FREEPORT-MCMORAN INC - Annual Report: 2020 (Form 10-K)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2020
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 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 | Arizona | 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 |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act ☑ Yes ☐ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☑ No
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 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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☑ No
The aggregate market value of common stock held by non-affiliates of the registrant was $14.9 billion on June 30, 2020.
Common stock issued and outstanding was 1,458,480,446 shares on January 29, 2021.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s proxy statement for its 2021 annual meeting of stockholders are incorporated by reference into Part III of this report. |
Freeport-McMoRan Inc.
TABLE OF CONTENTS | |||||
Page | |||||
Item 6. Reserved | |||||
i
PART I
Items 1. and 2. Business and Properties.
All of our periodic reports filed with the United States (U.S.) Securities and Exchange Commission (SEC) pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available, free of charge, through our website, “fcx.com,” including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports. These reports and amendments are available through our website as soon as reasonably practicable after we electronically file or furnish such material to the SEC. Our website is for information only and is not intended to incorporate any website information into this Form 10-K.
References to “we,” “us” and “our” refer to Freeport-McMoRan Inc. (FCX) and its consolidated subsidiaries. References to “Notes” refer to the Notes to Consolidated Financial Statements included herein (refer to Item 8.), and references to “MD&A” refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures About Market Risk included herein (refer to Items 7. and 7A.).
GENERAL
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. The ramp-up of underground mining at PT Freeport Indonesia (PT-FI) is advancing on schedule, production from the recently completed Lone Star copper leach project remains on track to produce over 200 million pounds of copper during the year 2021 and Cerro Verde has restored operations following a government-mandated shutdown in mid-March 2020 as part of efforts to contain the spread of COVID-19 in Peru. We are also pursuing other opportunities to enhance our mines’ net present values, and we continue to advance studies for future development of our portfolio of resources, the timing of which will depend on market conditions. We plan to prioritize long-term development opportunities during 2021 while focusing on the continued execution of our strategic objectives of maintaining a strong balance sheet, increasing cash returns to shareholders and advancing opportunities for future growth.
Protecting the health of our workforce and communities where we operate is a top priority, and we continue to focus on safeguarding our business in an uncertain public health and economic environment. Our operating sites successfully executed our April 2020 revised operating plans implemented in response to the global COVID-19 pandemic and resulting negative impact on the global economy.
In connection with our financing activities in 2019 and 2020, we issued a total of $4.0 billion in new senior notes and used most of the net proceeds to purchase and redeem outstanding senior notes. As a result, we have extended our debt maturities and strengthened our financial flexibility. We have no senior note maturities until 2022 and at December 31, 2020, we had no amounts drawn under our $3.5 billion revolving credit facility, which matures in April 2024.
1
Following are our ownership interests at December 31, 2020, in operating mines through our consolidated subsidiaries, Freeport Minerals Corporation (FMC) and PT-FI:

a.Prior to December 21, 2018, we owned 90.64 percent of PT-FI and PT-FI had an unincorporated joint venture with Rio Tinto plc (Rio Tinto). Refer to Note 2 for further discussion of the PT-FI divestment transaction and Note 3 for discussion of the former joint venture with Rio Tinto (Rio Tinto Joint Venture).
b.FMC has a 72 percent undivided interest in Morenci via an unincorporated joint venture. Refer to Note 3 for further discussion.
At December 31, 2020, our estimated consolidated recoverable proven and probable mineral reserves totaled 113.2 billion pounds of copper, 28.9 million ounces of gold and 3.71 billion pounds of molybdenum. Following is the allocation of our estimated consolidated recoverable proven and probable mineral reserves at December 31, 2020, by geographic location (refer to “Mining Operations” for further discussion):
Copper | Gold | Molybdenum | |||||||||||||||||||||
North America | 42 | % | 2 | % | 81 | % | a | ||||||||||||||||
South America | 29 | — | 19 | ||||||||||||||||||||
Indonesia | 29 | 98 | — | ||||||||||||||||||||
100 | % | 100 | % | 100 | % |
a.Our Henderson and Climax molybdenum mines contain 18 percent of our estimated consolidated recoverable proven and probable molybdenum reserves, and our North America copper mines contain 63 percent.
In North America, we operate seven copper mines - Morenci, Bagdad, Safford, Sierrita and Miami in Arizona, and Chino and Tyrone in New Mexico, and two molybdenum mines - Henderson and Climax in Colorado. In addition to copper, certain of our North America copper mines also produce molybdenum concentrate, gold and silver. In South America, we operate two copper mines - Cerro Verde in Peru and El Abra in Chile. In addition to copper, the Cerro Verde mine also produces molybdenum concentrate and silver. In Indonesia, PT-FI operates in the Grasberg minerals district. In addition to copper, the Grasberg minerals district also produces gold and silver.
2
Following is the allocation of our consolidated copper, gold and molybdenum production for the year 2020 by geographic location (refer to “Mining Operations” for further information):
Copper | Gold | Molybdenum | ||||||||||||||||||
North America | 44 | % | 1 | % | 75 | % | a | |||||||||||||
South America | 31 | — | 25 | |||||||||||||||||
Indonesia | 25 | 99 | — | |||||||||||||||||
100 | % | 100 | % | 100 | % |
a.Our Henderson and Climax molybdenum mines produced 32 percent of our consolidated molybdenum production, and our North America copper mines produced 43 percent.
The geographic locations of our operating mines are shown on the world map below. 

COPPER, GOLD AND MOLYBDENUM
Following is a brief discussion of our primary natural resources – copper, gold and molybdenum. For further discussion of historical and current market prices of these commodities, refer to MD&A and Item 1A. “Risk Factors.”
Copper
Copper is an internationally traded commodity, and its prices are determined by the major metals exchanges – the London Metal Exchange (LME), Commodity Exchange Inc. (COMEX) and Shanghai Futures Exchange. Prices on these exchanges generally reflect the worldwide balance of copper supply and demand, and can be volatile and cyclical. During 2020, the LME copper settlement price averaged $2.80 per pound, ranging from a low of $2.09 per pound to a high of $3.61 per pound, and was $3.51 per pound at December 31, 2020.
In general, demand for copper reflects the rate of underlying world economic growth, particularly in industrial production and construction. According to Wood Mackenzie, a widely followed independent metals market consultant, copper’s end-use markets (and their estimated shares of total consumption) are construction (28 percent), electrical applications (28 percent), consumer products (21 percent), transportation (12 percent) and industrial machinery (11 percent). We believe copper will continue to be essential in these basic uses as well as contribute significantly to new technologies for clean energy, to advance communications and to enhance public health. Examples of areas we believe will require additional copper in the future include: (i) high efficiency motors, which consume up to 75 percent more copper than a standard motor; (ii) electric vehicles, which consume up to four times the amount of copper in terms of weight compared to vehicles of similar size with an internal combustion engine, and require copper-intensive charging station infrastructure to refuel; and (iii) renewable energy such as wind and solar, which consume four to five times the amount of copper compared to traditional fossil fuel generated power.
3
Gold
Gold is used for jewelry, coinage and bullion as well as various industrial and electronic applications. Gold can be readily sold on numerous markets throughout the world. Benchmark prices are generally based on London Bullion Market Association (London) quotations. During 2020, the London PM gold price averaged $1,770 per ounce, ranging from a low of $1,474 per ounce to a record high of $2,067 per ounce, and was $1,888 per ounce on December 30, 2020 (there was no London PM gold price quote on December 31, 2020).
Molybdenum
Molybdenum is a key alloying element in steel and the raw material for several chemical-grade products used in catalysts, lubrication, smoke suppression, corrosion inhibition and pigmentation. Molybdenum, as a high-purity metal, is also used in electronics such as flat-panel displays and in super alloys used in aerospace. Reference prices for molybdenum are available in several publications, including Metals Week, CRU Report and Metal Bulletin. During 2020, the weekly average price of molybdenum quoted by Metals Week averaged $8.69 per pound, ranging from a low of $7.01 per pound to a high of $10.79 per pound, and was $9.86 per pound at December 31, 2020.
PRODUCTS AND SALES
Our consolidated revenues for 2020 primarily included sales of copper (80 percent), gold (12 percent) and molybdenum (6 percent). Copper concentrate sales to PT Smelting (PT-FI’s 25-percent-owned copper smelter and refinery in Gresik, Indonesia) totaled 12 percent of our consolidated revenues for the year ended December 31, 2020, 13 percent for the year ended December 31, 2019, and 12 percent for the year ended December 31, 2018, which is the only customer that accounted for 10 percent or more of our consolidated revenues during the three years ended December 31, 2020. Refer to Note 16 for a summary of our consolidated revenues and operating income (loss) by business segment and geographic area.
Copper Products
We are one of the world’s leading producers of copper concentrate, cathode and continuous cast copper rod. During 2020, 51 percent of our mined copper was sold in concentrate, 28 percent as cathode and 21 percent as rod from our North America operations. The copper ore from our mines is generally processed either by smelting and refining or by solution extraction and electrowinning (SX/EW) as described below.
Copper Concentrate. We produce copper concentrate at six of our mines in which mined ore is crushed and treated to produce a copper concentrate with copper content of approximately 20 to 30 percent. In North America, copper concentrate is produced at the Morenci, Bagdad, Sierrita and Chino mines, and a significant portion is shipped to our Miami smelter in Arizona for further processing. Copper concentrate is also produced at the Cerro Verde mine in Peru and the Grasberg minerals district in Indonesia.
Copper Cathode. We produce copper cathode at our electrolytic refinery located in El Paso, Texas, and at nine of our mines.
SX/EW cathode is produced from the Morenci, Bagdad, Safford, Sierrita, Miami, Chino and Tyrone mines in North America, and from the Cerro Verde and El Abra mines in South America. For ore subject to the SX/EW process, the ore is placed on stockpiles and copper is extracted from the ore by dissolving it with a weak sulphuric acid solution. The copper content of the solution is increased in two additional SX stages, and then the copper-bearing solution undergoes an EW process to produce cathode that is, on average, 99.99 percent copper. Our copper cathode is used as the raw material input for copper rod, brass mill products and for other uses.
Copper cathode is also produced at Atlantic Copper (our wholly owned copper smelting and refining unit in Spain) and PT Smelting. Copper concentrate is smelted (i.e., subjected to extreme heat) to produce copper anode, which weighs between 800 and 900 pounds and has an average copper content of 99.5 percent. The anode is further treated by electrolytic refining to produce copper cathode, which weighs between 100 and 350 pounds and has an average copper content of 99.99 percent. Refer to “Mining Operations - Smelting Facilities and Other Mining Properties” for further discussion of Atlantic Copper and PT Smelting.
Continuous Cast Copper Rod. We manufacture continuous cast copper rod at our facilities in El Paso, Texas and Miami, Arizona, primarily using copper cathode produced at our North America copper mines.
4
Copper Sales
North America. The majority of the copper produced at our North America copper mines and refined in our El Paso, Texas refinery is consumed at our rod plants to produce copper rod which is sold to wire and cable manufacturers. The remainder of our North America copper production is sold in the form of copper cathode or copper concentrate under U.S. dollar-denominated annual contracts. Cathode and rod contract prices are generally based on the prevailing COMEX monthly average settlement price for the month of shipment and include a premium. Generally, copper cathode is sold to rod, brass or tube fabricators. During 2020, 12 percent of our North America mines’ copper concentrate sales volumes were shipped to Atlantic Copper for smelting and refining and sold as copper anode and copper cathode.
South America. Production from our South America mines is sold as copper concentrate or copper cathode under U.S. dollar-denominated, annual and multi-year contracts. During 2020, our South America mines sold approximately 76 percent of their copper production in concentrate and 24 percent as cathode.
Substantially all of our South America copper concentrate and cathode sales contracts provide final copper pricing in a specified future month (generally one to four months from the shipment date) primarily based on quoted LME monthly average settlement copper prices. Revenues from our South America concentrate sales are recorded net of royalties and treatment charges (i.e., fees paid to smelters that are generally negotiated annually). In addition, because a portion of the metals contained in copper concentrate is unrecoverable from the smelting process, revenues from our South America concentrate sales are also recorded net of allowances for unrecoverable metals, which are a negotiated term of the contracts and vary by customer.
Indonesia. PT-FI sells its production in the form of copper concentrate, which contains significant quantities of gold and silver, primarily under U.S. dollar-denominated, long-term contracts. PT-FI also sells a small amount of copper concentrate in the spot market. Following is a summary of PT-FI’s aggregate percentage of concentrate sales to unaffiliated third parties, PT Smelting and Atlantic Copper for the years ended December 31:
2020 | 2019 | 2018 | |||||||||||||||
Third parties | 48 | % | 34 | % | 60 | % | |||||||||||
PT Smelting | 50 | 64 | 38 | ||||||||||||||
Atlantic Copper | 2 | 2 | 2 | ||||||||||||||
100 | % | 100 | % | 100 | % |
Substantially all of PT-FI’s concentrate sales contracts provide final copper pricing in a specified future month (generally one to four months from the shipment date) primarily based on quoted LME monthly average settlement copper prices. Revenues from PT-FI’s concentrate sales are recorded net of royalties, export duties, treatment charges and allowances for unrecoverable metals.
Refer to Item 1A. “Risk Factors” for discussion of Indonesia regulations regarding PT-FI’s concentrate exports.
Gold Products and Sales
We produce gold almost exclusively from the Grasberg minerals district. The gold we produce is primarily sold as a component of our copper concentrate or in slimes, which are a product of the smelting and refining process. Gold generally is priced at the average London price for a specified month near the month of shipment. Revenues from gold sold as a component of our copper concentrate are recorded net of treatment and refining charges, royalties, export duties and allowances for unrecoverable metals. Revenues from gold sold in slimes are recorded net of refining charges.
Molybdenum Products and Sales
We are the world’s largest producer of molybdenum and molybdenum-based chemicals. In addition to production from the Henderson and Climax molybdenum mines, we produce molybdenum concentrate at certain of the North America copper mines and the Cerro Verde copper mine in Peru. The majority of our molybdenum concentrate is processed in our own conversion facilities. Our molybdenum sales are primarily priced based on the average published Metals Week price for the month prior to the month of shipment.
5
GOVERNMENTAL REGULATIONS
Our operations are subject to a broad range of laws and regulations imposed by governments and regulatory bodies. These regulations touch all aspects of our operations, including how we extract, process and explore for minerals and how we conduct our business, including regulations governing matters such as environmental and reclamation matters, occupational health and safety, mining rights and human rights.
Environmental and Reclamation Matters
The cost of complying with environmental laws and regulations is fundamental to and a substantial cost of our business. We conduct our operations in a manner that aims to protect public health and the environment and we believe our operations are in compliance with applicable laws and regulations in all material respects. For information about environmental regulation, litigation and related costs, refer to Item 1A. “Risk Factors” and Notes 1 and 12.
Health and Safety
We prioritize the safety and health of our workforce. 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. In the U.S., mine health and safety is governed by the U.S. Mine Safety and Health Administration. For information about health and safety, refer to “Human Capital” below and Item 4. “Mine Safety Disclosures.”
Mining Rights
We conduct our mining and exploration activities pursuant to concessions granted by, or under contracts with, the host government in the countries where we operate. These countries include, among others, the U.S., Peru, Chile and Indonesia. Mining rights include our license to operate and involve our payment of applicable taxes and royalties to the host governments. The concessions and contracts are subject to the political risks associated with the host countries. For information about mining rights, including governmental agreements, and licenses to operate, refer to “Mining Operations” below, Item 1A. “Risk Factors” and Notes 2, 11, 12 and 13.
Human Rights
We have adopted policies that govern our working relationships with the communities and governments where we operate and that are designed to guide our practices and programs in a manner that respects human rights and the culture of the local people impacted by our operations. For information about human rights, refer to “Community and Human Rights” below.
COMPETITION
The top 10 producers of copper comprise approximately 43 percent of total worldwide mined copper production. For the year 2020, we ranked fourth among those producers, with approximately five percent of estimated total worldwide mined copper production. Our competitive position is based on the size, quality and grade of our ore bodies and our ability to manage costs compared with other producers. We have a diverse portfolio of mining operations with varying ore grades and cost structures. Our costs are driven by the location, grade and nature of our ore bodies, and the level of input costs, including energy, labor and equipment. The metals markets are cyclical, and our ability to maintain our competitive position over the long term is based on our ability to acquire and develop quality deposits, hire and retain a skilled workforce, and to manage our costs.
MINING OPERATIONS
Following are maps and descriptions of our mining operations in North America (including both copper and molybdenum operations), South America and Indonesia.
North America
In the U.S., most of the land occupied by our copper and molybdenum mines, concentrators, SX/EW facilities, smelter, refinery, rod mills, molybdenum roasters and processing facilities is owned by us or is located on unpatented mining claims owned by us. Certain portions of our Bagdad, Sierrita, Miami, Chino, Tyrone, Henderson and Climax operations are located on government-owned land and are operated under a Mine Plan of Operations or other use permit. We hold various federal and state permits or leases on government land for purposes incidental to mine operations.
6
Morenci

We own a 72 percent undivided interest in Morenci, with the remaining 28 percent owned by Sumitomo Metal Mining Arizona, Inc. (15 percent) and SMM Morenci, Inc. (13 percent). Each partner takes in kind its share of Morenci’s production.
Morenci is an open-pit copper mining complex that has been in continuous operation since 1939 and previously was mined through underground workings. Morenci is located in Greenlee County, Arizona, approximately 50 miles northeast of Safford on U.S. Highway 191. The site is accessible by a paved highway and a railway spur.
The Morenci mine is a porphyry copper deposit that has oxide, secondary sulfide and primary sulfide mineralization. The predominant oxide copper mineral is chrysocolla. Chalcocite is the most important secondary copper sulfide mineral, with chalcopyrite as the dominant primary copper sulfide.
The Morenci operation consists of two concentrators capable of milling 132,000 metric tons of ore per day, which produce copper and molybdenum concentrate; a 68,000 metric ton-per-day, crushed-ore leach pad and stacking system; a low-grade run-of-mine (ROM) leaching system; four SX plants; and three EW tank houses that produce copper cathode. Total EW tank house capacity is approximately 900 million pounds of copper per year. Morenci’s available mining fleet consists of one hundred and forty-one 236-metric ton haul trucks loaded by 13 shovels with bucket sizes ranging from 47 to 57 cubic meters, which are capable of moving an average of 815,000 metric tons of material per day. One of Morenci’s concentrators, which has a milling capacity of approximately 50,000 metric tons of ore per day, is on care and maintenance and expected to resume operating in 2022.
Morenci’s production, including our joint venture partner’s share, totaled 1.0 billion pounds of copper in each of the last three years and 6 million pounds of molybdenum in 2020, 5 million pounds of molybdenum in 2019 and 9 million pounds of molybdenum in 2018.
Morenci is located in a desert environment with rainfall averaging 13 inches per year. The highest bench elevation is 2,000 meters above sea level and the ultimate pit bottom is expected to have an elevation of 840 meters above sea level. The Morenci operation encompasses approximately 61,300 acres, comprising 51,300 acres of fee lands and 10,000 acres of unpatented mining claims held on public mineral estate and numerous state or federal permits, easements and rights-of-way.
The Morenci operation’s electrical power is primarily sourced from Tucson Electric Power Company, Arizona Public Service Company and the Luna Energy facility in Deming, New Mexico. Although we believe the Morenci operation has sufficient water sources to support current operations, we are a party to litigation that may impact our water right claims or rights to continued use of currently available water supplies, which could adversely affect our water supply for the Morenci operation. Refer to Item 1A. “Risk Factors” and Item 3. “Legal Proceedings” for further discussion.
7
Bagdad

