indonesia government levied an administrative fine of FCX’s quarterly report on Form 10-Q for the quarter ended June 30, 2017, SUNAT, Peru’s national tax authority, has assessed mining royalties on ore processed by the Cerro Verde concentrator, which commenced operations in late 2006, for the period December 2006 to September 2011. Cerro Verde contested these assessments because it believes its 1998 stability agreement exempts from royalties all minerals extracted from its mining concession, irrespective of the method used for processing those minerals. No assessments have been issued$149 million for the period from October 2011 to December 2013, and no assessments can be issued for years after 2013, as Cerro Verde began paying royalties on all of its production in January 2014 under its new 15-year stability agreement. Since 2014, Cerro Verde has been paying the disputed assessments for the period December 2006 through December 2008 under an installment program ($135 million paid by Cerro VerdeMarch 30, 2020, through September 30, 2017).2020, on PT-FI for failing to achieve physical development progress on its greenfield smelter as of July 31, 2020. On January 13, 2021, PT-FI responded to the Indonesia government objecting to the fine because of events outside of its control causing a delay of the greenfield smelter’s development progress. PT-FI believes that its communications during 2020 with the Indonesia government were not properly considered before the administrative fine was levied.
In October 2017,June 2021, the Peruvian Supreme CourtIndonesia government issued a ruling in favor of SUNAT that the assessments of royaltiesministerial decree for the year 2008calculation of an administrative fine for lack of smelter development in light of the COVID-19 pandemic. During 2021, PT-FI recorded charges totaling $16 million for a potential settlement of the administrative fine. On January 25, 2022, the Indonesia government submitted a new estimate of the administrative fine totaling $57 million. In March 2022, PT-FI paid the administrative fine and recorded a charge of $41 million in first-quarter 2022. Based on ore processedPT-FI’s revised smelter construction schedule, PT-FI does not believe any additional fines should be applied and will dispute any attempts by the Cerro Verde concentrator were proper under Peruvian law.Indonesia government to levy additional fines, which could be significant.
As a result of the unfavorable Peruvian Supreme Court ruling on the 2008 royalty dispute, Cerro Verde recorded pre-tax charges totaling $357 million ($359 million including net tax charges and $188 million net of noncontrolling interests) in third-quarter 2017, consisting of $240 million in royalty assessments, $147 million of penalties and interest related to the December 2006 to December 2008 assessments, and $97 million for related items (primarily associated with the special mining tax and net assets tax) that Cerro Verde would have incurred under the view that its concentrator was not stabilized.
A summary of the charges recorded in third-quarter 2017 for the Cerro Verde royalty dispute follows (in millions):
|
| | | | | | |
Royalty and related assessment charges: | | | |
| Production and delivery | | $ | 216 |
| a |
| Interest expense, net | | 141 |
| |
| Provision for income taxes | | 2 |
| b |
Net loss attributable to noncontrolling interests | | (171 | ) | |
| | | $ | 188 |
| |
| |
a. | Includes $176 million related to disputed royalty assessments for the period from December 2006 to September 2011 (when royalties were determined based on revenues), $6 million of penalties related to the December 2006 to December 2008 royalty assessments and $34 million primarily associated with the net assets tax. |
| |
b. | Includes tax charges of $127 million for disputed royalties ($64 million) and other related mining taxes ($63 million) for the period October 2011 through the year 2013 when royalties were determined based on operating income, mostly offset by a tax benefit of $125 million associated with disputed royalties and other related mining taxes for the period December 2006 through the year 2013. |
Cerro Verde acted in good faith in applying the provisions of its 1998 stability agreement and continues to evaluate alternatives to defend its rights. Cerro Verde intends to seek a waiver available under Peruvian law of penalties and interest associated with this matter and has not recorded charges for potential unpaid penalties and interest totaling $360 million ($193 million net of noncontrolling interests) at September 30, 2017, as FCX believes that Cerro Verde should be successful under Peruvian law in obtaining a waiver. Cerro Verde also intends to file a reimbursement claim with SUNAT for penalties and interest paid under the installment plan for the December 2006 to December 2008 assessments, and may have claims for reimbursement of payments it would not have made in the absence of the stabilization agreement, such as the overpayments madePT-FI Export License. Export licenses are valid for a special (voluntary) levy (GEM), import duties and civil association contributions. No amounts have been recorded for these potential gain contingencies at September 30, 2017.
Other Peru Tax Matters
There were no significant changes to other Peru tax matters during third-quarter 2017 (refer to Note 12 of FCX’s annual report on Form 10-K for the year ended December 31, 2016).
Indonesia Tax Matters
The following information includes a discussion of updates to previously reported Indonesia tax matters included in Note 12 of FCX’s annual report on Form 10-K for the year ended December 31, 2016.
PT-FI received assessments from the local regional tax authority in Papua, Indonesia, for additional taxes and penalties related to surface water taxes for theone-year period, from January 2011 through September 2017. PT-FI is filing objections to these assessments. During 2017, the Indonesia Tax Court issued rulings against PT-FI with respect to assessments for additional taxes and penalties for the period from January 2011 through December 2015 in the amount of $402 million (based on the exchange rate as of September 30, 2017, and including $240 million in penalties). The aggregate amount of assessments received from January 2016 through September 2017 was an additional $114 million, including penalties (based on the exchange rate as of September 30, 2017). No charges have been recorded for these assessments as of September 30, 2017, because PT-FI believes its Contract of Work (COW) exempts it from these payments and that it has the right to contest these assessments (in which FCX estimates the total exposure based on the exchange rate as of September 30, 2017, totals $516 million, including penalties) in the Indonesia Tax Court and ultimately the Indonesia Supreme Court. As of November 7, 2017, PT-FI has not paid and does not intend to pay these assessments unless there is a mechanism established to secure a refund for any such payments upon the final court decision. Additionally, PT-FI is seeking to address this matter in connection with the ongoing negotiations with the Indonesian government to resolve PT-FI’s long-term operating rights.
Indonesia Mining Contract. The following information includes updates to the discussion of PT-FI’s COW included in Note 13 of FCX’s annual report on Form 10-K for the year ended December 31, 2016.
In January and February 2017, the Indonesian government issued new regulations to address the export of unrefined metals, including copper concentrate and anode slimes, and other matters related to the mining sector. The new regulations permit the continuation of copper concentrate exports for a five-year period through January 2022, subject to various conditions, including conversion from a contract of work to a special operating license (known as an IUPK, which does not provide the same level of fiscal and legal protections as PT-FI’s COW, which remains in effect), a commitment to the completion of smelter construction in five years and payment of export duties to be determined by the Ministry of Finance. In addition, the new regulations enable application for an extension of operating rights five years before expiration of the IUPK and require foreign IUPK holders to divest a 51 percent interest in the licensed entity to Indonesian interests no later than the tenth year of production. Export licenses would be valid for one-year periods, subject to review and approval by the Indonesia government every six months, depending on smelter construction progress.
Following the issuance of the January and February 2017 regulations and discussions with the Indonesian government, In March 2022, PT-FI advised the government that it was prepared to convert its COW to an IUPK, subject to obtaining an investment stability agreement providing contractual rights with the same level of legal and fiscal certainty enumerated under its COW, and provided that the COW would remain in effect until it is replaced byobtained a mutually satisfactory alternative. PT-FI also committed to commence construction of a new smelter during a five-year time frame, following approval of theone-year extension of its long-term operating rights.
On January 12, 2017, PT-FI suspended exports in response to Indonesian regulations adopted in January 2014. In addition, as a result of labor disturbances and a delay in the renewal of itsconcentrate export license through March 19, 2023, for anode slimes, PT Smelting’s operations (PT-FI’s 25 percent-owned2000000 metric tons of concentrate, the approval of which was based on PT-FI’s revised smelter in Indonesia) were shut down from January 19, 2017, until early March 2017. On February 10, 2017, PT-FI was forcedconstruction schedule as modified to suspend production as a result of limited storage capacity at PT-FI and PT Smelting. On April 21, 2017, the Indonesian government issued a permit to PT-FI that allowed exports to resume for a six-month period, and PT-FI commenced export shipments.
In mid-February 2017, pursuant to the COW’s dispute resolution process, PT-FI provided formal notice to the Indonesian government of an impending dispute listing the government's breaches and violationsreflect impacts of the COW. PT-FI continues to reserve its rights under these provisions.ongoing COVID-19 pandemic.
As a result of the 2017 regulatory restrictions and uncertainties regarding long-term investment stability, PT-FI took actions to adjust its cost structure, slow investments in its underground development projects and new smelter, and place certain of its workforce on furlough programs.
In late March 2017, the Indonesian government amended the regulations to enable PT-FI to retain its COW until replaced with an IUPK accompanied by an investment stability agreement, and to grant PT-FI a temporary IUPK through October 10, 2017, that would allow concentrate exports to resume during this period. In April 2017, PT-FI entered into a Memorandum of Understanding with the Indonesian government confirming that the COW would continue to be valid and honored until replaced by a mutually agreed IUPK and investment stability agreement. PT-FI agreed to continue to pay a five percent export duty during this period.
In August 2017, FCX and the Indonesian government reached an understanding on a framework that would resolve PT-FI’s long-term operating rights. This framework includes (i) conversion from the COW to an IUPK providing PT-FI with long-term operating rights through 2041, (ii) Indonesian government certainty of fiscal and legal terms during the term of the IUPK, (iii) PT-FI commitment to construct a new smelter in Indonesia within five years of reaching a definitive agreement, and (iv) divestment of 51 percent of the project area interests to Indonesian participants at fair market value structured so that FCX retains control over operations and governance of PT-FI. FCX cannot currently predict whether there will be any material accounting and tax implications associated with the divestment.
The framework requires documentation and execution of a definitive agreement, which must be approved by the FCX Board of Directors and joint venture partner Rio Tinto. The parties continue to negotiate to reach agreement on important aspects of implementation of the framework, including the timing and process of divestment, governance matters, and the determination of fair market value, and to complete documentation on a comprehensive agreement for PT-FI’s operations through 2041. The parties have expressed a mutual objective of completing the negotiations and documentation during 2017.
In October 2017, the Indonesian government extended PT-FI’s export rights to December 31, 2017, while negotiations to reach and document a comprehensive long-term definitive agreement based on the agreed framework continue.
Until a definitive agreement is reached, PT-FI has reserved all rights under its COW, including pursuing arbitration under the dispute resolution provisions.
NOTE 10.9. BUSINESS SEGMENTS
FCX has organized its mining operations into four4 primary divisions – North America copper mines, South America mining, Indonesia mining and Molybdenum mines – and operating segments that meet certain thresholds are reportable segments. Separately disclosed in the following tables are FCX’s reportable segments, which include the Morenci and Cerro Verde andcopper mines, the Grasberg minerals district (Indonesia Mining) copper mines,, the Rod & Refining operations and Atlantic Copper Smelting & Refining.
FCX’s reportable segments previously included U.S. Oil & Gas operations. During 2016, FCX completed the sales of its Deepwater Gulf of Mexico, onshore California and Haynesville oil and gas properties. As a result, beginning in 2017, the U.S. oil and gas operations no longer qualify as a reportable segment, and oil and gas results for all periods presented have been included in Corporate, Other & Eliminations in the following tables. Refer to Note 2 of FCX’s annual report on Form 10-K for the year ended December 31, 2016, for additional information.
Intersegment sales between FCX’s business segments are based on terms similar to arms-length transactions with third parties at the time of the sale. Intersegment sales may not be reflective of the actual prices ultimately realized because of a variety of factors, including additional processing, timing of sales to unaffiliated customers and transportation premiums.
FCX defers recognizing profits on sales from its mines to other divisions,segments, including Atlantic Copper (FCX’s wholly owned smelter and refinery in Spain)Smelting & Refining, and on 2539.5 percent of PT-FI’s sales to PT Smelting, (PT-FI’s 25-percent-owned smelter and refinery in Indonesia), until final sales to third parties occur. Quarterly variations in ore grades, the timing of intercompany shipments and changes in product prices result in variability in FCX’s net deferred profits and quarterly earnings.
FCX allocates certain operating costs, expenses and capital expenditures to its operating divisions and individual segments. However, not all costs and expenses applicable to an operation are allocated. U.S. federal and state income taxes are recorded and managed at the corporate level (included in Corporate, Other & Eliminations), whereas foreign income taxes are recorded and managed at the applicable country level. In addition, most mining exploration and research activities are managed on a consolidated basis, and those costs, along with some selling, general and administrative costs, are not allocated to the operating divisions or individual segments. Accordingly, the following segment informationFinancial Information by Business Segment reflects management determinations that may not be indicative of what the actual financial performance of each operating division or segment would be if it was an independent entity.
Product Revenues. FCX’s revenues attributable to the products it sold for the second quarters and first six months of 2022 and 2021 follow (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended | |
| June 30, | | June 30, | |
| 2022 | | 2021 | | 2022 | | 2021 | |
Copper: | | | | | | | | |
Concentrate | $ | 2,694 | | | $ | 2,076 | | | $ | 5,385 | | | $ | 3,785 | | |
Cathode | 1,183 | | | 1,535 | | | 2,618 | | | 2,769 | | |
Rod and other refined copper products | 1,071 | | | 833 | | | 2,187 | | | 1,517 | | |
Purchased coppera | 104 | | | 310 | | | 174 | | | 528 | | |
Gold | 909 | | | 597 | | | 1,720 | | | 1,115 | | |
Molybdenum | 377 | | | 288 | | | 755 | | | 532 | | |
Other | 165 | | | 203 | | | 353 | | | 456 | | |
Adjustments to revenues: | | | | | | | | |
Treatment charges | (139) | | | (101) | | | (272) | | | (198) | | |
Royalty expenseb | (111) | | | (82) | | | (206) | | | (145) | | |
Export dutiesc | (84) | | | (44) | | | (182) | | d | (73) | | |
Revenues from contracts with customers | 6,169 | | | 5,615 | | | 12,532 | | | 10,286 | | |
Embedded derivativese | (753) | | | 133 | | | (513) | | | 312 | | |
Total consolidated revenues | $ | 5,416 | | | $ | 5,748 | | | $ | 12,019 | | | $ | 10,598 | | |
a.FCX purchases copper cathode primarily for processing by its Rod & Refining operations.
b.Reflects royalties on sales from PT-FI and Cerro Verde that will vary with the volume of metal sold and prices.
c.Reflects PT-FI export duties.
d.Includes a charge of $18 million associated with an adjustment to prior-period export duties.
e.Refer to Note 6 for discussion of embedded derivatives related to FCX’s provisionally priced concentrate and cathode sales contracts.
Financial Information by Business SegmentsSegment
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(In millions) | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | Atlantic | | | | | | | | Corporate, | | |
| North America Copper Mines | | South America Mining | | | | | | | | | | Copper | | | | | | | | Other | | |
| | | | | | | | | Cerro | | | | | | Indonesia | | | | Molybdenum | | Rod & | | Smelting | | | | | | | | & Elimi- | | FCX |
| Morenci | | | | Other | | Total | | Verde | | Other | | Total | | Mining | | | | Mines | | Refining | | & Refining | | | | | | | | nations | | Total |
Three Months Ended June 30, 2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Revenues: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unaffiliated customers | $ | 17 | | | | | $ | 30 | | | $ | 47 | | | $ | 702 | | | $ | 180 | | | $ | 882 | | | $ | 1,920 | | a | | | $ | — | | | $ | 1,753 | | | $ | 433 | | | | | | | | | $ | 381 | | b | $ | 5,416 | |
Intersegment | 730 | | | | | 1,078 | | | 1,808 | | | 134 | | | — | | | 134 | | | 58 | | | | | 144 | | | 8 | | | — | | | | | | | | | (2,152) | | | — | |
Production and delivery | 397 | | | | | 720 | | | 1,117 | | | 565 | | | 177 | | | 742 | | | 564 | | | | | 80 | | | 1,765 | | | 463 | | | | | | | | c | (1,728) | | | 3,003 | |
Depreciation, depletion and amortization | 44 | | | | | 58 | | | 102 | | | 91 | | | 11 | | | 102 | | | 262 | | | | | 18 | | | 1 | | | 6 | | | | | | | | | 16 | | | 507 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Metals inventory adjustments | — | | | | | 7 | | | 7 | | | 9 | | | 2 | | | 11 | | | — | | | | | — | | | — | | | — | | | | | | | | | — | | | 18 | |
Selling, general and administrative expenses | 1 | | | | | — | | | 1 | | | 2 | | | — | | | 2 | | | 30 | | | | | — | | | — | | | 5 | | | | | | | | | 62 | | | 100 | |
Mining exploration and research expenses | — | | | | | 1 | | | 1 | | | — | | | — | | | — | | | — | | | | | — | | | — | | | — | | | | | | | | | 24 | | | 25 | |
Environmental obligations and shutdown costs | (13) | | | | | — | | | (13) | | | — | | | — | | | — | | | — | | | | | — | | | — | | | — | | | | | | | | | 42 | | | 29 | |
Net gain on sales of assets | — | | | | | — | | | — | | | — | | | — | | | — | | | — | | | | | — | | | — | | | — | | | | | | | | | (2) | | | (2) | |
Operating income (loss) | 318 | | | | | 322 | | | 640 | | | 169 | | | (10) | | | 159 | | | 1,122 | | | | | 46 | | | (5) | | | (41) | | | | | | | | | (185) | | | 1,736 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest expense, net | — | | | | | — | | | — | | | 4 | | | — | | | 4 | | | 13 | | | | | — | | | — | | | 2 | | | | | | | | | 137 | | | 156 | |
Provision for (benefit from) income taxes | — | | | | | — | | | — | | | 68 | | | (7) | | | 61 | | | 434 | | | | | — | | | — | | | — | | | | | | | | | 76 | | | 571 | |
Total assets at June 30, 2022 | 2,839 | | | | | 5,338 | | | 8,177 | | | 8,379 | | | 1,843 | | | 10,222 | | | 20,679 | | | | | 1,702 | | | 300 | | | 1,078 | | | | | | | | | 7,955 | | | 50,113 | |
Capital expenditures | 63 | | | | | 83 | | | 146 | | | 35 | | | 33 | | | 68 | | | 388 | | | | | 8 | | | 2 | | | 32 | | | | | | | | | 219 | | d | 863 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Three Months Ended June 30, 2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Revenues: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unaffiliated customers | $ | 57 | | | | | $ | 55 | | | $ | 112 | | | $ | 825 | | | $ | 188 | | | $ | 1,013 | | | $ | 1,753 | | a | | | $ | — | | | $ | 1,689 | | | $ | 794 | | | | | | | | | $ | 387 | | b | $ | 5,748 | |
Intersegment | 721 | | | | | 1,021 | | | 1,742 | |
| 120 | | | — | | | 120 | | | 56 | | | | | 89 | | | 6 | | | — | | | | | | | | | (2,013) | | | — | |
Production and delivery | 351 | | | | | 574 | | | 925 | | | 494 | | e | 106 | | | 600 | | | 528 | | | | | 56 | | | 1,691 | | | 775 | | | | | | | | | (1,508) | | c | 3,067 | |
Depreciation, depletion and amortization | 40 | | | | | 61 | | | 101 | | | 82 | | | 12 | | | 94 | | | 247 | | | | | 17 | | | 1 | | | 8 | | | | | | | | | 15 | | | 483 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Selling, general and administrative expenses | 1 | | | | | — | | | 1 | | | 2 | | | — | | | 2 | | | 27 | | | | | — | | | — | | | 5 | | | | | | | | | 52 | | | 87 | |
Mining exploration and research expenses | — | | | | | — | | | — | | | — | | | — | | | — | | | — | | | | | — | | | — | | | — | | | | | | | | | 14 | | | 14 | |
Environmental obligations and shutdown costs | 1 | | | | | — | | | 1 | | | — | | | — | | | — | | | — | | | | | — | | | — | | | — | | | | | | | | | 32 | | | 33 | |
Net gain on sales of assets | — | | | | | — | | | — | | | — | | | — | | | — | | | — | | | | | — | | | — | | | — | | | | | | | | | (3) | | | (3) | |
Operating income (loss) | 385 | | | | | 441 | | | 826 | | | 367 | | | 70 | | | 437 | | | 1,007 | | | | | 16 | | | 3 | | | 6 | | | | | | | | | (228) | | | 2,067 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest expense, net | — | | | | | — | | | — | | | 12 | | | — | | | 12 | | | 6 | | | | | — | | | — | | | 2 | | | | | | | | | 128 | | | 148 | |
Provision for income taxes | — | | | | | — | | | — | | | 145 | | | 17 | | | 162 | | | 404 | | | | | — | | | — | | | — | | | | | | | | | 37 | | | 603 | |
Total assets at June 30, 2021 | 2,635 | | | | | 5,288 | | | 7,923 | | | 8,795 | | | 1,795 | | | 10,590 | | | 18,135 | | | | | 1,740 | | | 271 | | | 1,117 | | | | | | | | | 5,660 | | | 45,436 | |
Capital expenditures | 22 | | | | | 47 | | | 69 | | | 23 | | | 3 | | | 26 | | | 286 | | | | | 2 | | | — | | | 7 | | | | | | | | | 43 | | d | 433 | |
a.Includes PT-FI's sales to PT Smelting totaling $827 million in second-quarter 2022 and $756 million in second-quarter 2021.
b.Includes revenues from FCX's molybdenum sales company, which includes sales of molybdenum produced by the Molybdenum mines and by certain of the North America and South America copper mines.
c.Includes charges associated with major maintenance turnarounds totaling $40 million at Atlantic Copper in second-quarter 2022 and $19 million at the Miami smelter in second-quarter 2021.
d.Includes capital expenditures for the greenfield smelter and precious metals refinery (collectively, the Indonesia smelter projects).
e.Includes nonrecurring charges totaling $69 million associated with labor-related costs at Cerro Verde.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
(In millions) | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | Atlantic | | Corporate, | | | |
| North America Copper Mines | | South America | | | | | | | | Copper | | Other | | | |
| | | | | | | Cerro | | | | | | Indonesia | | Molybdenum | | Rod & | | Smelting | | & Elimi- | | FCX | |
| Morenci | | Other | | Total | | Verde | | Other | | Total | | Mining | | Mines | | Refining | | & Refining | | nationsa | | Total | |
Three Months Ended September 30, 2017 | | | | | | | | | | | | | | | | | | | | | | | | |
Revenues: | | | | | | | | | | | | | | | | | | | | | | | | |
Unaffiliated customers | $ | 57 |
| | $ | 40 |
| | $ | 97 |
| | $ | 850 |
| | $ | 109 |
| | $ | 959 |
| | $ | 1,121 |
| b | $ | — |
| | $ | 1,137 |
| | $ | 554 |
| | $ | 442 |
| c | $ | 4,310 |
| |
Intersegment | 460 |
| | 548 |
| | 1,008 |
| | 64 |
| | — |
| | 64 |
| | — |
| | 65 |
| | 8 |
| | 1 |
| | (1,146 | ) | | — |
| |
Production and delivery | 244 |
| | 414 |
| | 658 |
| | 683 |
| d | 76 |
| | 759 |
| | 406 |
| | 58 |
| | 1,141 |
| | 533 |
| | (753 | ) | | 2,802 |
| |
Depreciation, depletion and amortization | 42 |
| | 54 |
| | 96 |
| | 116 |
| | 18 |
| | 134 |
| | 136 |
| | 20 |
| | 2 |
| | 7 |
| | 23 |
| | 418 |
| |
Selling, general and administrative expenses | 1 |
| | 1 |
| | 2 |
| | 2 |
| | — |
| | 2 |
| | 32 |
| | — |
| | — |
| | 4 |
| | 66 |
| | 106 |
| |
Mining exploration and research expenses | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 27 |
| | 27 |
| |
Environmental obligations and shutdown costs | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 73 |
| | 73 |
| |
Net gain on sales of assets | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (33 | ) | | (33 | ) | |
Operating income (loss) | 230 |
| | 119 |
| | 349 |
| | 113 |
| | 15 |
| | 128 |
| | 547 |
| | (13 | ) | | 2 |
| | 11 |
| | (107 | ) | | 917 |
| |
| | | | | | | | | | | | | | | | | | | | | | | | |
Interest expense, net | 1 |
| | — |
| | 1 |
| | 156 |
| d | — |
| | 156 |
| | 1 |
| | — |
| | — |
| | 5 |
| | 141 |
| | 304 |
| |
Provision for income taxes | — |
| | — |
| | — |
| | 134 |
| d | 5 |
| | 139 |
| | 233 |
| | — |
| | — |
| | 1 |
| | 14 |
| | 387 |
| |
Total assets at September 30, 2017 | 2,844 |
| | 4,223 |
| | 7,067 |
| | 8,851 |
| | 1,595 |
| | 10,446 |
| | 11,100 |
| | 1,885 |
| | 264 |
| | 751 |
| | 5,814 |
| e | 37,327 |
| |
Capital expenditures | 26 |
| | 13 |
| | 39 |
| | 17 |
| | 3 |
| | 20 |
| | 206 |
| | 2 |
| | 1 |
| | 5 |
| | 41 |
| | 314 |
| |
| | | | | | | | | | | | | | | | | | | | | | | | |
Three Months Ended September 30, 2016 | | | | | | | | | | | | | | | | | | | | | | | | |
Revenues: | | | | | | | | | | | | | | | | | | | | | | | | |
Unaffiliated customers | $ | 115 |
| | $ | 112 |
| | $ | 227 |
| | $ | 505 |
| | $ | 112 |
| | $ | 617 |
| | $ | 984 |
| b | $ | — |
| | $ | 930 |
| | $ | 445 |
| | $ | 674 |
| c | $ | 3,877 |
| |
Intersegment | 358 |
| | 499 |
| | 857 |
| | 54 |
| | — |
| | 54 |
| | 2 |
| | 46 |
| | 7 |
| | — |
| | (966 | ) | | — |
| |
Production and delivery | 275 |
| | 464 |
| | 739 |
| | 333 |
| | 91 |
| | 424 |
| | 478 |
| | 57 |
| | 931 |
| | 416 |
| | (516 | ) | f | 2,529 |
| |
Depreciation, depletion and amortization | 51 |
| | 78 |
| | 129 |
| | 109 |
| | 25 |
| | 134 |
| | 110 |
| | 15 |
| | 2 |
| | 7 |
| | 246 |
| | 643 |
| |
Impairment of oil and gas properties | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 239 |
| | 239 |
| |
Selling, general and administrative expenses | 1 |
| | — |
| | 1 |
| | 1 |
| | 1 |
| | 2 |
| | 24 |
| | — |
| | — |
| | 5 |
| | 78 |
| | 110 |
| |
Mining exploration and research expenses | — |
| | 1 |
| | 1 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 12 |
| | 13 |
| |
Environmental obligations and shutdown costs | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (3 | ) | | (3 | ) | |
Net loss (gain) on sales of assets | 1 |
| | — |
| | 1 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (14 | ) | | (13 | ) | |
Operating income (loss) | 145 |
| | 68 |
| | 213 |
| | 116 |
| | (5 | ) | | 111 |
| | 374 |
| | (26 | ) | | 4 |
| | 17 |
| | (334 | ) | | 359 |
| |
| | | | | | | | | | | | | | | | | | | | | | | | |
Interest expense, net | 1 |
| | — |
| | 1 |
| | 21 |
| | — |
| | 21 |
| | — |
| | — |
| | — |
| | 3 |
| | 162 |
| | 187 |
| |
Provision for (benefit from) income taxes | — |
| | — |
| | — |
| | 36 |
| | (4 | ) | | 32 |
| | 158 |
| | — |
| | — |
| | 4 |
| | (308 | ) | | (114 | ) | |
Total assets at September 30, 2016 | 2,881 |
| | 4,540 |
| | 7,421 |
| | 9,139 |
| | 1,551 |
| | 10,690 |
| | 9,718 |
| | 1,953 |
| | 238 |
| | 565 |
| | 10,815 |
| e | 41,400 |
| |
Capital expenditures | 6 |
| | 5 |
| | 11 |
| | 38 |
| | 1 |
| | 39 |
| | 253 |
| | 1 |
| | — |
| | 5 |
| | 185 |
| g | 494 |
| |
| |
a. | Includes U.S. oil and gas operations, which were previously a reportable segment. |
| |
b. | Includes PT-FI's sales to PT Smelting totaling $652 million in third-quarter 2017 and $348 million in third-quarter 2016. |
| |
c. | Includes revenues from FCX's molybdenum sales company, which includes sales of molybdenum produced by the Molybdenum mines and by certain of the North America and South America copper mines. |
| |
d. | Includes net charges of $216 million in production and delivery costs, $141 million in interest expense and $2 million in provision for income taxes associated with disputed royalties for prior years. |
| |
e. | Includes assets held for sale totaling $549 million at September 30, 2017, primarily associated with Freeport Cobalt and the Kisanfu exploration project, and $5.1 billion at September 30, 2016, which also included discontinued operations. Also includes assets associated with oil and gas operations of $272 million at September 30, 2017, and $3.5 billion at September 30, 2016. |
| |
f. | Includes net charges for oil and gas operations totaling $49 million, primarily for idle rig costs, inventory adjustments and the termination of the Morocco well commitment. |
| |
g. | Includes $160 million associated with oil and gas operations and $15 million associated with discontinued operations. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(In millions) | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | Atlantic | | Corporate, | | | | | | |
| North America Copper Mines | | South America Mining | | | | | | | | | | Copper | | Other | | | | | | |
| | | | | | | | | Cerro | | | | | | | | Indonesia | | | | Molybdenum | | Rod & | | Smelting | | & Elimi- | | FCX | | | | |
| Morenci | | | | Other | | Total | | Verde | | | | Other | | Total | | Mining | | | | Mines | | Refining | | & Refining | | nations | | Total | | | | |
Six Months Ended June 30, 2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Revenues: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unaffiliated customers | $ | 107 | | | | | $ | 85 | | | $ | 192 | | | $ | 1,808 | | | | | $ | 340 | | | $ | 2,148 | | | $ | 4,246 | | a | | | $ | — | | | $ | 3,496 | | | $ | 1,151 | | | $ | 786 | | b | $ | 12,019 | | | | | |
Intersegment | 1,441 | | | | | 2,173 | | | 3,614 | | | 242 | | | | | — | | | 242 | | | 136 | | | | | 272 | | | 17 | | | — | | | (4,281) | | | — | | | | | |
Production and delivery | 760 | | | | | 1,375 | | | 2,135 | | | 1,123 | | | | | 289 | | | 1,412 | | | 1,190 | | | | | 155 | | | 3,519 | | | 1,185 | | c | (3,443) | | | 6,153 | | | | | |
Depreciation, depletion and amortization | 88 | | | | | 119 | | | 207 | | | 178 | | | | | 21 | | | 199 | | | 510 | | | | | 34 | | | 2 | | | 12 | | | 32 | | | 996 | | | | | |
Metals inventory adjustments | — | | | | | 7 | | | 7 | | | 9 | | | | | 2 | | | 11 | | | — | | | | | — | | | — | | | — | | | — | | | 18 | | | | | |
Selling, general and administrative expenses | 1 | | | | | 1 | | | 2 | | | 4 | | | | | — | | | 4 | | | 57 | | | | | — | | | — | | | 13 | | | 139 | | | 215 | | | | | |
Mining exploration and research expenses | — | | | | | 1 | | | 1 | | | — | | | | | — | | | — | | | — | | | | | — | | | — | | | — | | | 48 | | | 49 | | | | | |
Environmental obligations and shutdown costs | (13) | | | | | — | | | (13) | | | — | | | | | — | | | — | | | — | | | | | — | | | — | | | — | | | 58 | | | 45 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net gain on sales of assets | — | | | | | — | | | — | | | — | | | | | — | | | — | | | — | | | | | — | | | — | | | — | | | (2) | | | (2) | | | | | |
Operating income (loss) | 712 | | | | | 755 | | | 1,467 | | | 736 | | | | | 28 | | | 764 | | | 2,625 | | | | | 83 | | | (8) | | | (59) | | | (327) | | | 4,545 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest expense, net | — | | | | | — | | | — | | | 7 | | | | | — | | | 7 | | | 15 | | | | | — | | | — | | | 4 | | | 257 | | | 283 | | | | | |
Provision for income taxes | — | | | | | — | | | — | | | 295 | | | | | 7 | | | 302 | | | 1,020 | | | | | — | | | — | | | — | | | 73 | | | 1,395 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Capital expenditures | 136 | | | | | 140 | | | 276 | | | 68 | | | | | 56 | | | 124 | | | 759 | | | | | 9 | | | 4 | | | 43 | | | 371 | | d | 1,586 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Six Months Ended June 30, 2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Revenues: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unaffiliated customers | $ | 61 | | | | | $ | 83 | | | $ | 144 | | | $ | 1,742 | | | | | $ | 363 | | | $ | 2,105 | | | $ | 3,136 | | a | | | $ | — | | | $ | 2,998 | | | $ | 1,481 | | | $ | 734 | | b | $ | 10,598 | | | | | |
Intersegment | 1,285 | | | | | 1,763 | | | 3,048 | |
| 165 | | | | | — | | | 165 | | | 108 | | | | | 159 | | | 13 | | | — | | | (3,493) | | | — | | | | | |
Production and delivery | 620 | | | | | 1,054 | | | 1,674 | | | 930 | | e | | | 209 | | | 1,139 | | | 983 | | | | | 113 | | | 3,007 | | | 1,448 | | | (2,511) | | c | 5,853 | | | | | |
Depreciation, depletion and amortization | 74 | | | | | 107 | | | 181 | | | 171 | | | | | 24 | | | 195 | | | 446 | | | | | 32 | | | 2 | | | 15 | | | 31 | | | 902 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Metals inventory adjustments | — | | | | | — | | | — | | | — | | | | | — | | | — | | | — | | | | | 1 | | | — | | | — | | | — | | | 1 | | | | | |
Selling, general and administrative expenses | 1 | | | | | 1 | | | 2 | | | 4 | | | | | — | | | 4 | | | 53 | | | | | — | | | — | | | 12 | | | 116 | | | 187 | | | | | |
Mining exploration and research expenses | — | | | | | — | | | — | | | — | | | | | — | | | — | | | — | | | | | — | | | — | | | — | | | 21 | | | 21 | | | | | |
Environmental obligations and shutdown costs | 1 | | | | | — | | | 1 | | | — | | | | | — | | | — | | | — | | | | | — | | | — | | | — | | | 37 | | | 38 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net gain on sales of assets | — | | | | | — | | | — | | | — | | | | | — | | | — | | | — | | | | | — | | | — | | | — | | | (3) | | | (3) | | | | | |
Operating income (loss) | 650 | | | | | 684 | | | 1,334 | | | 802 | | | | | 130 | | | 932 | | | 1,762 | | | | | 13 | | | 2�� | | | 6 | | | (450) | | | 3,599 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest expense, net | — | | | | | — | | | — | | | 25 | | | | | — | | | 25 | | | 7 | | | | | — | | | — | | | 3 | | | 258 | | | 293 | | | | | |
Provision for (benefit from) income taxes | — | | | | | — | | | — | | | 318 | | | | | 38 | | | 356 | | | 719 | | | | | — | | | — | | | — | | | (29) | | | 1,046 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Capital expenditures | 32 | | | | | 63 | | | 95 | | | 43 | | | | | 4 | | | 47 | | | 576 | | | | | 3 | | | 1 | | | 13 | | | 68 | | d | 803 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
a.Includes PT-FI's sales to PT Smelting totaling $1.7 billion for the first six months of 2022 and $1.5 billion for the first six months of 2021.
b.Includes revenues from FCX's molybdenum sales company, which includes sales of molybdenum produced by the Molybdenum mines and by certain of the North America and South America copper mines.
c.Includes charges associated with major maintenance turnarounds totaling $40 million at Atlantic Copper for the first six months of 2022 and $87 million at the Miami smelter for the first six months of 2021.
d.Primarily includes capital expenditures for the Indonesia smelter projects.
e.Includes nonrecurring charges totaling $69 million associated with labor-related costs at Cerro Verde.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
(In millions) | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | Atlantic | | Corporate, | | | |
| North America Copper Mines | | South America Mining | | | | | | | | Copper | | Other | | | |
| | | | | | | Cerro | | | | | | Indonesia | | Molybdenum | | Rod & | | Smelting | | & Elimi- | | FCX | |
| Morenci | | Other | | Total | | Verde | | Other | | Total | | Mining | | Mines | | Refining | | & Refining | | nationsa | | Total | |
Nine Months Ended September 30, 2017 | | | | | | | | | | | | | | | | | | | | | | | | |
Revenues: | | | | | | | | | | | | | | | | | | | | | | | | |
Unaffiliated customers | $ | 168 |
| | $ | 122 |
| | $ | 290 |
| | $ | 2,057 |
| | $ | 332 |
| | $ | 2,389 |
| | $ | 2,720 |
| b | $ | — |
| | $ | 3,290 |
| | $ | 1,412 |
| | $ | 1,261 |
| c | $ | 11,362 |
| |
Intersegment | 1,354 |
| | 1,704 |
| | 3,058 |
| | 237 |
| | — |
| | 237 |
| | — |
| | 199 |
| | 22 |
| | 1 |
| | (3,517 | ) | | — |
| |
Production and delivery | 772 |
| | 1,284 |
| | 2,056 |
| | 1,450 |
| d | 245 |
| | 1,695 |
| | 1,233 |
| e | 169 |
| | 3,299 |
| | 1,369 |
| | (2,324 | ) | | 7,497 |
| |
Depreciation, depletion and amortization | 138 |
| | 192 |
| | 330 |
| | 332 |
| | 60 |
| | 392 |
| | 372 |
| | 58 |
| | 7 |
| | 21 |
| | 77 |
| | 1,257 |
| |
Selling, general and administrative expenses | 2 |
| | 2 |
| | 4 |
| | 7 |
| | — |
| | 7 |
| | 92 |
| e | — |
| | — |
| | 13 |
| | 250 |
| | 366 |
| |
Mining exploration and research expenses | — |
| | 2 |
| | 2 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 59 |
| | 61 |
| |
Environmental obligations and shutdown costs | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 81 |
| | 81 |
| |
Net gain on sales of assets | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (66 | ) | | (66 | ) | |
Operating income (loss) | 610 |
| | 346 |
| | 956 |
| | 505 |
| | 27 |
| | 532 |
| | 1,023 |
| | (28 | ) | | 6 |
| | 10 |
| | (333 | ) | | 2,166 |
| |
| | | | | | | | | | | | | | | | | | | | | | | | |
Interest expense, net | 2 |
| | 1 |
| | 3 |
| | 187 |
| d | — |
| | 187 |
| | 1 |
| | — |
| | — |
| | 13 |
| | 429 |
| | 633 |
| |
Provision for income taxes | — |
| | — |
| | — |
| | 288 |
| d | 10 |
| | 298 |
| | 435 |
| | — |
| | — |
| | 4 |
| | 10 |
| | 747 |
| |
Capital expenditures | 78 |
| | 28 |
| | 106 |
| | 60 |
| | 5 |
| | 65 |
| | 663 |
| | 4 |
| | 3 |
| | 30 |
| | 149 |
| | 1,020 |
| |
| | | | | | | | | | | | | | | | | | | | | | | | |
Nine Months Ended September 30, 2016 | | | | | | | | | | | | | | | | | | | | | | | | |
Revenues: | | | | | | | | | | | | | | | | | | | | | | | | |
Unaffiliated customers | $ | 356 |
| | $ | 211 |
| | $ | 567 |
| | $ | 1,485 |
| | $ | 379 |
| | $ | 1,864 |
| | $ | 2,014 |
| b | $ | — |
| | $ | 2,820 |
| | $ | 1,360 |
|
| $ | 1,828 |
| c | $ | 10,453 |
| |
Intersegment | 1,119 |
| | 1,594 |
| | 2,713 |
| | 155 |
| | — |
| | 155 |
| | 59 |
| | 136 |
| | 22 |
| | 3 |
| | (3,088 | ) | | — |
| |
Production and delivery | 913 |
| | 1,340 |
| | 2,253 |
| | 927 |
| | 313 |
| | 1,240 |
| | 1,228 |
| | 159 |
| | 2,820 |
| | 1,275 |
| | (991 | ) | f | 7,984 |
| |
Depreciation, depletion and amortization | 170 |
| | 237 |
| | 407 |
| | 319 |
| | 83 |
| | 402 |
| | 284 |
| | 51 |
| | 7 |
| | 22 |
| | 764 |
| | 1,937 |
| |
Impairment of oil and gas properties
| — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 4,317 |
|
| 4,317 |
| |
Selling, general and administrative expenses | 2 |
| | 2 |
| | 4 |
| | 5 |
| | 1 |
| | 6 |
| | 60 |
| | — |
| | — |
| | 13 |
| | 325 |
| f | 408 |
| |
Mining exploration and research expenses | — |
| | 2 |
| | 2 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 44 |
| | 46 |
| |
Environmental obligations and shutdown costs | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 18 |
| | 18 |
| |
Net gain on sales of assets
| (576 | ) | | — |
| | (576 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (186 | ) | | (762 | ) | |
Operating income (loss) | 966 |
| | 224 |
| | 1,190 |
| | 389 |
| | (18 | ) | | 371 |
| | 501 |
| | (74 | ) | | 15 |
| | 53 |
| | (5,551 | ) | | (3,495 | ) | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Interest expense, net | 2 |
| | 1 |
| | 3 |
| | 63 |
| | — |
| | 63 |
| | — |
| | — |
| | — |
| | 11 |
| | 497 |
| | 574 |
| |
Provision for (benefit from) income taxes | — |
| | — |
| | — |
| | 126 |
| | (12 | ) | | 114 |
| | 212 |
| | — |
| | — |
| | 5 |
| | (252 | ) | | 79 |
| |
Capital expenditures | 71 |
| | 16 |
| | 87 |
| | 329 |
| | 3 |
| | 332 |
| | 706 |
| | 2 |
| | 1 |
| | 12 |
| | 1,169 |
| g | 2,309 |
| |
| |
a. | Includes U.S. oil and gas operations, which were previously a reportable segment. |
| |
b. | Includes PT-FI’s sales to PT Smelting totaling $1.4 billion for the first nine months of 2017 and $912 million for the first nine months of 2016. |
| |
c. | Includes revenues from FCX’s molybdenum sales company, which includes sales of molybdenum produced by the Molybdenum mines and by certain of the North America and South America copper mines. |
| |
d. | Includes net charges of $216 million in production and delivery costs, $141 million in interest expense and $2 million in provision for income taxes associated with disputed royalties for prior years. |
| |
e. | Includes net charges of $112 million in production and delivery costs and $5 million in selling, general and administrative expenses for PT-FI workforce reductions. |
| |
f. | Includes net charges for oil and gas operations of $942 million in production and delivery costs, primarily for drillship settlements/idle rig costs and inventory adjustments and $38 million for net restructuring charges. |
| |
g. | Includes $1.1 billion associated with oil and gas operations and $70 million associated with discontinued operations. |
NOTE 11. GUARANTOR FINANCIAL STATEMENTS
All of the senior notes issued by FCX are fully and unconditionally guaranteed on a senior basis jointly and severally by FM O&G LLC, as guarantor, which is a 100-percent-owned subsidiary of FM O&G and FCX. The guarantee is an unsecured obligation of the guarantor and ranks equal in right of payment with all existing and future indebtedness of FM O&G LLC, including indebtedness under FCX’s revolving credit facility. The guarantee ranks senior in right of payment with all of FM O&G LLC’s future subordinated obligations and is effectively subordinated in right of payment to any debt of FM O&G LLC’s subsidiaries. The indentures provide that FM O&G LLC’s guarantee may be released or terminated for certain obligations under the following circumstances: (i) all or substantially all of the equity interests or assets of FM O&G LLC are sold to a third party; or (ii) FM O&G LLC no longer has any obligations under any FM O&G senior notes or any refinancing thereof and no longer guarantees any obligations of FCX under the revolving credit facility or any other senior debt or, in each case, any refinancing thereof.
The following condensed consolidating financial information includes information regarding FCX, as issuer, FM O&G LLC, as guarantor, and all other non-guarantor subsidiaries of FCX. Included are the condensed consolidating balance sheets at September 30, 2017, and December 31, 2016, and the related condensed consolidating statements of comprehensive income (loss) for the three and nine months ended September 30, 2017 and 2016, and the condensed consolidating statements of cash flows for the nine months ended September 30, 2017 and 2016 (in millions), which should be read in conjunction with FCX’s notes to the consolidated financial statements.
