FREEPORT-MCMORAN INC - Quarter Report: 2019 June (Form 10-Q)

United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-11307-01

Freeport-McMoRan 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	85004-2189
(Address of principal executive offices)			(Zip Code)

(602) 366-8100

(Registrant’s telephone number, including area code)

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



Title of each class	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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). ☑ Yes ☐ 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 grown company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging grown company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐	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 Act). ☐ Yes ☑ No

On July 31, 2019, there were issued and outstanding 1,450,890,574 shares of the registrant’s common stock, par value $0.10 per share.

Freeport-McMoRan Inc.

TABLE OF CONTENTS




	Page

Part I. Financial Information	3

Item 1. Financial Statements:	3

Consolidated Balance Sheets (Unaudited)	3

Consolidated Statements of Operations (Unaudited)	4

Consolidated Statements of Comprehensive (Loss) Income (Unaudited)	5

Consolidated Statements of Cash Flows (Unaudited)	6

Consolidated Statements of Equity (Unaudited)	7

Notes to Consolidated Financial Statements (Unaudited)	9

Report of Independent Registered Public Accounting Firm	31

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	32

Item 3. Quantitative and Qualitative Disclosures About Market Risk	69

Item 4. Controls and Procedures	69

Part II. Other Information	69

Item 1. Legal Proceedings	69

Item 1A. Risk Factors	69

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	69

Item 4. Mine Safety Disclosures	69

Item 6. Exhibits	70

Signature	S-1

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Part I.	FINANCIAL INFORMATION


Item 1.	Financial Statements.

Freeport-McMoRan Inc.

CONSOLIDATED BALANCE SHEETS (Unaudited)



	June 30, 2019			December 31, 2018
	(In millions)
ASSETS
Current assets:
Cash and cash equivalents	$	2,623		$	4,217
Trade accounts receivable	725			829
Income and other tax receivables	245			493
Inventories:
Materials and supplies, net	1,634			1,528
Mill and leach stockpiles	1,352			1,453
Product	1,391			1,778
Other current assets	760			422
Total current assets	8,730			10,720
Property, plant, equipment and mine development costs, net	28,841			28,010
Long-term mill and leach stockpiles	1,347			1,314
Other assets	2,168			2,172
Total assets	$	41,086		$	42,216

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	2,721		$	2,625
Current portion of environmental and asset retirement obligations	425			449
Dividends payable	73			73
Accrued income taxes	63			165
Current portion of debt	4			17
Total current liabilities	3,286			3,329
Long-term debt, less current portion	9,912			11,124
Deferred income taxes	4,055			4,032
Environmental and asset retirement obligations, less current portion	3,617			3,609
Other liabilities	2,399			2,230
Total liabilities	23,269			24,324

Equity:
Stockholders’ equity:
Common stock	158			158
Capital in excess of par value	25,949			26,013
Accumulated deficit	(12,082		)	(12,041		)
Accumulated other comprehensive loss	(582		)	(605		)
Common stock held in treasury	(3,734		)	(3,727		)
Total stockholders’ equity	9,709			9,798
Noncontrolling interests	8,108			8,094
Total equity	17,817			17,892
Total liabilities and equity	$	41,086		$	42,216

The accompanying notes are an integral part of these consolidated financial statements.

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Freeport-McMoRan Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)



	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
	(In millions, except per share amounts)
Revenues	$	3,546		$	5,168		$	7,338		$	10,036
Cost of sales:
Production and delivery	3,002			2,915			5,978			5,723
Depreciation, depletion and amortization	352			442			699			893
Total cost of sales	3,354			3,357			6,677			6,616
Selling, general and administrative expenses	97			109			209			240
Mining exploration and research expenses	31			24			58			45
Environmental obligations and shutdown costs	23			59			65			68
Net loss (gain) on sales of assets	8			(45		)	(25		)	(56		)
Total costs and expenses	3,513			3,504			6,984			6,913
Operating income	33			1,664			354			3,123
Interest expense, net	(132		)	(142		)	(278		)	(293		)
Net gain (loss) on early extinguishment of debt	—			9			(6		)	8
Other income, net	5			20			19			49
(Loss) income from continuing operations before income taxes and equity in affiliated companies’ net earnings	(94		)	1,551			89			2,887
Benefit from (provision for) income taxes	15			(515		)	(90		)	(1,021		)
Equity in affiliated companies’ net earnings	5			3			2			1
Net (loss) income from continuing operations	(74		)	1,039			1			1,867
Net (loss) income from discontinued operations	—			(4		)	1			(15		)
Net (loss) income	(74		)	1,035			2			1,852
Net loss (income) attributable to noncontrolling interests	2			(166		)	(43		)	(291		)
Net (loss) income attributable to common stockholders	$	(72	)	$	869		$	(41	)	$	1,561

Basic net (loss) income per share attributable to common stockholders:
Continuing operations	$	(0.05	)	$	0.60		$	(0.03	)	$	1.08
Discontinued operations	—			—			—			(0.01		)
	$	(0.05	)	$	0.60		$	(0.03	)	$	1.07

Diluted net (loss) income per share attributable to common stockholders:
Continuing operations	$	(0.05	)	$	0.59		$	(0.03	)	$	1.08
Discontinued operations	—			—			—			(0.01		)
	$	(0.05	)	$	0.59		$	(0.03	)	$	1.07

Weighted-average common shares outstanding:
Basic	1,451			1,449			1,451			1,449
Diluted	1,451			1,458			1,451			1,458

Dividends declared per share of common stock	$	0.05		$	0.05		$	0.10		$	0.10

The accompanying notes are an integral part of these consolidated financial statements.

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Freeport-McMoRan Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Unaudited)



	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
	(In millions)
Net (loss) income	$	(74	)	$	1,035		$	2		$	1,852

Other comprehensive income, net of taxes:
Defined benefit plans:
Amortization of unrecognized amounts included in net periodic benefit costs	13			11			24			23
Foreign exchange losses	—			—			—			(1		)
Other comprehensive income	13			11			24			22

Total comprehensive (loss) income	(61		)	1,046			26			1,874
Total comprehensive loss (income) attributable to noncontrolling interests	1			(166		)	(44		)	(290		)
Total comprehensive (loss) income attributable to common stockholders	$	(60	)	$	880		$	(18	)	$	1,584

The accompanying notes are an integral part of these consolidated financial statements.

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Freeport-McMoRan Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)



	Six Months Ended
	June 30,
	2019			2018
	(In millions)
Cash flow from operating activities:
Net income	$	2		$	1,852
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization	699			893
Metals inventory adjustments	59			2
Net gain on sales of assets	(25		)	(56		)
Stock-based compensation	40			60
Net charges for environmental and asset retirement obligations, including accretion	109			152
Payments for environmental and asset retirement obligations	(100		)	(110		)
Net charges for defined pension and postretirement plans	53			38
Pension plan contributions	(33		)	(44		)
Net loss (gain) on early extinguishment of debt	6			(8		)
Deferred income taxes	20			61
(Income) loss on disposal of discontinued operations	(1		)	15
(Increase) decrease in long-term mill and leach stockpiles	(33		)	38
PT Freeport Indonesia surface water tax settlement	28			—
Cerro Verde royalty dispute	28			4
Payments for Cerro Verde royalty dispute	(86		)	(21		)
Other, net	41			15
Changes in working capital and other tax payments:
Accounts receivable	256			309
Inventories	287			(468		)
Other current assets	(26		)	(20		)
Accounts payable and accrued liabilities	9			114
Accrued income taxes and timing of other tax payments	(245		)	(148		)
Net cash provided by operating activities	1,088			2,678

Cash flow from investing activities:
Capital expenditures:
North America copper mines	(417		)	(232		)
South America	(108		)	(138		)
Indonesia	(658		)	(449		)
Molybdenum mines	(6		)	(2		)
Other	(62		)	(63		)
Proceeds from sales of oil and gas properties	91			—
Intangible water rights and other, net	(7		)	(86		)
Net cash used in investing activities	(1,167		)	(970		)

Cash flow from financing activities:
Proceeds from debt	328			352
Repayments of debt	(1,563		)	(2,297		)
Cash dividends and distributions paid:
Common stock	(146		)	(73		)
Noncontrolling interests	(79		)	(241		)
Contributions from noncontrolling interests	100			—
Stock-based awards net (payments) proceeds	(6		)	5
Debt financing costs and other, net	(4		)	(23		)
Net cash used in financing activities	(1,370		)	(2,277		)

Net decrease in cash, cash equivalents, restricted cash and restricted cash equivalents	(1,449		)	(569		)
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of year	4,455			4,710
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period	$	3,006		$	4,141

The accompanying notes are an integral part of these consolidated financial statements.

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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
	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, 2019	1,582	$	158	$	25,963		$	(12,010	)	$	(594	)	131	$	(3,734	)	$	9,783		$	8,058		$	17,841
Stock-based compensation, including the tender of shares	—	—		10			—			—			—	—			10			—			10
Dividends	—	—		(73		)	—			—			—	—			(73		)	—			(73		)
Contributions from noncontrolling interests	—	—		49			—			—			—	—			49			51			100
Net loss attributable to common stockholders	—	—		—			(72		)	—			—	—			(72		)	—			(72		)
Net loss attributable to noncontrolling interests	—	—		—			—			—			—	—			—			(2		)	(2		)
Other comprehensive income	—	—		—			—			12			—	—			12			1			13
Balance at June 30, 2019	1,582	$	158	$	25,949		$	(12,082	)	$	(582	)	131	$	(3,734	)	$	9,709		$	8,108		$	17,817



	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
	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, 2018	1,579	$	158	$	26,729		$	(14,030	)	$	(475	)	130	$	(3,726	)	$	8,656		$	3,270		$	11,926
Exercised and issued stock-based awards	—	—		2			—			—			—	—			2			—			2
Stock-based compensation, including the tender of shares	—	—		9			—			—			—	—			9			—			9
Dividends	—	—		(73		)	—			—			—	—			(73		)	(68		)	(141		)
Net income attributable to common stockholders	—	—		—			869			—			—	—			869			—			869
Net income attributable to noncontrolling interests	—	—		—			—			—			—	—			—			166			166
Other comprehensive income	—	—		—			—			11			—	—			11			—			11
Balance at June 30, 2018	1,579	$	158	$	26,667		$	(13,161	)	$	(464	)	130	$	(3,726	)	$	9,474		$	3,368		$	12,842

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Freeport-McMoRan Inc.

CONSOLIDATED STATEMENTS OF EQUITY (Unaudited)

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
	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, 2018	1,579	$	158	$	26,013		$	(12,041	)	$	(605	)	130	$	(3,727	)	$	9,798		$	8,094		$	17,892
Exercised and issued stock-based awards	3	—		1			—			—			—	—			1			—			1
Stock-based compensation, including the tender of shares	—	—		33			—			—			1	(7		)	26			—			26
Dividends	—	—		(146		)	—			—			—	—			(146		)	(70		)	(216		)
Changes in noncontrolling interests	—	—		(1		)	—			—			—	—			(1		)	(11		)	(12		)
Contributions from noncontrolling interests	—	—		49			—			—			—	—			49			51			100
Net loss attributable to common stockholders	—	—		—			(41		)	—			—	—			(41		)	—			(41		)
Net income attributable to noncontrolling interests	—	—		—			—			—			—	—			—			43			43
Other comprehensive income	—	—		—			—			23			—	—			23			1			24
Balance at June 30, 2019	1,582	$	158	$	25,949		$	(12,082	)	$	(582	)	131	$	(3,734	)	$	9,709		$	8,108		$	17,817



	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
	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, 2017	1,578	$	158	$	26,751		$	(14,722	)	$	(487	)	130	$	(3,723	)	$	7,977		$	3,319		$	11,296
Exercised and issued stock-based awards	1	—		8			—			—			—	—			8			—			8
Stock-based compensation, including the tender of shares	—	—		53			—			—			—	(3		)	50			—			50
Dividends	—	—		(145		)	—			—			—	—			(145		)	(241		)	(386		)
Net income attributable to common stockholders	—	—		—			1,561			—			—	—			1,561			—			1,561
Net income attributable to noncontrolling interests	—	—		—			—			—			—	—			—			291			291
Other comprehensive income (loss)	—	—		—			—			23			—	—			23			(1		)	22
Balance at June 30, 2018	1,579	$	158	$	26,667		$	(13,161	)	$	(464	)	130	$	(3,726	)	$	9,474		$	3,368		$	12,842

The accompanying notes are an integral part of these consolidated financial statements.

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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, 2018 (2018 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. All such adjustments are, in the opinion of management, of a normal recurring nature. Operating results for the six-month period ended June 30, 2019, are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.

Property, Plant, Equipment and Mine Development Costs. The following is an update to FCX’s property, plant, equipment and mine development costs accounting policy included in Note 1 of its 2018 Form 10-K. Development costs are capitalized beginning after proven and probable mineral reserves have been established. Development costs include costs incurred resulting from mine pre-production activities undertaken to gain access to proven and probable reserves, including shafts, adits, drifts, ramps, permanent excavations, infrastructure and removal of overburden. For underground mines certain costs related to panel development, such as undercutting and drawpoint development, are also capitalized as mine development costs until production reaches design capacity for the mine. After reaching design capacity, the mine transitions to the production phase and panel development costs are allocated to inventory and then included as a component of cost of goods sold.

Attribution of PT Freeport Indonesia (PT-FI) Net Income or Loss. FCX has concluded that the attribution of PT-FI’s net income or loss from the date of the divestment transaction (i.e., December 21, 2018) through December 31, 2022 (the Initial Period), should be based on the economics replacement agreement, which provides for FCX and the other pre-transaction PT-FI shareholders (i.e., PT Indonesia Asahan Aluminium (Persero) (PT Inalum) and PT Indonesia Papua Metal Dan Mineral (PTI)) to retain the economics of the revenue and cost sharing arrangements under PT-FI’s joint venture formerly with Rio Tinto Plc (refer to Note 2 of FCX’s 2018 Form 10-K). The economics replacement agreement entitles FCX to approximately 81 percent of PT-FI dividends paid during the Initial Period, with the remaining 19 percent paid to the noncontrolling interests. PT-FI’s net loss in second-quarter 2019 totaled $56 million, of which $46 million was attributed to FCX, and for the first six months of 2019 totaled $4 million, of which $3 million was attributed to FCX. PT-FI’s cumulative net loss since the December 21, 2018, transaction date through June 30, 2019, totaled $140 million, of which $114 million was attributed to FCX.

The above-described attribution of PT-FI’s net income or loss applies only through the Initial Period. Beginning January 1, 2023, the attribution of PT-FI’s net income or loss will be based on equity ownership percentages (48.76 percent for FCX, 26.24 percent for PT Inalum and 25.00 percent for PTI). For all of its other partially owned consolidated subsidiaries, FCX attributes net income or loss based on equity ownership percentages.

Agreement to Sell a Portion of Cobalt Business. In second-quarter 2019, FCX entered into an agreement to sell its cobalt refinery in Kokkola, Finland, and related cobalt cathode precursor business (consisting of approximately $135 million of assets and $20 million of liabilities at June 30, 2019) for total consideration of approximately $150 million, plus working capital at the time of closing. FCX and the current noncontrolling interest partners in Freeport Cobalt will retain the remaining cobalt business. The transaction is expected to close by year-end 2019. Lundin Mining Corporation, which is one of the noncontrolling interest partners, is entitled to receive 30 percent of the proceeds from this transaction. In addition to customary closing conditions, including regulatory approvals, prior to completing the transaction, Freeport Cobalt is required to be segregated into two separate businesses. FCX evaluated the criteria required for assets held for sale classification and concluded that this transaction did not meet all of the criteria at June 30, 2019.

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NOTE 2. EARNINGS PER SHARE

FCX calculates its basic net (loss) income per share of common stock under the two-class method and calculates its diluted net (loss) income per share of common stock using the more dilutive of the two-class method or the treasury-stock method. Basic net (loss) income per share of common stock was computed by dividing net (loss) income attributable to common stockholders by the weighted-average shares of common stock outstanding during the period. Diluted net (loss) income 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.

Reconciliations of net (loss) income and weighted-average shares of common stock outstanding for purposes of calculating basic and diluted net (loss) income per share follow (in millions, except per share amounts):



	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Net (loss) income from continuing operations	$	(74	)	$	1,039		$	1		$	1,867
Net loss (income) from continuing operations attributable to noncontrolling interests	2			(166		)	(43		)	(291		)
Undistributed earnings allocated to participating securities	(3		)	(3		)	(3		)	(4		)
Net (loss) income from continuing operations attributable to common stockholders	(75		)	870			(45		)	1,572

Net (loss) income from discontinued operations attributable to common stockholders	—			(4		)	1			(15		)


Net (loss) income attributable to common stockholders	$	(75	)	$	866		$	(44	)	$	1,557

Basic weighted-average shares of common stock outstanding	1,451			1,449			1,451			1,449
Add shares issuable upon exercise or vesting of dilutive stock options and restricted stock units^a	—			9			—			9
Diluted weighted-average shares of common stock outstanding	1,451			1,458			1,451			1,458

Basic net (loss) income per share attributable to common stockholders:
Continuing operations	$	(0.05	)	$	0.60		$	(0.03	)	$	1.08
Discontinued operations	—			—			—			(0.01		)
	$	(0.05	)	$	0.60		$	(0.03	)	$	1.07
Diluted net (loss) income per share attributable to common stockholders:
Continuing operations	$	(0.05	)	$	0.59		$	(0.03	)	$	1.08
Discontinued operations	—			—			—			(0.01		)
	$	(0.05	)	$	0.59		$	(0.03	)	$	1.07


a.	Excludes approximately 10 million shares of common stock in second-quarter 2019, 2 million in second-quarter 2018, 12 million for the first six months of 2019 and 3 million for the first six months of 2018 associated with outstanding stock options with exercise prices less than the average market price of FCX’s common stock 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 (loss) income per share of common stock. Stock options for 43 million shares of common stock in second-quarter 2019, 35 million shares in second-quarter 2018, 41 million shares for the first six months of 2019 and 34 million shares for the first six months of 2018 were excluded.

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NOTE 3. INVENTORIES, INCLUDING LONG-TERM MILL AND LEACH STOCKPILES

The components of inventories follow (in millions):



	June 30, 2019		December 31, 2018
Current inventories:
Total materials and supplies, net^a	$	1,634	$	1,528

Mill stockpiles	$	227	$	282
Leach stockpiles	1,125		1,171
Total current mill and leach stockpiles	$	1,352	$	1,453

Raw materials (primarily concentrate)	$	295	$	260
Work-in-process	156		192
Finished goods	940		1,326
Total product	$	1,391	$	1,778

Long-term inventories:
Mill stockpiles	$	254	$	265
Leach stockpiles	1,093		1,049
Total long-term mill and leach stockpiles^b	$	1,347	$	1,314


a.	Materials and supplies inventory was net of obsolescence reserves totaling $24 million at June 30, 2019, and December 31, 2018.


b.	Estimated metals in stockpiles not expected to be recovered within the next 12 months.

FCX recorded charges of $2 million in second-quarter 2019 and $59 million for the first six months of 2019 to adjust metals inventory carrying values to net realizable value, primarily for cobalt inventory because of lower cobalt market prices.