Our wholly owned Bagdad mine is an open-pit copper and molybdenum mining complex located in Yavapai County in west-central Arizona. It is approximately 60 miles west of Prescott and 100 miles northwest of Phoenix. The property can be reached by Arizona Highway 96, which ends at the town of Bagdad. The closest railroad is at Hillside, Arizona, 24 miles southeast on Arizona Highway 96. The open-pit mining operation has been ongoing since 1945, and prior mining was conducted through underground workings.
The Bagdad mine is a porphyry copper deposit containing both sulfide and oxide mineralization. Chalcopyrite and molybdenite are the dominant primary sulfides and are the primary economic minerals in the mine. Chalcocite is the most common secondary copper sulfide mineral, and the predominant oxide copper minerals are chrysocolla, malachite and azurite.
The Bagdad operation consists of an 83,500 metric ton-per-day concentrator that produces copper and molybdenum concentrate, a SX/EW plant that will produce approximately 6 million pounds per year of copper cathode from solution generated by low-grade stockpile leaching, and a pressure-leach plant to process molybdenum concentrate. The available mining fleet consists of thirty-two 235-metric ton haul trucks loaded by eight shovels with bucket sizes ranging from 30 to 48 cubic meters, which are capable of moving an average of 236,000 metric tons of material per day.
Bagdad’s production totaled 216 million pounds of copper and 11 million pounds of molybdenum in 2020, 218 million pounds of copper and 13 million pounds of molybdenum in 2019, and 199 million pounds of copper and 10 million pounds of molybdenum in 2018.
Bagdad is located in a desert environment with rainfall averaging 15 inches per year. The highest bench elevation is 1,200 meters above sea level and the ultimate pit bottom is expected to be 150 meters above sea level. The Bagdad operation encompasses approximately 33,100 acres, comprising 21,900 acres of fee lands and 11,200 acres of unpatented mining claims held on public mineral estate and numerous state or federal permits, easements and rights-of-ways.
Bagdad receives electrical power from Arizona Public Service Company. We believe the Bagdad operation has sufficient water sources to support current operations.
8
Safford, including Lone Star

Our wholly owned Safford mine has been in operation since 2007 and is an open-pit copper mining complex located in Graham County, Arizona, 8 miles north of the town of Safford and 170 miles east of Phoenix. The site is accessible by paved county road off U.S. Highway 70.
The Safford mine includes three copper deposits that have oxide mineralization overlaying primary copper sulfide mineralization. The predominant oxide copper minerals are chrysocolla and copper-bearing iron oxides with the predominant copper sulfide material being chalcopyrite. One of the Safford deposits includes the Lone Star copper leach project, which was completed in third-quarter 2020, and advances exposure to a significant sulfide resource.
Total capital costs for the initial project, including mine equipment and pre-production stripping, approximated $820 million and benefits from the utilization of existing infrastructure at the Safford operation. Production from the Lone Star leachable ores continues to ramp-up on schedule and is expected to exceed 200 million pounds of copper for the year 2021. We expect to incorporate positive drilling and ongoing results in our future development plans.
The property is a mine-for-leach project and produces copper cathode. The operation consists of three open pits, of which one (Lone Star) is currently being mined, feeding a crushing facility with a capacity of 103,000 metric tons per day. The crushed ore is delivered to leach pads by a series of overland and portable conveyors. Leach solutions feed a SX/EW facility with a capacity of 285 million pounds of copper per year. A sulfur burner plant is also in operation at Safford, providing a cost-effective source of sulphuric acid used in SX/EW operations. The available mining fleet consists of thirty-seven 235-metric ton haul trucks loaded by six shovels with bucket sizes ranging from 34 to 47 cubic meters, which are capable of moving an average of 358,000 metric tons of material per day.
Safford’s copper production totaled 161 million pounds in 2020, 110 million pounds in 2019 and 123 million pounds in 2018.
Safford is located in a desert environment with rainfall averaging 10 inches per year. The highest bench elevation is 1,783 meters above sea level and the ultimate pit bottom is expected to have an elevation of 823 meters above sea level. The Safford operation encompasses approximately 76,000 acres, comprising 37,200 acres of fee lands and 38,800 acres of unpatented claims held on public mineral estate.
The Safford operation’s electrical power is primarily sourced from Tucson Electric Power Company, Arizona Public Service Company and the Luna Energy facility. Although we believe the Safford operation has sufficient water sources to support current operations, we are a party to litigation that may impact our water right claims or rights to continued use of currently available water supplies, which could adversely affect our water supply for the Safford operation. Refer to Item 1A. “Risk Factors” and Item 3. “Legal Proceedings” for further discussion.
9
Sierrita

Our wholly owned Sierrita mine has been in operation since 1959 and is an open-pit copper and molybdenum mining complex located in Pima County, Arizona, approximately 20 miles southwest of Tucson and 7 miles west of the town of Green Valley and Interstate Highway 19. The site is accessible by a paved highway and by rail.
The Sierrita mine is a porphyry copper deposit that has oxide, secondary sulfide and primary sulfide mineralization. The predominant oxide copper minerals are malachite, azurite and chrysocolla. Chalcocite is the most important secondary copper sulfide mineral, and chalcopyrite and molybdenite are the dominant primary sulfides.
The Sierrita operation includes a 100,000 metric ton-per-day concentrator that produces copper and molybdenum concentrate. Sierrita also produces copper from a ROM oxide-leaching system. Cathode copper is plated at the Twin Buttes EW facility, which has a design capacity of approximately 50 million pounds of copper per year. The Sierrita operation also has molybdenum facilities consisting of a leaching circuit, two molybdenum roasters and a packaging facility. The molybdenum facilities process molybdenum concentrate produced by Sierrita, from our other mines and from third-party sources. The available mining fleet consists of twenty-two 235-metric ton haul trucks loaded by three shovels with bucket sizes ranging from 34 to 56 cubic meters, which are capable of moving an average of 175,000 metric tons of material per day.
Sierrita’s production totaled 178 million pounds of copper and 17 million pounds of molybdenum in 2020, 160 million pounds of copper and 16 million pounds of molybdenum in 2019, and 152 million pounds of copper and 16 million pounds of molybdenum in 2018.
Sierrita is located in a desert environment with rainfall averaging 14.5 inches per year. The highest bench elevation is 1,300 meters above sea level and the ultimate pit bottom is expected to be 410 meters above sea level. The Sierrita operation, including the adjacent Twin Buttes site, encompasses approximately 46,700 acres, comprising 38,300 acres of fee lands including split estate lands and 8,400 acres of unpatented mining claims held on public mineral estate.
Sierrita receives electrical power through long-term contracts with the Tucson Electric Power Company. Although we believe the Sierrita operation has sufficient water sources to support current operations, we are a party to litigation that may impact our water rights claims or rights to continued use of currently available water supplies, which could adversely affect our water supply for the Sierrita operation. Refer to Item 1A. “Risk Factors” and Item 3. “Legal Proceedings” for further discussion.
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Miami

Our wholly owned Miami mine is an open-pit copper mining complex located in Gila County, Arizona, 90 miles east of Phoenix and 6 miles west of the city of Globe on U.S. Highway 60. The site is accessible by a paved highway and by rail.
The Miami mine is a porphyry copper deposit that has leachable oxide and secondary sulfide mineralization. The predominant oxide copper minerals are chrysocolla, copper-bearing clays, malachite and azurite. Chalcocite and covellite are the most important secondary copper sulfide minerals.
Since about 1915, the Miami mining operation had processed copper ore using both flotation and leaching technologies. The design capacity of the SX/EW plant is 200 million pounds of copper per year. Miami is no longer mining ore, but currently produces copper through leaching material already placed on stockpiles, which is currently expected to continue through at least 2025. Miami’s copper production totaled 17 million pounds in 2020, 15 million pounds in 2019 and 16 million pounds in 2018.
Miami is located in a desert environment with rainfall averaging 18 inches per year. The highest bench elevation is 1,390 meters above sea level and mining advanced the pit bottom to an elevation of 810 meters above sea level. Subsequent sloughing of material into the pit has filled it back to an elevation estimated to be 900 meters above sea level. The Miami operation encompasses approximately 14,400 acres, comprising 10,400 acres of fee lands and 4,000 acres of unpatented mining claims held on public mineral estate.
Miami receives electrical power through long-term contracts with the Salt River Project and natural gas through long-term contracts with El Paso Natural Gas as the transporter. We believe the Miami operation has sufficient water sources to support current operations.
Chino and Tyrone

Chino
Our wholly owned Chino mine is an open-pit copper mining complex located in Grant County, New Mexico, approximately 15 miles east of the town of Silver City off of State Highway 180. The mine is accessible by paved roads and by rail. Chino has been in operation since 1910.
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The Chino mine is a porphyry copper deposit with adjacent copper skarn deposits. There is leachable oxide, secondary sulfide and millable primary sulfide mineralization. The predominant oxide copper mineral is chrysocolla. Chalcocite is the most important secondary copper sulfide mineral, and chalcopyrite and molybdenite the dominant primary sulfides.
The Chino operation consists of a 36,000 metric ton-per-day concentrator that produces copper concentrate, and a 150 million pound-per-year SX/EW plant that produces copper cathode from solution generated by ROM leaching. The available mining fleet consists of thirty-five 240-metric ton haul trucks loaded by four shovels with bucket sizes ranging from 31 to 48 cubic meters, which are capable of moving an average of 235,000 metric tons of material per day.
In April 2020, operations at Chino were suspended in connection with our revised operating plans in response to the COVID-19 pandemic. A review of options for restarting Chino operations was completed in the second half of 2020, and in January 2021, we restarted mining activities at the Chino mine at a reduced rate of approximately 100 million pounds of copper per year (approximately 50 percent capacity). Chino’s copper production totaled 92 million pounds in 2020, 175 million pounds in 2019 and 173 million pounds in 2018.
Chino is located in a desert environment with rainfall averaging 16 inches per year. The highest bench elevation is 2,250 meters above sea level and the ultimate pit bottom is expected to be 1,460 meters above sea level. The Chino operation encompasses approximately 117,300 acres, comprising 103,900 acres of fee lands and 13,400 acres of unpatented mining claims held on public mineral estate.
Chino receives electrical power from the Luna Energy facility and from the open market. We believe the Chino operation has sufficient water resources to support current operations.
Tyrone
Our wholly owned Tyrone mine is an open-pit copper mining complex and has been in operation since 1967. It is located in Grant County, New Mexico, 10 miles south of Silver City, New Mexico, along State Highway 90. The site is accessible by paved road and by rail.
The Tyrone mine is a porphyry copper deposit. Mineralization is predominantly secondary sulfide consisting of chalcocite, with leachable oxide mineralization consisting of chrysocolla.
Copper processing facilities consist of a SX/EW operation with a maximum capacity of approximately 100 million pounds of copper cathode per year. The available mining fleet consists of seven 240-metric ton haul trucks loaded by one shovel with a bucket size of 47 cubic meters, which is capable of moving an average of 68,000 metric tons of material per day.
Tyrone’s copper production totaled 45 million pounds in 2020, 48 million pounds in 2019 and 55 million pounds in 2018.
Tyrone is located in a desert environment with rainfall averaging 16 inches per year. The highest bench elevation is 2,070 meters above sea level and the ultimate pit bottom is expected to have an elevation of 1,475 meters above sea level. The Tyrone operation encompasses approximately 31,100 acres, comprising 19,700 acres of fee lands and 11,400 acres of unpatented mining claims held on public mineral estate.
Tyrone receives electrical power from the Luna Energy facility and from the open market. We believe the Tyrone operation has sufficient water resources to support current operations.
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Henderson and Climax

Henderson
Our wholly owned Henderson molybdenum mine has been in operation since 1976 and is located 42 miles west of Denver, Colorado, off U.S. Highway 40. Nearby communities include the towns of Empire, Georgetown and Idaho Springs. The Henderson mill site is located 15 miles west of the mine and is accessible from Colorado State Highway 9. The Henderson mine and mill are connected by a 10-mile conveyor tunnel under the Continental Divide and an additional five-mile surface conveyor. The tunnel portal is located five miles east of the mill.
The Henderson mine is a porphyry molybdenum deposit, with molybdenite as the primary sulfide mineral.
The Henderson operation consists of a large block-cave underground mining complex feeding a concentrator with a current capacity of approximately 32,000 metric tons per day. Henderson has the capacity to produce approximately 16 million pounds of molybdenum per year. The majority of the molybdenum concentrate produced is shipped to our Fort Madison, Iowa, processing facility. The available underground mining equipment fleet consists of fifteen 9-metric ton load-haul-dump (LHD) units and seven 73-metric ton haul trucks, which deliver ore to a gyratory crusher feeding a series of three overland conveyors to the mill stockpiles.
Henderson’s molybdenum production totaled 10 million pounds in 2020, 12 million pounds in 2019 and 14 million pounds in 2018.
The Henderson mine is located in a mountainous region with the main access shaft at 3,180 meters above sea level. The main production levels are currently at elevations of 2,200 and 2,350 meters above sea level. This region experiences significant snowfall during the winter months.
The Henderson mine and mill operations encompass approximately 16,700 acres, comprising 13,100 acres of fee lands, 3,600 acres of unpatented mining claims held on public mineral estate and a 50-acre easement with the U.S. Forest Service for the surface portion of the conveyor corridor.
Henderson operations receive electrical power through long-term contracts with Xcel Energy and natural gas through long-term contracts with Encore Energy (with Xcel Energy as the transporter). We believe the Henderson operation has sufficient water resources to support current operations.
Climax
Our wholly owned Climax mine is located 13 miles northeast of Leadville, Colorado, off Colorado State Highway 91 at the top of Fremont Pass. The mine is accessible by paved roads. The mine was placed on care and maintenance status by its previous owner in 1995 and, after being acquired by us, began commercial production in 2012.
The Climax ore body is a porphyry molybdenum deposit, with molybdenite as the primary sulfide mineral.
The Climax open-pit mine includes a 25,000 metric ton-per-day mill facility. Climax has the capacity to produce approximately 30 million pounds of molybdenum per year. The available mining fleet consists of eleven 177-metric ton haul trucks loaded by two hydraulic shovels with bucket sizes of 34 cubic meters, which are capable of moving an average of 90,000 metric tons of material per day.
In April 2020, due to the decline in market prices of molybdenum, we revised our near-term operating plans, which included a reduction in production of molybdenum by approximately 50 percent at Climax over the remainder of
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2020. Climax expects to remain at reduced production levels of approximately half of the available capacity in 2021. Molybdenum production from Climax totaled 14 million pounds in 2020, 17 million pounds in 2019 and 21 million pounds in 2018.
The Climax mine is located in a mountainous region. The highest bench elevation is approximately 4,050 meters above sea level and the ultimate pit bottom is expected to have an elevation of approximately 3,100 meters above sea level. This region experiences significant snowfall during the winter months.
The Climax operation encompasses approximately 15,100 acres of fee lands.
Climax operations receive electrical power through long-term contracts with Xcel Energy and natural gas through long-term contracts with Encore Energy. We believe the Climax operation has sufficient water resources to support current operations.
South America
At our operations in South America, mine properties and facilities are controlled through mining claims or concessions under the general mining laws of the relevant country. The claims or concessions are owned or controlled by the operating companies in which we or our subsidiaries have a controlling ownership interest. Roads, power lines and aqueducts are controlled by easements.
Cerro Verde

We have a 53.56 percent ownership interest in Cerro Verde, with the remaining 46.44 percent held by SMM Cerro Verde Netherlands B.V. (21.0 percent), Compañia de Minas Buenaventura S.A.A. (19.58 percent) and other stockholders whose shares are publicly traded on the Lima Stock Exchange (5.86 percent).
Cerro Verde is an open-pit copper and molybdenum mining complex that has been in operation since 1976 and is located 20 miles southwest of Arequipa, Peru. The site is accessible by paved highway. Cerro Verde’s copper cathode and concentrate production that is not sold locally is transported approximately 70 miles by truck and by rail to the Port of Matarani for shipment to international markets.
The Cerro Verde mine is a porphyry copper deposit that has oxide, secondary sulfide and primary sulfide mineralization. The predominant oxide copper minerals are brochantite, chrysocolla, malachite and copper “pitch.” Chalcocite and covellite are the most important secondary copper sulfide minerals. Chalcopyrite and molybdenite are the dominant primary sulfides.
Cerro Verde’s operation consists of an open-pit copper mine, two concentrating facilities capable of milling a total of 409,500 metric tons of ore per day, and SX/EW leaching facilities. Leach copper production is derived from a 39,000 metric ton-per-day crushed leach facility and a 100,000 metric ton-per-day ROM leach system. This SX/EW leaching operation has a capacity of approximately 200 million pounds of copper per year.
The available fleet consists of fifty 290-metric ton haul trucks and ninety-three 230-metric ton haul trucks (21 of which are currently on standby) loaded by thirteen electric shovels with bucket sizes ranging in size from 33 to 57 cubic meters and two hydraulic shovels with a bucket size of 21 cubic meters (both of which are currently on standby). This fleet is capable of moving an average of approximately 910,000 metric tons of material per day.
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In mid-March 2020, the Peru government issued a Supreme Decree and declaration of a National Emergency in its efforts to contain the outbreak of COVID-19. To comply with the government requirements, we temporarily transitioned our Cerro Verde mine to care and maintenance status and adjusted operations to prioritize critical activities. A plan for Cerro Verde to restore operations was approved by the Peru government in second-quarter 2020 and strict health protocols have been implemented. This plan has allowed Cerro Verde to run both concentrators at their aggregate average design capacity of 360,000 metric ton-per-day in the second half of 2020.
Cerro Verde’s production totaled 0.8 billion pounds of copper and 19 million pounds of molybdenum in 2020, 1.0 billion pounds of copper and 29 million pounds of molybdenum in 2019, and 1.0 billion pounds of copper and 28 million pounds of molybdenum in 2018.
Cerro Verde is located in a desert environment with rainfall averaging 1.5 inches per year and is in an active seismic zone. The highest bench elevation is 2,750 meters above sea level and the ultimate pit bottom is expected to be 1,553 meters above sea level. The Peru general mining law and Cerro Verde’s mining stability agreement grant the surface rights of mining concessions located on government land. Government land obtained after 1997 must be leased or purchased. Cerro Verde has a mining concession covering approximately 180,000 acres, including access to 14,600 acres granted through an easement from the Peru National Assets Office, plus 150 acres of owned property, and 1,151 acres of rights-of-way outside the mining concession area.
Cerro Verde receives electrical power, including hydro-generated power, under long-term contracts with Kallpa Generación SA, ElectroPeru and Engie Energia Peru S.A.
Water for our Cerro Verde processing operations comes from renewable sources through a series of storage reservoirs on the Rio Chili watershed that collect water primarily from seasonal precipitation and from wastewater collected from the city of Arequipa and treated at a wastewater treatment plant. We believe the Cerro Verde operation has sufficient water resources to support current operations. For further discussion of risks associated with the availability of water, see Item 1A. “Risk Factors.”
El Abra

We own a 51 percent interest in El Abra, and the remaining 49 percent interest is held by the state-owned copper enterprise Corporación Nacional del Cobre de Chile.
El Abra is an open-pit copper mining complex that has been in operation since 1996 and is located 47 miles north of Calama in Chile’s El Loa province, Region II. The site is accessible by paved highway and by rail.
The El Abra mine is a porphyry copper deposit that has sulfide and oxide mineralization. The predominant primary sulfide copper minerals are bornite and chalcopyrite. There is a minor amount of secondary sulfide mineralization as chalcocite. The oxide copper minerals are chrysocolla and pseudomalachite. There are lesser amounts of copper bearing clays and tenorite.
The El Abra operation consists of an open-pit copper mine and a SX/EW facility with a capacity of 500 million pounds of copper cathode per year from a 125,000 metric ton-per-day crushed leach circuit and a ROM leaching operation. The available fleet consists of twenty-three 242-metric ton haul trucks loaded by four shovels with buckets ranging in size from 29 to 41 cubic meters, which are capable of moving an average of 224,000 metric tons of material per day.
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In April 2020, we revised our operating plans at El Abra to incorporate lower mining rates, operating costs and capital spending. We deferred the construction of a new leach pad at El Abra, from 2020 to future periods. We plan to increase operating rates during 2021 to pre-COVID-19 levels, subject to ongoing monitoring of public health conditions in Chile. Incremental copper production associated with increasing El Abra's stacking rates from 65,000 metric tons of ore per day to over 100,000 metric tons of ore per day, approximates 70 million pounds per year beginning in 2022.
El Abra’s copper production totaled 159 million pounds in 2020, 180 million pounds in 2019 and 200 million pounds in 2018.
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 evaluated to determine the optimal scope and timing for the project in parallel with extending the life of the current leaching operation.
El Abra is located in a desert environment with rainfall averaging less than one inch per year and is in an active seismic zone. The highest bench elevation is 4,195 meters above sea level and the ultimate pit bottom is expected to be 3,385 meters above sea level. El Abra controls a total of approximately 182,000 acres of mining claims covering the ore deposit, stockpiles, process plant, and water wellfield and pipeline. In addition, El Abra has land surface rights for the road between the processing plant and the mine, the water wellfield, power transmission lines and for the water pipeline from the Salar de Ascotán aquifer.
El Abra currently receives electrical power under a long-term contract with Engie Energia Chile S.A. Water for our El Abra processing operations comes from the continued pumping of groundwater from the Salar de Ascotán aquifer pursuant to regulatory approval. We believe El Abra has sufficient water rights and regulatory approvals to support current operations. For a discussion of risks associated with the availability of water, refer to Item 1A. “Risk Factors.”
Indonesia

