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FREEPORT-MCMORAN INC - Quarter Report: 2021 June (Form 10-Q)


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

FORM 10-Q
(Mark one)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021
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-20210630_g1.jpg
Freeport-McMoRan Inc.
(Exact name of registrant as specified in its charter)
Delaware74-2480931
(State or other jurisdiction of(I.R.S. Employer Identification No.)
incorporation or organization) 
333 North Central Avenue
PhoenixAZ85004-2189
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.10 per shareFCXThe 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 July 30, 2021, there were issued and outstanding 1,468,064,383 shares of the registrant’s common stock, par value $0.10 per share.



Freeport-McMoRan Inc.

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Part I.FINANCIAL INFORMATION

Item 1.Financial Statements.

Freeport-McMoRan Inc.
CONSOLIDATED BALANCE SHEETS (Unaudited)
June 30,
2021
December 31,
2020
 (In millions)
ASSETS  
Current assets:  
Cash and cash equivalents$6,313 $3,657 
Trade accounts receivable1,100 892 
Income and other tax receivables578 520 
Inventories: 
Materials and supplies, net1,616 1,594 
Mill and leach stockpiles1,006 1,014 
Product1,596 1,285 
Other current assets390 341 
Total current assets12,599 9,303 
Property, plant, equipment and mine development costs, net29,836 29,818 
Long-term mill and leach stockpiles1,473 1,463 
Other assets1,528 1,560 
Total assets$45,436 $42,144 
LIABILITIES AND EQUITY  
Current liabilities:  
Accounts payable and accrued liabilities$3,106 $2,708 
Current portion of debt1,057 34 
Accrued income taxes919 324 
Current portion of environmental and asset retirement obligations334 351 
Dividends payable111 — 
Total current liabilities5,527 3,417 
Long-term debt, less current portion8,638 9,677 
Deferred income taxes4,486 4,408 
Environmental and asset retirement obligations, less current portion3,721 3,705 
Other liabilities2,129 2,269 
Total liabilities24,501 23,476 
Equity:  
Stockholders’ equity:  
Common stock160 159 
Capital in excess of par value26,084 26,037 
Accumulated deficit(9,880)(11,681)
Accumulated other comprehensive loss(576)(583)
Common stock held in treasury(3,777)(3,758)
Total stockholders’ equity12,011 10,174 
Noncontrolling interests8,924 8,494 
Total equity20,935 18,668 
Total liabilities and equity$45,436 $42,144 

The accompanying notes are an integral part of these consolidated financial statements.
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Freeport-McMoRan Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months EndedSix Months Ended
June 30,June 30,
 2021202020212020
(In millions, except per share amounts)
Revenues$5,748 $3,054 $10,598 $5,852 
Cost of sales:  
Production and delivery3,067 2,394 5,853 4,939 
Depreciation, depletion and amortization483 358 902 699 
Metals inventory adjustments— (139)83 
Total cost of sales3,550 2,613 6,756 5,721 
Selling, general and administrative expenses87 91 187 201 
Mining exploration and research expenses14 18 21 34 
Environmental obligations and shutdown costs
33 11 38 37 
Net (gain) loss on sales of assets(3)— (3)11 
Total costs and expenses3,681 2,733 6,999 6,004 
Operating income (loss)2,067 321 3,599 (152)
Interest expense, net(148)(115)(293)(242)
Net loss on early extinguishment of debt
— (9)— (41)
Other income, net20 20 40 
Income (loss) before income taxes and equity in affiliated companies’ net earnings1,928 217 3,326 (395)
Provision for income taxes(603)(96)(1,046)(36)
Equity in affiliated companies’ net earnings
Net income (loss)1,331 124 2,284 (425)
Net income attributable to noncontrolling interests(248)(71)(483)(13)
Net income (loss) attributable to common stockholders$1,083 $53 $1,801 $(438)
Net income (loss) per share attributable to common stockholders:
Basic
$0.74 $0.03 $1.23 $(0.30)
Diluted
$0.73 $0.03 $1.21 $(0.30)
Weighted-average common shares outstanding:
Basic
1,467 1,453 1,465 1,453 
Diluted
1,483 1,458 1,480 1,453 
Dividends declared per share of common stock$0.075 $— $0.15 $— 
 
The accompanying notes are an integral part of these consolidated financial statements.