CONDENSED CONSOLIDATING BALANCE SHEET
September 30, 2017
|
| | | | | | | | | | | | | | | | | | | |
| FCX | | FM O&G LLC | | Non-guarantor | | | | Consolidated |
| Issuer | | Guarantor | | Subsidiaries | | Eliminations | | FCX |
ASSETS | | | | | | | | | |
Current assets | $ | 197 |
| | $ | 716 |
| | $ | 10,948 |
| | $ | (711 | ) | | $ | 11,150 |
|
Property, plant, equipment and mine development costs, net | 15 |
| | 11 |
| | 22,899 |
| | (11 | ) | | 22,914 |
|
Oil and gas properties, subject to amortization, less accumulated amortization and impairments | — |
| | — |
| | 20 |
| | — |
| | 20 |
|
Investments in consolidated subsidiaries | 20,178 |
| | — |
| | — |
| | (20,178 | ) | | — |
|
Other assets | 479 |
| | 36 |
| | 3,193 |
| | (465 | ) | | 3,243 |
|
Total assets | $ | 20,869 |
| | $ | 763 |
| | $ | 37,060 |
| | $ | (21,365 | ) | | $ | 37,327 |
|
| | | | | | | | | |
LIABILITIES AND EQUITY | | | | | | | | | |
Current liabilities | $ | 2,402 |
| | $ | 111 |
| | $ | 3,820 |
| | $ | (816 | ) | | $ | 5,517 |
|
Long-term debt, less current portion | 10,600 |
| | 6,428 |
| | 5,621 |
| | (10,082 | ) | | 12,567 |
|
Deferred income taxes | 832 |
| a | — |
| | 2,939 |
| | — |
| | 3,771 |
|
Environmental and asset retirement obligations, less current portion | — |
| | 208 |
| | 3,290 |
| | — |
| | 3,498 |
|
Investments in consolidated subsidiaries | — |
| | 850 |
| | 10,174 |
| | (11,024 | ) | | — |
|
Other liabilities | 62 |
| | 3,341 |
| | 1,828 |
| | (3,487 | ) | | 1,744 |
|
Total liabilities | 13,896 |
| | 10,938 |
| | 27,672 |
| | (25,409 | ) | | 27,097 |
|
| | | | | | | | | |
Equity: | | | | | | | | | |
Stockholders’ equity | 6,973 |
| | (10,175 | ) | | 6,782 |
| | 3,393 |
| | 6,973 |
|
Noncontrolling interests | — |
| | — |
| | 2,606 |
| | 651 |
| | 3,257 |
|
Total equity | 6,973 |
| | (10,175 | ) | | 9,388 |
| | 4,044 |
| | 10,230 |
|
Total liabilities and equity | $ | 20,869 |
| | $ | 763 |
| | $ | 37,060 |
| | $ | (21,365 | ) | | $ | 37,327 |
|
| |
a. | All U.S.-related deferred income taxes are recorded at the parent company. |
CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2016
|
| | | | | | | | | | | | | | | | | | | |
| FCX | | FM O&G LLC | | Non-guarantor | | | | Consolidated |
| Issuer | | Guarantor | | Subsidiaries | | Eliminations | | FCX |
ASSETS | | | | | | | | | |
Current assets | $ | 230 |
| | $ | 1,790 |
| | $ | 11,675 |
| | $ | (3,260 | ) | | $ | 10,435 |
|
Property, plant, equipment and mine development costs, net | 19 |
| | 24 |
| | 23,176 |
| | — |
| | 23,219 |
|
Oil and gas properties, subject to amortization, less accumulated amortization and impairments | — |
| | — |
| | 74 |
| | — |
| | 74 |
|
Investments in consolidated subsidiaries | 21,110 |
| | — |
| | — |
| | (21,110 | ) | | — |
|
Other assets | 1,985 |
| | 47 |
| | 3,522 |
| | (1,965 | ) | | 3,589 |
|
Total assets | $ | 23,344 |
| | $ | 1,861 |
| | $ | 38,447 |
| | $ | (26,335 | ) | | $ | 37,317 |
|
| | | | | | | | | |
LIABILITIES AND EQUITY | | | | | | | | | |
Current liabilities | $ | 3,895 |
| | $ | 308 |
| | $ | 3,306 |
| | $ | (3,244 | ) | | $ | 4,265 |
|
Long-term debt, less current portion | 12,517 |
| | 6,062 |
| | 11,297 |
| | (15,081 | ) | | 14,795 |
|
Deferred income taxes | 826 |
| a | — |
| | 2,942 |
| | — |
| | 3,768 |
|
Environmental and asset retirement obligations, less current portion | — |
| | 200 |
| | 3,287 |
| | — |
| | 3,487 |
|
Investments in consolidated subsidiary | — |
| | 893 |
| | 8,995 |
| | (9,888 | ) | | — |
|
Other liabilities | 55 |
| | 3,393 |
| | 1,784 |
| | (3,487 | ) | | 1,745 |
|
Total liabilities | 17,293 |
| | 10,856 |
| | 31,611 |
| | (31,700 | ) | | 28,060 |
|
| | | | | | | | | |
Equity: | | | | | | | | | |
Stockholders’ equity | 6,051 |
| | (8,995 | ) | | 4,237 |
| | 4,758 |
| | 6,051 |
|
Noncontrolling interests | — |
| | — |
| | 2,599 |
| | 607 |
| | 3,206 |
|
Total equity | 6,051 |
| | (8,995 | ) | | 6,836 |
| | 5,365 |
| | 9,257 |
|
Total liabilities and equity | $ | 23,344 |
| | $ | 1,861 |
| | $ | 38,447 |
| | $ | (26,335 | ) | | $ | 37,317 |
|
| |
a. | All U.S.-related deferred income taxes are recorded at the parent company. |
CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
|
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
Three Months Ended September 30, 2017 | | | | | | | | | |
| FCX | | FM O&G LLC | | Non-guarantor | | | | Consolidated |
| Issuer | | Guarantor | | Subsidiaries | | Eliminations | | FCX |
Revenues | $ | — |
| | $ | 13 |
| | $ | 4,297 |
| | $ | — |
| | $ | 4,310 |
|
Total costs and expenses | 8 |
| | 25 |
| | 3,361 |
| | (1 | ) | | 3,393 |
|
Operating (loss) income | (8 | ) | | (12 | ) | | 936 |
| | 1 |
| | 917 |
|
Interest expense, net | (116 | ) | | (59 | ) | | (218 | ) | | 89 |
| | (304 | ) |
Other income (expense), net | 97 |
| | 3 |
| | 2 |
| | (89 | ) | | 13 |
|
(Loss) income before income taxes and equity in affiliated companies’ net earnings (losses) | (27 | ) | | (68 | ) | | 720 |
| | 1 |
| | 626 |
|
Benefit from (provision for) income taxes | 21 |
| | 24 |
| | (432 | ) | | — |
| | (387 | ) |
Equity in affiliated companies’ net earnings (losses) | 286 |
| | 20 |
| | (20 | ) | | (283 | ) | | 3 |
|
Net income (loss) from continuing operations | 280 |
| | (24 | ) | | 268 |
| | (282 | ) | | 242 |
|
Net income from discontinued operations | — |
| | — |
| | 3 |
| | — |
| | 3 |
|
Net income (loss) | 280 |
| | (24 | ) | | 271 |
| | (282 | ) | | 245 |
|
Net loss (income) attributable to noncontrolling interests: | | | | | | | | | |
Continuing operations | — |
| | — |
| | 69 |
| | (34 | ) | | 35 |
|
Discontinued operations | — |
| | — |
| | — |
| | — |
| | — |
|
Net income (loss) attributable to common stockholders | $ | 280 |
| | $ | (24 | ) | | $ | 340 |
| | $ | (316 | ) | | $ | 280 |
|
| | | | | | | | | |
Other comprehensive income (loss) | 13 |
| | — |
| | 13 |
| | (13 | ) | | 13 |
|
Total comprehensive income (loss) | $ | 293 |
| | $ | (24 | ) | | $ | 353 |
| | $ | (329 | ) | | $ | 293 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
Three Months Ended September 30, 2016 | | | | | | | | | |
| FCX | | FM O&G LLC | | Non-guarantor | | | | Consolidated |
| Issuer | | Guarantor | | Subsidiaries | | Eliminations | | FCX |
Revenues | $ | — |
| | $ | 110 |
| | $ | 3,767 |
| | $ | — |
| | $ | 3,877 |
|
Total costs and expenses | 12 |
| | 266 |
| a | 3,239 |
| a | 1 |
| | 3,518 |
|
Operating (loss) income | (12 | ) | | (156 | ) | | 528 |
| | (1 | ) | | 359 |
|
Interest expense, net | (126 | ) | | (18 | ) | | (132 | ) | | 89 |
| | (187 | ) |
Other income (expense), net | 91 |
| | — |
| | (10 | ) | | (76 | ) | | 5 |
|
(Loss) income before income taxes and equity in affiliated companies’ net (losses) earnings | (47 | ) | | (174 | ) | | 386 |
| | 12 |
| | 177 |
|
Benefit from (provision for) income taxes | 343 |
| | (197 | ) | | (40 | ) | | 8 |
| | 114 |
|
Equity in affiliated companies’ net (losses) earnings | (75 | ) | | (218 | ) | | (589 | ) | | 883 |
| | 1 |
|
Net income (loss) from continuing operations | 221 |
| | (589 | ) | | (243 | ) | | 903 |
| | 292 |
|
Net (loss) income from discontinued operations | (4 | ) | | — |
| | 10 |
| | (12 | ) | | (6 | ) |
Net income (loss) | 217 |
| | (589 | ) | | (233 | ) | | 891 |
| | 286 |
|
Net income and preferred dividends attributable to noncontrolling interests: | | | | | | | | | |
Continuing operations | — |
| | — |
| | (24 | ) | | (23 | ) | | (47 | ) |
Discontinued operations | — |
| | — |
| | (22 | ) | | — |
| | (22 | ) |
Net income (loss) attributable to common stockholders | $ | 217 |
| | $ | (589 | ) | | $ | (279 | ) | | $ | 868 |
| | $ | 217 |
|
| | | | | | | | | |
Other comprehensive income (loss) | 12 |
| | — |
| | 12 |
| | (12 | ) | | 12 |
|
Total comprehensive income (loss) | $ | 229 |
| | $ | (589 | ) | | $ | (267 | ) | | $ | 856 |
| | $ | 229 |
|
| |
a. | Includes charges totaling $95 million at the FM O&G LLC guarantor and $0.2 billion at the non-guarantor subsidiaries related to impairment of FCX’s oil and gas properties pursuant to full cost accounting rules. |
CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS) |
| | | | | | | | | | | | | | | | | | | |
Nine Months Ended September 30, 2017 | | | | | | | | | |
| FCX | | FM O&G LLC | | Non-guarantor | | | | Consolidated |
| Issuer | | Guarantor | | Subsidiaries | | Eliminations | | FCX |
Revenues | $ | — |
| | $ | 38 |
| | $ | 11,324 |
| | $ | — |
| | $ | 11,362 |
|
Total costs and expenses | 31 |
| | 86 |
| | 9,068 |
| | 11 |
| | 9,196 |
|
Operating (loss) income | (31 | ) | | (48 | ) | | 2,256 |
| | (11 | ) | | 2,166 |
|
Interest expense, net | (355 | ) | | (167 | ) | | (363 | ) | | 252 |
| | (633 | ) |
Other income (expense), net | 256 |
| | 3 |
| | 37 |
| | (252 | ) | | 44 |
|
(Loss) income before income taxes and equity in affiliated companies’ net earnings (losses) | (130 | ) | | (212 | ) | | 1,930 |
| | (11 | ) | | 1,577 |
|
(Provision for) benefit from income taxes | (111 | ) | | 74 |
| | (714 | ) | | 4 |
| | (747 | ) |
Equity in affiliated companies’ net earnings (losses) | 1,017 |
| | 14 |
| | (118 | ) | | (907 | ) | | 6 |
|
Net income (loss) from continuing operations | 776 |
| | (124 | ) | | 1,098 |
| | (914 | ) | | 836 |
|
Net income from discontinued operations | — |
| | — |
| | 50 |
| | — |
| | 50 |
|
Net income (loss) | 776 |
| | (124 | ) | | 1,148 |
| | (914 | ) | | 886 |
|
Net income attributable to noncontrolling interests: | | | | | | | | | |
Continuing operations | — |
| | — |
| | (42 | ) | | (64 | ) | | (106 | ) |
Discontinued operations | — |
| | — |
| | (4 | ) | | — |
| | (4 | ) |
Net income (loss) attributable to common stockholders | $ | 776 |
| | $ | (124 | ) | | $ | 1,102 |
| | $ | (978 | ) | | $ | 776 |
|
| | | | | | | | | |
Other comprehensive income (loss) | 105 |
| | — |
| | 105 |
| | (105 | ) | | 105 |
|
Total comprehensive income (loss) | $ | 881 |
| | $ | (124 | ) | | $ | 1,207 |
| | $ | (1,083 | ) | | $ | 881 |
|
|
| | | | | | | | | | | | | | | | | | | |
Nine Months Ended September 30, 2016 | | | | | | | | | |
| FCX | | FM O&G LLC | | Non-guarantor | | | | Consolidated |
| Issuer | | Guarantor | | Subsidiaries | | Eliminations | | FCX |
Revenues | $ | — |
| | $ | 294 |
| | $ | 10,159 |
| | $ | — |
| | $ | 10,453 |
|
Total costs and expenses | 56 |
| | 2,859 |
| a | 11,026 |
| a | 7 |
| | 13,948 |
|
Operating loss | (56 | ) | | (2,565 | ) | | (867 | ) | | (7 | ) | | (3,495 | ) |
Interest expense, net | (404 | ) | | (37 | ) | | (370 | ) | | 237 |
| | (574 | ) |
Other income (expense), net | 248 |
| | — |
| | 59 |
| | (202 | ) | | 105 |
|
(Loss) income before income taxes and equity in affiliated companies’ net (losses) earnings | (212 | ) | | (2,602 | ) | | (1,178 | ) | | 28 |
| | (3,964 | ) |
(Provision for) benefit from income taxes | (1,785 | ) | | 725 |
| | 979 |
| | 2 |
| | (79 | ) |
Equity in affiliated companies’ net (losses) earnings | (2,450 | ) | | (3,202 | ) | | (5,072 | ) | | 10,733 |
| | 9 |
|
Net (loss) income from continuing operations | (4,447 | ) | | (5,079 | ) | | (5,271 | ) | | 10,763 |
| | (4,034 | ) |
Net income (loss) from discontinued operations | 1 |
| | — |
| | (159 | ) | | (33 | ) | | (191 | ) |
Net (loss) income | (4,446 | ) | | (5,079 | ) | | (5,430 | ) | | 10,730 |
| | (4,225 | ) |
Net income and preferred dividends attributable to noncontrolling interests: | | | | | | | | | |
Continuing operations | — |
| | — |
| | (141 | ) | | (36 | ) | | (177 | ) |
Discontinued operations | — |
| | — |
| | (44 | ) | | — |
| | (44 | ) |
Net (loss) income attributable to common stockholders | $ | (4,446 | ) | | $ | (5,079 | ) | | $ | (5,615 | ) | | $ | 10,694 |
| | $ | (4,446 | ) |
| | | | | | | | | |
Other comprehensive income (loss) | 27 |
| | — |
| | 27 |
| | (27 | ) | | 27 |
|
Total comprehensive (loss) income | $ | (4,419 | ) | | $ | (5,079 | ) | | $ | (5,588 | ) | | $ | 10,667 |
| | $ | (4,419 | ) |
| |
a. | Includes charges totaling $1.5 billion at the FM O&G LLC guarantor and $2.8 billion at the non-guarantor subsidiaries related to impairment of FCX’s oil and gas properties pursuant to full cost accounting rules. |
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
|
| | | | | | | | | | | | | | | | | | | |
Nine Months Ended September 30, 2017 | | | | | | | | | |
| FCX | | FM O&G LLC | | Non-guarantor | | | | Consolidated |
| Issuer | | Guarantor | | Subsidiaries | | Eliminations | | FCX |
Net cash (used in) provided by operating activities | $ | (222 | ) | | $ | (383 | ) | | $ | 3,623 |
| | $ | — |
| | $ | 3,018 |
|
| | | | | | | | | |
Cash flow from investing activities: | | | | | | | | | |
Capital expenditures | — |
| | (24 | ) | | (996 | ) | | — |
| | (1,020 | ) |
Intercompany loans | (609 | ) | | — |
| | — |
| | 609 |
| | — |
|
Dividends from (investments in) consolidated subsidiaries | 1,757 |
| | (16 | ) | | 93 |
| | (1,834 | ) | | — |
|
Asset sales and other, net | — |
| | 58 |
| | (12 | ) | | — |
| | 46 |
|
Net cash provided by (used in) investing activities | 1,148 |
| | 18 |
| | (915 | ) | | (1,225 | ) | | (974 | ) |
| | | | | | | | | |
Cash flow from financing activities: | | | | | | | | | |
Proceeds from debt | — |
| | — |
| | 795 |
| | — |
| | 795 |
|
Repayments of debt | (915 | ) | | (139 | ) | | (937 | ) | | — |
| | (1,991 | ) |
Intercompany loans | — |
| | 512 |
| | 97 |
| | (609 | ) | | — |
|
Cash dividends paid and contributions received, net | (2 | ) | | — |
| | (1,839 | ) | | 1,772 |
| | (69 | ) |
Other, net | (9 | ) | | (11 | ) | | (64 | ) | | 62 |
| | (22 | ) |
Net cash (used in) provided by financing activities | (926 | ) | | 362 |
| | (1,948 | ) | | 1,225 |
| | (1,287 | ) |
| | | | | | | | | |
Net increase in cash and cash equivalents | — |
| | (3 | ) | | 760 |
| | — |
| | 757 |
|
Increase in cash and cash equivalents in assets held for sale | — |
| | — |
| | (45 | ) | | — |
| | (45 | ) |
Cash and cash equivalents at beginning of period | — |
| | 3 |
| | 4,242 |
| | — |
| | 4,245 |
|
Cash and cash equivalents at end of period | $ | — |
| | $ | — |
| | $ | 4,957 |
| | $ | — |
| | $ | 4,957 |
|
|
| | | | | | | | | | | | | | | | | | | |
Nine Months Ended September 30, 2016 | | | | | | | | | |
| FCX | | FM O&G LLC | | Non-guarantor | | | | Consolidated |
| Issuer | | Guarantor | | Subsidiaries | | Eliminations | | FCX |
Net cash (used in) provided by operating activities | $ | (264 | ) | | $ | (294 | ) | | $ | 3,151 |
| | $ | 1 |
| | $ | 2,594 |
|
| | | | | | | | | |
Cash flow from investing activities: | | | | | | | | | |
Capital expenditures | — |
| | (497 | ) | | (1,814 | ) | | 2 |
| | (2,309 | ) |
Intercompany loans | (1,021 | ) | | (518 | ) | | — |
| | 1,539 |
| | — |
|
Dividends from (investments in) consolidated subsidiaries | 1,643 |
| | (41 | ) | | 124 |
| | (1,726 | ) | | — |
|
Asset sales and other, net | — |
| | 208 |
| | 1,210 |
| | (3 | ) | | 1,415 |
|
Net cash provided by (used in) investing activities | 622 |
| | (848 | ) | | (480 | ) | | (188 | ) | | (894 | ) |
| | | | | | | | | |
Cash flow from financing activities: | | | | | | | | | |
Proceeds from debt | 1,721 |
| | — |
| | 1,742 |
| | — |
| | 3,463 |
|
Repayments of debt | (2,498 | ) | | — |
| | (2,041 | ) | | — |
| | (4,539 | ) |
Intercompany loans | — |
| | 1,223 |
| | 316 |
| | (1,539 | ) | | — |
|
Net proceeds from sale of common stock | 442 |
| | — |
| | 374 |
| | (374 | ) | | 442 |
|
Cash dividends paid and contributions received, net | (5 | ) | | (78 | ) | | (2,096 | ) | | 2,087 |
| | (92 | ) |
Other, net | (18 | ) | | (2 | ) | | (15 | ) | | 13 |
| | (22 | ) |
Net cash (used in) provided by financing activities | (358 | ) | | 1,143 |
| | (1,720 | ) | | 187 |
| | (748 | ) |
| | | | | | | | | |
Net increase in cash and cash equivalents | — |
| | 1 |
| | 951 |
| | — |
| | 952 |
|
Increase in cash and cash equivalents in assets held for sale | — |
| | — |
| | (43 | ) | | — |
| | (43 | ) |
Cash and cash equivalents at beginning of period | — |
| | — |
| | 177 |
| | — |
| | 177 |
|
Cash and cash equivalents at end of period | $ | — |
| | $ | 1 |
| | $ | 1,085 |
| | $ | — |
| | $ | 1,086 |
|
NOTE 12. NEW ACCOUNTING STANDARDS
In May 2014, the Financial Accounting Standards Board (FASB) issued an Accounting Standard Update (ASU) that provides a single comprehensive revenue recognition model, which will replace most existing revenue recognition guidance, and also requires expanded disclosures. The core principle of the model is that revenue is recognized when control of goods or services has been transferred to customers at an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. For public entities, this ASU is effective for annual reporting periods beginning after December 15, 2017, and interim reporting periods within that reporting period. Early adoption is permitted for annual reporting periods beginning after December 15, 2016, and interim reporting periods within that reporting period. FCX will adopt this ASU January 1, 2018, and currently expects to apply the modified retrospective approach under which any cumulative effect adjustment would be recorded to retained earnings as of the adoption date. FCX has substantially completed its review of the impact of this guidance, and based on the terms of its sales contracts, does not expect the guidance to have any impact on its revenue recognition policies or processes. FCX continues to review the impact of the new guidance on its financial reporting and disclosures.
In March 2016, FASB issued an ASU that simplifies various aspects of the accounting for share-based payment transactions, including the income tax consequences, statutory tax withholding requirements, an accounting policy election for forfeitures and the classification on the statement of cash flows. FCX adopted this ASU effective January 1, 2017, and adoption did not have a material impact on its financial statements.
In March 2017, FASB issued an ASU that changes how entities with a defined benefit pension or other postretirement benefit plans present net periodic benefit cost in the income statement. This ASU requires the service cost component of net periodic benefit cost to be presented in the same income statement line item or items as other compensation costs for those employees who are receiving the retirement benefit. In addition, only the service cost component is eligible for capitalization when applicable (i.e., as a cost of inventory or an internally constructed asset). The other components of net periodic benefit cost are required to be presented separately from the service cost component and outside of operating income. These other components of net periodic benefit cost are not eligible for capitalization, and the income statement line item or items must be disclosed. For public entities, this ASU is effective for annual periods beginning after December 15, 2017, and interim reporting periods within that reporting period. Early adoption is permitted. FCX will adopt this ASU on January 1, 2018, and does not expect it to have a material impact on its presentation of the statements of operations.
NOTE 13. SUBSEQUENT EVENTS
FCX evaluated events after September 30, 2017, and through the date the consolidated financial statements were issued, and determined any events or transactions occurring during this period that would require recognition or disclosure are appropriately addressed in these consolidated financial statements.
REVIEW REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OFTo the Board of Directors and Stockholders of
FREEPORT-McMoRan INC.Freeport-McMoRan Inc.
Results of Review of Interim Financial Statements
We have reviewed the accompanying consolidated balance sheet of Freeport-McMoRan Inc. (the Company) as of SeptemberJune 30, 2017, and2022, the related consolidated statements of operations andincome, comprehensive income, (loss)and equity for the three- and nine-monthsix-month periods ended SeptemberJune 30, 20172022 and 2016,2021, the related consolidated statements of cash flows for the nine-monthsix-month periods ended SeptemberJune 30, 20172022 and 2016,2021, and the related notes (collectively referred to as the “consolidated interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated statement of equity for the nine-month period ended September 30, 2017. Theseinterim financial statements are the responsibility of the Company’s management.for them to be in conformity with U.S. generally accepted accounting principles.
We conducted our reviewhave previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States). (PCAOB), the consolidated balance sheet of the Company as of December 31, 2021, the related consolidated statements of operations, comprehensive income (loss), equity and cash flows for the year then ended, and the related notes (not presented herein); and in our report dated February 15, 2022, we expressed an unqualified audit opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2021, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
Basis for Review Results
These financial statements are the responsibility of the Company's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial informationstatements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States),PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Freeport-McMoRan Inc. as of December 31, 2016, and the related consolidated statements of operations, comprehensive loss, cash flows and equity for the year then ended (not presented herein) and we expressed an unqualified audit opinion on those consolidated financial statements in our report dated February 24, 2017. In our opinion, the accompanying consolidated balance sheet of Freeport-McMoRan Inc. as of December 31, 2016, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
/s/ ERNSTErnst & YOUNGYoung LLP
Phoenix, Arizona
November 7, 2017August 5, 2022
| |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.
In Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A), “we,” “us” and “our” refer to Freeport-McMoRan Inc. (FCX) and its consolidated subsidiaries. You should read this discussion in conjunction with our consolidated financial statements, the related Management’s Discussion and Analysis of Financial Condition and Results of OperationsMD&A and the discussion of our Business and Properties in our annual report on Form 10-K for the year ended December 31, 2016,2021 (2021 Form 10-K), filed with the United States (U.S.) Securities and Exchange Commission (SEC). 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.Statements (Unaudited). Throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations,MD&A, all references to earningsincome or losses per share are on a diluted basis. Additionally, in accordance with accounting guidelines, TF Holdings Limited (TFHL), through which we held a controlling interest in the Tenke Fungurume (Tenke) mine until it was sold on November 16, 2016, is reported as a discontinued operation for all periods presented.
OVERVIEW
We are a leading international mining company with headquarters in Phoenix, Arizona. We operate large, long-lived, geographically diverse assets with significant proven and probable mineral reserves of copper, gold and molybdenum. We are one of the world’s largest publicly traded copper producer.producers. Our portfolio of assets includes the Grasberg minerals district in Indonesia, one of the world’s largest copper and gold deposits; and significant mining operations in the Americas,North America and South America, including the large-scale Morenci minerals district in North AmericaArizona and the Cerro Verde operation in South America.Peru.
Our results for the first six months of 2022 reflect solid operating results, with strong margins and cash flow generation, despite the decline in copper prices that began in second-quarter 2022. We believe the actions we have taken in recent years to build a strong balance sheet, successfully expand low-cost operations, and maintain flexible growth options while maintaining sufficient liquidity will allow us to continue to execute our business plans in a prudent manner, despite current economic uncertainty, while preserving substantial future asset values. While we recognize the near-term volatility in our markets, we are optimistic about our portfolio of assets, our strong management and operating teams, and the long-term prospects for the copper markets we serve.
The London Metal Exchange (LME) copper settlement price averaged $4.43 per pound for the first six months of 2022 and reached a record high of $4.87 per pound in March 2022, supported by copper's increasingly important role in decarbonization technologies and limited mine supply. Beginning in second-quarter 2022, a series of macro-economic factors (concerns about the global economy, higher U.S. interest rates and currency exchange rates among other factors) led to a precipitous decline in copper prices. The LME copper settlement price declined from $4.69 per pound at March 31, 2022, to $3.74 per pound at June 30, 2022, and was $$3.54 per pound on July 29, 2022. Physical market fundamentals remain tight as evidenced by low levels of global exchange stocks. Our global customer base reports healthy demand for copper. We believe the outlook for copper fundamentals in the medium- and long-term remain favorable, with studies indicating that demand for copper may double in 15 years based on the global movement towards decarbonization. We also believe substantial new mine supply development will be required to meet the goals of the global energy transition, and current prices for copper are insufficient to support new mine supply development, which is expected to add to future supply deficits.
Our management team and global organization have substantial experience and success in executing under volatile market conditions. We believe we benefit from a diversified operations portfolio with an attractive cost structure, long-lived reserves, optionality in our project pipeline and a strong balance sheet and liquidity position.
We are closely monitoring market conditions and will adjust our operating plans to protect our liquidity and preserve our asset values, as necessary. We expect to maintain a strong balance sheet and liquidity position as we focus on building long-term value in our business, executing our operating plans safely, responsibly and efficiently, and prudently managing costs and capital expenditures.
Net income (loss) attributable to common stock totaled $280 million$0.8 billion in third-quarter 2017, $217 millionsecond-quarter 2022, compared with $1.1 billion in third-quarter 2016, $776 million for the first nine months of 2017second-quarter 2021, primarily reflecting lower copper prices and $(4.4)unfavorable adjustments to provisionally priced copper sales, partly offset by higher copper and gold sales volumes. Net income attributable to common stock totaled $2.4 billion for the first ninesix months of 2016. The 2017 periods,2022, compared with $1.8 billion for the 2016 periods, benefited fromfirst six months of 2021, primarily reflecting higher copper prices and higher gold sales volumes, partly offset by a higher provision for income taxes and lower copper sales volumes and higher tax expense.prices. The 2017results for the 2022 periods, compared with the 2021 periods, also include a net charge of $188 million for accruals related to Peruvian government claims for disputed royalties (refer to “Operations – South America Mining” for further discussion). The first nine months of 2016 included significant charges for the impairment of oil and gas propertiesreflect increased energy and other oil and gas charges for drillship settlements/idle rig costs, inventory adjustments, asset impairment and restructuring, partly offset by net gains on sales of assets.input costs. Refer to “Consolidated Results” for further discussion.
At SeptemberJune 30, 2017,2022, we had $5.0consolidated debt of $11.1 billion inand consolidated cash and cash equivalents of $9.5 billion, resulting in net debt of $1.6 billion ($1.0 billion excluding net debt for the Indonesia smelter projects). Refer to “Net Debt” for reconciliations of consolidated debt and $14.8consolidated cash and cash equivalents to net debt.
At June 30, 2022, we had $3.5 billion in total debt. We had no borrowings and $3.5 billion availableof availability under our revolving credit facility. facility, and PT-FI and Cerro Verde have $1.3 billion and $350 million, respectively, of availability under their revolving credit facilities.
Refer to Note 6 for further discussion of debt.
We continue to manage production, exploration5 and administrative costs“Capital Resources and capital spending and, subject to commodity prices and operational results, expect to generate operating cash flows in excess of capital expenditures for the years 2017 and 2018.
We believe that we have a high-quality portfolio of long-lived copper assets positioned to generate long-term value. We are pursuing opportunities to enhance our mines’ net present values, and we continue to advance studies for future development of our copper resources, the timing of which will be dependent on market conditions.
In August 2017, we reached an understanding with the Indonesian government on a framework that would resolve PT Freeport Indonesia’s (PT-FI) long-term operating rights. This framework includes (i) conversion from the Contract of Work (COW) to a new operating license (IUPK) providing PT-FI with long-term operating rights through 2041, (ii) Indonesian government certainty of fiscal and legal terms during the term of the IUPK, (iii) PT-FI commitment to construct a new smelter in Indonesia within five years of reaching a definitive agreement, and (iv) divestment of 51 percent of the project area interests to Indonesian participants at fair market value structured so that we retain control over operations and governance of PT-FI.
The framework requires documentation and execution of a definitive agreement, which must be approved by our Board of Directors (Board) and joint venture partner Rio Tinto. The parties continue to negotiate to reach agreement on important aspects of implementation of the framework, including the timing and process of divestment, governance matters, and the determination of fair market value, and to complete documentation on a comprehensive agreement for PT-FI’s operations through 2041. The parties have expressed a mutual objective of
completing the negotiations and documentation during 2017. In October 2017, the Indonesian government extended PT-FI’s export rights to December 31, 2017, while negotiations to reach and document a comprehensive long-term definitive agreement based on the agreed framework continue. Until a definitive agreement is reached, PT-FI has reserved all rights under its COW, including pursuing arbitration under the dispute resolution provisions. Refer to “Operations – Indonesia Mining”Liquidity” for further discussion.
OUTLOOK
We viewDespite uncertain market conditions in the near-term, we continue to believe the medium- and long-term outlook for our business positively,is positive, supported by limitations on supplies of copper and by the expected requirements for copper in the world’s economy. Our financial results vary as a result of fluctuations in market prices primarily for copper, gold and, to a lesser extent, molybdenum, as well as other factors. World market prices for these commodities have fluctuated historically fluctuated and are affected by numerous factors beyond our control. Copper prices, in particular, experienced a significant drop beginning in second-quarter 2022. Refer to “Markets” below and “Risk Factors” in Part I, Item 1A. of our 2021 Form 10-K for further discussion. Because we cannot control the priceprices of our products, the key measures that management focuses on in operating our business are sales volumes, unit net cash costs, operating cash flowflows and capital expenditures.
Refer to “Operations – Indonesia Mining” for further discussion of Indonesia regulatory matters, which could have a significant impact on future results.
Consolidated Sales Volumes
Following are our projected consolidated sales volumes for the year 2017:
| | | | | | | | | | | |
Copper (millions of recoverable pounds): | | | | | |
North America copper mines | 1,505 | | | | | |
South America mining | 1,160 | | | | | |
Indonesia mining | 1,549 | | | | | |
Total | 4,214 | | | | | |
| | | | | |
CopperGold (millions of recoverable pounds):ounces)
| 1.7 | | | | | |
North America copper mines | 1,470 |
| |
South America mining | 1,230 |
| |
Indonesia mining | 1,010 |
| |
Total | 3,710 |
| |
| | |
Gold (thousands of recoverable ounces)
| 1,600 |
| |
Molybdenum (millions of recoverable pounds) | 9480 |
| a |
| | |
a. | Projected molybdenum sales include 34 million pounds produced by our Molybdenum mines and 60 million pounds produced by our North America and South America copper mines. | | | | |
a.Projected molybdenum sales include 30 million pounds produced by our Molybdenum mines and 50 million pounds produced by our North America and South America copper mines.
Consolidated sales volumes for fourth-quarter 2017in third-quarter 2022 are expected to approximate 1.0 billion pounds of copper, 625400 thousand ounces of gold and 2321 million pounds of molybdenum.
Projected sales volumes are dependent on operational performance, weather-related conditions, timing of shipments, and other factors. factors detailed in the “Cautionary Statement” below.
For other important factors that could cause results to differ materially from projections, refer to “Cautionary Statement.”“Risk Factors” contained in Part I, Item 1A. of our 2021 Form 10-K.
Consolidated Unit Net Cash Costs
Assuming average prices of $1,300$1,700 per ounce of gold and $8.00$16.00 per pound of molybdenum for fourth-quarter 2017the second half of 2022 and achievement of current sales volume and cost estimates, consolidated unit net cash costs (net of by-product credits) for our copper mines are expected to average $1.19$1.50 per pound of copper for the year 2017.2022 (including $1.67 per pound of copper in third-quarter 2022). The increase from previous estimates primarily reflects lower by-product credits caused by lower projected gold and molybdenum prices. We also continue to experience significant cost inflation, principally associated with higher energy prices (which represents about 20 percent of our site operating costs) and increased costs for other consumables such as sulfuric acid, explosives and steel. The impact of price changes for fourth-quarter 2017during the second half of 2022 on consolidated unit net cash costs for the year 2022 would approximate $0.01$0.02 per pound of copper for each $50$100 per ounce change in the average price of gold and $0.005$0.01 per pound of copper for each $2$2.00 per pound change in the average price of molybdenum. Quarterly unit net cash costs vary with fluctuations in sales volumes and realized prices, primarily for gold and molybdenum. Refer to “Consolidated Results – Production and Delivery Costs” for further discussion
Consolidated Operating Cash FlowFlows
Our consolidated operating cash flows vary with sales volumes,volumes; prices realized from copper, gold and molybdenum sales,sales; production costs,costs; income taxes,taxes; other working capital changeschanges; and other factors. Based on current sales volume and cost estimates, and assuming average prices of $3.00$3.25 per pound offor copper, $1,300$1,700 per ounce offor gold, and $8.00$16.00 per pound offor molybdenum for fourth-quarter 2017,the second half of 2022, our consolidated operating cash flows are estimated to approximate $4.3$4.5 billion (net of $1.4 billion of working capital and other uses) for the year 2017 (including $0.5 billion in working capital sources and tax payments). Projected2022. Estimated consolidated operating cash flows for the year 20172022 also reflect an estimated income tax provision of $1.3$2.0 billion (refer to “Consolidated Results – Income Taxes” for further discussion of our projected income tax rate for the year 2017)2022). The impact of price changes during fourth-quarter 2017for the second half of 2022 on operating cash flows would approximate $80
$230 million for each $0.10 per pound change in the average price of copper, $20$80 million for each $50$100 per ounce change in the average price of gold and $15$50 million for each $2$2.00 per pound change in the average price of molybdenum.
Consolidated Capital Expenditures
Consolidated capitalCapital expenditures are expected to approximate $1.5$4.5 billion for the year 2017, including $0.92022 (including $1.9 billion for major mining projects and $1.4 billion for the greenfield smelter and precious metals refinery (PMR) - collectively, the Indonesia smelter projects). Projected capital expenditures for major mining projects include $1.3 billion for planned projects primarily associated with underground mine development in the Grasberg minerals district and supporting mill and power capital costs and $0.6 billion for underground development activities at Grasberg. As adiscretionary growth projects. We closely monitor market conditions and will adjust our operating plans, including capital expenditures, as necessary.
Capital expenditures for the Indonesia smelter projects are being funded with PT-FI's senior notes and its available revolving credit facility. Construction of the additional domestic smelter capacity will result in the elimination of regulatory uncertainty, PT-FI has slowed investments in its underground development projects. If PT-FI is unableexport duties, providing an offset to reach a definitive agreementthe economic cost associated with the Indonesian governmentIndonesia smelter projects. Based on its long-term mining rights, we intendcurrent development progress of additional smelting capacity, PT-FI expects export duties to reduce or defer investments significantlybe reduced from the current rate of 5 percent to 2.5 percent by the end of 2022, and eliminated in underground development projects.the second half of 2023.
MARKETS
World prices for copper, gold and molybdenum can fluctuate significantly. During the period from January 20072012 through September 2017,June 2022, the London Metal Exchange (LME) spotLME copper settlement price varied from a low of $1.26$1.96 per pound in 20082016 to a record high of $4.60$4.87 per pound in 2011;2022; the London Bullion Market Association (London) PM gold price fluctuated from a low of $608$1,049 per ounce in 20072015 to a record high of $1,895$2,067 per ounce in 2011;2020; and the Metals Week Molybdenum Dealer Oxide weekly average price ranged from a low of $4.46 per pound in 2015 to a high of $33.88$20.01 per pound in 2008.2021. Copper, gold and molybdenum prices are affected by numerous factors beyond our control as described further in “Risk Factors” contained in Part I, Item 1A. of our annual report on2021 Form 10-K for the year ended December 31, 2016.10-K.
This graph presents LME spot copper settlement prices and the combined reported stocks of copper at the LME, Commodity Exchange Inc. (COMEX), a division of the New York Mercantile Exchange (NYMEX), and the Shanghai Futures Exchange from January 20072012 through September 2017. Beginning in mid-2014,June 2022. During second-quarter 2022, LME copper prices declined because of concerns about slowing growth rates in China, a stronger U.S. dollar and a broad-based decline in commodity prices, but began to improve in fourth-quarter 2016 and into 2017. During third-quarter 2017, LME spot coppersettlement prices ranged from a low of $2.62$3.74 per pound to a high of $3.13$4.73 per pound, averaged $2.88$4.31 per pound and closedsettled at $2.94$3.74 per pound on SeptemberJune 30, 2017.2022. Beginning in June 2022, copper prices declined sharply as a result of a series of macro-economic factors, including concerns about the global economy, Chinese economic data, rising U.S. interest rates and currency exchange rates related to the strength of the U.S. dollar. The LME spot copper settlement price was $3.09$3.54 per pound on October 31, 2017.
We believe the underlying long-term fundamentals of the copper business remain positive, supported by the significant role of copper in the global economy and a challenging long-term supply environment attributable to difficulty in replacing the output of existing large mines with new production sources.July 29, 2022. Future copper prices are expectedmay continue to be volatile and are likelyexpected to be influenced by, among other things, demand from China and emerging markets, as well as economic activity, including the possibility of global recession.
We believe the weakness in current financial market sentiment is inconsistent with physical markets and longer-term fundamentals. We continue to believe future demand will be supported by copper’s role in the U.S.global transition to renewable power, electric vehicles and other industrialized countries,carbon-reduction initiatives, and continued urbanization in developing countries. The small number of approved, large-scale projects scheduled beyond those that have been announced, the timing of the development oflong lead times required to permit and build new supplies of copper and the production levels of mines and declining ore grades at existing operations continue to highlight the fundamental supply challenges for copper. The current copper smelters.price weakness is expected to add to the already significant barriers to future copper supply development.
This graph presents London PM gold prices from January 20072012 through September 2017. An improving economic outlook, stronger U.S. dollar and positive equity performance contributed to lower demand for gold since 2014.June 2022. During third-quarter 2017,second-quarter 2022, London PM gold prices ranged from a low of $1,211$1,810 per ounce to a high of $1,346$1,977 per ounce, averaged $1,278$1,871 per ounce, and closed at $1,283$1,817 per ounce on SeptemberJune 30, 2017.2022. The strength of the U.S. dollar has negatively impacted gold prices as the U.S. dollar index reached a 20-year high in June 2022. The London PM gold price was $1,270$1,753 per ounce on October 31, 2017.July 29, 2022.
This graph presents the Metals Week Molybdenum Dealer Oxide weekly average pricesprice from January 20072012 through September 2017. Molybdenum prices declined beginning in mid-2014 because of weaker demand from global steel and stainless steel producers but have rebounded slightly starting in mid-2016.June 2022. During third-quarter 2017,second-quarter 2022, the weekly average price of molybdenum ranged from a low of $7.11$17.08 per pound to a high of $8.88$19.31 per pound, averaged $8.14$18.42 per pound, and was $8.49$17.08 per pound on SeptemberJune 30, 2017.2022. During second-quarter 2022, concerns about China’s zero-COVID-19 policies, inflation and anticipated lower summer steel production prompted price weakness that has continued into July 2022. The Metals Week Molybdenum Dealer Oxide weekly average price was $8.38$15.15 per pound on October 31, 2017.July 29, 2022.