Ownership. PT-FI is a limited liability company organized under the laws of the Republic of Indonesia. On December 21, 2018, we completed the transaction with the Indonesia government regarding PT-FI’s long-term mining rights and share ownership (refer to Note 2 for further discussion). Following the transaction, we have a 48.76 percent share ownership in PT-FI and the remaining 51.24 percent share ownership is collectively held by PT Indonesia Asahan Aluminum (Persero) (PT Inalum, also known as MIND ID), an Indonesia state-owned enterprise, and PT Indonesia Papua Metal Dan Mineral (formerly known as PT Indocopper Investama), which is expected to be owned by PT Inalum and the provincial/regional government in Papua, Indonesia. The arrangements related to the transaction also provide for us and the other pre-transaction PT-FI shareholders to retain the economics of the
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revenue and cost sharing arrangements under the former Rio Tinto Joint Venture. As a result, our economic interest in PT-FI is expected to approximate 81 percent through 2022.
IUPK. Concurrent with closing the transaction, the Indonesia government granted PT-FI a new special mining license (IUPK) to replace its former Contract of Work (COW), enabling PT-FI to conduct operations in the Grasberg minerals district through 2041. Under the terms of the IUPK, PT-FI has been granted an extension of mining rights through 2031, with rights to extend mining rights through 2041, subject to PT-FI completing the construction of a new smelter in Indonesia within five years of closing the transaction and fulfilling its defined fiscal obligations to the Indonesia government. The IUPK, and related documentation, contains legal and fiscal terms and is legally enforceable through 2041. In addition, we, as a foreign investor, have rights to resolve investment disputes with the Indonesia government through international arbitration. Refer to Note 13 and Item 1A. “Risk Factors” for discussion of PT-FI’s IUPK and risks associated with our Indonesia mining operations.
In March 2020, PT-FI received a one-year extension of its export license through March 15, 2021. Export licenses are valid for one year periods, subject to review and approval by the Indonesia government every six months, depending on smelter construction progress.
Indonesia Smelter. As a result of COVID-19 mitigation measures, there have been disruptions to work and travel schedules of international contractors and restrictions on access to the proposed physical site of the new smelter in Gresik, Indonesia. PT-FI continues to discuss with the Indonesia government a deferred schedule for the new smelter project as well as other alternatives in light of the ongoing COVID-19 pandemic and volatile global economic conditions. Refer to MD&A, Note 12 and Item 1A. “Risk Factors” for additional discussion of the new smelter project.
Grasberg Minerals District. PT-FI operates in the remote highlands of the Sudirman Mountain Range in the province of Papua, Indonesia, which is on the western half of the island of New Guinea. Since 1967, we and our predecessors have been the only operator of exploration and mining activities in the approximately 24,600-acre operating area. The operating area is accessible by portsite facilities (Arafura Sea) and by the Timika airport. The project area includes a 70-mile main service road from portsite to the mill complex.
The Grasberg minerals district includes the following underground mines that are being operated; the Grasberg Block Cave, the Deep Mill Level Zone (DMLZ), Big Gossan and the Deep Ore Zone (DOZ). The ramp-up of underground production at the Grasberg minerals district in Indonesia continues to advance on schedule. During 2020, a total of 206 new drawbells were added at the Grasberg Block Cave and DMLZ underground mines, bringing cumulative open drawbells to over 370. Refer to Item 1A. “Risk Factors” for discussion of risks associated with development projects and underground mines.
Production from the Grasberg minerals district, including the former Rio Tinto Joint Venture share, totaled 0.8 billion pounds of copper and 0.8 million ounces of gold in 2020, 0.6 billion pounds of copper and 0.9 million ounces of gold in 2019, and 1.2 billion pounds of copper and 2.7 million ounces of gold in 2018.
Our principal source of power for all of our Indonesia operations is a coal-fired power plant that we built in 1998. Diesel generators supply peaking and backup electrical power generating capacity; however, beginning in 2022, higher efficiency bio-diesel fueled generators are expected to provide up to 40 percent of PT-FI’s power needs. A combination of naturally occurring mountain streams and water derived from our underground operations provides water for our operations. Our Indonesia operations are in an active seismic zone and experience average annual rainfall of approximately 200 inches.
Grasberg Block Cave
The Grasberg Block Cave ore body is the same ore body historically mined from the surface in the Grasberg open pit. Undercutting, drawbell construction and ore extraction activities in the Grasberg Block Cave underground mine continue to track expectations. Monitoring data on cave propagation in the Grasberg Block Cave underground mine is providing confidence in growing production rates over time. As existing drawpoints mature and additional drawpoints are added, cave expansion is expected to accelerate production rates to an average of over 98,000 metric tons of ore per day in 2022 and 127,000 metric tons of ore per day in 2023 from five production blocks spanning 335,000 square meters. As of December 31, 2020, the Grasberg Block Cave had 229 open drawbells.
Ore milled from the Grasberg Block Cave underground mine averaged 30,800 metric tons per day in 2020, 8,600 metric tons per day in 2019 and 4,000 metric tons per day in 2018. Production at the Grasberg Block Cave underground mine is expected to continue through 2041.
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The Grasberg Block Cave fleet consists of approximately 510 pieces of mobile equipment. The primary mining equipment directly associated with production and development includes an available fleet of 70 LHD units and 33 haul trucks. Each production LHD unit typically carries approximately 11 metric tons of ore and transfer ore into 55 to 60 metric ton capacity haul trucks. The Grasberg Block Cave has a rail haulage system currently operating with 5 locomotives and 59 ore wagons that haul the ore to the first of the 3 planned gyratory crushers located underground via an automated rail system. Each ore wagon typically carries 30 metric tons.
DMLZ Underground Mine
The DMLZ ore body lies below the DOZ underground mine at the 2,590-meter elevation and represents the downward continuation of mineralization in the Ertsberg East Skarn system and neighboring Ertsberg porphyry.
The DMLZ has continued its ramp-up of production. Hydraulic fracturing operations have been effective in managing rock stresses and pre-conditioning the cave following mining-induced seismic activity experienced from time to time. Ongoing hydraulic fracturing operations combined with continued undercutting and drawbell openings in the two currently active production blocks are expected to expand the cave, supporting higher production rates that are expected to average approximately 74,000 metric tons of ore per day in 2022 and 72,000 metric tons of ore per day in 2023 from three production blocks. As of December 31, 2020, the DMLZ underground mine had 143 open drawbells.
Ore milled from the DMLZ underground mine averaged 28,600 metric tons of ore per day in 2020, 9,800 metric tons of ore per day in 2019 and 3,200 metric tons per day in 2018. Production at the DMLZ underground mine is expected to continue through 2041.
The DMLZ fleet consists of over 374 pieces of mobile equipment, which includes 44 LHD units and 29 haul trucks used in production and development activities.
Big Gossan Underground Mine
The Big Gossan ore body lies underground and adjacent to the current mill site. It is a tabular, near vertical ore body with approximate dimensions of 1,200 meters along strike and 800 meters down dip with varying thicknesses from 20 meters to 120 meters. The mine utilizes a blasthole stoping method with delayed paste backfill. Stopes of varying sizes are mined and the ore dropped down passes to a truck haulage level. Trucks are chute loaded and transport the ore to a jaw crusher. The crushed ore is then hoisted vertically via a two-skip production shaft to a level where it is loaded onto a conveyor belt. The belt carries the ore to one of the main underground conveyors where the ore is transferred and conveyed to the surface stockpiles for processing.
Ore milled from the Big Gossan underground mine averaged 7,000 metric tons per day in 2020, 6,100 metric tons per day in 2019 and 3,800 metric tons per day in 2018. Production at the Big Gossan underground mine is expected to continue through 2041.
The Big Gossan fleet consists of over 95 pieces of mobile equipment, which includes 12 LHD units and 9 haul trucks used in development and production activities.
DOZ Underground Mine
The DOZ ore body lies vertically below the now depleted Intermediate Ore Zone. PT-FI began production from the DOZ ore body in 1989 using open-stope mining methods, but suspended production in 1991 in favor of production from the Grasberg open pit. Production resumed in 2000 using the block-cave method and is at the 3,110-meter elevation level.
The DOZ is a mature block-cave mine that previously operated at 80,000 metric tons of ore per day. Current operating rates from the DOZ underground mine are driven by the value of the incremental DOZ ore grade compared to the ore from the DMLZ and Grasberg Block Cave underground mines. Ore milled from the DOZ underground mine averaged 20,900 metric tons per day in 2020, 25,500 metric tons per day in 2019 and 33,800 metric tons per day in 2018. Production at the DOZ underground mine is expected to continue through 2022.
The DOZ fleet consists of 186 pieces of mobile equipment. The primary mining equipment directly associated with production includes an available fleet of 40 LHD units and 19 haul trucks. The trucks dump into two gyratory crushers, and the ore is then conveyed to the surface stockpiles for processing.
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Grasberg Open Pit
PT-FI began open-pit mining of the Grasberg ore body in 1990. The final phase of the Grasberg open pit was mined during 2019, including the removal of the open pit ramps. In aggregate, the Grasberg open pit produced over 27 billion pounds of copper and 46 million ounces of gold in the 30-year period from 1990 through 2019.
Ore milled from the Grasberg open pit and stockpiles averaged 400 metric tons per day in 2020, 60,100 metric tons per day in 2019 and 133,300 metric tons per day in 2018.
Description of Indonesia Ore Bodies. Our Indonesia ore bodies are located within and around two main igneous intrusions, the Grasberg monzodiorite and the Ertsberg diorite. The host rocks of these ore bodies include both carbonate and clastic rocks that form the ridge crests and upper flanks of the Sudirman Range, and the igneous rocks of monzonitic to dioritic composition that intrude them. The igneous-hosted ore bodies (the Grasberg Block Cave and portions of the DOZ) occur as vein stockworks and disseminations of copper sulfides, dominated by chalcopyrite and, to a lesser extent, bornite. The sedimentary-rock hosted ore bodies (portions of the DOZ and all of the Big Gossan) occur as “magnetite-rich, calcium/magnesian skarn” replacements, whose location and orientation are strongly influenced by major faults and by the chemistry of the carbonate rocks along the margins of the intrusions.
The copper mineralization in these skarn deposits is dominated by chalcopyrite, but higher bornite concentrations are common. Moreover, gold occurs in significant concentrations in all of the district’s ore bodies, though rarely visible to the naked eye. These gold concentrations usually occur as inclusions within the copper sulfide minerals, though, in some deposits, these concentrations can also be strongly associated with pyrite.
The following diagram indicates the relative elevations (in meters) of our reported Indonesia ore bodies.

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The following map, which encompasses an area of 42 square kilometers (16 square miles), indicates the relative positions and sizes of our reported Indonesia ore bodies and their locations.