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Freeport-McMoRan Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
Three Months EndedSix Months Ended
June 30,June 30,
2021202020212020
(In millions)
Net income (loss)$1,331 $124 $2,284 $(425)
Other comprehensive income, net of taxes:
Defined benefit plans:
Actuarial losses arising during the period— — (1)— 
Amortization of unrecognized amounts included in net periodic benefit costs12 24 
Foreign exchange gains (losses)— (1)(1)
Other comprehensive income16 23 
Total comprehensive income (loss)1,335 140 2,290 (402)
Total comprehensive income attributable to noncontrolling interests(248)(71)(482)(12)
Total comprehensive income (loss) attributable to common stockholders
$1,087 $69 $1,808 $(414)

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



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Freeport-McMoRan Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended
June 30,
 20212020
 (In millions)
Cash flow from operating activities:  
Net income (loss)$2,284 $(425)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:  
Depreciation, depletion and amortization902 699 
Metals inventory adjustments83 
Net (gain) loss on sales of assets(3)11 
Stock-based compensation56 43 
Net charges for environmental and asset retirement obligations, including accretion94 112 
Payments for environmental and asset retirement obligations(110)(119)
Net charges for defined pension and postretirement plans45 
Pension plan contributions(42)(29)
Net loss on early extinguishment of debt— 41 
Deferred income taxes79 (28)
Charges for Cerro Verde royalty dispute
15 
Payments for Cerro Verde royalty dispute(65)(90)
Other, net77 (46)
Changes in working capital and other:
 
Accounts receivable(279)83 
Inventories(299)168 
Other current assets(12)(4)
Accounts payable and accrued liabilities272 (73)
Accrued income taxes and timing of other tax payments505 (33)
Net cash provided by operating activities3,470 453 
Cash flow from investing activities:  
Capital expenditures:  
North America copper mines(95)(332)
South America(47)(125)
Indonesia(624)(634)
Molybdenum mines(3)(11)
Other(34)(35)
Proceeds from sales of assets16 116 
Acquisition of minority interest in PT Smelting(33)— 
Other, net(13)(5)
Net cash used in investing activities(833)(1,026)
Cash flow from financing activities:  
Proceeds from debt160 1,585 
Repayments of debt(179)(1,527)
Cash dividends and distributions paid: 
Common stock(111)(73)
Noncontrolling interests(93)— 
Contributions from noncontrolling interests88 74 
Proceeds from exercised stock options184 
Payments for withholding of employee taxes related to stock-based awards(19)(5)
Debt financing costs and other, net(1)(31)
Net cash provided by financing activities29 24 
Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents2,666 (549)
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of year3,903 2,278 
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period$6,569 $1,729 
The accompanying notes are an integral part of these consolidated financial statements.
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Freeport-McMoRan Inc.
CONSOLIDATED STATEMENTS OF EQUITY (Unaudited)
THREE MONTHS ENDED JUNE 30
 Stockholders’ Equity  
Common StockAccum-ulated DeficitAccumu-
lated
Other Compre-
hensive
Loss
Common Stock
Held in Treasury
Total
Stock-holders’ Equity
Number
of
Shares
At Par
Value
Capital in
Excess of
Par Value
Number
of
Shares
At
Cost
Non-
controlling
Interests
Total
Equity
 (In millions)
Balance at March 31, 20211,597 $160 $26,080 $(10,963)$(580)133 $(3,777)$10,920 $8,653 $19,573 
Exercised and issued stock-based awards— 78 — — — — 78 — 78 
Stock-based compensation, including the tender of shares— — 14 — — — — 14 (1)13 
Dividends— — (111)— — — — (111)— (111)
Contributions from noncontrolling interests— — 23 — — — — 23 24 47 
Net income attributable to common stockholders— — — 1,083 — — — 1,083 — 1,083 
Net income attributable to noncontrolling interests
— — — — — — — — 248 248 
Other comprehensive income — — — — — — — 
Balance at June 30, 20211,601 $160 $26,084 $(9,880)$(576)133 $(3,777)$12,011 $8,924 $20,935 
 Stockholders’ Equity  
Common StockAccum-ulated DeficitAccumu-
lated
Other Compre-
hensive
Loss
Common Stock
Held in Treasury
Total
Stock-holders’ Equity
Number
of
Shares
At Par
Value
Capital in
Excess of
Par Value
Number
of
Shares
At
Cost
Non-
controlling
Interests
Total
Equity
 (In millions)
Balance at March 31, 20201,583 $158 $25,875 $(12,771)$(668)131 $(3,739)$8,855 $8,108 $16,963 
Stock-based compensation, including the tender of shares— — — — — — 10 
Contributions from noncontrolling interests— — 21 — — — — 21 21 42 
Net income attributable to common stockholders— — — 53 — — — 53 — 53 
Net income attributable to noncontrolling interests— — — — — — — — 71 71 
Other comprehensive income — — — — 16 — — 16 — 16 
Balance at June 30, 20201,583 $158 $25,905 $(12,718)$(652)131 $(3,739)$8,954 $8,201 $17,155 