CONSOLIDATED RESULTS
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, | |
| 2022 | | 2021 | | 2022 | | 2021 | |
SUMMARY FINANCIAL DATA | (in millions, except per share amounts) | |
Revenuesa,b | $ | 5,416 | | | $ | 5,748 | | | $ | 12,019 | | | $ | 10,598 | | |
Operating incomea | $ | 1,736 | | | $ | 2,067 | |
| $ | 4,545 | | | $ | 3,599 | | |
| | | | | | | | |
| | | | | | | | |
Net income attributable to common stockc | $ | 840 | | d | $ | 1,083 | | e | $ | 2,367 | | d | $ | 1,801 | | e |
Diluted net income per share of common stock | $ | 0.57 | | | $ | 0.73 | | | $ | 1.61 | | | $ | 1.21 | | |
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| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Diluted weighted-average shares of common stock outstanding | 1,457 | | | 1,483 | | | 1,463 | | | 1,480 | | |
| | | | | | | | |
Operating cash flowsf | $ | 1,621 | | | $ | 2,395 | | | $ | 3,312 | | | $ | 3,470 | | |
Capital expenditures | $ | 863 | | | $ | 433 | | | $ | 1,586 | | | $ | 803 | | |
At June 30: | | | | | | | | |
Cash and cash equivalents | $ | 9,492 | | | $ | 6,313 | | | $ | 9,492 | | | $ | 6,313 | | |
Total debt, including current portion | $ | 11,092 | | | $ | 9,695 | | | $ | 11,092 | | | $ | 9,695 | | |
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|
| | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, | |
| 2017 | | 2016 | | 2017 | | 2016 | |
SUMMARY FINANCIAL DATA | (in millions, except per share amounts) | |
Revenuesa,b | $ | 4,310 |
| | $ | 3,877 |
| | $ | 11,362 |
| | $ | 10,453 |
| |
Operating income (loss)a,c,d,e,f | $ | 917 |
| g | $ | 359 |
| h | $ | 2,166 |
| g | $ | (3,495 | ) | h |
Net income (loss) from continuing operationsi,j,k | $ | 242 |
| | $ | 292 |
| | $ | 836 |
| | $ | (4,034 | ) | |
Net income (loss) from discontinued operationsl | $ | 3 |
| | $ | (6 | ) | | $ | 50 |
| | $ | (191 | ) | |
Net income (loss) attributable to common stock | $ | 280 |
|
| $ | 217 |
|
| $ | 776 |
| | $ | (4,446 | ) | |
Diluted net income (loss) per share of common stock: | | | | | | | | |
Continuing operations | $ | 0.19 |
| | $ | 0.18 |
| | $ | 0.50 |
| | $ | (3.27 | ) | |
Discontinued operations | — |
| | (0.02 | ) | | 0.03 |
| | (0.18 | ) | |
| $ | 0.19 |
|
| $ | 0.16 |
|
| $ | 0.53 |
| | $ | (3.45 | ) | |
Diluted weighted-average common shares outstanding | 1,454 |
| | 1,351 |
| | 1,453 |
| | 1,289 |
| |
| | | | | | | | |
Operating cash flowsm | $ | 1,189 |
| | $ | 980 |
| | $ | 3,018 |
| | $ | 2,594 |
| |
Capital expenditures | $ | 314 |
| | $ | 494 |
| | $ | 1,020 |
| | $ | 2,309 |
| |
At September 30: | | | | | | | | |
Cash and cash equivalents | $ | 4,957 |
| | $ | 1,086 |
| | $ | 4,957 |
| | $ | 1,086 |
| |
Total debt, including current portion | $ | 14,782 |
| | $ | 18,882 |
| | $ | 14,782 |
| | $ | 18,882 |
| |
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a.As further detailed ina.Refer to Note 10, following is9 for a summary of revenues and operating income (loss) by operating division (in millions):division. |
| | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, | |
Revenues | 2017 | | 2016 | | 2017 | | 2016 | |
North America copper mines | $ | 1,105 |
| | $ | 1,084 |
| | $ | 3,348 |
| | $ | 3,280 |
| |
South America mining | 1,023 |
| | 671 |
| | 2,626 |
| | 2,019 |
| |
Indonesia mining | 1,121 |
| | 986 |
| | 2,720 |
| | 2,073 |
| |
Molybdenum mines | 65 |
| | 46 |
| | 199 |
| | 136 |
| |
Rod & Refining | 1,145 |
| | 937 |
| | 3,312 |
| | 2,842 |
| |
Atlantic Copper Smelting & Refining | 555 |
| | 445 |
| | 1,413 |
| | 1,363 |
| |
Corporate, other & eliminations | (704 | ) | | (292 | ) | | (2,256 | ) | | (1,260 | ) | |
Total revenues | $ | 4,310 |
| | $ | 3,877 |
| | $ | 11,362 |
| | $ | 10,453 |
| |
| | | | | | | | |
Operating income (loss) | | | | | | | | |
North America copper mines | $ | 349 |
| | $ | 213 |
| | $ | 956 |
| | $ | 1,190 |
| |
South America mining | 128 |
| | 111 |
| | 532 |
| | 371 |
| |
Indonesia mining | 547 |
| | 374 |
| | 1,023 |
| | 501 |
| |
Molybdenum mines | (13 | ) | | (26 | ) | | (28 | ) | | (74 | ) | |
Rod & Refining | 2 |
| | 4 |
| | 6 |
| | 15 |
| |
Atlantic Copper Smelting & Refining | 11 |
| | 17 |
| | 10 |
| | 53 |
| |
Corporate, other & eliminations | (107 | ) | | (334 | ) | | (333 | ) | | (5,551 | ) | |
Total operating income (loss) | $ | 917 |
| | $ | 359 |
| | $ | 2,166 |
| | $ | (3,495 | ) | |
| |
b. | b.Includes (unfavorable) favorable (unfavorable) adjustments to provisionally priced concentrate and cathode copper sales recognized in prior periods totaling $95 million ($39 million to net income attributable to common stock or $0.03 per share) in third-quarter 2017, $(15) million ($(7) million to net income attributable to common stock or $(0.01) per share) in third-quarter 2016, $81 million ($35 million to net income attributable to common stock or $0.02 per share) for the first nine months of 2017 and $5 million ($2 million to net loss attributable to common stock or less than $0.01 per share) for the first nine months of 2016. Refer to “Revenues” for further discussion. |
| |
c. | Includes net (credits) charges to mining operations totaling $(4) million ($(4) million to net income attributable to common stock or less than $(0.01) per share) in third-quarter 2017, $40 million ($40 million to net income attributable to common stock or $0.02 per share) in third-quarter 2016, $24 million ($24 million to net income attributable to common stock or $0.02 per share) for the first nine months of 2017 and $44 million ($44 million to net loss attributable to common stock or $0.03 per share) for the first nine months of 2016, primarily for inventory adjustments and asset impairment/retirement. |
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d. | Includes net credits to oil and gas operations totaling $4 million ($4 million to net income attributable to common stock or less than $0.01 per share) in third-quarter 2017 and $8 million ($8 million to net income attributable to common stock or |
$0.01 per share) for the first nine months of 2017, primarily related to drillship settlements,prior period provisionally priced concentrate and net charges of $49cathode copper sales totaling $(355) million ($49(154) million to net income attributable to common stock or $0.03$(0.10) per share) in third-quarter 2016 and $980second-quarter 2022, $173 million ($98066 million to net lossincome attributable to common stock or $0.76$0.05 per share) in second-quarter 2021, $65 million ($27 million to net income attributable to common stock or $0.02 per share) for the first ninesix months of 2016,2022 and $169 million ($65 million to net income attributable to common stock or $0.04 per share) for drillship settlements,the first six months of 2021. Refer to Note 6 for further discussion.
c.We defer recognizing profits on intercompany sales until final sales to third parties occur. Refer to “Operations – Smelting and Refining” for a summary of net impacts from changes in these deferrals.
d.Includes net charges totaling $14 million ($0.01 per share) in second-quarter 2022 and $52 million ($0.04 per share) for the first six months of 2022. Net charges for second-quarter 2022 were primarily associated with environmental obligations and metals inventory adjustments, partly offset by a net gain on early extinguishment of debt. Net charges for the first six months of 2022 also included the settlement of an administrative fine and an adjustment to prior-period export duties at PT-FI, and asset impairmentretirement obligation (ARO) adjustments.
e.Includes net charges totaling $56 million ($0.04 per share) in second-quarter 2021 and restructuring charges.$94 million ($0.06 per share) for the first six months of 2021, primarily associated with contested matters at PT-FI (including historical tax audits and an administrative fine levied by the Indonesia government), nonrecurring labor-related costs at Cerro Verde and adjustments to environmental obligations and AROs.
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e. | Includes a net gain on sales of assets totaling $33 million ($33 million to net income attributable to common stock or $0.02 per share) in third-quarter 2017 and $66 million ($66 million to net income attributable to common stock or $0.05 per share) for the first nine months of 2017, primarily associated with oil and gas transactions and $13 million ($13 million to net income attributable to common stock or $0.01 per share) in third quarter 2016 and $762 million ($757 million to net loss attributable to common stock or $0.59 per share) for the first nine months of 2016, primarily associated with the sales of a 13 percent undivided interest in the Morenci unincorporated joint venture and our interest in the Timok exploration project in Serbia. |
| |
f. | Includes net charges (credits) to environmental obligations and related litigation reserves totaling $64 million ($64 million to net income attributable to common stock or $0.04 per share) in third-quarter 2017, $(12) million ($(12) million to net income attributable to common stock or $(0.01) per share) in third-quarter 2016, $53 million ($53 million to net income attributable to common stock or $0.04 per share) for the first nine months of 2017 and $(11) million ($(11) million to net loss attributable to common stock or $(0.01) per share) for the first nine months of 2016. Refer to Note 9 for further discussion. |
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g. | Includes a charge of $357 million ($188 million to net income attributable to common stock or $0.13 per share) in the third-quarter and first nine months of 2017 associated with disputed Cerro Verde royalties for prior years as well as net charges of $9 million ($5 million to net income attributable to common stock or less than $0.01 per share) in third-quarter 2017 and $117 million ($62 million to net income attributable to common stock or $0.04 per share) for the first nine months of 2017 associated with workforce reductions at PT-FI. |
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h. | Includes $239 million ($239 million to net income attributable to common stock or $0.18 per share) in third-quarter 2016 and $4.3 billion ($4.3 billion to net loss attributable to common stock or $3.35 per share) for the first nine months of 2016 to reduce the carrying value of oil and gas properties pursuant to full cost accounting rules. |
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i. | Includes net gains on exchanges and early extinguishment of debt totaling $11 million ($11 million to net income attributable to common stock or $0.01 per share) in third-quarter 2017, $15 million ($15 million to net income attributable to common stock or $0.01 per share) in third-quarter 2016, $8 million ($8 million to net income attributable to common stock or $0.01 per share) for the first nine months of 2017 and $51 million ($51 million to net loss attributable to common stock or $0.04 per share) for the first nine months of 2016. |
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j. | We defer recognizing profits on intercompany sales until final sales to third parties occur. Refer to “Operations – Smelting & Refining” for a summary of net impacts from changes in these deferrals. |
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k. | Includes net tax (charges) credits of $(10) million ($(0.01) per share) in third-quarter 2017 and $21 million ($0.01 per share) for the first nine months of 2017 associated with alternative minimum tax credit carryforwards, and $332 million ($0.24 per share) in third-quarter 2016 and $290 million ($0.22 per share) for the first nine months of 2016 associated with alternative minimum tax credits, changes to valuation allowances and net operating loss carryback claims. |
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l. | Net income from discontinued operations for the third quarter and first nine months of 2017 primarily reflects adjustments to the fair value of the potential $120 million in contingent consideration related to the November 2016 sale of our interest in TFHL, which totaled $58 million at September 30, 2017, and will continue to be adjusted through December 31, 2019. Net loss from discontinued operations for the third quarter and first nine months of 2016 includes an estimated loss of $5 million (less than $0.01 per share) and $182 million ($0.14 per share), respectively, on the sale of our interest in TFHL. Refer to Note 2 for a summary of the components of net income (loss) from discontinued operations. |
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m. | Includes net working capital sources and changes in tax payments of $52 million in third-quarter 2017, $8 million in third-quarter 2016, $395 million for the first nine months of 2017 and $483 million for the first nine months of 2016. |
f.Working capital and other sources (uses) totaled $100 million in second-quarter 2022, $523 million in second-quarter 2021, $(711) million for the first six months of 2022 and $187 million for the first six months of 2021.
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| Three Months Ended June 30, | | Six Months Ended June 30, | |
| 2022 | | 2021 | | 2022 | | 2021 | |
SUMMARY OPERATING DATA | | | | | | |
Copper (millions of recoverable pounds) | | | | | | | | |
Production | 1,075 | | | 913 | | | 2,084 | | | 1,823 | | |
Sales, excluding purchases | 1,087 | | | 929 | | | 2,111 | | | 1,754 | | |
Average realized price per pound | $ | 4.03 | | | $ | 4.34 | |
| $ | 4.18 | | | $ | 4.25 | | |
Site production and delivery costs per pounda | $ | 2.09 | | | $ | 2.02 | | b | $ | 2.06 | | | $ | 1.94 | | b |
Unit net cash costs per pounda | $ | 1.41 | | | $ | 1.48 | | | $ | 1.37 | | | $ | 1.44 | | |
Gold (thousands of recoverable ounces) | | | | | | | | |
Production | 476 | | | 305 | | | 891 | | | 602 | | |
Sales, excluding purchases | 476 | | | 305 | | | 885 | | | 563 | | |
Average realized price per ounce | $ | 1,827 | | | $ | 1,794 | | | $ | 1,861 | | | $ | 1,785 | | |
Molybdenum (millions of recoverable pounds) | | | | | | | | |
Production | 23 | | | 20 | | | 44 | | | 40 | | |
Sales, excluding purchases | 20 | | | 22 | | | 39 | | | 43 | | |
Average realized price per pound | $ | 19.44 | | | $ | 13.11 | | | $ | 19.37 | | | $ | 12.38 | | |
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a.Reflects per pound weighted-average production and delivery costs and unit net cash costs (net of by-product credits) for all copper mines, before net noncash and other costs. For reconciliations of per pound unit costs (credits) by operating division to production and delivery costs applicable to sales reported in our consolidated financial statements, refer to “Product Revenues and Production Costs.” |
| | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, | |
| 2017 | | 2016a | | 2017 | | 2016a | |
SUMMARY OPERATING DATA | | | | | | |
Copper (millions of recoverable pounds) | | | | | | | | |
Production | 996 |
| | 1,093 |
| | 2,730 |
| | 3,091 |
| |
Sales, excluding purchases | 932 |
| | 1,113 |
| | 2,683 |
| | 3,100 |
| |
Average realized price per pound | $ | 2.94 |
| | $ | 2.19 |
| | $ | 2.79 |
| | $ | 2.17 |
| |
Site production and delivery costs per poundb | $ | 1.57 |
| | $ | 1.37 |
| | $ | 1.60 |
| | $ | 1.42 |
| |
Unit net cash costs per poundb | $ | 1.21 |
| | $ | 1.14 |
| | $ | 1.26 |
| | $ | 1.28 |
| |
Gold (thousands of recoverable ounces) | | | | | | | | |
Production | 418 |
| | 308 |
| | 1,010 |
| | 658 |
| |
Sales, excluding purchases | 355 |
| | 317 |
| | 969 |
| | 674 |
| |
Average realized price per ounce | $ | 1,290 |
| | $ | 1,327 |
| | $ | 1,261 |
| | $ | 1,292 |
| |
Molybdenum (millions of recoverable pounds) | | | | | | | | |
Production | 24 |
| | 19 |
| | 70 |
| | 58 |
| |
Sales, excluding purchases | 22 |
| | 16 |
| | 71 |
| | 52 |
| |
Average realized price per pound | $ | 9.22 |
| | $ | 9.14 |
| | $ | 9.18 |
| | $ | 8.36 |
| |
Oil Equivalents | | | | | | | | |
Sales volumes | | | | | | | | |
Oil (millions of barrels (MMBbls)) | 0.4 |
| | 9.1 |
| | 1.4 |
| | 26.1 |
| |
Natural gas (billion cubic feet (Bcf)) | 3.1 |
| | 13.8 |
| | 13.3 |
| | 52.2 |
| |
Natural gas liquids (MMBbls) | — |
| | 0.6 |
| | 0.2 |
| | 1.8 |
| |
Million barrels of oil equivalent (MMBOE) | 1.0 |
| | 12.0 |
| | 3.8 |
| | 36.6 |
| |
Thousand BOE (MBOE) per day | 11 |
| | 131 |
| | 14 |
| | 133 |
| |
b.Includes $0.07 per pound of copper in second-quarter 2021 and $0.04 per pound of copper for the first six months of 2021 associated with nonrecurring labor-related costs at Cerro Verde. Refer to “Operations – South America Mining” for further discussion. | |
a. | Excludes the results of the Tenke mine, which was sold in November 2016 and is reported as a discontinued operation. Copper sales from the Tenke mine totaled 118 million pounds in third-quarter 2016 and 365 million for the first nine months of 2016. |
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b. | Reflects per pound weighted-average production and delivery costs and unit net cash costs (net of by-product credits) for all copper mines, before net noncash and other costs. For reconciliations of per pound unit costs by operating division to production and delivery costs applicable to sales reported in our consolidated financial statements, refer to “Product Revenues and Production Costs.” |
Revenues
Consolidated revenues totaled $4.3$5.4 billion in third-quarter 2017 and $11.4second-quarter 2022, $5.7 billion in second-quarter 2021, $12.0 billion for the first ninesix months of 2017, compared with $3.9 billion in third-quarter 20162022 and $10.5$10.6 billion for the first ninesix months of 2016.2021. Revenues from our mining operations primarily include the sale of copper concentrate, copper cathode, copper rod, gold in concentrate and molybdenum. Revenues from our oil and gas operations, mostRefer to Note 9 for a summary of which were sold in 2016, include the sale of oil, natural gas and natural gas liquids (NGLs).product revenues.
Following is a summary of changes in our consolidated revenues between periods (in millions):
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| Three Months Ended June 30 | | Six Months Ended June 30 | |
| | | | |
Consolidated revenues - 2021 period | $ | 5,748 | | | $ | 10,598 | | |
Higher (lower) sales volumes: | | | | |
Copper | 681 | | | 1,515 | | |
Gold | 305 | | | 575 | | |
Molybdenum | (34) | | | (49) | | |
| | | | |
(Lower) higher average realized prices: | | | | |
Copper | (337) | | | (148) | | |
Gold | 16 | | | 67 | | |
Molybdenum | 121 | | | 270 | | |
Adjustments for prior period provisionally priced copper sales | (528) | | | (104) | | |
Lower Atlantic Copper revenues | (361) | | | (330) | | |
Lower revenues from purchased copper | (206) | | | (354) | | |
| | | | |
Higher treatment charges | (38) | | | (74) | | |
Higher royalties and export duties | (69) | | | (170) | | |
Other, including intercompany eliminations | 118 | | | 223 | | |
Consolidated revenues - 2022 period | $ | 5,416 | | | $ | 12,019 | | |
| | | | |
| | | | |
|
| | | | | | | |
| Three Months Ended September 30 | | Nine Months Ended September 30 |
| | | |
Revenues - 2016 period | $ | 3,877 |
| | $ | 10,453 |
|
(Lower) higher sales volumes: | | | |
Copper | (394 | ) | | (903 | ) |
Gold | 50 |
| | 381 |
|
Molybdenum | 56 |
| | 161 |
|
Oil and gas | (394 | ) | | (1,031 | ) |
Higher (lower) average realized prices: | | | |
Copper | 700 |
| | 1,664 |
|
Gold | (13 | ) | | (29 | ) |
Molybdenum | 2 |
| | 59 |
|
Net adjustments for prior period provisionally priced copper sales | 110 |
| | 76 |
|
Lower treatment charges | 38 |
| | 83 |
|
Higher revenues from purchased copper | 87 |
| | 256 |
|
Higher Atlantic Copper revenues | 110 |
| | 50 |
|
Other, including intercompany eliminations | 81 |
| | 142 |
|
Revenues - 2017 period | $ | 4,310 |
| | $ | 11,362 |
|
| | | |
Sales Volumes.Consolidated copper sales decreased to 932 million pounds in third-quarter 2017, compared with 1.1 billion pounds in third-quarter 2016, primarily reflecting lower ore grades in North America and Indonesia and the timing of shipments. Consolidated copper sales decreased to 2.7 billion pounds for the first nine months of 2017, compared with 3.1 billion pounds for the first nine months of 2016, primarily reflecting lower ore grades in North America and the impact of the May 2016 sale of an additional 13 percent interest in Morenci.
Consolidated gold sales volumes increased to 355 thousand ounces in third-quarter 2017 and 969 thousand ounces for the first nine months of 2017,2022 periods, compared with 317 thousand ounces in third-quarter 2016 and 674 thousand ounces for the first nine months of 2016,2021 periods, primarily reflecting higher ore grades in Indonesia.
Consolidated molybdenum sales volumes increased to 22 million pounds in third-quarter 2017operating rates at the Grasberg minerals district and 71 million pounds for the first nine months of 2017, compared with 16 million pounds in third-quarter 2016 and 52 million pounds for the first nine months of 2016, primarily reflecting higher demand.
Cerro Verde. Refer to “Operations” for further discussion of sales volumes at our mining operations.
Oil and gas sales volumes
Realized Prices.Our consolidated revenues can vary significantly as a result of fluctuations in the market prices of copper, gold and molybdenum. Third-quarter 2017 averageAverage realized prices in second-quarter 2022, compared with third-quarter 2016,second-quarter 2021, were 347 percent lower for copper, 2 percent higher for copper, 3 percent lower for gold and 148 percent higher for molybdenum, and average realized prices for the first ninesix months of 2017,2022, compared with the first ninesix months of 2016,2021, were 29 percent higher for copper, 2 percent lower for gold and 10copper, 4 percent higher for gold and 56 percent higher for molybdenum. Refer
Average realized copper prices include net (unfavorable) favorable adjustments to “Markets”current period provisionally priced copper sales totaling $(365) million in second-quarter 2022, $(55) million in second-quarter 2021, $(567) million for further discussion.
Provisionally Priced Copper Sales.Substantiallythe first six months of 2022 and $156 million for the first six months of 2021. As discussed in Note 6, 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 final pricing on the date of settlement. 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. Favorable
Prior Period Provisionally Priced Copper Sales.Net (unfavorable)
impacts of net favorable adjustments to prior periods’ provisionally priced copper sales from continuing operations(i.e., provisionally priced sales at March 31, 2022 and 2021, and December 31, 2021 and 2020) recorded in consolidated revenues totaled $95$(355) million in third-quarter 2017 and $81second-quarter 2022, $173 million in second-quarter 2021, $65 million for the first ninesix months of 2017, compared with $(15) million in third-quarter 20162022 and $5$169 million for the first ninesix months of 2016, primarily reflecting higher copper prices in the 2017 periods.2021. Refer to Notes 6 and 9 for a summary of total adjustments to prior period and current period provisionally priced sales.
At SeptemberJune 30, 2017,2022, we had provisionally priced copper sales at our copper mining operations totaling 338447 million pounds of copper (net of intercompany sales and noncontrolling interests) recorded at an average of $2.93$3.75 per pound, subject to final pricing over the next several months. We estimate that each $0.05 change in the price realized from the SeptemberJune 30, 2017,2022, provisional price recorded would have an approximate $11$14 million effect on our 20172022 net income attributable to common stock. The LME spot copper price was $3.09settled at $$3.54 per pound on October 31, 2017.July 29, 2022.
Treatment Charges. Revenues from our concentrate sales are recorded netAtlantic Copper Revenues.Atlantic Copper revenues totaled $433 million in second-quarter 2022 and $1.2 billion for the first six months of treatment charges.2022, compared with $794 million in second-quarter 2021 and $1.5 billion for the first six months of 2021. Lower treatment chargesrevenues in the 20172022 periods, compared with the 20162021 periods, primarily reflect lower concentrate sales volumes at North America copper mines.reflects reduced operations as a result of a scheduled major maintenance turnaround that began in second-quarter 2022.
Purchased Copper.We purchase copper cathode primarily for processing by our Rod & Refining operations. In addition to higherThe volumes of copper prices, we had higher purchased copper volumes in the 2017 periods (75purchases vary depending on cathode production from our operations and totaled 23 million pounds in third-quarter 2017 and 195 million for the first nine months of 2017, compared with 61second-quarter 2022, 68 million pounds in third-quarter 2016 and 131second-quarter 2021, 38 million pounds for the first ninesix months of 2016).
Atlantic Copper Revenues.Atlantic Copper revenues totaled $5552022 and 121 million in third-quarter 2017 and $1.4 billionpounds for the first ninesix months of 2017,2021. The decrease in revenues associated with purchased copper in the 2022 periods, compared to the 2021 periods, reflects the impact of lower purchases and copper prices.
Treatment Charges. Revenues from our concentrate sales are recorded net of treatment charges (i.e., fees paid to smelters that are generally negotiated annually), which will vary with $445 millionthe sales volumes and the price of copper. The increase in third-quarter 2016 and $1.4 billion for the first nine months of 2016. Higher revenuestreatment charges in third-quarter 2017, compared with third-quarter 2016,the 2022 periods primarily reflectreflects higher copper prices.sales volumes.
Royalties and Export Duties. Royalties are primarily on PT-FI sales and vary with the volume of metal sold and the prices of copper and gold. Higher royalties and export duties in the 2022 periods, compared to the 2021 periods, are primarily associated with increased copper and gold sales volumes. PT-FI currently pays duties on concentrate exports of 5 percent, declining to 2.5 percent when development progress for additional smelting capacity in Indonesia exceeds 30 percent, and eliminated when development progress for additional smelting capacity in Indonesia exceeds 50 percent. Based on current development progress of additional smelting capacity, PT-FI expects export duties to be reduced from the current rate of 5 percent to 2.5 percent by the end of 2022, and eliminated in the second half of 2023. Refer to “Operations – Indonesia Mining” for further discussion of the current progress on additional smelting capacity in Indonesia and to Note 9 for a summary of royalty expense and export duties.
Production and Delivery Costs
Consolidated production and delivery costs totaled $2.8$3.0 billion in third-quarter 2017, $2.5second-quarter 2022, $3.1 billion in third-quarter 2016, $7.5second-quarter 2021, $6.2 billion for the first ninesix months of 20172022 and $8.0$5.9 billion for the first ninesix months of 2016. Production2021. We continue to experience significant cost inflation, principally associated with higher energy prices (which represents approximately 20 percent of our site operating costs) and deliveryincreased costs for the third quarterother consumables such as sulfuric acid, explosives and first nine monthssteel. These higher costs were partly offset by lower costs at Atlantic Copper related to reduced operations as a result of 2017 included charges totaling $216 million at Cerro Verde associated with disputed royalties for prior years (refer to “Operations – South America Mining” for further discussion). Production and delivery costs for the first nine months of 2016 included charges totaling $942 million at oil and gas operations primarily for drillship settlements and inventory adjustments.a scheduled major maintenance turnaround that began in second-quarter 2022.
Mining Unit Site Production and Delivery Costs.Costs Per Pound. Site production and delivery costs for our copper mining operations primarily include labor, energy and commodity-based inputs, such as sulphuricsulfuric acid, explosives, steel, reagents, liners tires and explosives.tires. Consolidated unit site production and delivery costs (before net noncash and other costs) for our copper mines averaged $1.57$2.09 per pound of copper in third-quarter 2017second-quarter 2022, $2.02 per pound of copper in second-quarter 2021, $2.06 for the first six months of 2022 and $1.60$1.94 for the first six months of 2021.
Higher consolidated site production and delivery costs per pound of copper for the second quarter and first ninesix months of 2017, compared with $1.37 per pound of copper in third-quarter 2016 and $1.42 per pound of copper for the first nine months of 2016. Higher consolidated unit site production and delivery costs for the 2017 periods,2022, compared with the 2016 periods,second quarter and first six months of 2021, primarily reflect lower copper sales volumes.higher costs associated with energy, input costs (including operating supplies such as sulfuric acid, explosives and steel) and maintenance. 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.
Depreciation, Depletion and Amortization
Depreciation will vary under the unit-of-production (UOP) method as a result of changes in sales volumes and the related UOP rates at our individual mines.mining operations. Consolidated depreciation, depletion and amortization (DD&A) totaled $418$507 million in third-quarter 2017 and $1.3 billion for the first nine months of 2017, compared with $643second-quarter 2022, $483 million in third-quarter 2016 and $1.9 billion for the first nine months of 2016. Lower DD&A in the 2017 periods, compared with the 2016 periods, primarily reflects lower DD&A from oil and gas operations resulting from sales of significant oil and gas properties in 2016.
Impairment of Oil and Gas Properties
The review of the carrying value of our oil and gas properties for impairment under full cost accounting rules resulted in the recognition of impairment charges totaling $239 million for third-quarter 2016 and $4.3 billion for the first nine months of 2016.
Selling, General and Administrative Expenses
Consolidated selling, general and administrative expenses totaled $106 million in third-quarter 2017, $110 million in third-quarter 2016, $366second-quarter 2021, $996 million for the first ninesix months of 20172022 and $408$902 million for the first ninesix months of 2016. Selling, general2021. Higher DD&A in the 2022 periods primarily reflects higher sales volumes and administrative expenses include net oilassets placed in service associated with the ramp-up of underground mining at PT-FI.
Metals Inventory Adjustments
Metals inventory adjustments totaled $18 million for the second quarter and gas-related charges totaling $17first six months of 2022 and $1 million for the first ninesix months of 20172021. Metals inventory adjustments in the 2022 periods include net realizable value (NRV) inventory adjustments related to lower market prices for contract terminationcopper ($9 million) and $38a stockpile write-off at Cerro Verde ($9 million).
As discussed in “Markets,” there has been a sharp decline in the price of copper in recent months. The LME copper settlement price was $3.74 per pound on June 30, 2022, and $3.54 per pound on July 29, 2022. Prolonged or further declines in the prices of the commodities that we sell, particularly copper, could result in additional NRV inventory adjustments, which could be significant.
Interest Expense, Net
Consolidated interest costs (before capitalization) totaled $189 million in second-quarter 2022, $165 million in second-quarter 2021, $342 million for the first ninesix months of 2016 for restructuring.
Consolidated selling, general2022 and administrative expenses were net of capitalized general and administrative expenses at our oil and gas operations totaling $16 million in third-quarter 2016 and $66$325 million for the first ninesix months of 2016.
Mining Exploration and Research Expenses
Consolidated exploration and research expenses for our mining operations totaled $27 million in third-quarter 2017, $13 million in third-quarter 2016, $61 million for the first nine months of 2017 and $46 million for the first nine months of 2016. Our mining exploration activities are generally associated with our existing mines and focus on opportunities to expand reserves and resources to support development of additional future production capacity. Exploration results continue to indicate opportunities for significant future potential reserve additions in North America and South America. Exploration spending is expected to approximate $75 million for the year 2017.
Environmental Obligations and Shutdown Costs
Environmental obligation costs reflect net revisions to our long-term environmental obligations, which vary from period to period because of changes to environmental laws and regulations, the settlement of environmental matters and/or circumstances affecting our operations that could result in significant changes in our estimates. Shutdown costs include care-and-maintenance costs and any litigation, remediation or related expenditures associated with closed facilities or operations. Net charges (credits) for environmental obligations and shutdown costs totaled $73 million in third-quarter 2017, $(3) million in third-quarter 2016, $81 million for the first nine months of 2017 and $18 million for the first nine months of 2016. Refer to Note 9 for further discussion.
Net Gain on Sales of Assets
Net gain on sales of assets totaled $33 million in third-quarter 2017 and $66 million for the first nine months of 2017, primarily associated with oil and gas transactions. Net gain on sales of assets totaled $13 million in third-quarter 2016 and $762 million for the first nine months of 2016, primarily associated with the sales of a 13 percent undivided interest in the Morenci unincorporated joint venture and a portion of our interest in the Timok exploration project in Serbia.
Interest Expense, Net
Interest expense, net, for the third quarter and first nine months of 2017 includes $141 million associated with disputed Cerro Verde royalties (refer to Note 9 for additional discussion). Consolidated2021. Higher interest costs (before capitalization and excluding interest expense associated with disputed Cerro Verde royalties) totaled $196 millioncapitalization) in third-quarter 2017, $211 millionthe 2022 periods are primarily related to PT-FI's senior notes that were issued in third-quarter 2016, $583 million for the first nine monthsApril 2022. Nearly all of 2017 and $647 million for the first nine months of 2016. Lower interest cost for the 2017 periods, compared to the 2016 periods, reflects a decrease in totalour outstanding debt .is fixed rate.
Capitalized interest varies with the level of expenditures forqualifying assets associated with our development projects and average interest rates on our borrowings andborrowings. Capitalized interest totaled $33 million in third-quarter 2017, $24second-quarter 2022, $17 million in third-quarter 2016, $91second-quarter 2021, $59 million for the first ninesix months of 20172022 and $73$32 million for the first ninesix months of 2016.2021. The increase in capitalized interest in the 2022 periods, compared with the 2021 periods, is related to major mining projects primarily associated with underground development activities in the Grasberg minerals district and development of the greenfield smelter in Indonesia. Refer to “Capital Resources and Liquidity - Investing Activities” for discussion of capital expenditures associated with our major development projects.
Net Gain on Early Extinguishment of Debt
Net gain on extinguishment of debt totaled $8 million in the second quarter and first six months of 2022, consisting of $18 million associated with senior note purchases, partly offset by a charge of $10 million associated with the repayment of the PT-FI term loan. Refer to Note 5 for further discussion.
Income Taxes
Following is a summary of the approximate amounts used in the calculation of our consolidated income tax provision from continuing operations for the 2017 and 2016 periods (in millions, except percentages):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, | |
| 2022 | | 2021 | |
| Income (Loss)a | | Effective Tax Rate | | Income Tax (Provision) Benefit | | Income (Loss)a | | Effective Tax Rate | | Income Tax (Provision) Benefit | |
U.S.b | $ | 909 | | | 1 | % | c | $ | (5) | | | $ | 743 | | | — | % | c | $ | (3) | | |
South America | 776 | | | 39 | % | | (302) | | | 923 | | | 39 | % | | (356) | | |
Indonesia | 2,625 | | | 39 | % | | (1,020) | | | 1,759 | | | 41 | % | | (719) | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Eliminations and other | 2 | | | N/A | | (7) | | | (99) | | | N/A | | 5 | | |
Rate adjustmentd | — | | | N/A | | (61) | | | — | | | N/A | | 27 | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Consolidated FCX | $ | 4,312 | | | 32 | % | | $ | (1,395) | | | $ | 3,326 | | | 31 | % | | $ | (1,046) | | |
| | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | |
| 2017 | | 2016 | |
| Income (Loss)a | | Effective Tax Rate | | Income Tax Benefit (Provision) | | Income (Loss)a | | Effective Tax Rate | | Income Tax Benefit (Provision) | |
U.S. | $ | 66 |
| | (40)% | | $ | 27 |
| b | $ | (616 | ) | | 47% | | $ | 292 |
| c |
South America | 709 |
| | 42% | | (296 | ) | | 290 |
| | 39% | | (114 | ) | |
Indonesia | 1,035 |
| | 42% | | (435 | ) | | 544 |
| | 39% | | (212 | ) | |
Cerro Verde royalty dispute | (357 | ) | | N/A | | (2 | ) | d | — |
| | N/A | | — |
| |
Impairment of oil and gas properties | — |
| | N/A | | — |
| | (4,317 | ) | | 38% | | 1,632 |
| |
Valuation allowance, net | — |
| | N/A | | — |
| | — |
| | N/A | | (1,632 | ) | e |
Eliminations and other | 124 |
| | N/A | | (38 | ) | | 135 |
| | N/A | | (46 | ) | |
Rate adjustmentf | — |
| | N/A | | (3 | ) | | — |
| | N/A | | 1 |
| |
Consolidated FCX | $ | 1,577 |
| | 47% | g | $ | (747 | ) | | $ | (3,964 | ) | | (2)% | | $ | (79 | ) | |
| |
a. | Represents income (loss) from continuing operations by geographic location before income taxes and equity in affiliated companies’ net earnings. |
| |
b. | Includes net tax credits of $21 million associated with alternative minimum tax credit carryforwards. |
| |
c. | Includes net tax credits of $290 million associated with alternative minimum tax credits, changes to valuation allowances and net operating loss carryback claims. |
| |
d. | Includes tax charges of $127 million for disputed royalties and other related mining taxes for the period October 2011 through the year 2013 (when royalties were determined based on operating income), mostly offset by a tax benefit of $125 million associated with disputed royalties and other related mining taxes for the period December 2006 through the year 2013. |
| |
e. | As a result of the impairment to U.S. oil and gas properties, we recorded tax charges to establish valuation allowances against U.S. federal and state deferred tax assets that will not generate a future benefit. |
| |
f. | In accordance with applicable accounting rules, we adjust our interim provision for income taxes to equal our consolidated tax rate. |
| |
g. | The consolidated effective income tax rate is a function of the combined effective tax rates for the jurisdictions in which we operate. Accordingly, variations in the relative proportions of jurisdictional income result in fluctuations to our consolidated effective income tax rate. Assuming achievement of current sales volume and cost estimates and average prices of $3.00 per pound for copper, $1,300 per ounce for gold and $8.00 per pound for molybdenum for fourth-quarter 2017, we estimate our consolidated effective tax rate related to continuing operations for the year 2017 will approximate 45 percent and would decrease with higher prices. |
a.Represents income before income taxes and equity in affiliated companies’ net earnings.
Net Income (Loss) from Discontinued Operationsb.In addition to our North America mining operations, the U.S. jurisdiction reflects corporate-level expenses, which include interest expense associated with senior notes, general and administrative expenses, and environmental obligations and shutdown costs.
In November 2016, we completed the sale of our interest in TFHL, through which we had an effective 56 percent interest in the Tenke copper and cobalt concessions in the Democratic Republic of Congo. c.Includes valuation allowance release on prior year unbenefited net operating losses.
d.In accordance with applicable accounting guidelines,rules, we adjust our interim provision for income taxes equal to our consolidated tax rate.
Assuming achievement of current sales volume and cost estimates and average prices of $3.25 per pound for copper, $1,700 per ounce for gold and $16.00 per pound for molybdenum for the resultssecond half of TFHL have been reported as discontinued operations2022, we estimate our consolidated effective tax rate for all periods presented. Net income from discontinued operations totaled $3 millionthe year 2022 would approximate 34 percent (which would result in a 47 percent effective tax rate in third-quarter 2017 and $50 million2022). The consolidated effective tax rate would decrease with higher prices - for example, we estimate that an increase in the average price of copper to $3.50 per pound for the first nine monthssecond half of 2017, which primarily reflected adjustments to2022 would result in an estimated effective tax rate of approximately 33 percent for the fair value of the potential $120 million contingent consideration related to the sale, which totaled $58 million at September 30, 2017, and will continue to be adjusted through December 31, 2019. Net loss from discontinued operations of $6 millionyear 2022 (which would result in a 38 percent effective tax rate in third-quarter 20162022). Changes in projected sales volumes and $191 millionaverage prices during 2022 would incur tax impacts at estimated effective rates of 39 percent for Peru, 38 percent for Indonesia and 0 percent for the first nine months of 2016 include an estimated loss on disposal of $5 million for third-quarter 2016 and $182 million for the first nine months of 2016. Refer to Note 2 for a summary of the components of net income (loss) from discontinued operations.U.S.
OPERATIONS
Responsible Production
2021 Annual Report on Sustainability. In April 2022, we published our 2021 Annual Report on Sustainability, which is available on our website at fcx.com/sustainability. We have a long history of environmental, social and governance (ESG) programs, and we are focused on leading as a responsible copper producer.
The Copper Mark. We are committed to validating all of our copper producing sites with the Copper Mark, a comprehensive assurance framework designed to demonstrate the copper industry's responsible production practices. To achieve the Copper Mark, each site is required to complete an external assurance process to assess conformance with 32 ESG requirements. During second-quarter 2022, Safford and Sierrita were awarded the Copper Mark. To date, we have achieved the Copper Mark at all 11 of our eligible copper producing sites in North America, South America and Europe, and PT-FI has signed a letter of commitment and initiated the validation process.
Leaching Innovation Initiatives
We are advancing efforts to improve copper recovery from all ore types using leach processes. Several initiatives ongoing across our North America and South America operations incorporate new applications, technologies and data analytics. We believe these leach innovation initiatives provide potential opportunities to produce incremental copper from our large existing leach stockpiles and lower-grade material currently classified as waste. Initial results support the potential for incremental low-cost additions to our production and reserve profile.
Feasibility and Optimization Studies
We are engaged in various studies associated with potential future expansion projects primarily in North America and South America. The costs for these studies are charged to production and delivery costs as incurred and totaled $31 million in second-quarter 2022, $11 million in second-quarter 2021, $50 million for the first six months of 2022 and $16 million for the first six months of 2021. We estimate the costs of these studies will approximate $180 million for the year 2022 (including approximately $60 million in third-quarter 2022), compared with approximately $60 million for the year 2021, subject to market conditions and other factors.
North America Copper Mines
We operate seven open-pit copper mines in North America – Morenci, Bagdad, Safford (including Lone Star), Sierrita and Miami in Arizona, and Chino and Tyrone in New Mexico. All of the North America mining operations are wholly owned, except for Morenci.
We record our 72 percent undivided joint venture interest in Morenci using the proportionate consolidation method. On May 31, 2016, we completed the sale of an additional 13 percent undivided interest in Morenci. As a result of the transaction, our undivided interest in Morenci was prospectively reduced from 85 percent to 72 percent.
The North America copper mines include open-pit mining, sulfide oresulfide-ore concentrating, leaching and solution extraction/electrowinning (SX/EW) operations. A majority of the copper produced at our North America copper mines is cast into copper rod by our Rod & Refining segment. The remainder of our North America copper salesproduction is in the form ofsold as copper cathode or copper concentrate, a portion of which is shipped to Atlantic Copper (our wholly owned smelter). Molybdenum concentrate, gold and silver are also produced by certain of our North America copper mines.mines.
Operating and Development Activities. We have significant undevelopedsubstantial reserves and resourcesfuture opportunities in North America and a portfolio of potential long-term development projects. Future investments will be undertaken based on the results of economic and technical feasibility studies, and are dependent on market conditions. We continue to study opportunities to reduce the capital intensity of our long-term development projects.U.S., primarily associated with existing mining operations.
Through exploration drilling, we have identified a significant resource at our wholly owned Lone Star project located near the Safford operation in eastern Arizona. The Safford mine is expectedincreasing its operating rates to have copperachieve targeted production through 2024. Initial production from the Lone Star oxide ores could begin in 2021 assuming an approximate three-year development period and using existing infrastructure at the adjacent Safford operation. Total preliminary capital cost estimates for development, including mine equipment and pre-production stripping, approximates $850 million. Projected production from the Lone Star oxide ores would averageof approximately 200300 million pounds of copper per year in 2023 from oxide ores (compared with an approximate 20-year mine life. Considering the long-term nature and sizeinitial design capacity of 200 million pounds per year). The oxide project at Lone Star advances the project, results could vary from these estimates. The project would also advance the potentialopportunity for development of the underlying, large-scale sulfide resources. We are also increasing exploration in the area to support metallurgical testing and mine development planning for a larger-scale district opportunity. potential significant long-term investment to build additional scale on an economically attractive basis.
We are planning an expansion to double the concentrator capacity of our Bagdad operation in northwest Arizona. We are engaging stakeholders and have obtained regulatory approvalscommenced a feasibility study, which is expected to be completed in 2023, for this project and are assessing the timing to commence pre-stripping activities. We are conducting additional drilling as we continue to evaluate longer term opportunities available from the significant sulfide potential in the Lone Star/Safford minerals district. project.
Operating Data. Following is a summary of consolidated operating data for the North America copper minesmines:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, | | | |
| | | | | | |
| 2022 | | 2021 | | 2022 | | 2021 | | | |
Operating Data, Net of Joint Venture Interests | | | | | | | | | | |
Copper (millions of recoverable pounds) | | | | | | | | | | |
Production | 382 | | | 360 | | | 736 | | | 713 | | | | |
Sales, excluding purchases | 389 | | | 389 | | | 770 | | | 697 | | | | |
Average realized price per pound | $ | 4.36 | | | $ | 4.42 | | | $ | 4.46 | | | $ | 4.19 | |
| | |
| | | | | | | | | | |
Molybdenum (millions of recoverable pounds) | | | | | | | | | | |
Productiona | 8 | | | 9 | | | 15 | | | 17 | | | | |
| | | | | | | | | | |
100% Operating Data | | | | | | | | | | |
Leach operations | | | | | | | | | | |
Leach ore placed in stockpiles (metric tons per day) | 722,900 | | | 688,000 | | | 715,800 | | | 696,500 | | | | |
Average copper ore grade (percent) | 0.29 | | | 0.30 | | | 0.29 | | | 0.29 | | | | |
Copper production (millions of recoverable pounds) | 254 | | | 265 | | | 499 | | | 527 | | | | |
| | | | | | | | | | |
Mill operations | | | | | | | | | | |
Ore milled (metric tons per day) | 306,900 | | | 264,700 | | | 299,200 | | | 266,300 | | | | |
Average ore grade (percent): | | | | | | | | | | |
Copper | 0.39 | | | 0.36 | | | 0.38 | | | 0.37 | | | | |
Molybdenum | 0.02 | | | 0.03 | | | 0.02 | | | 0.03 | | | | |
Copper recovery rate (percent) | 83.2 | | | 82.4 | | | 82.1 | | | 80.5 | | | | |
Copper production (millions of recoverable pounds) | 195 | | | 155 | | | 364 | | | 306 | | | | |
| | | | | | | | | | |
a.Refer to “Consolidated Results” for our consolidated molybdenum sales volumes, which include sales of molybdenum produced at the third quarters and first nine months of 2017 and 2016:North America copper mines.
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Operating Data, Net of Joint Venture Interests | | | | | | | |
Copper (millions of recoverable pounds) | | | | | | | |
Production | 375 |
| | 455 |
| | 1,151 |
| | 1,411 |
|
Sales, excluding purchases | 347 |
| | 458 |
| | 1,130 |
| | 1,425 |
|
Average realized price per pound | $ | 2.92 |
| | $ | 2.19 |
| | $ | 2.74 |
| | $ | 2.18 |
|
| | | | | | | |
Molybdenum (millions of recoverable pounds) | | | | | | | |
Productiona | 8 |
| | 9 |
| | 25 |
| | 25 |
|
| | | | | | | |
100% Operating Data | | | | | | | |
SX/EW operations | | | | | | | |
Leach ore placed in stockpiles (metric tons per day) | 655,600 |
| | 681,400 |
| | 681,200 |
| | 764,900 |
|
Average copper ore grade (percent) | 0.27 |
| | 0.31 |
| | 0.28 |
| | 0.32 |
|
Copper production (millions of recoverable pounds) | 280 |
| | 316 |
| | 839 |
| | 921 |
|
| | | | | | | |
Mill operations | | | | | | | |
Ore milled (metric tons per day) | 297,200 |
| | 300,500 |
| | 300,000 |
| | 299,900 |
|
Average ore grade (percent): | | | | | | | |
Copper | 0.38 |
| | 0.47 |
| | 0.40 |
| | 0.48 |
|
Molybdenum | 0.03 |
| | 0.03 |
| | 0.03 |
| | 0.03 |
|
Copper recovery rate (percent) | 86.6 |
| | 87.8 |
| | 86.6 |
| | 86.3 |
|
Copper production (millions of recoverable pounds) | 167 |
| | 216 |
| | 527 |
| | 661 |
|
| |
a. | Refer to “Consolidated Results” for our consolidated molybdenum sales volumes, which include sales of molybdenum produced at the North America copper mines. |
North America’sOur consolidated copper sales volumes of 347from North America totaled 389 million pounds in third-quarter 2017both second-quarter 2022 and 1.1 billionsecond-quarter 2021, 770 million pounds for the first ninesix months of 2017 were lower than third-quarter 2016 sales of 4582022 and 697 million pounds and 1.4 billion pounds for the first ninesix months of 2016,2021. The changes in production and sales volumes for the 2022 periods, compared with the 2021 periods, primarily reflecting lower ore grades. Additionally, third-quarter 2017 was impacted by thereflect timing of shipments.