Smelting Facilities and Other Mining Properties
Atlantic Copper. Our wholly owned Atlantic Copper smelter and refinery is located on land concessions from the Huelva, Spain, port authorities, which are scheduled to expire in 2039.
The design capacity of the smelter is approximately 300,000 metric tons of copper per year, and the refinery has a capacity of 286,000 metric tons of copper per year. Atlantic Copper’s anode production from its smelter totaled 275,900 metric tons of copper in 2020, 272,000 metric tons in 2019 and 295,300 metric tons in 2018. Copper cathode production from its refinery totaled 275,000 metric tons of copper in 2020, 268,300 metric tons in 2019 and 283,100 metric tons in 2018.
Following is the allocation of Atlantic Copper’s concentrate purchases from unaffiliated third parties and our copper mining operations for the years ended December 31:
2020 | 2019 | 2018 | ||||||||||||||||||
Third parties | 79 | % | 73 | % | 77 | % | ||||||||||||||
North America copper mines | 10 | 22 | 14 | |||||||||||||||||
South America mining | 7 | 2 | 5 | |||||||||||||||||
Indonesia mining | 4 | 3 | 4 | |||||||||||||||||
100 | % | 100 | % | 100 | % |
Atlantic Copper’s major maintenance turnarounds typically occur approximately every eight years, with shorter-term maintenance turnarounds in the interim. Atlantic Copper completed a 79-day major maintenance turnaround in 2013, a 16-day maintenance turnaround in 2015, a 27-day maintenance turnaround in 2017 and a 16-day maintenance turnaround in 2019. The next major maintenance turnaround is scheduled for 2022.
PT Smelting. PT-FI’s former COW required us to construct, or cause to be constructed, a smelter in Indonesia if we and the Indonesia government determined that such a project would be economically viable. In 1995, following the completion of a feasibility study, we entered into agreements relating to the formation of PT Smelting, an Indonesia company, and the construction of the copper smelter and refinery in Gresik, Indonesia. PT Smelting owns and operates the smelter and refinery. PT-FI owns 25 percent of PT Smelting, with the remainder owned by Mitsubishi
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Materials Corporation (60.5 percent), Mitsubishi Corporation RtM Japan Ltd. (9.5 percent) and JX Nippon Mining & Metals Corporation (5 percent).
PT-FI’s contract with PT Smelting requires PT-FI to supply 100 percent of the copper concentrate requirements (at market rates 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. PT-FI supplied 74 percent of PT Smelting’s concentrate requirements in 2020 and 90 percent in both 2019 and 2018.
In early 2017, the Indonesia government issued new regulations to address exports of unrefined metals, including copper concentrate and anode slimes, and other matters related to the mining sector. These regulations permit the export of anode slimes, which is necessary for PT Smelting to continue operating. In March 2020, PT Smelting received a one-year extension of its anode slimes export license through March 10, 2021, and in January 2021, PT Smelting received a six-month extension of its anodes slimes export license, which currently expires July 18, 2021. Refer to Item 1A. “Risk Factors” for further discussion.
In connection with PT-FI's commitment to develop additional smelter capacity in Indonesia, PT-FI has advanced discussions with the majority owner of PT Smelting regarding an expansion of the smelter to increase smelter concentrate treatment capacity by approximately 30 percent (300,000 metric tons of concentrate per year). Commercial and financial arrangements for this potential project are being advanced.
PT Smelting’s anode production from its smelter totaled 276,900 metric tons of copper in 2020, 246,100 metric tons in 2019 and 258,800 metric tons in 2018. Copper cathode production from its refinery totaled 273,000 metric tons of copper in 2020, 241,200 metric tons in 2019 and 257,600 metric tons in 2018.
PT Smelting’s maintenance turnarounds (which range from two weeks to a month to complete) typically are expected to occur approximately every two years, with short-term maintenance turnarounds in the interim. PT Smelting completed a 30-day maintenance turnaround during December 2020, and the next major turnaround is scheduled for the second half of 2022.
Miami Smelter. We own and operate a smelter at our Miami mining operation in Arizona. The smelter has been operating for over 100 years and has been upgraded numerous times during that period to implement new technologies, improve production and comply with air quality requirements. In 2018, the Miami smelter completed the installation of emission control equipment that allows it to operate in compliance with current air quality standards. Refer to Item 1A. “Risk Factors” for further discussion.
The Miami smelter processes copper concentrate primarily from our North America copper mines. Concentrate processed through the smelter totaled 764,000 metric tons in 2020, 641,000 metric tons in 2019 and 729,900 metric tons in 2018. In addition, because sulphuric acid is a by-product of smelting concentrate, the Miami smelter is also the most significant source of sulphuric acid for our North America leaching operations.
Major maintenance turnarounds are anticipated to occur approximately every two or three years for the Miami smelter. The Miami smelter completed a major maintenance turnaround in the first half of 2019, and the next major maintenance turnaround is scheduled for the first half of 2021.
Rod & Refining Operations. Our Rod & Refining operations consist of conversion facilities located in North America, including a refinery in El Paso, Texas and rod mills in El Paso, Texas, and Miami, Arizona. We refine our copper anode production from our Miami smelter at our El Paso refinery. The El Paso refinery has the potential to operate at an annual production capacity of about 900 million pounds of copper cathode, which is sufficient to refine all of the copper anode we produce at our Miami smelter. Our El Paso refinery also produces nickel carbonate, copper telluride and autoclaved slimes material containing gold, silver, platinum and palladium.
Molybdenum Conversion Facilities. We process molybdenum concentrate at our conversion plants in the U.S. and Europe into such products as technical-grade molybdic oxide, ferromolybdenum, pure molybdic oxide, ammonium molybdates and molybdenum disulfide. We operate molybdenum roasters in Sierrita, Arizona; Fort Madison, Iowa; and Rotterdam, the Netherlands, and we operate a molybdenum pressure-leach plant in Bagdad, Arizona. We also produce ferromolybdenum for customers worldwide at our conversion plant located in Stowmarket, United Kingdom.
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Other North America Copper Mines. We also have five non-operating copper mines – Ajo, Bisbee, Tohono, Twin Buttes and Christmas, which are located in Arizona – that have been on care and maintenance status for several years and would require new or updated environmental studies, new permits, and additional capital investment, which could be significant, to return them to operating status.
MINING DEVELOPMENT PROJECTS AND EXPLORATION ACTIVITIES
Capital expenditures for mining operations totaled $2.0 billion (including $1.2 billion for major projects) in 2020, $2.65 billion (including $1.5 billion for major projects) in 2019 and $2.0 billion (including $1.2 billion for major projects) in 2018. Capital expenditures for major projects during 2020, 2019 and 2018 were primarily associated with underground development activities in the Grasberg minerals district and the now completed Lone Star copper leach project. Refer to MD&A for projected capital expenditures for the year 2021.
We have several projects and potential opportunities to expand production volumes, extend mine lives and develop large-scale underground ore bodies. As further discussed in MD&A, our near-term major development projects will focus on the underground development activities in the Grasberg minerals district. Considering the long-term nature and large size of our development projects, actual costs and timing could vary from estimates. Additionally, in response to market conditions, the timing of our expenditures will continue to be reviewed. We continue to review our mine development and processing plans to maximize the value of our mineral reserves.
We continue to plan the development of the Kucing Liar underground deposit, which lies on the southern flank of and underneath the southern portion of the Grasberg open pit at the 2,605-meter elevation level. We expect to mine the Kucing Liar ore body using the block-cave method at a full rate of 90,000 metric tons of ore per day. We have reviewed alternatives to improve the economics of the deposit by mining the sections of the ore body with lower pyrite content. The revised Kucing Liar reserve plan reduces mill and power capital expenditures as well as improves recoveries. The Kucing Liar project would produce 6 billion pounds of copper and 6 million ounces of gold between 2028 and 2041. Aggregate long-term capital cost estimates for development of the Kucing Liar ore body are projected to approximate $4 billion over an approximate 12-year period. In 2021, we are proceeding with a feasibility study, drilling (structure verification, geotechnical and metallurgical) and metallurgical testwork for the development of these reserves. Development of the Kucing Liar block cave could start as early as 2022 with caving and production ramp-up commencing in 2028.
Additionally, full development of the underground reserves is expected to require $2.8 billion (expected to be incurred over an approximate 17-year period) of capital expenditures at our processing facilities to optimize the handling of underground ore from the Grasberg Block Cave, DMLZ and Kucing Liar deposits. Increases in power loads at these processing facilities and the underground mines are expected to require additional power generation with capital expenditures approximating $0.7 billion for new power generation, upgrades to existing transmission lines, and refurbishment of the existing three coal units.
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. Exploration results continue to indicate opportunities for significant future potential reserve additions in North America and South America. Exploration spending associated with mining operations totaled $34 million in 2020, $77 million in 2019 and $78 million in 2018. Refer to MD&A for projected exploration expenditures for the year 2021.
Refer to Item 1A. “Risk Factors” for further discussion of risks associated with mine development projects and exploration activities, and PT-FI’s IUPK.
SOURCES AND AVAILABILITY OF ENERGY, NATURAL RESOURCES AND RAW MATERIALS
Our copper mining operations require significant amounts of energy, principally diesel, electricity, coal and natural gas, most of which is obtained from third parties under long-term contracts. Energy represented approximately 16 percent of our copper mine site operating costs in 2020, including purchases of approximately 180 million gallons of diesel fuel; 7,500 gigawatt hours of electricity at our North America and South America copper mining operations (we generate all of our power at our Indonesia mining operation); 700 thousand metric tons of coal for our coal power plant in Indonesia; and 1 million MMBtu (million British thermal units) of natural gas at certain of our North America mines. Based on current cost estimates, energy will approximate 18 percent of our copper mine site operating costs in 2021.
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Our mining operations also require significant quantities of water for mining, ore processing and related support facilities. The loss of water rights for any of our mines, in whole or in part, or shortages of water to which we have rights, could require us to curtail or shut down mining operations. For a further discussion of risks and legal proceedings associated with the availability of water, refer to Item 1A. “Risk Factors” and Item 3. “Legal Proceedings.”
Sulphuric acid is used in the SX/EW process and is produced as a by-product of the smelting process at our smelters and from our sulfur burners at the Safford mine. Sulphuric acid needs in excess of the sulphuric acid produced by our operations are purchased from third parties.
HUMAN CAPITAL
We are committed to promoting the health, safety and well-being of our workforce and striving to further strengthen our commitment to promoting an inclusive, diverse and agile workplace. We believe our global workforce is the foundation of our company’s success. The Corporate Responsibility Committee of FCX’s Board of Directors (the Board) assists the full Board in fulfilling its oversight responsibilities with respect to, among other things, our policies and implementation programs that govern our approach to management of our human capital.
Workforce
At December 31, 2020, we employed approximately 24,500 people (11,200 in North America, 6,500 in Indonesia, 5,600 in South America and 1,200 in Europe and other locations). We also had contractors that employ personnel at many of our operations, including approximately 20,900 at the Grasberg minerals district in Indonesia, 8,800 in North America, 3,400 at our South America mining operations and 700 in Europe and other locations.
Approximately 38 percent of our global employee population is covered by collective labor agreements (CLA). Our operations in Indonesia, Europe and South America are all covered by a minimum of 66 percent representation. In North America, our workforce is not represented by unions. Our North America hourly employees choose to work directly with company management rather than through union representation utilizing our Guiding Principles agreement, which sets out how we work together within the values of the company to achieve our collective goals. Employees represented by unions on December 31, 2020, are listed below, with the number of employees represented and the expiration date of the applicable union agreements:
Location | Number of Unions | Number of Union- Represented Employees | Expiration Date | |||||||||||
PT-FI – Indonesia | 3 | 4,788 | March 2022 | a | ||||||||||
Cerro Verde – Peru | 2 | 3,119 | August 2021 | |||||||||||
El Abra – Chile | 2 | 576 | April 2023 | |||||||||||
Atlantic Copper – Spain | 3 | 501 | December 2019 | b | ||||||||||
Kokkola - Finland | 3 | 190 | December 2021 | |||||||||||
Rotterdam – The Netherlands | 1 | 57 | September 2022 | |||||||||||
Stowmarket - United Kingdom | 1 | 41 | May 2020 | c |
a.The previous Collective Labor Agreement (CLA) between PT-FI and its workers' unions expired in September 2019, but remains valid in accordance with Indonesia law until a new agreement is reached. In December 2020, PT-FI reached a new CLA with one union effective April 2020 through March 2022, giving all employees the option to reject the new stipulations, but no employees have rejected the agreement. The second union filed a lawsuit in November 2020 regarding the new CLA, and the pending decision could modify the agreement. Additionally, in October 2020, PT-FI was notified that a third union was established, however the organization has not informed PT-FI about its membership or organizational details.
b.The CLA between Atlantic Copper and its workers' unions expired in December 2019, but remains active by mutual agreement from both parties in accordance with Spanish law. A new agreement is currently under negotiation.
c.The CLA between Stowmarket and its workers' union expired in May 2020, but remains active by consensus agreement. Negotiations for a new CLA are ongoing.
We engage openly with our employee and union leadership to negotiate and uphold labor agreements, recognizing that prolonged strikes or other work stoppages can adversely affect our business, our workforce and regional stakeholders. In third-quarter 2020, we experienced a five-day labor-related work stoppage related to COVID-19 travel restrictions when a group of workers at PT-FI staged protests and a blockade restricting access to the main
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road to the mining operations area. We reached an amicable resolution with the group of workers while upholding our COVID-19 safety protocols. There were no strikes or lockouts at any of our operations in 2020.
Health and Safety
Our highest priority is the health, safety and well-being of our employees and contractors. We also instill health and safety processes for our suppliers and the communities where we operate. We believe that health and safety considerations are integral to, and fundamental for, all other functions in our organization, and we understand that the health and safety of our workforce is critical to our operational efficiency and long-term success. Our global health and safety approach, “Safe Production Matters,” is focused on fatality prevention and continuous improvement through the use of robust management systems, empowering safe work behaviors and strengthening our safety culture.
We focus on fatality prevention through the use of data and technology as well as behavioral science principles. Our framework for managing risks and compliance obligations is certified in accordance with the internationally recognized Occupational Health and Safety Assessment (OHSAS) 18001 Standard. OHSAS requires third-party site-level verification of requirements, with a goal to prevent fatalities and reduce incidents. This standard is being replaced with the new ISO 45001 Health and Safety Management System, and company-wide conversion currently is expected to be complete in 2021.
As part of our commitment to providing a safe and healthy workplace, we strive to provide the training, tools and resources needed so our workforce can identify risks and consistently apply effective controls. We share information and key learnings about potentially fatal events, near misses and best practices throughout the company and engage with industry peers outside the organization to continuously improve our health and safety performance. We also review and discuss all fatalities with the Corporate Responsibility Committee and the Board.
Our objective is to achieve zero workplace fatalities and to decrease injuries and occupational illnesses. We measure our safety performance through regularly established benchmarks, including our company-wide Total Recordable Incident Rate (TRIR), which includes both employees and contractors. In 2020, regrettably, we had 5 workplace fatalities and 12 potential fatal events (PFEs), compared to 3 fatalities and 22 PFEs in 2019. Overall, the percentage of high risk incidents has continued to trend down from 23 percent in 2017, 11 percent in both 2018 and 2019 and 7 percent in 2020. Our 2020 target was to reach a TRIR of 0.70 per 200,000 man-hours worked. During 2020, our TRIR decreased to 0.69 from 0.74 in 2019, meeting our 2020 target. The metal mining sector industry average per 200,000 man-hours worked reported by the U.S. Mine Safety and Health Administration was 1.81 in 2019. The metal mining sector industry average for 2020 was not available at the time of this filing.
In response to the COVID-19 pandemic during 2020, we implemented operating protocols at each of our operating sites to contain and mitigate the risk of spread of COVID-19, including but not limited to, physical distancing, travel restrictions, sanitizing, and frequent testing and monitoring, and we obtained specialized medical equipment and set up quarantine and isolation facilities. We are committed to the communities where we operate and continue to work closely with them, including providing monetary support and in-kind contributions of medical supplies and food. To support our employees around the world, we adjusted our policies for sick leave and other pay practices to encourage ill employees to stay home. We also implemented a policy to allow those who can work from home to do so. During the pandemic and looking beyond, we have committed to maintaining health benefits and offer guidance resources to support mental and physical well-being.
Employee Engagement, Training and Development
We are committed to fostering a culture that is safety-focused, respectful, inclusive and representative of the communities where we operate. We operate in regions of varying ethnic, religious and cultural backgrounds, and we often are the largest employer in our local communities. A key to our success is the ability to recruit, retain, develop and advance talented employees with diverse perspectives.
In addition to the health, safety and well-being of our global workforce, we have prioritized a flexible, highly engaged and agile workforce. The COVID-19 pandemic has amplified our focus on the need for, and receptivity to, innovation across all facets of the business, particularly in how we communicate, engage and collaborate across our global workforce in a more virtual environment. To support our workforce transformation, engagement and ongoing talent development, we strengthened our Human Resources department in 2020 and established two new positions: Chief Human Resources Officer and Vice President – Transformation and Organizational Development, who maintain specific responsibility for inclusion and diversity efforts.
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We are committed to ongoing training and development of our workforce. We focus on attracting and retaining talented people by offering quality employment with competitive compensation and opportunities for professional development. Strategic talent reviews and succession planning occur regularly and across all business areas. To support the advancement of our employees, we offer training and development programs encouraging advancement from within and continue to promote strong and experienced management talent. We leverage both formal and informal programs to identify, foster, and retain top talent at both the corporate and operations levels.
Additionally, hiring locally is a commitment we make to the communities surrounding our operations and to our host countries. Most people employed at our operations are host country nationals. We retain expatriate expertise for managerial and technical roles only when it is not available in local communities. To further these efforts, expatriates receive cultural training upon their arrival to a new location.