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










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Freeport-McMoRan Inc.
CONSOLIDATED STATEMENTS OF EQUITY (Unaudited)
SIX MONTHS ENDED JUNE 30
 Stockholders’ Equity  
Common StockAccum-ulated DeficitAccumu-
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, 20201,590 $159 $26,037 $(11,681)$(583)132 $(3,758)$10,174 $8,494 $18,668 
Exercised and issued stock-based awards11 183 — — — — 184 — 184 
Stock-based compensation, including the tender of shares— — 43 — — (19)24 (4)20 
Dividends— — (222)— — — — (222)(93)(315)
Contributions from noncontrolling interests
— — 43 — — — — 43 45 88 
Net income attributable to common stockholders— — — 1,801 — — — 1,801 — 1,801 
Net income attributable to noncontrolling interests
— — — — — — — — 483 483 
Other comprehensive income (loss)— — — — — — (1)
Balance at June 30, 20211,601 $160 $26,084 $(9,880)$(576)133 $(3,777)$12,011 $8,924 $20,935 
 Stockholders’ Equity  
Common StockAccum-ulated DeficitAccumu-
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, 20191,582 $158 $25,830 $(12,280)$(676)131 $(3,734)$9,298 $8,150 $17,448 
Exercised and issued stock-based awards— — — — — — 
Stock-based compensation, including the tender of shares— — 38 — — — (5)33 34 
Contributions from noncontrolling interests— — 36 — — — — 36 38 74 
Net loss attributable to common stockholders— — — (438)— — — (438)— (438)
Net income attributable to noncontrolling interests
— — — — — — — — 13 13 
Other comprehensive income (loss)— — — — 24 — — 24 (1)23 
Balance at June 30, 20201,583 $158 $25,905 $(12,718)$(652)131 $(3,739)$8,954 $8,201 $17,155 
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Freeport-McMoRan Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE 1. GENERAL INFORMATION

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all information and disclosures required by generally accepted accounting principles (GAAP) in the United States (U.S.). Therefore, this information should be read in conjunction with Freeport-McMoRan Inc.’s (FCX) consolidated financial statements and notes contained in its annual report on Form 10-K for the year ended December 31, 2020 (2020 Form 10-K). The information furnished herein reflects all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim periods reported. All such adjustments are, in the opinion of management, of a normal recurring nature. Operating results for the six-month period ended June 30, 2021, are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

Trade Accounts Receivable Agreements. In first-quarter 2021, PT Freeport Indonesia (PT-FI) entered into agreements to sell certain trade accounts receivables to unrelated third-party financial institutions. The agreements were entered into in the normal course of business to fund the working capital for the additional quantity of copper to be supplied by PT-FI to PT Smelting (PT-FI’s 39.5 percent owned copper smelter and refinery in Gresik, Indonesia - see “Acquisition of Minority Interest in PT Smelting” below for further discussion). The balances sold under the agreements were excluded from trade accounts receivable on the consolidated balance sheet at June 30, 2021. Receivables are considered sold when (i) they are transferred beyond the reach of PT-FI and its creditors, (ii) the purchaser has the right to pledge or exchange the receivables, and (iii) PT-FI has no continuing involvement in the transferred receivables. In addition, PT-FI provides no other forms of continued financial support to the purchaser of the receivables once the receivables are sold.

Gross amounts sold under these arrangements totaled $135 million in second-quarter 2021 and $188 million for the six-month period ended June 30, 2021. Discounts on the sold receivables totaled less than $1 million during 2021.

Acquisition of Minority Interest in PT Smelting. On April 30, 2021, PT-FI acquired 14.5 percent of the outstanding common stock of PT Smelting for $33 million, increasing its ownership interest from 25 percent to 39.5 percent. The remaining shares of PT Smelting continue to be owned by Mitsubishi Materials Corporation. PT-FI has continued to account for its investment in PT Smelting using the equity method since it does not have control over PT Smelting.