North America copper sales are estimated to approximate 1.5 billion pounds for the year 2017, compared with 1.8 billion pounds in 2016.2022.
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. GAAPgenerally accepted accounting principles (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.
Gross Profit per Pound of Copper and Molybdenum
The following table summarizes unit net cash costs and gross profit per pound at our North America copper mines for the third quarters and first nine months of 2017 and 2016.mines. 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.
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
| Three Months Ended September 30, | |
| 2017 | | 2016 | |
| By- Product Method | | Co-Product Method | | By- Product Method | | Co-Product Method | |
| | Copper | | Molyb- denuma | | | Copper | | Molyb- denuma | |
Revenues, excluding adjustments | $ | 2.92 |
| | $ | 2.92 |
| | $ | 7.59 |
| | $ | 2.19 |
| | $ | 2.19 |
| | $ | 7.39 |
| |
| | | | | | | | | | | | |
Site production and delivery, before net noncash and other costs shown below | 1.67 |
| | 1.56 |
| | 5.58 |
| | 1.44 |
| | 1.34 |
| | 5.51 |
| |
By-product credits | (0.17 | ) | | — |
| | — |
| | (0.17 | ) | | — |
| | — |
| |
Treatment charges | 0.11 |
| | 0.11 |
| | — |
| | 0.10 |
| | 0.09 |
| | — |
| |
Unit net cash costs | 1.61 |
| | 1.67 |
| | 5.58 |
| | 1.37 |
| | 1.43 |
| | 5.51 |
| |
DD&A | 0.28 |
| | 0.27 |
| | 0.49 |
| | 0.28 |
| | 0.26 |
| | 0.70 |
| |
Noncash and other costs, net | 0.04 |
| | 0.04 |
| | 0.05 |
| | 0.06 |
| | 0.05 |
| | 0.13 |
| |
Total unit costs | 1.93 |
| | 1.98 |
| | 6.12 |
| | 1.71 |
| | 1.74 |
| | 6.34 |
| |
Revenue adjustments, primarily for pricing on prior period open sales | 0.03 |
| | 0.03 |
| | — |
| | — |
| | — |
| | — |
| |
Gross profit per pound | $ | 1.02 |
| | $ | 0.97 |
| | $ | 1.47 |
| | $ | 0.48 |
| | $ | 0.45 |
| | $ | 1.05 |
| |
| | | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | 345 |
| | 345 |
| | | | 457 |
| | 457 |
| | | |
Molybdenum sales (millions of recoverable pounds)a | | | | | 8 |
| | | | | | 9 |
| |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | |
| 2022 | | 2021 | |
| By- Product Method | | Co-Product Method | | By- Product Method | | Co-Product Method | |
| | Copper | | Molyb- denuma | | | Copper | | Molyb- denuma | |
Revenues, excluding adjustments | $ | 4.36 | | | $ | 4.36 | | | $ | 18.75 | | | $ | 4.42 | | | $ | 4.42 | | | $ | 11.75 | | |
| | | | | | | | | | | | |
Site production and delivery, before net noncash and other costs shown below | 2.50 | | | 2.30 | | | 12.42 | | | 2.14 | | | 2.03 | | | 6.86 | | |
By-product credits | (0.35) | | | — | | | — | | | (0.25) | | | — | | | — | | |
Treatment charges | 0.11 | | | 0.11 | | | — | | | 0.08 | | | 0.07 | | | — | | |
Unit net cash costs | 2.26 | | | 2.41 | | | 12.42 | | | 1.97 | | | 2.10 | | | 6.86 | | |
DD&A | 0.27 | | | 0.24 | | | 0.81 | | | 0.26 | | | 0.25 | | | 0.55 | | |
Metals inventory adjustments | 0.02 | | | 0.02 | | | 0.16 | | | — | | | — | | | — | | |
Noncash and other costs, net | 0.09 | | | 0.08 | | | 0.32 | | | 0.08 | | | 0.08 | | | 0.06 | | |
Total unit costs | 2.64 | | | 2.75 | | | 13.71 | | | 2.31 | | | 2.43 | | | 7.47 | | |
Revenue adjustments, primarily for pricing on prior period open sales | (0.10) | | | (0.10) | | | — | | | 0.02 | | | 0.02 | | | — | | |
Gross profit per pound | $ | 1.62 | | | $ | 1.51 | | | $ | 5.04 | | | $ | 2.13 | | | $ | 2.01 | | | $ | 4.28 | | |
| | | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | 389 | | | 389 | | | | | 389 | | | 389 | | | | |
Molybdenum sales (millions of recoverable pounds)a | | | | | 8 | | | | | | | 9 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, | |
| 2022 | | 2021 | |
| By- Product Method | | Co-Product Method | | By- Product Method | | Co-Product Method | |
| | Copper | | Molyb- denuma | | | Copper | | Molyb- denuma | |
Revenues, excluding adjustments | $ | 4.46 | | | $ | 4.46 | | | $ | 18.36 | | | $ | 4.19 | | | $ | 4.19 | | | $ | 11.12 | | |
| | | | | | | | | | | | |
Site production and delivery, before net noncash and other costs shown below | 2.44 | | | 2.25 | | | 11.68 | | | 2.09 | | | 1.96 | | | 6.76 | | |
By-product credits | (0.35) | | | — | | | — | | | (0.27) | | | — | | | — | | |
Treatment charges | 0.10 | | | 0.10 | | | — | | | 0.09 | | | 0.09 | | | — | | |
Unit net cash costs | 2.19 | | | 2.35 | | | 11.68 | | | 1.91 | | | 2.05 | | | 6.76 | | |
DD&A | 0.27 | | | 0.25 | | | 0.85 | | | 0.26 | | | 0.24 | | | 0.51 | | |
Metals inventory adjustments | 0.01 | | | 0.01 | | | 0.08 | | | — | | | — | | | — | | |
Noncash and other costs, net | 0.09 | | | 0.07 | | | 0.23 | | | 0.11 | | | 0.11 | | | 0.06 | | |
Total unit costs | 2.56 | | | 2.68 | | | 12.84 | | | 2.28 | | | 2.40 | | | 7.33 | | |
Revenue adjustments, primarily for pricing on prior period open sales | (0.01) | | | (0.01) | | | — | | | 0.01 | | | 0.01 | | | — | | |
Gross profit per pound | $ | 1.89 | | | $ | 1.77 | | | $ | 5.52 | | | $ | 1.92 | | | $ | 1.80 | | | $ | 3.79 | | |
| | | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | 770 | | | 770 | | | | | 697 | | | 697 | | | | |
Molybdenum sales (millions of recoverable pounds)a | | | | | 15 | | | | | | | 17 | | |
| | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
| Nine Months Ended September 30, | |
| 2017 | | 2016 | |
| By- Product Method | | Co-Product Method | | By- Product Method | | Co-Product Method | |
| | Copper | | Molyb- denuma | | | Copper | | Molyb- denuma | |
Revenues, excluding adjustments | $ | 2.74 |
| | $ | 2.74 |
| | $ | 7.57 |
| | $ | 2.18 |
| | $ | 2.18 |
| | $ | 6.24 |
| |
| | | | | | | | | | | | |
Site production and delivery, before net noncash and other costs shown below | 1.59 |
| | 1.50 |
| | 5.62 |
| | 1.41 |
| | 1.34 |
| | 4.86 |
| |
By-product credits | (0.16 | ) | | — |
| | — |
| | (0.12 | ) | | — |
| | — |
| |
Treatment charges | 0.11 |
| | 0.10 |
| | — |
| | 0.11 |
| | 0.10 |
| | — |
| |
Unit net cash costs | 1.54 |
| | 1.60 |
| | 5.62 |
| | 1.40 |
| | 1.44 |
| | 4.86 |
| |
DD&A | 0.29 |
| | 0.27 |
| | 0.56 |
| | 0.29 |
| | 0.27 |
| | 0.61 |
| |
Noncash and other costs, net | 0.06 |
| b | 0.06 |
| | 0.06 |
| | 0.05 |
| | 0.05 |
| | 0.06 |
| |
Total unit costs | 1.89 |
| | 1.93 |
| | 6.24 |
| | 1.74 |
| | 1.76 |
| | 5.53 |
| |
Revenue adjustments, primarily for pricing on prior period open sales | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| |
Gross profit per pound | $ | 0.85 |
| | $ | 0.81 |
| | $ | 1.33 |
| | $ | 0.44 |
| | $ | 0.42 |
| | $ | 0.71 |
| |
| | | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | 1,127 |
| | 1,127 |
| | | | 1,421 |
| | 1,421 |
| | | |
Molybdenum sales (millions of recoverable pounds)a | | | | | 25 |
| | | | | | 25 |
| |
| |
a. | Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing. |
| |
b. | Includes $21 million ($0.02 per pound of copper) for asset impairment charges at Morenci. |
a.Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing.
Our North America copper mines have varying cost structures because of differences in ore grades and characteristics, processing costs, by-product credits and other factors. AverageOur mining operations continue to experience significant cost inflation, principally associated with higher energy and other input costs. In addition to these higher costs, average unit net cash costs (net of by-product credits) for the North America copper mines of $1.61$2.26 per pound of copper in third-quarter2017second-quarter 2022 and $1.54$2.19 per pound for the first ninesix months of 2017 were higher than unit net cash costs of $1.372022, compared with $1.97 per pound in third-quarter2016second-quarter 2021 and $1.40$1.91 per pound for the first ninesix months of 2016, primarily reflecting lower sales volumes.2021, reflect higher operating rates, partly offset by higher by-product credits.
Because certain assets are depreciated on a straight-line basis, North America’s average unit depreciation rate may vary with asset additions and the level of copper production and sales.
Second-quarter 2022 revenue adjustments at our North America copper mines primarily reflect the impact of declining copper prices on provisionally priced copper sales, which include intercompany sales that are eliminated upon consolidation.
Average unit net cash costs (net of by-product credits) for our North America copper mines are expected to approximate $1.58$2.25 per pound of copper for the year 2017,2022, based on achievement of current sales volume and cost estimates and assuming an average molybdenum price of $8.00$16.00 per pound for fourth-quarter 2017.the second half of 2022. North America’s average unit net cash costs for the year 20172022 would change by approximately $0.007$0.02 per pound for each $2$2.00 per pound change in the average price of molybdenum.molybdenum for the second half of 2022.
South America Mining
We operate two copper mines in South America – Cerro Verde in Peru (in which we own a 53.56 percent interest) and El Abra in Chile (in which we own a 51 percent interest). These operations, which are consolidated in our financial statements.
South America mining includes open-pit mining, sulfide oresulfide-ore concentrating, leaching and SX/EW operations. Production from our South America mines is sold as copper concentrate or cathode under long-term contracts. Our South America mines also sell a portion of their copper concentrate production to Atlantic Copper. In addition to copper, the Cerro Verde mine produces molybdenum concentrate and silver.
Cerro Verde Royalty Dispute.In October 2017, the Peruvian Supreme Court issued a ruling in favor of SUNAT, Peru’s national tax authority, that the assessments of royalties for the year 2008 on ore processed by the Cerro Verde concentrator were proper under Peruvian law. As previously reported in our annual report on Form 10-K for the year ended December 31, 2016, SUNAT has assessed mining royalties on ore processed by the Cerro Verde concentrator for the period December 2006 to September 2011, which Cerro Verde has contested on the basis that its 1998 stability agreement exempts from royalties all minerals extracted from its mining concessions, irrespective of the method used for processing those minerals.
As a result of the unfavorable Peruvian Supreme Court decision on the 2008 royalty dispute, Cerro Verde recorded pre-tax charges totaling $357 million ($359 million including net tax charges and $188 million net of noncontrolling interests) in third-quarter 2017 associated with prior assessments and potential royalty and related assessments for December 2006 through the year 2013. Effective January 1, 2014, Cerro Verde entered into a new 15-year stability agreement and has been paying royalties in accordance with the new stability agreement.
Cerro Verde acted in good faith in applying the provisions of its 1998 stability agreement and continues to evaluate alternatives to defend its rights. Cerro Verde intends to seek a waiver available under Peruvian law of penalties and interest associated with this dispute and has not recorded charges for potential unpaid penalties and interest totaling $360 million ($193 million net of noncontrolling interests) at September 30, 2017, as we believe that Cerro Verde should be successful under Peruvian law in obtaining a waiver. Refer to Note 9 for additional discussion.
Operating and Development Activities. The first six months of 2022 reflected strong performance from Cerro Verde expansion project commenced operations in September 2015 and achieved capacity operating rates during first-quarter 2016. Cerro Verde’s expanded operations benefit from its large-scale, long-lived reserves and cost efficiencies. The project expanded theVerde's concentrator facilities, from 120,000including achievement of a quarterly record milling average of 427,100 metric tons of ore per day during second-quarter 2022. Subject to 360,000ongoing monitoring of COVID-19 protocols, milling rates at Cerro Verde are currently expected to average over 400,000 metric tons of ore per day.day for the second half of 2022.
We continue to evaluate a major expansionOperating rates at El Abra have returned to process additional sulfide materialpre-COVID-19 levels and increased mining and stacking activities are expected to achieve higher recoveries. Exploration results atresult in an approximate 30 percent increase in El Abra indicate a significantcopper production for the year 2022, compared with the year 2021.
El Abra's large sulfide resource which could potentially supportsupports a potential major mill project similar to facilities recentlythe large-scale concentrator constructed at Cerro Verde. Future investmentsVerde in 2015. Technical and economic studies continue to be evaluated to determine the optimal scope and timing for the sulfide project. We are considering options to invest in water infrastructure to provide options to extend existing operations, while we continue to monitor potential changes in Chile’s regulatory and fiscal matters. We will dependdefer major investment decisions pending clarity on technical studies, which are being advanced, economic factorsChile’s regulatory and market conditions.fiscal matters.
Operating Data. Following is a summary of consolidated operating data for our South America mining operationsmining:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, | |
| | | | |
| 2022 | | 2021 | | 2022 | | 2021 | |
Copper (millions of recoverable pounds) | | | | | | | | |
Production | 286 | | | 245 | | | 560 | | | 504 | | |
Sales | 288 | | | 230 | | | 552 | | | 489 | | |
Average realized price per pound | $ | 3.83 | | | $ | 4.31 | | | $ | 4.00 | | | $ | 4.28 | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Molybdenum (millions of recoverable pounds) | | | | | | | | |
Productiona | 7 | | | 4 | | | 14 | | | 9 | | |
| | | | | | | | |
Leach operations | | | | | | | | |
Leach ore placed in stockpiles (metric tons per day) | 157,700 | | | 190,200 | | | 148,800 | | | 172,100 | | |
Average copper ore grade (percent) | 0.37 | | | 0.33 | | | 0.36 | | | 0.34 | | |
Copper production (millions of recoverable pounds) | 71 | | | 65 | | | 132 | | | 126 | | |
| | | | | | | | |
Mill operations | | | | | | | | |
Ore milled (metric tons per day) | 427,100 | | | 374,100 | | | 410,800 | | | 382,100 | | |
Average ore grade (percent): | | | | | | | | |
Copper | 0.31 | | | 0.29 | | | 0.32 | | | 0.30 | | |
Molybdenum | 0.01 | | | 0.01 | | | 0.02 | | | 0.01 | | |
| | | | | | | | |
Copper recovery rate (percent) | 84.4 | | | 85.2 | | | 85.5 | | | 86.4 | | |
Copper production (millions of recoverable pounds) | 215 | | | 179 | | | 428 | | | 377 | | |
a.Refer to “Consolidated Results” for the third quarters and first nine monthsour consolidated molybdenum sales volumes, which include sales of 2017 and 2016:molybdenum produced at Cerro Verde.
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Copper (millions of recoverable pounds) | | | | | | | |
Production | 328 |
| | 317 |
| | 932 |
| | 986 |
|
Sales | 327 |
| | 323 |
| | 923 |
| | 973 |
|
Average realized price per pound | $ | 2.95 |
| | $ | 2.19 |
| | $ | 2.82 |
| | $ | 2.17 |
|
| | | | | | | |
Molybdenum (millions of recoverable pounds) | | | | | | | |
Productiona | 8 |
| | 5 |
| | 21 |
| | 14 |
|
| | | | | | | |
SX/EW operations | | | | | | | |
Leach ore placed in stockpiles (metric tons per day) | 180,400 |
| | 163,000 |
| | 153,100 |
| | 158,100 |
|
Average copper ore grade (percent) | 0.36 |
| | 0.41 |
| | 0.37 |
| | 0.41 |
|
Copper production (millions of recoverable pounds) | 65 |
| | 78 |
| | 190 |
| | 250 |
|
| | | | | | | |
Mill operations | | | | | | | |
Ore milled (metric tons per day) | 379,200 |
| | 355,300 |
| | 355,400 |
| | 348,900 |
|
Average ore grade (percent): | | | | | | | |
Copper | 0.44 |
| | 0.41 |
| | 0.44 |
| | 0.42 |
|
Molybdenum | 0.02 |
| | 0.02 |
| | 0.02 |
| | 0.02 |
|
Copper recovery rate (percent) | 80.9 |
| | 84.4 |
| | 82.7 |
| | 86.1 |
|
Copper production (millions of recoverable pounds) | 263 |
| | 239 |
| | 742 |
| | 736 |
|
| |
a. | Refer to “Consolidated Results” for our consolidated molybdenum sales volumes, which include sales of molybdenum produced at Cerro Verde. |
South America’sOur consolidated copper sales volumes of 327from South America totaled 288 million pounds in third-quarter 2017 approximated third-quarter2016 sales of 323second-quarter 2022, 230 million pounds. South America’s lower consolidated copper sales volumes of 923pounds in second-quarter 2021, 552 million pounds for the first ninesix months of 2017, compared with 9732022 and 489 million pounds for the first ninesix months of 2016,2021. Higher copper sales volumes in the 2022 periods, compared with the 2021 periods, primarily reflect thehigher mining and milling rates at Cerro Verde operation being unfavorably impacted by unusually high rainfall and a 21-day labor strike during first-quarter 2017.Verde.
Copper sales from South America minesmining are expected to approximate 1.2 billion pounds of copper for the year 2017, compared with 1.3 billion pounds of copper in 2016.2022.
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 metals 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 table summarizes unit net cash costs and gross profit per pound of copper at theour South America mining operations for the third quarters and first nine months of 2017 and 2016. Unit net cash costs per pound of copper are reflected under the by-product and co-product methods as the South America mining operations also had sales of molybdenum and silver.operations. 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. |
| | | | | | | | | | | | | | | | |
| | | | | | | | |
| Three Months Ended September 30, | |
| 2017 | | 2016 | |
| By-Product Method | | Co-Product Method | | By-Product Method | | Co-Product Method | |
Revenues, excluding adjustments | $ | 2.95 |
| | $ | 2.95 |
| | $ | 2.19 |
| | $ | 2.19 |
| |
| | | | | | | | |
Site production and delivery, before net noncash and other costs shown below | 1.60 |
| | 1.50 |
| | 1.27 |
| | 1.20 |
| |
By-product credits | (0.19 | ) | | — |
| | (0.12 | ) | | — |
| |
Treatment charges | 0.22 |
| | 0.22 |
| | 0.24 |
| | 0.24 |
| |
Royalty on metals | 0.01 |
| | 0.01 |
| | 0.01 |
| | — |
| |
Unit net cash costs | 1.64 |
| | 1.73 |
| | 1.40 |
| | 1.44 |
| |
DD&A | 0.41 |
| | 0.38 |
| | 0.41 |
| | 0.39 |
| |
Noncash and other costs, net | 0.69 |
| a | 0.63 |
| | 0.01 |
| | 0.01 |
| |
Total unit costs | 2.74 |
| | 2.74 |
| | 1.82 |
| | 1.84 |
| |
Revenue adjustments, primarily for pricing on prior period open sales | 0.18 |
| | 0.18 |
| | (0.02 | ) | | (0.02 | ) | |
Gross profit per pound | $ | 0.39 |
| | $ | 0.39 |
| | $ | 0.35 |
| | $ | 0.33 |
| |
| | | | | | | | |
Copper sales (millions of recoverable pounds) | 327 |
| | 327 |
| | 323 |
| | 323 |
| |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | |
| 2022 | | 2021 | |
| By-Product Method | | Co-Product Method | | By-Product Method | | Co-Product Method | |
Revenues, excluding adjustments | $ | 3.83 | | | $ | 3.83 | | | $ | 4.31 | | | $ | 4.31 | | |
| | | | | | | | |
Site production and delivery, before net noncash and other costs shown below | 2.48 | | | 2.29 | | | 2.48 | | a | 2.30 | | |
By-product credits | (0.35) | | | — | | | (0.31) | | | — | | |
Treatment charges | 0.15 | | | 0.15 | | | 0.13 | | | 0.13 | | |
Royalty on metals | 0.01 | | | 0.01 | | | 0.01 | | | 0.01 | | |
Unit net cash costs | 2.29 | | | 2.45 | | | 2.31 | | | 2.44 | | |
DD&A | 0.35 | | | 0.32 | | | 0.40 | | | 0.37 | | |
Metals inventory adjustments | 0.04 | | b | 0.03 | | | — | | | — | | |
Noncash and other costs, net | 0.06 | | | 0.06 | | | 0.08 | | | 0.07 | | |
Total unit costs | 2.74 | | | 2.86 | | | 2.79 | | | 2.88 | | |
Revenue adjustments, primarily for pricing on prior period open sales | (0.53) | | | (0.53) | | | 0.38 | | | 0.38 | | |
Gross profit per pound | $ | 0.56 | | | $ | 0.44 | | | $ | 1.90 | | | $ | 1.81 | | |
| | | | | | | | |
Copper sales (millions of recoverable pounds) | 288 | | | 288 | | | 230 | | | 230 | | |
|
| | | | | | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2017 | | 2016 |
| By-Product Method | | Co-Product Method | | By-Product Method | | Co-Product Method |
Revenues, excluding adjustments | $ | 2.82 |
| | $ | 2.82 |
| | $ | 2.17 |
| | $ | 2.17 |
|
| | | | | | | |
Site production and delivery, before net noncash and other costs shown below | 1.55 |
| | 1.45 |
| | 1.23 |
| | 1.17 |
|
By-product credits | (0.17 | ) | | — |
| | (0.10 | ) | | — |
|
Treatment charges | 0.22 |
| | 0.22 |
| | 0.24 |
| | 0.24 |
|
Royalty on metals | 0.01 |
| | 0.01 |
| | — |
| | — |
|
Unit net cash costs | 1.61 |
| | 1.68 |
| | 1.37 |
| | 1.41 |
|
DD&A | 0.42 |
| | 0.40 |
| | 0.41 |
| | 0.39 |
|
Noncash and other costs, net | 0.25 |
| a | 0.23 |
| | 0.02 |
| | 0.02 |
|
Total unit costs | 2.28 |
| | 2.31 |
| | 1.80 |
| | 1.82 |
|
Revenue adjustments, primarily for pricing on prior period open sales | 0.04 |
| | 0.04 |
| | 0.01 |
| | 0.01 |
|
Gross profit per pound | $ | 0.58 |
| | $ | 0.55 |
| | $ | 0.38 |
| | $ | 0.36 |
|
| | | | |
| |
|
Copper sales (millions of recoverable pounds) | 923 |
| | 923 |
| | 973 |
| | 973 |
|
| |
a. | Includes charges totaling $216 million ($0.66 per pound of copper in third-quarter 2017 and $0.23 per pound of copper for the first nine months of 2017) associated with disputed Cerro Verde royalties for prior years. |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, | |
| 2022 | | 2021 | |
| By-Product Method | | Co-Product Method | | By-Product Method | | Co-Product Method | |
Revenues, excluding adjustments | $ | 4.00 | | | $ | 4.00 | | | $ | 4.28 | | | $ | 4.28 | | |
| | | | | | | | |
Site production and delivery, before net noncash and other costs shown below | 2.45 | | | 2.26 | | | 2.23 | | a | 2.09 | | |
By-product credits | (0.38) | | | — | | | (0.26) | | | — | | |
Treatment charges | 0.15 | | | 0.15 | | | 0.13 | | | 0.13 | | |
Royalty on metals | 0.01 | | | 0.01 | | | 0.01 | | | 0.01 | | |
Unit net cash costs | 2.23 | | | 2.42 | | | 2.11 | | | 2.23 | | |
DD&A | 0.36 | | | 0.32 | | | 0.40 | | | 0.37 | | |
Metals inventory adjustments | 0.02 | | b | 0.02 | | | — | | | — | | |
Noncash and other costs, net | 0.06 | | | 0.06 | | | 0.06 | | | 0.05 | | |
Total unit costs | 2.67 | | | 2.82 | | | 2.57 | | | 2.65 | | |
Revenue adjustments, primarily for pricing on prior period open sales | 0.06 | | | 0.06 | | | 0.20 | | | 0.20 | | |
Gross profit per pound | $ | 1.39 | | | $ | 1.24 | | | $ | 1.91 | | | $ | 1.83 | | |
| | | | | | | | |
Copper sales (millions of recoverable pounds) | 552 | | | 552 | | | 489 | | | 489 | | |
| | | | | | | | |
a.Includes $0.30 per pound of copper in second-quarter 2021 and $0.14 per pound of copper for the first six months of 2021 associated with nonrecurring labor-related costs at Cerro Verde.
b.Primarily reflects a stockpile write-off at Cerro Verde.
Our South America mines have varying cost structures because of differences in ore grades and characteristics, processing costs, by-product credits and other factors. AverageOur mining operations continue to experience significant cost inflation, principally associated with higher energy and other input costs. In addition to higher overall costs, average unit net cash costs (net of by-product credits) for South America mining of $1.64$2.29 per pound of copper in third-quarter2017second-quarter 2022 and $1.61$2.23 per pound of copper for the first ninesix months of 2017 were2022, compared with $2.31 per pounds of copper in second-quarter 2021 and $2.11 per pound of copper for the first six months of 2021, reflect higher thansales volumes and by-product credits. Average unit net cash costs of $1.40 per pound in third-quarter2016 and $1.37 per pound for the first nine months2022 periods also reflect the impact of 2016, primarily reflecting higher mining, millinga change in estimate of copper recoveries in a leach stockpile at El Abra (refer to Note 3) and employeethe 2021 periods reflect nonrecurring labor-related costs at Cerro Verde.
As discussed in Note 3, the change in estimate of recoverable copper in the existing leach stockpile at El Abra resulted in a 135-million-pound reduction to its work in-process inventory volumes, which resulted in a higher average cost per pound of copper. Refer to “Consolidated Results - Metals Inventory Adjustments” for discussion of potential future NRV adjustments that may result because of prolonged or further declines in the price of copper.
Revenues from Cerro Verde’s concentrate sales are recorded net of treatment charges. Accordingly, treatment charges, which will vary with Cerro Verde’s sales volumes and the price of copper.
Because certain assets are depreciated on a straight-line basis, South America’s unit depreciation rate may vary with asset additions and the level of copper production and sales.
Revenue adjustments primarily result from changes in prices on provisionally priced copper sales recognized in prior periods. Refer to “Consolidated Results – Revenues” for further discussion of adjustments to prior period provisionally priced copper sales.
Average unit net cash costs (net of by-product credits) for our South America mining operations are expected to approximate $1.64$2.31 per pound of copper for the year 2017,2022, based on current sales volume and cost estimates and assuming an average price of $8.00$16.00 per pound of molybdenum for fourth-quarter 2017.the second half of 2022.
Indonesia Mining
Indonesia mining includes PT-FI’s Grasberg minerals district,PT-FI operates one of the world’s largest copper and gold deposits,mines at the Grasberg minerals district in Papua, Indonesia. We own 90.64 percent of PT-FI, including 9.36 percent owned through our wholly owned subsidiary, PT Indocopper Investama.
PT-FI proportionately consolidates an unincorporated joint venture with Rio Tinto plc (Rio Tinto), under which Rio Tinto has a 40 percent interest in certain assets and a 40 percent interest through 2022 in production exceeding specified annual amounts of copper, gold and silver. Refer to Note 3 in our annual report on Form 10-K for the year ended December 31, 2016, for discussion of our joint venture with Rio Tinto.
PT-FI produces copper concentrate that contains significant quantities of gold and silver. We have a 48.76 percent interest in PT-FI and manage its mining operations. As further discussed in Note 2 of our 2021 Form
10-K, under the terms of the 2018 shareholders agreement, our economic interest in PT-FI approximates 81 percent through 2022, and 48.76 percent thereafter. PT-FI’s results are consolidated in our financial statements.
Substantially all of PT-FI’s copper concentrate is sold under long-term contracts, and during thecontracts. During first ninesix months of 2017, approximately half2022, 37 percent of PT-FI’s concentrate production was sold to PT Smelting its 25-percent-owned(PT-FI’s 39.5-percent owned copper smelter and refinery in Gresik, Indonesia.Indonesia).
Regulatory Matters. In January and February 2017, the Indonesian government issued new regulations to address the export of unrefined metals, including copper concentrate and anode slimes, and other matters related to the mining sector. The new regulations permit the continuation of copper concentrate exports for a five-year period through January 2022, subject to various conditions, including conversion from a contract of work to a special operating license (known as an IUPK, which does not provide the same level of fiscal and legal protections as PT-FI’s Contract of Work (COW), which remains in effect), a commitment to the completion of smelter construction in five years and payment of export duties to be determined by the Ministry of Finance. In addition, the new regulations enable application for an extension of operating rights five years before expiration of the IUPK and require foreign IUPK holders to divest a 51 percent interest in the licensed entity to Indonesian interests no later than the tenth year of production. Export licenses would be valid for one-year periods, subject to review every six months, depending on smelter construction progress.
Following the issuance of the January and February 2017 regulations and discussions with the Indonesian government, PT-FI advised the government that it was prepared to convert its COW to an IUPK, subject to obtaining an investment stability agreement providing contractual rights with the same level of legal and fiscal certainty enumerated under its COW, and provided that the COW would remain in effect until it is replaced by a mutually satisfactory alternative. PT-FI also committed to commence construction of a new smelter during a five-year timeframe, following approval of the extension of its long-term operating rights.
On January 12, 2017, PT-FI suspended exports in response to Indonesian regulations adopted in January 2014. In addition, as a result of labor disturbances and a delay in the renewal of its export license for anode slimes, PT Smelting’s operations were shut down from January 19, 2017, until early March 2017. On February 10, 2017, PT-FI was forced to suspend production as a result of limited storage capacity at PT-FI and PT Smelting. On April 21,
2017, the Indonesian government issued a permit to PT-FI that allowed exports to resume for a six-month period, and PT-FI commenced export shipments.
In mid-February 2017, pursuant to the COW’s dispute resolution process, PT-FI provided formal notice to the Indonesian government of an impending dispute listing the government’s breaches and violations of the COW. PT-FI continues to reserve its rights under these provisions.
As a result of the 2017 regulatory restrictions and uncertainties regarding long-term investment stability, PT-FI took actions to adjust its cost structure, slow investments in its underground development projects and new smelter, and place certain of its workforce on furlough programs.
In late March 2017, the Indonesian government amended the regulations to enable PT-FI to retain its COW until replaced with an IUPK accompanied by an investment stability agreement, and to grant PT-FI a temporary IUPK through October 10, 2017, that would allow concentrate exports to resume during this period. In April 2017, PT-FI entered into a Memorandum of Understanding with the Indonesian government confirming that the COW would continue to be valid and honored until replaced by a mutually agreed IUPK and investment stability agreement. PT-FI agreed to continue to pay a five percent export duty during this period.
In August 2017, we reached an understanding with the Indonesian government on a framework that would resolve PT-FI’s long-term operating rights. This framework includes (i) conversion from the COW to an IUPK providing PT-FI with long-term operating rights through 2041, (ii) Indonesian government certainty of fiscal and legal terms during the term of the IUPK, (iii) PT-FI commitment to construct a new smelter in Indonesia within five years of reaching a definitive agreement, and (iv) divestment of 51 percent of the project area interests to Indonesian participants at fair market value structured so that we retain control over operations and governance of PT-FI.
The framework requires documentation and execution of a definitive agreement, which must be approved by our Board and joint venture partner Rio Tinto. The parties continue to negotiate to reach agreement on important aspects of implementation of the framework, including the timing and process of divestment, governance matters, and the determination of fair market value, and to complete documentation on a comprehensive agreement for PT-FI’s extended operations through 2041. The parties have expressed a mutual objective of completing the negotiations and documentation during 2017.
In October 2017, the Indonesian government extended PT-FI’s export rights to December 31, 2017, while negotiations to reach and document a comprehensive long-term definitive agreement based on the agreed framework continue. Until a definitive agreement is reached, PT-FI has reserved all rights under its COW, including pursuing arbitration under the dispute resolution provisions.
We cannot predict whether PT-FI will be successful in reaching a satisfactory definitive agreement on the terms of its long-term mining rights. Refer to “Risk Factors” contained in Part I, Item 1A. of our annual report on Form 10-K for the year ended December 31, 2016, for further discussion of risks associated with our operations in Indonesia.
Operating and Development Activities.PT-FI is currently mining the final phase of the Grasberg open pit, which contains high copper and gold ore grades. PT-FI expects to mine high-grade ore over the next several quarters prior to transitioning to the Grasberg Block Cavehas three underground mine in early 2019.
PT-FI has several projectsoperating mines in the Grasberg minerals district related to the development of its large-scale, long-lived, high-grade underground ore bodies. In aggregate, these underground ore bodies are expected to produce large-scale quantities of copper and gold following the transition from the Grasberg open pit. Assuming a definitive agreement is reached to support PT-FI’s long-term investment plans, estimated annual capital spending on these projects would average $1.0 billion per year ($0.8 billion per year net to PT-FI) over the next five years. Considering the long-term nature and size of these projects, actual costs could vary from these estimates. In response to market conditions and Indonesian regulatory uncertainty, timing of these expenditures continues to be reviewed. If PT-FI is unable to reach a definitive agreement with the Indonesian government on its long-term mining rights, we intend to reduce or defer investments significantly in our underground development projects and pursue arbitration under PT-FI’s COW.
The following provides additional information on the continued development of the Common Infrastructure project, thedistrict: Grasberg Block Cave, underground mine and the Deep Mill Level Zone (DMLZ) ore body that lies below the
Deep Ore Zone (DOZ) underground mine. Our current plans and mineral reserves in Indonesia assume that PT-FI’s long-term mining rights will be extended through 2041, as stated in the COW.
Common Infrastructure and Grasberg Block Cave Mine. In 2004, PT-FI 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-FI 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 was brought into production in 2010. The Big Gossan underground mine is currently preparing to restart production. Development of the DMLZ and Grasberg Block Cave underground mines is advancing using the Common Infrastructure project tunnels as access.
The Grasberg Block Cave underground mine accounts for approximately half of our recoverable proven and probable reserves in Indonesia. Production from the Grasberg Block Cave underground mine is expected to commence in early 2019, following the end of mining of the Grasberg open pit. Targeted production rates once the Grasberg Block Cave mining operation reaches full capacity are expected to approximate 130,000-160,000 metric tons of ore per day. PT-FI is reviewing its operating plans to determine the optimum mine plan for the Grasberg Block Cave underground mine.
Aggregate mine development capital for the Grasberg Block Cave underground mine and associated Common Infrastructure is expected to approximate $6.3 billion (incurred between 2008 and 2022), with PT-FI’s share totaling approximately $5.8 billion. Aggregate project costs totaling $3.2 billion have been incurred through September 30, 2017, including $118 million during third-quarter 2017. As a result of regulatory uncertainty, PT-FI has slowed investments in its underground development projects. If PT-FI is unable to reach a definitive agreement with the Indonesian government on its long-term mining rights, we intend to reduce or defer investments significantly in our underground development projects and pursue arbitration under PT-FI’s COW.
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. In September 2015, PT-FI initiated pre-commercial production that represents ore extracted during the development phase for the purpose of obtaining access to the ore body. In June 2017, production from the DMLZ underground mine was impacted by mining-induced seismic activity, which is not uncommon in block cave mining. To mitigate the impact of these events, PT-FI implemented a revised mine sequence and start-up plan in third-quarter 2017. PT-FI expects DMLZ to ramp up to full capacity of 80,000 metric tons of ore per day in 2021, but at a slower pace than previous estimates.
Drilling efforts continue to determine the extent of the ore body. Aggregate mine development capital costs for the DMLZ underground mine are expected to approximate $3.2 billion (incurred between 2009 and 2021), with PT-FI’s share totaling approximately $1.9 billion. Aggregate project costs totaling $2.1 billion have been incurred through September 30, 2017, including $62 million during third-quarter 2017. As a result of regulatory uncertainty, PT-FI has slowed investments in its underground development projects. If PT-FI is unable to reach a definitive agreement with the Indonesian government on its long-term mining rights, we intend to reduce or defer investments significantly in our underground development projects and pursue arbitration under PT-FI’s COW.
Other Matters.Gossan. In late October 2017, Indonesia’s Ministry2021, PT-FI achieved quarterly copper and gold volumes approximating 100 percent of Environment and Forestry (the Ministry) notified PT-FIprojected annualized levels of administrative sanctions related to certain activities the Ministry indicated are not reflected in its environmental permit. The Ministry also notified PT-FI that certain operational activities were inconsistent with factors set forth in its environmental permitting studies and that additional monitoring and improvements need to be undertaken related to air quality, water drainage, treatment and handling of certain wastes, and tailings management. PT-FI has been engaged in a process to update its permits through submissions and dialogue with the Ministry, which began in late 2014. PT-FI believes that it has submitted the required documentation to update its permits, and is in the process of addressing other points raised by the Ministry.
As further discussed in “Risk Factors” contained in Part I. Item 1A of our annual report on Form 10-K for the year ended December 31, 2016, in 2009, there were a series of shooting incidents within the PT-FI project area, with sporadic shooting incidents continuing through January 1, 2015. From August 2017 through November 3, 2017, there were six shooting incidents within the PT-FI project area and five shooting incidents in nearby areas, which resulted in one fatality and 12 injuries. The safety of our workforce is a critical concern, and PT-FI is working
cooperatively with the Indonesian government to address security issues. We also continue to limit the use of the road leading to our mining and milling operations to secured convoys.
Operating Data. Following is a summary of consolidated operating data for our Indonesia mining operations for the third quarters and first nine months of 2017 and 2016:
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Operating Data, Net of Joint Venture Interest | | | | | | | |
Copper (millions of recoverable pounds) | | | | | | | |
Production | 293 |
| | 321 |
| | 647 |
| | 694 |
|
Sales | 258 |
| | 332 |
| | 630 |
| | 702 |
|
Average realized price per pound | $ | 2.95 |
| | $ | 2.20 |
| | $ | 2.81 |
| | $ | 2.17 |
|
| | | | | | | |
Gold (thousands of recoverable ounces) | | | | | | | |
Production | 412 |
| | 301 |
| | 992 |
| | 637 |
|
Sales | 352 |
| | 307 |
| | 956 |
| | 653 |
|
Average realized price per ounce | $ | 1,290 |
| | $ | 1,327 |
| | $ | 1,261 |
| | $ | 1,292 |
|
| | | | | | | |
100% Operating Data | | | | | | | |
Ore milled (metric tons per day):a | | | | | | | |
Grasberg open pit | 130,500 |
| | 135,600 |
| | 91,200 |
| | 117,200 |
|
DOZ underground mineb | 34,500 |
| | 35,100 |
| | 29,400 |
| | 38,700 |
|
DMLZ underground mine | 2,400 |
| | 6,000 |
| | 3,100 |
| | 5,000 |
|
Grasberg Block Cave | 4,200 |
| | 2,800 |
| | 3,600 |
| | 2,600 |
|
Big Gossan underground mine | — |
| | 1,000 |
| | 500 |
| | 700 |
|
Total | 171,600 |
| | 180,500 |
| | 127,800 |
| | 164,200 |
|
Average ore grades: | | | | | | | |
Copper (percent) | 0.91 |
| | 1.02 |
| | 1.00 |
| | 0.86 |
|
Gold (grams per metric ton) | 0.98 |
| | 0.69 |
| | 1.08 |
| | 0.58 |
|
Recovery rates (percent): | | | | | | | |
Copper | 91.1 |
| | 91.4 |
| | 91.6 |
| | 90.5 |
|
Gold | 84.7 |
| | 82.7 |
| | 84.9 |
| | 81.4 |
|
Production: | | | | | | | |
Copper (millions of recoverable pounds) | 277 |
| | 327 |
| | 670 |
| | 736 |
|
Gold (thousands of recoverable ounces) | 405 |
| | 300 |
| | 993 |
| | 664 |
|
| |
a. | Amounts represent the approximate average daily throughput processed at PT-FI’s mill facilities from each producing mine and from development activities that result in metal production. |
| |
b. | Ore milled from the DOZ underground mine is expected to ramp up to 60,000 metric tons of ore per day in 2018. |
Indonesia mining’s consolidated copper sales volumes of 258 million pounds in third-quarter 2017 were lower than sales of 332 million pounds in third-quarter 2016, primarily reflecting lower copper ore grades and timing of shipments. Indonesia mining’s consolidated copper sales volumes of 630 million pounds for the first nine months of 2017 were lower than sales of 702 million pounds for the first nine months of 2016, primarily reflecting the impact of regulatory restrictions on PT-FI’s concentrate exports at the beginning of 2017 (see discussion above in “Regulatory Matters”).
Indonesia’s consolidated gold sales of 352 thousand ounces in third-quarter 2017 and 956 thousand ounces for the first nine months of 2017 were higher than sales of 307 thousand ounces in third-quarter 2016 and 653 thousand ounces for the first nine months of 2016, primarily reflecting higher gold ore grades, partly offset by timing of shipments.
During third-quarter 2017, PT-FI's labor productivity improved significantly following a recovery from disruptions that occurred in the first half of the year. Mining and milling rates improved throughout the quarter, and PT-FI continues to assess opportunities to advance mining of a section of high-grade material during 2018 and 2019 through open-pit mining rather than over time through the Grasberg Block Cave underground mine.
In October 2017, PT-FI and union officials commenced discussions for a new two-year labor agreement. The existing agreement will continue in effect until a new agreement is consummated.
Assuming achieving planned operating rates for fourth-quarter 2017, consolidated sales volumes from Indonesia mining are expected to approximate 1.0approximately 1.6 billion pounds of copper and 1.6 million ounces of goldgold.
PT-FI's milling rates for ore produced from its underground mines averaged 191,800 metric tons of ore per day for the year 2017, compared with 1.1first six months of 2022, and PT-FI expects milling rates to average approximately 190,000 metric tons of ore per day for the second half of 2022. The installation of additional milling facilities at PT-FI is currently expected to be completed in 2023, which would increase milling capacity to approximately 240,000 metric tons of ore per day and provide for continued annualized copper and gold production volumes of approximately 1.6 billion pounds of copper and 1.11.6 million ounces of gold. PT-FI is also advancing a mill recovery project with the installation of a new copper cleaner circuit that is expected to be completed in the first half of 2024, and is expected to provide incremental metal production of approximately 60 million pounds of copper and 40 thousand ounces of gold per year.
For the year 2022, PT-FI's estimated capital spending on the Grasberg Block Cave and DMLZ underground projects, including construction of a dual-fuel power plant, is expected to approximate $1.0 billion, net of scheduled contributions from PT Indonesia Asahan Aluminium (Persero) (PT Inalum, also known as MIND ID). In accordance with applicable accounting guidance, the aggregate costs (before scheduled contributions from PT Inalum), expected to approximate $1.2 billion for the year 2022, will be reflected as an investing activity in our cash flow statement, and contributions from PT Inalum will be reflected as a financing activity.
Kucing Liar. PT-FI commenced long-term mine development activities for its Kucing Liar deposit during 2021, which is expected to produce over 6 billion pounds of copper and 5 million ounces of gold over the life of the project. Pre-production development activities will occur over an approximate 10-year timeframe, and capital investments are expected to average approximately $400 million per year (including approximately $200 million for the year 2022). At full operating rates, annual production from Kucing Liar is expected to approximate 600 million pounds of copper and 500 thousand ounces of gold, providing PT-FI with sustained long-term, large-scale and low-cost production. Kucing Liar will benefit from substantial shared infrastructure and PT-FI's experience and long-term success in block-cave mining.
Indonesia Smelter. In connection with PT-FI’s 2018 agreement with the Indonesia government to secure the extension of its long-term mining rights, PT-FI committed to construct additional domestic smelting capacity totaling 2 million metric tons of concentrate per year by the end of 2023 (subject to force majeure provisions).