Inclusion and Diversity
We believe our greatest strength is our people. We respect and value the different ideas, beliefs, experiences, talents, skills, perspectives, backgrounds, and cultures of our workforce. We strive for, promote and foster a workplace where everyone feels a sense of belonging, is treated with respect and their opinions are valued. We believe an inclusive environment gives our people the confidence to speak up, share ideas that drive innovation, and achieve operational excellence. Our inclusive environment is the foundation of our high-performance culture and is paramount to the long-term sustainable success of our business. We are committed to fostering a culture that is safety focused, respectful, inclusive and representative of the communities where we operate.
Our inclusion and diversity principles align with our core values of safety, respect, integrity, excellence and commitment, and are reflected in our Principles of Business Conduct and other related policies. In addition to our Human Resources reorganization, in 2020, we formally established a stand-alone Inclusion and Diversity Policy and formalized a dedicated Inclusion and Diversity team to specifically support our enhanced focus on our program.
Refer to Item 1A. “Risk Factors” for further information on labor matters.
COMMUNITY AND HUMAN RIGHTS
We have adopted policies that govern our working relationships with the communities where we operate and that are designed to guide our practices and programs in a manner that respects human rights and the culture of the local people impacted by our operations.
We continue to make significant expenditures on community development, health, education, training and cultural programs, which include:
•comprehensive job training programs
•clean water and sanitation projects
•public health programs, including malaria control and human immunodeficiency virus
•agricultural assistance programs
•small and medium enterprise development programs
•basic education programs
•cultural promotion and preservation programs
•community infrastructure development
•charitable donations
In December 2000, we endorsed the joint U.S. State Department-British Foreign Office Voluntary Principles on Human Rights and Security (Voluntary Principles). We participated in developing these Voluntary Principles with other major natural resource companies and international human rights organizations and they are incorporated into our human rights policy. The Voluntary Principles provide guidelines for our security programs, including interaction with host-government security personnel, private security contractors and our internal security employees.
Our human rights policy, most recently updated in December 2020, reflects our commitment to implementing the United Nations Guiding Principles on Business and Human Rights. We have embarked on a program to plan and conduct site-level human rights impact assessments (HRIA) at our global operations.
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HRIAs help us to embed human rights considerations into our business practices, including site-level sustainable development risk registers. We completed a HRIA at our Cerro Verde operation in Peru in 2017 and at our New Mexico mining operations in 2018. We also participate in a multi-industry human rights working group to gain insight from peer companies.
We believe that our social and economic development programs are responsive to the issues raised by the local communities near our areas of operation and help us maintain good relations with the surrounding communities and avoid disruptions of mining operations. As part of our ongoing commitment to our community stakeholders, we have made and expect to continue making investments in certain social programs, including in-kind support and administration, across our global operations from time to time. Over the last three years, these investments have averaged $121 million per year. Nevertheless, social and political instability in the areas of our operations may adversely impact our mining operations. Refer to Item 1A. “Risk Factors” for further discussion.
South America. Cerro Verde has provided a variety of community support projects over the years. Following engagements with regional and local governments, civic leaders and development agencies, in 2006, Cerro Verde committed to support the costs for a new potable water treatment plant to serve Arequipa. In addition, an agreement was reached with the Peru government for development of a water storage network that was financed by Cerro Verde and a distribution network that was financed by the Cerro Verde Civil Association.
Cerro Verde reached an agreement with the Regional Government of Arequipa, the National Government, the local water utility company and other local institutions to allow it to finance, engineer and construct a wastewater treatment plant for the city of Arequipa, which was completed in 2015. The wastewater treatment plant supplements existing water supplies to support Cerro Verde’s concentrator expansion and also improves the local water quality, enhances agriculture products grown in the area and reduces the risk of waterborne illnesses. In addition to these projects, Cerro Verde annually makes significant community development investments in the Arequipa region.
Security Matters. Consistent with our operating permits in Peru and our commitment to protect our employees and property, we have taken steps to provide a safe and secure working environment. As part of its security program, Cerro Verde maintains its own internal security department. Both employees and contractors perform functions such as protecting company facilities, monitoring shipments of supplies and products, assisting in traffic control and aiding in emergency response operations. The security department receives human rights and Voluntary Principles training annually. Some contractors assigned to protection of expatriate personnel are armed. These contractors also receive training in defensive driving and firearms handling. Cerro Verde’s costs for its internal civilian security department totaled $7 million in 2020, $9 million in 2019 and $8 million in 2018.
Cerro Verde, like all businesses and residents of Peru, relies on the Peru government for the maintenance of public order, upholding the rule of law and the protection of personnel and property. The Peru government is responsible for employing police personnel and directing their operations. Cerro Verde has limited public security forces in support of its operation, with the arrangement defined through a memorandum of understanding with the Peru National Police. Cerro Verde’s share of support costs for government-provided security approximated $1 million in each of the years 2020, 2019 and 2018.
Indonesia. In 1996, PT-FI established the Freeport Partnership Fund for Community Development (the Partnership Fund) through which PT-FI has made available funding and technical assistance to support community development initiatives in the areas of health, education, economic development and local infrastructure. PT-FI has committed to provide funding through 2041 for the development of the local communities in its area of operations through the Partnership Fund. PT-FI recorded costs of $36 million in 2020, $28 million in 2019 and $55 million in 2018 for this commitment.
Historically, the Amungme and Kamoro Community Development Organization (Lembaga Pengembangan Masyarakat Amungme dan Kamoro) oversaw disbursement of the program funds PT-FI contributed to the Partnership Fund. Throughout 2019, PT-FI consulted with key stakeholders to restructure the management of the Partnership Fund in compliance with PT-FI’s IUPK. Throughout the restructuring process, PT-FI continued its contributions to ensure no disruptions in implementation of approved projects. Beginning in February 2020, the Partnership Fund is now managed by a legally recognized Indonesia foundation (Yayasan Pemberdayaan Masyarakat Amungme dan Kamoro or YPMAK). YPMAK is governed by a Board of Governors consisting of seven representatives, including four from PT-FI.
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In addition to the Partnership Fund, PT-FI has made and expects to continue making annual investments in public health, education, community infrastructure and local economic development.
Security Matters. Consistent with our ongoing commitment to protect our employees and property, we have taken steps to provide a safe and secure working environment. As part of its security program, PT-FI maintains its own internal civilian security department. Both employees and contractors are unarmed and perform functions such as protecting company facilities, monitoring shipments of supplies and products, assisting in traffic control and aiding in emergency response operations. The security department receives human rights training annually.
PT-FI’s costs for its internal civilian security department totaled $47 million in 2020, $52 million in 2019 and $59 million in 2018.
PT-FI, like all businesses and residents of Indonesia, relies on the Indonesia government for the maintenance of public order, upholding the rule of law and protection of personnel and property. The Grasberg minerals district has been designated by the Indonesia government as one of Indonesia’s vital national assets. This designation results in the police, and to a lesser extent, the military, playing a significant role in protecting the area of our operations. The Indonesia government is responsible for employing police and military personnel and directing their operations.
From the outset of PT-FI’s operations, the Indonesia government has looked to PT-FI to provide logistical and infrastructure support and assistance for these necessary services because of the limited resources of the Indonesia government and the remote location of and lack of development in Papua. PT-FI’s financial support of the Indonesia government security institutions assigned to PT-FI’s operations area represents a prudent response to PT-FI’s requirements and commitments to protect its workforce and property better ensuring that personnel are properly fed and lodged and have the logistical resources to patrol PT-FI’s roads and secure its area of operations. In addition, the provision of such support is consistent with our philosophy of responsible corporate citizenship, and reflects our commitment to pursue practices that protect and respect human rights.
PT-FI’s support costs for the government-provided security totaled $22 million in both 2020 and 2019 and $27 million in 2018. This supplemental support consists of various infrastructure and other costs, including food, housing, fuel, travel, vehicle repairs, allowances to cover incidental and administrative costs, and community assistance programs conducted by the military and police.
Refer to Item 1A. “Risk Factors” for further discussion of security risks in Indonesia.
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MINING PRODUCTION AND SALES DATA
Years Ended December 31, | ||||||||||||||||||||||||||||||||||||||
Production | Sales | |||||||||||||||||||||||||||||||||||||
COPPER (millions of recoverable pounds) | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 | ||||||||||||||||||||||||||||||||
(FCX’s net interest in %) | ||||||||||||||||||||||||||||||||||||||
North America | ||||||||||||||||||||||||||||||||||||||
Morenci (72%)a | 707 | 730 | 684 | 711 | 717 | 700 | ||||||||||||||||||||||||||||||||
Bagdad (100%) | 216 | 218 | 199 | 213 | 218 | 197 | ||||||||||||||||||||||||||||||||
Safford (100%) | 161 | 110 | 123 | 150 | 111 | 127 | ||||||||||||||||||||||||||||||||
Sierrita (100%) | 178 | 160 | 152 | 177 | 157 | 154 | ||||||||||||||||||||||||||||||||
Miami (100%) | 17 | 15 | 16 | 16 | 15 | 16 | ||||||||||||||||||||||||||||||||
Chino (100%) | 92 | 175 | 173 | 108 | 174 | 176 | ||||||||||||||||||||||||||||||||
Tyrone (100%) | 45 | 48 | 55 | 45 | 49 | 56 | ||||||||||||||||||||||||||||||||
Other (100%) | 2 | 1 | 2 | 2 | 1 | 2 | ||||||||||||||||||||||||||||||||
Total North America | 1,418 | 1,457 | 1,404 | 1,422 | 1,442 | 1,428 | ||||||||||||||||||||||||||||||||
South America | ||||||||||||||||||||||||||||||||||||||
Cerro Verde (53.56%) | 820 | 1,003 | 1,049 | 825 | 1,002 | 1,051 | ||||||||||||||||||||||||||||||||
El Abra (51%) | 159 | 180 | 200 | 151 | 181 | 202 | ||||||||||||||||||||||||||||||||
Total South America | 979 | 1,183 | 1,249 | 976 | 1,183 | 1,253 | ||||||||||||||||||||||||||||||||
Indonesia | ||||||||||||||||||||||||||||||||||||||
Grasberg minerals districtb | 809 | 607 | 1,160 | 804 | 667 | 1,130 | ||||||||||||||||||||||||||||||||
Consolidated | 3,206 | 3,247 | 3,813 | 3,202 | c | 3,292 | c | 3,811 | c | |||||||||||||||||||||||||||||
Less noncontrolling interests | 610 | 668 | 695 | 608 | 679 | 694 | ||||||||||||||||||||||||||||||||
Net | 2,596 | 2,579 | 3,118 | 2,594 | 2,613 | 3,117 | ||||||||||||||||||||||||||||||||
Average realized price per pound | $ | 2.95 | $ | 2.73 | $ | 2.91 | ||||||||||||||||||||||||||||||||
GOLD (thousands of recoverable ounces) | ||||||||||||||||||||||||||||||||||||||
North America (100%) | 9 | 19 | 23 | 13 | 18 | 23 | ||||||||||||||||||||||||||||||||
Indonesiab | 848 | 863 | 2,416 | 842 | 973 | 2,366 | ||||||||||||||||||||||||||||||||
Consolidated | 857 | 882 | 2,439 | 855 | 991 | 2,389 | ||||||||||||||||||||||||||||||||
Less noncontrolling interests | 159 | 162 | 228 | 158 | 182 | 223 | ||||||||||||||||||||||||||||||||
Net | 698 | 720 | 2,211 | 697 | 809 | 2,166 | ||||||||||||||||||||||||||||||||
Average realized price per ounce | $ | 1,832 | $ | 1,415 | $ | 1,254 | ||||||||||||||||||||||||||||||||
MOLYBDENUM (millions of recoverable pounds) | ||||||||||||||||||||||||||||||||||||||
Henderson (100%) | 10 | 12 | 14 | N/A | N/A | N/A | ||||||||||||||||||||||||||||||||
Climax (100%) | 14 | 17 | 21 | N/A | N/A | N/A | ||||||||||||||||||||||||||||||||
North America copper mines (100%)a | 33 | 32 | 32 | N/A | N/A | N/A | ||||||||||||||||||||||||||||||||
Cerro Verde (53.56%) | 19 | 29 | 28 | N/A | N/A | N/A | ||||||||||||||||||||||||||||||||
Consolidated | 76 | 90 | 95 | 80 | 90 | 94 | ||||||||||||||||||||||||||||||||
Less noncontrolling interest | 9 | 13 | 13 | 10 | 13 | 13 | ||||||||||||||||||||||||||||||||
Net | 67 | 77 | 82 | 70 | 77 | 81 | ||||||||||||||||||||||||||||||||
Average realized price per pound | $ | 10.20 | $ | 12.61 | $ | 12.50 |
a.Amounts are net of Morenci’s undivided joint venture partners’ interest.
b.Effective December 21, 2018, our share ownership in PT-FI is 48.76 percent (refer to Note 2 for further discussion). Our economic interest in PT-FI is expected to approximate 81 percent through 2022 and 48.76 percent thereafter.
c.Consolidated sales volumes exclude purchased copper of 290 million pounds in 2020, 379 million pounds in 2019 and 356 million pounds in 2018.
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SELECTED OPERATING DATA
Years Ended December 31, | ||||||||||||||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||||||||||||||
CONSOLIDATED MINING | ||||||||||||||||||||||||||||||||
Copper (millions of recoverable pounds) | ||||||||||||||||||||||||||||||||
Production | 3,206 | 3,247 | 3,813 | 3,737 | 4,222 | |||||||||||||||||||||||||||
Sales, excluding purchases | 3,202 | 3,292 | 3,811 | 3,700 | 4,227 | |||||||||||||||||||||||||||
Average realized price per pound | $ | 2.95 | $ | 2.73 | $ | 2.91 | $ | 2.93 | $ | 2.28 | ||||||||||||||||||||||
Gold (thousands of recoverable ounces) | ||||||||||||||||||||||||||||||||
Production | 857 | 882 | 2,439 | 1,577 | 1,088 | |||||||||||||||||||||||||||
Sales, excluding purchases | 855 | 991 | 2,389 | 1,562 | 1,079 | |||||||||||||||||||||||||||
Average realized price per ounce | $ | 1,832 | $ | 1,415 | $ | 1,254 | $ | 1,268 | $ | 1,238 | ||||||||||||||||||||||
Molybdenum (millions of recoverable pounds) | ||||||||||||||||||||||||||||||||
Production | 76 | 90 | 95 | 92 | 80 | |||||||||||||||||||||||||||
Sales, excluding purchases | 80 | 90 | 94 | 95 | 74 | |||||||||||||||||||||||||||
Average realized price per pound | $ | 10.20 | $ | 12.61 | $ | 12.50 | $ | 9.33 | $ | 8.33 | ||||||||||||||||||||||
NORTH AMERICA COPPER MINES | ||||||||||||||||||||||||||||||||
Operating Data, Net of Joint Venture Interestsa | ||||||||||||||||||||||||||||||||
Copper (millions of recoverable pounds) | ||||||||||||||||||||||||||||||||
Production | 1,418 | 1,457 | 1,404 | 1,518 | 1,831 | |||||||||||||||||||||||||||
Sales, excluding purchases | 1,422 | 1,442 | 1,428 | 1,484 | 1,841 | |||||||||||||||||||||||||||
Average realized price per pound | $ | 2.82 | $ | 2.74 | $ | 2.96 | $ | 2.85 | $ | 2.24 | ||||||||||||||||||||||
Molybdenum (millions of recoverable pounds) | ||||||||||||||||||||||||||||||||
Production | 33 | 32 | 32 | 33 | 33 | |||||||||||||||||||||||||||
100% Operating Data | ||||||||||||||||||||||||||||||||
Leach operations | ||||||||||||||||||||||||||||||||
Leach ore placed in stockpiles (metric tons per day) | 714,300 | 750,900 | 681,400 | 679,000 | 737,400 | |||||||||||||||||||||||||||
Average copper ore grade (percent) | 0.27 | 0.23 | 0.24 | 0.28 | 0.31 | |||||||||||||||||||||||||||
Copper production (millions of recoverable pounds) | 1,047 | 993 | 951 | 1,016 | 1,120 | |||||||||||||||||||||||||||
Mill operations | ||||||||||||||||||||||||||||||||
Ore milled (metric tons per day) | 279,700 | 326,100 | 301,000 | 299,500 | 300,500 | |||||||||||||||||||||||||||
Average ore grade (percent): | ||||||||||||||||||||||||||||||||
Copper | 0.35 | 0.34 | 0.35 | 0.39 | 0.47 | |||||||||||||||||||||||||||
Molybdenum | 0.02 | 0.02 | 0.02 | 0.03 | 0.03 | |||||||||||||||||||||||||||
Copper recovery rate (percent) | 84.1 | 87.0 | 87.8 | 86.4 | 85.5 | |||||||||||||||||||||||||||
Copper production (millions of recoverable pounds) | 647 | 748 | 719 | 788 | 958 | |||||||||||||||||||||||||||
SOUTH AMERICA MINING | ||||||||||||||||||||||||||||||||
Copper (millions of recoverable pounds) | ||||||||||||||||||||||||||||||||
Production | 979 | 1,183 | 1,249 | 1,235 | 1,328 | |||||||||||||||||||||||||||
Sales | 976 | 1,183 | 1,253 | 1,235 | 1,332 | |||||||||||||||||||||||||||
Average realized price per pound | $ | 3.05 | $ | 2.71 | $ | 2.87 | $ | 2.97 | $ | 2.31 | ||||||||||||||||||||||
Molybdenum (millions of recoverable pounds) | ||||||||||||||||||||||||||||||||
Production | 19 | 29 | 28 | 27 | 21 | |||||||||||||||||||||||||||
Leach operations | ||||||||||||||||||||||||||||||||
Leach ore placed in stockpiles (metric tons per day) | 160,300 | 205,900 | 195,200 | 142,800 | 149,100 | |||||||||||||||||||||||||||
Average copper ore grade (percent) | 0.35 | 0.37 | 0.33 | 0.37 | 0.41 | |||||||||||||||||||||||||||
Copper production (millions of recoverable pounds) | 241 | 268 | 287 | 255 | 328 | |||||||||||||||||||||||||||
Mill operations | ||||||||||||||||||||||||||||||||
Ore milled (metric tons per day) | 331,600 | 393,100 | 387,600 | 360,100 | 353,400 | |||||||||||||||||||||||||||
Average ore grade (percent): | ||||||||||||||||||||||||||||||||
Copper | 0.34 | 0.36 | 0.38 | 0.44 | 0.43 | |||||||||||||||||||||||||||
Molybdenum | 0.01 | 0.02 | 0.01 | 0.02 | 0.02 | |||||||||||||||||||||||||||
Copper recovery rate (percent) | 84.3 | 83.5 | 84.3 | 81.2 | 85.8 | |||||||||||||||||||||||||||
Copper production (millions of recoverable pounds) | 738 | 916 | 962 | 980 | 1,000 |
a.Net of Morenci’s joint venture interest; effective May 31, 2016, our undivided interest in Morenci was prospectively reduced from 85 percent to 72 percent.
29
SELECTED OPERATING DATA (Continued)
Years Ended December 31, | ||||||||||||||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||||||||||||||
INDONESIA MINING | ||||||||||||||||||||||||||||||||
Operating Data, Net of Rio Tinto Joint Venture Interesta | ||||||||||||||||||||||||||||||||
Copper (millions of recoverable pounds) | ||||||||||||||||||||||||||||||||
Production | 809 | 607 | 1,160 | 984 | 1,063 | |||||||||||||||||||||||||||
Sales | 804 | 667 | 1,130 | 981 | 1,054 | |||||||||||||||||||||||||||
Average realized price per pound | $ | 3.08 | $ | 2.72 | $ | 2.89 | $ | 3.00 | $ | 2.32 | ||||||||||||||||||||||
Gold (thousands of recoverable ounces) | ||||||||||||||||||||||||||||||||
Production | 848 | 863 | 2,416 | 1,554 | 1,061 | |||||||||||||||||||||||||||
Sales | 842 | 973 | 2,366 | 1,540 | 1,054 | |||||||||||||||||||||||||||
Average realized price per ounce | $ | 1,832 | $ | 1,416 | $ | 1,254 | $ | 1,268 | $ | 1,237 | ||||||||||||||||||||||
100% Operating Data | ||||||||||||||||||||||||||||||||
Ore milled (metric tons per day) | 87,700 | 110,100 | 178,100 | 140,400 | 165,700 | |||||||||||||||||||||||||||
Average ore grade: | ||||||||||||||||||||||||||||||||
Copper (percent) | 1.32 | 0.84 | 0.98 | 1.01 | 0.91 | |||||||||||||||||||||||||||
Gold (grams per metric ton) | 1.10 | 0.93 | 1.58 | 1.15 | 0.68 | |||||||||||||||||||||||||||
Recovery rates (percent): | ||||||||||||||||||||||||||||||||
Copper | 91.9 | 88.4 | 91.8 | 91.6 | 91.0 | |||||||||||||||||||||||||||
Gold | 78.1 | 75.0 | 84.7 | 85.0 | 82.2 | |||||||||||||||||||||||||||
Production: | ||||||||||||||||||||||||||||||||
Copper (millions of recoverable pounds) | 809 | 607 | 1,227 | 996 | 1,063 | |||||||||||||||||||||||||||
Gold (thousands of recoverable ounces) | 848 | 863 | 2,697 | 1,554 | 1,061 | |||||||||||||||||||||||||||
MOLYBDENUM MINES | ||||||||||||||||||||||||||||||||
Molybdenum production (millions of recoverable pounds) | 24 | 29 | 35 | 32 | 26 | |||||||||||||||||||||||||||
Ore milled (metric tons per day) | 20,700 | 30,100 | 27,900 | 22,500 | 18,300 | |||||||||||||||||||||||||||
Average molybdenum ore grade (percent) | 0.17 | 0.14 | 0.18 | 0.20 | 0.21 | |||||||||||||||||||||||||||
a.Prior to December 21, 2018, PT-FI had an unincorporated joint venture with Rio Tinto. Refer to Notes 2 and 3 for further discussion.
30
MINERAL RESERVES