Subsequent Events. FCX evaluated events after June 30, 2021, and through the date the consolidated financial statements were issued, and took into account events and transactions occurring during this period requiring recognition or disclosure in these consolidated financial statements.

On July 26, 2021, FCX’s 56-percent-owned subsidiary, Koboltti Chemicals Holdings Limited, entered into an agreement to sell its specialty cobalt business based in Kokkola, Finland (Freeport Cobalt) to Jervois Mining Limited (Jervois) for $85 million (in cash and Jervois shares) plus net working capital, estimated to approximate $125 million at June 30, 2021. In addition, FCX and its noncontrolling interest partners will have the right to receive up to $40 million in contingent cash consideration based on the future performance of the business. FCX currently estimates its share of the proceeds, excluding contingent consideration, would approximate $100 million cash plus its pro rata 56 percent share of 9.9 percent of Jervois shares. The transaction is subject to the completion of Jervois financing and other customary closing conditions and is expected to close in the third quarter of 2021. FCX expects to record a gain on the transaction.

The operating results of Freeport Cobalt are not significant to FCX’s financial statements for the year ended December 31, 2020, or the three- and six-month periods ended June 30, 2021. At June 30, 2021, Freeport Cobalt had total assets of $180 million and total liabilities of $28 million included on FCX's balance sheet. The Freeport Cobalt operations do not represent an operating segment of FCX and did not meet the criteria to be classified as held for sale at June 30, 2021.

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NOTE 2. EARNINGS PER SHARE

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

Reconciliations of net income (loss) and weighted-average shares of common stock outstanding for purposes of calculating basic and diluted net income (loss) per share follow (in millions, except per share amounts):
Three Months EndedSix Months Ended
June 30,June 30,
 2021202020212020
Net income (loss)$1,331 $124 $2,284 $(425)
Net income attributable to noncontrolling interests(248)(71)(483)(13)
Undistributed earnings allocated to participating securities(4)(3)(4)(3)
Net income (loss) attributable to common stockholders$1,079 $50 $1,797 $(441)
Basic weighted-average shares of common stock outstanding
1,467 1,453 1,465 1,453 
Add shares issuable upon exercise or vesting of dilutive stock options and restricted stock units (RSUs)16 15 — a
Diluted weighted-average shares of common stock outstanding
1,483 1,458 1,480 1,453 
Basic net income (loss) per share attributable to common stockholders:$0.74 $0.03 $1.23 $(0.30)
Diluted net income (loss) per share attributable to common stockholders:$0.73 $0.03 $1.21 $(0.30)
a.Excludes approximately 10 million shares 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 income (loss) per share of common stock. Stock options for 4 million shares of common stock in second-quarter 2021, 38 million shares of common stock in second-quarter 2020, 7 million shares of common stock for the first six months of 2021 and 39 million shares of common stock the first six months of 2020 were excluded.

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

The components of inventories follow (in millions):
June 30, 2021December 31, 2020
Current inventories:
Total materials and supplies, neta
$1,616 $1,594 
Mill stockpiles$172 $205 
Leach stockpiles834 809 
Total current mill and leach stockpiles$1,006 $1,014 
Raw materials (primarily concentrate)$433 $366 
Work-in-process200 174 
Finished goods963 745 
Total product$1,596 $1,285 
Long-term inventories:
Mill stockpiles$242 $223 
Leach stockpiles1,231 1,240 
Total long-term mill and leach stockpilesb
$1,473 $1,463 
a.Materials and supplies inventory was net of obsolescence reserves totaling $33 million at June 30, 2021, and $32 million at December 31, 2020.
b.Estimated metals in stockpiles not expected to be recovered within the next 12 months.

FCX recorded net favorable adjustments to increase long-term metals inventory carrying values by $139 million in second-quarter 2020, including an increase to long-term copper inventories ($144 million), primarily related to the reversal of net realizable value adjustments recorded on long-term copper inventories in first-quarter 2020 because of higher copper market prices at June 30, 2020, and a decrease to long-term molybdenum inventories ($5 million) because of lower molybdenum market prices at June 30, 2020. Net realizable value inventory adjustments to decrease metals inventory carrying values totaling $83 million were recorded in the first six months of 2020 associated with lower market prices for copper ($61 million) and molybdenum ($22 million). Refer to Note 9 for metals inventory adjustments by business segment.