PT-FI is actively engaged in the following projects for additional domestic smelting capacity:
•Construction of a greenfield smelter in Gresik, Indonesia with a capacity to process approximately 1.7 million metric tons of copper concentrate per year. In July 2021, PT-FI awarded a construction contract to a third-party contractor with an estimated cost of $2.8 billion. The greenfield smelter construction, currently approximately 30 percent complete, is expected to be completed as soon as feasible in 2024.
•Expansion of PT Smelting's capacity by 30 percent to 1.3 million metric tons of concentrate per year, which is expected to be completed by the end of 2023. PT-FI completed agreements in November 2021 with the majority owner of PT Smelting to implement the expansion plans. PT-FI is funding the cost of the expansion, estimated to approximate $250 million, with a loan that is expected to convert to equity, increasing ownership in PT Smelting from a 39.5 percent ownership interest to a majority ownership interest once the expansion is complete.
•Construction of a PMR to process gold and silver from the greenfield smelter and PT Smelting at an estimated cost of $400 million.
Capital expenditures for the Indonesia smelter projects, which are being funded with PT-FI’s senior notes and available revolving credit facility, totaled $0.3 billion for the first six months of 2022 and are expected to approximate $1.4 billion for the year 2022.
Construction of the additional domestic smelter capacity will result in the elimination of export duties, providing an offset to the economic cost associated with the Indonesia smelter projects. Based on current development progress of additional smelting capacity, PT-FI expects export duties to be reduced from the current rate of 5 percent to 2.5 percent by the end of 2022, and eliminated in the second half of 2023.
Operating Data. Following is summary consolidated operating data for Indonesia mining:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, | |
| | | | |
| 2022 | | 2021 | | 2022 | | 2021 | |
Copper (millions of recoverable pounds) | | | | | | | | |
Production | 407 | | | 308 | | | 788 | | | 606 | | |
Sales | 410 | | | 310 | | | 789 | | | 568 | | |
Average realized price per pound | $ | 3.86 | | | $ | 4.27 | | | $ | 4.04 | | | $ | 4.29 | | |
| | | | | | | | |
Gold (thousands of recoverable ounces) | | | | | | | | |
Production | 473 | | | 303 | | | 885 | | | 597 | | |
Sales | 474 | | | 302 | | | 880 | | | 558 | | |
Average realized price per ounce | $ | 1,827 | | | $ | 1,795 | | | $ | 1,861 | | | $ | 1,785 | | |
| | | | | | | | |
Ore extracted and milled (metric tons per day): | | | | | | | | |
Grasberg Block Cave underground mine | 101,800 | | | 64,400 | | | 101,100 | | | 58,100 | | |
DMLZ underground mine | 77,300 | | | 53,900 | | | 77,800 | | | 50,300 | | |
Big Gossan underground mine | 7,400 | | | 8,200 | | | 7,500 | | | 7,500 | | |
Deep Ore Zone underground minea and other | 10,500 | | | 16,500 | | | 5,400 | | | 17,700 | | |
| | | | | | | | |
| | | | | | | | |
Total | 197,000 | | | 143,000 | |
| 191,800 | | | 133,600 | | |
Average ore grades: | | | | | | | | |
Copper (percent) | 1.22 | | | 1.28 | | | 1.22 | | | 1.34 | | |
Gold (grams per metric ton) | 1.08 | | | 1.00 | | | 1.05 | | | 1.03 | | |
Recovery rates (percent): | | | | | | | | |
Copper | 89.8 | | | 88.8 | | | 89.6 | | | 90.0 | | |
Gold | 79.0 | | | 75.9 | | | 78.2 | | | 77.4 | | |
a.Ore body depleted in 2021.
Our consolidated copper and gold sales from PT-FI totaled 410 million pounds and 474 thousand ounces in second-quarter 2022 and 789 million pounds and 880 thousand ounces for the first six months of 2022, compared with copper and gold sales of 310 million pounds and 302 thousand ounces in second-quarter 2021 and 568 million pounds and 558 thousand ounces for the first six months of 2021. The increase in sales volumes for the 2022 periods, primarily reflects increased operating rates at the Grasberg minerals district.
Consolidated sales volumes from PT-FI are expected to approximate 1.5 billion pounds of copper and 1.7 million ounces of gold for the year 2016. At the Grasberg mine, the sequencing of mining areas with varying ore grades causes fluctuations in quarterly and annual production of copper and gold.2022.
Indonesia mining’s projected sales volumes for the year 2017 are dependent on a number of factors, including operational performance, workforce productivity and the timing of shipments.
Unit Net Cash (Credits) Costs. Unit net cash (credits) 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 metals mining companies, although our measure may not be comparable to similarly titled measures reported by other companies.
Gross Profit per Pound of Copper and per Ounce of Gold
The following table summarizes the unit net cash (credits) costs and gross profit per pound of copper and per ounce of gold at our Indonesia mining operations for the third quarters and first nine months of 2017 and 2016.operations. Refer to “Product Revenues and Production Costs” for an explanation of “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.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
| Three Months Ended September 30, |
| 2017 | | 2016 |
| By-Product Method | | Co-Product Method | | By-Product Method | | Co-Product Method |
| | Copper | | Gold | | | Copper | | Gold |
Revenues, excluding adjustments | $ | 2.95 |
| | $ | 2.95 |
| | $ | 1,290 |
| | $ | 2.20 |
| | $ | 2.20 |
| | $ | 1,327 |
|
| | | | | | | | | | | |
Site production and delivery, before net noncash and other costs shown below | 1.41 |
| | 0.87 |
| | 383 |
| | 1.37 |
| | 0.86 |
| | 520 |
|
Gold and silver credits | (1.80 | ) | | — |
| | — |
| | (1.29 | ) | | — |
| | — |
|
Treatment charges | 0.27 |
| | 0.17 |
| | 74 |
| | 0.27 |
| | 0.17 |
| | 104 |
|
Export duties | 0.08 |
| | 0.05 |
| | 22 |
| | 0.10 |
| | 0.07 |
| | 39 |
|
Royalty on metals | 0.17 |
| | 0.10 |
| | 48 |
| | 0.12 |
| | 0.07 |
| | 50 |
|
Unit net cash costs | 0.13 |
| | 1.19 |
| | 527 |
| | 0.57 |
| | 1.17 |
| | 713 |
|
DD&A | 0.53 |
| | 0.33 |
| | 143 |
| | 0.33 |
| | 0.21 |
| | 125 |
|
Noncash and other costs, net | 0.09 |
| a | 0.06 |
| | 25 |
| | 0.05 |
| b | 0.03 |
| | 19 |
|
Total unit costs | 0.75 |
| | 1.58 |
| | 695 |
| | 0.95 |
| | 1.41 |
| | 857 |
|
Revenue adjustments, primarily for pricing on prior period open sales | 0.11 |
| | 0.11 |
| | 4 |
| | (0.02 | ) | | (0.02 | ) | | 1 |
|
PT Smelting intercompany loss | (0.07 | ) | | (0.04 | ) | | (19 | ) | | (0.03 | ) | | (0.02 | ) | | (10 | ) |
Gross profit per pound/ounce | $ | 2.24 |
| | $ | 1.44 |
| | $ | 580 |
| | $ | 1.20 |
| | $ | 0.75 |
| | $ | 461 |
|
| | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | 258 |
| | 258 |
| | | | 332 |
| | 332 |
| | |
Gold sales (thousands of recoverable ounces) | | | | | 352 |
| | | | | | 307 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, |
| 2022 | | 2021 |
| By-Product Method | | Co-Product Method | | By-Product Method | | Co-Product Method |
| | Copper | | Gold | | | Copper | | Gold |
Revenues, excluding adjustments | $ | 3.86 | | | $ | 3.86 | | | $ | 1,827 | | | $ | 4.27 | | | $ | 4.27 | | | $ | 1,795 | |
| | | | | | | | | | | |
Site production and delivery, before net noncash and other costs shown below | 1.43 | | | 0.91 | | | 433 | | | 1.54 | | | 1.07 | | | 449 | |
Gold and silver credits | (2.17) | | | — | | | — | | | (1.93) | | | — | | | — | |
Treatment charges | 0.24 | | | 0.15 | | | 72 | | | 0.24 | | | 0.16 | | | 70 | |
Export duties | 0.21 | | | 0.13 | | | 63 | | | 0.14 | | | 0.10 | | | 42 | |
Royalty on metals | 0.27 | | | 0.18 | | | 74 | | | 0.26 | | | 0.19 | | | 66 | |
Unit net cash (credits) costs | (0.02) | | | 1.37 | | | 642 | | | 0.25 | | | 1.52 | | | 627 | |
DD&A | 0.63 | | | 0.41 | | | 193 | | | 0.79 | | | 0.55 | | | 232 | |
Noncash and other costs, net | 0.01 | | | 0.01 | | | 2 | | | 0.04 | | | 0.03 | | | 11 | |
Total unit costs | 0.62 | | | 1.79 | | | 837 | | | 1.08 | | | 2.10 | | | 870 | |
Revenue adjustments, primarily for pricing on prior period open sales | (0.49) | | | (0.49) | | | (17) | | | 0.28 | | | 0.28 | | | 53 | |
PT Smelting intercompany profit (loss) | 0.06 | | | 0.04 | | | 19 | | | (0.13) | | | (0.09) | | | (39) | |
Gross profit per pound/ounce | $ | 2.81 | | | $ | 1.62 | | | $ | 992 | | | $ | 3.34 | | | $ | 2.36 | | | $ | 939 | |
| | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | 410 | | | 410 | | | | | 310 | | | 310 | | | |
Gold sales (thousands of recoverable ounces) | | | | | 474 | | | | | | | 302 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, |
| 2022 | | 2021 |
| By-Product Method | | Co-Product Method | | By-Product Method | | Co-Product Method |
| | Copper | | Gold | | | Copper | | Gold |
Revenues, excluding adjustments | $ | 4.04 | | | $ | 4.04 | | | $ | 1,861 | | | $ | 4.29 | | | $ | 4.29 | | | $ | 1,785 | |
| | | | | | | | | | | |
Site production and delivery, before net noncash and other costs shown below | 1.42 | | | 0.92 | | | 426 | | | 1.51 | | | 1.05 | | | 439 | |
Gold and silver credits | (2.17) | | | — | | | — | | | (1.86) | | | — | | | — | |
Treatment charges | 0.24 | | | 0.16 | | | 73 | | | 0.24 | | | 0.17 | | | 71 | |
Export duties | 0.21 | | | 0.14 | | | 63 | | | 0.13 | | | 0.09 | | | 37 | |
Royalty on metals | 0.26 | | | 0.17 | | | 72 | | | 0.25 | | | 0.18 | | | 68 | |
Unit net cash (credits) costs | (0.04) | | | 1.39 | | | 634 | | | 0.27 | | | 1.49 | | | 615 | |
DD&A | 0.64 | | | 0.42 | | | 194 | | | 0.78 | | | 0.55 | | | 228 | |
Noncash and other costs, net | 0.04 | | | 0.03 | | | 11 | | | 0.01 | | | — | | | 1 | |
Total unit costs | 0.64 | | | 1.84 | | | 839 | | | 1.06 | | | 2.04 | | | 844 | |
Revenue adjustments, primarily for pricing on prior period open sales | 0.04 | | | 0.04 | | | 3 | | | 0.12 | | | 0.12 | | | (8) | |
PT Smelting intercompany (loss) | (0.03) | | | (0.02) | | | (10) | | | (0.16) | | | (0.11) | | | (46) | |
Gross profit per pound/ounce | $ | 3.41 | | | $ | 2.22 | | | $ | 1,015 | | | $ | 3.19 | | | $ | 2.26 | | | $ | 887 | |
| | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | 789 | | | 789 | | | | | 568 | | | 568 | | | |
Gold sales (thousands of recoverable ounces) | | | | | 880 | | | | | | | 558 | |
| | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2017 | | 2016 |
| By-Product Method | | Co-Product Method | | By-Product Method | | Co-Product Method |
| | Copper | | Gold | | | Copper | | Gold |
Revenues, excluding adjustments | $ | 2.81 |
| | $ | 2.81 |
| | $ | 1,261 |
| | $ | 2.17 |
| | $ | 2.17 |
| | $ | 1,292 |
|
| | | | | | | | | | | |
Site production and delivery, before net noncash and other costs shown below | 1.71 |
| | 1.01 |
| | 451 |
| | 1.70 |
| | 1.08 |
| | 639 |
|
Gold and silver credits | (1.98 | ) | | — |
| | — |
| | (1.28 | ) | | — |
| | — |
|
Treatment charges | 0.27 |
| | 0.16 |
| | 71 |
| | 0.29 |
| | 0.18 |
| | 109 |
|
Export duties | 0.10 |
| | 0.06 |
| | 26 |
| | 0.09 |
| | 0.06 |
| | 34 |
|
Royalty on metals | 0.16 |
| | 0.09 |
| | 47 |
| | 0.12 |
| | 0.07 |
| | 48 |
|
Unit net cash costs | 0.26 |
| | 1.32 |
| | 595 |
| | 0.92 |
| | 1.39 |
| | 830 |
|
DD&A | 0.59 |
| | 0.35 |
| | 156 |
| | 0.40 |
| | 0.25 |
| | 152 |
|
Noncash and other costs, net | 0.22 |
| a | 0.13 |
| | 58 |
| | 0.04 |
| b | 0.03 |
| | 16 |
|
Total unit costs | 1.07 |
| | 1.80 |
| | 809 |
| | 1.36 |
| | 1.67 |
| | 998 |
|
Revenue adjustments, primarily for pricing on prior period open sales | 0.06 |
| | 0.06 |
| | 9 |
| | — |
| | — |
| | 25 |
|
PT Smelting intercompany loss | (0.03 | ) | | (0.01 | ) | | (7 | ) | | (0.01 | ) | | (0.01 | ) | | (4 | ) |
Gross profit per pound/ounce | $ | 1.77 |
| | $ | 1.06 |
| | $ | 454 |
| | $ | 0.80 |
| | $ | 0.49 |
| | $ | 315 |
|
| | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | 630 |
| | 630 |
| | | | 702 |
| | 702 |
| | |
Gold sales (thousands of recoverable ounces) | | | | | 956 |
| | | | | | 653 |
|
| |
a. | Includes costs charged directly to production and delivery costs totaling $9 million ($0.03 per pound of copper) for third-quarter 2017 and $112 million ($0.18 per pound of copper) for the first nine months of 2017 as a result of workforce reductions. |
| |
b. | Includes asset retirement charges of $17 million ($0.05 per pound of copper in third-quarter 2016 and $0.02 per pound of copper for the first nine months of 2016). |
A significant portion ofFor the 2022 periods, PT-FI’s gold and silver credits exceeded its cash costs are fixed and unit costs vary depending on production volumes and other factors. Indonesia’sresulting in unit net cash costs (including gold and silver credits)credits of $0.13$0.02 per pound of copper in third-quarter 2017second-quarter 2022 and $0.26$0.04 per pound of copper for the first ninesix months of 2017 were lower than2022, compared to unit net cash costs of $0.57$0.25 per pound of copper in third-quarter2016second-quarter 2021 and $0.92$0.27 per pound of copper for the first ninesix months of 2016,2021.
Lower site production and delivery unit costs (before net noncash and other costs) in the 2022 periods primarily reflectingreflect higher gold and silver credits,sales volumes, partly offset by lower copper sales volumes.higher operating rates, energy and other input costs.
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.
PT-FI’s export duties totaled $85 million in second-quarter 2022, $44 million in second-quarter 2021, $164 million for the first six months of 2022 and $73 million for the first six months of 2021. The increase in export duties for the 2022 periods, compared with the 2021 periods, primarily reflects higher export sales volumes.
PT-FI’s royalties totaled $43$108 million in third-quarter 2017, $40second-quarter 2022, $80 million in third-quarter 2016, $106second-quarter 2021, $201 million for the first ninesix months of 20172022 and $84$140 million for the first ninesix months of 2016. Export duties totaled $21 million2021. The increase in third-quarter 2017, $34 million in third-quarter 2016, $62 millionroyalties for the first nine months of 2017 and $63 million for the first nine months of 2016. As further discussed above in “Regulatory Matters,” PT-FI agreed to continue to pay a five percent export duty.
Higher depreciation rates for the 20172022 periods, compared with the 20162021 periods, primarily relate toreflects higher amortization of asset retirement costs associated with revised estimates at the end of 2016 for an overburden stockpile. Additionally, becausesales volumes.
Because certain assets are depreciated on a straight-line basis, PT-FI’s unit depreciation rate variesmay vary with asset additions and the level of copper production and sales. The decrease in the DD&A rate per pound of copper for the 2022 periods, compared with the 2021 periods, primarily reflects depletion of the Deep Ore Zone underground mine during 2021 and higher volumes associated with increased operating rates, partly offset by significant underground development assets placed into service.
Revenue adjustments primarily result from changes in prices on provisionally priced copper sales recognized in prior periods. Refer to “Consolidated Results – Revenues” for further discussion of adjustments to prior period provisionally priced copper sales.
PT Smelting intercompany lossprofit (loss) represents the change in the deferral of 25 percent of PT-FI’s profit on sales to PT Smelting.Smelting (25 percent prior to April 30, 2021, and 39.5 percent thereafter). Refer to “Operations – Smelting &“Smelting and Refining” below for further discussion.
Assuming an average gold price of $1,300$1,700 per ounce for fourth-quarter 2017the second half of 2022 and achievement of current sales volume and cost estimates, unit net cash costs (net of gold and silver credits) for Indonesia miningPT-FI are expected to approximate $0.07$0.18 per pound of copper for the year 2017. Indonesia mining’s2022. PT-FI’s unit net cash costs for the year 20172022 would change by approximately $0.04$0.07 per pound of copper for each $50$100 per ounce change in the average price of gold.gold for the second half of 2022.
factors, including operational performance and timing of shipments.
Because of the fixed nature of a large portion of Indonesia’s costs, unit costs vary from quarter to quarter depending on copper and gold volumes.
Molybdenum Mines
We haveoperate two wholly owned molybdenum mines in North AmericaColorado – the Henderson underground mine and the Climax open-pit mine both in Colorado.and the Henderson underground mine. The HendersonClimax and ClimaxHenderson mines produce high-purity, chemical-grade molybdenum concentrate, which is typically further processed into value-added molybdenum chemical products. The majority of the molybdenum concentrate produced at the HendersonClimax and ClimaxHenderson mines, as well as from our North America and South America copper mines, is processed at our own conversion facilities.
Operating and Development Activities. In response to market conditions, the Henderson molybdenum mine continues to operate at reduced rates. Production from the Molybdenum mines totaled 8 million pounds of molybdenum in third-quarter2017, 5 million pounds in third-quarter 2016, 24second-quarter 2022, 15 million pounds for the first ninesix months of 20172022, 7 million pounds in second-quarter 2021 and 1914 million pounds for the first ninesix months of 2016.2021. Refer to “Consolidated Results” for our consolidated molybdenum operating data, which includes sales of molybdenum produced at our Molybdenum mines and from our North America and South America copper mines, and refermines. Refer to “Outlook” for projected consolidated molybdenum sales volumes.
Unit Net Cash Costs Per Pound of Molybdenum. 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 metals mining companies, although our measure may not be comparable to similarly titled measures reported by other companies.
Average unit net cash costs for our Molybdenum mines of $7.90$10.62 per pound of molybdenum in third-quarter2017second-quarter 2022 and $7.60$10.75 per pound of molybdenum for the first ninesix months of 20172022 were lowerhigher than average unit net cash costs of $10.28$8.14 per pound of molybdenum in third-quarter 2016second-quarter 2021 and $8.39$8.53 per pound of molybdenum for the first ninesix months of 2016,2021, primarily reflecting higher volumes. Assuming achievement ofenergy, outside service costs and other input costs, and increased development costs at the Henderson mine. Based on current sales volume and cost estimates, we estimateaverage unit net cash costs for the Molybdenum mines are expected to average $7.85approximate $11.75 per pound of molybdenum for the year 2017. 2022.
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.
Smelting and Refining
We wholly own and operate athe Miami smelter in Arizona, (Miami smelter)the El Paso refinery in Texas and Atlantic Copper, a smelter and refinery in Spain (Atlantic Copper).Spain. Additionally, PT-FI owns 25has a 39.5 percent ownership interest in PT Smelting and expects its ownership to increase to a majority interest upon completion of a smelter and refinery in Gresik, Indonesia (PT Smelting).the expansion of PT Smelting’s smelting capacity. Treatment charges for smelting and refining copper concentrate consist of a base rate per pound of copper and per ounce of gold and are generally fixed. Treatment charges represent a cost to our mining operations and income to Atlantic Copper and PT Smelting. Thus, higher treatment charges benefit our smelter operations and adversely affect our mining operations. Our North America copper mines are less significantly affected by changes in treatment charges because these operations are largely integrated with our Miami smelter. smelter and El Paso refinery.
Through this form of downstream integration, we are assured placement of a significant portion of our concentrate production.
Atlantic Copper smelts and refines copper concentrate and markets refined copper and precious metals in slimes. During the first ninesix months of 2017,2022, Atlantic Copper’s concentrate purchases included 37 percent from our copper mining operations included 16and 63 percent from our North America copper mines and 10 percent from South America mining, with the remainder purchased from third parties.
Atlantic Copper’s major maintenance turnarounds typically occur approximately every eight years, with shorter-term maintenance turnarounds in the interim. In March 2017, PT Smelting’s anode slimes export license was renewed through March 1, 2018. second-quarter 2022, Atlantic Copper substantially completed a 78-day major maintenance turnaround and incurred maintenance charges and idle facility costs totaling $40 million.
Our Miami smelter completed a major maintenance turnaround in second-quarter 2021 and incurred maintenance charges and idle facility costs totaling $19 million in second-quarter 2021 and $87 million for the first six months of 2021. Major maintenance turnarounds at the Miami smelter are anticipated to occur approximately every two or three years, with the next major maintenance turnaround scheduled for the first half of 2024.
PT-FI’s contract with PT Smelting provides for PT-FI to supply 100 percent of the copper concentrate requirements (subject to a minimum or maximum treatment charge rate) necessary for PT Smelting to produce 205,000 metric tons of copper annually on a priority basis. PT-FI may also sell copper concentrate to PT Smelting at market rates for quantities in excess of 205,000 metric tons of copper annually. DuringIn November 2021, PT-FI entered into a tolling agreement with PT Smelting that will be effective January 1, 2023, and will replace the first nine months of 2017,current concentrate sales agreement, as amended. Under the tolling agreement, PT-FI supplied substantiallywill pay PT Smelting to smelt and refine its concentrate and will retain title to all of PT Smelting’s concentrate requirements. Minimum and maximum treatment charge rates have been approved through April 2020.products for sale to third parties.
We defer recognizing profits on sales from our mining operations to Atlantic Copper and on 2539.5 percent of PT-FI’s sales to PT Smelting until final sales to third parties occur. Changes in these deferrals attributable to variability in intercompany volumes resulted in net (reductions) additions to operating income totaling $(7) million (less than $1 million to net income attributable to common stock of $24stock) in second-quarter 2022, $(99) million ($(81) million to net income attributable to common stock) in third-quarter2017, $17second-quarter 2021, $40 million for third-quarter 2016, less than $1($23 million to net income attributable to common stock) for the first ninesix months of 20172022 and $6$(185) million ($(145) million to net income attributable to common stock) for the first ninesix months of 2016.2021. Our net deferred profits on our inventories at Atlantic Copper and PT Smelting to be recognized in future periods’ net income attributable to common stock totaled $62$157 million at SeptemberJune 30, 2017.2022. 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.
CAPITAL RESOURCES AND LIQUIDITY
Our consolidated operating cash flows vary with sales volumes,volumes; prices realized from copper, gold and molybdenum sales,sales; production costs,costs; income taxes,taxes; other working capital changeschanges; and other factors. We generated operating cash flows totaling $3.3 billion during the first six months of 2022, reflecting solid operating and financial performance. We believe thatthe actions we have taken in recent years to build a high-quality portfolio of long-lived copper assets positionedstrong balance sheet, successfully expand low-cost operations and maintain flexible growth options while maintaining sufficient liquidity, will allow us to generate long-term value.continue to execute our business plans in a prudent manner despite current economic uncertainty while preserving substantial future asset values. We are pursuingclosely monitoring market conditions and will be prepared to adjust our operating plans if required. We will maintain a strong balance sheet and liquidity position as we focus on building
long-term value in our business, executing our operating plans safely, responsibly and efficiently, and prudently managing costs and capital expenditures.
Based on current sales volume, cost and metal price estimates discussed in “Outlook,” our projected consolidated operating cash flows for the year 2022 of $4.5 billion are expected to exceed projected capital expenditures of $3.1 billion, which includes $1.9 billion for major mining projects but excludes $1.4 billion of projected capital expenditures for the Indonesia smelter projects that are being funded with PT-FI’s senior notes and its available revolving credit facility. We have cash on hand and the financial flexibility to fund these expenditures as well as our other cash requirements for the year, including noncontrolling interest distributions, income tax payments, debt repayments, common stock dividends (base and variable) and any share repurchases.
Our cash generating capability and financial condition at June 30, 2022, which includes $9.5 billion of consolidated cash and cash equivalents (including $2.4 billion from PT-FI’s senior notes), together with $3.5 billion of availability under our revolving credit facility, is expected to be adequate to meet our operating, investing and financing needs for the foreseeable future. In addition, PT-FI and Cerro Verde have $1.3 billion and $350 million, respectively, of availability under their revolving credit facilities.
Refer to “Outlook” for further discussion of projected operating cash flows and capital expenditures for the year 2022 and to “Debt” below.
Financial Policy. Our financial policy is aligned with our strategic objectives of maintaining a strong balance sheet and increasing cash returns to shareholders while advancing opportunities to enhance our mines’ net present values, and we continue to advance studies for future developmentgrowth. The policy includes a base dividend and a performance-based payout framework, whereby up to 50 percent of available cash flows generated after planned capital spending and distributions to noncontrolling interest would be allocated to shareholder returns and the balance to debt reduction and investments in value enhancing growth projects, subject to us maintaining our copper resources,net debt at a level not to exceed the timingnet debt target of which$3.0 billion to $4.0 billion (excluding project debt for additional smelting capacity in Indonesia). The Board will be dependent on market conditions.review the structure of the performance-based payout framework at least annually.
At June 30, 2022, our net debt, excluding net debt for the Indonesia smelter projects, totaled $1.0 billion. Refer to "Net Debt."
Cash
Following is a summary of the U.S. and international components of consolidated cash and cash equivalents available to the parent company, net of noncontrolling interests’ share, taxes and other costs at SeptemberJune 30, 20172022 (in billions):
| | | | | | | | | |
Cash at domestic companies | $ | 5.1 | | | |
Cash at international operations | 4.4 | | a | |
Total consolidated cash and cash equivalents | 9.5 | | | |
Noncontrolling interests’ share | (1.1) | | | |
Cash, net of noncontrolling interests’ share | 8.4 | | | |
Withholding taxes | (0.3) | |
| |
Net cash available | $ | 8.1 | | | |
|
| | | |
Cash at domestic companies | $ | 3.7 |
|
Cash at international operations | 1.3 |
|
Total consolidated cash and cash equivalents | 5.0 |
|
Noncontrolling interests’ share | (0.4 | ) |
Cash, net of noncontrolling interests’ share | 4.6 |
|
Withholding taxes and other | (0.1 | ) |
Net cash available | $ | 4.5 |
|
a.Includes $2.4 billion from PT-FI's senior notes that is expected to be used to finance its smelter projects.
Cash held at our international operations is generally used to support our foreign operations’ capital expenditures, operating expenses, debt repayments, working capital and other tax payments, or other cash needs. Management believes that
sufficient liquidity is available in the U.S. from cash balances and availability from our revolving credit facility. 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 that are subject to applicable withholding taxes and noncontrolling interests’ share.
Debt
Following isAt June 30, 2022, we had consolidated debt of $11.1 billion, with a summaryweighted-average interest rate of 5.0 percent. Nearly all of our totaloutstanding debt and the related weighted-average interest rates at September 30, 2017 (in billions, except percentages):
|
| | | | | |
| | | Weighted- |
| | | Average |
| | | Interest Rate |
Senior Notes | $ | 13.3 |
| | 4.4% |
Cerro Verde credit facility | 1.5 |
| | 3.1% |
Total debt | $ | 14.8 |
| | 4.2% |
| | | |
In September 2017, we redeemed $543 million aggregate principal amount of senior notes, resulting in annual cash interest savings of approximately $35 million.is fixed rate. We recognized an $11 million gain on early extinguishment of debt in connection with the redemptions. During the first nine months of 2017, we have reduced our total debt balance by $1.25 billion. Maturities of debt at September 30, 2017, total $0.7 billion in fourth-quarter 2017, $1.5 billion in 2018, $1.9 billion in 2020, $1.3 billion in 2021 and $9.4 billion thereafter.
At September 30, 2017, we had no borrowings $36outstanding and $8 million in letters of credit issued and availability ofunder our $3.5 billion revolving credit facility. Additionally, at June 30, 2022, no amounts were drawn under ourPT-FI’s $1.3 billion revolving credit facility which matures on May 31, 2019.or Cerro Verde’s $350 million revolving credit facility.
Refer to Note 65 for further discussion of debt.discussion.
Operating Activities
We generatedreported consolidated cash provided by operating cash flowsactivities of $3.0$3.3 billion (including $0.4(net of $0.7 billion inof working capital sources and changes in tax payments)other uses) for the first ninesix months of 20172022 and $2.6$3.5 billion (including $0.5$0.2 billion inof working capital sources and changes in tax payments)other sources) for the first ninesix months of 2016.
Subject to future commodity prices for copper, gold and molybdenum, we expect estimated consolidated2021. Lower operating cash flows for the years 2017first six months of 2022, compared with the first six months of 2021, primarily reflect an increase in income tax payments at our international operations, partly offset by higher copper and 2018, plus available cash and availability under our credit facility and uncommitted lines of credit, to be sufficient to fund our budgeted capital expenditures, scheduled debt maturities, noncontrolling interest distributionsgold sales volumes and other cash requirements for the year. Refer to “Outlook” for further discussion of projected operating cash flows for the year 2017, and to “Risk Factors,” contained in Part I, Item 1A. of our annual report on Form 10-K for the year ended December 31, 2016, for discussion of regulatory matters in Indonesia, which could have a significant impact on future results.working capital changes.
Investing Activities
Capital Expenditures. Capital expenditures, including capitalized interest, totaled $1.0$1.6 billion for the first ninesix months of 2017,2022, including $0.6approximately $0.8 billion for major mining projects primarily associated with underground development activities in the Grasberg minerals district and $0.3 billion for the Indonesia smelter projects. Capital expenditures including capitalized interest, totaled $2.3 billion for the first nine months of 2016, consisting of $1.2 billion for mining operations (including approximately $0.9 billion for major projects)Indonesia smelter projects are being funded by PT-FI's senior notes and $1.1 billion for oil and gas operations.
Lower capital expenditures for the first nine months of 2017, compared with the first nine months of 2016, primarily reflect a decrease in oil and gas activities as a result of the sales of significant oil and gas properties in 2016 and a decrease in major mining projects associated with the completion of the Cerro Verde expansion.its available revolving credit facility. Refer to “Outlook” for further discussion of projected capital expenditures for the year 2017.2022.
Dispositions. Net proceeds from asset salesCapital expenditures, including capitalized interest, totaled $1.4$0.8 billion for the first ninesix months of 20162021, including approximately $0.6 billion for major mining projects primarily associated with underground development activities in the $1.0Grasberg minerals district.
Proceeds from Sales of Assets. Proceeds from sales of assets totaled $96 million for the first six months of 2022 and $16 million for the first six months of 2021. In May 2022, we sold all of the shares we owned in Jervois Global Limited for proceeds of $60 million (refer to Note 1).
Acquisition of Minority Interest in PT Smelting.In April 2021, PT-FI acquired 14.5 percent of the outstanding common stock of PT Smelting for $33 million, increasing its ownership interest from 25 percent to 39.5 percent.
Loans to PT Smelting for Expansion.PT-FI made loans to PT Smelting totaling $34 million during the first six months of 2022 to fund PT Smelting’s expansion project.
Financing Activities
Debt Transactions. Net borrowings of debt totaled $1.7 billion salefor the first six months of 2022 and net payments of debt totaled $19 million for the first six months of 2021. Net borrowings for the first six months of 2022 primarily reflected borrowings under PT-FI’s $3.0 billion senior note offering that was completed in April 2022, partly offset by the repayment of borrowings under PT-FI’s term loan ($0.6 billion) and Cerro Verde’s term loan ($0.3 billion). In addition, during the second quarter and first six months of 2022, we completed open-market purchases of $582 million aggregate principal amount of FCX senior notes for a total cost of $558 million. From July 1, 2022, through August 5, 2022, we purchased an additional 13 percent undivided interest$291 million aggregate principal amount of our senior notes in Morenci, the saleopen-market transactions, for a total redemption value of an interest in the Timok exploration project in Serbia and from oil and gas asset sales, including the Haynesville shale assets and certain oil and gas royalty interests. $273 million.
Refer to Note 25 for further discussion of these transactions.our debt.
Financing Activities
Debt Transactions. Net repayments of debtCash Dividends and Distributions Paid. We paid cash dividends on our common stock totaling $438 million for the first ninesix months of 2017 totaled $1.2 billion primarily for the redemption2022 and repayment of senior notes and the repayment of Cerro Verde’s shareholder loans, partly offset by the additional borrowings on Cerro Verde’s credit facility.
Net repayments of debt$111 million for the first ninesix months of 2016 totaled $1.1 billion, primarily reflecting payments of $0.6 billion on our term loan, $0.2 billion on the Cerro Verde credit facility and $0.2 billion on lines of credit.
Dividends. The Board suspended our annual common stock dividend in December 2015.2021. The declaration and payment of dividends (base or variable) is at the discretion of ourthe Board and will depend uponon our financial results, cash requirements, futurebusiness prospects, global economic conditions and other factors deemed relevant by the Board. Refer to Note 5, Item 1A. “Risk Factors” contained in Part I of our Board.2021 Form 10-K, “Cautionary Statement” below and discussion of our financial policy above.
Common stockCash dividends of $2and distributions paid to noncontrolling interests at our international operations totaled $513 million for the first ninesix months of 20172022 and $5$93 million for the first ninesix months of 2016 related to accumulated2021. Based on the estimates discussed in “Outlook,” we currently expect cash dividends paid for vested stock-based compensation.
Cash dividendsand distributions paid to noncontrolling interests totaled $67 millionto approximate $0.9
billion for the first nine months of 2017year 2022. Cash dividends and $87 million for the first nine months of 2016. These payments willdistributions to noncontrolling interests vary based on the operating results and cash requirements of our consolidated subsidiaries.
Treasury Stock Purchases. During the first six months of 2022, we acquired 29.4 million shares of our common stock under our share repurchase program for a total cost of $1.2 billion ($40.32 average cost per share). In July 2022, the Board authorized an increase in the share repurchase program from up to $3.0 billion to up to $5.0 billion. Through August 5, 2022, we acquired 47.9 million shares of our common stock for a total cost of $1.8 billion ($38.35 average cost per share) and $3.2 billion remains available under the share repurchase program. The timing and amount of share repurchases is at the discretion of management and will depend on a variety of factors. The share repurchase program may be modified, increased, suspended or terminated at any time at the Board’s discretion. Refer to Item 1A. “Risk Factors” contained in Part I of our 2021 Form 10-K, “Cautionary Statement” below and discussion of our financial policy above.
Contributions from Noncontrolling Interests. We received equity contributions totaling $94 million for the first six months of 2022 and $88 million for the first six months of 2021 from PT Inalum for their share of capital spending on underground mine development projects in the Grasberg minerals district.
Stock-based awards. Proceeds from exercised stock options totaled $106 million for the first six months of 2022 and $184 million for the first six months of 2021, and payments for related employee taxes totaled $55 million for the first six months of 2022 and $19 million for the first six months of 2021. See Note 10 in our 2021 Form 10-K for a discussion of stock-based awards.
CONTRACTUAL OBLIGATIONS
AsRefer to Note 5 for further discusseddiscussion of PT-FI’s $3.0 billion aggregate principal amount of unsecured senior notes issued in Note 6, duringApril 2022, and the first nine monthsrepayment of 2017, we have reduced our December 31, 2016, total debt balance by $1.25 billion.borrowings under PT-FI’s term loan and Cerro Verde’s term loan. There have been no other material changes in our contractual obligations since December 31, 2016.2021. Refer to Note 13 and Part II, Items 7. and 7A. in our annual report on2021 Form 10-K, for the year ended December 31, 2016, for information regarding our contractual obligations.
CONTINGENCIES
Environmental Liabilities and Asset Retirement ObligationsAROs
Our current and historical operating activities are subject to stringent laws and regulations governing the protection of the environment. We perform a comprehensive annual review of our environmental liabilities and asset retirement obligationsAROs and also review changes in facts and circumstances associated with these obligations at least quarterly. Other than as disclosed
Refer to Note 8 for further discussion of increases in Note 9, thereour ARO at the Bagdad mine. There have been no materialother significant changes to our environmental liabilities and asset retirement obligationsAROs since December 31, 2016.2021. Updated cost assumptions, including increases and decreases to cost estimates, changes in the anticipated scope and timing of remediation activities, and settlement of environmental matters may result in additional revisions to certain of our environmental obligations. Refer to Note 12 in our annual report on2021 Form 10-K, for the year ended December 31, 2016, for further information regarding our environmental liabilities and asset retirement obligations.AROs.
Litigation and Other Contingencies
Other than as discussed in Note 9, thereThere have been no material changes to our contingencies associated with legal proceedings, environmental and other matters since December 31, 2016.2021. Refer to Note 12 and “Legal Proceedings” contained in Part I, Item 3. of our annual report on2021 Form 10-K, for the year ended December 31, 2016, as updated inby Note 9 in our quarterly reports on Form 10-Q for the quarters ended March 31, 2017, and June 30, 2017,8, for further information regarding AROs, legal proceedings, environmental and other matters.
NEW ACCOUNTING STANDARDS
ReferThere were no significant updates to previously reported accounting standards included in Note 121 of our 2021 Form 10-K.
NET DEBT
Net debt, which we define as consolidated debt less consolidated cash and cash equivalents, is intended to provide investors with information related to the performance-based payout framework in our financial policy, which requires achievement of a net debt target in the range of $3 billion to $4 billion (excluding project debt for additional smelting capacity in Indonesia). This information differs from consolidated debt determined in accordance with U.S. GAAP and should not be considered in isolation or as a summarysubstitute for consolidated debt determined in accordance with U.S. GAAP. Our net debt follows, which may not be comparable to similarly titled measures reported by other companies (in millions):
| | | | | | | | | | | | | | |
| June 30, 2022 | | December 31, 2021 | |
Current portion of debt | $ | 1,038 | | | $ | 372 | | |
Long-term debt, less current portion | 10,054 | | | 9,078 | | |
Consolidated debt | 11,092 | |
| 9,450 | | |
Less: consolidated cash and cash equivalents | 9,492 | | | 8,068 | | |
Net debt | $ | 1,600 | | | $ | 1,382 | | |
Less: net debt for Indonesia smelter projectsa | 585 | |
| 207 | | |
FCX net debt, excluding Indonesia smelter projects | $ | 1,015 | | | $ | 1,175 | | |
a.Includes consolidated debt of recently adopted accounting standards.$3.0 billion and consolidated cash and cash equivalents of $2.4 billion as of June 30, 2022, and consolidated debt of $0.4 billion and consolidated cash and cash equivalents of $0.2 billion as of December 31, 2021.
PRODUCT REVENUES AND PRODUCTION COSTS
Mining Product Revenues and Unit Net Cash Cost
Unit net cash costs (credits) 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. These measures are presented by other metals mining companies, although our measures 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 and (iv) it is the method used by our management and our Board to monitor our mining operations and to compare mining operations in certain industry publications. In the co-product method presentations, 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 revenue adjustments for prior period open sales as a separate line item. Because these adjustments do not result from current period sales, these amounts have been reflected separately from revenues on current period
sales. Noncash and other costs, net, which are removed from site production and delivery costs in the calculation of unit
net cash costs (credits), consist of items such as stock-based compensation costs, start-up costs, inventory adjustments,
long-lived asset impairments, idle facility costs, restructuring and/or unusual charges.charges (credits). 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. The following schedules are presentations under both the by-product and co-product methods
together with reconciliations to amounts reported in our consolidated financial statements.
North America Copper Mines Product Revenues, Production Costs and Unit Net Cash Costs
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
|
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Three Months Ended June 30, 2022 | | | | | |
(In millions) | | By-Product | | Co-Product Method | |
| | Method | | Copper | | Molybdenuma | | Otherb | | Total | |
Revenues, excluding adjustments | | $ | 1,697 | | | $ | 1,697 | | | $ | 144 | | | $ | 30 | | | $ | 1,871 | | |
Site production and delivery, before net noncash and other costs shown below | | 975 | | | 897 | | | 95 | | | 21 | | | 1,013 | | |
By-product credits | | (136) | | | — | | | — | | | — | | | — | | |
Treatment charges | | 41 | | | 40 | | | — | | | 1 | | | 41 | | |
Net cash costs | | 880 | | | 937 | | | 95 | | | 22 | | | 1,054 | | |
DD&A | | 103 | | | 95 | | | 7 | | | 1 | | | 103 | | |
Metals inventory adjustments | | 7 | | | 6 | | | 1 | | | — | | | 7 | | |
Noncash and other costs, net | | 36 | | | 33 | | | 2 | | | 1 | | | 36 | | |
Total costs | | 1,026 | | | 1,071 | | | 105 | | | 24 | | | 1,200 | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | (37) | | | (37) | | | — | | | — | | | (37) | | |
Gross profit | | $ | 634 | | | $ | 589 | | | $ | 39 | | | $ | 6 | | | $ | 634 | | |
| | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 389 | | | 389 | | | | | | | | |
Molybdenum sales (millions of recoverable pounds)a | | | | | | 8 | | | | | | |
| | | | | | | | | | | |
Gross profit per pound of copper/molybdenum: | | | | | | |
| | | | | | | | | | | |
Revenues, excluding adjustments | | $ | 4.36 | | | $ | 4.36 | | | $ | 18.75 | | | | | | |
Site production and delivery, before net noncash and other costs shown below | | 2.50 | | | 2.30 | | | 12.42 | | | | | | |
By-product credits | | (0.35) | | | — | | | — | | | | | | |
Treatment charges | | 0.11 | | | 0.11 | | | — | | | | | | |
Unit net cash costs | | 2.26 | | | 2.41 | | | 12.42 | | | | | | |
DD&A | | 0.27 | | | 0.24 | | | 0.81 | | | | | | |
Metals inventory adjustments | | 0.02 | | | 0.02 | | | 0.16 | | | | | | |
Noncash and other costs, net | | 0.09 | | | 0.08 | | | 0.32 | | | | | | |
Total unit costs | | 2.64 | | | 2.75 | | | 13.71 | | | | | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | (0.10) | | | (0.10) | | | — | | | | | | |
Gross profit per pound | | $ | 1.62 | | | $ | 1.51 | | | $ | 5.04 | | | | | | |
| | | | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | | | |
| | | | | | | | | | | |
| | Revenues | | Production and Delivery | | DD&A | | Metals Inventory Adjustments | | | |
Totals presented above | | $ | 1,871 | | | $ | 1,013 | | | $ | 103 | | | $ | 7 | | | | |
Treatment charges | | (5) | | | 36 | | | — | | | — | | | | |
Noncash and other costs, net | | — | | | 36 | | | — | | | — | | | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | (37) | | | — | | | — | | | — | | | | |
Eliminations and other | | 26 | | | 32 | | | (1) | | | — | | | | |
North America copper mines | | 1,855 | | | 1,117 | | | 102 | | | 7 | | | | |
Other miningc | | 5,332 | | | 3,614 | | | 389 | | | 11 | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Corporate, other & eliminations | | (1,771) | | | (1,728) | | | 16 | | | — | | | | |
As reported in our consolidated financial statements | | $ | 5,416 | | | $ | 3,003 | | | $ | 507 | | | $ | 18 | | | | |
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| | | | | | | | | | | |
Three Months Ended September 30, 2017 | | | | | |
(In millions) | | By-Product | | Co-Product Method | |
| | Method | | Copper | | Molybdenuma | | Otherb | | Total | |
Revenues, excluding adjustments | | $ | 1,011 |
| | $ | 1,011 |
| | $ | 62 |
| | $ | 19 |
| | $ | 1,092 |
| |
Site production and delivery, before net noncash and other costs shown below | | 576 |
| | 541 |
| | 45 |
| | 11 |
| | 597 |
| |
By-product credits | | (60 | ) | | — |
| | — |
| | — |
| | — |
| |
Treatment charges | | 39 |
| | 38 |
| | — |
| | 1 |
| | 39 |
| |
Net cash costs | | 555 |
| | 579 |
| | 45 |
| | 12 |
| | 636 |
| |
DD&A | | 96 |
| | 90 |
| | 4 |
| | 2 |
| | 96 |
| |
Noncash and other costs, net | | 15 |
| | 14 |
| | 1 |
| | — |
| | 15 |
| |
Total costs | | 666 |
| | 683 |
| | 50 |
| | 14 |
| | 747 |
| |
Revenue adjustments, primarily for pricing on prior period open sales | | 7 |
| | 7 |
| | — |
| | — |
| | 7 |
| |
Gross profit | | $ | 352 |
| | $ | 335 |
| | $ | 12 |
| | $ | 5 |
| | $ | 352 |
| |
| | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 345 |
| | 345 |
| | | | | | | |
Molybdenum sales (millions of recoverable pounds)a | | | | | | 8 |
| | | | | |
| | | | | | | | | | | |
Gross profit per pound of copper/molybdenum: | | | | | | |
| | | | | | | | | | | |
Revenues, excluding adjustments | | $ | 2.92 |
| | $ | 2.92 |
| | $ | 7.59 |
| | | | | |
Site production and delivery, before net noncash and other costs shown below | | 1.67 |
| | 1.56 |
| | 5.58 |
| | | | | |
By-product credits | | (0.17 | ) | | — |
| | — |
| | | | | |
Treatment charges | | 0.11 |
| | 0.11 |
| | — |
| | | | | |
Unit net cash costs | | 1.61 |
| | 1.67 |
| | 5.58 |
| | | | | |
DD&A
| | 0.28 |
| | 0.27 |
| | 0.49 |
| | | | | |
Noncash and other costs, net | | 0.04 |
| | 0.04 |
| | 0.05 |
| | | | | |
Total unit costs | | 1.93 |
| | 1.98 |
| | 6.12 |
| | | | | |
Revenue adjustments, primarily for pricing on prior period open sales | | 0.03 |
| | 0.03 |
| | — |
| | | | | |
Gross profit per pound | | $ | 1.02 |
| | $ | 0.97 |
| | $ | 1.47 |
| | | | | |
| | | | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | | | |
(In millions) | | Revenues | | Production and Delivery | | DD&A | | | | | |
Totals presented above | | $ | 1,092 |
| | $ | 597 |
| | $ | 96 |
| | | | | |
Treatment charges | | (8 | ) | | 31 |
| | — |
| | | | | |
Noncash and other costs, net | | — |
| | 15 |
| | — |
| | | | | |
Revenue adjustments, primarily for pricing on prior period open sales | | 7 |
| | — |
| | — |
| | | | | |
Eliminations and other | | 14 |
| | 15 |
| | — |
| | | | | |
North America copper mines | | 1,105 |
| | 658 |
| | 96 |
| | | | | |
Other miningc | | 3,909 |
| | 2,897 |
| | 299 |
| | | | | |
Corporate, other & eliminations | | (704 | ) | | (753 | ) | | 23 |
| | | | | |
As reported in FCX’s consolidated financial statements | | $ | 4,310 |
| | $ | 2,802 |
| | $ | 418 |
| | | | | |
| |
a. | Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing. |
| |
b. | Includes gold and silver product revenues and production costs. |
| |
c. | Represents the combined total for our other mining operations, including South America mining, Indonesia mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 10. |
a.Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing.
b.Includes gold and silver product revenues and production costs.
c.Represents the combined total for our other segments as presented in Note 9.