Proven and probable reserves were determined by the use of mapping, drilling, sampling, assaying and evaluation methods generally applied in the mining industry, as more fully discussed below. The term “reserve,” as used in the reserve data presented here, means that part of a mineral deposit that can be economically and legally extracted or produced at the time of the reserve determination. The term “proven reserves” means reserves for which (i) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; (ii) grade and/or quality are computed from the results of detailed sampling; and (iii) the sites for inspection, sampling and measurements are spaced so closely and the geologic character is sufficiently defined that size, shape, depth and mineral content of reserves are well established. The term “probable reserves” means reserves for which quantity and grade are computed from information similar to that used for proven reserves but the sites for sampling are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity between points of observation.
Our mineral reserve estimates are based on the latest available geological and geotechnical studies. We conduct ongoing studies of our ore bodies to optimize economic values and to manage risk. We revise our mine plans and estimates of recoverable proven and probable mineral reserves as required in accordance with the latest available studies. Refer to Item 1A. “Risk Factors” for discussion of risks associated with our estimates of proven and probable reserves.
Estimated recoverable proven and probable reserves at December 31, 2020, were determined using metals price assumptions of $2.50 per pound for copper, $1,200 per ounce for gold and $10 per pound for molybdenum.
For the three-year period ended December 31, 2020, LME copper settlement prices averaged $2.83 per pound, London PM gold prices averaged $1,477 per ounce and the weekly average price for molybdenum quoted by Metals Week averaged $10.65 per pound.
The estimated recoverable proven and probable reserves presented in the table below represent the estimated metal quantities from which we expect to be paid after application of estimated metallurgical recovery rates and smelter recovery rates, where applicable. Recoverable reserves are that part of a mineral deposit that we estimate can be economically and legally extracted or produced at the time of the reserve determination.
Estimated Recoverable Proven and Probable Mineral Reserves at December 31, 2020 | ||||||||||||||||||||
Coppera (billion pounds) | Gold (million ounces) | Molybdenum (billion pounds) | ||||||||||||||||||
North America | 47.1 | 0.6 | 3.01 | |||||||||||||||||
South America | 32.7 | — | 0.70 | |||||||||||||||||
Indonesiab | 33.4 | 28.3 | — | |||||||||||||||||
Consolidated basisc | 113.2 | 28.9 | 3.71 | |||||||||||||||||
Net equity interestd | 81.8 | 15.5 | 3.39 |
a.Estimated consolidated recoverable copper reserves include 1.7 billion pounds in leach stockpiles and 0.3 billion pounds in mill stockpiles (refer to “Mill and Leach Stockpiles” for further discussion).
b.Reflects estimates of minerals that can be recovered through 2041. Refer to Item 1A. “Risk Factors.”
c.Consolidated reserves represent estimated metal quantities after reduction for joint venture partner interests at the Morenci mine in North America (refer to Note 3 for further discussion of our Morenci joint venture). Excluded from the table above are our estimated recoverable proven and probable reserves of 362 million ounces of silver, which were determined using $15 per ounce.
d.Net equity interest reserves represent estimated consolidated metal quantities further reduced for noncontrolling interest ownership (refer to Note 3 for further discussion of our ownership in subsidiaries). Excluded from the table above are our estimated recoverable proven and probable reserves of 247 million ounces of silver. Our net equity interest for estimated metal quantities in Indonesia reflects approximately 81 percent from 2021 through 2022 and 48.76 percent from 2023 through 2041.
31
Estimated Recoverable Proven and Probable Mineral Reserves | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
at December 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Proven Reserves | Probable Reserves | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Average Ore Grade | Average Ore Grade | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Processing | Million | Copper | Gold | Moly | Silver | Million | Copper | Gold | Moly | Silver | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Method | metric tons | % | g/t | % | g/t | metric tons | % | g/t | % | g/t | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
North America | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Morenci | Mill | 918 | 0.38 | — | 0.02 | — | 124 | 0.33 | — | 0.02 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Crushed leach | 479 | 0.35 | — | — | — | 70 | 0.32 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ROM leach | 2,273 | 0.15 | — | — | — | 435 | 0.16 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Bagdad | Mill | 1,977 | 0.32 | — | a | 0.02 | 1.35 | 602 | 0.27 | — | a | 0.02 | 1.12 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ROM leach | 5 | 0.28 | — | — | — | 7 | 0.26 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Safford, including Lone Star | Crushed leach | 610 | 0.46 | — | — | — | 167 | 0.41 | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sierrita | Mill | 2,875 | 0.22 | — | a | 0.02 | 1.21 | 366 | 0.18 | — | a | 0.02 | 0.94 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Chino, including Cobre | Mill | 143 | 0.53 | 0.04 | — | 0.89 | 70 | 0.49 | 0.05 | — | 0.92 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ROM leach | 87 | 0.28 | — | — | — | 13 | 0.27 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tyrone | ROM leach | 31 | 0.28 | — | — | — | 2 | 0.17 | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Henderson | Mill | 40 | — | — | 0.19 | — | 20 | — | — | 0.13 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Climax | Mill | 143 | — | — | 0.15 | — | 13 | — | — | 0.10 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
9,582 | b | 1,889 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
South America | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cerro Verde | Mill | 701 | 0.38 | — | 0.02 | 2.02 | 3,302 | 0.36 | — | 0.01 | 1.91 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Crushed leach | 29 | 0.44 | — | — | — | 6 | 0.34 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ROM leach | 21 | 0.23 | — | — | — | 20 | 0.14 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
El Abra | Crushed leach | 543 | 0.44 | — | — | — | 191 | 0.38 | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ROM leach | 32 | 0.15 | — | — | — | 13 | 0.13 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1,325 | b | 3,532 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Indonesia | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Grasberg Block Cave | Mill | 326 | 1.13 | 0.75 | — | 3.62 | 548 | 1.05 | 0.72 | — | 3.61 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DMLZ | Mill | 89 | 0.94 | 0.78 | — | 4.50 | 350 | 0.88 | 0.71 | — | 4.25 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Big Gossan | Mill | 17 | 2.53 | 1.03 | — | 15.77 | 36 | 2.19 | 0.95 | — | 13.05 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DOZ | Mill | 2 | 0.59 | 0.54 | — | 2.62 | 6 | 0.54 | 0.45 | — | 2.62 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Kucing Liarc | Mill | 168 | 0.99 | 0.92 | — | 4.13 | 183 | 0.87 | 0.89 | — | 3.42 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
603 | b | 1,122 | b | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total FCX - 100% Basis | 11,510 | 6,542 | b | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
a.Amounts not shown because of rounding.
b.Does not foot because of rounding.
c.Would require additional capital investment, which could be significant, to bring into production.
The reserve table above and the tables on the following pages utilize the abbreviations described below:
•g/t – grams per metric ton
•Moly – Molybdenum
32
Estimated Recoverable Proven and Probable Mineral Reserves | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
at December 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(continued) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Proven and | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Probablea | Average Ore Grade | Recoveriesb | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Processing | Million | Copper | Gold | Moly | Silver | Copper | Gold | Moly | Silver | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Method | metric tons | % | g/t | % | g/t | % | % | % | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||
North America | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Morenci | Mill | 1,042 | 0.37 | — | 0.02 | — | 81.2 | — | 49.0 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Crushed leach | 550 | 0.35 | — | — | — | 80.0 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
ROM leach | 2,708 | 0.15 | — | — | — | 40.3 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Bagdad | Mill | 2,579 | 0.31 | — | c | 0.02 | 1.30 | 86.1 | 59.1 | 82.4 | 49.3 | |||||||||||||||||||||||||||||||||||||||||||||||||||
ROM leach | 12 | 0.27 | — | — | — | 40.2 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Safford, including Lone Star | Crushed leach | 777 | 0.45 | — | — | — | 70.4 | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Sierrita | Mill | 3,240 | 0.22 | — | c | 0.02 | 1.18 | 82.8 | 59.1 | 76.7 | 49.3 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Chino, including Cobre | Mill | 213 | 0.51 | 0.05 | — | 0.90 | 80.0 | 77.9 | — | 78.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
ROM leach | 100 | 0.28 | — | — | — | 40.9 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Tyrone | ROM leach | 33 | 0.27 | — | — | — | 55.2 | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Henderson | Mill | 60 | — | — | 0.17 | — | — | — | 89.4 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Climax | Mill | 156 | — | — | 0.15 | — | — | — | 88.7 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
11,471 | d | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
South America | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cerro Verde | Mill | 4,002 | 0.36 | — | 0.01 | 1.93 | 86.5 | — | 54.4 | 44.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Crushed leach | 34 | 0.42 | — | — | — | 78.4 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
ROM leach | 41 | 0.19 | — | — | — | 45.2 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
El Abra | Crushed leach | 734 | 0.43 | — | — | — | 54.9 | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
ROM leach | 45 | 0.15 | — | — | — | 36.4 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
4,856 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Indonesia | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Grasberg Block Cave | Mill | 874 | 1.08 | 0.73 | — | 3.61 | 84.0 | 63.6 | — | 56.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
DMLZ | Mill | 439 | 0.89 | 0.72 | — | 4.30 | 86.3 | 79.1 | — | 64.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Big Gossan | Mill | 53 | 2.30 | 0.98 | — | 13.93 | 91.6 | 67.6 | — | 63.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
DOZ | Mill | 8 | 0.55 | 0.47 | — | 2.62 | 86.9 | 79.3 | — | 64.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Kucing Liare | Mill | 351 | 0.92 | 0.90 | — | 3.76 | 83.4 | 58.4 | — | 42.8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
1,724 | d | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total FCX - 100% Basis | 18,052 | d | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
a.Amounts may not equal the sum of proven and probable reserves as presented on the previous page because of rounding.
b.Recoveries are net of estimated mill and smelter losses.
c.Amounts not shown because of rounding.
d.Does not foot because of rounding.
e.Would require additional capital investment, which could be significant, to bring into production.
33
Estimated Recoverable Proven and Probable Mineral Reserves | ||||||||||||||||||||||||||||||||||||||
at December 31, 2020 | ||||||||||||||||||||||||||||||||||||||
(continued) | ||||||||||||||||||||||||||||||||||||||
Recoverable Reserves | ||||||||||||||||||||||||||||||||||||||
Copper | Gold | Moly | Silver | |||||||||||||||||||||||||||||||||||
FCX’s | Processing | billion | million | billion | million | |||||||||||||||||||||||||||||||||
Interest | Method | lbs. | ozs. | lbs. | ozs. | |||||||||||||||||||||||||||||||||
North America | ||||||||||||||||||||||||||||||||||||||
Morenci | 72% | Mill | 6.9 | — | 0.20 | — | ||||||||||||||||||||||||||||||||
Crushed leach | 3.4 | — | — | — | ||||||||||||||||||||||||||||||||||
ROM leach | 3.7 | — | — | — | ||||||||||||||||||||||||||||||||||
Bagdad | 100% | Mill | 15.1 | 0.2 | 0.92 | 53.1 | ||||||||||||||||||||||||||||||||
ROM leach | — | a | — | — | — | |||||||||||||||||||||||||||||||||
Safford, including Lone Star | 100% | Crushed leach | 5.4 | — | — | — | ||||||||||||||||||||||||||||||||
Sierrita | 100% | Mill | 13.0 | 0.2 | 1.28 | 60.7 | ||||||||||||||||||||||||||||||||
Chino, including Cobre | 100% | Mill | 1.9 | 0.2 | — | 4.8 | ||||||||||||||||||||||||||||||||
ROM leach | 0.3 | — | — | — | ||||||||||||||||||||||||||||||||||
Tyrone | 100% | ROM leach | 0.1 | — | — | — | ||||||||||||||||||||||||||||||||
Henderson | 100% | Mill | — | — | 0.20 | — | ||||||||||||||||||||||||||||||||
Climax | 100% | Mill | — | — | 0.46 | — | ||||||||||||||||||||||||||||||||
49.8 | 0.6 | 3.05 | b | 118.7 | b | |||||||||||||||||||||||||||||||||
Recoverable metal in stockpilesc | 1.2 | — | a | 0.02 | 0.1 | |||||||||||||||||||||||||||||||||
100% operations | 51.1 | b | 0.6 | 3.07 | 118.9 | b | ||||||||||||||||||||||||||||||||
Consolidated | 47.1 | 0.6 | 3.01 | 118.9 | ||||||||||||||||||||||||||||||||||
Net equity interest | 47.1 | 0.6 | 3.01 | 118.9 | ||||||||||||||||||||||||||||||||||
South America | ||||||||||||||||||||||||||||||||||||||
Cerro Verde | 53.56% | Mill | 27.7 | — | 0.69 | 111.4 | ||||||||||||||||||||||||||||||||
Crushed leach | 0.3 | — | — | — | ||||||||||||||||||||||||||||||||||
ROM leach | 0.1 | — | — | — | ||||||||||||||||||||||||||||||||||
El Abra | 51% | Crushed leach | 3.8 | — | — | — | ||||||||||||||||||||||||||||||||
ROM leach | 0.1 | — | — | — | ||||||||||||||||||||||||||||||||||
31.9 | b | — | 0.69 | 111.4 | ||||||||||||||||||||||||||||||||||
Recoverable metal in stockpilesc | 0.9 | — | 0.01 | 1.2 | ||||||||||||||||||||||||||||||||||
100% operations | 32.7 | b | — | 0.70 | 112.6 | |||||||||||||||||||||||||||||||||
Consolidated | 32.7 | — | 0.70 | 112.6 | ||||||||||||||||||||||||||||||||||
Net equity interest | 17.4 | — | 0.37 | 60.3 | ||||||||||||||||||||||||||||||||||
Indonesia | ||||||||||||||||||||||||||||||||||||||
Grasberg Block Cave | d | Mill | 17.5 | 13.1 | — | 57.8 | ||||||||||||||||||||||||||||||||
DMLZ | d | Mill | 7.4 | 8.1 | — | 39.0 | ||||||||||||||||||||||||||||||||
Big Gossan | d | Mill | 2.5 | 1.1 | — | 15.3 | ||||||||||||||||||||||||||||||||
DOZ | d | Mill | 0.1 | 0.1 | — | 0.4 | ||||||||||||||||||||||||||||||||
Kucing Liar | d | Mill | 6.0 | 6.0 | — | 18.1 | ||||||||||||||||||||||||||||||||
100% operations | 33.4 | b | 28.3 | b | — | 130.6 | ||||||||||||||||||||||||||||||||
Consolidated | 33.4 | 28.3 | — | 130.6 | ||||||||||||||||||||||||||||||||||
Net equity interest | 17.3 | 14.9 | — | 67.7 | ||||||||||||||||||||||||||||||||||
Total FCX – 100% basis | 117.2 | 28.9 | 3.77 | 362.1 | ||||||||||||||||||||||||||||||||||
Total FCX – Consolidated basise | 113.2 | 28.9 | 3.71 | 362.1 | ||||||||||||||||||||||||||||||||||
Total FCX – Net equity interestf | 81.8 | 15.5 | 3.39 | b | 246.9 |
a.Amounts not shown because of rounding.
b.Does not foot because of rounding.
c.Refer to “Mill and Leach Stockpiles” for additional information.
d.Effective December 21, 2018, our share ownership in PT-FI is 48.76 percent (refer to Note 2 for further discussion). Our economic interest in PT-FI is expected to approximate 81 percent through 2022 and 48.76 percent thereafter.
e.Consolidated reserves represent estimated metal quantities after reduction for Morenci’s joint venture partner interests (refer to Note 3 for further discussion).
f.Net equity interest represents estimated consolidated metal quantities further reduced for noncontrolling interest ownership (refer to Note 3 for further discussion of our ownership in subsidiaries). Our net equity interest for estimated metal quantities in Indonesia reflects approximately 81 percent from 2021 through 2022 and 48.76 percent from 2023 through 2041.
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In defining our open-pit reserves, we apply a “variable cutoff grade” strategy. The objective of this strategy is to maximize the net present value of our operations. We use a “break-even cutoff grade” to define the in-situ reserves for our underground ore bodies. The break-even cutoff grade is defined for a metric ton of ore as that equivalent copper grade, once produced and sold, that generates sufficient revenue to cover all operating and administrative costs associated with our production.
Our copper mines may contain other commercially recoverable metals, such as gold, molybdenum and silver. We value all commercially recoverable metals in terms of a copper equivalent percentage to determine a single cutoff grade. Copper equivalent percentage is used to express the relative value of multi-metal ores in terms of one metal. The calculation expresses the relative value of the ore using estimates of contained metal quantities, metals prices as used for reserve determination, recovery rates, treatment charges and royalties. Our molybdenum properties use a molybdenum cutoff grade.
The table below shows the minimum cutoff grade by process for each of our existing ore bodies as of December 31, 2020:
Copper Equivalent Cutoff Grade (Percent) | Molybdenum Cutoff Grade (Percent) | ||||||||||||||||||||||
Mill | Crushed Leach | ROM Leach | Mill | ||||||||||||||||||||
North America | |||||||||||||||||||||||
Morenci | 0.17 | 0.12 | 0.03 | — | |||||||||||||||||||
Bagdad | 0.09 | — | 0.04 | — | |||||||||||||||||||
Safford, including Lone Star | — | 0.12 | — | — | |||||||||||||||||||
Sierrita | 0.15 | — | — | — | |||||||||||||||||||
Chino, including Cobre | 0.22 | — | 0.07 | — | |||||||||||||||||||
Tyrone | — | — | 0.02 | — | |||||||||||||||||||
Henderson | — | — | — | 0.13 | |||||||||||||||||||
Climax | — | — | — | 0.05 | |||||||||||||||||||
South America | |||||||||||||||||||||||
Cerro Verde | 0.15 | 0.09 | 0.08 | — | |||||||||||||||||||
El Abra | — | 0.11 | 0.06 | — | |||||||||||||||||||
Indonesia | |||||||||||||||||||||||
Grasberg Block Cave | 0.58 | — | — | — | |||||||||||||||||||
DMLZ | 0.64 | — | — | — | |||||||||||||||||||
Big Gossan | 1.70 | — | — | — | |||||||||||||||||||
DOZ | 0.91 | — | — | — | |||||||||||||||||||
Kucing Liar | 0.65 | — | — | — |
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Drill hole spacing data is used by mining professionals, such as geologists and geological engineers, in determining the suitability of data coverage (on a relative basis) in a given deposit type and mining method scenario so as to achieve a given level of confidence in the resource estimate. Drill hole spacing is only one of several criteria necessary to establish resource classification. Drilling programs are typically designed to achieve an optimum sample spacing to support the level of confidence in results that apply to a particular stage of development of a mineral deposit.
The following table sets forth the average drill hole spacing based on average sample distance or drill pattern spacing for proven and probable ore reserves by process type:
Average Drill Hole Spacing (in Meters) | |||||||||||||||||||||||||||||
Proven | Probable | ||||||||||||||||||||||||||||
Mining Unit | Mill | Leach | Mill | Leach | |||||||||||||||||||||||||
North America | |||||||||||||||||||||||||||||
Morenci | Open Pit | 86 | 86 | 122 | 122 | ||||||||||||||||||||||||
Bagdad | Open Pit | 86 | 86 | 122 | 122 | ||||||||||||||||||||||||
Safford, including Lone Star | Open Pit | — | 86 | — | 122 | ||||||||||||||||||||||||
Sierrita | Open Pit | 73 | — | 104 | — | ||||||||||||||||||||||||
Chino | Open Pit | 43 | 86 | 86 | 122 | ||||||||||||||||||||||||
Cobre | Open Pit | 86 | 86 | 122 | 122 | ||||||||||||||||||||||||
Tyrone | Open Pit | — | 86 | — | 122 | ||||||||||||||||||||||||
Henderson | Block Cave | 47 | — | 96 | — | ||||||||||||||||||||||||
Climax | Open Pit | 61 | — | 91 | — | ||||||||||||||||||||||||
South America | |||||||||||||||||||||||||||||
Cerro Verde | Open Pit | 55 | 55 | 110 | 110 | ||||||||||||||||||||||||
El Abra | Open Pit | — | 75 | — | 120 | ||||||||||||||||||||||||
Indonesia | |||||||||||||||||||||||||||||
Grasberg Block Cave | Block Cave | 28 | — | 66 | — | ||||||||||||||||||||||||
DMLZ | Block Cave | 22 | — | 63 | — | ||||||||||||||||||||||||
Big Gossan | Open Stope | 13 | — | 37 | — | ||||||||||||||||||||||||
DOZ | Block Cave | 23 | — | 54 | — | ||||||||||||||||||||||||
Kucing Liar | Block Cave | 39 | — | 88 | — |
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Production Sequencing
The following chart illustrates our current plans for sequencing and producing our proven and probable reserves at each of our ore bodies and the years in which we currently expect production from each ore body and related stockpiles. Our proven and probable ore reserves in Indonesia reflect estimates of minerals that can be recovered through the end of 2041, and our current mine plan and planned operations are based on the assumption that PT-FI will comply with its obligations under the IUPK and receive the second 10-year extension from 2031 through 2041 (refer to Item 1A. “Risk Factors” and Note 13 for further discussion). Production volumes are typically lower in the first few years for each ore body as development activities are ongoing and as the mine ramps up to full production and production volumes may also be lower as the mine reaches the end of its life. The sequencing dates shown in the chart below include development activity that results in metal production. The ultimate timing of the start of production from our undeveloped mines is dependent upon a number of factors, including the results of our exploration and development efforts, and may vary from the dates shown below. In addition, we develop our mine plans based on maximizing the net present value from the ore bodies. Significant additional capital expenditures will be required at many of these mines in order to achieve the life-of-mine plans reflected below.

