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FREEPORT-MCMORAN INC - Quarter Report: 2020 March (Form 10-Q)




United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark one)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 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
fcx_logoa01a01a03a29.jpg
Freeport-McMoRan Inc.
(Exact name of registrant as specified in its charter)
Delaware
 
74-2480931
(State or other jurisdiction of
 
(I.R.S. Employer Identification No.)
incorporation or organization)
 
 
333 North Central Avenue

 
 

Phoenix
 
AZ
 
 
 
85004-2189
(Address of principal executive offices)
 
 
 
(Zip Code)
(602) 366-8100
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.10 per share
FCX
The New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑ Yes  ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☑ Yes  ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).  ☐ Yes  ☑ No 
On April 30, 2020, there were issued and outstanding 1,451,970,774 shares of the registrant’s common stock, par value $0.10 per share.


Freeport-McMoRan Inc.

TABLE OF CONTENTS

 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


2
Table of Contents             

Part I.
FINANCIAL INFORMATION

Item 1.
Financial Statements.

Freeport-McMoRan Inc.
CONSOLIDATED BALANCE SHEETS (Unaudited)

 
March 31,
2020
 
December 31,
2019
 
(In millions)
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
1,602

 
$
2,020

Trade accounts receivable
515

 
741

Income and other tax receivables
591

 
426

Inventories:
 
 
 
Materials and supplies, net
1,614

 
1,649

Mill and leach stockpiles
1,106

 
1,143

Product
1,134

 
1,281

Other current assets
795

 
655

Total current assets
7,357

 
7,915

Property, plant, equipment and mine development costs, net
29,899

 
29,584

Long-term mill and leach stockpiles
1,272

 
1,425

Other assets
1,691

 
1,885

Total assets
$
40,219

 
$
40,809

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable and accrued liabilities
$
2,465

 
$
2,576

Current portion of environmental and asset retirement obligations
305

 
436

Current portion of debt
245

 
5

Accrued income taxes
128

 
119

Dividends payable
—

 
73

Total current liabilities
3,143

 
3,209

Long-term debt, less current portion
9,829

 
9,821

Deferred income taxes
4,087

 
4,210

Environmental and asset retirement obligations, less current portion
3,758

 
3,630

Other liabilities
2,439

 
2,491

Total liabilities
23,256

 
23,361

 
 
 
 
Equity:
 
 
 
Stockholders’ equity:
 
 
 
Common stock
158

 
158

Capital in excess of par value
25,875

 
25,830

Accumulated deficit
(12,771
)
 
(12,280
)
Accumulated other comprehensive loss
(668
)
 
(676
)
Common stock held in treasury
(3,739
)
 
(3,734
)
Total stockholders’ equity
8,855

 
9,298

Noncontrolling interests
8,108

 
8,150

Total equity
16,963

 
17,448

Total liabilities and equity
$
40,219

 
$
40,809


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

3
Table of Contents             

Freeport-McMoRan Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

 
Three Months Ended
 
 
March 31,
 
 
2020
 
2019
 
 
(In millions, except per share amounts)
 
Revenues
$
2,798

 
$
3,792

 
Cost of sales:
 
 
 
 
Production and delivery
2,545

 
2,919

 
Depreciation, depletion and amortization
341

 
347

 
Metals inventory adjustments
222

 
57

 
Total cost of sales
3,108

 
3,323

 
Selling, general and administrative expenses
110

 
112

 
Mining exploration and research expenses
16

 
27

 
Environmental obligations and shutdown costs
26

 
42

 
Net loss (gain) on sales of assets
11

 
(33
)
 
Total costs and expenses
3,271

 
3,471

 
Operating (loss) income
(473
)
 
321

 
Interest expense, net
(127
)
 
(146
)
 
Net loss on early extinguishment of debt
(32
)
 
(6
)
 
Other income, net
20

 
14

 
(Loss) income from continuing operations before income taxes and equity in affiliated companies’ net earnings (losses)
(612
)
 
183

 
Benefit from (provision for) income taxes
60

 
(105
)
 
Equity in affiliated companies’ net earnings (losses)
3

 
(3
)
 
Net (loss) income from continuing operations
(549
)
 
75

 
Net gain from discontinued operations
—

 
1

 
Net (loss) income
(549
)
 
76

 
Net loss (income) attributable to noncontrolling interests
58

 
(45
)
 
Net (loss) income attributable to common stockholders
$
(491
)
 
$
31

 
 
 
 
 
 
Basic and diluted net (loss) income per share attributable to common stockholders:
 
 
 
 
Continuing operations
$
(0.34
)
 
$
0.02

 
Discontinued operations
—

 
—

 
 
$
(0.34
)
 
$
0.02

 
 
 
 
 
 
Weighted-average common shares outstanding:
 
 
 
 
Basic
1,452

 
1,451

 
Diluted
1,452

 
1,457

 
 
 
 
 
 
Dividends declared per share of common stock
$
—

 
$
0.05

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


4
Table of Contents             

Freeport-McMoRan Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Unaudited)

 
Three Months Ended
 
 
March 31,
 
 
2020
 
2019
 
 
(In millions)
Net (loss) income
$
(549
)
 
$
76

 
 
 
 
 
 
Other comprehensive income, net of taxes:
 
 
 
 
Defined benefit plans:
 
 
 
 
Amortization of unrecognized amounts included in net periodic benefit costs
12

 
11

 
Foreign exchange losses
(5
)
 
—

 
Other comprehensive income
7

 
11

 
 
 
 
 
 
Total comprehensive (loss) income
(542
)
 
87

 
Total comprehensive loss (income) attributable to noncontrolling interests
59

 
(45
)
 
Total comprehensive (loss) income attributable to common stockholders
$
(483
)
 
$
42

 

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




5
Table of Contents             

Freeport-McMoRan Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
 
Three Months Ended
 
 
March 31,
 
 
2020
 
2019
 
 
(In millions)
 
Cash flow from operating activities:
 
 
 
 
Net (loss) income
$
(549
)
 
$
76

 
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
 
 
 
 
Depreciation, depletion and amortization
341

 
347

 
Metals inventory adjustments
222

 
57

 
Net loss (gain) on sales of assets
11

 
(33
)
 
Stock-based compensation
27

 
29

 
Net charges for environmental and asset retirement obligations, including accretion
60

 
64

 
Payments for environmental and asset retirement obligations
(71
)
 
(46
)
 
Net charges for defined pension and postretirement plans
18

 
26

 
Pension plan contributions
(26
)
 
(16
)
 
Net loss on early extinguishment of debt
32

 
6

 
Deferred income taxes
(118
)
 
33

 
Charges for Cerro Verde royalty dispute
9

 
15

 
Payments for Cerro Verde royalty dispute
(57
)
 
(10
)
 
Other, net
(56
)
 
42

 
Changes in working capital and other:
 
 
 
 
Accounts receivable
205

 
19

 
Inventories
154

 
192

 
Other current assets
(89
)
 
42

 
Accounts payable and accrued liabilities
(149
)
 
(247
)
 
Accrued income taxes and timing of other tax payments
(2
)
 
(62
)
 
Net cash (used in) provided by operating activities
(38
)
 
534

 
 
 
 
 
 
Cash flow from investing activities:
 
 
 
 
Capital expenditures:
 
 
 
 
North America copper mines
(184
)
 
(210
)
 
South America
(74
)
 
(61
)
 
Indonesia
(326
)
 
(319
)
 
Molybdenum mines
(7
)
 
(4
)
 
Other
(19
)
 
(28
)
 
Proceeds from sales of assets
66

 
84

 
Other, net
(2
)
 
(8
)
 
Net cash used in investing activities
(546
)
 
(546
)
 
 
 
 
 
 
Cash flow from financing activities:
 
 
 
 
Proceeds from debt
1,478

 
114

 
Repayments of debt
(1,242
)
 
(1,356
)
 
Cash dividends and distributions paid:
 
 
 
 
Common stock
(73
)
 
(73
)
 
Noncontrolling interests
—

 
(9
)
 
Contributions from noncontrolling interests
32

 
—

 
Stock-based awards net payments
(4
)
 
(7
)
 
Debt financing costs and other, net
(18
)
 
—

 
Net cash provided by (used in) financing activities
173

 
(1,331
)
 
 
 
 
 
 
Net decrease in cash, cash equivalents, restricted cash and restricted cash equivalents
(411
)
 
(1,343
)
 