North America Copper Mines Product Revenues, Production Costs and Unit Net Cash Costs
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Three Months Ended June 30, 2021 | | | | | |
(In millions) | | By-Product | | Co-Product Method | |
| | Method | | Copper | | Molybdenuma | | Otherb | | Total | |
Revenues, excluding adjustments | | $ | 1,717 | | | $ | 1,717 | | | $ | 97 | | | $ | 32 | | | $ | 1,846 | | |
Site production and delivery, before net noncash and other costs shown below | | 833 | | | 789 | | | 56 | | | 18 | | | 863 | | |
By-product credits | | (99) | | | — | | | — | | | — | | | — | | |
Treatment charges | | 31 | | | 29 | | | — | | | 2 | | | 31 | | |
Net cash costs | | 765 | | | 818 | | | 56 | | | 20 | | | 894 | | |
DD&A | | 102 | | | 95 | | | 5 | | | 2 | | | 102 | | |
| | | | | | | | | | | |
Noncash and other costs, net | | 31 | |
| 30 | | | 1 | | | — | | | 31 | | |
Total costs | | 898 | | | 943 | | | 62 | | | 22 | | | 1,027 | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | 8 | | | 8 | | | — | | | — | | | 8 | | |
Gross profit | | $ | 827 | | | $ | 782 | | | $ | 35 | | | $ | 10 | | | $ | 827 | | |
| | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 389 | | | 389 | | | | | | | | |
Molybdenum sales (millions of recoverable pounds)a | | | | | 9 | | | | | | |
| | | | | | | | | | | |
Gross profit per pound of copper/molybdenum: | | | | | | |
| | | | | | | | | | | |
Revenues, excluding adjustments | | $ | 4.42 | | | $ | 4.42 | | | $ | 11.75 | | | | | | |
Site production and delivery, before net noncash and other costs shown below | | 2.14 | | | 2.03 | | | 6.86 | | | | | | |
By-product credits | | (0.25) | | | — | | | — | | | | | | |
Treatment charges | | 0.08 | | | 0.07 | | | — | | | | | | |
Unit net cash costs | | 1.97 | | | 2.10 | | | 6.86 | | | | | | |
DD&A | | 0.26 | | | 0.25 | | | 0.55 | | | | | | |
| | | | | | | | | | | |
Noncash and other costs, net | | 0.08 | | | 0.08 | | | 0.06 | | | | | | |
Total unit costs | | 2.31 | | | 2.43 | | | 7.47 | | | | | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | 0.02 | | | 0.02 | | | — | | | | | | |
Gross profit per pound | | $ | 2.13 | | | $ | 2.01 | | | $ | 4.28 | | | | | | |
| | | | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | | | |
| | Revenues | | Production and Delivery | | DD&A | | | | | |
Totals presented above | | $ | 1,846 | | | $ | 863 | | | $ | 102 | | | | | | |
Treatment charges | | (12) | | | 19 | | | — | | | | | | |
Noncash and other costs, net | | — | | | 31 | | | — | | | | | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | 8 | | | — | | | — | | | | | | |
Eliminations and other | | 12 | | | 12 | | | (1) | | | | | | |
North America copper mines | | 1,854 | | | 925 | | | 101 | | | | | | |
Other miningc | | 5,520 | | | 3,650 | | | 367 | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Corporate, other & eliminations | | (1,626) | | | (1,508) | | | 15 | | | | | | |
As reported in our consolidated financial statements | | $ | 5,748 | | | $ | 3,067 | | | $ | 483 | | | | | | |
| | | | | | | | | | | |
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Three Months Ended September 30, 2016 | | | |
(In millions) | By-Product | | Co-Product Method |
| Method | | Copper | | Molybdenuma | | Otherb | | Total |
Revenues, excluding adjustments | $ | 1,002 |
| | $ | 1,002 |
| | $ | 65 |
| | $ | 35 |
| | $ | 1,102 |
|
Site production and delivery, before net noncash and other costs shown below | 659 |
| | 610 |
| | 48 |
| | 25 |
| | 683 |
|
By-product credits | (76 | ) | | — |
| | — |
| | — |
| | — |
|
Treatment charges | 45 |
| | 42 |
| | — |
| | 3 |
| | 45 |
|
Net cash costs | 628 |
| | 652 |
| | 48 |
| | 28 |
| | 728 |
|
DD&A
| 127 |
| | 117 |
| | 6 |
| | 4 |
| | 127 |
|
Noncash and other costs, net | 26 |
|
| 25 |
| | 1 |
| | — |
| | 26 |
|
Total costs | 781 |
| | 794 |
| | 55 |
| | 32 |
| | 881 |
|
Revenue adjustments, primarily for pricing on prior period open sales | (3 | ) | | (3 | ) | | — |
| | — |
| | (3 | ) |
Gross profit | $ | 218 |
| | $ | 205 |
| | $ | 10 |
| | $ | 3 |
| | $ | 218 |
|
| | | | | | | | | |
Copper sales (millions of recoverable pounds) | 457 |
| | 457 |
| | | | | | |
Molybdenum sales (millions of recoverable pounds)a | | | | 9 |
| | | | |
| | | | | | | | | |
Gross profit per pound of copper/molybdenum: | | | | | |
| | | | | | | | | |
Revenues, excluding adjustments | $ | 2.19 |
| | $ | 2.19 |
| | $ | 7.39 |
| | | | |
Site production and delivery, before net noncash and other costs shown below | 1.44 |
| | 1.34 |
| | 5.51 |
| | | | |
By-product credits | (0.17 | ) | | — |
| | — |
| | | | |
Treatment charges | 0.10 |
| | 0.09 |
| | — |
| | | | |
Unit net cash costs | 1.37 |
| | 1.43 |
| | 5.51 |
| | | | |
DD&A
| 0.28 |
| | 0.26 |
| | 0.70 |
| | | | |
Noncash and other costs, net | 0.06 |
|
| 0.05 |
| | 0.13 |
| | | | |
Total unit costs | 1.71 |
| | 1.74 |
| | 6.34 |
| | | | |
Revenue adjustments, primarily for pricing on prior period open sales | — |
| | — |
| | — |
| | | | |
Gross profit per pound | $ | 0.48 |
| | $ | 0.45 |
| | $ | 1.05 |
| | | | |
| | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | |
(In millions) | Revenues | | Production and Delivery | | DD&A | | | | |
Totals presented above | $ | 1,102 |
| | $ | 683 |
| | $ | 127 |
| | | | |
Treatment charges | (26 | ) | | 19 |
| | — |
| | | | |
Noncash and other costs, net | — |
| | 26 |
| | — |
| | | | |
Revenue adjustments, primarily for pricing on prior period open sales | (3 | ) | | — |
| | — |
| | | | |
Eliminations and other | 11 |
| | 11 |
| | 2 |
| | | | |
North America copper mines | 1,084 |
| | 739 |
| | 129 |
| | | | |
Other miningc | 3,085 |
| | 2,306 |
| | 268 |
| | | | |
Corporate, other & eliminations | (292 | ) | | (516 | ) | | 246 |
| | | | |
As reported in FCX’s consolidated financial statements | $ | 3,877 |
| | $ | 2,529 |
| | $ | 643 |
| | | | |
a.Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing. | |
a. | Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing. |
| |
b. | Includes gold and silver product revenues and production costs. |
| |
c. | Represents the combined total for our other mining operations, including South America mining, Indonesia mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 10. |
b.Includes gold and silver product revenues and production costs.
c.Represents the combined total for our other segments as presented in Note 9.
North America Copper Mines Product Revenues, Production Costs and Unit Net Cash Costs
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Six Months Ended June 30, 2022 | | | | | |
(In millions) | | By-Product | | Co-Product Method | |
| | Method | | Copper | | Molybdenuma | | Otherb | | Total | |
Revenues, excluding adjustments | | $ | 3,440 | | | $ | 3,440 | | | $ | 282 | | | $ | 57 | | | $ | 3,779 | | |
Site production and delivery, before net noncash and other costs shown below | | 1,883 | | | 1,735 | | | 179 | | | 39 | | | 1,953 | | |
By-product credits | | (269) | | | — | | | — | | | — | | | — | | |
Treatment charges | | 77 | | | 75 | | | — | | | 2 | | | 77 | | |
Net cash costs | | 1,691 | | | 1,810 | | | 179 | | | 41 | | | 2,030 | | |
DD&A | | 207 | | | 192 | | | 13 | | | 2 | | | 207 | | |
Metals inventory adjustments | | 7 | | | 6 | | | 1 | | | — | | | 7 | | |
Noncash and other costs, net | | 65 | | | 60 | | | 4 | | | 1 | | | 65 | | |
Total costs | | 1,970 | | | 2,068 | | | 197 | | | 44 | | | 2,309 | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | (7) | | | (7) | | | — | | | — | | | (7) | | |
Gross profit | | $ | 1,463 | | | $ | 1,365 | | | $ | 85 | | | $ | 13 | | | $ | 1,463 | | |
| | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 770 | | | 770 | | | | | | | | |
Molybdenum sales (millions of recoverable pounds)a | | | | | | 15 | | | | | | |
| | | | | | | | | | | |
Gross profit per pound of copper/molybdenum: | | | | | | | |
| | | | | | | | | | | |
Revenues, excluding adjustments | | $ | 4.46 | | | $ | 4.46 | | | $ | 18.36 | | | | | | |
Site production and delivery, before net noncash and other costs shown below | | 2.44 | | | 2.25 | | | 11.68 | | | | | | |
By-product credits | | (0.35) | | | — | | | — | | | | | | |
Treatment charges | | 0.10 | | | 0.10 | | | — | | | | | | |
Unit net cash costs | | 2.19 | | | 2.35 | | | 11.68 | | | | | | |
DD&A | | 0.27 | | | 0.25 | | | 0.85 | | | | | | |
Metals inventory adjustments | | 0.01 | | | 0.01 | | | 0.08 | | | | | | |
Noncash and other costs, net | | 0.09 | | | 0.07 | | | 0.23 | | | | | | |
Total unit costs | | 2.56 | | | 2.68 | | | 12.84 | | | | | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | (0.01) | | | (0.01) | | | — | | | | | | |
Gross profit per pound | | $ | 1.89 | | | $ | 1.77 | | | $ | 5.52 | | | | | | |
| | | | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | |
| | | | | | | | Metals | | | |
| | | | Production | | | | Inventory | | | |
| | Revenues | | and Delivery | | DD&A | | Adjustments | | | |
Totals presented above | | $ | 3,779 | | | $ | 1,953 | | | $ | 207 | | | $ | 7 | | | | |
Treatment charges | | (9) | | | 68 | | | — | | | — | | | | |
Noncash and other costs, net | | — | | | 65 | | | — | | | — | | | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | (7) | | | — | | | — | | | — | | | | |
Eliminations and other | | 43 | | | 49 | | | — | | | — | | | | |
North America copper mines | | 3,806 | | | 2,135 | | | 207 | | | 7 | | | | |
Other miningc | | 11,708 | | | 7,461 | | | 757 | | | 11 | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Corporate, other & eliminations | | (3,495) | | | (3,443) | | | 32 | | | — | | | | |
As reported in our consolidated financial statements | | $ | 12,019 | | | $ | 6,153 | | | $ | 996 | | | $ | 18 | | | | |
| | | | | | | | | | | |
a.Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing.
b.Includes gold and silver product revenues and production costs.
c.Represents the combined total for our other segments as presented in Note 9.
|
| | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Nine Months Ended September 30, 2017 | | | | | |
(In millions) | | By-Product | | Co-Product Method | |
| | Method | | Copper | | Molybdenuma | | Otherb | | Total | |
Revenues, excluding adjustments | | $ | 3,091 |
| | $ | 3,091 |
| | $ | 184 |
| | $ | 62 |
| | $ | 3,337 |
| |
Site production and delivery, before net noncash | | | | | | | | | | | |
and other costs shown below | | 1,794 |
| | 1,688 |
| | 137 |
| | 34 |
| | 1,859 |
| |
By-product credits | | (181 | ) | | — |
| | — |
| | — |
| | — |
| |
Treatment charges | | 121 |
| | 116 |
| | — |
| | 5 |
| | 121 |
| |
Net cash costs | | 1,734 |
| | 1,804 |
| | 137 |
| | 39 |
| | 1,980 |
| |
DD&A | | 329 |
| | 309 |
| | 14 |
| | 6 |
| | 329 |
| |
Noncash and other costs, net | | 68 |
| c | 66 |
| | 1 |
| | 1 |
| | 68 |
| |
Total costs | | 2,131 |
| | 2,179 |
| | 152 |
| | 46 |
| | 2,377 |
| |
Revenue adjustments, primarily for pricing | | | | | | | | | | | |
on prior period open sales | | 4 |
| | 4 |
| | — |
| | — |
| | 4 |
| |
Gross profit | | $ | 964 |
| | $ | 916 |
| | $ | 32 |
| | $ | 16 |
| | $ | 964 |
| |
| | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 1,127 |
| | 1,127 |
| | | | | | | |
Molybdenum sales (millions of recoverable pounds)a | | | | | | 25 |
| | | | | |
| | | | | | | | | | | |
Gross profit per pound of copper/molybdenum: | | | | | | | |
| | | | | | | | | | | |
Revenues, excluding adjustments | | $ | 2.74 |
| | $ | 2.74 |
| | $ | 7.57 |
| | | | | |
Site production and delivery, before net noncash | | | | | | | | | | | |
and other costs shown below | | 1.59 |
| | 1.50 |
| | 5.62 |
| | | | | |
By-product credits | | (0.16 | ) | | — |
| | — |
| | | | | |
Treatment charges | | 0.11 |
| | 0.10 |
| | — |
| | | | | |
Unit net cash costs | | 1.54 |
| | 1.60 |
| | 5.62 |
| | | | | |
DD&A | | 0.29 |
| | 0.27 |
| | 0.56 |
| | | | | |
Noncash and other costs, net | | 0.06 |
| c | 0.06 |
| | 0.06 |
| | | | | |
Total unit costs | | 1.89 |
| | 1.93 |
| | 6.24 |
| | | | | |
Revenue adjustments, primarily for pricing | | | | | | | | | | | |
on prior period open sales | | — |
| | — |
| | — |
| | | | | |
Gross profit per pound | | $ | 0.85 |
| | $ | 0.81 |
| | $ | 1.33 |
| | | | | |
| | | | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | | | |
(In millions) | | | | | | | | | | | |
| | | | Production | | | | | | | |
| | Revenues | | and Delivery | | DD&A | | | | | |
Totals presented above | | $ | 3,337 |
| | $ | 1,859 |
| | $ | 329 |
| | | | | |
Treatment charges | | (36 | ) | | 85 |
| | — |
| | | | | |
Noncash and other costs, net | | — |
| | 68 |
| | — |
| | | | | |
Revenue adjustments, primarily for pricing | | | | | | | | | | | |
on prior period open sales | | 4 |
| | — |
| | — |
| | | | | |
Eliminations and other | | 43 |
| | 44 |
| | 1 |
| | | | | |
North America copper mines | | 3,348 |
| | 2,056 |
| | 330 |
| | | | | |
Other miningd | | 10,270 |
| | 7,765 |
| | 850 |
| | | | | |
Corporate, other & eliminations | | (2,256 | ) | | (2,324 | ) | | 77 |
| | | | | |
As reported in FCX’s consolidated financial statements | | $ | 11,362 |
| | $ | 7,497 |
| | $ | 1,257 |
| | | | | |
|
| |
a. | Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing. |
| |
b. | Includes gold and silver product revenues and production costs. |
| |
c. | Includes $21 million ($0.02 per pound of copper) for asset impairment charges at Morenci. |
| |
d. | Represents the combined total for our other mining operations, including South America mining, Indonesia mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 10. |
North America Copper Mines Product Revenues, Production Costs and Unit Net Cash Costs
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Six Months Ended June 30, 2021 | | | | | |
(In millions) | | By-Product | | Co-Product Method | |
| | Method | | Copper | | Molybdenuma | | Otherb | | Total | |
Revenues, excluding adjustments | | $ | 2,919 | |
| $ | 2,919 | | | $ | 185 | | | $ | 67 | | | $ | 3,171 | | |
Site production and delivery, before net noncash and other costs shown below | | 1,459 | | | 1,369 | | | 113 | | | 40 | | | 1,522 | | |
By-product credits | | (189) | | | — | | | — | | | — | | | — | | |
Treatment charges | | 63 | | | 60 | | | — | | | 3 | | | 63 | | |
Net cash costs | | 1,333 | | | 1,429 | | | 113 | | | 43 | | | 1,585 | | |
DD&A | | 181 | | | 169 | | | 8 | | | 4 | | | 181 | | |
| | | | | | | | | | | |
Noncash and other costs, net | | 73 | | | 71 | | | 1 | | | 1 | | | 73 | | |
Total costs | | 1,587 | | | 1,669 | | | 122 | | | 48 | | | 1,839 | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | 7 | | | 7 | | | — | | | — | | | 7 | | |
Gross profit | | $ | 1,339 | | | $ | 1,257 | | | $ | 63 | | | $ | 19 | | | $ | 1,339 | | |
| | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 697 | | | 697 | | | | | | | | |
Molybdenum sales (millions of recoverable pounds)a | | | | | | 17 | | | | | | |
| | | | | | | | | | | |
Gross profit per pound of copper/molybdenum: | | | | | | | |
| | | | | | | | | | | |
Revenues, excluding adjustments | | $ | 4.19 | |
| $ | 4.19 | | | $ | 11.12 | | | | | | |
Site production and delivery, before net noncash and other costs shown below | | 2.09 | | | 1.96 | | | 6.76 | | | | | | |
By-product credits | | (0.27) | | | — | | | — | | | | | | |
Treatment charges | | 0.09 | | | 0.09 | | | — | | | | | | |
Unit net cash costs | | 1.91 | | | 2.05 | | | 6.76 | | | | | | |
DD&A | | 0.26 | | | 0.24 | | | 0.51 | | | | | | |
| | | | | | | | | | | |
Noncash and other costs, net | | 0.11 | | | 0.11 | | | 0.06 | | | | | | |
Total unit costs | | 2.28 | | | 2.40 | | | 7.33 | | | | | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | 0.01 | | | 0.01 | | | — | | | | | | |
Gross profit per pound | | $ | 1.92 | | | $ | 1.80 | | | $ | 3.79 | | | | | | |
| | | | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | |
| | | | | | | | | | | |
| | | | Production | | | | | | | |
| | Revenues | | and Delivery | | DD&A | | | | | |
Totals presented above | | $ | 3,171 | | | $ | 1,522 | | | $ | 181 | | | | | | |
Treatment charges | | (17) | | | 46 | | | — | | | | | | |
Noncash and other costs, net | | — | | | 73 | | | — | | | | | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | 7 | | | — | | | — | | | | | | |
Eliminations and other | | 31 | | | 33 | | | — | | | | | | |
North America copper mines | | 3,192 | | | 1,674 | | | 181 | | | | | | |
Other miningc | | 10,165 | | | 6,690 | | | 690 | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Corporate, other & eliminations | | (2,759) | | | (2,511) | | | 31 | | | | | | |
As reported in our consolidated financial statements | | $ | 10,598 | | | $ | 5,853 | | | $ | 902 | | | | | | |
| | | | | | | | | | | |
a.Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing.
b.Includes gold and silver product revenues and production costs.
c.Represents the combined total for our other segments as presented in Note 9.
|
| | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Nine Months Ended September 30, 2016 | | | | | |
(In millions) | | By-Product | | Co-Product Method | |
| | Method | | Copper | | Molybdenuma | | Otherb | | Total | |
Revenues, excluding adjustments | | $ | 3,092 |
| | $ | 3,092 |
| | $ | 155 |
| | $ | 76 |
| | $ | 3,323 |
| |
Site production and delivery, before net noncash | | | | | | | | | | | |
and other costs shown below | | 2,008 |
| | 1,904 |
| | 121 |
| | 46 |
| | 2,071 |
| |
By-product credits | | (168 | ) | | — |
| | — |
| | — |
| | — |
| |
Treatment charges | | 148 |
| | 142 |
| | — |
| | 6 |
| | 148 |
| |
Net cash costs | | 1,988 |
| | 2,046 |
| | 121 |
| | 52 |
| | 2,219 |
| |
DD&A | | 405 |
| | 381 |
| | 15 |
| | 9 |
| | 405 |
| |
Noncash and other costs, net | | 74 |
| | 72 |
| | 1 |
| | 1 |
| | 74 |
| |
Total costs | | 2,467 |
| | 2,499 |
| | 137 |
| | 62 |
| | 2,698 |
| |
Revenue adjustments, primarily for pricing | | | | | | | | | | | |
on prior period open sales | | (1 | ) | | (1 | ) | | — |
| | — |
| | (1 | ) | |
Gross profit | | $ | 624 |
| | $ | 592 |
| | $ | 18 |
| | $ | 14 |
| | $ | 624 |
| |
| | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 1,421 |
| | 1,421 |
| | | | | | | |
Molybdenum sales (millions of recoverable pounds)a | | | | | | 25 |
| | | | | |
| | | | | | | | | | | |
Gross profit per pound of copper/molybdenum: | | | | | | | |
| | | | | | | | | | | |
Revenues, excluding adjustments | | $ | 2.18 |
| | $ | 2.18 |
| | $ | 6.24 |
| | | | | |
Site production and delivery, before net noncash | | | | | | | | | | | |
and other costs shown below | | 1.41 |
| | 1.34 |
| | 4.86 |
| | | | | |
By-product credits | | (0.12 | ) | | — |
| | — |
| | | | | |
Treatment charges | | 0.11 |
| | 0.10 |
| | — |
| | | | | |
Unit net cash costs | | 1.40 |
| | 1.44 |
| | 4.86 |
| | | | | |
DD&A | | 0.29 |
| | 0.27 |
| | 0.61 |
| | | | | |
Noncash and other costs, net | | 0.05 |
| | 0.05 |
| | 0.06 |
| | | | | |
Total unit costs | | 1.74 |
| | 1.76 |
| | 5.53 |
| | | | | |
Revenue adjustments, primarily for pricing | | | | | | | | | | | |
on prior period open sales | | — |
| | — |
| | — |
| | | | | |
Gross profit per pound | | $ | 0.44 |
| | $ | 0.42 |
| | $ | 0.71 |
| | | | | |
| | | | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | | | |
(In millions) | | | | Production | | | | | | | |
| | Revenues | | and Delivery | | DD&A | | | | | |
Totals presented above | | $ | 3,323 |
| | $ | 2,071 |
| | $ | 405 |
| | | | | |
Treatment charges | | (74 | ) | | 74 |
| | — |
| | | | | |
Noncash and other costs, net | | — |
| | 74 |
| | — |
| | | | | |
Revenue adjustments, primarily for pricing | | | | | | | | | | | |
on prior period open sales | | (1 | ) | | — |
| | — |
| | | | | |
Eliminations and other | | 32 |
| | 34 |
| | 2 |
| | | | | |
North America copper mines | | 3,280 |
| | 2,253 |
| | 407 |
| | | | | |
Other miningc | | 8,433 |
| | 6,722 |
| | 766 |
| | | | | |
Corporate, other & eliminations | | (1,260 | ) | | (991 | ) | | 764 |
| | | | | |
As reported in FCX’s consolidated financial statements | | $ | 10,453 |
| | $ | 7,984 |
| | $ | 1,937 |
| | | | | |
|
| |
a. | Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing. |
| |
b. | Includes gold and silver product revenues and production costs. |
| |
c. | Represents the combined total for our other mining operations, including South America mining, Indonesia mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 10. |
South America Mining Product Revenues, Production Costs and Unit Net Cash Costs
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
| |
| |
| | | | | |
Three Months Ended June 30, 2022 | | | | | |
(In millions) | | By-Product | | Co-Product Method | |
| | Method | | Copper | | Othera | | Total | |
Revenues, excluding adjustments | | $ | 1,102 | | | $ | 1,102 | | | $ | 116 | | | $ | 1,218 | | |
Site production and delivery, before net noncash and other costs shown below | | 712 | | | 658 | | | 69 | | | 727 | | |
By-product credits | | (101) | | | — | | | — | | | — | | |
Treatment charges | | 44 | | | 44 | | | — | | | 44 | | |
Royalty on metals | | 3 | | | 3 | | | — | | | 3 | | |
Net cash costs | | 658 | | | 705 | | | 69 | | | 774 | | |
DD&A | | 101 | | | 91 | | | 10 | | | 101 | | |
Metals inventory adjustments | | 11 | | | 10 | | | 1 | | | 11 | | |
Noncash and other costs, net | | 18 | |
| 17 | | | 1 | | | 18 | | |
Total costs | | 788 | | | 823 | | | 81 | | | 904 | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | (154) | | | (154) | | | — | | | (154) | | |
Gross profit | | $ | 160 | | | $ | 125 | | | $ | 35 | | | $ | 160 | | |
| | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 288 | | | 288 | | | | | | |
| | | | | | | | | |
Gross profit per pound of copper: | | | | | |
| | | | | | | | | |
Revenues, excluding adjustments | | $ | 3.83 | | | $ | 3.83 | | | | | | |
Site production and delivery, before net noncash and other costs shown below | | 2.48 | |
| 2.29 | | | | | | |
By-product credits | | (0.35) | | | — | | | | | | |
Treatment charges | | 0.15 | | | 0.15 | | | | | | |
Royalty on metals | | 0.01 | | | 0.01 | | | | | | |
Unit net cash costs | | 2.29 | | | 2.45 | | | | | | |
DD&A | | 0.35 | | | 0.32 | | | | | | |
Metals inventory adjustments | | 0.04 | | | 0.03 | | | | | | |
Noncash and other costs, net | | 0.06 | |
| 0.06 | | | | | | |
Total unit costs | | 2.74 | | | 2.86 | | | | | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | (0.53) | | | (0.53) | | | | | | |
Gross profit per pound | | $ | 0.56 | | | $ | 0.44 | | | | | | |
| | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | Metals | |
| | | | Production | | | | Inventory | |
| | Revenues | | and Delivery | | DD&A | | Adjustments | |
Totals presented above | | $ | 1,218 | | | $ | 727 | | | $ | 101 | | | $ | 11 | | |
Treatment charges | | (44) | | | — | | | — | | | — | | |
Royalty on metals | | (3) | | | — | | | — | | | — | | |
Noncash and other costs, net | | — | | | 18 | | | — | | | — | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | (154) | | | — | | | — | | | — | | |
Eliminations and other | | (1) | | | (3) | | | 1 | | | — | | |
South America mining | | 1,016 | | | 742 | | | 102 | | | 11 | | |
Other miningb | | 6,171 | | | 3,989 | | | 389 | | | 7 | | |
| | | | | | | | | |
| | | | | | | | | |
Corporate, other & eliminations | | (1,771) | | | (1,728) | | | 16 | | | — | | |
As reported in our consolidated financial statements | | $ | 5,416 | | | $ | 3,003 | | | $ | 507 | | | $ | 18 | | |
| | | | | | | | | |
a.Includes silver sales of 1.1 million ounces ($23.26 per ounce average realized price). Also reflects sales of molybdenum produced by Cerro Verde to our molybdenum sales company at market-based pricing.
b.Represents the combined total for our other segments as presented in Note 9.
|
| | | | | | | | | | | | | | | | |
|
Three Months Ended September 30, 2017 | | | | |
(In millions) | | By-Product | | Co-Product Method |
| | Method | | Copper | | Othera | | Total |
Revenues, excluding adjustments | | $ | 965 |
| | $ | 965 |
| | $ | 75 |
| | $ | 1,040 |
|
Site production and delivery, before net noncash | | | | | | | | |
and other costs shown below | | 524 |
| | 490 |
| | 46 |
| | 536 |
|
By-product credits | | (63 | ) | | — |
| | — |
| | — |
|
Treatment charges | | 73 |
| | 73 |
| | — |
| | 73 |
|
Royalty on metals | | 2 |
| | 2 |
| | — |
| | 2 |
|
Net cash costs | | 536 |
| | 565 |
| | 46 |
| | 611 |
|
DD&A | | 134 |
| | 125 |
| | 9 |
| | 134 |
|
Noncash and other costs, net | | 225 |
| b | 207 |
| | 18 |
| | 225 |
|
Total costs | | 895 |
| | 897 |
| | 73 |
| | 970 |
|
Revenue adjustments, primarily for pricing | | | | | | | | |
on prior period open sales | | 59 |
| | 59 |
| | — |
| | 59 |
|
Gross profit | | $ | 129 |
| | $ | 127 |
| | $ | 2 |
| | $ | 129 |
|
| | | | | | | | |
Copper sales (millions of recoverable pounds) | | 327 |
| | 327 |
| | | | |
| | | | | | | | |
Gross profit per pound of copper: | | | | |
| | | | | | | | |
Revenues, excluding adjustments | | $ | 2.95 |
| | $ | 2.95 |
| | | | |
Site production and delivery, before net noncash | | | | | | | | |
and other costs shown below | | 1.60 |
| | 1.50 |
| | | | |
By-product credits | | (0.19 | ) | | — |
| | | | |
Treatment charges | | 0.22 |
| | 0.22 |
| | | | |
Royalty on metals | | 0.01 |
| | 0.01 |
| | | | |
Unit net cash costs | | 1.64 |
| | 1.73 |
| | | | |
DD&A | | 0.41 |
| | 0.38 |
| | | | |
Noncash and other costs, net | | 0.69 |
| b | 0.63 |
| | | | |
Total unit costs | | 2.74 |
| | 2.74 |
| | | | |
Revenue adjustments, primarily for pricing | | | | | | | | |
on prior period open sales | | 0.18 |
| | 0.18 |
| | | | |
Gross profit per pound | | $ | 0.39 |
| | $ | 0.39 |
| | | | |
| | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | |
(In millions) | | | | | | | | |
| | | | Production | | | | |
| | Revenues | | and Delivery | | DD&A | | |
Totals presented above | | $ | 1,040 |
| | $ | 536 |
| | $ | 134 |
| | |
Treatment charges | | (73 | ) | | — |
| | — |
| | |
Royalty on metals | | (2 | ) | | — |
| | — |
| | |
Noncash and other costs, net | | — |
| | 225 |
| | — |
| | |
Revenue adjustments, primarily for pricing | | | | | | | | |
on prior period open sales | | 59 |
| | — |
| | — |
| | |
Eliminations and other | | (1 | ) | | (2 | ) | | — |
| | |
South America mining | | 1,023 |
| | 759 |
| | 134 |
| | |
Other miningc | | 3,991 |
| | 2,796 |
| | 261 |
| | |
Corporate, other & eliminations | | (704 | ) | | (753 | ) | | 23 |
| | |
As reported in FCX’s consolidated financial statements | | $ | 4,310 |
| | $ | 2,802 |
| | $ | 418 |
| | |
| | | | | | | | |
| |
a. | Includes silver sales of 1.0 million ounces ($16.15 per ounce average realized price). Also reflects sales of molybdenum produced by Cerro Verde to our molybdenum sales company at market-based pricing. |
| |
b. | Includes charges totaling $216 million ($0.66 per pound of copper) associated with disputed Cerro Verde royalties for prior years. |
| |
c. | Represents the combined total for our other mining operations, including North America copper mines, Indonesia mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 10. |
South America Mining Product Revenues, Production Costs and Unit Net Cash Costs
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
|
|
| | | | | |
| | | | | |
Three Months Ended June 30, 2021 | | | | | |
(In millions) | | By-Product | | Co-Product Method | |
| | Method | | Copper | | Othera | | Total | |
Revenues, excluding adjustments | | $ | 995 | | | $ | 995 | | | $ | 82 | | | $ | 1,077 | | |
Site production and delivery, before net noncash and other costs shown below | | 573 | | b | 531 | | | 52 | | | 583 | | |
By-product credits | | (72) | | | — | | | — | | | — | | |
Treatment charges | | 29 | | | 29 | | | — | | | 29 | | |
Royalty on metals | | 2 | | | 2 | | | — | | | 2 | | |
Net cash costs | | 532 | | | 562 | | | 52 | | | 614 | | |
DD&A | | 94 | | | 86 | | | 8 | | | 94 | | |
| | | | | | | | | |
Noncash and other costs, net | | 18 | | | 17 | | | 1 | | | 18 | | |
Total costs | | 644 | | | 665 | | | 61 | | | 726 | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | 88 | | | 88 | | | — | | | 88 | | |
Gross profit | | $ | 439 | | | $ | 418 | | | $ | 21 | | | $ | 439 | | |
| | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 230 | | | 230 | | | | | | |
| | | | | | | | | |
Gross profit per pound of copper: | | | | | |
| | | | | | | | | |
Revenues, excluding adjustments | | $ | 4.31 | | | $ | 4.31 | | | | | | |
Site production and delivery, before net noncash and other costs shown below | | 2.48 | | b | 2.30 | | | | | | |
By-product credits | | (0.31) | | | — | | | | | | |
Treatment charges | | 0.13 | | | 0.13 | | | | | | |
Royalty on metals | | 0.01 | | | 0.01 | | | | | | |
Unit net cash costs | | 2.31 | | | 2.44 | | | | | | |
DD&A | | 0.40 | | | 0.37 | | | | | | |
| | | | | | | | | |
Noncash and other costs, net | | 0.08 | | | 0.07 | | | | | | |
Total unit costs | | 2.79 | | | 2.88 | | | | | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | 0.38 | | | 0.38 | | | | | | |
Gross profit per pound | | $ | 1.90 | | | $ | 1.81 | | | | | | |
| | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | |
| | | | Production | | | | | |
| | Revenues | | and Delivery | | DD&A | | | |
Totals presented above | | $ | 1,077 | | | $ | 583 | | | $ | 94 | | | | |
Treatment charges | | (29) | | | — | | | — | | | | |
Royalty on metals | | (2) | | | — | | | — | | | | |
Noncash and other costs, net | | — | | | 18 | | | — | | | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | 88 | | | — | | | — | | | | |
Eliminations and other | | (1) | | | (1) | | | — | | | | |
South America mining | | 1,133 | | | 600 | | | 94 | | | | |
Other miningc | | 6,241 | | | 3,975 | | | 374 | | | | |
| | | | | | | | | |
| | | | | | | | | |
Corporate, other & eliminations | | (1,626) | | | (1,508) | | | 15 | | | | |
As reported in our consolidated financial statements | | $ | 5,748 | | | $ | 3,067 | | | $ | 483 | | | | |
| | | | | | | | | |
|
| | | | | | | | | | | | | | | | | |
| | | | | |
Three Months Ended September 30, 2016 | | | | | |
(In millions) | | By-Product | | Co-Product Method | |
| | Method | | Copper | | Othera | | Total | |
Revenues, excluding adjustments | | $ | 709 |
| | $ | 709 |
| | $ | 50 |
| | $ | 759 |
| |
Site production and delivery, before net noncash | | | | | | | | | |
and other costs shown below | | 409 |
| | 386 |
| | 35 |
| | 421 |
| |
By-product credits | | (38 | ) | | — |
| | — |
| | — |
| |
Treatment charges | | 79 |
| | 79 |
| | — |
| | 79 |
| |
Royalty on metals | | 2 |
| | 2 |
| | — |
| | 2 |
| |
Net cash costs | | 452 |
| | 467 |
| | 35 |
| | 502 |
| |
DD&A | | 134 |
| | 126 |
| | 8 |
| | 134 |
| |
Noncash and other costs, net | | 4 |
| | 3 |
| | 1 |
| | 4 |
| |
Total costs | | 590 |
| | 596 |
| | 44 |
| | 640 |
| |
Revenue adjustments, primarily for pricing | | | | | | | | | |
on prior period open sales | | (7 | ) | | (7 | ) | | — |
| | (7 | ) | |
Gross profit | | $ | 112 |
| | $ | 106 |
| | $ | 6 |
| | $ | 112 |
| |
| | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 323 |
| | 323 |
| | | | | |
| | | | | | | | | |
Gross profit per pound of copper: | | | | | |
| | | | | | | | | |
Revenues, excluding adjustments | | $ | 2.19 |
| | $ | 2.19 |
| | | | | |
Site production and delivery, before net noncash | | | | | | | | | |
and other costs shown below | | 1.27 |
| | 1.20 |
| | | | | |
By-product credits | | (0.12 | ) | | — |
| | | | | |
Treatment charges | | 0.24 |
| | 0.24 |
| | | | | |
Royalty on metals | | 0.01 |
| | — |
| | | | | |
Unit net cash costs | | 1.40 |
| | 1.44 |
| | | | | |
DD&A | | 0.41 |
| | 0.39 |
| | | | | |
Noncash and other costs, net | | 0.01 |
| | 0.01 |
| | | | | |
Total unit costs | | 1.82 |
| | 1.84 |
| | | | | |
Revenue adjustments, primarily for pricing | | | | | | | | | |
on prior period open sales | | (0.02 | ) | | (0.02 | ) | | | | | |
Gross profit per pound | | $ | 0.35 |
| | $ | 0.33 |
| | | | | |
| | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | |
(In millions) | | | | Production | | | | | |
| | Revenues | | and Delivery | | DD&A | | | |
Totals presented above | | $ | 759 |
| | $ | 421 |
| | $ | 134 |
| | | |
Treatment charges | | (79 | ) | | — |
| | — |
| | | |
Royalty on metals | | (2 | ) | | — |
| | — |
| | | |
Noncash and other costs, net | | — |
| | 4 |
| | — |
| | | |
Revenue adjustments, primarily for pricing | | | | | | | | | |
on prior period open sales | | (7 | ) | | — |
| | — |
| | | |
Eliminations and other | | — |
| | (1 | ) | | — |
| | | |
South America mining | | 671 |
| | 424 |
| | 134 |
| | | |
Other miningb | | 3,498 |
| | 2,621 |
| | 263 |
| | | |
Corporate, other & eliminations | | (292 | ) | | (516 | ) | | 246 |
| | | |
As reported in FCX’s consolidated financial statements | | $ | 3,877 |
| | $ | 2,529 |
| | $ | 643 |
| | | |
| | | | | | | | | |
| |
a. | Includes silver sales of 952 thousand ounces ($21.72 per ounce average realized price). Also reflects sales of molybdenum produced by Cerro Verde to our molybdenum sales company at market-based pricing. |
| |
b. | Represents the combined total for our other mining operations, including North America copper mines, Indonesia mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 10. |
a.Includes silver sales of 0.8 million ounces ($27.33 per ounce average realized price). Also reflects sales of molybdenum produced by Cerro Verde to our molybdenum sales company at market-based pricing.
b.Includes nonrecurring charges totaling $69 million ($0.30 per pound of copper) associated with labor related costs at Cerro Verde.
c.Represents the combined total for our other segments as presented in Note 9.