NOTE 4. INCOME TAXES

Variations in the relative proportions of jurisdictional income result in fluctuations to FCX’s consolidated effective income tax rate. FCX’s consolidated effective income tax rate was 101 percent for the first six months of 2019 and 35 percent for the first six months of 2018. Geographic sources of FCX’s benefit from (provision for) income taxes follow (in millions):



	Six Months Ended
	June 30,
	2019				2018
U.S. operations	$	20		^a	$	8		^b
International operations	(110		)		(1,029		)
Total	$	(90	)		$	(1,021	)


a.	Includes a tax credit of $18 million primarily associated with state law changes.


b.	Includes a tax credit of $5 million associated with the settlement of a state income tax examination.

FCX's consolidated effective income tax rate for the first six months of 2019 is a function of the combined effective tax rates for the jurisdictions in which FCX operates, excluding the U.S. jurisdiction. Because FCX's U.S. jurisdiction generated net losses in the first six months of 2019 that will not result in a realized tax benefit, applicable accounting rules require FCX to adjust its estimated annual effective tax rate to exclude the impact of U.S. net losses.

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NOTE 5. DEBT AND EQUITY

The components of debt follow (in millions):



	June 30, 2019			December 31, 2018
Senior notes and debentures:
Issued by FCX	$	8,595		$	9,594
Issued by Freeport Minerals Corporation (FMC)	357			358
Cerro Verde credit facility	825			1,023
Other	139			166
Total debt	9,916			11,141
Less current portion of debt	(4		)	(17		)
Long-term debt	$	9,912		$	11,124

Revolving Credit Facility. At June 30, 2019, there were no borrowings outstanding and $13 million in letters of credit issued under FCX’s revolving credit facility, resulting in availability of approximately $3.5 billion, of which approximately $1.5 billion could be used for additional letters of credit.

On May 2, 2019, FCX’s $3.5 billion revolving credit facility was amended to extend $3.26 billion of the facility by one year to April 20, 2024. The remaining $240 million matures on April 20, 2023. In addition, the revolving credit facility was amended to modify the calculation of the total debt component used to determine the total leverage ratio by increasing the amount of unrestricted cash that may be applied to reduce the amount of total debt. There were no other substantive modifications to the revolving credit facility.

Senior Notes. On March 27, 2019, FCX redeemed all of its outstanding $1.0 billion aggregate principal amount of 3.100% Senior Notes due 2020. Holders of these senior notes received the principal amount together with the redemption premium and accrued and unpaid interest up to the redemption date. As a result of this redemption, FCX recorded a loss on early extinguishment of debt totaling $5 million in first-quarter 2019.

Cerro Verde Credit Facility. In March 2019, Cerro Verde prepaid $200 million of its credit facility, which resulted in a $1 million loss recorded to early extinguishment of debt in first-quarter 2019.

Interest Expense, Net. Consolidated interest costs totaled $167 million in second-quarter 2019, $165 million in second-quarter 2018, $345 million for the first six months of 2019 and $341 million for the first six months of 2018. Capitalized interest added to property, plant, equipment and mine development costs, net, totaled $35 million in second-quarter 2019, $23 million in second-quarter 2018, $67 million for the first six months of 2019 and $48 million for the first six months of 2018.

Common Stock. On June 26, 2019, FCX declared a quarterly cash dividend of $0.05 per share on its common stock, which was paid on August 1, 2019, to common stockholders of record as of July 15, 2019.

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NOTE 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 June 30, 2019, and December 31, 2018, FCX had no price protection contracts relating to its mine production. A discussion of FCX’s derivative contracts and programs follows.

Derivatives Designated as Hedging Instruments – Fair Value Hedges

Copper Futures and Swap Contracts. Some of FCX’s U.S. copper rod 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 six-month periods ended June 30, 2019 and 2018. At June 30, 2019, FCX held copper futures and swap contracts that qualified for hedge accounting for 74 million pounds at an average contract price of $2.76 per pound, with maturities through December 2020.

A summary of (losses) gains recognized in revenues for derivative financial instruments related to commodity contracts that are designated and qualify as fair value hedge transactions, including the unrealized gains (losses) on the related hedged item follows (in millions):



	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Copper futures and swap contracts:
Unrealized (losses) gains:
Derivative financial instruments	$	(13	)	$	(4	)	$	5		$	(19	)
Hedged item – firm sales commitments	13			4			(5		)	19

Realized (losses) gains:
Matured derivative financial instruments	(3		)	—			(1		)	2

Derivatives Not Designated as Hedging Instruments

Embedded Derivatives. Certain FCX 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 (LBMA) gold price at the time of shipment as specified in the contract. FCX receives 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 prices and the LBMA gold prices as specified in the contracts, which results in an embedded derivative (i.e., a pricing mechanism that 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 LBMA 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 these contracts do not allow for net settlement and always result in physical delivery. The embedded derivative does not qualify for hedge accounting and is adjusted to fair value through earnings each period, using the period-end LME or COMEX copper forward prices and the adjusted LBMA gold prices, until the date of final pricing. Similarly, FCX purchases copper and cobalt under contracts that provide for provisional pricing. Mark-to-market price fluctuations from these embedded derivatives are recorded through the settlement date and are reflected in revenues for sales contracts and in inventory for purchase contracts.

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A summary of FCX’s embedded derivatives at June 30, 2019, follows:



	Open Positions	Average Price Per Unit				Maturities Through
	Open Positions	Contract		Market		Maturities Through
Embedded derivatives in provisional sales contracts:
Copper (millions of pounds)	505	$	2.79	$	2.72	November 2019
Gold (thousands of ounces)	74	1,328		1,416		August 2019
Embedded derivatives in provisional purchase contracts:
Copper (millions of pounds)	86	2.83		2.72		September 2019
Cobalt (millions of pounds)	6	10.56		8.88		September 2019

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. At June 30, 2019, Atlantic Copper held net copper forward sales contracts for 2 million pounds at an average contract price of $2.66 per pound, with maturities through July 2019.

Summary of (Losses) Gains. A summary of the realized and unrealized (losses) gains recognized in operating income for commodity contracts that do not qualify as hedge transactions, including embedded derivatives, follows (in millions):



	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Embedded derivatives in provisional sales contracts:^a
Copper	$	(122	)	$	(14	)	$	—		$	(149	)
Gold and other metals	13			(30		)	11			(12		)
Copper forward contracts^b	(4		)	6			(3		)	8


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, 2019		December 31, 2018
Commodity Derivative Assets:
Derivatives designated as hedging instruments:
Copper futures and swap contracts	$	1	$	—
Derivatives not designated as hedging instruments:
Embedded derivatives in provisional copper, gold and cobalt
sales/purchase contracts	41		23
Total derivative assets	$	42	$	23

Commodity Derivative Liabilities:
Derivatives designated as hedging instruments:
Copper futures and swap contracts	$	5	$	9
Derivatives not designated as hedging instruments:
Embedded derivatives in provisional copper, gold and cobalt
sales/purchase contracts	51		39
Total derivative liabilities	$	56	$	48

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 contract on its balance sheet. FCX’s embedded derivatives on provisional sales/purchase contracts are netted with the corresponding outstanding receivable/payable balances.

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A summary of these unsettled commodity contracts that are offset in the balance sheets follows (in millions):



	Assets				Liabilities
	June 30, 2019		December 31, 2018		June 30, 2019		December 31, 2018

Gross amounts recognized:
Embedded derivatives in provisional
sales/purchase contracts	$	41	$	23	$	51	$	39
Copper derivatives	1		—		5		9
	42		23		56		48

Less gross amounts of offset:
Embedded derivatives in provisional
sales/purchase contracts	4		7		4		7
Copper derivatives	1		—		1		—
	5		7		5		7

Net amounts presented in balance sheet:
Embedded derivatives in provisional
sales/purchase contracts	37		16		47		32
Copper derivatives	—		—		4		9
	$	37	$	16	$	51	$	41

Balance sheet classification:
Trade accounts receivable	$	26	$	3	$	22	$	24
Accounts payable and accrued liabilities	11		13		29		17
	$	37	$	16	$	51	$	41

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 June 30, 2019, the maximum amount of credit exposure associated with derivative transactions was $37 million.

Other Financial Instruments. Other financial instruments include cash and cash equivalents, restricted cash, restricted cash equivalents, accounts receivable, investment securities, legally restricted funds, accounts payable and accrued liabilities, dividends payable and long-term debt. The carrying value for cash and cash equivalents (which included time deposits of $1.4 billion at June 30, 2019, and $2.3 billion at December 31, 2018), restricted cash, restricted cash equivalents, accounts receivable, accounts payable and accrued liabilities, and dividends payable approximates fair value because of their short-term nature and generally negligible credit losses (refer to Note 7 for the fair values of investment securities, legally restricted funds and long-term debt).

In addition, as of June 30, 2019, FCX has contingent consideration assets related to the 2016 asset sales of TF Holdings Limited (TFHL), onshore California oil and gas properties and the Deepwater Gulf of Mexico (GOM) oil and gas properties (refer to Note 7 for the related fair values and to Note 2 of FCX’s 2018 Form 10-K for further discussion of these instruments).

Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents. The following table provides a reconciliation of total cash, cash equivalents, restricted cash and restricted cash equivalents presented in the consolidated statements of cash flows (in millions):



	June 30, 2019		December 31, 2018
Balance sheet components:
Cash and cash equivalents	$	2,623	$	4,217
Restricted cash and restricted cash equivalents included in:
Other current assets	218		110
Other assets	165		128
Total cash, cash equivalents, restricted cash and restricted cash equivalents presented in the consolidated statements of cash flows	$	3,006	$	4,455

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NOTE 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 did not have any significant transfers in or out of Level 3 during second-quarter 2019.

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 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, restricted cash, restricted cash equivalents, accounts receivable, accounts payable and accrued liabilities, and dividends payable (refer to Note 6) follows (in millions):



	At June 30, 2019
	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	4		4		—		4		—		—
Total	30		30		26		4		—		—

Legally restricted funds:^a
U.S. core fixed income fund	58		58		58		—		—		—
Government mortgage-backed securities	37		37		—		—		37		—
Government bonds and notes	37		37		—		—		37		—
Corporate bonds	32		32		—		—		32		—
Asset-backed securities	12		12		—		—		12		—
Collateralized mortgage-backed securities	7		7		—		—		7		—
Money market funds	7		7		—		7		—		—
Municipal bonds	1		1		—		—		1		—
Total	191		191		58		7		126		—

Derivatives:
Embedded derivatives in provisional copper, gold and cobalt sales/purchase contracts in a gross asset position^c	41		41		—		—		41		—
Copper futures and swap contracts^c	1		1		—		1		—		—
Contingent consideration for the sales of TFHL
and onshore California oil and gas properties^a	79		79		—		—		79		—
Total	121		121		—		1		120		—

Contingent consideration for the sale of the
Deepwater GOM oil and gas properties^a	132		111		—		—		—		111

Liabilities
Derivatives:^c
Embedded derivatives in provisional copper, gold and cobalt sales/purchase contracts in a gross liability position	$	51	$	51	$	—	$	—	$	51	$	—
Copper futures and swap contracts	5		5		—		4		1		—
Total	56		56		—		4		52		—

Long-term debt, including current portion^d	9,916		9,861		—		—		9,861		—

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	At December 31, 2018
	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	$	—	$	—	$	—
Equity securities	4		4		—		4		—		—
Total	29		29		25		4		—		—

Legally restricted funds:^a
U.S. core fixed income fund	55		55		55		—		—		—
Government mortgage-backed securities	38		38		—		—		38		—
Government bonds and notes	36		36		—		—		36		—
Corporate bonds	28		28		—		—		28		—
Asset-backed securities	11		11		—		—		11		—
Collateralized mortgage-backed securities	7		7		—		—		7		—
Money market funds	5		5		—		5		—		—
Municipal bonds	1		1		—		—		1		—
Total	181		181		55		5		121		—

Derivatives:
Embedded derivatives in provisional copper, gold and cobalt sales/purchase contracts in a gross asset position^c	23		23		—		—		23		—
Contingent consideration for the sales of TFHL
and onshore California oil and gas properties^a	73		73		—		—		73		—
Total	96		96		—		—		96		—

Contingent consideration for the sale of the
Deepwater GOM oil and gas properties^a	143		127		—		—		—		127

Liabilities
Derivatives:^c
Embedded derivatives in provisional copper, gold and cobalt sales/purchase contracts in a gross liability position	$	39	$	39	$	—	$	—	$	39	$	—
Copper futures and swap contracts	9		9		—		7		2		—
Total	48		48		—		7		41		—

Long-term debt, including current portion^d	11,141		10,238		—		—		10,238		—


a.	Current portion included in other current assets and long-term portion included in other assets.

Excludes time deposits (which approximated fair value) included in (i) other current assets of $218 million at June 30, 2019, and $109 million at December 31, 2018, and (ii) other assets of $164 million at June 30, 2019, and $126 million at December 31, 2018, primarily associated with an assurance bond to support PT-FI’s commitment for the development of a new smelter 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. The U.S. core fixed income fund is valued at 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).

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.

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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 quoted monthly LME or COMEX copper forward prices and the adjusted LBMA gold prices at each reporting date based on the month of maturity (refer to Note 6 for further discussion); however, FCX’s contracts themselves are not traded on an exchange. FCX’s embedded derivatives on provisional cobalt purchases are valued using quoted monthly LME cobalt forward prices or average published Metals Bulletin cobalt prices subject to certain adjustments as specified by the terms of the contracts, at each reporting date based on the month of maturity. 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 6 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.

As reported in Note 2 of FCX’s 2018 Form 10-K, in November 2016, FCX’s sale of its interest in TFHL included 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 the 24-month period beginning January 1, 2018. The fair value of the contingent consideration derivative associated with the sale of TFHL was $59 million at June 30, 2019 (included in other current assets in the consolidated balance sheet), and $57 million at December 31, 2018 (included in other assets). Future changes in the fair value of this contingent consideration derivative will continue to be recorded in discontinued operations. Also in 2016, FCX’s sale of its onshore California oil and gas properties included contingent consideration of up to $150 million, consisting of $50 million per year for 2018, 2019 and 2020 if the price of Brent crude oil averages over $70 per barrel in each of these calendar years. The fair value of the contingent consideration derivative associated with the sale of the onshore California oil and gas properties was $20 million at June 30, 2019 ($7 million included in other current assets and $13 million in other assets), and $16 million at December 31, 2018 (included in other assets). Future changes in the fair value of this contingent consideration derivative will continue to be recorded in operating income. Also, contingent consideration of $50 million associated with the onshore California oil and gas properties was realized in 2018 and collected in first-quarter 2019 (included in proceeds from sales of oil and gas properties in the consolidated statements of cash flows) because the average Brent crude oil price exceeded $70 per barrel for 2018 and was included in other current assets in the consolidated balance sheet at December 31, 2018. These fair values were 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.

As reported in Note 2 of FCX’s 2018 Form 10-K, in 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 will be received over time as future cash flows are realized in connection with a third-party production handling agreement for an offshore platform. The first collection occurred in third-quarter 2018. The contingent consideration included in (i) other current assets totaled $14 million at June 30, 2019, and $27 million at December 31, 2018, and (ii) other assets totaled $118 million at June 30, 2019, and $116 million at December 31, 2018. The fair value of this contingent consideration was calculated based on a discounted cash flow model using inputs that include third-party 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.

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Long-term debt, including current portion, is 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 June 30, 2019, as compared with those techniques used at December 31, 2018.

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 six months of 2019 follows (in millions):



Fair value at January 1, 2019	$	127
Net unrealized loss related to assets still held at the end of the period	(5		)
Settlements	(11		)
Fair value at June 30, 2019	$	111

NOTE 8. CONTINGENCIES AND COMMITMENTS

Litigation

There were no significant updates to previously reported legal proceedings included in Note 12 of FCX’s 2018 Form 10-K, other than the matter below, which was updated in Note 8 of FCX’s quarterly report on Form 10-Q for the quarter ended March 31, 2019.

As previously disclosed, there has been a significant increase in the number of cases alleging the presence of asbestos contamination in talc-based personal care products and in cases alleging exposure to talc products that are not alleged to be contaminated with asbestos. The primary targets have been the producers of those products, but defendants in many of these cases also include talc miners. Cyprus Amax Minerals Company (CAMC), an indirect wholly owned subsidiary of FCX, and Cyprus Mines Corporation (Cyprus Mines), a wholly owned subsidiary of CAMC, are among those targets. Cyprus Mines was engaged in talc mining from 1964 until 1992 when it exited its talc business by conveying it to a third party in two related transactions. Those transactions involved (i) a transfer by Cyprus Mines of the assets of its talc business to a newly formed subsidiary that assumed all pre-sale and post-sale talc liabilities, subject to limited reservations, and (ii) a sale of the stock of that subsidiary to the third party. In 2011, the third party sold that subsidiary to Imerys Talc America (Imerys), an affiliate of Imerys S.A.

Cyprus Mines has contractual indemnification rights, subject to limited reservations, against Imerys, which has historically acknowledged those indemnification obligations, and had taken responsibility for all cases tendered to it. However, on February 13, 2019, Imerys filed for Chapter 11 bankruptcy protection, which triggered an immediate automatic stay under the federal bankruptcy code prohibiting any party from continuing or initiating litigation or asserting new claims against Imerys. As a result, Imerys is no longer defending the talc lawsuits against Cyprus Mines and CAMC. In addition, Imerys has taken the position that it alone owns, and has the sole right to access, the proceeds of the legacy insurance coverage of Cyprus Mines and CAMC for talc liabilities. In late March 2019, Cyprus Mines and CAMC challenged this position and obtained emergency relief from the bankruptcy court to gain access to the insurance until the question of ownership and contractual access can be decided in an adversary proceeding before the bankruptcy court, which is currently scheduled for October 2019.

During first-quarter 2019, in a case pending at the time Imerys filed bankruptcy, a California jury entered a $29 million verdict against Johnson & Johnson and Cyprus Mines, of which approximately $2 million was attributed to Cyprus Mines. Taking advantage of the temporary access to the insurance authorized by the bankruptcy court, Cyprus Mines used the insurance to fully resolve the case. Cyprus Mines and the insurers also settled several other cases set for trial in recent months, and secured delays or dismissals in other cases. Multiple trials have been scheduled over the remainder of 2019, and others may be scheduled prior to the adversary proceeding regarding the legacy insurance.

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FCX believes that Cyprus Mines and CAMC each has strong defenses to legal liability and that both should have access to the legacy insurance to cover defense costs, settlements and judgments, at least until the bankruptcy court decides otherwise or the insurance is exhausted. At this time, FCX cannot estimate the range of possible loss associated with these proceedings, but it does not currently believe the amount of any such losses are material to its consolidated financial statements. However, there can be no assurance that future developments will not alter this conclusion.

Tax and Other Matters

As discussed in Note 12 of FCX’s 2018 Form 10-K, PT-FI received assessments from the local regional tax authorities in Papua, Indonesia, for additional taxes and penalties related to surface water taxes. In May 2019, PT-FI agreed to pay 1.394 trillion rupiah ($99 million based on the exchange rate at June 30, 2019), which will be paid over three years to settle historical disputes. As a result, in second-quarter 2019, PT-FI recorded charges of $28 million to production and delivery costs ($69 million was previously accrued in 2018 for this matter). In accordance with PT-FI’s special mining license (IUPK), PT-FI is also obligated to pay surface water taxes of $15 million annually, beginning in 2019, which are recognized in production and delivery costs as incurred.