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of year
2,278

 
4,455

 
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period
$
1,867

 
$
3,112

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

6
Table of Contents             

Freeport-McMoRan Inc.
CONSOLIDATED STATEMENTS OF EQUITY (Unaudited)
THREE MONTHS ENDED MARCH 31
 
Stockholders’ Equity
 
 
 
 
 
Common Stock
 
 
 
Accum-ulated Deficit
 
Accumu-
lated
Other Compre-
hensive
Loss
 
Common Stock
Held in Treasury
 
Total
Stock-holders’ Equity
 
 
 
 
 
Number
of
Shares
 
At Par
Value
 
Capital in
Excess of
Par Value
 
 
 
Number
of
Shares
 
At
Cost
 
 
Non-
controlling
Interests
 
Total
Equity
 
 
 
 
 
 
 
 
 
 
 
(In millions)
Balance at December 31, 2019
1,582

 
$
158

 
$
25,830

 
$
(12,280
)
 
$
(676
)
 
131

 
$
(3,734
)
 
$
9,298

 
$
8,150

 
$
17,448

Exercised and issued stock-based awards
1

 
—

 
1

 
—

 
—

 
—

 
—

 
1

 
—

 
1

Stock-based compensation, including the tender of shares
—

 
—

 
29

 
—

 
—

 
—

 
(5
)
 
24

 
—

 
24

Contributions from noncontrolling interests
—

 
—

 
15

 
—

 
—

 
—

 
—

 
15

 
17

 
32

Net loss attributable to common stockholders
—

 
—

 
—

 
(491
)
 
—

 
—

 
—

 
(491
)
 
—

 
(491
)
Net loss attributable to noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(58
)
 
(58
)
Other comprehensive income (loss)
—

 
—

 
—

 
—

 
8

 
—

 
—

 
8

 
(1
)
 
7

Balance at March 31, 2020
1,583

 
$
158

 
$
25,875

 
$
(12,771
)
 
$
(668
)
 
131

 
$
(3,739
)
 
$
8,855

 
$
8,108

 
$
16,963

 
Stockholders’ Equity
 
 
 
 
 
Common Stock
 
 
 
Accum-ulated Deficit
 
Accumu-
lated
Other Compre-
hensive
Loss
 
Common Stock
Held in Treasury
 
Total
Stock-holders’ Equity
 
 
 
 
 
Number
of
Shares
 
At Par
Value
 
Capital in
Excess of
Par Value
 
 
 
Number
of
Shares
 
At
Cost
 
 
Non-
controlling
Interests
 
Total
Equity
 
 
 
 
 
 
 
 
 
 
 
(In millions)
Balance at December 31, 2018
1,579

 
$
158

 
$
26,013

 
$
(12,041
)
 
$
(605
)
 
130

 
$
(3,727
)
 
$
9,798

 
$
8,094

 
$
17,892

Exercised and issued stock-based awards
3

 
—

 
1

 
—

 
—

 
—

 
—

 
1

 
—

 
1

Stock-based compensation, including the tender of shares
—

 
—

 
23

 
—

 
—

 
1

 
(7
)
 
16

 
—

 
16

Dividends
—

 
—

 
(73
)
 
—

 
—

 
—

 
—

 
(73
)
 
(70
)
 
(143
)
Changes in noncontrolling interests
—

 
—

 
(1
)
 
—

 
—

 
—

 
—

 
(1
)
 
(11
)
 
(12
)
Net income attributable to common stockholders
—

 
—

 
—

 
31

 
—

 
—

 
—

 
31

 
—

 
31

Net income attributable to noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
45

 
45

Other comprehensive income
—

 
—

 
—

 
—

 
11

 
—

 
—

 
11

 
—

 
11

Balance at March 31, 2019
1,582

 
$
158

 
$
25,963

 
$
(12,010
)
 
$
(594
)
 
131

 
$
(3,734
)
 
$
9,783

 
$
8,058

 
$
17,841



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


7
Table of Contents             

Freeport-McMoRan Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE 1. GENERAL INFORMATION

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all information and disclosures required by generally accepted accounting principles (GAAP) in the United States (U.S.). Therefore, this information should be read in conjunction with Freeport-McMoRan Inc.’s (FCX) consolidated financial statements and notes contained in its annual report on Form 10-K for the year ended December 31, 2019 (2019 Form 10-K). The information furnished herein reflects all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim periods reported. All such adjustments are, in the opinion of management, of a normal recurring nature. Operating results for the three-month period ended March 31, 2020, are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.

Operations Update. Because of the significant negative impacts of the COVID-19 pandemic on the global economy, including the recent decline in copper and molybdenum prices, in April 2020 FCX revised its operating plans. FCX has assessed its near-term operating plans with a focus on maximizing cash flow and protecting liquidity in a weak and uncertain economic environment and to preserve asset values for anticipated improved copper prices as economic conditions recover. A series of actions are being implemented to significantly reduce costs and capital spending and adjust mine plans and corresponding mining and milling rates to maximize cash flow at lower prices. The plans also incorporate the impact of lower input costs, principally energy and foreign exchange rates, and higher gold prices.

In mid-March 2020, the Peruvian government issued a Supreme Decree and declaration of a National Emergency in its efforts to contain the outbreak of COVID-19, and subsequently extended this order through May 10, 2020. To comply with the government’s requirements, Cerro Verde temporarily transitioned to a care and maintenance status and has adjusted its operations to prioritize critical activities. Cerro Verde has also completed construction of temporary onsite facilities and enhanced protocols to enable critical operations to be maintained in compliance with the Peruvian government order. During April 2020, Cerro Verde operated at an average of approximately one-third of planned rates. Beginning in late April 2020, operating rates increased to over 50 percent of capacity. In early May, the Peruvian government updated its State of Emergency to allow major mining operations to gradually increase activities. Cerro Verde is in discussions with the Peruvian government to clarify the requirements for gradual resumption of normal operations. The revised operating plans reflect the continuation of limited operations at Cerro Verde during second-quarter 2020 and increased mining and milling rates in the second half of 2020. Idle facility costs associated with this temporary shutdown totaled $22 million in first-quarter 2020. Additionally, in April 2020, FCX suspended operations at its Chino copper mine in New Mexico to address COVID-19 concerns. The revised operating plans take into account the impact of the currently suspended operations at the Chino mine. FCX is currently assessing options and future timing of restart of the Chino mine. FCX’s revised operating plans and estimates reflect current assumptions, and FCX will continue to closely monitor health and market conditions and make further adjustments to its mine plans as required.

In connection with the decline in copper and molybdenum prices, FCX evaluated its long-lived assets, other than indefinite-lived intangible assets, for impairment as of March 31 2020. Indefinite-lived intangible assets are evaluated annually as of December 31, and when it is more likely than not that the intangible asset is impaired. FCX’s long-lived asset impairment evaluations required FCX to make several assumptions in determining estimates of future cash flows of its individual mining operations, including: near- and long-term metal price assumptions; estimates of commodity-based and other input costs; proven and probable mineral reserves estimates, including the timing and costs to develop and produce the reserves; and the value of mineral resources not yet included in proven and probable mineral reserves. Projected long-term average metal prices represented the most significant assumption used in the cash flow estimates.

FCX’s evaluation of long-lived assets (other than indefinite-lived intangible assets) did not result in the recognition of significant impairments as of March 31, 2020. Should copper and molybdenum prices decline further in future periods, FCX will continue to evaluate its long-lived assets for impairment. Refer to Note 3 for adjustments to reduce inventories to their net realizable values.



8
Table of Contents             

NOTE 2. EARNINGS PER SHARE

FCX calculates its basic net (loss) income per share of common stock under the two-class method and calculates its diluted net (loss) income per share of common stock using the more dilutive of the two-class method or the treasury-stock method. Basic net (loss) income per share of common stock was computed by dividing net (loss) income attributable to common stockholders (after deducting accumulated dividends and undistributed earnings to participating securities) by the weighted-average shares of common stock outstanding during the period. Diluted net (loss) income per share of common stock was calculated by including the basic weighted-average shares of common stock outstanding adjusted for the effects of all potential dilutive shares of common stock, unless their effect would be anti-dilutive.