a.The timing of development is still under review.
Mill and Leach Stockpiles
Mill and leach stockpiles generally contain lower grade ores that have been extracted from an ore body and are available for metal recovery. Mill stockpiles contain sulfide ores and recovery of metal is through milling, concentrating, smelting and refining or, alternatively, by concentrate leaching. Leach stockpiles contain oxide ores and certain secondary sulfide ores and recovery of metal is through exposure to acidic solutions that dissolve contained copper and deliver it in solution to extraction processing facilities.
Because it is impracticable to determine copper contained in mill and leach stockpiles by physical count, reasonable estimation methods are employed. The quantity of material delivered to mill and leach stockpiles is based on surveyed volumes of mined material and daily production records. Sampling and assaying of blasthole cuttings determine the estimated copper grades of material delivered to mill and leach stockpiles.
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Expected copper recovery rates for mill stockpiles are determined by metallurgical testing. The recoverable copper in mill stockpiles, once entered into the production process, can be produced into copper concentrate almost immediately.
Expected copper recovery rates for leach stockpiles are determined using small-scale laboratory tests, small- to large-scale column testing (which simulates the production process), historical trends and other factors, including mineralogy of the ore and rock type. Total copper recovery in leach stockpiles can vary significantly from a low percentage to more than 90 percent depending on several variables, including processing methodology, processing variables, mineralogy and particle size of the rock. For newly placed material on active stockpiles, as much as 80 percent of total copper recovery may be extracted during the first year, and the remaining copper may be recovered over many years. Processes and recovery rates are monitored regularly, and recovery rate estimates are adjusted periodically as additional information becomes available and as related technology changes.
Following are our stockpiles and the estimated recoverable copper contained within those stockpiles as of December 31, 2020:
Recoverable | ||||||||||||||||||||||||||
Million | Average | Recovery | Copper | |||||||||||||||||||||||
Metric Tons | Ore Grade (%) | Rate (%) | (billion pounds) | |||||||||||||||||||||||
Mill stockpiles | ||||||||||||||||||||||||||
Cerro Verde | 77 | 0.27 | 64.7 | 0.3 | ||||||||||||||||||||||
North America copper mines | 6 | 0.45 | 88.2 | — | a | |||||||||||||||||||||
83 | 0.3 | |||||||||||||||||||||||||
Leach stockpiles | ||||||||||||||||||||||||||
Morenci | 7,019 | 0.24 | 0.7 | 0.3 | ||||||||||||||||||||||
Bagdad | 504 | 0.25 | 0.2 | — | a | |||||||||||||||||||||
Safford, including Lone Star | 350 | 0.41 | 7.5 | 0.2 | ||||||||||||||||||||||
Sierrita | 650 | 0.15 | 9.1 | 0.2 | ||||||||||||||||||||||
Miami | 498 | 0.39 | 1.3 | 0.1 | ||||||||||||||||||||||
Chino, including Cobre | 1,761 | 0.25 | 3.1 | 0.3 | ||||||||||||||||||||||
Tyrone | 1,170 | 0.28 | 1.4 | 0.1 | ||||||||||||||||||||||
Cerro Verde | 535 | 0.46 | 4.4 | 0.2 | ||||||||||||||||||||||
El Abra | 818 | 0.43 | 4.3 | 0.3 | ||||||||||||||||||||||
13,306 | b | 1.7 | ||||||||||||||||||||||||
Total FCX - 100% basis | 2.1 | b | ||||||||||||||||||||||||
Total FCX - Consolidated basisc | 2.0 | |||||||||||||||||||||||||
Total FCX - Net equity interestd | 1.6 | |||||||||||||||||||||||||
a.Rounds to less than 0.1 billion pounds of recoverable copper.
b.Does not foot because of rounding.
c.Consolidated stockpiles represent estimated metal quantities after reduction for Morenci’s joint venture partner interests. Refer to Note 3 for further discussion.
d.Net equity interest represents estimated consolidated metal quantities further reduced for noncontrolling interest ownership (refer to Note 3 for further discussion of our ownership in subsidiaries).
Mineralized Material
We hold various properties containing mineralized material that we believe could be brought into production should market conditions warrant. However, permitting and significant capital expenditures would be required before operations could commence at these properties. Mineralized material is a mineralized body that has been delineated by appropriately spaced drilling and/or underground sampling to support the reported tonnage and average metal grades. Such a deposit cannot qualify as recoverable proven and probable reserves until legal and economic feasibility are confirmed based upon a comprehensive evaluation of development costs, unit costs, grades, recoveries and other material factors. Accordingly, no assurance can be given that the estimated mineralized material not included in reserves will become proven and probable mineral reserves. Estimated mineralized materials as presented on the following page were assessed using prices of $3.00 per pound for copper, $1,200 per ounce for gold, $12 per pound for molybdenum and $20 per ounce for silver. Refer to Item 1A. “Risk Factors” for discussion of risks associated with our estimates of mineralized material.
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Estimated Mineralized Material | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
at December 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Milling Material | Leaching Material | Total Mineralized Materiala | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Million | Million | Million | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FCX’s | metric | Copper | Gold | Moly | Silver | metric | Copper | metric | |||||||||||||||||||||||||||||||||||||||||||||||||||
Interest | tons | % | g/t | % | g/t | tons | % | tons | |||||||||||||||||||||||||||||||||||||||||||||||||||
North America | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Morenci | 72% | 1,228 | 0.26 | — | 0.02 | — | 862 | 0.22 | 2,090 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Bagdad | 100% | 378 | 0.30 | — | b | 0.02 | 1.3 | 1 | 0.14 | 379 | |||||||||||||||||||||||||||||||||||||||||||||||||
Safford, including Lone Star | 100% | 1,084 | 0.42 | 0.05 | — | 1.1 | 887 | 0.29 | 1,971 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Sierrita | 100% | 1,125 | 0.18 | — | b | 0.02 | 1.0 | — | — | 1,125 | |||||||||||||||||||||||||||||||||||||||||||||||||
Chino, including Cobre | 100% | 260 | 0.47 | 0.04 | 0.01 | 0.9 | 30 | 0.25 | 291 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Tyrone | 100% | — | — | — | — | — | 52 | 0.28 | 52 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Henderson | 100% | 116 | — | — | 0.14 | — | — | — | 116 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Climax | 100% | 383 | — | — | 0.16 | — | — | — | 383 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Ajo | 100% | 601 | 0.37 | 0.06 | 0.01 | 0.8 | — | — | 601 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Cochise/Bisbee | 100% | — | — | — | — | — | 262 | 0.46 | 262 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Sanchez | 100% | — | — | — | — | — | 175 | 0.29 | 175 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Tohono | 100% | 269 | 0.67 | — | — | — | 281 | 0.67 | 550 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Twin Buttes | 100% | 169 | 0.57 | 0.01 | 0.03 | 6.0 | 80 | 0.21 | 249 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Christmas | 100% | 301 | 0.40 | 0.06 | — | b | 1.1 | — | — | 301 | |||||||||||||||||||||||||||||||||||||||||||||||||
South America | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cerro Verde | 53.56% | 451 | 0.32 | — | 0.01 | 1.7 | 29 | 0.26 | 480 | ||||||||||||||||||||||||||||||||||||||||||||||||||
El Abra | 51% | 2,065 | 0.40 | 0.02 | 0.01 | 1.3 | 147 | 0.23 | 2,212 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Indonesia | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Grasberg minerals district | 48.76% | 2,649 | 0.72 | 0.61 | — | 4.0 | — | — | 2,649 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Total FCX - 100% basis | 11,081 | c | 2,805 | c | 13,886 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total FCX - Consolidated basisd | 10,737 | 2,562 | 13,299 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total FCX - Net equity intereste | 8,158 | 2,476 | 10,635 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
a.Amounts may not equal the sum of milling and leach material because of rounding.
b.Amounts not shown because of rounding.
c.Does not foot because of rounding.
d.Consolidated basis represents estimated mineralized materials after reduction for Morenci’s joint venture partner interests. Refer to Note 3 for further discussion.
e.Net equity interest represents estimated consolidated mineralized material further reduced for noncontrolling interest ownership. Refer to Note 3 for further discussion of our ownership in subsidiaries.
39
Item 1A. Risk Factors.
This report contains “forward-looking statements” within the meaning of United States (U.S.) federal securities laws. Forward-looking statements are all statements other than statements of historical facts, such as plans, projections or expectations relating to ore grades and milling rates; business outlook; production and sales volumes; unit net cash costs; cash flows, capital expenditures, liquidity; operating costs; operating plans; our financial policy; our expectations regarding PT Freeport Indonesia’s (PT-FI) ramp-up of underground mining activities and future cash flows through 2022; PT-FI’s development, financing, construction and completion of a new smelter in Indonesia and possible expansion of the smelter at PT Smelting; our commitments to deliver responsibly produced copper, including plans to implement and validate all of our operating sites under specific frameworks; improvements in operating procedures and technology; exploration efforts and results; development and production activities, rates and costs; tax rates; export quotas and duties; the impact of copper, gold and molybdenum price changes; the impact of deferred intercompany profits on earnings; mineralization and reserve estimates; execution of the settlement agreements associated with the Louisiana coastal erosion cases and talc-related litigation; descriptions of our objectives, strategies, plans, goals or targets, including our net debt target, anticipated improvements in energy efficiency at certain operating sites, and environmental, social and governance (ESG) targets; and future dividend payments, share purchases and sales, including under our Board of Director’s (Board’s) financial policy.
We undertake no obligation to update any forward-looking statements. We caution readers that forward-looking statements are not guarantees of future performance and our 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 the following:
Risk Factor Summary
Investing in our securities involves a high degree of risk and uncertainties. Below is a summary of the material risk factors associated with an investment in our securities. You should read this summary together with the more detailed description of each risk factor that immediately follows this summary.
However, the risk factors described herein are not all of the risks we may face. Other risks not presently known to us or that we currently believe are immaterial may materially affect our business if they occur. Moreover, new risks emerge from time to time. Further, our business may also be affected by additional factors that apply to all companies operating in the U.S. and globally, which have not been included.
In addition to this summary and the more detailed description of the risk factors, you should carefully consider other sections of this annual report on Form 10-K, which may include additional factors that could adversely affect our business, prior to investing in our securities.
Financial risks
•Fluctuations in the market prices of the commodities we produce have caused and may continue to cause significant volatility in our financial performance and in the trading prices of our common stock and debt. Extended declines in the market prices of the commodities we produce could have an adverse effect on our business.
•Our debt and other financial commitments may limit our financial and operating flexibility.
•The ongoing COVID-19 pandemic and any future pandemic, epidemic, endemic or similar public health threats and resulting negative impact on the global economy and financial markets may have an adverse impact on our business and results of operations, the duration and extent of which is highly uncertain and could be material.
•Changes in or the failure to comply with the financial assurance requirements relating to our mine closure reclamation and plugging and abandonment obligations could have a material adverse effect on our business.
•Unanticipated litigation or negative developments in pending litigation or with respect to other contingencies could have a material adverse effect on our business.
•We may be adversely impacted by increased liabilities and costs related to our defined benefit pension plans.
40
International risks
•Our international operations are subject to, and may be adversely affected by, political, economic, social and regional risks of doing business in countries outside the U.S.
•Our special mining license (IUPK) may not be extended through 2041 if PT-FI fails to abide by the terms and conditions of the IUPK and applicable laws and regulations.
Operational risks
•Our mining operations are subject to operational risks that could adversely affect our business and our underground mining operations can be particularly dangerous.
•Our management of waste rock and tailings are subject to significant environmental, safety and engineering challenges and risks that could adversely affect our business.
•Violence, including shooting incidents, civil and religious strife, and activism could result in loss of life and/or disrupt our operations and may adversely affect our business.
•Our business depends on good relations with our workforce and labor disputes or labor unrest could disrupt our operations from time to time, which could adversely affect our financial results.
•Our mining operations depend on the availability of significant quantities of secure water supplies.
•Development projects are inherently risky and may require more capital than anticipated, which could adversely affect our business. The development of our underground mines and operations are also subject to other unique risks.
•We must continually replace reserves depleted by production but exploration is highly speculative and our exploration activities may not result in additional discoveries.
•Estimates of proven and probable reserves and mineralized material are uncertain and the volume and grade of ore actually recovered may vary from our estimates.
•Our operations are subject to extensive laws and regulations, some of which require permits and other approvals, which may increase our costs and may delay or result in a suspension of our operations.
•Our business is dependent upon information technology systems, which may be adversely affected by disruptions, damage, failure and risks associated with implementation and integration.
Environmental and social risks
•Our operations are subject to environmental laws and regulations, and compliance with these laws and regulations involves significant costs and may constrain existing operations or expansion opportunities.
•We incur significant costs for remediating environmental conditions on properties that have not been operated in many years.
•Our Indonesia mining operations create difficult and costly environmental challenges, which could require us to incur increased costs.
•Our operations require significant energy and regulation of greenhouse gas emissions may increase our costs and adversely affect our operations.
•The physical impacts of climate change may adversely affect our copper mining operations.
•Increasing scrutiny and evolving expectations from stakeholders with respect to our environmental, social and governance practices, performance and disclosures may impact our reputation and business and impose additional costs on us.
•Failure or perceived failure to manage our relationships with the communities where we operate, including communities that are adjacent to or near our operations and Indigenous People, could harm our reputation and social license to operate.
Other risks
•Our holding company structure may impact our ability to service debt and our stockholders’ ability to receive dividends.
•Anti-takeover provisions in our charter documents and Delaware law may make an acquisition of us more difficult.
41
Financial risks
Fluctuations in the market prices of the commodities we produce, primarily copper, gold and molybdenum, have caused and may continue to cause significant volatility in our financial performance and in the trading prices of our common stock and debt. Extended declines in the market prices of copper, gold and, to a lesser extent, molybdenum, could adversely affect our earnings, cash flows and asset values and, if sustained, may adversely affect our ability to repay debt.
Our financial results vary with fluctuations in the market prices of the commodities we produce, primarily copper and gold, and to a lesser extent molybdenum. During 2020, the COVID-19 pandemic and resulting negative impact on the global economy created significant volatility in the financial markets, including the copper market. In 2020, copper prices ranged from a low of $2.09 per pound in March 2020 and a high of $3.61 per pound in December 2020, and with the ongoing COVID-19 pandemic, significant volatility may continue. Extended declines in market prices of our commodities, whether related to the ongoing COVID-19 pandemic or otherwise, could have a material adverse effect on our financial results and the value of our assets, may depress the price of our common stock, and may have a material adverse effect on our ability to comply with financial and other covenants in our debt agreements, repay our debt and meet our other obligations.
Additionally, if market prices for our primary commodities decline and remain low for a sustained period of time, we may have to revise our operating plans, including curtailing or modifying some of our mining and processing operations. We may be unable to decrease our costs in an amount sufficient to offset reductions in revenues, in which case we may incur losses, and those losses may be material. For example, in early 2020, we announced revised operating plans in response to the global COVID-19 pandemic and resulting negative impact on the global economy, which resulted in reductions in (i) operating costs, (ii) capital expenditures, (iii) exploration and administrative costs, and (iv) sales volumes and production from those planned.
Fluctuations in commodities prices are caused by varied and complex factors beyond our control, including global supply and demand and inventory levels; global economic and political conditions; international regulatory, trade and/or tax policies, including national tariffs; commodities investment activity and speculation; interest rates; expectations regarding future inflation rates; the strength of the U.S. dollar compared to foreign currencies; the price and availability of substitute products; and changes in technology. Volatility in global economic growth, particularly in developing economies, has the potential to adversely affect future demand and prices for commodities. Geopolitical uncertainty and protectionism, have the potential to inhibit international trade and negatively impact business confidence, which creates the risk of constraints on our ability to trade in certain markets and has the potential to increase price volatility.
Copper prices may be affected by demand from China, which is currently the largest consumer of refined copper in the world, and by changes in demand for industrial, commercial and residential products containing copper. China had a major economic shutdown during first-quarter 2020 in connection with its efforts to contain and mitigate the spread of COVID-19, which resulted in the country’s first reported economic contraction in over 40 years. Although our sales during 2020 were not significantly affected, a slowing in China’s economic growth, another widespread COVID-19 outbreak in China or other pandemic, epidemic or endemic health issues, the adoption and expansion of trade restrictions, changes in China-U.S. relations, or other governmental action related to tariffs or trade agreements or policies are difficult to predict and could adversely affect copper prices, demand for our products, our costs, our customers, our suppliers, and the U.S. economy, which in turn could have a material adverse effect on our business, results of operations, or financial condition.
Copper prices have fluctuated historically, with London Metal Exchange (LME) copper settlement prices ranging from $2.09 per pound to $3.61 per pound during the three years ended December 31, 2020. LME copper settlement prices averaged $2.80 per pound in 2020, $2.72 per pound in 2019 and $2.96 per pound in 2018. The LME copper settlement price was $3.51 per pound on December 31, 2020, and $3.57 per pound on January 29, 2021.
Factors affecting gold prices may include the relative strength of the U.S. dollar to other currencies, inflation and interest rate expectations, purchases and sales of gold by governments and central banks, demand from China and India, two of the world’s largest consumers of gold, and global demand for jewelry containing gold. The London Bullion Market Association (London) PM gold price averaged $1,770 per ounce in 2020, $1,393 per ounce in 2019 and $1,268 per ounce in 2018. The London PM gold price was $1,888 per ounce on December 30, 2020 (there was no London PM gold price quote on December 31, 2020), and $1,864 per ounce on January 29, 2021.
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The Metals Week Molybdenum Dealer Oxide weekly average price averaged $8.69 per pound in 2020, $11.37 per pound in 2019 and $11.93 per pound in 2018. The Metals Week Molybdenum Dealer Oxide weekly average price was $9.86 per pound on December 31, 2020, and $10.38 per pound on January 29, 2021.
Declines in prices of commodities we sell could result in metals inventory adjustments and impairment charges for our long-lived assets. During 2020, we recorded unfavorable metals inventory adjustments totaling $96 million associated with lower market prices for copper and molybdenum. Refer to Note 4 for additional information regarding metals inventory adjustments. Other events that could result in impairment of our long-lived assets include, but are not limited to, decreases in estimated proven and probable mineral reserves and any event that might have a material adverse effect on current and future expected mine production costs.
Our debt and other financial commitments may limit our financial and operating flexibility.
At December 31, 2020, our total consolidated debt was $9.7 billion (see Note 8) and our total consolidated cash was $3.7 billion. We also have various other financial commitments, including reclamation and environmental obligations, take-or-pay contracts and leases. For further information, see risk factor below relating to mine closure and reclamation regulations, and plugging and abandonment obligations related to our remaining oil and gas properties. Although we have been successful in repaying debt in the past, refinancing our bank facilities, and issuing new debt securities in capital markets transactions, there can be no assurance that we can continue to do so. In addition, we may incur additional debt in future periods or reduce our holdings of cash and cash equivalents in connection with funding existing operations, capital expenditures, dividends, share repurchases or in pursuing other business opportunities.
Our level of indebtedness and other financial commitments could have important consequences to our business, including the following:
•Limiting our flexibility in planning for, or reacting to, changes in the industry in which we operate;
•Increasing our vulnerability to general adverse economic, industry and regulatory conditions;
•Limiting our ability to fund future working capital, capital expenditures, general corporate requirements and/or material contingencies, to engage in future development activities, or to otherwise realize the value of our assets and opportunities fully because of the need to dedicate a substantial portion of our cash flows from operations to payments on our debt;
•Requiring us to sell assets to reduce debt; or
•Placing us at a competitive disadvantage compared to our competitors that have less debt and/or fewer financial commitments.
Any failure to comply with the financial and/or other covenants in our debt agreements may result in an event of default that would allow the creditors to accelerate maturities of the related debt, which in turn may trigger cross-acceleration or cross-default provisions in other debt agreements. Our available cash and liquidity may not be sufficient to fully repay borrowings under our debt instruments that may be accelerated upon an event of default.
As of January 29, 2021, our senior unsecured debt was rated “BB“ with a positive outlook by Standard & Poor’s, “BB+” with a stable outlook by Fitch Ratings, and “Ba1” with a stable outlook by Moody’s Investors Service. If we are unable to maintain our indebtedness and financial ratios at levels acceptable to these credit rating agencies, or should our business prospects deteriorate, our current credit ratings could be downgraded, which could adversely affect the value of our outstanding securities and existing debt and our ability to obtain new financing on favorable terms and could increase our borrowing costs.
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The ongoing COVID-19 pandemic and any future pandemic, epidemic, endemic or similar public health threats and resulting negative impact on the global economy and financial markets may have an adverse impact on our business and results of operations, the duration and extent of which is highly uncertain and could be material.
The ongoing COVID-19 pandemic continues to adversely impact the global economy and is creating significant volatility in the financial markets, including the copper markets. The duration and scope of and uncertainties associated with, the ongoing COVID-19 pandemic and the related impact on commodity prices, our business and the global economy are evolving and beyond our control. The extent and duration of adverse impacts that the COVID-19 pandemic may have on supply, demand and prices of the commodities we produce, on our suppliers, vendors, customers and employees and on global financial markets is unknown at this time, but could be both material and prolonged. Prolonged unfavorable economic conditions, and any resulting slowed global economic growth, including the current U.S. recession, may result in lower demand for the commodities we produce, as well as the inability of various customers, contractors, suppliers and other business partners to fulfill their obligations, which could have a material adverse effect on our business and results of operations.
The COVID-19 pandemic disrupted our 2020 operating plans. In April 2020, we announced revised operating plans in response to the global COVID-19 pandemic and resulting negative impact on the global economy. Our revised operating plans focused on safeguarding our business in an uncertain public health and economic environment, advancing the ramp-up of underground production at Grasberg, and advancing initiatives in North America and South America. The ongoing COVID-19 pandemic or any future pandemic, epidemic, endemic or other similar public health threats could disrupt or change our future operating plans. For additional information, refer to Part 1, Item 2. herein.
Our business and results of operations could be adversely affected if significant portions of our workforce are unable to work effectively, including because of illness, quarantines, government actions or other restrictions in connection with the COVID-19 pandemic. We have proactively implemented operating protocols at each of our operating sites to contain and mitigate the risk of spread of COVID-19, including but not limited to, physical distancing, travel restrictions, sanitizing, and frequent health screening and monitoring. COVID-19 cases have been confirmed through testing at our operating sites, including PT-FI’s remote operating site in Papua, Indonesia. Despite our efforts to manage these impacts, there can be no assurance that our actions will be effective in containing and mitigating the risk of spread or a major outbreak of COVID-19 at our operating sites. Additionally, although several vaccines for COVID-19 have been approved, there are risks that these vaccines will not be effective against variants of the virus and that these vaccines may not be accepted or widely available in the areas in which we operate due to shortages or other issues with distribution. A major outbreak of COVID-19 at any of our operating sites, and particularly at PT-FI’s remote operating site, could have a material adverse effect on our business and results of operations.
Actions taken by governmental authorities and third parties to contain and mitigate the risk of spread of COVID-19 may have an adverse impact on our business. For example, in mid-March 2020, the Peru government issued a Supreme Decree and declaration of a National Emergency in its efforts to contain the outbreak of COVID-19, and subsequently extended the order through May 10, 2020. The Peru government also extended the quarantine measures instituted in mid-March 2020 through August 31, 2020, for certain cities in Peru (including Arequipa, where our Cerro Verde mine is located). To comply with the government’s requirements, we temporarily transitioned our Cerro Verde mine to care and maintenance status and adjusted operations to prioritize critical activities. Strict health protocols have been implemented and a plan for Cerro Verde to restore operations was approved by the Peru government in second-quarter 2020. Cerro Verde continued to increase milling rates while operating consistent with our April 2020 revised operating plans and under strict COVID-19 restrictions and protocols. Cerro Verde expects mill rates to average approximately 360,000 metric tons of ore per day in 2021 with the potential to ramp-up to pre-COVID-19 levels approximating 400,000 metric tons of ore per day as COVID-19 restrictions are lifted.
These and other impacts of COVID-19 or other pandemic, epidemic, endemic or similar public health threats could also have the effect of heightening many of the other risks described in these “Risk Factors.” The ultimate impact of COVID-19 on our business is difficult to predict and depends on factors that are evolving and beyond our control, including the scope and duration of the outbreak and recovery, including any future resurgences, as well as actions taken by governmental authorities and third parties, including the distribution, effectiveness and acceptance of
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vaccines, to contain its spread and mitigate its public health effects. Any of these disruptions could continue to adversely impact our business and results of operations, and such adverse impacts could be material.
Mine closure and reclamation regulations impose substantial costs on our operations and include requirements that we provide financial assurance supporting those obligations. We also have plugging and abandonment obligations related to our remaining oil and gas properties, and are required to provide bonds or other forms of financial assurance in connection with those properties. Changes in or the failure to comply with these requirements could have a material adverse effect on our business.