In March 2019, PT-FI’s export license was extended to March 8, 2020, and PT Smelting (PT-FI’s 25 percent-owned smelter and refinery in Indonesia) received an extension of its anode slimes export license through March 11, 2020.

NOTE 9. BUSINESS SEGMENTS

FCX has organized its mining operations into four 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, Cerro Verde and Grasberg (Indonesia Mining) copper mines, the Rod & Refining operations and Atlantic Copper Smelting & Refining.

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 segments, including Atlantic Copper Smelting & Refining and on 25 percent of PT-FI’s sales to PT Smelting, 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 Financial 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.

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Product Revenues. FCX’s revenues attributable to the products it sold for the second quarters and first six months of 2019 and 2018 follow (in millions):



	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Copper:
Concentrate	$	1,134		$	1,703		$	2,299		$	3,350
Cathode	959			1,183			1,818			2,368
Rod and other refined copper products	516			668			1,023			1,338
Purchased copper^a	325			282			662			520
Gold	305			933			696			1,741
Molybdenum	327			310			615			596
Other^b	218			400			495			798
Adjustments to revenues:
Treatment charges	(100		)	(139		)	(205		)	(271		)
Royalty expense^c	(19		)	(73		)	(49		)	(142		)
Export duties^d	(10		)	(55		)	(27		)	(101		)
Revenues from contracts with customers	3,655			5,212			7,327			10,197
Embedded derivatives^e	(109		)	(44		)	11			(161		)
Total consolidated revenues	$	3,546		$	5,168		$	7,338		$	10,036


a.	FCX purchases copper cathode primarily for processing by its Rod & Refining operations.


b.	Primarily includes revenues associated with cobalt and silver.


c.	Reflects royalties on sales from PT-FI and Cerro Verde that will vary with the volume of metal sold and prices.


d.	Reflects PT-FI export duties.


e.	Refer to Note 6 for discussion of embedded derivatives related to FCX’s provisionally priced concentrate and cathode sales contracts.

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Financial Information by Business Segment




(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		nations				Total
Three Months Ended June 30, 2019
Revenues:
Unaffiliated customers	$	16	$	69	$	85	$	562	$	128		$	690	$	583		^a	$	—	$	1,171	$	546	$	471		^b	$	3,546
Intersegment	491		544		1,035		71		—			71		(1		)		109		4		—		(1,218		)		—
Production and delivery	348		477		825		455		126			581		554				78		1,171		515		(722		)		3,002
Depreciation, depletion and amortization	43		44		87		101		18			119		99				18		3		7		19				352
Selling, general and administrative expenses	—		—		—		2		—			2		30				—		—		5		60				97
Mining exploration and research expenses	—		1		1		—		—			—		—				—		—		—		30				31
Environmental obligations and shutdown costs	—		—		—		—		—			—		—				—		—		—		23				23
Net loss on sales of assets	—		—		—		—		—			—		—				—		—		—		8				8
Operating income (loss)	116		91		207		75		(16		)	59		(101		)		13		1		19		(165		)		33

Interest expense, net	1		—		1		25		—			25		1				—		—		6		99				132
Provision for (benefit from) income taxes	—		—		—		20		(9		)	11		(35		)		—		—		2		7				(15		)
Total assets at June 30, 2019	2,917		4,921		7,838		8,571		1,699			10,270		16,261				1,792		250		764		3,911				41,086
Capital expenditures	49		158		207		43		4			47		339				2		1		5		28				629

Three Months Ended June 30, 2018
Revenues:
Unaffiliated customers	$	25	$	13	$	38	$	719	$	171		$	890	$	1,639		^a	$	—	$	1,387	$	602	$	612		^b	$	5,168
Intersegment	568		641		1,209		100		—			100		1				111		8		—		(1,429		)		—
Production and delivery	298		491		789		445		133			578		425				71		1,389		579		(916		)		2,915
Depreciation, depletion and amortization	44		48		92		109		24			133		172				21		3		7		14				442
Selling, general and administrative expenses	1		—		1		2		—			2		28				—		—		5		73				109
Mining exploration and research expenses	—		—		—		—		—			—		—				—		—		—		24				24
Environmental obligations and shutdown costs	—		—		—		—		—			—		—				—		—		—		59				59
Net gain on sales of assets	—		—		—		—		—			—		—				—		—		—		(45		)		(45		)
Operating income (loss)	250		115		365		263		14			277		1,015				19		3		11		(26		)		1,664

Interest expense, net	1		—		1		16		—			16		—				—		—		6		119				142
Provision for (benefit from) income taxes	—		—		—		102		6			108		429				—		—		—		(22		)		515
Total assets at June 30, 2018	2,819		4,374		7,193		8,630		1,715			10,345		10,911				1,820		278		931		5,550				37,028
Capital expenditures	41		99		140		68		3			71		246				1		1		3		20				482


a.	Includes PT-FI's sales to PT Smelting totaling $470 million in second-quarter 2019 and $649 million in second-quarter 2018.


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.

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(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, 2019
Revenues:
Unaffiliated customers	$	28	$	164	$	192	$	1,289	$	226		$	1,515	$	1,288		^a	$	—	$	2,299	$	1,117	$	927		^b	$	7,338
Intersegment	949		1,013		1,962		197		—			197		57				200		10		5		(2,431		)		—
Production and delivery	643		925		1,568		894		226			1,120		1,110				149		2,304		1,067		(1,340		)		5,978
Depreciation, depletion and amortization	83		87		170		201		32			233		204				34		5		14		39				699
Selling, general and administrative expenses	1		1		2		4		—			4		60				—		—		10		133				209
Mining exploration and research expenses	—		1		1		—		—			—		—				—		—		—		57				58
Environmental obligations and shutdown costs	—		—		—		—		—			—		—				—		—		—		65				65
Net gain on sales of assets	—		—		—		—		—			—		—				—		—		—		(25		)		(25		)
Operating income (loss)	250		163		413		387		(32		)	355		(29		)		17		—		31		(433		)		354

Interest expense, net	2		—		2		54		—			54		1				—		—		12		209				278
Provision for (benefit from) income taxes	—		—		—		130		(14		)	116		(9		)		—		—		3		(20		)		90
Capital expenditures	111		306		417		99		9			108		658				6		2		9		51				1,251

Six Months Ended June 30, 2018
Revenues:
Unaffiliated customers	$	28	$	28	$	56	$	1,344	$	321		$	1,665	$	3,160		^a	$	—	$	2,772	$	1,179	$	1,204		^b	$	10,036
Intersegment	1,169		1,330		2,499		202		—			202		53				206		16		2		(2,978		)		—
Production and delivery	588		992		1,580		872		249			1,121		882				138		2,777		1,135		(1,910		)		5,723
Depreciation, depletion and amortization	90		96		186		214		46			260		353				40		5		14		35				893
Selling, general and administrative expenses	2		2		4		4		—			4		67				—		—		11		154				240
Mining exploration and research expenses	—		1		1		—		—			—		—				—		—		—		44				45
Environmental obligations and shutdown costs	—		—		—		—		—			—		—				—		—		—		68				68
Net gain on sales of assets	—		—		—		—		—			—		—				—		—		—		(56		)		(56		)
Operating income (loss)	517		267		784		456		26			482		1,911				28		6		21		(109		)		3,123

Interest expense, net	2		—		2		33		—			33		—				—		—		11		247				293
Provision for income taxes	—		—		—		170		10			180		830				—		—		1		10				1,021
Capital expenditures	88		144		232		131		7			138		449				2		2		7		54				884


a.	Includes PT-FI’s sales to PT Smelting totaling $879 million for the first six months of 2019 and $1.3 billion for the first six months of 2018.


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.

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NOTE 10. GUARANTOR FINANCIAL STATEMENTS

All of the senior notes issued by FCX are fully and unconditionally guaranteed on a senior basis jointly and severally by Freeport-McMoRan Oil & Gas LLC (FM O&G LLC), as guarantor, which is a 100-percent-owned subsidiary of FCX Oil & Gas LLC (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 June 30, 2019, and December 31, 2018, and the related condensed consolidating statements of comprehensive (loss) income for the three and six months ended June 30, 2019 and 2018, and the condensed consolidating statements of cash flows for the six months ended June 30, 2019 and 2018 (in millions), which should be read in conjunction with the other notes in these consolidated financial statements.

CONDENSED CONSOLIDATING BALANCE SHEET

June 30, 2019



	FCX			FM O&G LLC			Non-guarantor					Consolidated
	Issuer			Guarantor			Subsidiaries		Eliminations			FCX
ASSETS
Current assets	$	84		$	570		$	8,634	$	(558	)	$	8,730
Property, plant, equipment and mine development costs, net	18			2			28,821		—			28,841
Investments in consolidated subsidiaries	17,773			—			—		(17,773		)	—
Other assets	1,335			21			3,252		(1,093		)	3,515
Total assets	$	19,210		$	593		$	40,707	$	(19,424	)	$	41,086

LIABILITIES AND EQUITY
Current liabilities	$	255		$	55		$	3,574	$	(598	)	$	3,286
Long-term debt, less current portion	8,595			7,097			5,963		(11,743		)	9,912
Deferred income taxes	561		^a	—			3,494		—			4,055
Environmental and asset retirement obligations, less current portion	—			234			3,383		—			3,617
Investments in consolidated subsidiaries	—			594			10,728		(11,322		)	—
Other liabilities	90			3,340			2,456		(3,487		)	2,399
Total liabilities	9,501			11,320			29,598		(27,150		)	23,269

Equity:
Stockholders’ equity	9,709			(10,727		)	8,455		2,272			9,709
Noncontrolling interests	—			—			2,654		5,454			8,108
Total equity	9,709			(10,727		)	11,109		7,726			17,817
Total liabilities and equity	$	19,210		$	593		$	40,707	$	(19,424	)	$	41,086


a.	All U.S.-related deferred income taxes are recorded at the parent company.

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CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2018



	FCX			FM O&G LLC			Non-guarantor					Consolidated
	Issuer			Guarantor			Subsidiaries		Eliminations			FCX
ASSETS
Current assets	$	309		$	620		$	10,376	$	(585	)	$	10,720
Property, plant, equipment and mine development costs, net	19			7			27,984		—			28,010
Investments in consolidated subsidiaries	19,064			—			—		(19,064		)	—
Other assets	880			23			3,218		(635		)	3,486
Total assets	$	20,272		$	650		$	41,578	$	(20,284	)	$	42,216

LIABILITIES AND EQUITY
Current liabilities	$	245		$	34		$	3,667	$	(617	)	$	3,329
Long-term debt, less current portion	9,594			6,984			5,649		(11,103		)	11,124
Deferred income taxes	524		^a	—			3,508		—			4,032
Environmental and asset retirement obligations, less current portion	—			227			3,382		—			3,609
Investments in consolidated subsidiaries	—			578			10,513		(11,091		)	—
Other liabilities	111			3,340			2,265		(3,486		)	2,230
Total liabilities	10,474			11,163			28,984		(26,297		)	24,324

Equity:
Stockholders’ equity	9,798			(10,513		)	9,912		601			9,798
Noncontrolling interests	—			—			2,682		5,412			8,094
Total equity	9,798			(10,513		)	12,594		6,013			17,892
Total liabilities and equity	$	20,272		$	650		$	41,578	$	(20,284	)	$	42,216


a.	All U.S.-related deferred income taxes are recorded at the parent company.

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CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE (LOSS) INCOME




Three Months Ended June 30, 2019
	FCX			FM O&G LLC			Non-guarantor						Consolidated
	Issuer			Guarantor			Subsidiaries			Eliminations			FCX
Revenues	$	—		$	13		$	3,533		$	—		$	3,546
Total costs and expenses	4			26			3,481			2			3,513
Operating (loss) income	(4		)	(13		)	52			(2		)	33
Interest expense, net	(83		)	(82		)	(102		)	135			(132		)
Other (expense) income, net	(1		)	—			7			(1		)	5
(Loss) income before income taxes and equity in affiliated companies’ net earnings (losses)	(88		)	(95		)	(43		)	132			(94		)
(Provision for) benefit from income taxes	(7		)	22			—			—			15
Equity in affiliated companies’ net earnings (losses)	23			(21		)	(89		)	92			5
Net (loss) income	(72		)	(94		)	(132		)	224			(74		)
Net (income) loss attributable to noncontrolling interests	—			—			(8		)	10			2
Net (loss) income attributable to common stockholders	$	(72	)	$	(94	)	$	(140	)	$	234		$	(72	)

Other comprehensive income (loss)	12			—			12			(12		)	12
Total comprehensive (loss) income	$	(60	)	$	(94	)	$	(128	)	$	222		$	(60	)




Three Months Ended June 30, 2018
	FCX			FM O&G LLC			Non-guarantor						Consolidated
	Issuer			Guarantor			Subsidiaries			Eliminations			FCX
Revenues	$	—		$	16		$	5,152		$	—		$	5,168
Total costs and expenses	4			(16		)	3,525			(9		)	3,504
Operating (loss) income	(4		)	32			1,627			9			1,664
Interest expense, net	(97		)	(76		)	(92		)	123			(142		)
Other income (expense), net	132			2			18			(123		)	29
Income (loss) before income taxes and equity in affiliated companies’ net earnings (losses)	31			(42		)	1,553			9			1,551
(Provision for) benefit from income taxes	(11		)	10			(512		)	(2		)	(515		)
Equity in affiliated companies’ net earnings (losses)	849			2			(45		)	(803		)	3
Net income (loss) from continuing operations	869			(30		)	996			(796		)	1,039
Net loss from discontinued operations	—			—			(4		)	—			(4		)
Net income (loss)	869			(30		)	992			(796		)	1,035
Net income attributable to noncontrolling interests	—			—			(102		)	(64		)	(166		)
Net income (loss) attributable to common stockholders	$	869		$	(30	)	$	890		$	(860	)	$	869

Other comprehensive income (loss)	11			—			11			(11		)	11
Total comprehensive income (loss)	$	880		$	(30	)	$	901		$	(871	)	$	880

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CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE (LOSS) INCOME



Six Months Ended June 30, 2019
	FCX			FM O&G LLC			Non-guarantor						Consolidated
	Issuer			Guarantor			Subsidiaries			Eliminations			FCX
Revenues	$	—		$	16		$	7,322		$	—		$	7,338
Total costs and expenses	17			26			6,941			—			6,984
Operating (loss) income	(17		)	(10		)	381			—			354
Interest expense, net	(173		)	(168		)	(211		)	274			(278		)
Other income (expense), net	64			—			23			(74		)	13
(Loss) income before income taxes and equity in affiliated companies’ net earnings (losses)	(126		)	(178		)	193			200			89
(Provision for) benefit from income taxes	(8		)	40			(122		)	—			(90		)
Equity in affiliated companies’ net earnings (losses)	93			(16		)	(152		)	77			2
Net (loss) income from continuing operations	(41		)	(154		)	(81		)	277			1
Net income from discontinued operations	—			—			1			—			1
Net (loss) income	(41		)	(154		)	(80		)	277			2
Net income attributable to noncontrolling interests	—			—			(42		)	(1		)	(43		)
Net (loss) income attributable to common stockholders	$	(41	)	$	(154	)	$	(122	)	$	276		$	(41	)

Other comprehensive income (loss)	23			—			23			(23		)	23
Total comprehensive (loss) income	$	(18	)	$	(154	)	$	(99	)	$	253		$	(18	)



Six Months Ended June 30, 2018	FCX			FM O&G LLC			Non-guarantor						Consolidated
	Issuer			Guarantor			Subsidiaries			Eliminations			FCX
Revenues	$	—		$	31		$	10,005		$	—		$	10,036
Total costs and expenses	13			(8		)	6,918			(10		)	6,913
Operating (loss) income	(13		)	39			3,087			10			3,123
Interest expense, net	(201		)	(140		)	(177		)	225			(293		)
Other income (expense), net	233			2			47			(225		)	57
Income (loss) before income taxes and equity in affiliated companies’ net earnings (losses)	19			(99		)	2,957			10			2,887
(Provision for) benefit from income taxes	(94		)	22			(947		)	(2		)	(1,021		)
Equity in affiliated companies’ net earnings (losses)	1,636			(4		)	(79		)	(1,552		)	1
Net income (loss) from continuing operations	1,561			(81		)	1,931			(1,544		)	1,867
Net loss from discontinued operations	—			—			(15		)	—			(15		)
Net income (loss)	1,561			(81		)	1,916			(1,544		)	1,852
Net income attributable to noncontrolling interests	—			—			(173		)	(118		)	(291		)
Net income (loss) attributable to common stockholders	$	1,561		$	(81	)	$	1,743		$	(1,662	)	$	1,561

Other comprehensive income (loss)	23			—			23			(23		)	23
Total comprehensive income (loss)	$	1,584		$	(81	)	$	1,766		$	(1,685	)	$	1,584

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CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS



Six Months Ended June 30, 2019
	FCX			FM O&G LLC			Non-guarantor						Consolidated
	Issuer			Guarantor			Subsidiaries			Eliminations			FCX
Net cash provided by (used in) operating activities	$	330		$	(204	)	$	962		$	—		$	1,088

Cash flow from investing activities:
Capital expenditures	—			—			(1,251		)	—			(1,251		)
Intercompany loans	(640		)	—			—			640			—
Dividends from (investments in) consolidated subsidiaries	1,470			—			47			(1,519		)	(2		)
Asset sales and other, net	(1		)	91			(4		)	—			86
Net cash provided by (used in) investing activities	829			91			(1,208		)	(879		)	(1,167		)

Cash flow from financing activities:
Proceeds from debt	—			—			328			—			328
Repayments of debt	(1,003		)	—			(560		)	—			(1,563		)
Intercompany loans	—			113			527			(640		)	—
Cash dividends paid and contributions received, net	(146		)	—			(1,478		)	1,499			(125		)
Other, net	(10		)	—			(20		)	20			(10		)
Net cash (used in) provided by financing activities	(1,159		)	113			(1,203		)	879			(1,370		)

Net decrease in cash, cash equivalents, restricted cash and restricted cash equivalents	—			—			(1,449		)	—			(1,449		)
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of year	—			—			4,455			—			4,455
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period	$	—		$	—		$	3,006		$	—		$	3,006



Six Months Ended June 30, 2018
	FCX			FM O&G LLC			Non-guarantor						Consolidated
	Issuer			Guarantor			Subsidiaries			Eliminations			FCX
Net cash (used in) provided by operating activities	$	(163	)	$	(184	)	$	3,025		$	—		$	2,678

Cash flow from investing activities:
Capital expenditures	(2		)	—			(882		)	—			(884		)
Intercompany loans	(442		)	—			—			442			—
Dividends from (investments in) consolidated subsidiaries	2,519			—			45			(2,564		)	—
Asset sales and other, net	4			1			(91		)	—			(86		)
Net cash provided by (used in) investing activities	2,079			1			(928		)	(2,122		)	(970		)

Cash flow from financing activities:
Proceeds from debt	—			—			352			—			352
Repayments of debt	(1,826		)	(52		)	(419		)	—			(2,297		)
Intercompany loans	—			228			214			(442		)	—
Cash dividends paid and contributions received, net	(73		)	—			(2,789		)	2,548			(314		)
Other, net	(17		)	—			(17		)	16			(18		)
Net cash (used in) provided by financing activities	(1,916		)	176			(2,659		)	2,122			(2,277		)

Net decrease in cash, cash equivalents, restricted cash and restricted cash equivalents	—			(7		)	(562		)	—			(569		)
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of year	—			7			4,703			—			4,710
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period	$	—		$	—		$	4,141		$	—		$	4,141

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NOTE 11. NEW ACCOUNTING STANDARDS

Leases. Effective January 1, 2019, FCX adopted the Financial Accounting Standards Board’s (FASB) Accounting Standards Update (ASU) that requires lessees to recognize most leases on the balance sheet. FCX elected the practical expedients allowing it to (i) apply the provisions of the updated lease guidance at the effective date, without adjusting the comparative periods presented and (ii) not reassess lease contracts, lease classification and initial direct costs of leases existing at adoption. FCX also elected an accounting policy to not recognize a lease asset and liability for leases with a term of 12 months or less and a purchase option that is not expected to be exercised.