Reconciliations of net (loss) income and weighted-average shares of common stock outstanding for purposes of calculating basic and diluted net (loss) income per share follow (in millions, except per share amounts):
 
Three Months Ended
 
 
March 31,
 
 
2020
 
2019
 
Net (loss) income from continuing operations
$
(549
)
 
$
75

 
Net loss (income) from continuing operations attributable to noncontrolling interests
58

 
(45
)
 
Undistributed earnings allocated to participating securities
(3
)
 
(3
)
 
Net (loss) income from continuing operations attributable to common stockholders
(494
)
 
27

 
 
 
 
 
 
Net income from discontinued operations attributable to common stockholders
—

 
1

 
 
 
 
 
 
 
 
 
 
 
Net (loss) income attributable to common stockholders
$
(494
)
 
$
28

 
 
 
 
 
 
Basic weighted-average shares of common stock outstanding
1,452

 
1,451

 
Add shares issuable upon exercise or vesting of dilutive stock options and restricted stock units (RSUs)a
—

 
6

 
Diluted weighted-average shares of common stock outstanding
1,452

 
1,457

 
 
 
 
 
 
Basic and diluted net (loss) income per share attributable to common stockholders:
 
 
 
 
Continuing operations
$
(0.34
)
 
$
0.02

 
Discontinued operations
—

 
—

 
 
$
(0.34
)
 
$
0.02

 

a.
Excludes approximately 10 million shares of common stock in first-quarter 2020 and 3 million in first-quarter 2019 associated with outstanding stock options with exercise prices less than the average market price of FCX’s common stock and RSUs that were anti-dilutive.

Outstanding stock options with exercise prices greater than the average market price of FCX’s common stock during the period are excluded from the computation of diluted net (loss) income per share of common stock. Stock options for 40 million shares of common stock were excluded in first-quarter 2020 and 39 million shares in first-quarter 2019.


9
Table of Contents             

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

The components of inventories follow (in millions):
 
March 31,
2020
 
December 31, 2019
 
Current inventories:
 
 
 
 
Total materials and supplies, neta
$
1,614

 
$
1,649

 
 
 
 
 
 
Mill stockpiles
$
158

 
$
220

 
Leach stockpiles
948

 
923

 
Total current mill and leach stockpiles
$
1,106

 
$
1,143

 
 
 
 
 
 
Raw materials (primarily concentrate)
$
209

 
$
318

 
Work-in-process
106

 
124

 
Finished goods
819

 
839

 
Total product
$
1,134

 
$
1,281

 
 
 
 
 
 
Long-term inventories:
 
 
 
 
Mill stockpiles
$
193

 
$
181

 
Leach stockpiles
1,079

 
1,244

 
Total long-term mill and leach stockpilesb
$
1,272

 
$
1,425

 

a.
Materials and supplies inventory was net of obsolescence reserves totaling $25 million at March 31, 2020, and $24 million at December 31, 2019.
b.
Estimated metals in stockpiles not expected to be recovered within the next 12 months.

FCX recorded charges to adjust metals inventory carrying values to net realizable values because of lower market prices totaling $222 million in first-quarter 2020, associated with copper inventories ($205 million) and molybdenum inventories ($17 million); and $57 million in first-quarter 2019, associated with cobalt inventories (refer to Note 9 for metals inventory adjustments by business segment).

NOTE 4. INCOME TAXES

Geographic sources of FCX’s benefit from (provision for) income taxes follow (in millions):
 
Three Months Ended
 
 
March 31,
 
 
2020
 
2019
 
U.S. operations
$
5

 
$
2

 
International operations
55

 
(107
)
 
Total
$
60

 
$
(105
)
 

FCX’s consolidated effective income tax rate was 10 percent for first-quarter 2020 and 57 percent for first-quarter 2019. Because FCX's U.S. jurisdiction generated net losses in first-quarter 2020 and 2019 that will not result in a realized tax benefit, applicable accounting rules require FCX to adjust its estimated annual effective tax rate to exclude the impact of U.S. net losses. Variations in the relative proportions of jurisdictional income result in fluctuations to FCX’s consolidated effective income tax rate.

In connection with the negative impacts of the COVID-19 pandemic on the global economy, governments throughout the world are announcing measures that are intended to provide tax and other financial relief. Such measures include the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), signed into law by President Trump on March 27, 2020. None of these measures, including the CARES Act, resulted in material impacts to FCX’s March 31, 2020, provision for income taxes.  Some of these measures will provide FCX with the opportunity to accelerate the timing of cash collections, primarily those associated with the U.S. alternative minimum tax credit refunds. FCX continues to evaluate income tax accounting considerations of additional measures as they develop, including any impact on the Company’s measurement of existing deferred tax assets and deferred tax liabilities. FCX will recognize any impact from COVID-19 related changes to tax laws in the period in which the new legislation is enacted.

10
Table of Contents             

NOTE 5. DEBT AND EQUITY

The components of debt follow (in millions):
 
 
March 31,
2020
 
December 31, 2019
Senior notes and debentures:
 
 
 
 
Issued by FCX
 
$
8,773

 
$
8,602

Issued by Freeport Minerals Corporation (FMC)
 
357

 
357

Cerro Verde credit facility
 
826

 
826

Other
 
118

 
41

Total debt
 
10,074

 
9,826

Less current portion of debt
 
(245
)
 
(5
)
Long-term debt
 
$
9,829

 
$
9,821



Revolving Credit Facility. At March 31, 2020, FCX had no borrowings outstanding and $13 million in letters of credit issued under its revolving credit facility, resulting in availability of approximately $3.5 billion, of which approximately $1.5 billion could be used for additional letters of credit. Availability under FCX’s revolving credit facility consists of $3.28 billion maturing April 2024 and $220 million maturing April 2023. At March 31, 2020, FCX was in compliance with its revolving credit facility covenants.

Senior Notes.  On March 4, 2020, FCX completed the sale of $700 million of 4.125% Senior Notes due 2028 and $600 million of 4.25% Senior Notes due 2030 for total net proceeds of $1.29 billion. Interest on these senior notes is payable semiannually on March 1 and September 1 of each year. These senior notes rank equally with FCX’s other existing and future unsecured and unsubordinated indebtedness. FCX used a portion of the net proceeds from this offering to purchase a portion of its 4.00% Senior Notes due 2021 and its 3.55% Senior Notes due 2022 and the payment of accrued and unpaid interest, premiums, fees and expenses in connection with these transactions. As a result of these transactions, FCX recorded a loss on early extinguishment of debt totaling $32 million in first-quarter 2020 as follows (in millions):
 
 
 
 
 
 
 
 
 
 
 
Principal Amount
 
Net Adjustments
 
Book Value
 
Tender Value
 
Loss
FCX 4.00% Senior Notes due 2021
$
40

 
$
—

 
$
40

 
$
42

 
$
2

FCX 3.55% Senior Notes due 2022
1,075

 
5

 
1,070

 
1,100

 
30

 
$
1,115

 
$
5

 
$
1,110

 
$
1,142

 
$
32



On April 3, 2020, FCX used the remaining net proceeds from the offering to fund the make-whole redemption of all of its remaining 4.00% Senior Notes due 2021 (book value of $154 million as of March 31, 2020) and the payment of accrued and unpaid interest, premiums, fees and expenses in connection with the transaction. As a result of the redemption, FCX expects to record a loss on early extinguishment of debt of $9 million in second-quarter 2020.

Interest Expense, Net. Consolidated interest costs (before capitalization) totaled $171 million in first-quarter 2020 and $178 million in first-quarter 2019. Capitalized interest added to property, plant, equipment and mine development costs, net, totaled $44 million in first-quarter 2020 and $32 million in first-quarter 2019.

Common Stock.  In March 2020, in response to the COVID-19 pandemic and resulting global economic uncertainties, the FCX Board of Directors (the Board) suspended FCX’s quarterly cash dividend of $0.05 per share previously planned for May 1, 2020. Under current market and economic conditions, the Board does not expect to declare common stock dividends during 2020. The declaration and payment of future dividends is at the discretion of the Board and will be assessed on an ongoing basis, taking into account FCX’s financial results, cash requirements, future prospects, global economic conditions and other factors deemed relevant by the Board.

11
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NOTE 6. FINANCIAL INSTRUMENTS

FCX does not purchase, hold or sell derivative financial instruments unless there is an existing asset or obligation, or it anticipates a future activity that is likely to occur and will result in exposure to market risks, which FCX intends to offset or mitigate. FCX does not enter into any derivative financial instruments for speculative purposes, but has entered into derivative financial instruments in limited instances to achieve specific objectives. These objectives principally relate to managing risks associated with commodity price changes, foreign currency exchange rates and interest rates.

Commodity Contracts.  From time to time, FCX has entered into derivative contracts to hedge the market risk associated with fluctuations in the prices of commodities it purchases and sells. Derivative financial instruments used by FCX to manage its risks do not contain credit risk-related contingent provisions.