South America Mining Product Revenues, Production Costs and Unit Net Cash Costs
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Six Months Ended June 30, 2022 | | | | | |
(In millions) | | By-Product | | Co-Product Method | |
| | Method | | Copper | | Othera | | Total | |
Revenues, excluding adjustments | | $ | 2,204 | | | $ | 2,204 | | | $ | 240 | | | $ | 2,444 | | |
Site production and delivery, before net noncash and other costs shown below | | 1,352 | | | 1,244 | | | 135 | | | 1,379 | | |
By-product credits | | (213) | | | — | | | — | | | — | | |
Treatment charges | | 84 | | | 84 | | | — | | | 84 | | |
Royalty on metals | | 6 | | | 5 | | | 1 | | | 6 | | |
Net cash costs | | 1,229 | | | 1,333 | | | 136 | | | 1,469 | | |
DD&A | | 198 | | | 179 | | | 19 | | | 198 | | |
Metals inventory adjustments | | 11 | | | 10 | | | 1 | | | 11 | | |
Noncash and other costs, net | | 35 | | | 33 | | | 2 | | | 35 | | |
Total costs | | 1,473 | | | 1,555 | | | 158 | | | 1,713 | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | 35 | | | 35 | | | — | | | 35 | | |
Gross profit | | $ | 766 | | | $ | 684 | | | $ | 82 | | | $ | 766 | | |
| | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 552 | | | 552 | | | | | | |
| | | | | | | | | |
Gross profit per pound of copper: | | | | | |
| | | | | | | | | |
Revenues, excluding adjustments | | $ | 4.00 | | | $ | 4.00 | | | | | | |
Site production and delivery, before net noncash and other costs shown below | | 2.45 | | | 2.26 | | | | | | |
By-product credits | | (0.38) | | | — | | | | | | |
Treatment charges | | 0.15 | | | 0.15 | | | | | | |
Royalty on metals | | 0.01 | | | 0.01 | | | | | | |
Unit net cash costs | | 2.23 | | | 2.42 | | | | | | |
DD&A | | 0.36 | | | 0.32 | | | | | | |
Metals inventory adjustments | | 0.02 | | | 0.02 | | | | | | |
Noncash and other costs, net | | 0.06 | | | 0.06 | | | | | | |
Total unit costs | | 2.67 | | | 2.82 | | | | | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | 0.06 | | | 0.06 | | | | | | |
Gross profit per pound | | $ | 1.39 | | | $ | 1.24 | | | | | | |
| | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | |
| | | | | | | | Metals | |
| | | | Production | | | | Inventory | |
| | Revenues | | and Delivery | | DD&A | | Adjustments | |
Totals presented above | | $ | 2,444 | | | $ | 1,379 | | | $ | 198 | | | $ | 11 | | |
Treatment charges | | (84) | | | — | | | — | | | — | | |
Royalty on metals | | (6) | | | — | | | — | | | — | | |
Noncash and other costs, net | | — | | | 35 | | | — | | | — | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | 35 | | | — | | | — | | | — | | |
Eliminations and other | | 1 | | | (2) | | | 1 | | | — | | |
South America mining | | 2,390 | | | 1,412 | | | 199 | | | 11 | | |
Other miningb | | 13,124 | | | 8,184 | | | 765 | | | 7 | | |
| | | | | | | | | |
| | | | | | | | | |
Corporate, other & eliminations | | (3,495) | | | (3,443) | | | 32 | | | — | | |
As reported in our consolidated financial statements | | $ | 12,019 | | | $ | 6,153 | | | $ | 996 | | | $ | 18 | | |
| | | | | | | | | |
|
| | | | | | | | | | | | | | | | | |
| | | | |
Nine Months Ended September 30, 2017 | | | | |
(In millions) | | By-Product | | Co-Product Method |
| | Method | | Copper | | Othera | | Total |
Revenues, excluding adjustments | | $ | 2,605 |
| | $ | 2,605 |
| | $ | 190 |
| | $ | 2,795 |
|
Site production and delivery, before net noncash | | | | | | | | |
and other costs shown below | | 1,429 |
| | 1,340 |
| | 123 |
| | 1,463 |
|
By-product credits | | (156 | ) | | — |
| | — |
| | — |
|
Treatment charges | | 204 |
| | 204 |
| | — |
| | 204 |
|
Royalty on metals | | 6 |
| | 5 |
| | 1 |
| | 6 |
|
Net cash costs | | 1,483 |
| | 1,549 |
| | 124 |
| | 1,673 |
|
DD&A | | 392 |
| | 365 |
| | 27 |
| | 392 |
|
Noncash and other costs, net | | 234 |
| b | 217 |
| | 17 |
| | 234 |
|
Total costs | | 2,109 |
| | 2,131 |
| | 168 |
| | 2,299 |
|
Revenue adjustments, primarily for pricing | | | | | | | | |
on prior period open sales | | 40 |
| | 40 |
| | — |
| | 40 |
|
Gross profit | | $ | 536 |
| | $ | 514 |
| | $ | 22 |
| | $ | 536 |
|
| | | | | | | | |
Copper sales (millions of recoverable pounds) | | 923 |
| | 923 |
| | | | |
| | | | | | | | |
Gross profit per pound of copper: | | | | |
| | | | | | | | |
Revenues, excluding adjustments | | $ | 2.82 |
| | $ | 2.82 |
| | | | |
Site production and delivery, before net noncash | | | | | | | | |
and other costs shown below | | 1.55 |
| | 1.45 |
| | | | |
By-product credits | | (0.17 | ) | | — |
| | | | |
Treatment charges | | 0.22 |
| | 0.22 |
| | | | |
Royalty on metals | | 0.01 |
| | 0.01 |
| | | | |
Unit net cash costs | | 1.61 |
| | 1.68 |
| | | | |
DD&A | | 0.42 |
| | 0.40 |
| | | | |
Noncash and other costs, net | | 0.25 |
| b | 0.23 |
| | | | |
Total unit costs | | 2.28 |
| | 2.31 |
| | | | |
Revenue adjustments, primarily for pricing | | | | | | | | |
on prior period open sales | | 0.04 |
| | 0.04 |
| | | | |
Gross profit per pound | | $ | 0.58 |
| | $ | 0.55 |
| | | | |
| | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | |
(In millions) | | | | Production | | | | |
| | Revenues | | and Delivery | | DD&A | | |
Totals presented above | | $ | 2,795 |
| | $ | 1,463 |
| | $ | 392 |
| | |
Treatment charges | | (204 | ) | | — |
| | — |
| | |
Royalty on metals | | (6 | ) | | — |
| | — |
| | |
Noncash and other costs, net | | — |
| | 234 |
| | — |
| | |
Revenue adjustments, primarily for pricing | | | | | | | | |
on prior period open sales | | 40 |
| | — |
| | — |
| | |
Eliminations and other | | 1 |
| | (2 | ) | | — |
| | |
South America mining | | 2,626 |
| | 1,695 |
| | 392 |
| | |
Other miningc | — |
| 10,992 |
| | 8,126 |
| | 788 |
| | |
Corporate, other & eliminations | — |
| (2,256 | ) | | (2,324 | ) | | 77 |
| | |
As reported in FCX’s consolidated financial statements | | $ | 11,362 |
| | $ | 7,497 |
| | $ | 1,257 |
| | |
| | | | | | | | |
a.Includes silver sales of 2.1 millionounces ($23.31 per ounce average realized price). Also reflects sales of molybdenum produced by Cerro Verde to our molybdenum sales company at market-based pricing. | |
a. | Includes silver sales of 2.8 million ounces ($16.66 per ounce average realized price). Also reflects sales of molybdenum produced by Cerro Verde to our molybdenum sales company at market-based pricing. |
| |
b. | Includes charges totaling $216 million ($0.23 per pound of copper) associated with disputed Cerro Verde royalties for prior years. |
| |
c. | Represents the combined total for our other mining operations, including North America copper mines, Indonesia mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 10. |
b.Represents the combined total for our other segments as presented in Note 9.
South America Mining Product Revenues, Production Costs and Unit Net Cash Costs
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | |
Six Months Ended June 30, 2021 | | | | | |
(In millions) | | By-Product | | Co-Product Method | |
| | Method | | Copper | | Othera | | Total | |
Revenues, excluding adjustments | | $ | 2,093 | | | $ | 2,093 | | | $ | 147 | | | $ | 2,240 | | |
Site production and delivery, before net noncash and other costs shown below | | 1,092 | | b | 1,022 | | | 91 | | | 1,113 | | |
By-product credits | | (126) | | | — | | | — | | | — | | |
Treatment charges | | 64 | | | 64 | | | — | | | 64 | | |
Royalty on metals | | 4 | | | 4 | | | — | | | 4 | | |
Net cash costs | | 1,034 | | | 1,090 | | | 91 | | | 1,181 | | |
DD&A | | 195 | | | 181 | | | 14 | | | 195 | | |
| | | | | | | | | |
Noncash and other costs, net | | 28 | | | 26 | | | 2 | | | 28 | | |
Total costs | | 1,257 | | | 1,297 | | | 107 | | | 1,404 | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | 99 | | | 99 | | | — | | | 99 | | |
Gross profit | | $ | 935 | | | $ | 895 | | | $ | 40 | | | $ | 935 | | |
| | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 489 | | | 489 | | | | | | |
| | | | | | | | | |
Gross profit per pound of copper: | | | | | |
| | | | | | | | | |
Revenues, excluding adjustments | | $ | 4.28 | | | $ | 4.28 | | | | | | |
Site production and delivery, before net noncash and other costs shown below | | 2.23 | | b | 2.09 | | | | | | |
By-product credits | | (0.26) | | | — | | | | | | |
Treatment charges | | 0.13 | | | 0.13 | | | | | | |
Royalty on metals | | 0.01 | | | 0.01 | | | | | | |
Unit net cash costs | | 2.11 | | | 2.23 | | | | | | |
DD&A | | 0.40 | | | 0.37 | | | | | | |
| | | | | | | | | |
Noncash and other costs, net | | 0.06 | | | 0.05 | | | | | | |
Total unit costs | | 2.57 | | | 2.65 | | | | | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | 0.20 | | | 0.20 | | | | | | |
Gross profit per pound | | $ | 1.91 | | | $ | 1.83 | | | | | | |
| | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | |
| | | | | | | | | |
| | | | Production | | | | | |
| | Revenues | | and Delivery | | DD&A | | | |
Totals presented above | | $ | 2,240 | | | $ | 1,113 | | | $ | 195 | | | | |
Treatment charges | | (64) | | | — | | | — | | | | |
Royalty on metals | | (4) | | | — | | | — | | | | |
Noncash and other costs, net | | — | | | 28 | | | — | | | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | 99 | | | — | | | — | | | | |
Eliminations and other | | (1) | | | (2) | | | — | | | | |
South America mining | | 2,270 | | | 1,139 | | | 195 | | | | |
Other miningc | | 11,087 | | | 7,225 | | | 676 | | | | |
| | | | | | | | | |
| | | | | | | | | |
Corporate, other & eliminations | | (2,759) | | | (2,511) | | | 31 | | | | |
As reported in our consolidated financial statements | | $ | 10,598 | | | $ | 5,853 | | | $ | 902 | | | | |
| | | | | | | | | |
a.Includes silver sales of 1.7 million ounces ($26.67 per ounce average realized price). Also reflects sales of molybdenum produced by Cerro Verde to our molybdenum sales company at market-based pricing.
b.Includes nonrecurring charges totaling $69 million ($0.14 per pound of copper) associated with labor related costs at Cerro Verde.
c.Represents the combined total for our other segments as presented in Note 9.
|
| | | | | | | | | | | | | | | | | |
| | | | | |
Nine Months Ended September 30, 2016 | | | | | |
(In millions) | | By-Product | | Co-Product Method | |
| | Method | | Copper | | Othera | | Total | |
Revenues, excluding adjustments | | $ | 2,115 |
| | $ | 2,115 |
| | $ | 129 |
| | $ | 2,244 |
| |
Site production and delivery, before net noncash | | | | | | | | | |
and other costs shown below | | 1,199 |
| | 1,140 |
| | 88 |
| | 1,228 |
| |
By-product credits | | (100 | ) | | — |
| | — |
| | — |
| |
Treatment charges | | 230 |
| | 230 |
| | — |
| | 230 |
| |
Royalty on metals | | 5 |
| | 5 |
| | — |
| | 5 |
| |
Net cash costs | | 1,334 |
| | 1,375 |
| | 88 |
| | 1,463 |
| |
DD&A | | 401 |
| | 379 |
| | 22 |
| | 401 |
| |
Noncash and other costs, net | | 15 |
| | 14 |
| | 1 |
| | 15 |
| |
Total costs | | 1,750 |
| | 1,768 |
| | 111 |
| | 1,879 |
| |
Revenue adjustments, primarily for pricing | | | | | | | | | |
on prior period open sales | | 9 |
| | 9 |
| | — |
| | 9 |
| |
Gross profit | | $ | 374 |
| | $ | 356 |
| | $ | 18 |
| | $ | 374 |
| |
| | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 973 |
| | 973 |
| | | | | |
| | | | | | | | | |
Gross profit per pound of copper: | | | | | |
| | | | | | | | | |
Revenues, excluding adjustments | | $ | 2.17 |
| | $ | 2.17 |
| | | | | |
Site production and delivery, before net noncash | | | | | | | | | |
and other costs shown below | | 1.23 |
| | 1.17 |
| | | | | |
By-product credits | | (0.10 | ) | | — |
| | | | | |
Treatment charges | | 0.24 |
| | 0.24 |
| | | | | |
Royalty on metals | | — |
| | — |
| | | | | |
Unit net cash costs | | 1.37 |
| | 1.41 |
| | | | | |
DD&A | | 0.41 |
| | 0.39 |
| | | | | |
Noncash and other costs, net | | 0.02 |
| | 0.02 |
| | | | | |
Total unit costs | | 1.80 |
| | 1.82 |
| | | | | |
Revenue adjustments, primarily for pricing | | | | | | | | | |
on prior period open sales | | 0.01 |
| | 0.01 |
| | | | | |
Gross profit per pound | | $ | 0.38 |
| | $ | 0.36 |
| | | | | |
| | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | |
(In millions) | | | | Production | | | | | |
| | Revenues | | and Delivery | | DD&A | | | |
Totals presented above | | $ | 2,244 |
| | $ | 1,228 |
| | $ | 401 |
| | | |
Treatment charges | | (230 | ) | | — |
| | — |
| | | |
Royalty on metals | | (5 | ) | | — |
| | — |
| | | |
Noncash and other costs, net | | — |
| | 15 |
| | — |
| | | |
Revenue adjustments, primarily for pricing | | | | | | | | | |
on prior period open sales | | 9 |
| | — |
| | — |
| | | |
Eliminations and other | | 1 |
| | (3 | ) | | 1 |
| | | |
South America mining | | 2,019 |
| | 1,240 |
| | 402 |
| | | |
Other miningb | | 9,694 |
| | 7,735 |
|
| 771 |
| | | |
Corporate, other & eliminations | | (1,260 | ) | | (991 | ) | | 764 |
| | | |
As reported in FCX’s consolidated financial statements | | $ | 10,453 |
| | $ | 7,984 |
| | $ | 1,937 |
| | | |
| | | | | | | | | |
| |
a. | Includes silver sales of 2.8 million ounces ($17.99 per ounce average realized price). Also reflects sales of molybdenum produced by Cerro Verde to our molybdenum sales company at market-based pricing. |
| |
b. | Represents the combined total for our other mining operations, including North America copper mines, Indonesia mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 10. |
Indonesia Mining Product Revenues, Production Costs and Unit Net Cash (Credits) Costs
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
| |
| |
| |
Three Months Ended June 30, 2022 | | | | | |
(In millions) | | By-Product | | Co-Product Method | |
| | Method | | Copper | | Gold | | Silvera | | Total | |
Revenues, excluding adjustments | | $ | 1,582 | | | $ | 1,582 | | | $ | 865 | | | $ | 32 | | | $ | 2,479 | | |
Site production and delivery, before net noncash and other costs shown below | | 587 | | | 374 | | | 205 | | | 8 | | | 587 | | |
Gold and silver credits | | (888) | | | — | | | — | | | — | | | — | | |
Treatment charges | | 98 | | | 63 | | | 34 | | | 1 | | | 98 | | |
Export duties | | 85 | | | 54 | | | 30 | | | 1 | | | 85 | | |
Royalty on metals | | 108 | | | 72 | | | 35 | | | 1 | | | 108 | | |
Net cash (credits) costs | | (10) | | | 563 | | | 304 | | | 11 | | | 878 | | |
DD&A | | 262 | | | 167 | | | 91 | | | 4 | | | 262 | | |
| | | | | | | | | | | |
Noncash and other costs, net | | 3 | | | 2 | | | 1 | | | — | | | 3 | | |
Total costs | | 255 | | | 732 | | | 396 | | | 15 | | | 1,143 | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | (201) | | | (201) | | | (8) | | | (1) | | | (210) | | |
PT Smelting intercompany profit | | 26 | | | 17 | | | 9 | | | — | | | 26 | | |
Gross profit | | $ | 1,152 | | | $ | 666 | | | $ | 470 | | | $ | 16 | | | $ | 1,152 | | |
| | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 410 | | | 410 | | | | | | | | |
Gold sales (thousands of recoverable ounces) | | | | | | 474 | | | | | | |
| | | | | | | | | | | |
Gross profit per pound of copper/per ounce of gold: | | | | | | | |
| | | | | | | | | | | |
Revenues, excluding adjustments | | $ | 3.86 | | | $ | 3.86 | | | $ | 1,827 | | | | | | |
Site production and delivery, before net noncash and other costs shown below | | 1.43 | | | 0.91 | | | 433 | | | | | | |
Gold and silver credits | | (2.17) | | | — | | | — | | | | | | |
Treatment charges | | 0.24 | | | 0.15 | | | 72 | | | | | | |
Export duties | | 0.21 | | | 0.13 | | | 63 | | | | | | |
Royalty on metals | | 0.27 | | | 0.18 | | | 74 | | | | | | |
Unit net cash (credits) costs | | (0.02) | | | 1.37 | | | 642 | | | | | | |
DD&A | | 0.63 | | | 0.41 | | | 193 | | | | | | |
| | | | | | | | | | | |
Noncash and other costs, net | | 0.01 | | | 0.01 | | | 2 | | | | | | |
Total unit costs | | 0.62 | | | 1.79 | | | 837 | | | | | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | (0.49) | | | (0.49) | | | (17) | | | | | | |
PT Smelting intercompany profit | | 0.06 | | | 0.04 | | | 19 | | | | | | |
Gross profit per pound/ounce | | $ | 2.81 | | | $ | 1.62 | | | $ | 992 | | | | | | |
| | | | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | | | |
| | | | Production | | | | | | | |
| | Revenues | | and Delivery | | DD&A | | | | | |
Totals presented above | | $ | 2,479 | | | $ | 587 | | | $ | 262 | | | | | | |
Treatment charges | | (98) | | | — | | | — | | | | | | |
Export duties | | (85) | | | — | | | — | | | | | | |
Royalty on metals | | (108) | | | — | | | — | | | | | | |
Noncash and other costs, net | | — | | | 3 | | | — | | | | | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | (210) | | | — | | | — | | | | | | |
PT Smelting intercompany profit | | — | | | (26) | | | — | | | | | | |
Indonesia mining | | 1,978 | | | 564 | | | 262 | | | | | | |
Other miningb | | 5,209 | | | 4,167 | | | 229 | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Corporate, other & eliminations | | (1,771) | | | (1,728) | | | 16 | | | | | | |
As reported in our consolidated financial statements | | $ | 5,416 | | | $ | 3,003 | | | $ | 507 | | | | | | |
| | | | | | | | | | | |
a.Includes silver sales of 1.6 million ounces ($20.71 per ounce average realized price).
b.Represents the combined total for our other segments as presented in Note 9.
|
| | | | | | | | | | | | | | | | | | | | |
| | | | |
Three Months Ended September 30, 2017 | | | | |
(In millions) | | By-Product | | Co-Product Method |
| | Method | | Copper | | Gold | | Silvera | | Total |
Revenues, excluding adjustments | | $ | 762 |
| | $ | 762 |
| | $ | 453 |
| | $ | 11 |
| | $ | 1,226 |
|
Site production and delivery, before net noncash | | | | | | | | | | |
and other costs shown below | | 364 |
| | 226 |
| | 134 |
| | 4 |
| | 364 |
|
Gold and silver credits | | (466 | ) | | — |
| | — |
| | — |
| | — |
|
Treatment charges | | 71 |
| | 44 |
| | 26 |
| | 1 |
| | 71 |
|
Export duties | | 21 |
| | 13 |
| | 8 |
| | — |
| | 21 |
|
Royalty on metals | | 43 |
| | 26 |
| | 17 |
| | — |
| | 43 |
|
Net cash costs | | 33 |
| | 309 |
| | 185 |
| | 5 |
| | 499 |
|
DD&A | | 136 |
| | 85 |
| | 50 |
| | 1 |
| | 136 |
|
Noncash and other costs, net | | 24 |
| b | 15 |
| | 9 |
| | — |
| | 24 |
|
Total costs | | 193 |
| | 409 |
| | 244 |
| | 6 |
| | 659 |
|
Revenue adjustments, primarily for pricing on | | | | | | | | | | |
prior period open sales | | 28 |
| | 28 |
| | 2 |
| | — |
| | 30 |
|
PT Smelting intercompany loss | | (18 | ) | | (11 | ) | | (7 | ) | | — |
| | (18 | ) |
Gross profit | | $ | 579 |
| | $ | 370 |
| | $ | 204 |
| | $ | 5 |
| | $ | 579 |
|
| | | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 258 |
| | 258 |
| | | | | | |
Gold sales (thousands of recoverable ounces) | | | | | | 352 |
| | | | |
| | | | | | | | | | |
Gross profit per pound of copper/per ounce of gold: | | | | | | |
| | | | | | | | | | |
Revenues, excluding adjustments | | $ | 2.95 |
| | $ | 2.95 |
| | $ | 1,290 |
| | | | |
Site production and delivery, before net noncash | | | | | | | | | | |
and other costs shown below | | 1.41 |
| | 0.87 |
| | 383 |
| | | | |
Gold and silver credits | | (1.80 | ) | | — |
| | — |
| | | | |
Treatment charges | | 0.27 |
| | 0.17 |
| | 74 |
| | | | |
Export duties | | 0.08 |
| | 0.05 |
| | 22 |
| | | | |
Royalty on metals | | 0.17 |
| | 0.10 |
| | 48 |
| | | | |
Unit net cash costs | | 0.13 |
| | 1.19 |
| | 527 |
| | | | |
DD&A | | 0.53 |
| | 0.33 |
| | 143 |
| | | | |
Noncash and other costs, net | | 0.09 |
| b | 0.06 |
| | 25 |
| | | | |
Total unit costs | | 0.75 |
| | 1.58 |
| | 695 |
| | | | |
Revenue adjustments, primarily for pricing on | | | | | | | | | | |
prior period open sales | | 0.11 |
| | 0.11 |
| | 4 |
| | | | |
PT Smelting intercompany loss | | (0.07 | ) | | (0.04 | ) | | (19 | ) | | | | |
Gross profit per pound/ounce | | $ | 2.24 |
| | $ | 1.44 |
| | $ | 580 |
| | | | |
| | | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | | |
(In millions) | | | | Production | | | | | | |
| | Revenues | | and Delivery | | DD&A | | | | |
Totals presented above | | $ | 1,226 |
| | $ | 364 |
| | $ | 136 |
| | | | |
Treatment charges | | (71 | ) | | — |
| | — |
| | | | |
Export duties | | (21 | ) | | — |
| | — |
| | | | |
Royalty on metals | | (43 | ) | | — |
| | — |
| | | | |
Noncash and other costs, net | | — |
| | 24 |
| | — |
| | | | |
Revenue adjustments, primarily for pricing on | | | | | | | | | | |
prior period open sales | | 30 |
| | — |
| | — |
| | | | |
PT Smelting intercompany loss | | — |
| | 18 |
| | — |
| | | | |
Indonesia mining | | 1,121 |
| | 406 |
| | 136 |
| | | | |
Other miningc | | 3,893 |
| | 3,149 |
| | 259 |
| | | | |
Corporate, other & eliminations | | (704 | ) | | (753 | ) | | 23 |
| | | | |
As reported in FCX’s consolidated financial statements | | $ | 4,310 |
| | $ | 2,802 |
| | $ | 418 |
| | | | |
| | | | | | | | | | |
| |
a. | Includes silver sales of 666 thousand ounces ($16.64 per ounce average realized price). |
| |
b. | Includes $9 million ($0.03 per pound of copper) of costs charged directly to production and delivery costs as a result of workforce reductions. |
| |
c. | Represents the combined total for our other mining operations, including North America copper mines, South America mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 10. |
Indonesia Mining Product Revenues, Production Costs and Unit Net Cash Costs |
| | | | | | | | | | | | | | | | | | | | | |
|
Three Months Ended September 30, 2016 | | | | | |
(In millions) | | By-Product | | Co-Product Method | |
| | Method | | Copper | | Gold | | Silvera | | Total | |
Revenues, excluding adjustments | | $ | 729 |
| | $ | 729 |
| | $ | 408 |
| | $ | 18 |
| | $ | 1,155 |
| |
Site production and delivery, before net noncash | | | | | | | | | | | |
and other costs shown below | | 453 |
| | 286 |
| | 160 |
| | 7 |
| | 453 |
| |
Gold and silver credits | | (427 | ) | | — |
| | — |
| | — |
| | — |
| |
Treatment charges | | 90 |
| | 57 |
| | 32 |
| | 1 |
| | 90 |
| |
Export duties | | 34 |
| | 21 |
| | 12 |
| | 1 |
| | 34 |
| |
Royalty on metals | | 40 |
| | 24 |
| | 15 |
| | 1 |
| | 40 |
| |
Net cash costs | | 190 |
| | 388 |
| | 219 |
| | 10 |
| | 617 |
| |
DD&A | | 110 |
| | 69 |
| | 39 |
| | 2 |
| | 110 |
| |
Noncash and other costs, net | | 16 |
| b | 11 |
| | 5 |
| | — |
| | 16 |
| |
Total costs | | 316 |
| | 468 |
| | 263 |
| | 12 |
| | 743 |
| |
Revenue adjustments, primarily for pricing on | | | | | | | | | | | |
prior period open sales | | (6 | ) | | (6 | ) | | — |
| | 1 |
| | (5 | ) | |
PT Smelting intercompany loss | | (9 | ) | | (6 | ) | | (3 | ) | | — |
| | (9 | ) | |
Gross profit | | $ | 398 |
| | $ | 249 |
| | $ | 142 |
| | $ | 7 |
| | $ | 398 |
| |
| | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 332 |
| | 332 |
| | | | | | | |
Gold sales (thousands of recoverable ounces) | | | | | | 307 |
| | | | | |
| | | | | | | | | | | |
Gross profit per pound of copper/per ounce of gold: | | | | | | | |
| | | | | | | | | | | |
Revenues, excluding adjustments | | $ | 2.20 |
| | $ | 2.20 |
| | $ | 1,327 |
| | | | | |
Site production and delivery, before net noncash | | | | | | | | | | | |
and other costs shown below | | 1.37 |
| | 0.86 |
| | 520 |
| | | | | |
Gold and silver credits | | (1.29 | ) | | — |
| | — |
| | | | | |
Treatment charges | | 0.27 |
| | 0.17 |
| | 104 |
| | | | | |
Export duties | | 0.10 |
| | 0.07 |
| | 39 |
| | | | | |
Royalty on metals | | 0.12 |
| | 0.07 |
| | 50 |
| | | | | |
Unit net cash costs | | 0.57 |
| | 1.17 |
| | 713 |
| | | | | |
DD&A | | 0.33 |
| | 0.21 |
| | 125 |
| | | | | |
Noncash and other costs, net | | 0.05 |
| b | 0.03 |
| | 19 |
| | | | | |
Total unit costs | | 0.95 |
| | 1.41 |
| | 857 |
| | | | | |
Revenue adjustments, primarily for pricing on | | | | | | | | | | | |
prior period open sales | | (0.02 | ) | | (0.02 | ) | | 1 |
| | | | | |
PT Smelting intercompany loss | | (0.03 | ) | | (0.02 | ) | | (10 | ) | | | | | |
Gross profit per pound/ounce | | $ | 1.20 |
| | $ | 0.75 |
| | $ | 461 |
| | | | | |
| | | | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | | | |
(In millions) | | | | Production | | | | | | | |
| | Revenues | | and Delivery | | DD&A | | | | | |
Totals presented above | | $ | 1,155 |
| | $ | 453 |
| | $ | 110 |
| | | | | |
Treatment charges | | (90 | ) | | — |
| | — |
| | | | | |
Export duties | | (34 | ) | | — |
| | — |
| | | | | |
Royalty on metals | | (40 | ) | | — |
| | — |
| | | | | |
Noncash and other costs, net | | — |
| | 16 |
| | — |
| | | | | |
Revenue adjustments, primarily for pricing on | | | | | | | | | | | |
prior period open sales | | (5 | ) | | — |
| | — |
| | | | | |
PT Smelting intercompany loss | | — |
| | 9 |
| | — |
| | | | | |
Indonesia mining | | 986 |
| | 478 |
| | 110 |
| | | | | |
Other miningc | | 3,183 |
| | 2,567 |
|
| 287 |
| | | | | |
Corporate, other & eliminations | | (292 | ) | | (516 | ) | | 246 |
| | | | | |
As reported in FCX’s consolidated financial statements | | $ | 3,877 |
| | $ | 2,529 |
| | $ | 643 |
| | | | | |
| | | | | | | | | | | |
| |
a. | Includes silver sales of 928 thousand ounces ($18.97 per ounce average realized price). |
| |
b. | Includes asset retirement charges of $17 million ($0.05 per pound of copper). |
| |
c. | Represents the combined total for our other mining operations, including North America copper mines, South America mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 10. |
Indonesia Mining Product Revenues, Production Costs and Unit Net Cash Costs
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Three Months Ended June 30, 2021 | | | | | |
(In millions) | | By-Product | | Co-Product Method | |
| | Method | | Copper | | Gold | | Silvera | | Total | |
Revenues, excluding adjustments | | $ | 1,323 | | | $ | 1,323 | | | $ | 543 | | | $ | 37 | | | $ | 1,903 | | |
Site production and delivery, before net noncash and other costs shown below | | 476 | | | 331 | | | 136 | | | 9 | | | 476 | | |
Gold and silver credits | | (597) | | | — | | | — | | | — | | | — | | |
Treatment charges | | 74 | | | 52 | | | 21 | | | 2 | | | 75 | | |
Export duties | | 44 | | | 30 | | | 13 | | | 1 | | | 44 | | |
Royalty on metals | | 80 | | | 59 | | | 20 | | | 1 | | | 80 | | |
Net cash costs | | 77 | | | 472 | | | 190 | | | 13 | | | 675 | | |
DD&A | | 247 | | | 172 | | | 70 | | | 5 | | | 247 | | |
Noncash and other costs, net | | 11 | | | 8 | | | 3 | | | — | | | 11 | | |
Total costs | | 335 | | | 652 | | | 263 | | | 18 | | | 933 | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | 87 | | | 87 | | | 16 | | | 2 | | | 105 | | |
PT Smelting intercompany loss | | (41) | | | (28) | | | (12) | | | (1) | | | (41) | | |
Gross profit | | $ | 1,034 | | | $ | 730 | | | $ | 284 | | | $ | 20 | | | $ | 1,034 | | |
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Copper sales (millions of recoverable pounds) | | 310 | | | 310 | | | | | | | | |
Gold sales (thousands of recoverable ounces) | | | | | | 302 | | | | | | |
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Gross profit per pound of copper/per ounce of gold: | | | | | | | |
| | | | | | | | | | | |
Revenues, excluding adjustments | | $ | 4.27 | | | $ | 4.27 | | | $ | 1,795 | | | | | | |
Site production and delivery, before net noncash and other costs shown below | | 1.54 | | | 1.07 | | | 449 | | | | | | |
Gold and silver credits | | (1.93) | | | — | | | — | | | | | | |
Treatment charges | | 0.24 | | | 0.16 | | | 70 | | | | | | |
Export duties | | 0.14 | | | 0.10 | | | 42 | | | | | | |
Royalty on metals | | 0.26 | | | 0.19 | | | 66 | | | | | | |
Unit net cash costs | | 0.25 | | | 1.52 | | | 627 | | | | | | |
DD&A | | 0.79 | | | 0.55 | | | 232 | | | | | | |
Noncash and other costs, net | | 0.04 | | | 0.03 | | | 11 | | | | | | |
Total unit costs | | 1.08 | | | 2.10 | | | 870 | | | | | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | 0.28 | | | 0.28 | | | 53 | | | | | | |
PT Smelting intercompany loss | | (0.13) | | | (0.09) | | | (39) | | | | | | |
Gross profit per pound/ounce | | $ | 3.34 | | | $ | 2.36 | | | $ | 939 | | | | | | |
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Reconciliation to Amounts Reported | | | | | | | | | | | |
| | | | Production | | | | | | | |
| | Revenues | | and Delivery | | DD&A | | | | | |
Totals presented above | | $ | 1,903 | | | $ | 476 | | | $ | 247 | | | | | | |
Treatment charges | | (75) | | | — | | | — | | | | | | |
Export duties | | (44) | | | — | | | — | | | | | | |
Royalty on metals | | (80) | | | — | | | — | | | | | | |
Noncash and other costs, net | | — | | | 11 | | | — | | | | | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | 105 | | | — | | | — | | | | | | |
PT Smelting intercompany loss | | — | | | 41 | | | — | | | | | | |
Indonesia mining | | 1,809 | | | 528 | | | 247 | | | | | | |
Other miningb | | 5,565 | | | 4,047 | | | 221 | | | | | | |
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Corporate, other & eliminations | | (1,626) | | | (1,508) | | | 15 | | | | | | |
As reported in our consolidated financial statements | | $ | 5,748 | | | $ | 3,067 | | | $ | 483 | | | | | | |
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Nine Months Ended September 30, 2017 | | | | |
(In millions) | | By-Product | | Co-Product Method |
| | Method | | Copper | | Gold | | Silvera | | Total |
Revenues, excluding adjustments | | $ | 1,772 |
| | $ | 1,772 |
| | $ | 1,206 |
| | $ | 32 |
| | $ | 3,010 |
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Site production and delivery, before net noncash | | | | | | | | | | |
and other costs shown below | | 1,076 |
| | 634 |
| | 431 |
| | 11 |
| | 1,076 |
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Gold and silver credits | | (1,247 | ) | | — |
| | — |
| | — |
| | — |
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Treatment charges | | 170 |
| | 100 |
| | 68 |
| | 2 |
| | 170 |
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Export duties | | 62 |
| | 36 |
| | 25 |
| | 1 |
| | 62 |
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Royalty on metals | | 106 |
| | 60 |
| | 45 |
| | 1 |
| | 106 |
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Net cash costs | | 167 |
| | 830 |
| | 569 |
| | 15 |
| | 1,414 |
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DD&A | | 372 |
| | 219 |
| | 149 |
| | 4 |
| | 372 |
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Noncash and other costs, net | | 140 |
| b | 82 |
| | 56 |
| | 2 |
| | 140 |
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Total costs | | 679 |
| | 1,131 |
| | 774 |
| | 21 |
| | 1,926 |
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Revenue adjustments, primarily for pricing on | | | | | | | | | | |
prior period open sales | | 39 |
| | 39 |
| | 9 |
| | — |
| | 48 |
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PT Smelting intercompany loss | | (17 | ) | | (10 | ) | | (7 | ) | | — |
| | (17 | ) |
Gross profit | | $ | 1,115 |
| | $ | 670 |
| | $ | 434 |
| | $ | 11 |
| | $ | 1,115 |
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Copper sales (millions of recoverable pounds) | | 630 |
| | 630 |
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Gold sales (thousands of recoverable ounces) | | | | | | 956 |
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Gross profit per pound of copper/per ounce of gold: | | | | | | |
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Revenues, excluding adjustments | | $ | 2.81 |
| | $ | 2.81 |
| | $ | 1,261 |
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Site production and delivery, before net noncash | | | | | | | | | | |
and other costs shown below | | 1.71 |
| | 1.01 |
| | 451 |
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Gold and silver credits | | (1.98 | ) | | — |
| | — |
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Treatment charges | | 0.27 |
| | 0.16 |
| | 71 |
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Export duties | | 0.10 |
| | 0.06 |
| | 26 |
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Royalty on metals | | 0.16 |
| | 0.09 |
| | 47 |
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Unit net cash costs | | 0.26 |
| | 1.32 |
| | 595 |
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DD&A | | 0.59 |
| | 0.35 |
| | 156 |
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Noncash and other costs, net | | 0.22 |
| b | 0.13 |
| | 58 |
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Total unit costs | | 1.07 |
| | 1.80 |
| | 809 |
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Revenue adjustments, primarily for pricing on | | | | | | | | | | |
prior period open sales | | 0.06 |
| | 0.06 |
| | 9 |
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PT Smelting intercompany loss | | (0.03 | ) | | (0.01 | ) | | (7 | ) | | | | |
Gross profit per pound/ounce | | $ | 1.77 |
| | $ | 1.06 |
| | $ | 454 |
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Reconciliation to Amounts Reported | | | | | | | | | | |
(In millions) | | | | Production | | | | | | |
| | Revenues | | and Delivery | | DD&A | | | | |
Totals presented above | | $ | 3,010 |
| | $ | 1,076 |
| | $ | 372 |
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Treatment charges | | (170 | ) | | — |
| | — |
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Export duties | | (62 | ) | | — |
| | — |
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Royalty on metals | | (106 | ) | | — |
| | — |
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Noncash and other costs, net | | — |
| | 140 |
| | — |
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Revenue adjustments, primarily for pricing on | | | | | | | | | | |
prior period open sales | | 48 |
| | — |
| | — |
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PT Smelting intercompany loss | | — |
| | 17 |
| | — |
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Indonesia mining | | 2,720 |
| | 1,233 |
| | 372 |
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Other miningc | | 10,898 |
| | 8,588 |
| | 808 |
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Corporate, other & eliminations | | (2,256 | ) | | (2,324 | ) | | 77 |
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As reported in FCX’s consolidated financial statements | | $ | 11,362 |
| | $ | 7,497 |
| | $ | 1,257 |
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a. | Includes silver sales of 1.9 million ounces ($16.70 per ounce average realized price). |
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b. | Includes $112 million ($0.18 per pound of copper) of costs charged directly to production and delivery costs as a result of workforce reductions. |
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c. | Represents the combined total for our other mining operations, including North America copper mines, South America mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 10. |
a.Includes silver sales of 1.4 million ounces ($26.08 per ounce average realized price).
b.Represents the combined total for our other segments as presented in Note 9.
Indonesia Mining Product Revenues, Production Costs and Unit Net Cash (Credits) Costs
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Six Months Ended June 30, 2022 | | | | |
(In millions) | | By-Product | | Co-Product Method |
| | Method | | Copper | | Gold | | Silvera | | Total |
Revenues, excluding adjustments | | $ | 3,184 | | | $ | 3,184 | | | $ | 1,638 | | | $ | 69 | | | $ | 4,891 | |
Site production and delivery, before net noncash and other costs shown below | | 1,121 | | | 730 | | | 375 | | | 16 | | | 1,121 | |
Gold and silver credits | | (1,710) | | | — | | | — | | | — | | | — | |
Treatment charges | | 191 | | | 124 | | | 64 | | | 3 | | | 191 | |
Export duties | | 164 | | | 107 | | | 55 | | | 2 | | | 164 | |
Royalty on metals | | 201 | | | 135 | | | 64 | | | 2 | | | 201 | |
Net cash (credits) costs | | (33) | | | 1,096 | | | 558 | | | 23 | | | 1,677 | |
DD&A | | 510 | | | 332 | | | 171 | | | 7 | | | 510 | |
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Noncash and other costs, net | | 30 | | b | 20 | | | 10 | | | — | | | 30 | |
Total costs | | 507 | | | 1,448 | | | 739 | | | 30 | | | 2,217 | |
Other revenue adjustments, primarily for pricing on prior period open sales | | 32 | | | 32 | | | 3 | | | — | | | 35 | |
PT Smelting intercompany loss | | (27) | | | (17) | | | (9) | | | (1) | | | (27) | |
Gross profit | | $ | 2,682 | | | $ | 1,751 | | | $ | 893 | | | $ | 38 | | | $ | 2,682 | |
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Copper sales (millions of recoverable pounds) | | 789 | | | 789 | | | | | | | |
Gold sales (thousands of recoverable ounces) | | | | | | 880 | | | | | |
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Gross profit per pound of copper/per ounce of gold: | | | | | | |
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Revenues, excluding adjustments | | $ | 4.04 | | | $ | 4.04 | | | $ | 1,861 | | | | | |
Site production and delivery, before net noncash and other costs shown below | | 1.42 | | | 0.92 | | | 426 | | | | | |
Gold and silver credits | | (2.17) | | | — | | | — | | | | | |
Treatment charges | | 0.24 | | | 0.16 | | | 73 | | | | | |
Export duties | | 0.21 | | | 0.14 | | | 63 | | | | | |
Royalty on metals | | 0.26 | | | 0.17 | | | 72 | | | | | |
Unit net cash (credits) costs | | (0.04) | | | 1.39 | | | 634 | | | | | |
DD&A | | 0.64 | | | 0.42 | | | 194 | | | | | |
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Noncash and other costs, net | | 0.04 | | b | 0.03 | | | 11 | | | | | |
Total unit costs | | 0.64 | | | 1.84 | | | 839 | | | | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | 0.04 | | | 0.04 | | | 3 | | | | | |
PT Smelting intercompany loss | | (0.03) | | | (0.02) | | | (10) | | | | | |
Gross profit per pound/ounce | | $ | 3.41 | | | $ | 2.22 | | | $ | 1,015 | | | | | |
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Reconciliation to Amounts Reported | | | | | | | | | | |
| | | | Production | | | | | | |
| | Revenues | | and Delivery | | DD&A | | | | |
Totals presented above | | $ | 4,891 | | | $ | 1,121 | | | $ | 510 | | | | | |
Treatment charges | | (191) | | | — | | | — | | | | | |
Export duties | | (164) | | | — | | | — | | | | | |
Royalty on metals | | (201) | | | — | | | — | | | | | |
Noncash and other costs, net | | 12 | | | 42 | | | — | | | | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | 35 | | | — | | | — | | | | | |
PT Smelting intercompany loss | | — | | | 27 | | | — | | | | | |
Indonesia mining | | 4,382 | | | 1,190 | | | 510 | | | | | |
Other miningc | | 11,132 | | | 8,406 | | | 454 | | | | | |
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Corporate, other & eliminations | | (3,495) | | | (3,443) | | | 32 | | | | | |
As reported in our consolidated financial statements | | $ | 12,019 | | | $ | 6,153 | | | $ | 996 | | | | | |
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a.Includes silver sales of 3.1 million ounces ($22.18 per ounce average realized price).
b.Includes credits of $30 million ($0.04 per pound of copper) associated with adjustments to prior year treatment and refining charges and a charge of $41 million ($0.05 per pound of copper) associated with a settlement of an administrative fine levied by the Indonesia government. Also includes a charge of $18 million ($0.02 per pound of copper) to reserve for exposure associated with export duties in prior periods.
c.Represents the combined total for our other segments as presented in Note 9.
Indonesia Mining Product Revenues, Production Costs and Unit Net Cash Costs
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Six Months Ended June 30, 2021 | | | | | |
(In millions) | | By-Product | | Co-Product Method | |
| | Method | | Copper | | Gold | | Silvera | | Total | |
Revenues, excluding adjustments | | $ | 2,435 | | | $ | 2,435 | | | $ | 995 | | | $ | 68 | | | $ | 3,498 | | |
Site production and delivery, before net noncash and other costs shown below | | 859 | | | 598 | | | 244 | | | 17 | | | 859 | | |
Gold and silver credits | | (1,059) | | | — | | | — | | | — | | | — | | |
Treatment charges | | 140 | | | 97 | | | 40 | | | 3 | | | 140 | | |
Export duties | | 73 | | | 51 | | | 21 | | | 1 | | | 73 | | |
Royalty on metals | | 140 | | | 100 | | | 38 | | | 2 | | | 140 | | |
Net cash costs | | 153 | | | 846 | | | 343 | | | 23 | | | 1,212 | | |
DD&A | | 446 | | | 310 | | | 127 | | | 9 | | | 446 | | |
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Noncash and other costs, net | | 3 | | b | 2 | | | 1 | | | — | | | 3 | | |
Total costs | | 602 | | | 1,158 | | | 471 | | | 32 | | | 1,661 | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | 72 | | | 72 | | | (4) | | | — | | | 68 | | |
PT Smelting intercompany loss | | (90) | | | (63) | | | (25) | | | (2) | | | (90) | | |
Gross profit | | $ | 1,815 | | | $ | 1,286 | | | $ | 495 | | | $ | 34 | | | $ | 1,815 | | |
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Copper sales (millions of recoverable pounds) | | 568 | | | 568 | | | | | | | | |
Gold sales (thousands of recoverable ounces) | | | | | | 558 | | | | | | |
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Gross profit per pound of copper/per ounce of gold: | | | | | | | |
| | | | | | | | | | | |
Revenues, excluding adjustments | | $ | 4.29 | | | $ | 4.29 | | | $ | 1,785 | | | | | | |
Site production and delivery, before net noncash and other credits shown below | | 1.51 | | | 1.05 | | | 439 | | | | | | |
Gold and silver credits | | (1.86) | | | — | | | — | | | | | | |
Treatment charges | | 0.24 | | | 0.17 | | | 71 | | | | | | |
Export duties | | 0.13 | | | 0.09 | | | 37 | | | | | | |
Royalty on metals | | 0.25 | | | 0.18 | | | 68 | | | | | | |
Unit net cash costs | | 0.27 | | | 1.49 | | | 615 | | | | | | |
DD&A | | 0.78 | | | 0.55 | | | 228 | | | | | | |
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Noncash and other costs, net | | 0.01 | | b | — | | | 1 | | | | | | |
Total unit costs | | 1.06 | | | 2.04 | | | 844 | | | | | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | 0.12 | | | 0.12 | | | (8) | | | | | | |
PT Smelting intercompany loss | | (0.16) | | | (0.11) | | | (46) | | | | | | |
Gross profit per pound/ounce | | $ | 3.19 | | | $ | 2.26 | | | $ | 887 | | | | | | |
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Reconciliation to Amounts Reported | | | | | | | | | | | |
| | | | Production | | | | | | | |
| | Revenues | | and Delivery | | DD&A | | | | | |
Totals presented above | | $ | 3,498 | | | $ | 859 | | | $ | 446 | | | | | | |
Treatment charges | | (140) | | | — | | | — | | | | | | |
Export duties | | (73) | | | — | | | — | | | | | | |
Royalty on metals | | (140) | | | — | | | — | | | | | | |
Noncash and other costs, net | | 31 | | | 34 | | | — | | | | | | |
Other revenue adjustments, primarily for pricing on prior period open sales | | 68 | | | — | | | — | | | | | | |
PT Smelting intercompany loss | | — | | | 90 | | | — | | | | | | |
Indonesia mining | | 3,244 | | | 983 | | | 446 | | | | | | |
Other miningc | | 10,113 | | | 7,381 | | | 425 | | | | | | |
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Corporate, other & eliminations | | (2,759) | | | (2,511) | | | 31 | | | | | | |
As reported in our consolidated financial statements | | $ | 10,598 | | | $ | 5,853 | | | $ | 902 | | | | | | |
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a.Includes silver sales of 2.6 million ounces ($26.05 per ounce average realized price).
b.Includes credits of $31 million ($0.05 per pound of copper) associated with adjustments to prior year treatment and refining charges and a charge of $16 million ($0.03 per pound of copper) associated with a potential settlement of an administrative fine levied by the Indonesia government.
c.Represents the combined total for our other segments as presented in Note 9.