FCX leases various types of properties, including offices and equipment under non-cancelable leases. Nearly all of FCX’s leases were considered operating leases under the new ASU. Adoption of this ASU resulted in the recognition of $243 million in lease right-of-use assets and lease liabilities as of January 1, 2019.

The components of FCX’s leases presented in the consolidated balance sheet as of June 30, 2019, follow (in millions):



Lease right-of-use assets (included in property, plant, equipment and mine development costs, net)	$	242

Short-term lease liabilities (included in accounts payable and accrued liabilities)	$	47
Long-term lease liabilities (included in other liabilities)	216
Total lease liabilities	$	263

Operating lease costs, primarily included in production and delivery expense in the consolidated statement of operations, are as follows (in millions):



	Three Months Ended		Six Months Ended
	June 30, 2019		June 30, 2019

Operating leases	$	21	$	33
Variable and short-term leases	19		40
Total lease costs	$	40	$	73

Lease costs totaled $80 million for the year 2018.

FCX paid $20 million during the first six months of 2019 for lease liabilities recorded in the consolidated balance sheet (primarily included in operating cash flows in the consolidated statements of cash flows). As of June 30, 2019, the weighted-average discount rate used to determine the lease liabilities was 5.2 percent and the weighted-average remaining lease term was 8.8 years.

The future minimum payments for leases presented in the consolidated balance sheets at June 30, 2019, follow (in millions):



Remaining six months of 2019	$	27
2020	54
2021	40
2022	33
2023	30
Thereafter	158
Total payments	342
Less amount representing interest	(79		)
Present value of net minimum lease payments	263
Less current portion	(47		)
Long-term portion	$	216

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Financial Instruments. In June 2016, FASB issued an ASU that requires entities to estimate all expected credit losses for most financial assets held at the reporting date based on an expected loss model, which requires consideration of historical experience, current conditions, and reasonable and supportable forecasts. This ASU also requires enhanced disclosure requirements to enable users of financial statements to understand the entity’s assumptions, models and methods for estimating expected credit losses. For public companies, this ASU is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. FCX does not expect this guidance to have a material impact on its consolidated financial statements.

NOTE 12. SUBSEQUENT EVENTS

On August 1, 2019, FCX agreed to sell $600 million of 5.00% Senior Notes due 2027 and $600 million of 5.25% Senior Notes due 2029 for total net proceeds of $1.187 billion. The sale is expected to settle on August 15, 2019, subject to customary closing conditions. Interest on these senior notes is payable semiannually on September 1 and March 1 of each year. These senior notes rank equally with FCX’s other existing and future unsecured and unsubordinated indebtedness. FCX intends to use the net proceeds from this offering to fund the redemption of all of its outstanding 6.875% Senior Notes due 2023 (book value of $764 million as of June 30, 2019) and its concurrent cash tender offers for up to $430 million aggregate purchase price of its 4.00% Senior Notes due 2021, 3.55% Senior Notes due 2022 and 3.875% Senior Notes due 2023, and the payment of accrued and unpaid interest, premiums, fees and expenses in connection with these transactions. As a result of the redemption and tender offers, FCX expects to record a loss on early extinguishment of debt of approximately $15 million in third-quarter 2019.

FCX evaluated events after June 30, 2019, 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.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

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 June 30, 2019, the related consolidated statements of operations, comprehensive (loss) income, and equity for the three- and six-month periods ended June 30, 2019 and 2018, the consolidated statements of cash flows for the six-month period ended June 30, 2019 and 2018, 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 interim financial statements 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) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2018, the related consolidated statements of operations, comprehensive income (loss), cash flows and equity for the year then ended, and the related notes (not presented herein); and in our report dated February 15, 2019, 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, 2018, 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 statements 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 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.

/s/ Ernst & Young LLP

Phoenix, Arizona

August 6, 2019

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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 MD&A and the discussion of our Business and Properties in our annual report on Form 10-K for the year ended December 31, 2018 (2018 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 (Unaudited). Throughout MD&A, all references to income or losses per share are on a diluted basis.

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 reserves of copper, gold and molybdenum. We are one of the world’s largest publicly traded copper 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 North America and South America, including the large-scale Morenci minerals district in Arizona and the Cerro Verde operation in Peru.

We believe that we have a high-quality portfolio of long-lived copper assets positioned to generate long-term value. We continue to advance a project to develop the Lone Star leachable ores near the Safford operation in eastern Arizona, and PT Freeport Indonesia (PT-FI) has several projects in the Grasberg minerals district related to the development of its large-scale, long-lived, high-grade underground ore bodies. We are also pursuing other 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.

During second-quarter 2019, PT-FI achieved important milestones with respect to its underground mining operations in the Grasberg minerals district (refer to “Operations - Indonesia Mining” for further discussion).

Net (loss) income attributable to common stock totaled $(72) million in second-quarter 2019, $869 million in second-quarter 2018, $(41) million for the first six months of 2019 and $1.6 billion for the first six months of 2018. The results for the 2019 periods, compared with 2018 periods, primarily reflect lower copper and gold sales volumes resulting from anticipated lower mill rates and ore grades in Indonesia as PT-FI transitions mining from the open pit to underground, and lower copper prices. Refer to “Consolidated Results” for further discussion.

At June 30, 2019, we had $2.6 billion in consolidated cash and cash equivalents and $9.9 billion in total debt. At June 30, 2019, we had no borrowings, and $3.5 billion was available under our $3.5 billion, unsecured revolving credit facility. Refer to Note 5 for discussion of debt and Note 12 for discussion of the August 2019 debt transactions.

OUTLOOK

We continue to view the long-term outlook for our business positively, supported by limitations on supplies of copper and by the requirements for copper in the world’s economy. Our financial results vary as a result of fluctuations in market prices primarily for copper, gold and molybdenum, as well as other factors. World market prices for these commodities have fluctuated historically and are affected by numerous factors beyond our control. Refer to “Markets” for further discussion. Because we cannot control the prices of our products, the key measures that management focuses on in operating our business are sales volumes, unit net cash costs, operating cash flow and capital expenditures.

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Consolidated Sales Volumes

Following are our projected consolidated sales volumes for the year 2019 (which is a transition year for Indonesia mining):



Copper (millions of recoverable pounds):
North America copper mines	1,394
South America mining	1,237
Indonesia mining	630
Total	3,261

Gold (thousands of recoverable ounces)	841

Molybdenum (millions of recoverable pounds)	94	^a


a.	Projected molybdenum sales include 36 million pounds produced by our Molybdenum mines and 58 million pounds produced by our North America and South America copper mines.

Consolidated sales volumes for third-quarter 2019 are expected to approximate 830 million pounds of copper, 230 thousand ounces of gold and 25 million pounds of molybdenum. As PT-FI transitions mining from the open pit to underground, metal production is expected to improve by 2021.

Consolidated Unit Net Cash Costs

Assuming average prices of $1,400 per ounce of gold and $12.00 per pound of molybdenum for the second half of 2019 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 $1.75 per pound of copper for the year 2019 (including $1.67 per pound for the second half of 2019). The impact of price changes on consolidated unit net cash costs for the year 2019 would approximate $0.01 per pound for each $50 per ounce change in the average price of gold for the second half of 2019 and $0.015 per pound for each $2 per pound change in the average price of molybdenum for the second half of 2019. 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 of consolidated production costs for our mining operations.

Consolidated Operating Cash Flow

Our consolidated operating cash flows vary with sales volumes; prices realized from copper, gold and molybdenum sales; production costs; income taxes; other working capital changes; and other factors. Based on current sales volume and cost estimates, and assuming average prices of $2.75 per pound of copper, $1,400 per ounce of gold and $12.00 per pound of molybdenum for the second half of 2019, our consolidated operating cash flows are estimated to approximate $1.9 billion (including $0.3 billion of working capital sources and timing of other tax payments) for the year 2019. Estimated consolidated operating cash flows for the year 2019 also reflect an estimated income tax provision of $0.4 billion (refer to “Consolidated Results – Income Taxes” for further discussion of our projected income tax rate for the year 2019). The impact of price changes during the second half of 2019 on operating cash flows would approximate $185 million for each $0.10 per pound change in the average price of copper, $20 million for each $50 per ounce change in the average price of gold and $55 million for each $2 per pound change in the average price of molybdenum.

Consolidated Capital Expenditures

Consolidated capital expenditures are expected to approximate $2.6 billion for the year 2019, including $1.6 billion for major mining projects primarily associated with underground development activities in the Grasberg minerals district and development of the Lone Star copper leach project, and exclude estimates associated with the new smelter in Indonesia. A large portion of the capital expenditures relates to projects that are expected to add significant production and cash flow in future periods, enabling us to generate operating cash flows exceeding capital expenditures in future years. We have cash on hand and the financial flexibility to fund these expenditures and will continue to be disciplined in deploying capital.

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MARKETS

World prices for copper, gold and molybdenum can fluctuate significantly. During the period from January 2009 through June 2019, the London Metal Exchange (LME) copper settlement price varied from a low of $1.38 per pound in 2009 to a record high of $4.60 per pound in 2011; the London Bullion Market Association (LBMA) PM gold price fluctuated from a low of $810 per ounce in 2009 to a record high of $1,895 per ounce in 2011; 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 $18.60 per pound in 2010. 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 2018 Form 10-K.

This graph presents LME copper settlement prices and the combined reported stocks of copper at the LME, Commodity Exchange Inc., a division of the New York Mercantile Exchange, and the Shanghai Futures Exchange from January 2009 through June 2019. During second-quarter 2019, LME copper settlement prices ranged from a low of $2.61 per pound to a high of $2.95 per pound, averaged $2.77 per pound and settled at $2.71 per pound on June 28, 2019. During the first six months of 2019, copper prices continued to be negatively impacted by the trade dispute between the U.S. and China. The LME copper settlement price was $2.69 per pound on July 31, 2019.

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 existing large mines’ output with new production sources. Future copper prices are expected to be volatile and are likely to be influenced by demand from China and emerging markets, as well as economic activity in the U.S. and other industrialized countries, the timing of the development of new supplies of copper and the production levels of mines and copper smelters.

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This graph presents LBMA PM gold prices from January 2009 through June 2019. During second-quarter 2019, LBMA PM gold prices ranged from a low of $1,270 per ounce to a high of $1,431 per ounce, averaged $1,309 per ounce, and closed at $1,409 per ounce on June 28, 2019. The LBMA PM gold price was $1,428 per ounce on July 31, 2019.

This graph presents the Metals Week Molybdenum Dealer Oxide weekly average price from January 2009 through June 2019. During second-quarter 2019, the weekly average price of molybdenum ranged from a low of $11.96 per pound to a high of $12.35 per pound, averaged $12.18 per pound, and was $12.10 per pound on June 28, 2019. The Metals Week Molybdenum Dealer Oxide weekly average price was $11.90 per pound on July 31, 2019.

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CONSOLIDATED RESULTS



	Three Months Ended June 30,							Six Months Ended June 30,
	2019				2018			2019				2018
SUMMARY FINANCIAL DATA	(in millions, except per share amounts)
Revenues^a,b	$	3,546			$	5,168		$	7,338			$	10,036
Operating income^a,c,d	$	33		^e	$	1,664		$	354		^e,f	$	3,123
Net (loss) income from continuing operations^g,h	$	(74	)		$	1,039		$	1			$	1,867
Net (loss) income from discontinued operationsⁱ	$	—			$	(4	)	$	1			$	(15	)
Net (loss) income attributable to common stock	$	(72	)		$	869		$	(41	)		$	1,561
Diluted net (loss) income per share of common stock:
Continuing operations	$	(0.05	)		$	0.59		$	(0.03	)		$	1.08
Discontinued operations	—				—			—				(0.01		)
	$	(0.05	)		$	0.59		$	(0.03	)		$	1.07

Diluted weighted-average common shares outstanding	1,451				1,458			1,451				1,458

Operating cash flows^j	$	554			$	1,309		$	1,088			$	2,678
Capital expenditures	$	629			$	482		$	1,251			$	884
At June 30:
Cash and cash equivalents	$	2,623			$	3,894		$	2,623			$	3,894
Total debt, including current portion	$	9,916			$	11,277		$	9,916			$	11,277


a.	Refer to Note 9 for a summary of revenues and operating income by operating division.


b.	Includes adjustments to embedded derivatives for provisionally priced concentrate and cathode sales (refer to Note 6).

Includes net (losses) gains on sales of assets totaling $(8) million ($(8) million to net loss attributable to common stock or $(0.01) per share) in second-quarter 2019, $45 million ($45 million to net income attributable to common stock or $0.03 per share) in second-quarter 2018, $25 million ($25 million to net loss attributable to common stock or $0.02 per share) for the first six months of 2019 and $56 million ($56 million to net income attributable to common stock or $0.04 per share) for the first six months of 2018, associated with sales of oil and gas assets, including adjustments to the estimated fair value of contingent consideration related to the 2016 sale of onshore California oil and gas properties (refer to Note 7).

Includes net charges to environmental obligations and related litigation reserves totaling $9 million ($9 million to net loss attributable to common stock or $0.01 per share) in second-quarter 2019, $44 million ($44 million to net loss attributable to common stock or $0.03 per share) for the first six months of 2019 and $50 million ($50 million to net income attributable to common stock or $0.03 per share) for the second quarter and first six months of 2018.


e.	Includes charges of $28 million ($14 million to net loss attributable to common stock or $0.01 per share) for the second quarter and first six months of 2019 for an adjustment to the settlement of the historical surface water tax disputes with the local regional tax authority in Papua, Indonesia. Refer to Note 8 for further discussion.


f.	Includes metals inventory adjustments of $59 million ($27 million to net loss attributable to common stock or $0.02 per share), primarily for cobalt inventory, and charges totaling $23 million ($9 million to net loss attributable to common stock or $0.01 per share) associated with weather-related issues at El Abra and for non-recurring employee costs at PT-FI.


g.	Includes net tax credits of $18 million ($0.01 per share) in second-quarter 2019, $24 million ($0.02 per share) for the first six months of 2019 and $7 million (less than $0.01 per share) for the second quarter and first six months of 2018. Refer to “Income Taxes” for further discussion of these net tax credits.


h.	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.


i.	Primarily reflects adjustments to the estimated fair value of contingent consideration related to the November 2016 sale of our interest in TF Holdings Limited, which will continue to be adjusted through December 31, 2019.


j.	Includes working capital sources (uses) and timing of other tax payments of $308 million in second-quarter 2019, $(192) million in second-quarter 2018, $281 million for the first six months of 2019 and $(213) million for the first six months of 2018.

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	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
SUMMARY OPERATING DATA
Copper (millions of recoverable pounds)
Production	776		1,014		1,556		1,966
Sales, excluding purchases	807		989		1,591		1,982
Average realized price per pound	$	2.75	$	3.08	$	2.78	$	3.10
Site production and delivery costs per pound^a	$	2.26	$	1.69	$	2.21	$	1.68
Unit net cash costs per pound^a	$	1.92	$	0.96	$	1.85	$	0.97
Gold (thousands of recoverable ounces)
Production	160		746		326		1,345
Sales, excluding purchases	189		676		431		1,286
Average realized price per ounce	$	1,351	$	1,274	$	1,315	$	1,291
Molybdenum (millions of recoverable pounds)
Production	25		24		48		46
Sales, excluding purchases	24		24		46		48
Average realized price per pound	$	13.15	$	12.89	$	12.93	$	12.42


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 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 $3.5 billion in second-quarter 2019, $5.2 billion in second-quarter 2018, $7.3 billion for the first six months of 2019 and $10.0 billion for the first six months of 2018. Revenues from our mining operations primarily include the sale of copper concentrate, copper cathode, copper rod, gold in concentrate and molybdenum. Refer to Note 9 for a summary of product revenues. Following is a summary of changes in our consolidated revenues between periods (in millions):



	Three Months Ended June 30			Six Months Ended June 30

Consolidated revenues - 2018 period	$	5,168		$	10,036
(Lower) higher sales volumes:
Copper	(563		)	(1,214		)
Gold	(620		)	(1,102		)
Molybdenum	4			(19		)
(Lower) higher average realized prices:
Copper	(266		)	(509		)
Gold	15			10
Molybdenum	6			23
Adjustments for prior period provisionally priced copper sales	(106		)	128
Lower treatment charges	39			66
Higher revenues from purchased copper	43			142
Lower Atlantic Copper revenues	(56		)	(59		)
Lower royalties and export duties	99			167
Other, including intercompany eliminations	(217		)	(331		)
Consolidated revenues - 2019 period	$	3,546		$	7,338

Sales Volumes. Consolidated copper and gold sales volumes decreased in the 2019 periods, compared to the 2018 periods, primarily reflecting anticipated lower mill rates and ore grades in Indonesia as PT-FI transitions mining from the open pit to underground. Refer to “Operations” for further discussion of sales volumes at our mining operations.

Realized Prices. Our consolidated revenues can vary significantly as a result of fluctuations in the market prices of copper, gold and molybdenum. Average realized prices in second-quarter 2019, compared with second-quarter 2018, were 11 percent lower for copper, 6 percent higher for gold and 2 percent higher for molybdenum, and average realized prices for the first six months of 2019, compared with first six months of 2018, were 10 percent lower for copper, 2 percent higher for gold and 4 percent higher for molybdenum.

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Average realized copper prices include net unfavorable adjustments to current period provisionally priced copper sales totaling $39 million in second-quarter 2019 and $58 million for the first six months of 2019, compared with $37 million in second-quarter 2018 and $79 million for the first six months of 2018. 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 copper prices. We record revenues and invoice customers at the time of shipment based on then-current LME prices, which results in an embedded derivative on 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.

Prior Period Provisionally Priced Copper Sales. Net (unfavorable) favorable adjustments to prior periods’ provisionally priced copper sales (i.e., provisionally priced sales at March 31, 2019 and 2018 and December 31, 2018 and 2017) recorded in consolidated revenues totaled $(83) million in second-quarter 2019 and $58 million for the first six months of 2019, compared with $23 million in second-quarter 2018 and $(70) million for the first six months of 2018. Refer to Notes 6 and 9 for a summary of total adjustments to prior period and current period provisionally priced sales.