In April 2020, FCX entered into forward sales contracts for 150 million pounds of copper for settlement in May and June of 2020. The forward sales provide for fixed pricing of $2.34 per pound of copper on approximately 60 percent of North America's projected sales volumes for May and June 2020.

A discussion of FCX’s other derivative contracts and programs follow.

Derivatives Designated as Hedging Instruments – Fair Value Hedges
Copper Futures and Swap Contracts. Some of FCX’s U.S. copper rod customers request a fixed market price instead of the Commodity Exchange Inc. (COMEX) average copper price in the month of shipment. FCX hedges this price exposure in a manner that allows it to receive the COMEX average price in the month of shipment while the customers pay the fixed price they requested. FCX accomplishes this by entering into copper futures or swap contracts. Hedging gains or losses from these copper futures and swap contracts are recorded in revenues. FCX did not have any significant gains or losses resulting from hedge ineffectiveness during the three-month periods ended March 31, 2020 and 2019. At March 31, 2020, FCX held copper futures and swap contracts that qualified for hedge accounting for 84 million pounds at an average contract price of $2.56 per pound, with maturities through September 2021.

A summary of (losses) gains recognized in revenues for derivative financial instruments related to commodity contracts that are designated and qualify as fair value hedge transactions, including the unrealized gains (losses) on the related hedged item follows (in millions):
 
Three Months Ended
 
March 31,
 
2020
 
2019
Copper futures and swap contracts:
 
 
 
Unrealized (losses) gains:
 
 
 
Derivative financial instruments
$
(33
)
 
$
18

Hedged item – firm sales commitments
33

 
(18
)
 
 
 
 
Realized (losses) gains:
 
 
 
Matured derivative financial instruments
(9
)
 
2



Derivatives Not Designated as Hedging Instruments
Embedded Derivatives. Certain FCX concentrate, copper cathode and gold sales contracts provide for provisional pricing primarily based on the London Metal Exchange (LME) copper price or the COMEX copper price and the London Bullion Market Association (LBMA) gold price at the time of shipment as specified in the contract. FCX receives market prices based on prices in the specified future month, which results in price fluctuations recorded in revenues until the date of settlement. FCX records revenues and invoices customers at the time of shipment based on then-current LME or COMEX copper prices and the LBMA gold prices as specified in the contracts, which results in an embedded derivative (i.e., a pricing mechanism that is finalized after the time of delivery) that is required to be bifurcated from the host contract. The host contract is the sale of the metals contained in the concentrate or cathode at the then-current LME or COMEX copper price, and the LBMA gold price. FCX applies the normal purchases and normal sales scope exception in accordance with derivatives and hedge accounting guidance to the host contract in its concentrate or cathode sales agreements since these contracts do not allow for net settlement and always result in physical delivery. The embedded derivative does not qualify for hedge accounting and is adjusted to fair value through earnings each period, using the period-end LME or COMEX copper forward prices

12
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and the adjusted LBMA gold prices, until the date of final pricing. Similarly, FCX purchases copper under contracts that provide for provisional pricing. Mark-to-market price fluctuations from these embedded derivatives are recorded through the settlement date and are reflected in revenues for sales contracts and in inventory for purchase contracts.

A summary of FCX’s embedded derivatives at March 31, 2020, follows:
 
Open Positions
 
Average Price
Per Unit
 
Maturities Through
 
 
Contract
 
Market
 
Embedded derivatives in provisional sales contracts:
 
 
 
 
 
 
 
Copper (millions of pounds)
333

 
$
2.59

 
$
2.24

 
July 2020
Gold (thousands of ounces)
92

 
1,601

 
1,614

 
May 2020
Embedded derivatives in provisional purchase contracts:
 
 
 
 
 
 
 
Copper (millions of pounds)
87

 
2.58

 
2.24

 
July 2020


Copper Forward Contracts. Atlantic Copper, FCX’s wholly owned smelting and refining unit in Spain, enters into copper forward contracts designed to hedge its copper price risk whenever its physical purchases and sales pricing periods do not match. These economic hedge transactions are intended to hedge against changes in copper prices, with the mark-to-market hedging gains or losses recorded in cost of sales. At March 31, 2020, Atlantic Copper held net copper forward purchase contracts for 34 million pounds at an average contract price of $2.35 per pound, with maturities through May 2020.

Summary of (Losses) Gains. A summary of the realized and unrealized (losses) gains recognized in operating income for commodity contracts that do not qualify as hedge transactions, including embedded derivatives, follows (in millions):
 
 
Three Months Ended
 
 
March 31,
 
 
2020
 
2019
Embedded derivatives in provisional sales contracts:a
 
 
 
 
Copper
 
$
(238
)
 
$
122

Gold and other metals
 
7

 
(2
)
Copper forward contractsb
 
24

 
1

a.
Amounts recorded in revenues. 
b.
Amounts recorded in cost of sales as production and delivery costs.

Unsettled Derivative Financial Instruments
A summary of the fair values of unsettled commodity derivative financial instruments follows (in millions):
 
 
March 31,
2020
 
December 31, 2019
Commodity Derivative Assets:
 
 
 
 
Derivatives designated as hedging instruments:
 
 
 
 
Copper futures and swap contracts
 
$
4

 
$
6

Derivatives not designated as hedging instruments:
 
 
 
 
Embedded derivatives in provisional
 
 
 
 
sales/purchase contracts
 
34

 
68

Total derivative assets
 
$
38

 
$
74

 
 
 
 
 
Commodity Derivative Liabilities:
 
 
 
 
Derivatives designated as hedging instruments:
 
 
 
 
Copper futures and swap contracts
 
$
28

 
$
—

Derivatives not designated as hedging instruments:
 
 
 
 
Embedded derivatives in provisional
 
 
 
 
sales/purchase contracts
 
119

 
20

Copper forward contracts
 
—

 
1

Total derivative liabilities
 
$
147

 
$
21




13
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FCX’s commodity contracts have netting arrangements with counterparties with which the right of offset exists, and it is FCX’s policy to generally offset balances by contract on its balance sheet. FCX’s embedded derivatives on provisional sales/purchase contracts are netted with the corresponding outstanding receivable/payable balances.
A summary of these unsettled commodity contracts that are offset in the balance sheets follows (in millions):
 
 
Assets
 
Liabilities
 
 
March 31,
2020
 
December 31, 2019
 
March 31,
2020
 
December 31, 2019
 
 
 
 
 
 
 
 
 
Gross amounts recognized:
 
 
 
 
 
 
 
 
Embedded derivatives in provisional
 
 
 
 
 
 
 
 
sales/purchase contracts
 
$
34

 
$
68

 
$
119

 
$
20

Copper derivatives
 
4

 
6

 
28

 
1

 
 
38

 
74

 
147

 
21

 
 
 
 
 
 
 
 
 
Less gross amounts of offset:
 
 
 
 
 
 
 
 
Embedded derivatives in provisional
 
 
 
 
 
 
 
 
sales/purchase contracts
 
1

 
—

 
1

 
—

Copper derivatives
 
1

 
—

 
1

 
—

 
 
2

 
—

 
2

 
—

 
 
 
 
 
 
 
 
 
Net amounts presented in balance sheet:
 
 
 
 
 
 
 
 
Embedded derivatives in provisional
 
 
 
 
 
 
 
 
sales/purchase contracts
 
33

 
68

 
118

 
20

Copper derivatives
 
3

 
6

 
27

 
1

 
 
$
36

 
$
74

 
$
145

 
$
21

 
 
 
 
 
 
 
 
 
Balance sheet classification:
 
 
 
 
 
 
 
 
Trade accounts receivable
 
$
13

 
$
66

 
$
54

 
$
—

Other current assets
 
3

 
6

 
—

 
—

Accounts payable and accrued liabilities
 
20

 
2

 
91

 
21

 
 
$
36

 
$
74

 
$
145

 
$
21



Credit Risk.  FCX is exposed to credit loss when financial institutions with which it has entered into derivative transactions (commodity, foreign exchange and interest rate swaps) are unable to pay. To minimize the risk of such losses, FCX uses counterparties that meet certain credit requirements and periodically reviews the creditworthiness of these counterparties. FCX does not anticipate that any of the counterparties it deals with will default on their obligations. As of March 31, 2020, the maximum amount of credit exposure associated with derivative transactions was $34 million.