NOTE 4. INCOME TAXES

Geographic sources of FCX’s (provision for) benefit from income taxes follow (in millions):
Six Months Ended
June 30,
 20212020
U.S. operations$(4)

$58 
a
International operations(1,042)

(94)
Total$(1,046)$(36)

a.Includes a tax credit of $53 million associated with the reversal of a year-end 2019 tax charge related to the sale of FCX’s interest in the lower zone of the Timok exploration project in Serbia, after considering relevant tax law.
FCX’s consolidated effective income tax rate was 31 percent for the first six months of 2021 and (9) percent for the first six months of 2020. Because FCX's U.S. jurisdiction generated pre-tax losses for the first six months of 2020 that did not result in a realized tax benefit, applicable accounting rules required FCX to adjust its 2020 estimated annual effective tax rate to exclude the impact of U.S. pre-tax 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 American Rescue Plan Act of 2021 (ARPA), enacted on March 11, 2021, and the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), enacted on March 27, 2020. None of these measures resulted in material impacts to FCX’s provision for income taxes for the six months ended June 30, 2021 and 2020.
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However, certain provisions of the CARES Act provided FCX with the opportunity to accelerate collections of tax refunds, primarily those associated with the U.S. alternative minimum tax. FCX collected U.S. alternative minimum tax credit refunds of $221 million in July 2020, $24 million in October 2020 and $23 million in March 2021. FCX continues to evaluate income tax accounting considerations of COVID-19 measures as they develop, including any impact on its 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.

NOTE 5. DEBT AND EQUITY

The components of debt follow (in millions):
 June 30,
2021
December 31, 2020
Senior notes and debentures:
Issued by FCX$8,787 $8,783 
Issued by Freeport Minerals Corporation (FMC)356 356 
Cerro Verde Term Loan524 523 
Other 28 49 
Total debt9,695 9,711 
Less current portion of debt(1,057)a(34)
Long-term debt$8,638 $9,677 
a.Includes $0.5 billion for the 3.55% Senior Notes due March 2022 and $0.5 billion for the Cerro Verde Term Loan due June 2022.

Revolving Credit Facility. At June 30, 2021, FCX had no borrowings outstanding and $8 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.

In March 2021, FCX delivered a Covenant Reversion Notice (as defined in the third amendment to the revolving credit facility dated June 3, 2020), which provided notification of its election to end the Covenant Increase Period (as defined in the third amendment to the revolving credit facility dated June 3, 2020). As a result, the leverage ratio limit reverted to 5.25x through the quarter ended June 30, 2021 (and will step down to 3.75x beginning with the quarter ending September 30, 2021), and the interest expense coverage ratio minimum reverted to 2.25x. Additionally, following FCX’s election to end the Covenant Increase Period, the additional limits on priority debt and liens, and the provisions related to minimum liquidity and restricted payments (which included restrictions on the payment of common stock dividends) are no longer applicable. At June 30, 2021, FCX was in compliance with its revolving credit facility covenants.

PT-FI Credit Facility. In July 2021, PT-FI entered into a $1.0 billion, five-year, unsecured credit facility (consisting of a $667 million term loan and a $333 million revolving credit facility) to fund project costs in connection with the PT Smelting expansion and construction of a precious metals refinery, and for PT-FI’s general corporate purposes. The term loan allows for borrowings up to $667 million within the first three years, and amortizes in four installments, with 15 percent of the outstanding balance due in January 2025, 15 percent due in July 2025, 35 percent due in January 2026 and the remaining 35 percent due in July 2026. The $333 million revolving credit facility is available for drawings until June 2026. Amounts drawn under the credit facility bear interest at the London Inter-bank Offered Rate plus a margin of 1.875% or 2.125%, as defined by the agreement.

PT-FI’s credit facility contains customary affirmative covenants and representations and also contains standard covenants that, among other things, restrict, subject to certain exceptions, the ability of PT-FI to incur additional indebtedness; create liens on assets; enter into sale and leaseback transactions; sell assets; and modify or amend the shareholders agreement or related governance structure. The credit facility also contains financial ratios governing maximum total leverage and minimum interest expense coverage and certain environmental and social compliance requirements.

Senior Notes. In March 2020, FCX completed the sale of $1.3 billion of senior notes. FCX used a portion of the net proceeds from this offering to purchase or redeem its 4.00% Senior Notes due 2021 and to purchase a portion of 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 of $9 million in second-quarter 2020 and $41 million for the six months ended June 30, 2020.