At June 30, 2019, we had provisionally priced copper sales totaling 285 million pounds of copper (net of intercompany sales and noncontrolling interests) recorded at an average of $2.72 per pound, subject to final pricing over the next several months. We estimate that each $0.05 change in the price realized from the June 30, 2019, provisional price recorded would have an approximate $10 million effect on our 2019 net income attributable to common stock. The LME copper price settled at $2.69 per pound on July 31, 2019.

Treatment Charges. Revenues from our concentrate sales are recorded net of treatment charges, which will vary with the sales volumes and the price of copper.

Purchased Copper. We purchase copper cathode primarily for processing by our Rod & Refining operations. Purchased copper volumes totaled 114 million pounds in second-quarter 2019 and 231 million pounds for the first six months of 2019, compared with 90 million pounds in second-quarter 2018 and 164 million pounds for the first six months of 2018.

Atlantic Copper Revenues. Atlantic Copper revenues totaled $546 million in second-quarter 2019 and $1.1 billion for the first six months of 2019, compared with $602 million in second-quarter 2018 and $1.2 billion for the first six months of 2018. Lower revenues in the 2019 periods, compared with the 2018 periods, primarily reflect lower copper sales volumes and lower copper prices.

Royalties and Export Duties. Royalties are primarily for sales from PT-FI and vary with the volume of metal sold and the prices of copper and gold. PT-FI also pays export duties until development progress for the new smelter in Indonesia exceeds 50 percent. Refer to Note 9 for a summary of royalty expense and export duties.

Production and Delivery Costs

Consolidated production and delivery costs totaled $3.0 billion in second-quarter 2019, $2.9 billion in second-quarter 2018, $6.0 billion for the first six months of 2019 and $5.7 billion for the first six months of 2018. Higher consolidated production and delivery costs in the 2019 periods, compared with the 2018 periods, primarily reflect costs at PT-FI that were historically shared under the joint venture formerly with Rio Tinto plc.

Site Production and Delivery Costs Per Pound. Site production and delivery costs for our copper mining operations primarily include labor, energy and commodity-based inputs, such as sulphuric acid, reagents, liners, tires and explosives. Consolidated site production and delivery costs (before net noncash and other costs) for our copper mines averaged $2.26 per pound of copper in second-quarter 2019, $1.69 per pound of copper in second-quarter 2018, $2.21 per pound of copper for the first six months of 2019 and $1.68 per pound of copper for the first six months of 2018. Higher consolidated site production and delivery costs per pound in the 2019 periods, compared with the 2018 periods, primarily reflect lower volumes associated with PT-FI’s transition from mining the open pit to underground. 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

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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 mining operations. Consolidated depreciation, depletion and amortization (DD&A) totaled $352 million in second-quarter 2019, $442 million in second-quarter 2018, $699 million for the first six months of 2019 and $893 million for the first six months of 2018. Lower DD&A in the 2019 periods, compared with the 2018 periods, primarily reflect lower sales volumes at PT-FI and lower UOP rates because of increased reserves at our North America and South America mines.

Mining Exploration and Research Expenses

Consolidated exploration and research expenses for our mining operations totaled $31 million in second-quarter 2019, $24 million in second-quarter 2018, $58 million for the first six months of 2019 and $45 million for the first six months of 2018. Our mining exploration activities are generally associated with our existing mines, focusing on opportunities to expand reserves and resources to support development of additional future production capacity. A drilling program to further delineate the Lone Star resource continues to indicate significant additional mineralization in this district, with higher ore grades than our other North America copper mines. Exploration spending is expected to approximate $75 million for the year 2019.

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 for environmental obligations and shutdown costs totaled $23 million in second-quarter 2019, $59 million in second-quarter 2018, $65 million for the first six months of 2019 and $68 million for the first six months of 2018.

Interest Expense, Net

Consolidated interest costs (before capitalization) totaled $167 million in second-quarter 2019, $165 million in second-quarter 2018, $345 million for the first six months of 2019 and $341 million for the first six months of 2018. The increase in the 2019 periods, compared to the 2018 periods, primarily reflects interest associated with disputed Cerro Verde royalties for prior years, partly offset by lower debt balances. Capitalized interest varies with the level of expenditures for our development projects and average interest rates on our borrowings, and totaled $35 million in second-quarter 2019, $23 million in second-quarter 2018, $67 million for the first six months of 2019 and $48 million for the first six months of 2018.

Income Taxes

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



	Six Months Ended June 30,
	2019									2018
	Income (Loss)^a			Effective Tax Rate		Income Tax (Provision) Benefit				Income^a		Effective Tax Rate	Income Tax (Provision) Benefit
U.S.^b	$	(183	)	10%		$	19		^c	$	311	(3)%	$	9		^c
South America	294			40%		(117		)		459		39%	(180		)	^d
Indonesia	(13		)	69%		9			^e	1,945		43%	(830		)
Eliminations and other	(9		)	N/A		(10		)		172		N/A	(31		)
Rate adjustment^f	—			N/A		9				—		N/A	11
Consolidated FCX	$	89		101%	^g	$	(90	)		$	2,887	35%	$	(1,021	)


a.	Represents income from continuing operations before income taxes and equity in affiliated companies’ net earnings.


b.	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.


c.	The first six months of 2019 include tax credits totaling $18 million primarily associated with state law changes. The first six months of 2018 include a tax credit of $5 million associated with the settlement of a state income tax examination.

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d.	Includes a tax credit of $5 million ($2 million net of noncontrolling interest) associated with Cerro Verde's disputed royalties and other related mining taxes.


e.	Includes a tax credit of $8 million ($6 million net of noncontrolling interest) associated with the reduction in PT-FI's statutory tax rates in accordance with its special mining license (IUPK).


f.	In accordance with applicable accounting rules, we adjust our interim provision for income taxes to equal our consolidated tax rate.

Our consolidated effective income tax rate is a function of the combined effective tax rates for the jurisdictions in which we operate, excluding the U.S. jurisdiction. Because our U.S. jurisdiction generated net losses in the first six months of 2019 that will not result in a realized tax benefit, applicable accounting rules require us to adjust our estimated annual effective tax rate to exclude the impact of U.S. net losses.

Assuming achievement of current sales volume and cost estimates and average prices of $2.75 per pound for copper, $1,400 per ounce for gold and $12.00 per pound for molybdenum for the second half of 2019, we estimate our consolidated effective tax rate for the year 2019 would approximate 57 percent (comprised of an estimated effective rate of 42 percent on South America income, 39 percent on Indonesia income and 0 percent for the U.S.). Variations in the relative proportions of jurisdictional income result in fluctuations to our consolidated effective income tax rate. Because of our U.S. tax position, we do not record a financial statement impact for income or losses generated in the U.S.; therefore, the consolidated effective tax rate is generally higher than the international rates at lower copper prices and lower than international rates at higher copper prices.

OPERATIONS

North America Copper Mines

We operate seven open-pit copper mines in North America – Morenci, Bagdad, Safford, 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.

The North America copper mines include open-pit mining, sulfide 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 sales is in the form of 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.

Operating and Development Activities. We have significant undeveloped reserves and resources 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 pursue projects to enhance productivity through innovative technologies and to study opportunities to reduce the capital intensity of our potential long-term development projects.

Through exploration drilling, we have identified a significant resource at our wholly owned Lone Star copper leach project located near the Safford operation in eastern Arizona. An initial project to develop the Lone Star leachable ores commenced in 2018, with first production expected by the end of 2020. Initial production from the Lone Star leachable ores is expected to average approximately 200 million pounds of copper per year, with the potential for future expansion options. Total capital costs for the initial project, including mine equipment and pre-production stripping, are expected to approximate $850 million and will benefit from the utilization of existing infrastructure at the adjacent Safford operation. As of June 30, 2019, approximately $480 million has been incurred for this project. The project also advances exposure to a significant sulfide resource. We expect to incorporate recent positive drilling and ongoing results in our future development plans.

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Operating Data. Following is summary consolidated operating data for the North America copper mines:



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Operating Data, Net of Joint Venture Interests
Copper (millions of recoverable pounds)
Production	370		354		706		702
Sales, excluding purchases	369		361		689		745
Average realized price per pound	$	2.78	$	3.12	$	2.80	$	3.14

Molybdenum (millions of recoverable pounds)
Production^a	9		8		16		15

100% Operating Data
Leach operations
Leach ore placed in stockpiles (metric tons per day)	797,600		689,500		751,600		682,100
Average copper ore grade (percent)	0.23		0.24		0.23		0.26
Copper production (millions of recoverable pounds)	245		241		471		480

Mill operations
Ore milled (metric tons per day)	320,300		307,000		317,900		297,900
Average ore grade (percent):
Copper	0.36		0.35		0.34		0.35
Molybdenum	0.02		0.02		0.02		0.02
Copper recovery rate (percent)	87.4		89.1		87.6		88.5
Copper production (millions of recoverable pounds)	195		184		371		358


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’s consolidated copper sales volumes totaled 369 million pounds in second-quarter 2019, 361 million pounds in second-quarter 2018, 689 million pounds for the first six months of 2019 and 745 million pounds for the first six months of 2018. Lower sales volumes for the first six months of 2019, compared with the first six months of 2018, primarily reflect timing of shipments. North America copper sales are estimated to approximate 1.4 billion pounds for the year 2019.

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 and Molybdenum

The following table summarizes unit net cash costs and gross profit per pound at our North America copper 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.

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	Three Months Ended June 30,
	2019								2018
	By- Product Method			Co-Product Method					By- Product Method			Co-Product Method
	By- Product Method			Copper			Molyb- denum^a		By- Product Method			Copper		Molyb- denum^a
Revenues, excluding adjustments	$	2.78		$	2.78		$	12.39	$	3.12		$	3.12	$	12.13

Site production and delivery, before net noncash and other costs shown below	2.05			1.88			9.53		1.94			1.78		9.09
By-product credits	(0.26		)	—			—		(0.25		)	—		—
Treatment charges	0.11			0.10			—		0.10			0.10		—
Unit net cash costs	1.90			1.98			9.53		1.79			1.88		9.09
DD&A	0.24			0.22			0.77		0.25			0.23		0.80
Noncash and other costs, net	0.03			0.02			0.23		0.07			0.06		0.15
Total unit costs	2.17			2.22			10.53		2.11			2.17		10.04
Revenue adjustments, primarily for pricing on prior period open sales	(0.04		)	(0.04		)	—		—			—		—
Gross profit per pound	$	0.57		$	0.52		$	1.86	$	1.01		$	0.95	$	2.09

Copper sales (millions of recoverable pounds)	369			369					361			361
Molybdenum sales (millions of recoverable pounds)^a							9							8



	Six Months Ended June 30,
	2019							2018
	By- Product Method			Co-Product Method				By- Product Method			Co-Product Method
	By- Product Method			Copper		Molyb- denum^a		By- Product Method			Copper			Molyb- denum^a
Revenues, excluding adjustments	$	2.80		$	2.80	$	12.06	$	3.14		$	3.14		$	11.52

Site production and delivery, before net noncash and other costs shown below	2.05			1.87		9.69		1.89			1.75			8.47
By-product credits	(0.26		)	—		—		(0.22		)	—			—
Treatment charges	0.11			0.11		—		0.10			0.10			—
Unit net cash costs	1.90			1.98		9.69		1.77			1.85			8.47
DD&A	0.25			0.22		0.75		0.25			0.23			0.74
Noncash and other costs, net	0.05			0.04		0.22		0.05			0.05			0.12
Total unit costs	2.20			2.24		10.66		2.07			2.13			9.33
Other revenue adjustments, primarily for pricing on prior period open sales	0.01			0.01		—		(0.01		)	(0.01		)	—
Gross profit per pound	$	0.61		$	0.57	$	1.40	$	1.06		$	1.00		$	2.19

Copper sales (millions of recoverable pounds)	689			689				744			744
Molybdenum sales (millions of recoverable pounds)^a						16								15


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. Average unit net cash costs (net of by-product credits) for the North America copper mines were $1.90 per pound of copper for the second quarter and first six months of 2019, $1.79 per pound in second-quarter 2018 and $1.77 per pound for the first six months of 2018. The increase in the 2019 periods, compared to the 2018 periods, primarily reflects higher mining rates, maintenance activities and higher cost of consumables, primarily sulphuric acid. The increase in average unit net cash costs for the first six months of 2019 also reflects lower sales volumes.

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.

Average unit net cash costs (net of by-product credits) for our North America copper mines are expected to approximate $1.91 per pound of copper for the year 2019, based on achievement of current sales volume and cost estimates and assuming an average molybdenum price of $12.00 per pound for the second half of 2019. North

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America’s average unit net cash costs for the year 2019 would change by approximately $0.02 per pound for each $2 per pound change in the average price of molybdenum for the second half of 2019.

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), which are consolidated in our financial statements.

South America mining includes open-pit mining, sulfide 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.

Operating and Development Activities. Cerro Verde’s expanded operations benefit from its large-scale, long-lived reserves and cost efficiencies. Cerro Verde's concentrator facilities have continued to perform well, with average mill throughput rates of 407,700 metric tons of ore per day in second-quarter 2019 and 397,200 metric tons of ore per day for the first six months of 2019. Debottlenecking projects and additional initiatives to enhance operating rates continue to be advanced.

We continue to evaluate a large-scale expansion at El Abra to process additional sulfide material and to achieve higher recoveries. El Abra’s large sulfide resource could potentially support a major mill project similar to facilities constructed at Cerro Verde. Technical and economic studies continue to be advanced to determine the optimal scope and timing for the project.

Operating Data. Following is summary consolidated operating data for South America mining:



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Copper (millions of recoverable pounds)
Production	281		313		580		606
Sales	287		312		577		602
Average realized price per pound	$	2.72	$	3.07	$	2.75	$	3.09

Molybdenum (millions of recoverable pounds)
Production^a	7		7		15		13

Leach operations
Leach ore placed in stockpiles (metric tons per day)	187,000		246,700		178,400		207,600
Average copper ore grade (percent)	0.38		0.30		0.36		0.32
Copper production (millions of recoverable pounds)	63		75		122		142

Mill operations
Ore milled (metric tons per day)	407,700		385,200		397,200		385,300
Average ore grade (percent):
Copper	0.34		0.38		0.36		0.39
Molybdenum	0.02		0.01		0.02		0.01
Copper recovery rate (percent)	81.7		84.4		84.5		81.7
Copper production (millions of recoverable pounds)	218		238		458		464


a.	Refer to “Consolidated Results” for our consolidated molybdenum sales volumes, which include sales of molybdenum produced at Cerro Verde.

South America’s consolidated copper sales volumes totaled 287 million pounds in second-quarter 2019, 312 million pounds in second-quarter 2018, 577 million pounds for the first six months of 2019 and 602 million pounds for the first six months of 2018. Lower sales volumes for the 2019 periods, compared to the 2018 periods, reflect lower ore grades at Cerro Verde. Sales volumes for the first six months of 2019 were also impacted by heavy rainfall and electrical storms that resulted in a suspension of El Abra’s crushed leach stacking operations for approximately 35 days in first-quarter 2019.

Copper sales from South America mines are expected to approximate 1.2 billion pounds for the year 2019.

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Protests in connection with an unaffiliated copper development project have resulted in restricted access to certain areas and roads in Peru used by the mining community, including Cerro Verde, to transport fuel, concentrate and other critical supplies. Our team at Cerro Verde is monitoring the situation and executing contingency plans as needed. There have been limited impacts to our mining and milling operations to date.

Gross Profit per Pound of Copper

The following table summarizes unit net cash costs and gross profit per pound of copper at the South America mining operations. 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. 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 June 30,
	2019							2018
	By-Product Method				Co-Product Method			By-Product Method			Co-Product Method
Revenues, excluding adjustments	$	2.72			$	2.72		$	3.07		$	3.07

Site production and delivery, before net noncash and other costs shown below	1.92				1.74			1.77			1.65
By-product credits	(0.28		)		—			(0.22		)	—
Treatment charges	0.18				0.18			0.18			0.18
Royalty on metals	0.01				0.01			0.01			0.01
Unit net cash costs	1.83				1.93			1.74			1.84
DD&A	0.41				0.37			0.43			0.40
Noncash and other costs, net	0.07			^a	0.07			0.05			0.05
Total unit costs	2.31				2.37			2.22			2.29
Revenue adjustments, primarily for pricing on prior period open sales	(0.20		)		(0.20		)	0.04			0.04
Gross profit per pound	$	0.21			$	0.15		$	0.89		$	0.82

Copper sales (millions of recoverable pounds)	287				287			312			312



	Six Months Ended June 30,
	2019						2018
	By-Product Method				Co-Product Method		By-Product Method			Co-Product Method
Revenues, excluding adjustments	$	2.75			$	2.75	$	3.09		$	3.09

Site production and delivery, before net noncash and other costs shown below	1.82				1.64		1.78			1.64
By-product credits	(0.31		)		—		(0.24		)	—
Treatment charges	0.19				0.19		0.19			0.19
Royalty on metals	0.01				0.01		0.01			0.01
Unit net cash costs	1.71				1.84		1.74			1.84
DD&A	0.40				0.35		0.43			0.40
Noncash and other costs, net	0.08			^a	0.08		0.05			0.05
Total unit costs	2.19				2.27		2.22			2.29
Other revenue adjustments, primarily for pricing on prior period open sales	0.06				0.06		(0.06		)	(0.06		)
Gross profit per pound	$	0.62			$	0.54	$	0.81		$	0.74

Copper sales (millions of recoverable pounds)	577				577		602			602

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a.	Includes charges of $0.01 per pound of copper in second-quarter 2019 and $0.03 per pound of copper for the first six months of 2019 associated with weather-related impacts at El Abra.

Our South America mines have varying cost structures because of differences in ore grades and characteristics, processing costs, by-product credits and other factors. Average unit net cash costs (net of by-product credits) of $1.83 per pound of copper in second-quarter 2019 were higher than unit net cash costs of $1.74 per pound in second-quarter 2018, primarily reflecting lower copper volumes, partly offset by higher by-product credits. Average unit net cash costs (net of by-product credits) of $1.71 per pound for the first six months of 2019 were lower than unit net cash costs of $1.74 per pound for the first six months of 2018, primarily reflecting higher by-product credits, partly offset by lower copper volumes.

Revenues from Cerro Verde’s concentrate sales are recorded net of 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 South America mining are expected to approximate $1.68 per pound of copper for the year 2019, based on current sales volume and cost estimates and assuming an average price of $12.00 per pound of molybdenum for the second half of 2019.

Indonesia Mining

PT-FI’s assets include one of the world’s largest copper and gold deposits at the Grasberg minerals district in Papua, Indonesia. PT-FI produces copper concentrate that contains significant quantities of gold and silver. Effective December 21, 2018, our ownership interest in PT-FI is 48.76 percent. We manage PT-FI’s mining operations and consolidate PT-FI in our financial statements. As further discussed in Note 1, our economic interest in PT-FI is expected to approximate 81 percent through 2022.

Substantially all of PT-FI’s copper concentrate is sold under long-term contracts. During the first six months of 2019, 64 percent of PT-FI’s concentrate production was sold to PT Smelting (PT-FI’s 25-percent-owned smelter and refinery in Gresik, Indonesia).