Other Financial Instruments.  Other financial instruments include cash and cash equivalents, restricted cash, restricted cash equivalents, accounts receivable, investment securities, legally restricted funds, accounts payable and accrued liabilities, dividends payable and long-term debt. The carrying value for cash and cash equivalents (which included time deposits of $0.4 billion at March 31, 2020, and $1.3 billion at December 31, 2019), restricted cash, restricted cash equivalents, accounts receivable, accounts payable and accrued liabilities, and dividends payable approximates fair value because of their short-term nature and generally negligible credit losses (refer to Note 7 for the fair values of investment securities, legally restricted funds and long-term debt).

In addition, as of March 31, 2020, FCX has contingent consideration assets related to the sales of certain oil and gas properties (refer to Note 7 for the related fair values).

Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents. The following table provides a reconciliation of total cash, cash equivalents, restricted cash and restricted cash equivalents presented in the consolidated statements of cash flows (in millions):
 
 
March 31,
2020
 
December 31, 2019
Balance sheet components:
 
 
 
 
Cash and cash equivalents
 
$
1,602

 
$
2,020

Restricted cash and restricted cash equivalents included in:
 
 
 
 
Other current assets
 
113

 
100

Other assets
 
152

 
158

Total cash, cash equivalents, restricted cash and restricted cash equivalents presented in the consolidated statements of cash flows
 
$
1,867

 
$
2,278



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NOTE 7. FAIR VALUE MEASUREMENT

Fair value accounting guidance includes a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). FCX did not have any significant transfers in or out of Level 3 during first-quarter 2020.

FCX’s financial instruments are recorded on the consolidated balance sheets at fair value except for contingent consideration associated with the sale of the Deepwater Gulf of Mexico (GOM) oil and gas properties (which was recorded under the loss recovery approach) and debt. A summary of the carrying amount and fair value of FCX’s financial instruments (including those measured at net asset value (NAV) as a practical expedient), other than cash and cash equivalents, restricted cash, restricted cash equivalents, accounts receivable, accounts payable and accrued liabilities, and dividends payable (refer to Note 6) follows (in millions):
 
At March 31, 2020
 
Carrying
 
Fair Value
 
Amount
 
Total
 
NAV
 
Level 1
 
Level 2
 
Level 3
Assets
 
 
 
 
 
 
 
 
 
 
 
Investment securities:a,b
 
 
 
 
 
 
 
 
 
 
 
U.S. core fixed income fund
$
28

 
$
28

 
$
28

 
$
—

 
$
—

 
$
—

Equity securities
3

 
3

 
—

 
3

 
—

 
—

Total
31

 
31

 
28

 
3

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
Legally restricted funds:a
 
 
 
 
 
 
 
 
 
 
 
U.S. core fixed income fund
60

 
60

 
60

 
—

 
—

 
—

Government mortgage-backed securities
55

 
55

 
—

 
—

 
55

 
—

Corporate bonds
39

 
39

 
—

 
—

 
39

 
—

Government bonds and notes
22

 
22

 
—

 
—

 
22

 
—

Asset-backed securities
11

 
11

 
—

 
—

 
11

 
—

Money market funds
8

 
8

 
—

 
8

 
—

 
—

Collateralized mortgage-backed securities
4

 
4

 
—

 
—

 
4

 
—

Municipal bonds
1

 
1

 
—

 
—

 
1

 
—

Total
200

 
200

 
60

 
8

 
132

 
—

 
 
 
 
 
 
 
 
 
 
 
 
Derivatives:
 
 
 
 
 
 
 
 
 
 
 
Embedded derivatives in provisional sales/purchase contracts in a gross asset positionc
34

 
34

 
—

 
—

 
34

 
—

Copper forward contractsc
4

 
4

 
—

 
1

 
3

 
—

       Total
38

 
38

 
—

 
1

 
37

 
—

 
 
 
 
 
 
 
 
 
 
 
 
Contingent consideration for the sale of the
 
 
 
 
 
 
 
 
 
 
 
Deepwater GOM oil and gas propertiesa
119

 
78

 
—

 
—

 
—

 
78

 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
Derivatives:c
 
 
 
 
 
 
 
 
 
 
 
Embedded derivatives in provisional sales/purchase contracts in a gross liability position
(119
)
 
(119
)
 
—

 
—

 
(119
)
 
—

Copper futures and swap contractsc
(28
)
 
(28
)
 
—

 
(25
)
 
(3
)
 
—

Total
(147
)
 
(147
)
 
—

 
(25
)
 
(122
)
 
—

 
 
 
 
 
 
 
 
 
 
 
 
Long-term debt, including current portiond
10,074

 
9,530

 
—

 
—

 
9,530

 
—

 
 
 
 
 
 
 
 
 
 
 
 



15
Table of Contents             

 
At December 31, 2019
 
Carrying
 
Fair Value
 
Amount
 
Total
 
NAV
 
Level 1
 
Level 2
 
Level 3
Assets
 
 
 
 
 
 
 
 
 
 
 
Investment securities:a,b
 
 
 
 
 
 
 
 
 
 
 
U.S. core fixed income fund
$
27

 
$
27

 
$
27

 
$
—

 
$
—

 
$
—

Equity securities
4

 
4

 
—

 
4

 
—

 
—

Total
31

 
31

 
27

 
4

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
Legally restricted funds:a
 
 
 
 
 
 
 
 
 
 
 
U.S. core fixed income fund
59

 
59

 
59

 
—

 
—

 
—

Government mortgage-backed securities
43

 
43

 
—

 
—

 
43

 
—

Government bonds and notes
36

 
36

 
—

 
—

 
36

 
—

Corporate bonds
33

 
33

 
—

 
—

 
33

 
—

Asset-backed securities
14

 
14

 
—

 
—

 
14

 
—

Collateralized mortgage-backed securities
7

 
7

 
—

 
—

 
7

 
—

Money market funds
3

 
3

 
—

 
3

 
—

 
—

Municipal bonds
1

 
1

 
—

 
—

 
1

 
—

Total
196

 
196

 
59

 
3

 
134

 
—

 
 
 
 
 
 
 
 
 
 
 
 
Derivatives:
 
 
 
 
 
 
 
 
 
 
 
Embedded derivatives in provisional sales/purchase contracts in a gross asset positionc
68

 
68

 
—

 
—

 
68

 
—

Copper futures and swap contractsc
6

 
6

 
—

 
5

 
1

 
—

Contingent consideration for the sale of onshore
 
 
 
 
 
 
 
 
 
 
 
   California oil and gas propertiesa
11

 
11

 
—

 
—

 
11

 
—

Total
85

 
85

 
—

 
5

 
80

 
—

 
 
 
 
 
 
 
 
 
 
 
 
Contingent consideration for the sale of the
 
 
 
 
 
 
 
 
 
 
 
   Deepwater GOM oil and gas propertiesa
122

 
108

 
—

 
—

 
—

 
108

 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
Derivatives:c
 
 
 
 
 
 
 
 
 
 
 
Embedded derivatives in provisional sales/purchase contracts in a gross liability position
20

 
20

 
—

 
—

 
20

 
—

Copper forward contracts
1

 
1

 
—

 
—

 
1

 
—

Total
21

 
21

 
—

 
—

 
21

 
—

 
 
 
 
 
 
 
 
 
 
 
 
Long-term debt, including current portiond
9,826

 
10,239

 
—

 
—

 
10,239

 
—

 
 
 
 
 
 
 
 
 
 
 
 

a.
Current portion included in other current assets and long-term portion included in other assets.
b.
Excludes time deposits (which approximated fair value) included in (i) other current assets of $113 million at March 31, 2020, and $100 million at December 31, 2019, and (ii) other assets of $151 million at March 31, 2020, and $157 million at December 31, 2019, primarily associated with an assurance bond to support PT-FI’s commitment for the development of a new smelter in Indonesia and PT-FI’s closure and reclamation guarantees.
c.
Refer to Note 6 for further discussion and balance sheet classifications.
d.
Recorded at cost except for debt assumed in acquisitions, which are recorded at fair value at the respective acquisition dates.

Valuation Techniques. The U.S. core fixed income fund is valued at NAV. The fund strategy seeks total return consisting of income and capital appreciation primarily by investing in a broad range of investment-grade debt securities, including U.S. government obligations, corporate bonds, mortgage-backed securities, asset-backed securities and money market instruments. There are no restrictions on redemptions (which are usually within one business day of notice).

Equity securities are valued at the closing price reported on the active market on which the individual securities are traded and, as such, are classified within Level 1 of the fair value hierarchy.