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Nine Months Ended September 30, 2016 | | | | | |
(In millions) | | By-Product | | Co-Product Method | |
| | Method | | Copper | | Gold | | Silvera | | Total | |
Revenues, excluding adjustments | | $ | 1,525 |
| | $ | 1,525 |
| | $ | 844 |
| | $ | 36 |
| | $ | 2,405 |
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Site production and delivery, before net noncash | | | | | | | | | | | |
and other costs shown below | | 1,190 |
| | 754 |
| | 418 |
| | 18 |
| | 1,190 |
| |
Gold and silver credits | | (897 | ) | | — |
| | — |
| | — |
| | — |
| |
Treatment charges | | 202 |
| | 128 |
| | 71 |
| | 3 |
| | 202 |
| |
Export duties | | 63 |
| | 40 |
| | 22 |
| | 1 |
| | 63 |
| |
Royalty on metals | | 84 |
| | 51 |
| | 32 |
| | 1 |
| | 84 |
| |
Net cash costs | | 642 |
| | 973 |
| | 543 |
| | 23 |
| | 1,539 |
| |
DD&A | | 284 |
| | 180 |
| | 100 |
| | 4 |
| | 284 |
| |
Noncash and other costs, net | | 31 |
| b | 20 |
| | 10 |
| | 1 |
| | 31 |
| |
Total costs | | 957 |
| | 1,173 |
| | 653 |
| | 28 |
| | 1,854 |
| |
Revenue adjustments, primarily for pricing on | | | | | | | | | | | |
prior period open sales | | — |
| | — |
| | 17 |
| | — |
| | 17 |
| |
PT Smelting intercompany loss | | (7 | ) | | (5 | ) | | (2 | ) | | — |
| | (7 | ) | |
Gross profit | | $ | 561 |
| | $ | 347 |
| | $ | 206 |
| | $ | 8 |
| | $ | 561 |
| |
| | | | | | | | | | | |
Copper sales (millions of recoverable pounds) | | 702 |
| | 702 |
| | | | | | | |
Gold sales (thousands of recoverable ounces) | | | | | | 653 |
| | | | | |
| | | | | | | | | | | |
Gross profit per pound of copper/per ounce of gold: | | | | | | | |
| | | | | | | | | | | |
Revenues, excluding adjustments | | $ | 2.17 |
| | $ | 2.17 |
| | $ | 1,292 |
| | | | | |
Site production and delivery, before net noncash | | | | | | | | | | | |
and other costs shown below | | 1.70 |
| | 1.08 |
| | 639 |
| | | | | |
Gold and silver credits | | (1.28 | ) | | — |
| | — |
| | | | | |
Treatment charges | | 0.29 |
| | 0.18 |
| | 109 |
| | | | | |
Export duties | | 0.09 |
| | 0.06 |
| | 34 |
| | | | | |
Royalty on metals | | 0.12 |
| | 0.07 |
| | 48 |
| | | | | |
Unit net cash costs | | 0.92 |
| | 1.39 |
| | 830 |
| | | | | |
DD&A | | 0.40 |
| | 0.25 |
| | 152 |
| | | | | |
Noncash and other costs, net | | 0.04 |
| b | 0.03 |
| | 16 |
| | | | | |
Total unit costs | | 1.36 |
| | 1.67 |
| | 998 |
| | | | | |
Revenue adjustments, primarily for pricing on | | | | | | | | | | | |
prior period open sales | | — |
| | — |
| | 25 |
| | | | | |
PT Smelting intercompany loss | | (0.01 | ) | | (0.01 | ) | | (4 | ) | | | | | |
Gross profit per pound/ounce | | $ | 0.80 |
| | $ | 0.49 |
| | $ | 315 |
| | | | | |
| | | | | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | | | | |
(In millions) | | | | Production | | | | | | | |
| | Revenues | | and Delivery | | DD&A | | | | | |
Totals presented above | | $ | 2,405 |
| | $ | 1,190 |
| | $ | 284 |
| | | | | |
Treatment charges | | (202 | ) | | — |
| | — |
| | | | | |
Export duties | | (63 | ) | | — |
| | — |
| | | | | |
Royalty on metals | | (84 | ) | | — |
| | — |
| | | | | |
Noncash and other costs, net | | — |
| | 31 |
| | — |
| | | | | |
Revenue adjustments, primarily for pricing on | | | | | | | | | | | |
prior period open sales | | 17 |
| | — |
| | — |
| | | | | |
PT Smelting intercompany loss | | — |
| | 7 |
| | — |
| | | | | |
Indonesia mining | | 2,073 |
| | 1,228 |
| | 284 |
| | | | | |
Other miningc | | 9,640 |
| | 7,747 |
| | 889 |
| | | | | |
Corporate, other & eliminations | | (1,260 | ) | | (991 | ) | | 764 |
| | | | | |
As reported in FCX’s consolidated financial statements | | $ | 10,453 |
| | $ | 7,984 |
| | $ | 1,937 |
| | | | | |
| | | | | | | | | | | |
| |
a. | Includes silver sales of 2.0 million ounces ($17.95 per ounce average realized price). |
| |
b. | Includes asset retirement charges of $17 million ($0.02 per pound of copper). |
| |
c. | Represents the combined total for our other mining operations, including North America copper mines, South America mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 10. |
Molybdenum Mines Product Revenues, Production Costs and Unit Net Cash Costs
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
|
|
|
|
| | | | | | | | |
| Three Months Ended June 30, | | | |
(In millions) | 2022 | | 2021 | | | | | |
| | | | | | | | |
Revenues, excluding adjustmentsa | $ | 151 | | | $ | 95 | | | | | | |
Site production and delivery, before net noncash and other costs shown below | 78 | | | 54 | | | | | | |
Treatment charges and other | 7 | | | 6 | | | | | | |
Net cash costs | 85 | | | 60 | | | | | | |
DD&A | 18 | | | 17 | | | | | | |
| | | | | | | | |
Noncash and other costs, net | 2 | |
| 2 | | | | | | |
Total costs | 105 | | | 79 | | | | | | |
Gross profit | $ | 46 | | | $ | 16 | | | | | | |
| | | | | | | | |
Molybdenum sales (millions of recoverable pounds)a | 8 | | | 7 | | | | | | |
| | | | | | | | |
Gross profit per pound of molybdenum: | | | |
| | | | | | | | |
Revenues, excluding adjustmentsa | $ | 18.87 | | | $ | 12.77 | | | | | | |
Site production and delivery, before net noncash and other costs shown below | 9.77 | | | 7.29 | | | | | | |
Treatment charges and other | 0.85 | | | 0.85 | | | | | | |
Unit net cash costs | 10.62 | | | 8.14 | | | | | | |
DD&A | 2.27 | | | 2.29 | | | | | | |
| | | | | | | | |
Noncash and other costs, net | 0.30 | |
| 0.30 | | | | | | |
Total unit costs | 13.19 | | | 10.73 | | | | | | |
Gross profit per pound | $ | 5.68 | | | $ | 2.04 | | | | | | |
| | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | |
| | | Production | | | | | |
Three Months Ended June 30, 2022 | Revenues | | and Delivery | | DD&A | | | |
Totals presented above | $ | 151 | | | $ | 78 | | | $ | 18 | | | | |
Treatment charges and other | (7) | | | — | | | — | | | | |
Noncash and other costs, net | — | | | 2 | | | — | | | | |
Molybdenum mines | 144 | | | 80 | | | 18 | | | | |
Other miningb | 7,043 | | | 4,651 | | | 473 | | | | |
| | | | | | | | |
| | | | | | | | |
Corporate, other & eliminations | (1,771) | | | (1,728) | | | 16 | | | | |
As reported in our consolidated financial statements | $ | 5,416 | | | $ | 3,003 | | | $ | 507 | | | | |
| | | | | | | | |
Three Months Ended June 30, 2021 | | | | | | | | |
Totals presented above | $ | 95 | | | $ | 54 | | | $ | 17 | | | | |
Treatment charges and other | (6) | | | — | | | — | | | | |
Noncash and other costs, net | — | | | 2 | | | — | | | | |
| | | | | | | | |
| | | | | | | | |
Molybdenum mines | 89 | | | 56 | | | 17 | | | | |
Other miningb | 7,285 | | | 4,519 | | | 451 | | | | |
| | | | | | | | |
| | | | | | | | |
Corporate, other & eliminations | (1,626) | | | (1,508) | | | 15 | | | | |
As reported in our consolidated financial statements | $ | 5,748 | | | $ | 3,067 | | | $ | 483 | | | | |
| | | | | | | | |
|
| | | | | | | | | | | | | | |
| | | | | | | | |
| Three Months Ended September 30, | | | |
(In millions) | 2017 | | 2016 | | | | | |
| | | | | | | | |
Revenues, excluding adjustmentsa | $ | 72 |
| | $ | 51 |
| | | | | |
Site production and delivery, before net noncash and other costs shown below | 56 |
| | 53 |
| | | | | |
Treatment charges and other | 7 |
| | 5 |
| | | | | |
Net cash costs | 63 |
| | 58 |
| | | | | |
DD&A | 20 |
| | 15 |
| | | | | |
Noncash and other costs, net | 2 |
| | 4 |
| | | | | |
Total costs | 85 |
| | 77 |
| | | | | |
Gross loss | $ | (13 | ) | | $ | (26 | ) | | | | | |
| | | | | | | | |
Molybdenum sales (millions of recoverable pounds)a | 8 |
| | 5 |
| | | | | |
| | | | | | | | |
Gross loss per pound of molybdenum: | | | |
| | | | | | | | |
Revenues, excluding adjustmentsa | $ | 9.02 |
| | $ | 9.08 |
| | | | | |
Site production and delivery, before net noncash and other costs shown below | 7.05 |
| | 9.42 |
| | | | | |
Treatment charges and other | 0.85 |
| | 0.86 |
| | | | | |
Unit net cash costs | 7.90 |
| | 10.28 |
| | | | | |
DD&A | 2.44 |
| | 2.63 |
| | | | | |
Noncash and other costs, net | 0.28 |
| | 0.77 |
| | | | | |
Total unit costs | 10.62 |
| | 13.68 |
| | | | | |
Gross loss per pound | $ | (1.60 | ) | | $ | (4.60 | ) | | | | | |
| | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | |
(In millions) | | | | | | | | |
| | | | | | | | |
| | | Production | | | | | |
Three Months Ended September 30, 2017 | Revenues | | and Delivery | | DD&A | | | |
Totals presented above | $ | 72 |
| | $ | 56 |
| | $ | 20 |
| | | |
Treatment charges and other | (7 | ) | | — |
| | — |
| | | |
Noncash and other costs, net | — |
| | 2 |
| | — |
| | | |
Molybdenum mines | 65 |
| | 58 |
| | 20 |
| | | |
Other miningb | 4,949 |
| | 3,497 |
| | 375 |
| | | |
Corporate, other & eliminations | (704 | ) | | (753 | ) | | 23 |
| | | |
As reported in FCX’s consolidated financial statements | $ | 4,310 |
| | $ | 2,802 |
| | $ | 418 |
| | | |
| | | | | | | | |
Three Months Ended September 30, 2016 | | | | | | | | |
Totals presented above | $ | 51 |
| | $ | 53 |
| | $ | 15 |
| | | |
Treatment charges and other | (5 | ) | | — |
| | — |
| | | |
Noncash and other costs, net | — |
| | 4 |
| | — |
| | | |
Molybdenum mines | 46 |
| | 57 |
| | 15 |
| | | |
Other miningb | 4,123 |
| | 2,988 |
| | 382 |
| | | |
Corporate, other & eliminations | (292 | ) | | (516 | ) | | 246 |
| | | |
As reported in FCX’s consolidated financial statements | $ | 3,877 |
| | $ | 2,529 |
| | $ | 643 |
| | | |
| | | | | | | | |
a.Reflects sales of the Molybdenum mines’ production to our molybdenum sales company at market-based pricing. On a consolidated basis, realizations are based on the actual contract terms for sales to third parties; as a result, our consolidated average realized price per pound of molybdenum will differ from the amounts reported in this table. | |
a. | Reflects sales of the Molybdenum mines’ production to our molybdenum sales company at market-based pricing. On a consolidated basis, realizations are based on the actual contract terms for sales to third parties; as a result, our consolidated average realized price per pound of molybdenum will differ from the amounts reported in this table. |
| |
b. | Represents the combined total for our other mining operations, including North America copper mines, South America mining, Indonesia mining, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 10. Also includes amounts associated with our molybdenum sales company, which includes sales of molybdenum produced by the Molybdenum mines and by certain of the North America and South America copper mines. |
b.Represents the combined total for our other segments as presented in Note 9. Also includes amounts associated with our molybdenum sales company, which includes sales of molybdenum produced by the Molybdenum mines and by certain of the North America and South America copper mines.
Molybdenum Mines Product Revenues, Production Costs and Unit Net Cash Costs
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| | Six Months Ended June 30, | | |
(In millions) | | 2022 | | 2021 | | | | |
| | | | | | | | |
Revenues, excluding adjustmentsa | | $ | 285 | | | $ | 171 | | | | | |
Site production and delivery, before net noncash and other costs shown below | | 150 | | | 108 | | | | | |
Treatment charges and other | | 13 | | | 12 | | | | | |
Net cash costs | | 163 | | | 120 | | | | | |
DD&A | | 34 | | | 32 | | | | | |
Metals inventory adjustments | | — | | | 1 | | | | | |
Noncash and other costs, net | | 5 | | | 5 | | | | | |
Total costs | | 202 | | | 158 | | | | | |
Gross profit | | $ | 83 | | | $ | 13 | | | | | |
| | | | | | | | |
Molybdenum sales (millions of recoverable pounds)a | | 15 | | | 14 | | | | | |
| | | | | | | | |
Gross profit per pound of molybdenum: | | |
| | | | | | | | |
Revenues, excluding adjustmentsa | | $ | 18.81 | | | $ | 12.12 | | | | | |
Site production and delivery, before net noncash and other costs shown below | | 9.90 | | | 7.68 | | | | | |
Treatment charges and other | | 0.85 | | | 0.85 | | | | | |
Unit net cash costs | | 10.75 | | | 8.53 | | | | | |
DD&A | | 2.27 | | | 2.27 | | | | | |
Metals inventory adjustments | | — | | | 0.06 | | | | | |
Noncash and other costs, net | | 0.34 | | | 0.36 | | | | | |
Total unit costs | | 13.36 | | | 11.22 | | | | | |
Gross profit per pound | | $ | 5.45 | | | $ | 0.90 | | | | | |
| | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | |
| | | | | | | | Metals |
| | | | Production | | | | Inventory |
Six Months Ended June 30, 2022 | | Revenues | | and Delivery | | DD&A | | Adjustments |
Totals presented above | | $ | 285 | | | $ | 150 | | | $ | 34 | | | $ | — | |
Treatment charges and other | | (13) | | | — | | | — | | | — | |
Noncash and other costs, net | | — | | | 5 | | | — | | | — | |
Molybdenum mines | | 272 | | | 155 | | | 34 | | | — | |
Other miningb | | 15,242 | | | 9,441 | | | 930 | | | 18 | |
| | | | | | | | |
| | | | | | | | |
Corporate, other & eliminations | | (3,495) | | | (3,443) | | | 32 | | | — | |
As reported in our consolidated financial statements | | $ | 12,019 | | | $ | 6,153 | | | $ | 996 | | | $ | 18 | |
| | | | | | | | |
Six Months Ended June 30, 2021 | | | | | | | | |
Totals presented above | | $ | 171 | | | $ | 108 | | | $ | 32 | | | $ | 1 | |
Treatment charges and other | | (12) | | | — | | | — | | | — | |
Noncash and other costs, net | | — | | | 5 | | | — | | | — | |
| | | | | | | | |
| | | | | | | | |
Molybdenum mines | | 159 | | | 113 | | | 32 | | | 1 | |
Other miningb | | 13,198 | | | 8,251 | | | 839 | | | — | |
| | | | | | | | |
| | | | | | | | |
Corporate, other & eliminations | | (2,759) | | | (2,511) | | | 31 | | | — | |
As reported in our consolidated financial statements | | $ | 10,598 | | | $ | 5,853 | | | $ | 902 | | | $ | 1 | |
| | | | | | | | |
a.Reflects sales of the Molybdenum mines’ production to our molybdenum sales company at market-based pricing. On a consolidated basis, realizations are based on the actual contract terms for sales to third parties; as a result, our consolidated average realized price per pound of molybdenum will differ from the amounts reported in this table.
b.Represents the combined total for our other segments as presented in Note 9. Also includes amounts associated with our molybdenum sales company, which includes sales of molybdenum produced by the Molybdenum mines and by certain of the North America and South America copper mines.
|
| | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | | |
(In millions) | 2017 | | 2016 | | | | | |
| | | | | | | | |
Revenues, excluding adjustmentsa | $ | 220 |
| | $ | 153 |
| | | | | |
Site production and delivery, before net noncash and other costs shown below | 164 |
| | 146 |
| | | | | |
Treatment charges and other | 21 |
| | 17 |
| | | | | |
Net cash costs | 185 |
| | 163 |
| | | | | |
DD&A | 58 |
| | 51 |
| | | | | |
Noncash and other costs, net | 5 |
| | 13 |
| | | | | |
Total costs | 248 |
| | 227 |
| | | | | |
Gross loss | $ | (28 | ) | | $ | (74 | ) | | | | | |
| | | | | | | | |
Molybdenum sales (millions of recoverable pounds)a | 24 |
| | 19 |
| | | | | |
| | | | | | | | |
Gross loss per pound of molybdenum: | | | |
| | | | | | | | |
Revenues, excluding adjustmentsa | $ | 9.05 |
| | $ | 7.94 |
| | | | | |
Site production and delivery, before net noncash and other costs shown below | 6.75 |
| | 7.53 |
| | | | | |
Treatment charges and other | 0.85 |
| | 0.86 |
| | | | | |
Unit net cash costs | 7.60 |
| | 8.39 |
| | | | | |
DD&A | 2.38 |
| | 2.65 |
| | | | | |
Noncash and other costs, net | 0.23 |
| | 0.72 |
| | | | | |
Total unit costs | 10.21 |
| | 11.76 |
| | | | | |
Gross loss per pound | $ | (1.16 | ) | | $ | (3.82 | ) | | | | | |
| | | | | | | | |
Reconciliation to Amounts Reported | | | | | | | | |
(In millions) | | | | | | | | |
| | | | | | | | |
| | | Production | | | | | |
Nine Months Ended September 30, 2017 | Revenues | | and Delivery | | DD&A | | | |
Totals presented above | $ | 220 |
| | $ | 164 |
| | $ | 58 |
| | | |
Treatment charges and other | (21 | ) | | — |
| | — |
| | | |
Noncash and other costs, net | — |
| | 5 |
| | — |
| | | |
Molybdenum mines | 199 |
| | 169 |
| | 58 |
| | | |
Other miningb | 13,419 |
| | 9,652 |
| | 1,122 |
| | | |
Corporate, other & eliminations | (2,256 | ) | | (2,324 | ) | | 77 |
| | | |
As reported in FCX’s consolidated financial statements | $ | 11,362 |
| | $ | 7,497 |
| | $ | 1,257 |
| | | |
| | | | | | | | |
Nine Months Ended September 30, 2016 | | | | | | | | |
Totals presented above | $ | 153 |
| | $ | 146 |
| | $ | 51 |
| | | |
Treatment charges and other | (17 | ) | | — |
| | — |
| | | |
Noncash and other costs, net | — |
| | 13 |
| | — |
| | | |
Molybdenum mines | 136 |
| | 159 |
| | 51 |
| | | |
Other miningb | 11,577 |
| | 8,816 |
| | 1,122 |
| | | |
Corporate, other & eliminations | (1,260 | ) | | (991 | ) | | 764 |
| | | |
As reported in FCX’s consolidated financial statements | $ | 10,453 |
| | $ | 7,984 |
| | $ | 1,937 |
| | | |
| | | | | | | | |
| |
a. | Reflects sales of the Molybdenum mines’ production to our molybdenum sales company at market-based pricing. On a consolidated basis, realizations are based on the actual contract terms for sales to third parties; as a result, our consolidated average realized price per pound of molybdenum will differ from the amounts reported in this table. |
| |
b. | Represents the combined total for our other mining operations, including North America copper mines, South America mining, Indonesia mining, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 10. Also includes amounts associated with our molybdenum sales company, which includes sales of molybdenum produced by the Molybdenum mines and by certain of the North America and South America copper mines. |
CAUTIONARY STATEMENT
Our discussion and analysis contains forward-looking statements in which we discuss our potential future performance. Forward-looking statements are all statements other than statements of historical facts, such as plans, projections, or expectations relating to business outlook, strategy, goals or targets; global market conditions; ore grades and milling rates,rates; production and sales volumes,volumes; unit net cash costs,costs; capital expenditures; operating costs; operating plans; cash flows, capital expenditures,flows; liquidity; PT-FI’s financing, construction and completion of additional domestic smelting capacity in Indonesia in accordance with the terms of the special mining license (IUPK); our commitments to deliver responsibly produced copper, including plans to implement and validate all of our operating sites under the Copper Mark and to comply with other disclosure frameworks; execution of our energy and climate strategies and the underlying assumptions and estimated impacts on our business related thereto; achievement of climate commitments and net zero aspiration; improvements in operating procedures and technology innovations; exploration efforts and results,results; development and production activities, rates and costs, liquidity,costs; future organic growth opportunities; tax rates,rates; export quotas and duties; the impact of copper, gold and molybdenum price changes,changes; the impact of deferred intercompany profits on earnings,earnings; mineral reserve estimates,and mineral resource estimates; final resolution of settlements associated with ongoing legal proceedings; debt repurchases and the ongoing implementation of our financial policy and future returns to shareholders, including dividend payments (base or variable) and share purchases and sales.repurchases. The words “anticipates,” “may,” “can,” “plans,” “believes,” “estimates,” “expects,” “projects,” “targets,”"targets," “intends,” “likely,” “will,” “should,” “could,” “to be,” “potential””potential," “assumptions,” “guidance,” “aspirations,” “future” and any similar expressions are intended to identify those assertions as forward-looking statements. The declaration and payment of dividends (base or variable) and timing and amount of any share repurchases is at the discretion of the Board and management, respectively, and is subject to a number of factors, including maintaining our net debt target, capital availability, our financial results, cash requirements, business prospects, global economic conditions, changes in laws, contractual restrictions and other factors deemed relevant by the Board or management, as applicable. The share repurchase program may be modified, increased, suspended or terminated at any time at the Board’s discretion.
We caution readers that forward-looking statements are not guarantees of future performance and actual results may differ materially from those anticipated, expected, 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, but are not limited to, supply of and demand for, and prices of copper, goldthe commodities we produce, primarily copper; changes in our cash requirements, financial position, financing or investment plans; changes in general market, economic, tax, regulatory or industry conditions, including as a result of Russia’s invasion of Ukraine or potential global economic downturn or recession; reductions in liquidity and molybdenum;access to capital; the ongoing COVID-19 pandemic and any future public health crisis; political and social risks; operational risks inherent in mining, with higher inherent risks in underground mining; fluctuations in price and availability of commodities purchased; constraints on supply, logistics and transportation services; mine sequencing; changes in mine plans or operational modifications, delays, deferrals or cancellations; production rates; potential effectstiming of cost and capital expenditure reductions and production curtailments on financialshipments; results and cash flow;of technical, economic or feasibility studies; potential inventory adjustments; potential impairment of long-lived mining assets; the outcome of negotiations with the Indonesian government regarding PT-FI’s long-term operating rights; the potential effects of violence in Indonesia generally and in the province of Papua; industry risks; regulatory changes (including adoptionthe Indonesia government's extension of financial assurance regulations as proposed byPT-FI's export license after March 19, 2023; satisfaction of requirements in accordance with PT-FI's IUPK to extend mining rights from 2031 through 2041; the U.S. Environmental Protection Agency under CERCLAIndonesia government's approval of a deferred schedule for completion of additional domestic smelting capacity in Indonesia; cybersecurity incidents; labor relations, including labor-related work stoppages and costs; the hard rockresults of the human health assessment to evaluate the potential impacts of tailings and mining industry); political risks; labor relations;waste, and compliance with applicable environmental, health and safety laws and regulations; weather- and climate-related risks; environmental risks;risks and litigation results (including the final disposition of the unfavorable Indonesia Tax Court ruling relatingresults; our ability to surface water taxescomply with our responsible production commitments under specific frameworks and the outcome of Cerro Verde’s royalty dispute with the Peruvian national tax authority);any changes to such frameworks and other factors described in more detail under the heading “Risk Factors” contained in Part I, Item 1A. “Risk Factors” of our annual report on2021 Form 10-K for the year ended December 31, 2016, filed with the SEC as updated by our subsequent filings with the SEC. With respect to our operations in Indonesia, such factors include whether PT-FI will be able to resolve complex regulatory matters in Indonesia and continue to export copper after December 31, 2017.10-K.
Investors are cautioned that many of the assumptions upon which our forward-looking statements are based are likely to change after the date the forward-looking statements are made, including for example commodity prices, which we cannot control, and production volumes and costs or technological solutions and innovation, some aspects of which we may not be able to control. Further, we may make changes to our business plans that could affect our results. We caution investors that we do not intendundertake no obligation to update any forward-looking statements, more frequently than quarterlywhich speak only as of the date made, notwithstanding any changes in our assumptions, changes in business plans, actual experience or other changes,changes.
This report on Form 10-Q also contains financial measures such as net debt and we undertake no obligationunit net cash costs (credits) per pound of copper and molybdenum, which are not recognized under U.S. GAAP. Refer to update any forward-looking statements.“Operations – Unit Net
Cash Costs (Credits)” for further discussion of unit net cash costs (credits) 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. Refer to “Net Debt” for reconciliations of debt and consolidated cash and cash equivalents to net debt.
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Item 3. | Quantitative and Qualitative Disclosures About Market Risk. |
Item 3.Quantitative and Qualitative Disclosures About Market Risk.
There have been no material changes in our market risks during the nine-monthsix-month period ended SeptemberJune 30, 2017. 2022.
For additional information on market risks, refer to “Disclosures About Market Risks” included in Part II, Items 7. and 7A. of our annual report on2021 Form 10-K for the year ended December 31, 2016.10-K. For projected sensitivities of our operating cash flow to changes in commodity prices, refer to “Outlook” in Part I, Item 2. of this quarterly report on Form 10-Q for the period ended September 30, 2017;10-Q; for projected sensitivities of our provisionally priced copper sales and derivative instruments to changes in commodity prices refer to “Consolidated Results – Revenues” in Part I, Item 2. of this quarterly report on Form 10-Q for10-Q.
Item 4.Controls and Procedures.
(a)Evaluation of disclosure controls and procedures. Our chief executive officer and chief financial officer, with the participation of management, have evaluated the effectiveness of our “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this quarterly report on Form 10-Q. Based on their evaluation, they have concluded that our disclosure controls and procedures were effective as of June 30, 2022.
(b)Changes in internal control over financial reporting. There has been no change in our internal control over financial reporting that occurred during the quarter ended SeptemberJune 30, 2017.2022, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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Item 4. | Controls and Procedures.
|
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(a) | Evaluation of disclosure controls and procedures. Our chief executive officer and chief financial officer, with the participation of management, have evaluated the effectiveness of our “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this quarterly report on Form 10-Q. Based on their evaluation, they have concluded that our disclosure controls and procedures are effective as of September 30, 2017.
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(b) | Changes in internal control over financial reporting. There has been no change in our internal control over financial reporting that occurred during the quarter ended September 30, 2017, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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Part II. | OTHER INFORMATION |
Part II.OTHER INFORMATION
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Item 1. | Legal Proceedings.
|
Item 1.Legal Proceedings.
We are involved in numerous legal proceedings that arise in the ordinary course of our business or that are associated with environmental issues arising from legacy operations conducted over the years by Freeport Minerals Corporation and its affiliates.issues. We are also involved from time to timeperiodically in other reviews, inquiries, investigations and other proceedings initiated by or involving 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 reported in Note 9 of this quarterly report on Form 10-Q for the period ended September 30, 2017, and in Part I, Item 3. “Legal Proceedings” and Note 12 of our annual report on2021 Form 10-K, for the year ended December 31, 2016, as updated inand Note 9 in our quarterly reports on Form 10-Q for the quarters ended March 31, 2017, and June 30, 2017,8 herein, will have a material adverse effect on our financial condition; although individual or cumulative 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.
Environmental ProceedingsThere have been no material changes to legal proceedings previously disclosed in Part I, Item 3. “Legal Proceedings” and Note 12 of our 2021 Form 10-K. Refer to Note 8 for an update to our asbestos and talc claims.
Notices of Violation - Cerro Verde
In September 2017, Cerro Verde paid approximately $148,000, including interest, in connection with final resolution of a Notice of Violation (NOV) issued in December 2006 by Peru’s Agency for Environmental Assessment and Enforcement (OEFA) alleging a spill of dry tailings from a pipeline near the Enlozada tailings dam and findings of dissolved oxidized copper in excess of permissible limits near the Hyuarondo dam. In September 2017, Cerro Verde also paid approximately $169,000, including interest, in connection with final resolution of an NOV issued in October 2008 by OEFA alleging findings of dissolved oxidized copper in excess of permissible limits, that sprinklers were not being used to moisten stockpiles or the conveyer belt at a concentrator plant, and that the uncleanliness of septic tanks at the transfer station resulted in findings of raw sewage in the treated water used for landscaping around administrative buildings.
Item 1A. Risk Factors.
There have been no material changes to our risk factors previously disclosed in Part I, Item 1A. “Risk Factors” of our annual report on2021 Form 10-K for the year ended December 31, 2016, except as disclosed in Part II, 10-K.
Item 1A. “Risk Factors”2.Unregistered Sales of our quarterly report on Form 10-Q for the quarter ended March 31, 2017, which provided as follows:Equity Securities and Use of Proceeds.
The risk factor “Mine closure and reclamation regulations impose substantial costs on our operations and include requirements that we provide financial assurance supporting those obligations. We also have plugging and abandonment obligations related to our remaining oil and gas properties, and are required to provide bonds or other forms of financial assurance in connection with those operations. Changes in or the failure to comply with these requirements could have a material adverse effect on us” which was included in our annual report on Form 10-K for the year ended December 31, 2016, is updated to add the following:
The United States (U.S.) Environmental Protection Agency extended the comment period for the proposed regulations under Section 108(b) of CERCLA to July 11, 2017. Since filing our annual report on Form 10-K in February 2017, we have evaluated the potential impact of these proposed rules. Based on this evaluation, we believe that, if adopted without material modification, the rules would impose financial responsibility obligations on U.S. hard rock mining operations that are unnecessary, duplicative of existing state and other federal requirements, and unreasonable. Our initial calculations also suggest that the financial responsibility amounts would be difficult, if not impossible, for us and others to meet with corporate resources, and would be extremely expensive, if not impossible, to finance with third-party financial instruments such as letters of credit, bonds or insurance. We and others in the industry will continue to participate in the public comment process and oppose the adoption of these rules in anything like their proposed form, as adoption in that form would severely harm the international competitiveness of the U.S. hard rock mining industry and would materially and adversely affect our cash flows, results of operations and financial condition.
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Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
There were no unregistered sales of equity securities during the three months ended SeptemberJune 30, 2017.2022.
There were noThe following table sets forth information with respect to shares of FCX common stock purchased by us during the three months ended SeptemberJune 30, 2017.2022, and the approximate dollar value of shares that may yet be purchased pursuant to our share repurchase program:
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Period | | (a) Total Number of Shares Purchased | | (b) Average Price Paid Per Share | | (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programsa | | (d) Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programsa |
April 1-30, 2022 | | 2,668,891 | | | $ | 46.85 | | | 2,668,891 | | | $ | 1,846,078,689 | |
May 1-31, 2022 | | 5,581,338 | | | $ | 37.64 | | | 5,581,338 | | | $ | 1,636,023,901 | |
June 1-30, 2022 | | 8,863,479 | | | $ | 34.91 | | | 8,863,479 | | | $ | 1,326,563,372 | |
Total | | 17,113,708 | | | $ | 37.66 | | | 17,113,708 | | | |
a.On November 1, 2021, our Board approved a share repurchase program authorizing repurchases of up to $3.0 billion of our common stock. On July 21, 2008,19, 2022, our Board of Directors approvedauthorized an increase in our open-marketthe share purchaserepurchase program forfrom up to 30 million shares. There have been no purchases under this$3.0 billion to up to $5.0 billion. The share repurchase program since 2008. This programdoes not obligate us to acquire any specific amount of shares and does not have an expiration date. At September 30, 2017, there were 23.7 million shares that could still be purchased under the program.
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Item 4. | Mine Safety Disclosures. |
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 safety and health of our workforce is to continuously improve performance through implementing robust management systems and providing adequate training, safety incentive and occupational health programs. The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95.1 to this quarterly report on Form 10-Q.
Item 6.Exhibits.
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Exhibit | | with this | Incorporated by Reference |
Number | Exhibit Title | Form 10-Q | Form | File No. | Date Filed |
| PT-FI Divestment Agreement dated as of September 27, 2018 among FCX, International Support LLC, PT Freeport Indonesia, PT Indocopper Investama and PT Indonesia Asahan Aluminium (Persero). | | 10-Q | 001-11307-01 | 11/9/2018 |
| Supplemental and Amendment Agreement to the PT-FI Divestment Agreement, dated December 21, 2018, among FCX, PT Freeport Indonesia, PT Indonesia Papua Metal Dan Mineral (f/k/a PT Indocopper Investama), PT Indonesia Asahan Aluminium (Persero) and International Support LLC. | | 10-K | 001-11307-01 | 2/15/2019 |
| Amended and Restated Certificate of Incorporation of FCX, effective as of June 8, 2016. | | 8-K | 001-11307-01 | 6/9/2016 |
| Amended and Restated By-Laws of FCX, effective as of June 8, 2016.3, 2020. | | 8-K | 001-11307-01 | 6/9/20163/2020 |
| Indenture dated as of February 13, 2012, between FCX and U.S. Bank National Association, as Trustee (relating to the 3.55% Senior Notes due 2022, the 2.30% Senior Notes due 2017, the 4.00% Senior Notes due 2021, the 4.55% Senior Notes due 2024, and the 5.40% Senior Notes due 2034). | | 8-K | 001-11307-01 | 2/13/2012 |
| Third Supplemental Indenture dated as of February 13, 2012, between FCX and U.S. Bank National Association, as Trustee (relating to the 3.55% Senior Notes due 2022). | | 8-K | 001-11307-01 | 2/13/2012 |
| Fourth Supplemental Indenture dated as of May 31, 2013, among FCX, Freeport-McMoRan Oil & Gas LLC and U.S. Bank National Association, as Trustee (relating to the 3.55% Senior Notes due 2022, the 2.30% Senior Notes due 2017, the 4.00% Senior Notes due 2021, the 4.55% Senior Notes due 2024, and the 5.40% Senior Notes due 2034). | | 8-K | 001-11307-01 | 6/3/2013 |
| Fifth Supplemental Indenture dated as of November 14, 2014 among FCX, Freeport-McMoRan Oil & Gas LLC and U.S. Bank National Association, as Trustee (relating to the 2.30% Senior Notes due 2017). | | 8-K | 001-11307-01 | 11/14/2014 |
| Sixth Supplemental Indenture dated as of November 14, 2014 among FCX, Freeport-McMoRan Oil & Gas LLC and U.S. Bank National Association, as Trustee (relating to the 4.00% Senior Notes due 2021). | | 8-K | 001-11307-01 | 11/14/2014 |
| Seventh Supplemental Indenture dated as of November 14, 2014 among FCX, Freeport-McMoRan Oil & Gas LLC and U.S. Bank National Association, as (relating to the 4.55% Senior Notes due 2024). | | 8-K | 001-11307-01 | 11/14/2014 |
| Eighth Supplemental Indenture dated as of November 14, 2014 among FCX, Freeport-McMoRan Oil & Gas LLC and U.S. Bank National Association, as Trustee (relating to the 5.40% Senior Notes due 2034). | | 8-K | 001-11307-01 | 11/14/2014 |
| Indenture dated as of March 7, 2013, between FCX and U.S. Bank National Association, as Trustee (relating to the 2.375% Senior Notes due 2018, the 3.100% Senior Notes due 2020, the 3.875% Senior Notes due 2023, and the 5.450% Senior Notes due 2043). | | 8-K | 001-11307-01 | 3/7/2013 |
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Exhibit | | with this | Incorporated by Reference |
Number | Exhibit Title | Form 10-Q | Form | File No. | Date Filed |
| Indenture dated as of March 13, 2007, among Plains Exploration & Production Company, the Subsidiary Guarantors parties thereto, and Wells Fargo Bank, N.A., as Trustee (relating to the 6.5% Senior Notes due 2020 and the 6.875% Senior Notes due 2023). | | 8-K | 001-31470 | 3/13/2007 |
| Sixteenth Supplemental Indenture dated as of October 26, 2012 to the Indenture dated as of March 13, 2007, among Plains Exploration & Production Company, the Subsidiary Guarantors parties thereto and Wells Fargo Bank, N.A., as Trustee (relating to the 6.5% Senior Notes due 2020). | | 8-K | 001-31470 | 10/26/2012 |
| Seventeenth Supplemental Indenture dated as of October 26, 2012 to the Indenture dated as of March 13, 2007, among Plains Exploration & Production Company, the Subsidiary Guarantors parties thereto and Wells Fargo Bank, N.A., as Trustee (relating to the 6.875% Senior Notes due 2023). | | 8-K | 001-31470 | 10/26/2012 |
| Eighteenth Supplemental Indenture dated as of May 31, 2013 to the Indenture dated as of March 13, 2007, among Freeport-McMoRan Oil & Gas LLC, as Successor Issuer, FCX Oil & Gas Inc., as Co-Issuer, FCX, as Parent Guarantor, Plains Exploration & Production Company, as Original Issuer, and Wells Fargo Bank, N.A., as Trustee (relating to the 6.5% Senior Notes due 2020 and the 6.875% Senior Notes due 2023). | | 8-K | 001-11307-01 | 6/3/2013 |
| Nineteenth Supplemental Indenture dated as of September 30, 2016 to the Indenture dated as of March 13, 2007, among Freeport-McMoRan Oil & Gas LLC, as Successor Issuer, FCX Oil & Gas Inc., as Co-Issuer, FMSTP Inc., as Additional Co-Issuer, FCX, as Parent Guarantor, and Wells Fargo Bank, N.A., as Trustee (relating to the 6.50% Senior Notes due 2020 and the 6.875% Senior Notes due 2023). | | 10-Q | 001-11307-01 | 11/9/2016 |
| Twentieth Supplemental Indenture dated as of December 13, 2016 to the Indenture dated as of March 13, 2007, among Freeport-McMoRan Oil & Gas LLC, as Successor Issuer, FCX Oil & Gas LLC, as Co-Issuer, FMSTP Inc., as Additional Co-Issuer, FCX, as Parent Guarantor, and Wells Fargo Bank, N.A., as Trustee (relating to the 6.50% Senior Notes due 2020 and the 6.875% Senior Notes due 2023). | | 8-K | 001-11307-01 | 12/13/2016 |
| Form of Indenture dated as of September 22, 1997, between Phelps Dodge Corporation and The Chase Manhattan Bank, as Trustee (relating to the 7.125% Senior Notes due 2027, the 9.50% Senior Notes due 2031, and the 6.125% Senior Notes due 2034). | | S-3 | 333-36415 | 9/25/1997 |
| Form of 7.125% Debenture due November 1, 2027 of Phelps Dodge Corporation issued on November 5, 1997, pursuant to the Indenture dated as of September 22, 1997, between Phelps Dodge Corporation and The Chase Manhattan Bank, as Trustee (relating to the 7.125% Senior Notes due 2027). | | 8-K | 01-00082 | 11/3/1997 |
| Form of 9.5% Note due June 1, 2031 of Phelps Dodge Corporation issued on May 30, 2001, pursuant to the Indenture dated as of September 22, 1997, between Phelps Dodge Corporation and First Union National Bank, as successor Trustee (relating to the 9.50% Senior Notes due 2031). | | 8-K | 01-00082 | 5/30/2001 |
| Form of 6.125% Note due March 15, 2034 of Phelps Dodge Corporation issued on March 4, 2004, pursuant to the Indenture dated as of September 22, 1997, between Phelps Dodge Corporation and First Union National Bank, as successor Trustee (relating to the 6.125% Senior Notes due 2034). | | 10-K | 01-00082 | 3/7/2005 |
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Exhibit | | with this | Incorporated by Reference |
Number | Exhibit Title | Form 10-Q | Form | File No. | Date Filed |
| Supplemental Indenture dated as of April 4, 2007 to the Indenture dated as of September 22, 1997, among Phelps Dodge Corporation, as Issuer, Freeport-McMoRan Copper & Gold Inc., as Parent Guarantor, and U.S. Bank National Association, as Trustee (relating to the 7.125% Senior Notes due 2027, the 9.50% Senior Notes due 2031, and the 6.125% Senior Notes due 2034).
| | 10-K | 001-11307-01 | 2/26/2016 |
| Indenture dated as of December 13, 2016, among FCX, Freeport-McMoRan Oil & Gas LLC, as guarantor, and U.S. Bank National Association, as Trustee (relating to the 6.125% Senior Notes due 2019, the 6.50% Senior Notes due 2020, the 6.625% Senior Notes due 2021, the 6.75% Senior Notes due 2022, and the 6.875% Senior Notes due 2023). | | 8-K | 001-11307-01 | 12/13/2016 |
| Registration Rights Agreement dated as of December 13, 2016 among FCX, Freeport-McMoRan Oil & Gas LLC, as Guarantor, and J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Dealer Managers, relating to the 6.125% Senior Notes due 2019. | | 8-K | 001-11307-01 | 12/13/2016 |
| Registration Rights Agreement dated as of December 13, 2016 among FCX, Freeport-McMoRan Oil & Gas LLC, as Guarantor, and J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Dealer Managers, relating to the 6.50% Senior Notes due 2020. | | 8-K | 001-11307-01 | 12/13/2016 |
| Registration Rights Agreement dated as of December 13, 2016 among FCX, Freeport-McMoRan Oil & Gas LLC, as Guarantor, and J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Dealer Managers, relating to the 6.625% Senior Notes due 2021. | | 8-K | 001-11307-01 | 12/13/2016 |
| Registration Rights Agreement dated as of December 13, 2016 among FCX, Freeport-McMoRan Oil & Gas LLC, as Guarantor, and J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Dealer Managers, relating to the 6.75% Senior Notes due 2022. | | 8-K | 001-11307-01 | 12/13/2016 |
| Registration Rights Agreement dated as of December 13, 2016 among FCX, Freeport-McMoRan Oil & Gas LLC, as Guarantor, and J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Dealer Managers, relating to the 6.875% Senior Notes due 2023. | | 8-K | 001-11307-01 | 12/13/2016 |
| Letter from Ernst & Young LLP regarding unaudited interim financial statements. | X | | | |
| List of Subsidiary Guarantors and Subsidiary Issuers of Guaranteed Securities. | | 10-K | 001-11307-01 | 2/15/2022 |
| Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d – 14(a). | X | | | |
| Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d – 14(a). | X | | | |
| Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350. | X | | | |
| Certification of Principal Financial Officer pursuant to 18 U.S.C Section 1350. | X | | | |
| Mine Safety and Health Administration Safety Data. | X | | | |
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101.INS | XBRL Instance Document- the XBRL Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | X | | | |
101.SCH | | Filed | |
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Number | Exhibit Title | Form 10-Q | Form | File No. | Date Filed |
101.INS | XBRL Instance Document. | X | | | |
101.SCH | Inline XBRL Taxonomy Extension Schema. | X | | | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase. | X | | | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase. | X | | | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase. | X | | | |
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104 | The cover page from this Quarterly Report on Form 10-Q, formatted in Inline XBRL. | X | | | |
* Indicates management contract or compensatory plan or arrangement.
Note: Certain instruments with respect to long-term debt of FCX have not been filed as exhibits to this Quarterly Report on Form 10-Q since the total amount of securities authorized under any such instrument does not exceed 10 percent of the total assets of FCX and its subsidiaries on a consolidated basis. FCXThe registrant agrees to furnish a copy of each such instrument upon request ofsupplementally to the Securities and Exchange Commission.Commission (SEC) a copy of any omitted schedule or exhibit upon the request of the SEC in accordance with Item 601(a)(5) of Regulation S-K.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| Freeport-McMoRan Inc. |
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| FREEPORT-McMoRan INC.By: | /s/ Ellie L. Mikes |
| | Ellie L. Mikes |
| By: | /s/ C. Donald Whitmire, Jr. |
| | C. Donald Whitmire, Jr. |
| | Vice President and Chief Accounting Officer |
| | Controller - Financial Reporting(authorized signatory |
| | (authorized signatory |
| | and Principal Accounting Officer) |
Date: November 7, 2017August 5, 2022