Operating and Development Activities. PT-FI continues to mine the final stages of the Grasberg open pit. During second-quarter 2019, PT-FI opened an additional area to extend mining in the Grasberg open pit into third-quarter 2019 and potentially longer. The mine sequencing changes in the open pit delayed access to the high-grade material previously expected to be produced during second-quarter 2019, but are expected to meet previous estimates for copper and gold production for the year 2019. PT-FI will continue to monitor geotechnical conditions to determine the extent of mining in the open pit. Material not mined from the open pit is expected to be available to be mined from the Grasberg Block Cave underground mine.

During second-quarter 2019, PT-FI achieved important milestones 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. PT-FI's estimated annual capital spending on underground mine development projects is expected to average $0.7 billion per year for the four-year period 2019 through 2022, net of scheduled contributions from PT Indonesia Asahan Aluminium (Persero) (PT Inalum). In accordance with applicable accounting guidance, aggregate costs (before scheduled contributions from PT Inalum), which are expected to average $0.9 billion per year for the four-year period 2019 through 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. Considering the long-term nature and size of these projects, actual costs could vary from these estimates.

The following provides additional information on the development of the Grasberg Block Cave underground mine, the Deep Mill Level Zone (DMLZ) underground mine and the new Indonesian smelter. Estimates of timing of future production from the underground mines continue to be reviewed and may be modified as additional information becomes available.

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Grasberg Block Cave. PT-FI has commenced extraction of ore from the Grasberg Block Cave underground mine, which is the same ore body historically mined from the surface in the Grasberg open pit. During second-quarter 2019, undercutting, drawbell construction and ore extraction activities in the Grasberg Block Cave underground mine exceeded expectations. Ore extraction from the Grasberg Block Cave underground mine averaged 7,400 metric tons per day in second-quarter 2019 and is expected to ramp up to 15,000 metric tons per day by the end of 2019. Monitoring data on cave propagation in the Grasberg Block Cave underground mine is providing increased confidence in growing production rates over time. As existing drawpoints mature and additional drawpoints are added, cave expansion is expected to accelerate production rates from an average of 30,000 metric tons of ore per day in 2020 to 130,000 metric tons of ore per day in 2023 from five production blocks spanning 335,000 square meters.

DMLZ. The DMLZ underground mine, located east of the Grasberg ore body and below the Deep Ore Zone (DOZ) underground mine, has commenced production. Hydraulic fracturing operations have been effective in managing rock stresses and pre-conditioning the cave following mining-induced seismic activity experienced in 2017 and 2018. In second-quarter 2019, undercutting and drawbell construction were in line with expectations, and ore extraction exceeded expectations. Ore extraction from the DMLZ underground mine averaged 7,700 metric tons per day in second-quarter 2019 and is expected to ramp up to 11,000 metric tons of ore per day by the end of 2019. Ongoing hydraulic fracturing operations combined with continued undercutting and drawbell openings in the two production blocks are expected to expand the cave, supporting higher production rates that are expected to average 28,000 metric tons of ore per day in 2020 and 80,000 metric tons of ore per day in 2022 from three production blocks.

Indonesian Smelter. In connection with the extension of PT-FI’s mining rights from 2031 to 2041, PT-FI committed to construct a new smelter in Indonesia by December 21, 2023. A site for the new smelter has been selected in Gresik near PT Smelting and ground preparation is in progress. Engineering and front-end engineering and design for the selected process technology are ongoing, with construction of the smelter expected to begin in 2020. The preliminary capital cost estimate for the project is in the $3 billion range, and PT-FI is pursuing financing, commercial and potential partner arrangements for this project. The economics of PT-FI’s share of the new smelter will be shared by PT-FI’s shareholders according to their respective share ownership percentages.

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Operating Data. Following is summary consolidated operating data for Indonesia mining:



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Operating Data
Copper (millions of recoverable pounds)
Production	125		347		270		658
Sales	151		316		325		635
Average realized price per pound	$	2.71	$	3.05	$	2.77	$	3.07

Gold (thousands of recoverable ounces)
Production	154		740		316		1,335
Sales	185		671		420		1,274
Average realized price per ounce	$	1,350	$	1,274	$	1,314	$	1,291

100% Operating Data
Ore extracted and milled (metric tons per day):
Grasberg open pit^a	54,000		148,400		78,300		136,800
DOZ underground mine^b	21,100		29,200		25,700		34,300
DMLZ underground mine^b	7,700		2,700		7,200		2,700
Grasberg Block Cave underground mine^b	7,400		3,800		6,200		3,900
Big Gossan underground mine^b	5,400		3,800		5,500		3,100
Total	95,600		187,900		122,900		180,800
Average ore grades:
Copper (percent)	0.80		1.06		0.69		1.09
Gold (grams per metric ton)	0.79		1.77		0.66		1.71
Recovery rates (percent):
Copper	88.3		92.7		86.3		92.4
Gold	74.9		86.1		71.6		85.5
Production:
Copper (millions of recoverable pounds)	125		353		270		693
Gold (thousands of recoverable ounces)	154		816		316		1,489


a.	Includes ore from related stockpiles.


b.	Reflects ore extracted, including ore from development activities that result in metal production.

PT-FI’s consolidated sales of 151 million pounds of copper and 185 thousand ounces of gold in second-quarter 2019 and 325 million pounds of copper and 420 thousand ounces of gold for the first six months of 2019 were lower than second-quarter 2018 sales of 316 million pounds of copper and 671 thousand ounces of gold and 635 million pounds of copper and 1.3 million ounces of gold for the first six months of 2018, primarily reflecting anticipated lower mill rates and ore grades as PT-FI transitions mining from the open pit to underground.

Consolidated sales volumes from PT-FI are expected to approximate 630 million pounds of copper and 830 thousand ounces of gold in 2019. PT-FI will continue to monitor geotechnical conditions to determine the extent of mining in the Grasberg open pit. As PT-FI transitions mining from the open pit to underground, metal production is expected to improve by 2021.

During the first half of 2019, PT-FI utilized its approved export quota of approximately 180,000 dry metric tons of concentrate for the current export period, which expires March 8, 2020. PT-FI has requested approval from the Indonesian government to increase its export quota for the current export period for expected higher production volumes associated with changes to PT-FI's production plan. PT-FI expects to receive approval during third-quarter 2019.

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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 (Loss) Profit per Pound of Copper and per Ounce of Gold

The following table summarizes the unit net cash costs (credits) and gross (loss) profit per pound of copper and per ounce of gold at our Indonesia mining 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 (credits) per pound to production and delivery costs applicable to sales reported in our consolidated financial statements.



	Three Months Ended June 30,
	2019										2018
	By-Product Method				Co-Product Method						By-Product Method			Co-Product Method
	By-Product Method				Copper			Gold			By-Product Method			Copper			Gold
Revenues, excluding adjustments	$	2.71			$	2.71		$	1,350		$	3.05		$	3.05		$	1,274

Site production and delivery, before net noncash and other costs (credits) shown below	3.40				2.09			1,041			1.33			0.70			291
Gold and silver credits	(1.69		)		—			—			(2.76		)	—			—
Treatment charges	0.26				0.16			80			0.26			0.14			57
Export duties	0.07				0.04			20			0.18			0.09			38
Royalty on metals	0.11				0.08			28			0.22			0.11			51
Unit net cash costs (credits)	2.15				2.37			1,169			(0.77		)	1.04			437
DD&A	0.65				0.40			199			0.54			0.28			119
Noncash and other costs (credits), net	0.30			^a	0.18			91			(0.01		)	—			(2		)
Total unit costs (credits)	3.10				2.95			1,459			(0.24		)	1.32			554
Revenue adjustments, primarily for pricing on prior period open sales	(0.13		)		(0.13		)	(7		)	0.04			0.04			(2		)
PT Smelting intercompany profit (loss)	0.06				0.03			16			(0.03		)	(0.01		)	(6		)
Gross (loss) profit per pound/ounce	$	(0.46	)		$	(0.34	)	$	(100	)	$	3.30		$	1.76		$	712

Copper sales (millions of recoverable pounds)	151				151						316			316
Gold sales (thousands of recoverable ounces)								185									671



	Six Months Ended June 30,
	2019								2018
	By-Product Method				Co-Product Method				By-Product Method			Co-Product Method
	By-Product Method				Copper		Gold		By-Product Method			Copper			Gold
Revenues, excluding adjustments	$	2.77			$	2.77	$	1,314	$	3.07		$	3.07		$	1,291

Site production and delivery, before net noncash and other costs shown below	3.24				1.99		944		1.34			0.72			304
Gold and silver credits	(1.75		)		—		—		(2.67		)	—			—
Treatment charges	0.28				0.17		81		0.25			0.14			57
Export duties	0.08				0.05		24		0.16			0.09			36
Royalty on metals	0.14				0.09		38		0.22			0.11			50
Unit net cash costs (credits)	1.99				2.30		1,087		(0.70		)	1.06			447
DD&A	0.63				0.38		183		0.55			0.30			125
Noncash and other costs, net	0.14			^a	0.09		43		0.02			0.01			4
Total unit costs (credits)	2.76				2.77		1,313		(0.13		)	1.37			576
Other revenue adjustments, primarily for pricing on prior period open sales	0.05				0.05		5		(0.05		)	(0.05		)	13
PT Smelting intercompany profit (loss)	0.04				0.02		10		(0.04		)	(0.01		)	(7		)
Gross profit per pound/ounce	$	0.10			$	0.07	$	16	$	3.11		$	1.64		$	721

Copper sales (millions of recoverable pounds)	325				325				635			635
Gold sales (thousands of recoverable ounces)							420								1,274


a.	Includes charges of $0.18 per pound of copper in second-quarter 2019 and $0.09 per pound of copper for the first six months of 2019 associated with adjustments to the settlement of the historical surface water tax disputes with the local regional tax authority in Papua, Indonesia.

Because of the fixed nature of a large portion of PT-FI’s costs, unit net cash costs (credits) can vary significantly from quarter to quarter depending on copper and gold volumes. PT-FI’s unit net cash costs (credits) (including gold

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and silver credits) of $2.15 per pound of copper in second-quarter 2019 and $1.99 per pound for the first six months of 2019, compared with unit net cash credits of $0.77 per pound in second-quarter 2018 and $0.70 per pound for the first six months of 2018, primarily reflect lower copper and gold volumes.

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.

Because certain assets are depreciated on a straight-line basis, PT-FI’s unit depreciation rate may vary with asset additions and the level of copper production and sales.

PT Smelting intercompany profit (loss) represents the change in the deferral of 25 percent of PT-FI’s profit on sales to PT Smelting. Refer to “Smelting and Refining” below for further discussion.

Assuming an average gold price of $1,400 per ounce for the second half of 2019 and achievement of current sales volume and cost estimates, unit net cash costs (including gold and silver credits) for PT-FI are expected to approximate $1.55 per pound of copper for the year 2019 (including $1.14 per pound of copper for the second half of 2019). PT-FI’s unit net cash costs for the second half of 2019 are expected to benefit from access to higher grade ore from the Grasberg open pit. PT-FI’s unit net cash costs for the year 2019 would change by approximately $0.04 per pound for each $50 per ounce change in the average price of gold for the second half of 2019.

PT-FI’s projected sales volumes and unit net cash costs for the year 2019 are dependent on a number of factors, including operational performance, mine sequencing changes, timing of shipments and export quotas.

Molybdenum Mines

We have two wholly owned molybdenum mines in Colorado – the Henderson underground mine and the Climax open-pit mine. The Henderson and Climax 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 Henderson and Climax mines, as well as from our North America and South America copper mines, is processed at our own conversion facilities.

Operating and Development Activities. Production from the Molybdenum mines totaled 9 million pounds of molybdenum in both second-quarter 2019 and 2018, 17 million pounds for the first six months of 2019 and 18 million pounds for the first six months of 2018. 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 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.

Unit net cash costs for our Molybdenum mines averaged $9.15 per pound of molybdenum in second-quarter 2019, $8.36 per pound in second-quarter 2018, $9.45 per pound for the first six months of 2019 and $8.46 per pound for the first six months of 2018. Based on current sales volume and cost estimates, average unit net cash costs for the Molybdenum mines are expected to approximate $9.60 per pound of molybdenum for the year 2019. 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.

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Smelting and Refining

We wholly own and operate a smelter in Arizona (Miami smelter), a refinery in Texas (El Paso refinery) and a smelter and refinery in Spain (Atlantic Copper). Additionally, PT-FI owns 25 percent of a smelter and refinery in Gresik, Indonesia (PT Smelting). 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 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 six months of 2019, Atlantic Copper’s concentrate purchases include 28 percent from our copper mining operations and 72 percent from third parties.

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. During the first six months of 2019, PT-FI supplied substantially all of PT Smelting’s concentrate requirements. In March 2019, PT Smelting received a one-year extension of its anode slimes export license through March 11, 2020.

We defer recognizing profits on sales from our mining operations to Atlantic Copper and on 25 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 net income attributable to common stock of $(1) million in second-quarter 2019, $27 million in second-quarter 2018, $(15) million for the first six months of 2019 and $20 million for the first six months of 2018. 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 $23 million at June 30, 2019. 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. In third-quarter 2019, we expect increased intercompany sales volumes to Atlantic Copper and PT Smelting, resulting in the deferral of approximately $30 million of net income until final sales occur.

CAPITAL RESOURCES AND LIQUIDITY

Our consolidated operating cash flows vary with sales volumes; prices realized from copper, gold and molybdenum sales; production costs; income taxes; other working capital changes; and other factors. We believe that we have a high-quality portfolio of long-lived copper assets positioned to generate long-term value. We continue to advance a project to develop the Lone Star leachable ores near our Safford operation in eastern Arizona, and PT-FI has several projects in the Grasberg minerals district related to the development of its large-scale, long-lived, high-grade underground ore bodies. We are also pursuing other opportunities to enhance 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.

As presented in “Outlook,” our projected capital expenditures for 2019 are approximately $0.7 billion higher than projected operating cash flows. A large portion of the capital expenditures relate to projects that are expected to add significant production and cash flow in future periods, enabling us to generate operating cash flows exceeding capital expenditures in future years. We have cash on hand and the financial flexibility to fund these expenditures and will continue to be disciplined in deploying capital. Subject to future commodity prices for copper, gold and molybdenum, we expect estimated consolidated operating cash flows in 2019, plus available cash and availability under our credit facility, to be sufficient to fund our budgeted capital expenditures, cash dividends, noncontrolling interest distributions and other cash requirements for the year.

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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 June 30, 2019 (in billions):



Cash at domestic companies	$	1.6
Cash at international operations	1.0
Total consolidated cash and cash equivalents	2.6
Noncontrolling interests’ share	(0.4		)
Cash, net of noncontrolling interests’ share	2.2
Withholding taxes and other	—			^a
Net cash available	$	2.2

a. Rounds to less than $0.1 billion.

Cash held at our international operations is generally used to support our foreign operations’ capital expenditures, operating expenses, debt repayment, 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

At June 30, 2019, FCX's consolidated debt totaled $9.9 billion, with no material scheduled maturities until 2021. At June 30, 2019, we had no borrowings, $13 million in letters of credit issued and $3.5 billion of availability under our revolving credit facility.

Refer to Note 5 for discussion of debt (including an amendment that extended the maturity date for our credit facility) and to Note 12 for discussion of the August 2019 debt transactions.

Operating Activities

We generated consolidated operating cash flows of $1.1 billion (including $0.3 billion of working capital sources and timing of other tax payments) for the first six months of 2019 and $2.7 billion (net of $0.2 billion in working capital uses and timing of other tax payments) for the first six months of 2018. Lower operating cash flows for the first six months of 2019, compared with the first six months of 2018, primarily reflect lower copper and gold sales volumes and lower copper prices.

Investing Activities

Capital Expenditures. Capital expenditures, including capitalized interest, totaled $1.25 billion for the first six months of 2019, including approximately $0.7 billion for major mining projects. Capital expenditures, including capitalized interest, totaled $0.9 billion for the first six months of 2018, including approximately $0.5 billion for major mining projects. Higher capital expenditures for the first six months of 2019, compared with the first six months of 2018, primarily reflect underground development activities in the Grasberg minerals district and development of the Lone Star copper leach project. Refer to “Outlook” for further discussion of projected capital expenditures for the year 2019.

Proceeds from sales of oil and gas properties. We received $91 million of proceeds from sales of oil and gas properties for the first six months of 2019, including $50 million in contingent consideration received associated with the 2016 sale of onshore California oil and gas properties.

Intangible water rights and other, net. During first-quarter 2018, our North America copper mines purchased intangible water rights totaling $88 million.

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Financing Activities

Debt Transactions. Net repayments of debt for the first six months of 2019 totaled $1.2 billion, consisting of the redemption of $1.0 billion aggregate principal amount of our 3.100% Senior Notes due 2020 and the repayment of $200 million under Cerro Verde's credit facility.

Net repayments of debt for the first six months of 2018 totaled $1.9 billion, consisting of $1.4 billion of 2.375% Senior Notes that matured in March 2018 and $454 million for senior notes due in 2022 and 2023.

Cash Dividends and Distributions Paid. We paid cash dividends on our common stock totaling $146 million for the first six months of 2019 and $73 million for the first six months of 2018. On June 26, 2019, we declared a quarterly cash dividend of $0.05 per share on our common stock, which was paid on August 1, 2019, to shareholders of record as of July 15, 2019. The declaration of dividends is at the discretion of our Board of Directors (Board) and will depend upon our financial results, cash requirements, future prospects and other factors deemed relevant by our Board.

Cash dividends and distributions paid to noncontrolling interests totaled $79 million for the first six months of 2019 and $241 million for the first six months of 2018. These payments will vary based on the operating results and cash requirements of our consolidated subsidiaries.

Contributions from Noncontrolling Interests. During second-quarter 2019, we received equity contributions totaling $100 million from PT Inalum for their share of smelter costs and capital spending on PT-FI underground mine development projects.

CONTRACTUAL OBLIGATIONS

As further discussed in Note 5, during the first six months of 2019, we reduced our December 31, 2018, total debt by $1.2 billion. There have been no other material changes in our contractual obligations since December 31, 2018. Refer to Part II, Items 7. and 7A. in our 2018 Form 10-K, for information regarding our contractual obligations.

CONTINGENCIES

Environmental and Asset Retirement Obligations

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 and asset retirement obligations and also review changes in facts and circumstances associated with these obligations at least quarterly.

There have been no material changes to our environmental and asset retirement obligations since December 31, 2018. 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 2018 Form 10-K, for further information regarding our environmental and asset retirement obligations.

Litigation and Other Contingencies

Other than as discussed in Note 8, there have been no material changes to our contingencies associated with legal proceedings, environmental and other matters since December 31, 2018. Refer to Note 12 and “Legal Proceedings” contained in Part I, Item 3. of our 2018 Form 10-K, as updated by Note 8, for further information regarding legal proceedings, environmental and other matters.

NEW ACCOUNTING STANDARDS

Refer to Note 11 for a summary of recently adopted accounting standards.

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PRODUCT REVENUES AND PRODUCTION COSTS

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 (loss) 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 (loss) 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 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, 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, restructuring and/or unusual charges. 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.