16
Table of Contents             

Fixed income securities (government securities, corporate bonds, asset-backed securities, collateralized mortgage-backed securities and municipal bonds) are valued using a bid-evaluation price or a mid-evaluation price. These evaluations are based on quoted prices, if available, or models that use observable inputs and, as such, are classified within Level 2 of the fair value hierarchy.

Money market funds are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets.

FCX’s embedded derivatives on provisional copper concentrate, copper cathode and gold purchases and sales are valued using quoted monthly LME or COMEX copper forward prices and the adjusted LBMA gold prices at each reporting date based on the month of maturity (refer to Note 6 for further discussion); however, FCX’s contracts themselves are not traded on an exchange. As a result, these derivatives are classified within Level 2 of the fair value hierarchy.

FCX’s derivative financial instruments for copper futures and swap contracts and copper forward contracts that are traded on the respective exchanges are classified within Level 1 of the fair value hierarchy because they are valued using quoted monthly COMEX or LME prices at each reporting date based on the month of maturity (refer to Note 6 for further discussion). Certain of these contracts are traded on the over-the-counter market and are classified within Level 2 of the fair value hierarchy based on COMEX and LME forward prices.

In 2016, FCX completed the sale of its onshore California oil and gas properties, which included contingent consideration of up to $150 million, consisting of $50 million per year for 2018, 2019 and 2020 if the price of Brent crude oil averages over $70 per barrel in each of these calendar years. Based on current and forecasted oil prices for the remainder of 2020, FCX has concluded the fair value of the last tranche of this contingent consideration derivative approximates zero at March 31, 2020. The fair value of the contingent consideration derivative was $11 million (included in other assets in the consolidated balance sheets) at December 31, 2019. Future changes in the fair value of this contingent consideration derivative will continue to be recorded in operating income. Also, contingent consideration of $50 million was realized in 2018 and collected in first-quarter 2019 (included in proceeds from sales of oil and gas properties in the consolidated statements of cash flows) because the average Brent crude oil price exceeded $70 per barrel for 2018. Contingent consideration of $50 million was not realized in 2019 because the average Brent crude oil price did not exceed $70 per barrel for 2019. The fair value at December 31, 2019, was calculated based on average commodity price forecasts through the applicable maturity date using a Monte-Carlo simulation model. The model used various observable inputs, including Brent crude oil forward prices, volatilities and discount rates. As a result, this contingent consideration asset was classified within Level 2 of the fair value hierarchy.

In December 2016, FCX’s sale of its Deepwater GOM oil and gas properties included up to $150 million in contingent consideration that was recorded at the total amount under the loss recovery approach. The contingent consideration will be received over time as future cash flows are realized from a third-party production handling agreement for an offshore platform, with the related payments commencing in third-quarter 2018. The contingent consideration included in (i) other current assets totaled $18 million at each of March 31, 2020, and December 31, 2019, and (ii) other assets totaled $101 million at March 31, 2020, and $104 million at December 31, 2019. The fair value of this contingent consideration was calculated based on a discounted cash flow model using inputs that include third-party estimates for reserves, production rates and production timing, and discount rates. Because significant inputs are not observable in the market, the contingent consideration is classified within Level 3 of the fair value hierarchy.

Long-term debt, including current portion, is primarily valued using available market quotes and, as such, is classified within Level 2 of the fair value hierarchy.

The techniques described above may produce a fair value that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while FCX believes its valuation techniques are appropriate and consistent with other market participants, the use of different techniques or assumptions to determine fair value of certain financial instruments could result in a different fair value measurement at the reporting date. There have been no changes in the techniques used at March 31, 2020, as compared with those techniques used at December 31, 2019.


17
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A summary of the changes in the fair value of FCX’s Level 3 instrument, contingent consideration for the sale of the Deepwater GOM oil and gas properties, during the first three months of 2020 follows (in millions):
Fair value at January 1, 2020
$
108

 
Net unrealized loss related to assets still held at the end of the period
(27
)
 
Settlements
(3
)
 
Fair value at March 31, 2020
$
78

 


NOTE 8. CONTINGENCIES AND COMMITMENTS

Litigation
There were no significant updates to previously reported legal proceedings included in Note 12 of FCX’s 2019 Form 10-K, other than the matters below.

Louisiana Parishes Coastal Erosion Cases. As previously disclosed, in September 2019, affiliates of FCX reached an agreement in principle to settle all 13 cases filed in Louisiana state courts by six south Louisiana parishes (Cameron, Jefferson, Plaquemines, St. Bernard, St. John the Baptist and Vermilion) and the parties that intervened in the litigation in support of the parishes’ claims, including the state of Louisiana, alleging that certain oil and gas exploration and production operations and sulphur mining and production operations of the FCX affiliates damaged coastal wetlands and caused significant land loss along the Louisiana coast.

The agreement in principle does not include any admission of liability by FCX or its affiliates. FCX recorded a charge in third-quarter 2019 for the initial payment of $15 million, which will be paid upon execution of the settlement agreement. The settlement agreement has been executed by the FCX affiliates and several of the Louisiana parishes. FCX expects the agreement to be executed by all parties; however, execution has been delayed by the ongoing COVID-19 pandemic. Upon execution of the settlement agreement by all parties, the FCX affiliates will be fully released and dismissed from all 13 pending cases.

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

Cyprus Mines has contractual indemnification rights, subject to limited reservations, against Imerys, which has historically acknowledged those indemnification obligations, and had taken responsibility for all cases tendered to it. However, on February 13, 2019, Imerys filed for Chapter 11 bankruptcy protection, which triggered an immediate automatic stay under the federal bankruptcy code prohibiting any party from continuing or initiating litigation or asserting new claims against Imerys. As a result, Imerys is no longer defending the talc lawsuits against Cyprus Mines and CAMC. In addition, Imerys has taken the position that it alone owns, and has the sole right to access, the proceeds of the legacy insurance coverage of Cyprus Mines and CAMC for talc liabilities. In late March 2019, Cyprus Mines and CAMC challenged this position and obtained emergency relief from the bankruptcy court to gain access to the insurance until the question of ownership and contractual access can be decided in an adversary proceeding before the bankruptcy court, which was previously scheduled for March 2020, but has been put on hold.

During first-quarter 2019, in a case pending at the time Imerys filed bankruptcy, a California jury entered a $29 million verdict against Johnson & Johnson and Cyprus Mines, of which approximately $2 million was attributed to Cyprus Mines. Taking advantage of the temporary access to the insurance authorized by the bankruptcy court, Cyprus Mines used the insurance to fully resolve the case. Cyprus Mines and the insurers also settled several other cases and secured delays or dismissals in other cases. Multiple trials previously scheduled over the first half of 2020 have been postponed because of the ongoing COVID-19 pandemic. Other cases remain scheduled for trial in

18
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the second half of 2020, and postponed cases may be reset prior to the adversary proceeding regarding the legacy insurance, which is currently on hold.

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

Other Matters

PT-FI and PT Smelting Export Licenses. In March 2020, PT-FI received a one-year extension of its export license through March 15, 2021, and PT Smelting (PT-FI’s 25 percent-owned smelter and refinery in Indonesia) received an extension of its anode slimes export license through March 10, 2021.

Cerro Verde Royalty Dispute. In November 2019, Cerro Verde filed a notice of intent to initiate international arbitration against the Peruvian government, which triggered a period for mandatory good faith settlement discussions. The parties were unable to find an amicable resolution and, on February 28, 2020, Cerro Verde filed international arbitration proceedings against the Peruvian government.

NOTE 9. BUSINESS SEGMENTS
FCX has organized its mining operations into four primary divisions – North America copper mines, South America mining, Indonesia mining and Molybdenum mines, and operating segments that meet certain thresholds are reportable segments. Separately disclosed in the following tables are FCX’s reportable segments, which include the Morenci, Bagdad, Cerro Verde and Grasberg (Indonesia Mining) copper mines, the Rod & Refining operations and Atlantic Copper Smelting & Refining.
 
Beginning in fourth-quarter 2019, Bagdad became a reportable segment. As a result, FCX revised its segment disclosure for the three months ended March 31, 2019, to conform with the current year presentation.
 
Intersegment sales between FCX’s business segments are based on terms similar to arms-length transactions with third parties at the time of the sale. Intersegment sales may not be reflective of the actual prices ultimately realized because of a variety of factors, including additional processing, timing of sales to unaffiliated customers and transportation premiums.