We are required by U.S. federal and state laws and regulations to provide financial assurance sufficient to allow a third party to implement approved closure and reclamation plans for our mining properties if we are unable to do so. Most of our financial assurance obligations are imposed by state laws that vary significantly by jurisdiction, depending on how each state regulates land use and groundwater quality. The U.S. Environmental Protection Agency (EPA) and state agencies may also require financial assurance for investigation and remediation actions that are required under settlements of enforcement actions under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA) or similar state laws. Refer to Note 12 for additional information regarding our financial assurance obligations.
We are also subject to financial assurance requirements in connection with our remaining oil and gas properties and certain of our previously sold oil and gas properties under both state and federal laws, including financial responsibility required under the Oil Pollution Act of 1990 to cover containment and cleanup costs resulting from an oil spill. As a result of a significant increase in the number of oil and gas companies experiencing financial distress, especially those operating in the Outer Continental Shelf, we may have additional exposure if our partners or buyers of our previously owned properties file for bankruptcy and/or default on their share of the abandonment obligations. In 2016, the U.S. Bureau of Ocean Energy Management (BOEM) issued revised requirements for lessees operating in federal waters to secure the cost of plugging, abandoning, decommissioning and/or removing wells, platforms and pipelines at the end of production. The revised requirements eliminate previously provided waivers from requirements to post security. In early 2017, the BOEM announced a delay in the implementation of certain aspects of the rules pending further review and in June 2017, BOEM further extended the start date for implementation indefinitely. On October 16, 2020, BOEM issued a Notice of Proposed Rulemaking and Request for Comments that proposed to limit the circumstances in which it will require supplemental bonding so that it will apply more narrowly than the 2016 requirements. However, we may still be subject to significant levels of supplemental bonding. The cost for bonds or other forms of assurances can be substantial, and there is no assurance that they can be obtained in all cases.
As of December 31, 2020, our financial assurance obligations totaled $1.5 billion for closure and reclamation/restoration costs of U.S. mining sites, and $0.5 billion for plugging and abandonment obligations of our remaining oil and gas properties. A substantial portion of our financial assurance obligations are satisfied by Freeport-McMoRan Inc. (FCX) and subsidiary guarantees and financial capability demonstrations. Our ability to continue to provide guarantees and financial capability demonstrations depends on state and other regulatory requirements, our financial performance and our financial condition. Other forms of assurance, such as letters of credit and surety bonds, are costly to provide and, depending on our financial condition and market conditions, may be difficult or impossible to obtain. Failure to provide the required financial assurance could result in the closure of the affected properties.
The laws and regulations governing mine closure and remediation in a particular jurisdiction and oil and gas properties plugging and abandonment obligations are subject to review at any time and may be amended to impose additional requirements and conditions, which may cause our provisions for environmental and asset retirement obligations to be underestimated and could materially affect our financial position or results of operations. Similarly, our implementation of the Global Industry Standard for Tailings Management (the Tailings Standard) (discussed below) could require changes to our closure and reclamation plans, although it is uncertain if these changes would result in material capital or operating cost increases. In addition, climate change could lead to changes in the physical risks posed to our operations, which could result in changes in our closure and reclamation plans to address such risks. Any modifications to our closure and reclamation plans that may be required to address physical climate risks may materially increase the costs associated with implementing closure and reclamation at any or all of our active or inactive mine sites and the financial assurance obligations related to the same. Refer to Notes 1 and 12, for further discussion of our environmental and asset retirement obligations.
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Unanticipated litigation or negative developments in pending litigation or with respect to other contingencies could have a material adverse effect on our cash flows, results of operations and financial condition.
We are involved in numerous legal proceedings and subject to other contingencies that have arisen or may arise in the ordinary course of our business or are associated with environmental issues, including those described in Note 12 and in Item 3. “Legal Proceedings” involving matters such as remediation, restoration and reclamation of environmental contamination, claims of personal injury or property damage arising from contamination or from exposure to substances such as lead, arsenic, asbestos, talc, uranium and other allegedly toxic substances, disputes over water rights, and disputes with foreign governments or regulatory authorities over royalties, taxes, rights and obligations under concession or other agreements, or other matters. We are also involved periodically in other reviews, inquiries, investigations and other proceedings initiated by or involving government agencies, some of which may result in adverse judgments, settlements, fines, penalties, injunctions or other relief. From time to time we are involved in disputes over the allocation of environmental remediation obligations at “superfund” and other sites. In addition, we may be held responsible for the costs of addressing contamination at the site of current or former activities or at third party sites, or be held liable to third parties for exposure to hazardous substances should those be identified in the future. The outcome of litigation is inherently uncertain and adverse developments or outcomes can result in significant monetary damages, penalties, other sanctions or injunctive relief against us, limitations on our property rights, or regulatory interpretations that increase our operating costs. Management does not believe, based on currently available information, that the outcome of any individual legal proceeding 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.
We may be adversely impacted by increased liabilities and costs related to our defined benefit pension plans.
We sponsor defined benefit pension plans for certain current and former employees in the U.S. and a few pension plans for non-U.S. locations which provide for specified payments after retirement. The major defined benefit pension plans are funded with trust assets invested in a diversified portfolio of securities and other investments. Changes in regulatory requirements or the market value of plan assets, investment returns, interest rates and mortality rates affect the funded status of our defined benefit pension plans and may cause volatility in the net periodic benefit cost, future funding requirements of the plans and the funded status as recorded on the balance sheet. A sustained period of low or insufficient investment returns or low interest rates could require us to fund our pension plans to a greater extent than anticipated. Refer to Note 9 for further discussion.
International risks
Our international operations are subject to political, economic, social and regional risks of doing business in countries outside the U.S.
We are a U.S.-based mining company with substantial assets located outside of the U.S. Risks of conducting business in countries outside the U.S. include:
•Delays in obtaining or renewing, or the inability to obtain, maintain or renew, or the renegotiation, cancellation, revocation or forced modification of existing contracts, leases, licenses, permits or other agreements and/or approvals;
•Expropriation or nationalization of property, protectionism, or restrictions on repatriation of earnings or capital;
•Changes in the host country’s laws, regulations and policies (which may be applied retroactively), including, but not limited to, those relating to labor, taxation, royalties, duties, tariffs, divestment, imports, exports (including restrictions on the export of copper concentrates, copper and/or gold), trade regulations, immigration, currency and environmental matters (including land use and water use), which because of rising “resource nationalism” in countries around the world, may impose increasingly onerous requirements on foreign operations and investment, and/or result in fines, fees, and sanctions imposed for failure to comply with the laws and regulations of the jurisdictions in which we operate;
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•Political, social and economic instability, bribery, extortion, corruption, civil unrest, acts of war, guerrilla activities, insurrection and terrorism, certain of which may result in, among other things, an inability to access our property;
•Risk of loss associated with trespass, local artisanal or illegal mining, theft and vandalism or due to potential pandemic, epidemic and endemic health issues;
•Changes in U.S. trade, tariff, tax, immigration or other policies that may harm relations with foreign countries or result in retaliatory policies;
•Increases in training and other costs and challenges relating to requirements by governmental entities to employ the nationals of the country in which a particular operation is located;
•Foreign exchange controls, fluctuations in foreign currency exchange rates and inflation;
•Reduced protection for intellectual property rights; and
•The risk of having to submit to the jurisdiction of an international court or arbitration panel or having to enforce the judgment of an international court or arbitration panel against a sovereign nation.
Our insurance does not cover most losses caused by the above described risks. Accordingly, our exploration, development and production activities outside of the U.S. may be substantially affected by many unpredictable factors beyond our control, some of which could have a material adverse effect on our cash flows, results of operations and financial condition.
Our international operations must comply with the U.S. Foreign Corrupt Practices Act and similar anti-corruption and anti-bribery laws of the other jurisdictions in which we operate. There has been a substantial increase in the global enforcement of these laws in recent years. We operate in jurisdictions that have experienced public and private sector corruption and where significant anti-corruption enforcement activities, prosecutions, and settlements have occurred. There can be no assurance that our internal control policies and procedures will always protect us from misinterpretation of or noncompliance with applicable laws and internal policies, recklessness, fraudulent behavior, dishonesty or other inappropriate acts committed by our affiliates, employees, agents or contractors. As such, our corporate policies and processes may not prevent or detect all potential breaches of law or other governance practices. Any violation of anti-corruption or anti-bribery laws could result in significant criminal or civil fines and penalties, litigation, and loss of operating licenses or permits, and may damage our reputation, which could have a material adverse effect on our cash flows, results of operations and financial condition.
We conduct international mining operations in Indonesia, Peru and Chile and exploration activities in various foreign jurisdictions. Accordingly, in addition to the usual risks associated with conducting business in countries outside the U.S., our business may be adversely affected by political, economic, social and regional uncertainties in each of these countries. For example, we are involved in several significant tax proceedings and other tax disputes with Indonesia and Peru tax authorities (refer to Note 12 for further discussion of these matters). Other risks specific to certain countries in which we operate are discussed in more detail below.
Because our mining operations in Indonesia are a significant operating asset, our business may be adversely affected by political, economic and social uncertainties in Indonesia.
Our Indonesia mining operations include the Grasberg minerals district, one of the world’s largest copper and gold deposits. These operations are conducted by our subsidiary PT-FI pursuant to a special mining license (IUPK) issued by the Indonesia government. Refer to Note 13 for a summary of the IUPK’s key fiscal terms.
Maintaining a good working relationship with the Indonesia government is important because of the significance of our Indonesia operations to our business, and because our mining operations there are among Indonesia’s most significant business enterprises. The Grasberg minerals district has been designated by the Indonesia government as one of Indonesia’s vital national assets. Partially because of its significance to Indonesia’s economy, the environmentally sensitive area where it is located, and the number of people employed, our Indonesia operations have been the subject of political debates and criticism in the Indonesia press, and have been the target of protests and occasional violence. Improper management of our working relationship with the Indonesia government could lead to a disruption of operations and/or impact our reputation in Indonesia and in the region where we operate,
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which could adversely affect our business. In addition, PT Indonesia Asahan Aluminium (Persero) (PT Inalum, also known as MIND ID), a shareholder in PT-FI, is an Indonesia state-owned enterprise. Disputes between us and PT Inalum may result in litigation or arbitration, which could increase our expenses and distract our officers and directors from focusing their time and effort on our business and could create tensions with the Indonesia government.
The Indonesia mining industry is subject to extensive regulation within Indonesia, and there have been major developments in laws and regulations applicable to mining concession holders, some of which have conflicted with PT-FI’s contractual rights in the past. In particular, the enactment of Law No. 4 of 2009 on Coal and Mineral Mining on January 12, 2009 (the Mining Law) replaced the previous regulatory framework which allowed concession holders, including PT-FI, to conduct mining activities in Indonesia under a contract of work system. The Mining Law, which sets out the regulatory framework for the mining industry in Indonesia, only contains substantive principles and leaves many specific issues to be addressed in implementing regulations, some of which have conflicted with PT-FI’s contractual rights in the past, including, but not limited to, regulations that imposed a progressive export duty on copper concentrate, restricted exports of copper concentrate and anode slimes, increased royalty rates, and required payment of a smelter assurance bond to support a commitment to construct a new smelter in Indonesia (refer to Note 13 for further discussion of the smelter assurance bond).
Notwithstanding provisions in PT-FI’s former Contract of Work (COW) prohibiting it from doing so, the Indonesia government sought to modify PT-FI’s former COW to address provisions contained in the Mining Law and implementing regulations adopted thereunder, some of which were not required under or conflicted with PT-FI’s former COW, including, but not limited to (i) restrictions on PT-FI’s basic right to export mining products; (ii) imposition of additional export duties and higher royalty rates; (iii) imposition of excess surface water taxes (refer to Note 12); (iv) imposition of new requirement to build additional smelter capacity in Indonesia; (v) unreasonable withholding and delay in granting approval of two successive ten-year extensions of the term of the former COW; and (vi) imposition of new divestment requirements.
In early 2017, the Indonesia government issued new regulations to address exports of unrefined metals, including copper concentrate and anode slimes, and other matters related to the mining sector. PT-FI’s export license for copper concentrate is valid for one year periods, subject to review and approval by the Indonesia government every six months, depending on smelter construction progress. PT-FI’s export license expires on March 15, 2021. Refer to MD&A and Note 12 for further discussion of the administrative fine levied by the Indonesia government on PT-FI for failing to achieve physical development progress on the new smelter, and ongoing discussions with the Indonesia government regarding a deferred schedule for the completion of the new smelter project as well as other alternatives in light of the ongoing COVID-19 pandemic and volatile global economic conditions. The 2017 regulations also permit the export of anode slimes, which is necessary for PT Smelting (PT-FI’s 25-percent-owned copper smelter and refinery located in Gresik, Indonesia) to continue operating. PT Smelting’s export license for anode slimes expires on July 18, 2021. In addition to a delay in the renewal of its export license for anode slimes in 2017, PT Smelting’s operations were shut down from mid-January 2017 until early March 2017 as a result of labor disturbances. Copper concentrate sales to PT Smelting totaled over 10 percent of our consolidated revenues for each of the years ended December 31, 2020, 2019 and 2018. We cannot predict when PT-FI’s copper concentrate license and PT Smelting’s anode slimes export license may be renewed. PT-FI’s sale of concentrates could be interrupted if either of these export license is not timely renewed or if PT Smelting is unable to operate either due to other operational or financial constraints, which would adversely impact our revenues and operations.
We cannot assure you that future regulatory changes affecting the mining industry in Indonesia will not be introduced or unexpectedly repealed, or that new interpretations of existing laws and regulations will not be issued, which could adversely affect our business, financial condition and results of operations.
We will not mine all of PT-FI’s ore reserves in the Grasberg minerals district before the initial term of PT-FI’s IUPK expires in 2031 and the IUPK may not be extended through 2041 if PT-FI fails to abide by the terms and conditions of the IUPK and applicable laws and regulations.
On December 21, 2018, PT-FI was granted an IUPK to replace its former COW, enabling PT-FI to conduct operations in the Grasberg minerals district through 2041. Under the terms of the IUPK, PT-FI has been granted mining rights through 2031, with rights to extend its mining rights through 2041, subject to, among other things, PT-FI completing the construction of a new smelter in Indonesia by December 21, 2023 (an extension of which has been requested due to COVID-19 mitigation measures subject to the approval of the Indonesia government), and
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fulfilling its defined fiscal obligations to the Indonesia government. Refer to Note 13 for a summary of the IUPK’s key fiscal terms.
The IUPK also requires PT-FI to pay duties on concentrate exports of 5 percent, declining to 2.5 percent when smelter development progress exceeds 30 percent, and eliminated when smelter development progress exceeds 50 percent. Refer to MD&A and Note 12 for further discussion of the administrative fine levied by the Indonesia government on PT-FI for failing to achieve physical development progress on the new smelter, and ongoing discussions with the Indonesia government regarding a deferred schedule for the completion of the new smelter project as well as other alternatives in light of the ongoing COVID-19 pandemic and volatile global economic conditions. Engineering and front-end engineering and design for the selected process technology are ongoing. The preliminary capital cost estimate for the project approximates $3 billion, and PT-FI plans to arrange financing for the project. The economics of the new smelter will be borne by PT-FI’s shareholders according to their respective share ownership percentages. PT-FI’s ability to raise and service significant new sources of capital will be a function of macroeconomic conditions, future market prices as well as PT-FI’s operational performance, cash flow and debt position, among other factors. Financing may not be available when needed or, if available, the terms of such financing may not be favorable to PT-FI.
Our proven and probable ore reserves in Indonesia reflect estimates of minerals that can be recovered through the end of 2041, and PT-FI’s current long-term mine plan and planned operations are based on the assumption that PT-FI will abide by the terms and conditions of the IUPK and will be granted the 10-year extension from 2031 through 2041. As a result, we will not mine all of these ore reserves during the initial term of the IUPK. Prior to the end of 2031, we expect to mine 50 percent of aggregate proven and probable recoverable ore at December 31, 2020, representing 57 percent of our net equity share of recoverable copper reserves and 59 percent of our net equity share of recoverable gold reserves.
If PT-FI does not complete the construction of a new smelter in Indonesia by December 21, 2023 (an extension of which has been requested due to COVID-19 mitigation measures subject to the approval of the Indonesia government), or fulfill its defined fiscal obligations to the Indonesia government as set forth in the IUPK, the IUPK will likely not be extended from 2031 to 2041, and we would be unable to mine all of PT-FI’s ore reserves in the Grasberg minerals district, which would adversely affect our business, results of operations and financial position.
Operational risks
Our mining operations are subject to operational risks that could adversely affect our business and our underground mining operations can be particularly dangerous.
Our mines are very large in scale and, by their nature are subject to significant operational risks, some of which are outside of our control, and many of which are not covered fully, or in some cases even partially, by insurance. These operational risks, which could materially and adversely affect our business, operating results and cash flow, include earthquakes, rainstorms, floods, and other natural disasters; environmental hazards, including discharge of metals, concentrates, pollutants or hazardous chemicals; surface or underground fires; equipment failures; accidents, including in connection with mining equipment, milling equipment or conveyor systems, transportation of chemicals, explosives or other materials and in the transportation of employees and business partners to and from sites; wall failures and rock slides in our open-pit mines, and structural collapses of our underground mines or tailings impoundments; lower than expected ore grades or recovery rates; and unexpected geological formations or conditions (whether in mineral or gaseous form).
For a discussion of risks specific to our tailings management, see below “Our management of waste rock and tailings are subject to significant environmental, safety and engineering challenges and risks that could adversely affect our business.”
We are facing continued geotechnical challenges due to the older age of some of our open-pit mines and a trend toward mining deeper pits and more complex deposits. No assurances can be given that unanticipated geotechnical and hydrological conditions may or may not occur, nor whether these conditions may lead to events such as landslides and pit wall failures, in the future or that such events will be detected in advance. Geotechnical instabilities can be difficult to predict and are often affected by risks and hazards outside of our control, such as seismic activity or severe weather, which may lead to floods, mudslides, pit-wall instability, and possibly even slippage of material. During the first quarter of 2019, our El Abra operation in Chile experienced heavy rainfall and electrical storms. As a result, our operating results for 2019 were impacted by a suspension of El Abra’s crushed
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leach stacking operations for approximately 35 days. We cannot predict whether similar events will occur in the future or the extent to which any such event would affect this, or any of our other operations.
Underground mining operations can be particularly dangerous, and in May 2013, a tragic accident, which resulted in 28 fatalities and 10 injuries, occurred at PT-FI when the rock structure above the ceiling of an underground training facility collapsed. PT-FI temporarily suspended mining and processing activities at the Grasberg complex to conduct inspections and resumed open-pit mining and concentrating activities in June 2013, and underground operations in July 2013. No assurance can be given that similar events will not occur in the future.
In addition to the usual risks encountered in the mining industry, our Indonesia mining operations involve additional risks given their location in steep mountainous terrain in a remote area of Indonesia. These conditions have required us to overcome special engineering difficulties and develop extensive infrastructure facilities. The area also receives extreme rainfall, which has led to periodic floods and mudslides. Further, the mine site is also in an active seismic area and has experienced earth tremors from time to time.
We maintain insurance at amounts we believe to be reasonable to cover some of these risks and hazards; however, our insurance may not sufficiently cover losses from certain natural or operating disasters. No assurance can be given that such insurance will continue to be available, or that it will be available at economically feasible premiums, or that we will be able to obtain or maintain such insurance. We may elect to not purchase insurance for certain risks due to the high premium costs associated with insuring such risk or for various other reasons. We do not have coverage for certain environmental losses and other risks, as such coverage generally cannot be purchased at a commercially reasonable cost by us or other companies within the mining industry. The lack of, or insufficiency of, insurance coverage could adversely affect our cash flow and overall profitability.
The occurrence of one or more of these events in connection with our exploration activities and development of and production from mining operations may result in the death of, or personal injury to, our employees, other personnel or third parties, the loss of mining equipment, damage to or destruction of mineral properties or production facilities, significant repair costs, monetary losses, deferral or unanticipated fluctuations in production, extensive community disruption, loss of licenses, permits or necessary approvals to operate, loss of infrastructure and services, disruption to essential supplies or delivery of our products, environmental damage and potential legal liabilities, all of which may adversely affect our reputation, business, prospects, results of operations and financial position.
Our management of waste rock and tailings are subject to significant environmental, safety and engineering challenges and risks that could adversely affect our business.
The waste rock (including overburden) and tailings produced in our mining operations represent our largest volume of waste material. Managing the volume of waste rock and tailings presents significant environmental, safety and engineering challenges and risks primarily relating to structural stability, geochemistry, water quality and dust generation. Management of this waste is regulated in the jurisdictions where we operate and our programs are designed to comply with applicable national, state and local laws, permits and approved environmental impact studies.
We maintain large leach pads and tailings impoundments containing viscous material. Tailings impoundments include large embankments that must be engineered, constructed and monitored to ensure structural stability and avoid leakages or structural collapse. Our tailings impoundments in arid areas must have effective programs to suppress fugitive dust emissions, and we must effectively monitor and treat acid rock drainage at all of our operations. In Indonesia, we use a river transport system for tailings management, which presents other risks discussed in more detail below under Environmental and social risks - “Our Indonesia mining operations create difficult and costly environmental challenges, and future changes in environmental laws, or unanticipated environmental impacts from those operations, could require us to incur increased costs.”
Affiliates of our company currently operate 17 tailings storage facilities, 15 in the U.S. and 2 in Peru; and manage 56 tailings storage facilities in the U.S. that are inactive or closed (approximately three-fourths of the inactive facilities have been closed). Our inventory of tailings storage facilities comprises 12 active and 51 inactive or closed facilities with an upstream design and 5 active and 5 inactive with a centerline design. In 2020, we produced approximately 259 million metric tons of tailings. The failure of tailings and other embankments at any of our mining operations could cause severe, and in some cases catastrophic, property and environmental damage and loss of life, as well as adverse effects on our business and reputation. Many of our tailings storage facilities are located in areas where a failure has the potential to impact individual dwellings and a limited number of impoundments are in areas where a
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failure has the potential to impact nearby communities or mining infrastructure. As a result, our programs take into account the significant consequences resulting from a potential failure, and we apply substantial financial resources and internal and external technical resources to pursue the safe management of all those facilities. Our tailings management and stewardship program, which involves qualified external Engineers of Record and periodic oversight by independent tailings Technical Review Boards and our Tailings Stewardship Team, complies with the tailings governance framework on preventing catastrophic failure of tailings storage facilities adopted in December 2016 by the International Council on Mining and Metals (ICMM), an industry group of which we are a founding member, and required to be implemented by ICMM members. We continue to enhance our existing practices and work with ICMM on additional initiatives to strengthen the design, operation and closure of tailings storage facilities in an effort to reduce the risk of severe or catastrophic failure of those facilities. However, no assurance can be given that these events will not occur in the future.
The importance of careful design, management and monitoring of large impoundments has been emphasized in recent years by large scale tailings dam failures at unaffiliated mines, which resulted in numerous fatalities and caused extensive property and environmental damage. As a result of failures at unaffiliated mine