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North America Copper Mines Product Revenues, Production Costs and Unit Net Cash Costs




Three Months Ended June 30, 2019
(In millions)	By-Product			Co-Product Method
	Method			Copper			Molybdenum^a			Other^b		Total
Revenues, excluding adjustments	$	1,026		$	1,026		$	103		$	20	$	1,149
Site production and delivery, before net noncash and other costs shown below	758			692			79			13		784
By-product credits	(97		)	—			—			—		—
Treatment charges	40			39			—			1		40
Net cash costs	701			731			79			14		824
DD&A	88			79			7			2		88
Noncash and other costs, net	10			8			2			—		10
Total costs	799			818			88			16		922
Other revenue adjustments, primarily for pricing on prior period open sales	(16		)	(16		)	—			—		(16		)
Gross profit	$	211		$	192		$	15		$	4	$	211

Copper sales (millions of recoverable pounds)	369			369
Molybdenum sales (millions of recoverable pounds)^a							9

Gross profit per pound of copper/molybdenum:

Revenues, excluding adjustments	$	2.78		$	2.78		$	12.39
Site production and delivery, before net noncash and other costs shown below	2.05			1.88			9.53
By-product credits	(0.26		)	—			—
Treatment charges	0.11			0.10			—
Unit net cash costs	1.90			1.98			9.53
DD&A	0.24			0.22			0.77
Noncash and other costs, net	0.03			0.02			0.23
Total unit costs	2.17			2.22			10.53
Other revenue adjustments, primarily for pricing on prior period open sales	(0.04		)	(0.04		)	—
Gross profit per pound	$	0.57		$	0.52		$	1.86

Reconciliation to Amounts Reported
(In millions)
	Revenues			Production and Delivery			DD&A
Totals presented above	$	1,149		$	784		$	88
Treatment charges	(19		)	21			—
Noncash and other costs, net	—			10			—
Other revenue adjustments, primarily for pricing on prior period open sales	(16		)	—			—
Eliminations and other	6			10			(1		)
North America copper mines	1,120			825			87
Other mining^c	3,173			2,899			246
Corporate, other & eliminations	(747		)	(722		)	19
As reported in our consolidated financial statements	$	3,546		$	3,002		$	352


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.

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North America Copper Mines Product Revenues, Production Costs and Unit Net Cash Costs




Three Months Ended June 30, 2018
(In millions)	By-Product			Co-Product Method
	Method			Copper			Molybdenum^a		Other^b		Total
Revenues, excluding adjustments	$	1,126		$	1,126		$	91	$	22	$	1,239
Site production and delivery, before net noncash and other costs shown below	701			644			68		12		724
By-product credits	(90		)	—			—		—		—
Treatment charges	37			36			—		1		37
Net cash costs	648			680			68		13		761
DD&A	91			83			6		2		91
Noncash and other costs, net	23			21			1		1		23
Total costs	762			784			75		16		875
Other revenue adjustments, primarily for pricing on prior period open sales	1			1			—		—		1
Gross profit	$	365		$	343		$	16	$	6	$	365

Copper sales (millions of recoverable pounds)	361			361
Molybdenum sales (millions of recoverable pounds)^a							8

Gross profit per pound of copper/molybdenum:

Revenues, excluding adjustments	$	3.12		$	3.12		$	12.13
Site production and delivery, before net noncash and other costs shown below	1.94			1.78			9.09
By-product credits	(0.25		)	—			—
Treatment charges	0.10			0.10			—
Unit net cash costs	1.79			1.88			9.09
DD&A	0.25			0.23			0.80
Noncash and other costs, net	0.07			0.06			0.15
Total unit costs	2.11			2.17			10.04
Other revenue adjustments, primarily for pricing on prior period open sales	—			—			—
Gross profit per pound	$	1.01		$	0.95		$	2.09

Reconciliation to Amounts Reported
(In millions)	Revenues			Production and Delivery			DD&A
Totals presented above	$	1,239		$	724		$	91
Treatment charges	(5		)	32			—
Noncash and other costs, net	—			23			—
Other revenue adjustments, primarily for pricing on prior period open sales	1			—			—
Eliminations and other	12			10			1
North America copper mines	1,247			789			92
Other mining^c	4,738			3,042			336
Corporate, other & eliminations	(817		)	(916		)	14
As reported in our consolidated financial statements	$	5,168		$	2,915		$	442


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.

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North America Copper Mines Product Revenues, Production Costs and Unit Net Cash Costs




Six Months Ended June 30, 2019
(In millions)	By-Product			Co-Product Method
	Method			Copper			Molybdenum^a		Other^b		Total
Revenues, excluding adjustments	$	1,931		$	1,931		$	190	$	43	$	2,164
Site production and delivery, before net noncash and other costs shown below	1,416			1,288			153		28		1,469
By-product credits	(180		)	—			—		—		—
Treatment charges	76			73			—		3		76
Net cash costs	1,312			1,361			153		31		1,545
DD&A	170			155			12		3		170
Noncash and other costs, net	33			29			3		1		33
Total costs	1,515			1,545			168		35		1,748
Other revenue adjustments, primarily for pricing on prior period open sales	4			4			—		—		4
Gross profit	$	420		$	390		$	22	$	8	$	420

Copper sales (millions of recoverable pounds)	689			689
Molybdenum sales (millions of recoverable pounds)^a							16

Gross profit per pound of copper/molybdenum:

Revenues, excluding adjustments	$	2.80		$	2.80		$	12.06
Site production and delivery, before net noncash and other costs shown below	2.05			1.87			9.69
By-product credits	(0.26		)	—			—
Treatment charges	0.11			0.11			—
Unit net cash costs	1.90			1.98			9.69
DD&A	0.25			0.22			0.75
Noncash and other costs, net	0.05			0.04			0.22
Total unit costs	2.20			2.24			10.66
Other revenue adjustments, primarily for pricing on prior period open sales	0.01			0.01			—
Gross profit per pound	$	0.61		$	0.57		$	1.40

Reconciliation to Amounts Reported
(In millions)
				Production
	Revenues			and Delivery			DD&A
Totals presented above	$	2,164		$	1,469		$	170
Treatment charges	(32		)	44			—
Noncash and other costs, net	—			33			—
Other revenue adjustments, primarily for pricing on prior period open sales	4			—			—
Eliminations and other	18			22			—
North America copper mines	2,154			1,568			170
Other mining^c	6,688			5,750			490
Corporate, other & eliminations	(1,504		)	(1,340		)	39
As reported in our consolidated financial statements	$	7,338		$	5,978		$	699


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.

Table of Contents

North America Copper Mines Product Revenues, Production Costs and Unit Net Cash Costs




Six Months Ended June 30, 2018
(In millions)	By-Product			Co-Product Method
	Method			Copper			Molybdenum^a		Other^b		Total
Revenues, excluding adjustments	$	2,337		$	2,337		$	167	$	45	$	2,549
Site production and delivery, before net noncash and other costs shown below	1,405			1,304			123		25		1,452
By-product credits	(165		)	—			—		—		—
Treatment charges	74			71			—		3		74
Net cash costs	1,314			1,375			123		28		1,526
DD&A	185			171			10		4		185
Noncash and other costs, net	42			40			2		—		42
Total costs	1,541			1,586			135		32		1,753
Other revenue adjustments, primarily for pricing on prior period open sales	(5		)	(5		)	—		—		(5		)
Gross profit	$	791		$	746		$	32	$	13	$	791

Copper sales (millions of recoverable pounds)	744			744
Molybdenum sales (millions of recoverable pounds)^a							15

Gross profit per pound of copper/molybdenum:

Revenues, excluding adjustments	$	3.14		$	3.14		$	11.52
Site production and delivery, before net noncash and other costs shown below	1.89			1.75			8.47
By-product credits	(0.22		)	—			—
Treatment charges	0.10			0.10			—
Unit net cash costs	1.77			1.85			8.47
DD&A	0.25			0.23			0.74
Noncash and other costs, net	0.05			0.05			0.12
Total unit costs	2.07			2.13			9.33
Other revenue adjustments, primarily for pricing on prior period open sales	(0.01		)	(0.01		)	—
Gross profit per pound	$	1.06		$	1.00		$	2.19

Reconciliation to Amounts Reported
(In millions)				Production
	Revenues			and Delivery			DD&A
Totals presented above	$	2,549		$	1,452		$	185
Treatment charges	(13		)	61			—
Noncash and other costs, net	—			42			—
Other revenue adjustments, primarily for pricing on prior period open sales	(5		)	—			—
Eliminations and other	24			25			1
North America copper mines	2,555			1,580			186
Other mining^c	9,255			6,053			672
Corporate, other & eliminations	(1,774		)	(1,910		)	35
As reported in our consolidated financial statements	$	10,036		$	5,723		$	893


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.

Table of Contents

South America Mining Product Revenues, Production Costs and Unit Net Cash Costs




Three Months Ended June 30, 2019
(In millions)	By-Product			Co-Product Method
	Method			Copper			Other^a		Total
Revenues, excluding adjustments	$	781		$	781		$	92	$	873
Site production and delivery, before net noncash and other costs shown below	550			498			64		562
By-product credits	(80		)	—			—		—
Treatment charges	52			52			—		52
Royalty on metals	2			2			—		2
Net cash costs	524			552			64		616
DD&A	119			107			12		119
Noncash and other costs, net	21			20			1		21
Total costs	664			679			77		756
Other revenue adjustments, primarily for pricing on prior period open sales	(57		)	(57		)	—		(57		)
Gross profit	$	60		$	45		$	15	$	60

Copper sales (millions of recoverable pounds)	287			287

Gross profit per pound of copper:

Revenues, excluding adjustments	$	2.72		$	2.72
Site production and delivery, before net noncash and other costs shown below	1.92			1.74
By-product credits	(0.28		)	—
Treatment charges	0.18			0.18
Royalty on metals	0.01			0.01
Unit net cash costs	1.83			1.93
DD&A	0.41			0.37
Noncash and other costs, net	0.07			0.07
Total unit costs	2.31			2.37
Other revenue adjustments, primarily for pricing on prior period open sales	(0.20		)	(0.20		)
Gross profit per pound	$	0.21		$	0.15

Reconciliation to Amounts Reported
(In millions)
				Production
	Revenues			and Delivery			DD&A
Totals presented above	$	873		$	562		$	119
Treatment charges	(52		)	—			—
Royalty on metals	(2		)	—			—
Noncash and other costs, net	—			21			—
Other revenue adjustments, primarily for pricing on prior period open sales	(57		)	—			—
Eliminations and other	(1		)	(2		)	—
South America mining	761			581			119
Other mining^b	3,532			3,143			214
Corporate, other & eliminations	(747		)	(722		)	19
As reported in our consolidated financial statements	$	3,546		$	3,002		$	352


a.	Includes silver sales of 1.2 million ounces ($15.39 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.

Table of Contents

South America Mining Product Revenues, Production Costs and Unit Net Cash Costs




Three Months Ended June 30, 2018
(In millions)	By-Product			Co-Product Method
	Method			Copper			Other^a		Total
Revenues, excluding adjustments	$	958		$	958		$	81	$	1,039
Site production and delivery, before net noncash and other costs shown below	552			513			50		563
By-product credits	(70		)	—			—		—
Treatment charges	59			59			—		59
Royalty on metals	2			2			—		2
Net cash costs	543			574			50		624
DD&A	133			123			10		133
Noncash and other costs, net	17			17			—		17
Total costs	693			714			60		774
Other revenue adjustments, primarily for pricing on prior period open sales	13			13			—		13
Gross profit	$	278		$	257		$	21	$	278

Copper sales (millions of recoverable pounds)	312			312

Gross profit per pound of copper:

Revenues, excluding adjustments	$	3.07		$	3.07
Site production and delivery, before net noncash and other costs shown below	1.77			1.65
By-product credits	(0.22		)	—
Treatment charges	0.18			0.18
Royalty on metals	0.01			0.01
Unit net cash costs	1.74			1.84
DD&A	0.43			0.40
Noncash and other costs, net	0.05			0.05
Total unit costs	2.22			2.29
Other revenue adjustments, primarily for pricing on prior period open sales	0.04			0.04
Gross profit per pound	$	0.89		$	0.82

Reconciliation to Amounts Reported
(In millions)				Production
	Revenues			and Delivery			DD&A
Totals presented above	$	1,039		$	563		$	133
Treatment charges	(59		)	—			—
Royalty on metals	(2		)	—			—
Noncash and other costs, net	—			17			—
Other revenue adjustments, primarily for pricing on prior period open sales	13			—			—
Eliminations and other	(1		)	(2		)	—
South America mining	990			578			133
Other mining^b	4,995			3,253			295
Corporate, other & eliminations	(817		)	(916		)	14
As reported in our consolidated financial statements	$	5,168		$	2,915		$	442


a.	Includes silver sales of 1.1 million ounces ($16.38 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.

Table of Contents

South America Mining Product Revenues, Production Costs and Unit Net Cash Costs




Six Months Ended June 30, 2019
(In millions)	By-Product			Co-Product Method
	Method			Copper			Other^a		Total
Revenues, excluding adjustments	$	1,584		$	1,584		$	204	$	1,788
Site production and delivery, before net noncash and other costs shown below	1,053			949			129		1,078
By-product credits	(179		)	—			—		—
Treatment charges	108			108			—		108
Royalty on metals	3			3			—		3
Net cash costs	985			1,060			129		1,189
DD&A	233			207			26		233
Noncash and other costs, net	46			45			1		46
Total costs	1,264			1,312			156		1,468
Other revenue adjustments, primarily for pricing on prior period open sales	37			37			—		37
Gross profit	$	357		$	309		$	48	$	357

Copper sales (millions of recoverable pounds)	577			577

Gross profit per pound of copper:

Revenues, excluding adjustments	$	2.75		$	2.75
Site production and delivery, before net noncash and other costs shown below	1.82			1.64
By-product credits	(0.31		)	—
Treatment charges	0.19			0.19
Royalty on metals	0.01			0.01
Unit net cash costs	1.71			1.84
DD&A	0.40			0.35
Noncash and other costs, net	0.08			0.08
Total unit costs	2.19			2.27
Other revenue adjustments, primarily for pricing on prior period open sales	0.06			0.06
Gross profit per pound	$	0.62		$	0.54

Reconciliation to Amounts Reported
(In millions)				Production
	Revenues			and Delivery			DD&A
Totals presented above	$	1,788		$	1,078		$	233
Treatment charges	(108		)	—			—
Royalty on metals	(3		)	—			—
Noncash and other costs, net	—			46			—
Other revenue adjustments, primarily for pricing on prior period open sales	37			—			—
Eliminations and other	(2		)	(4		)	—
South America mining	1,712			1,120			233
Other mining^b	7,130			6,198			427
Corporate, other & eliminations	(1,504		)	(1,340		)	39
As reported in our consolidated financial statements	$	7,338		$	5,978		$	699


a.	Includes silver sales of 2.5 million ounces ($15.58 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.

Table of Contents

South America Mining Product Revenues, Production Costs and Unit Net Cash Costs




Six Months Ended June 30, 2018
(In millions)	By-Product			Co-Product Method
	Method			Copper			Other^a		Total
Revenues, excluding adjustments	$	1,859		$	1,859		$	167	$	2,026
Site production and delivery, before net noncash and other costs shown below	1,069			990			102		1,092
By-product credits	(144		)	—			—		—
Treatment charges	117			117			—		117
Royalty on metals	4			4			—		4
Net cash costs	1,046			1,111			102		1,213
DD&A	260			239			21		260
Noncash and other costs, net	32			32			—		32
Total costs	1,338			1,382			123		1,505
Other revenue adjustments, primarily for pricing on prior period open sales	(37		)	(37		)	—		(37		)
Gross profit	$	484		$	440		$	44	$	484

Copper sales (millions of recoverable pounds)	602			602

Gross profit per pound of copper:

Revenues, excluding adjustments	$	3.09		$	3.09
Site production and delivery, before net noncash and other costs shown below	1.78			1.64
By-product credits	(0.24		)	—
Treatment charges	0.19			0.19
Royalty on metals	0.01			0.01
Unit net cash costs	1.74			1.84
DD&A	0.43			0.40
Noncash and other costs, net	0.05			0.05
Total unit costs	2.22			2.29
Other revenue adjustments, primarily for pricing on prior period open sales	(0.06		)	(0.06		)
Gross profit per pound	$	0.81		$	0.74

Reconciliation to Amounts Reported
(In millions)				Production
	Revenues			and Delivery			DD&A
Totals presented above	$	2,026		$	1,092		$	260
Treatment charges	(117		)	—			—
Royalty on metals	(4		)	—			—
Noncash and other costs, net	—			32			—
Other revenue adjustments, primarily for pricing on prior period open sales	(37		)	—			—
Eliminations and other	(1		)	(3		)	—
South America mining	1,867			1,121			260
Other mining^b	9,943			6,512			598
Corporate, other & eliminations	(1,774		)	(1,910		)	35
As reported in our consolidated financial statements	$	10,036		$	5,723		$	893


a.	Includes silver sales of 2.1 million ounces ($16.45 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.

Table of Contents

Indonesia Mining Product Revenues, Production Costs and Unit Net Cash Costs




Three Months Ended June 30, 2019
(In millions)	By-Product				Co-Product Method
	Method				Copper			Gold			Silver^a		Total
Revenues, excluding adjustments	$	412			$	412		$	250		$	8	$	670
Site production and delivery, before net noncash and other costs shown below	516				317			193			6		516
Gold and silver credits	(256		)		—			—			—		—
Treatment charges	40				25			14			1		40
Export duties	10				6			4			—		10
Royalty on metals	17				12			5			—		17
Net cash costs	327				360			216			7		583
DD&A	99				61			37			1		99
Noncash and other costs, net	45			^b	28			17			—		45
Total costs	471				449			270			8		727
Other revenue adjustments, primarily for pricing on prior period open sales	(19		)		(19		)	(2		)	—		(21		)
PT Smelting intercompany profit	7				4			3			—		7
Gross loss	$	(71	)		$	(52	)	$	(19	)	$	—	$	(71	)

Copper sales (millions of recoverable pounds)	151				151
Gold sales (thousands of recoverable ounces)								185

Gross loss per pound of copper/per ounce of gold:

Revenues, excluding adjustments	$	2.71			$	2.71		$	1,350
Site production and delivery, before net noncash and other costs shown below	3.40				2.09			1,041
Gold and silver credits	(1.69		)		—			—
Treatment charges	0.26				0.16			80
Export duties	0.07				0.04			20
Royalty on metals	0.11				0.08			28
Unit net cash costs	2.15				2.37			1,169
DD&A	0.65				0.40			199
Noncash and other costs, net	0.30			^b	0.18			91
Total unit costs	3.10				2.95			1,459
Other revenue adjustments, primarily for pricing on prior period open sales	(0.13		)		(0.13		)	(7		)
PT Smelting intercompany profit	0.06				0.03			16
Gross loss per pound/ounce	$	(0.46	)		$	(0.34	)	$	(100	)

Reconciliation to Amounts Reported
(In millions)					Production
	Revenues				and Delivery			DD&A
Totals presented above	$	670			$	516		$	99
Treatment charges	(40		)		—			—
Export duties	(10		)		—			—
Royalty on metals	(17		)		—			—
Noncash and other costs, net	—				45			—
Other revenue adjustments, primarily for pricing on prior period open sales	(21		)		—			—
PT Smelting intercompany profit	—				(7		)	—
Indonesia mining	582				554			99
Other mining^c	3,711				3,170			234
Corporate, other & eliminations	(747		)		(722		)	19
As reported in our consolidated financial statements	$	3,546			$	3,002		$	352


a.	Includes silver sales of 0.5 million ounces ($14.57 per ounce average realized price).


b.	Includes charges totaling $28 million ($0.18 per pound of copper) associated with adjustments to the settlement of the historical surface water tax disputes with the local regional tax authority in Papua, Indonesia. Refer to Note 8.


c.	Represents the combined total for our other segments, as presented in Note 9.