FCX defers recognizing profits on sales from its mines to other segments, including Atlantic Copper Smelting & Refining, and on 25 percent of PT-FI’s sales to PT Smelting, until final sales to third parties occur. Quarterly variations in ore grades, the timing of intercompany shipments and changes in product prices result in variability in FCX’s net deferred profits and quarterly earnings.
FCX allocates certain operating costs, expenses and capital expenditures to its operating divisions and individual segments. However, not all costs and expenses applicable to an operation are allocated. U.S. federal and state income taxes are recorded and managed at the corporate level (included in Corporate, Other & Eliminations), whereas foreign income taxes are recorded and managed at the applicable country level. In addition, most mining exploration and research activities are managed on a consolidated basis, and those costs, along with some selling, general and administrative costs, are not allocated to the operating divisions or individual segments. Accordingly, the following Financial Information by Business Segment reflects management determinations that may not be indicative of what the actual financial performance of each operating division or segment would be if it was an independent entity.


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Product Revenues. FCX’s revenues attributable to the products it sold for the first quarters of 2020 and 2019 follow (in millions):
 
Three Months Ended
 
March 31,
 
2020
 
2019
Copper:
 
 
 
Concentrate
$
849

 
$
1,165

Cathode
837

 
859

Rod and other refined copper products
542

 
507

Purchased coppera
235

 
337

Gold
270

 
391

Molybdenum
243

 
288

Otherb
157

 
277

Adjustments to revenues:
 
 
 
Treatment charges
(80
)
 
(105
)
Royalty expensec
(20
)
 
(30
)
Export dutiesd
(4
)
 
(17
)
Revenues from contracts with customers
3,029

 
3,672

Embedded derivativese
(231
)
 
120

Total consolidated revenues
$
2,798

 
$
3,792

a.
FCX purchases copper cathode primarily for processing by its Rod & Refining operations.
b.
Primarily includes revenues associated with cobalt and silver.
c.
Reflects royalties on sales from PT-FI and Cerro Verde that will vary with the volume of metal sold and prices.
d.
Reflects PT-FI export duties.
e.
Refer to Note 6 for discussion of embedded derivatives related to FCX’s provisionally priced concentrate and cathode sales contracts.

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Financial Information by Business Segment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(In millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Atlantic
 
Corporate,
 
 
 
North America Copper Mines
 
South America Mining
 
 
 
 
 
 
 
Copper
 
Other
 
 
 
 
 
 
 
 
 
 
 
Cerro
 
 
 
 
 
Indonesia
 
Molybdenum
 
Rod &
 
Smelting
 
& Elimi-
 
FCX
 
Morenci
 
Bagdad
 
Other
 
Total
 
Verde
 
Other
 
Total
 
Mining
 
Mines
 
Refining
 
& Refining
 
nations
 
Total
Three Months Ended March 31, 2020
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unaffiliated customers
$
2

 
$
—

 
$
7

 
$
9

 
$
376

 
$
98

 
$
474

 
$
445

a 
$
—

 
$
1,115

 
$
429

 
$
326

b 
$
2,798

Intersegment
442

 
159

 
375

 
976

 
38

 
—

 
38

 
—

 
71

 
8

 
11

 
(1,104
)
 
—

Production and delivery
349

 
126

 
385

 
860

 
424

 
110

 
534

 
343

 
66

 
1,119

 
411

 
(788
)
 
2,545

Depreciation, depletion and amortization
44

 
14

 
34

 
92

 
93

 
15

 
108

 
101

 
16

 
2

 
7

 
15

 
341

Metals inventory adjustments
4

 
—

 
141

 
145

 
—

 
60

 
60

 
—

 
4

 
—

 
—

 
13

 
222

Selling, general and administrative expenses
1

 
—

 
—

 
1

 
2

 
—

 
2

 
28

 
—

 
—

 
5

 
74

 
110

Mining exploration and research expenses
—

 
—

 
1

 
1

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
15

 
16

Environmental obligations and shutdown costs
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
1

 
—

 
25

 
26

Net loss on sales of assets
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
11

 
11

Operating income (loss)
46

 
19

 
(179
)
 
(114
)
 
(105
)
 
(87
)
 
(192
)
 
(27
)
 
(15
)
 
1

 
17

 
(143
)
 
(473
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense, net
1

 
—

 
—

 
1

 
28

 
—

 
28

 
1

 
—

 
—

 
3

 
94

 
127

(Benefit from) provision for income taxes
—

 
—

 
—

 
—

 
(52
)
 
(26
)
 
(78
)
 
12

 
—

 
—

 
—

 
6

 
(60
)
Total assets at March 31, 2020
2,814

 
800

 
4,293

 
7,907

 
8,471

 
1,655

 
10,126

 
16,711

 
1,788

 
231

 
635

 
2,821

 
40,219

Capital expenditures
44

 
25

 
115

 
184

 
59

 
15

 
74

 
326

 
7

 
2

 
6

 
11

 
610

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unaffiliated customers
$
12

 
$
—

 
$
95

 
$
107

 
$
727

 
$
98

 
$
825

 
$
705

a 
$
—

 
$
1,128

 
$
571

 
$
456

b 
$
3,792

Intersegment
458

 
178

 
291

 
927

 
126

 
—

 
126

 
58

 
91

 
6

 
5

 
(1,213
)
 
—

Production and delivery
295

 
120

 
328

 
743

 
439

 
100

 
539

 
556

 
71

 
1,133

 
552

 
(675
)
 
2,919

Depreciation, depletion and amortization
40

 
10

 
33

 
83

 
100

 
14

 
114

 
105

 
16

 
2

 
7

 
20

 
347

Metals inventory adjustments
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
57

 
57

Selling, general and administrative expenses
1

 
—

 
1

 
2

 
2

 
—

 
2

 
30

 
—

 
—

 
5

 
73

 
112

Mining exploration and research expenses
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
27

 
27

Environmental obligations and shutdown costs
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
42

 
42

Net gain on sales of assets
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(33
)
 
(33
)
Operating income (loss)
134

 
48

 
24

 
206

 
312

 
(16
)
 
296

 
72

 
4

 
(1
)
 
12

 
(268
)
 
321

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense, net
1

 
—

 
—

 
1

 
29

 
—

 
29

 
—

 
—

 
—

 
6

 
110

 
146

Provision for (benefit from) income taxes
—

 
—

 
—

 
—

 
110

 
(5
)
 
105

 
26

 
—

 
—

 
1

 
(27
)
 
105

Total assets at March 31, 2019
2,904

 
709

 
4,051

 
7,664

 
8,674

 
1,720

 
10,394

 
15,792

 
1,785

 
232

 
771

 
4,421

 
41,059

Capital expenditures
62

 
25

 
123

 
210

 
56

 
5

 
61

 
319

 
4

 
1

 
4

 
23

 
622

a.
Includes PT-FI's sales to PT Smelting totaling $380 million in first-quarter 2020 and $409 million in first-quarter 2019.
b.
Includes revenues from FCX's molybdenum sales company, which includes sales of molybdenum produced by the Molybdenum mines and by certain of the North America and South America copper mines.



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NOTE 10. NEW ACCOUNTING STANDARDS

Financial Instruments. In June 2016, FASB issued an ASU that requires entities to estimate all expected credit losses for most financial assets held at the reporting date based on an expected loss model, which requires consideration of historical experience, current conditions, and reasonable and supportable forecasts. FCX adopted this ASU effective January 1, 2020, and the adoption of this ASU did not have a material impact on its consolidated financial statements.

NOTE 11. SUBSEQUENT EVENTS

FCX evaluated events after March 31, 2020, and through the date the consolidated financial statements were issued, and determined any events or transactions occurring during this period that would require recognition or disclosure are appropriately addressed in these consolidated financial statements.


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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Freeport-McMoRan Inc.

Results of Review of Interim Financial Statements
We have reviewed the accompanying consolidated balance sheet of Freeport-McMoRan Inc. (the Company) as of March 31, 2020, the related consolidated statements of operations, comprehensive (loss) income, cash flows and equity for the three-month periods ended March 31, 2020 and 2019, and the related notes (collectively referred to as the “consolidated interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial statements for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2019, the related consolidated statements of operations, comprehensive income (loss), cash flows and equity for the year then ended, and the related notes (not presented herein); and in our report dated February 14, 2020, we expressed an unqualified audit opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2019, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
  
Basis for Review Results
These financial statements are the responsibility of the Company's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.