Table of Contents

Indonesia Mining Product Revenues, Production Costs and Unit Net Cash (Credits) Costs




Three Months Ended June 30, 2018
(In millions)	By-Product			Co-Product Method
	Method			Copper			Gold			Silver^a		Total
Revenues, excluding adjustments	$	965		$	965		$	855		$	17	$	1,837
Site production and delivery, before net noncash and other credits shown below	420			221			195			4		420
Gold and silver credits	(871		)	—			—			—		—
Treatment charges	82			43			38			1		82
Export duties	55			29			26			—		55
Royalty on metals	71			36			34			1		71
Net cash (credits) costs	(243		)	329			293			6		628
DD&A	172			90			80			2		172
Noncash and other credits, net	(3		)	(1		)	(2		)	—		(3		)
Total (credits) costs	(74		)	418			371			8		797
Other revenue adjustments, primarily for pricing on prior period open sales	12			12			(2		)	1		11
PT Smelting intercompany loss	(8		)	(4		)	(4		)	—		(8		)
Gross profit	$	1,043		$	555		$	478		$	10	$	1,043

Copper sales (millions of recoverable pounds)	316			316
Gold sales (thousands of recoverable ounces)							671

Gross profit per pound of copper/per ounce of gold:

Revenues, excluding adjustments	$	3.05		$	3.05		$	1,274
Site production and delivery, before net noncash and other credits shown below	1.33			0.70			291
Gold and silver credits	(2.76		)	—			—
Treatment charges	0.26			0.14			57
Export duties	0.18			0.09			38
Royalty on metals	0.22			0.11			51
Unit net cash (credits) costs	(0.77		)	1.04			437
DD&A	0.54			0.28			119
Noncash and other credits, net	(0.01		)	—			(2		)
Total unit (credits) costs	(0.24		)	1.32			554
Other revenue adjustments, primarily for pricing on prior period open sales	0.04			0.04			(2		)
PT Smelting intercompany loss	(0.03		)	(0.01		)	(6		)
Gross profit per pound/ounce	$	3.30		$	1.76		$	712

Reconciliation to Amounts Reported
(In millions)				Production
	Revenues			and Delivery			DD&A
Totals presented above	$	1,837		$	420		$	172
Treatment charges	(82		)	—			—
Export duties	(55		)	—			—
Royalty on metals	(71		)	—			—
Noncash and other credits, net	—			(3		)	—
Other revenue adjustments, primarily for pricing on prior period open sales	11			—			—
PT Smelting intercompany loss	—			8			—
Indonesia mining	1,640			425			172
Other mining^b	4,345			3,406			256
Corporate, other & eliminations	(817		)	(916		)	14
As reported in our consolidated financial statements	$	5,168		$	2,915		$	442


a.	Includes silver sales of 1.1 million ounces ($15.89 per ounce average realized price).


b.	Represents the combined total for our other segments, as presented in Note 9.

Table of Contents

Indonesia Mining Product Revenues, Production Costs and Unit Net Cash Costs




Six Months Ended June 30, 2019
(In millions)	By-Product				Co-Product Method
	Method				Copper			Gold		Silver^a		Total
Revenues, excluding adjustments	$	900			$	900		$	552	$	17	$	1,469
Site production and delivery, before net noncash and other costs shown below	1,054				646			396		12		1,054
Gold and silver credits	(571		)		—			—		—		—
Treatment charges	91				56			34		1		91
Export duties	27				17			10		—		27
Royalty on metals	45				28			16		1		45
Net cash costs	646				747			456		14		1,217
DD&A	204				125			77		2		204
Noncash and other costs, net	48			^b	29			18		1		48
Total costs	898				901			551		17		1,469
Other revenue adjustments, primarily for pricing on prior period open sales	18				18			2		—		20
PT Smelting intercompany profit	11				7			4		—		11
Gross profit	$	31			$	24		$	7	$	—	$	31

Copper sales (millions of recoverable pounds)	325				325
Gold sales (thousands of recoverable ounces)								420

Gross profit per pound of copper/per ounce of gold:

Revenues, excluding adjustments	$	2.77			$	2.77		$	1,314
Site production and delivery, before net noncash and other costs shown below	3.24				1.99			944
Gold and silver credits	(1.75		)		—			—
Treatment charges	0.28				0.17			81
Export duties	0.08				0.05			24
Royalty on metals	0.14				0.09			38
Unit net cash costs	1.99				2.30			1,087
DD&A	0.63				0.38			183
Noncash and other costs, net	0.14			^b	0.09			43
Total unit costs	2.76				2.77			1,313
Other revenue adjustments, primarily for pricing on prior period open sales	0.05				0.05			5
PT Smelting intercompany profit	0.04				0.02			10
Gross profit per pound/ounce	$	0.10			$	0.07		$	16

Reconciliation to Amounts Reported
(In millions)					Production
	Revenues				and Delivery			DD&A
Totals presented above	$	1,469			$	1,054		$	204
Treatment charges	(72		)		19			—
Export duties	(27		)		—			—
Royalty on metals	(45		)		—			—
Noncash and other costs, net	—				48			—
Other revenue adjustments, primarily for pricing on prior period open sales	20				—			—
PT Smelting intercompany profit	—				(11		)	—
Indonesia mining	1,345				1,110			204
Other mining^c	7,497				6,208			456
Corporate, other & eliminations	(1,504		)		(1,340		)	39
As reported in our consolidated financial statements	$	7,338			$	5,978		$	699


a.	Includes silver sales of 1.1 million ounces ($14.66 per ounce average realized price).


b.	Includes charges totaling $28 million ($0.09 per pound of copper) associated with adjustments to the settlement of the historical surface water tax disputes with the local regional tax authority in Papua, Indonesia. Refer to Note 8.


c.	Represents the combined total for our other segments, as presented in Note 9.

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Indonesia Mining Product Revenues, Production Costs and Unit Net Cash (Credits) Costs




Six Months Ended June 30, 2018
(In millions)	By-Product			Co-Product Method
	Method			Copper			Gold			Silver^a		Total
Revenues, excluding adjustments	$	1,949		$	1,949		$	1,644		$	36	$	3,629
Site production and delivery, before net noncash and other costs shown below	853			458			387			8		853
Gold and silver credits	(1,697		)	—			—			—		—
Treatment charges	160			86			72			2		160
Export duties	101			54			46			1		101
Royalty on metals	138			73			64			1		138
Net cash (credits) costs	(445		)	671			569			12		1,252
DD&A	353			189			160			4		353
Noncash and other costs, net	12			7			5			—		12
Total (credits) costs	(80		)	867			734			16		1,617
Other revenue adjustments, primarily for pricing on prior period open sales	(34		)	(34		)	17			—		(17		)
PT Smelting intercompany loss	(17		)	(9		)	(8		)	—		(17		)
Gross profit	$	1,978		$	1,039		$	919		$	20	$	1,978

Copper sales (millions of recoverable pounds)	635			635
Gold sales (thousands of recoverable ounces)							1,274

Gross profit per pound of copper/per ounce of gold:

Revenues, excluding adjustments	$	3.07		$	3.07		$	1,291
Site production and delivery, before net noncash and other costs shown below	1.34			0.72			304
Gold and silver credits	(2.67		)	—			—
Treatment charges	0.25			0.14			57
Export duties	0.16			0.09			36
Royalty on metals	0.22			0.11			50
Unit net cash (credits) costs	(0.70		)	1.06			447
DD&A	0.55			0.30			125
Noncash and other costs, net	0.02			0.01			4
Total unit (credits) costs	(0.13		)	1.37			576
Other revenue adjustments, primarily for pricing on prior period open sales	(0.05		)	(0.05		)	13
PT Smelting intercompany loss	(0.04		)	(0.01		)	(7		)
Gross profit per pound/ounce	$	3.11		$	1.64		$	721

Reconciliation to Amounts Reported
(In millions)				Production
	Revenues			and Delivery			DD&A
Totals presented above	$	3,629		$	853		$	353
Treatment charges	(160		)	—			—
Export duties	(101		)	—			—
Royalty on metals	(138		)	—			—
Noncash and other costs, net	—			12			—
Other revenue adjustments, primarily for pricing on prior period open sales	(17		)	—			—
PT Smelting intercompany loss	—			17			—
Indonesia mining	3,213			882			353
Other mining^b	8,597			6,751			505
Corporate, other & eliminations	(1,774		)	(1,910		)	35
As reported in our consolidated financial statements	$	10,036		$	5,723		$	893


a.	Includes silver sales of 2.3 million ounces ($15.93 per ounce average realized price).


b.	Represents the combined total for our other segments, as presented in Note 9.

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Molybdenum Mines Product Revenues, Production Costs and Unit Net Cash Costs




	Three Months Ended June 30,
(In millions)	2019			2018

Revenues, excluding adjustments^a	$	117		$	119
Site production and delivery, before net noncash and other costs shown below	76			71
Treatment charges and other	8			8
Net cash costs	84			79
DD&A	18			21
Noncash and other costs, net	2			—
Total costs	104			100
Gross profit	$	13		$	19

Molybdenum sales (millions of recoverable pounds)^a	9			9

Gross profit per pound of molybdenum:

Revenues, excluding adjustments^a	$	12.74		$	12.72
Site production and delivery, before net noncash and other costs shown below	8.31			7.51
Treatment charges and other	0.84			0.85
Unit net cash costs	9.15			8.36
DD&A	2.07			2.24
Noncash and other costs, net	0.15			0.05
Total unit costs	11.37			10.65
Gross profit per pound	$	1.37		$	2.07

Reconciliation to Amounts Reported
(In millions)

				Production
Three Months Ended June 30, 2019	Revenues			and Delivery			DD&A
Totals presented above	$	117		$	76		$	18
Treatment charges and other	(8		)	—			—
Noncash and other costs, net	—			2			—
Molybdenum mines	109			78			18
Other mining^b	4,184			3,646			315
Corporate, other & eliminations	(747		)	(722		)	19
As reported in our consolidated financial statements	$	3,546		$	3,002		$	352

Three Months Ended June 30, 2018
Totals presented above	$	119		$	71		$	21
Treatment charges and other	(8		)	—			—
Noncash and other costs, net	—			—			—
Molybdenum mines	111			71			21
Other mining^b	5,874			3,760			407
Corporate, other & eliminations	(817		)	(916		)	14
As reported in our consolidated financial statements	$	5,168		$	2,915		$	442


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.

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Molybdenum Mines Product Revenues, Production Costs and Unit Net Cash Costs




	Six Months Ended June 30,
(In millions)	2019			2018

Revenues, excluding adjustments^a	$	215		$	221
Site production and delivery, before net noncash and other costs shown below	146			136
Treatment charges and other	15			15
Net cash costs	161			151
DD&A	34			40
Noncash and other costs, net	3			2
Total costs	198			193
Gross profit	$	17		$	28

Molybdenum sales (millions of recoverable pounds)^a	17			18

Gross profit per pound of molybdenum:

Revenues, excluding adjustments^a	$	12.63		$	12.38
Site production and delivery, before net noncash and other costs shown below	8.60			7.61
Treatment charges and other	0.85			0.85
Unit net cash costs	9.45			8.46
DD&A	2.04			2.24
Noncash and other costs, net	0.15			0.10
Total unit costs	11.64			10.80
Gross profit per pound	$	0.99		$	1.58

Reconciliation to Amounts Reported
(In millions)

				Production
Six Months Ended June 30, 2019	Revenues			and Delivery			DD&A
Totals presented above	$	215		$	146		$	34
Treatment charges and other	(15		)	—			—
Noncash and other costs, net	—			3			—
Molybdenum mines	200			149			34
Other mining^b	8,642			7,169			626
Corporate, other & eliminations	(1,504		)	(1,340		)	39
As reported in our consolidated financial statements	$	7,338		$	5,978		$	699

Six Months Ended June 30, 2018
Totals presented above	$	221		$	136		$	40
Treatment charges and other	(15		)	—			—
Noncash and other costs, net	—			2			—
Molybdenum mines	206			138			40
Other mining^b	11,604			7,495			818
Corporate, other & eliminations	(1,774		)	(1,910		)	35
As reported in our consolidated financial statements	$	10,036		$	5,723		$	893


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.

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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 projections or expectations relating to ore grades and milling rates; production and sales volumes; unit net cash costs; operating cash flows; capital expenditures; our expectations regarding our share of PT-FI’s net (loss) income and future cash flows through 2022; PT-FI’s development, financing, construction and completion of a new smelter in Indonesia; PT-FI’s compliance with environmental standards under the framework established by Indonesia’s Ministry of Environment and Forestry; exploration efforts and results; development and production activities, rates and costs; liquidity; tax rates; export quotas and duties; the impact of copper, gold and molybdenum price changes; the impact of deferred intercompany profits on earnings; reserve estimates; consummation of the pending Freeport Cobalt transaction; and future dividend payments, share purchases and sales. The words “anticipates,” “may,” “can,” “plans,” “believes,” “estimates,” “expects,” “projects,” “targets,” “intends,” “likely,” “will,” “should,” “to be,” “potential” and any similar expressions are intended to identify those assertions as forward-looking statements. The declaration of dividends is at the discretion of the Board and will depend on our financial results, cash requirements, future prospects, and other factors deemed relevant by the Board.

We caution readers that forward-looking statements are not guarantees of future performance and 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, gold and molybdenum; mine sequencing; changes in mine plans; production rates; timing of shipments; results of feasibility studies; potential inventory adjustments; potential impairment of long-lived mining assets; satisfaction of customary closing conditions, including receipt of regulatory approvals to consummate the pending Freeport Cobalt transaction; the potential effects of violence in Indonesia generally and in the province of Papua; the Indonesian government’s approval of an increase in PT-FI's export quota for the current export period ending March 8, 2020, and extension of PT-FI's export license after March 8, 2020; risks associated with underground mining; satisfaction of requirements in accordance with PT-FI’s IUPK to extend mining rights from 2031 through 2041; industry risks; regulatory changes; political and social risks; labor relations; weather- and climate-related risks; environmental risks; litigation results; cybersecurity incidents; and other factors described in more detail in Part I, Item 1A. “Risk Factors” of our 2018 Form 10-K.

Investors are cautioned that many of the assumptions upon which our forward-looking statements are based are likely to change after the forward-looking statements are made, including for example commodity prices, which we cannot control, and production volumes and costs, some aspects of which we may 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 intend to update forward-looking statements more frequently than quarterly notwithstanding any changes in our assumptions, changes in business plans, actual experience or other changes, and we undertake no obligation to update any forward-looking statements.

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Item 3.	Quantitative and Qualitative Disclosures About Market Risk.

There have been no material changes in our market risks during the six-month period ended June 30, 2019. For additional information on market risks, refer to “Disclosures About Market Risks” included in Part II, Items 7. and 7A. of our 2018 Form 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 June 30, 2019; for projected sensitivities of our provisionally priced copper sales to changes in commodity prices refer to “Consolidated Results – Revenues” in Part I, Item 2. of this quarterly report on Form 10-Q for the period ended June 30, 2019.


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 are effective as of June 30, 2019.


(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 June 30, 2019, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


Part II.	OTHER INFORMATION


Item 1.	Legal Proceedings.

We are involved in numerous legal proceedings that arise in the ordinary course of our business or are associated with environmental issues. We are also involved periodically in 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 Part I, Item 3. “Legal Proceedings” and Note 12 of our 2018 Form 10-K, as updated in Note 8 of our quarterly reports on Form 10-Q for the quarters ended March 31, 2019 and June 30, 2019, 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.

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 2018 Form 10-K. For additional information on risk factors, refer to Part I, Item 1A. “Risk Factors” of our 2018 Form 10-K.


Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.

There were no unregistered sales of equity securities during the three months ended June 30, 2019.

There were no shares of common stock purchased by us during the three months ended June 30, 2019. On July 21, 2008, our Board of Directors approved an increase in our open-market share purchase program for up to 30 million shares. There have been no purchases under this program since 2008. This program does not have an expiration date. At June 30, 2019, there were 23.7 million shares that could still be purchased under the program.


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

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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.



		Filed
Exhibit		with this	Incorporated by Reference
Number	Exhibit Title	Form 10-Q	Form	File No.	Date Filed
2.1	PTFI 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
2.2	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
3.1	Amended and Restated Certificate of Incorporation of FCX, effective as of June 8, 2016.		8-K	001-11307-01	6/9/2016
3.2	Amended and Restated By-Laws of FCX, effective as of June 8, 2016.		8-K	001-11307-01	6/9/2016
4.1	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 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
4.2	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
4.3	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 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
4.4	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
4.5	Seventh 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 4.55% Senior Notes due 2024).		8-K	001-11307-01	11/14/2014
4.6	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
4.7	Indenture dated as of March 7, 2013, between FCX and U.S. Bank National Association, as Trustee (relating to the 3.875% Senior Notes due 2023, and the 5.450% Senior Notes due 2043).		8-K	001-11307-01	3/7/2013
4.8	Supplemental Indenture dated as of May 31, 2013, among FCX, Freeport-McMoRan Oil & Gas LLC, as guarantor, and U.S. Bank National Association, as Trustee (relating to the 3.875% Senior Notes due 2023 and the 5.450% Senior Notes due 2043).		8-K	001-11307-01	6/3/2013
4.9	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

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		Filed
Exhibit		with this	Incorporated by Reference
Number	Exhibit Title	Form 10-Q	Form	File No.	Date Filed
4.10	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
4.11	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
4.12	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
4.13	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
4.14	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 6.875% Senior Notes due 2023).		8-K	001-11307-01	12/13/2016
4.15	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
4.16	Form of Certificate representing shares of common stock, par value $0.10.		8-A/A	001-11307-01	8/10/2015
10.1	First Amendment dated as of May 2, 2019 to the Revolving Credit Agreement dated as of April 20, 2018, among FCX, PT Freeport Indonesia, Freeport-McMoRan Oil & Gas LLC, JPMorgan Chase Bank, N.A., as administrative agent, Bank of America, N.A., as syndication agent, and each of the lenders and issuing banks party thereto.		8-K	001-11307-01	5/2/2019
15.1	Letter from Ernst & Young LLP regarding unaudited interim financial statements.	X
31.1	Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d – 14(a).	X
31.2	Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d – 14(a).	X
32.1	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350.	X
32.2	Certification of Principal Financial Officer pursuant to 18 U.S.C Section 1350.	X

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		Filed
Exhibit		with this	Incorporated by Reference
Number	Exhibit Title	Form 10-Q	Form	File No.	Date Filed
95.1	Mine Safety and Health Administration Safety Data.	X
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	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
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase.	X

(*) The registrant agrees to furnish supplementally to the Securities and Exchange 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.

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. FCX agrees to furnish a copy of each such instrument upon request of the Securities and Exchange Commission.

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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.



	Freeport-McMoRan Inc.

	By:	/s/ C. Donald Whitmire, Jr.
		C. Donald Whitmire, Jr.
		Vice President and
		Controller - Financial Reporting
		(authorized signatory
		and Principal Accounting Officer)

Date: August 6, 2019

S-1