/s/ Ernst & Young LLP

Phoenix, Arizona
May 7, 2020

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

In Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A), “we,” “us” and “our” refer to Freeport-McMoRan Inc. (FCX) and its consolidated subsidiaries. You should read this discussion in conjunction with our consolidated financial statements, the related MD&A and the discussion of our Business and Properties in our annual report on Form 10-K for the year ended December 31, 2019 (2019 Form 10-K), filed with the United States (U.S.) Securities and Exchange Commission (SEC). The results of operations reported and summarized below are not necessarily indicative of future operating results (refer to “Cautionary Statement” for further discussion). References to “Notes” are Notes included in our Notes to Consolidated Financial Statements (Unaudited). Throughout MD&A, all references to losses or income per share are on a diluted basis.

OVERVIEW

We are a leading international mining company with headquarters in Phoenix, Arizona. We operate large, long-lived, geographically diverse assets with significant proven and probable reserves of copper, gold and molybdenum. We are one of the world’s largest publicly traded copper producers. Our portfolio of assets includes the Grasberg minerals district in Indonesia, one of the world’s largest copper and gold deposits; and significant mining operations in North America and South America, including the large-scale Morenci minerals district in Arizona and the Cerro Verde operation in Peru.

In response to the global coronavirus (COVID-19) pandemic and resulting significant negative impact on the global economy, we have revised our operating plans. These revised operating plans are designed to protect the health and well-being of our employees, their families and communities where they live, ensure safe and reliable operations, to serve customers and protect our strong liquidity position through reductions in costs and capital spending while preserving the long-term value of our assets.

We have proactively implemented operating protocols at each of our operating sites to contain and mitigate the risk of spread of COVID-19. A series of actions have been implemented, including, but not limited to, physical distancing, travel restrictions, sanitizing, and frequent health screening and monitoring. We are also incorporating testing procedures administered by medical providers at many of our facilities. In April 2020, we suspended operations at our Chino copper mine in New Mexico because of the spread of COVID-19 among a limited number of employees. Our protocols have been effective in mitigating and preventing a major outbreak of COVID-19 at our operating sites. As the COVID-19 pandemic and related effects continue to evolve rapidly worldwide, we will continue to monitor, assess and update our COVID-19 related response, as needed.

We have assessed our near-term operating plans with a focus on maximizing cash flow and protecting liquidity in a weak and uncertain economic environment to preserve asset values for anticipated improved copper prices as economic conditions recover. A series of actions are being implemented to significantly reduce costs and capital spending and adjust mine plans and corresponding mining and milling rates to maximize cash flow at lower prices. Our revised operating plans are highlighted by: (1) a $1.3 billion reduction in 2020 estimated operating costs; (2) an $800 million reduction in 2020 estimated capital expenditures; (3) a $100 million reduction in 2020 estimated exploration and administrative costs; and (4) an approximate 400 million pound reduction in North America and South America 2020 estimated copper sales volumes. These and other actions taken are discussed in more detail in “Operations.” The plans also incorporate the impact of lower input costs, principally energy and foreign exchange rates, and higher gold prices. Our revised operating plans and estimates reflect current assumptions, and we will continue to closely monitor health and market conditions and make further adjustments to mine plans as required.

We continue to achieve important progress to establish large-scale, low-cost production from our underground ore bodies at Grasberg and are nearing completion of the initial phase of the Lone Star copper leach project (refer to “Operations” for further discussion).
 
Net (loss) income attributable to common stock totaled $(491) million in first-quarter 2020 and $31 million in first-quarter 2019. First-quarter 2020 results, compared with the 2019 period, primarily reflect net realizable value metals inventory adjustments, lower copper prices, and lower copper and gold sales volumes. Refer to “Consolidated Results” for further discussion.

At March 31, 2020, we had $1.6 billion in consolidated cash and cash equivalents and $10.1 billion in total debt. We had no borrowings and $3.5 billion was available under our $3.5 billion, unsecured revolving credit facility at

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March 31, 2020. We have a strong liquidity position to manage volatility, and following the April 2020 redemption of the remaining 4.00% Senior Notes, no senior notes maturing until 2022. Refer to Note 5 for discussion of debt and “Capital Resources and Liquidity” for discussion of our first-quarter 2020 debt transactions.

OUTLOOK
 
Despite a rapid change in market conditions and unfavorable changes to the global economy as a result of the COVID-19 pandemic, which is negatively impacting our short-term outlook, we continue to view the long-term outlook for our business positively, supported by limitations on supplies of copper and by the requirements for copper in the world’s economy. Our financial results vary as a result of fluctuations in market prices primarily for copper, gold and, to a lesser extent, molybdenum, as well as other factors. World market prices for these commodities have fluctuated historically and are affected by numerous factors beyond our control. Refer to “Markets” below and “Risk Factors” in Part II, Item 1A. herein for further discussion. Because we cannot control the prices of our products, the key measures that management focuses on in operating our business are sales volumes, unit net cash costs, operating cash flows and capital expenditures.

Following are consolidated operating and financial data for the year 2020, comparing current estimates to the estimates reported in January 2020:
 
 
 
April 2020
Estimates
 
January 2020 Estimates
 
 
 
 
 
(Based on $2.30
per pound of
copper)
 
(Based on $2.85 per pound of copper)
 
 
 
First-quarter 2020
(Actual)
 

Remainder of 2020
 

Total
2020
 

Total
2020
 
Total Percent Change
CONSOLIDATED OPERATING DATA
 
 
 
 
 
 
 
 
 
Sales, excluding purchases
 
 
 
 
 
 
 
 
 
Copper (billions of recoverable pounds)
0.7

 
2.4

 
3.1

 
3.5

 
(11)%
Gold (thousands of recoverable ounces)
144

 
636

 
780

 
775

 
1%
Molybdenum (millions of recoverable pounds)
21

 
59

 
80

a 
88

 
(9)%
 
 
 
 
 
 
 
 
 
 
Unit net cash costs per poundb
$
1.90

c 
$
1.44

 
$
1.55

d,e 
$
1.75

d 
(12)%
 
 
 
 
 
 
 
 
 
 
CONSOLIDATED FINANCIAL DATA (in billions)
 
 
 
 
 
 
 
 
Operating cash flows
$
—

 
$
1.8

 
$
1.8

d,e 
$
2.4

d 
(25)%
Capital expendituresf
$
0.6

 
$
1.4

 
$
2.0

 
$
2.8

 
(29)%
Operating cash flows less capital expenditures
$
(0.6
)
 
$
0.4

 
$
(0.2
)
 
$
(0.4
)
 
50%
Cash and cash equivalents
$
1.6

 
N/A

 
$
1.7

 
$
1.1

 
55%
Total debt, including current portion
$
10.1

 
N/A

 
$
9.7

 
$
9.9

g 
(2)%
a.
Projected molybdenum sales include 25 million pounds produced by our Molybdenum mines and 55 million pounds produced by our North America and South America copper mines.
b.
Reflects per pound weighted-average unit net cash costs (net of by-product credits) for all copper mines, before net noncash and other costs.
c.
For reconciliations of per pound unit costs by operating division to production and delivery costs applicable to sales reported in our consolidated financial statements, refer to “Product Revenues and Production Costs.”
d.
Based on current sales volume and cost estimates, and assuming average prices of $1,600 per ounce of gold and $9.00 per pound of molybdenum for the remainder of 2020. The January 2020 estimates were based on average prices of $1,500 per ounce of gold and $10.00 per pound of molybdenum for the year 2020.
e.
The impact of price changes for the remainder of 2020 on consolidated unit net cash costs and operating cash flows follows:
Change for Remainder of 2020
 
Consolidated Unit Net Cash Costs
 
Operating Cash Flows
 
 
(per pound)
 
(in millions)
Copper: +/- $0.10 per pound
 
N/A

 
$
250

Gold: +/- $50 per ounce
 
$
0.01

 
$
30

Molybdenum: +/- $2 per pound
 
$
0.02

 
$
100

f.
Excludes capital expenditures for the development of the new smelter in Indonesia (refer to “Operations - Indonesia Mining”).
g.
The January 2020 estimates included $0.5 billion in debt associated with the new smelter for PT Freeport Indonesia (PT-FI).

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Table of Contents             

Sales Volumes
For our projected consolidated sales volumes for the year 2020, see the table above. Consolidated sales volumes for second-quarter 2020 under our revised operating plans are expected to approximate 690 million pounds of copper, 165 thousand ounces of gold and 19 million pounds of molybdenum. Projected sales volumes for the remainder of 2020 are dependent on operational performance, impacts from COVID-19, weather-related conditions, timing of shipments, and other factors. For other important factors that could cause results to