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Interest Expense, Net. Consolidated interest costs (before capitalization) totaled $165 million in second-quarter 2021, $159 million in second-quarter 2020, $325 million for the first six months of 2021 and $330 million for the first six months of 2020. Capitalized interest added to property, plant, equipment and mine development costs, net, totaled $17 million in second-quarter 2021, $44 million in second-quarter 2020, $32 million for the first six months of 2021 and $88 million for the first six months of 2020. The decrease in capitalized interest for the 2021 periods results from significant assets placed in service as PT-FI’s underground mining operations continue to ramp up.

Common Stock. In February 2021, FCX’s Board of Directors (the Board) reinstated a cash dividend on FCX’s common stock. On June 23, 2021, FCX declared a quarterly cash dividend of $0.075 per share on its common stock, which was paid on August 2, 2021, to common stockholders of record as of July 15, 2021.

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 provided for fixed pricing of $2.34 per pound of copper on approximately 60
percent of North America's sales volumes for May and June 2020. These contracts resulted in hedging losses
totaling $24 million in second-quarter 2020 and for the six months ended June 30, 2020. There were no remaining
forward sales contracts as of June 30, 2020.

A discussion of FCX’s other derivative contracts and programs follows:

Derivatives Designated as Hedging Instruments – Fair Value Hedges
Copper Futures and Swap Contracts. Some of FCX’s U.S. copper rod and cathode customers request a fixed market price instead of the Commodity Exchange Inc. (COMEX) average copper price in the month of shipment. FCX hedges this price exposure in a manner that allows it to receive the COMEX average price in the month of shipment while the customers pay the fixed price they requested. FCX accomplishes this by entering into copper futures or swap contracts. Hedging gains or losses from these copper futures and swap contracts are recorded in revenues. FCX did not have any significant gains or losses resulting from hedge ineffectiveness during the six-month periods ended June 30, 2021 and 2020. At June 30, 2021, FCX held copper futures and swap contracts that qualified for hedge accounting for 80 million pounds at an average contract price of $4.20 per pound, with maturities through May 2023.

A summary of gains (losses) recognized in revenues for derivative financial instruments related to commodity contracts that are designated and qualify as fair value hedge transactions, including the unrealized (losses) gains on the related hedged item follows (in millions):
 Three Months EndedSix Months Ended
June 30,June 30,
 2021202020212020
Copper futures and swap contracts:  
Unrealized (losses) gains:  
Derivative financial instruments$(11)$40 $(8)$
Hedged item – firm sales commitments11 (40)(7)
Realized gains (losses):  
Matured derivative financial instruments28 (8)52 (17)


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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 (London) 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 London 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 London gold price. FCX applies the normal purchases and normal sales scope exception in accordance with derivatives and hedge accounting guidance to the host contract in its concentrate or cathode sales agreements since these contracts do not allow for net settlement and always result in physical delivery. The embedded derivative does not qualify for hedge accounting and is adjusted to fair value through earnings each period, using the period-end LME or COMEX copper forward prices and the adjusted London 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 June 30, 2021, follows:
Open PositionsAverage Price
Per Unit
Maturities Through
 ContractMarket
Embedded derivatives in provisional sales contracts:    
Copper (millions of pounds)597 $4.31 $4.25 December 2021
Gold (thousands of ounces)157 1,848 1,762 September 2021
Embedded derivatives in provisional purchase contracts:  
Copper (millions of pounds)115 4.30 4.25 November 2021

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 production and delivery costs. At June 30, 2021, Atlantic Copper held net copper forward purchase contracts for 17 million pounds at an average contract price of $4.36 per pound, with maturities through August 2021.

Summary of Gains (Losses). A summary of the realized and unrealized gains (losses) recognized in operating income for commodity contracts that do not qualify as hedge transactions, including embedded derivatives, follows (in millions):
 Three Months EndedSix Months Ended
June 30,June 30,
 2021202020212020
Embedded derivatives in provisional sales contracts:a
Copper$118 $162 $325 $(76)
Gold and other metals15 17 (13)24 
Copper forward contractsb
(5)(4)(13)19 
a.Amounts recorded in revenues. 
b.Amounts recorded in cost of sales as production and delivery costs.


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Unsettled Derivative Financial Instruments
A summary of the fair values of unsettled commodity derivative financial instruments follows (in millions):
June 30,
2021
December 31, 2020
Commodity Derivative Assets:  
Derivatives designated as hedging instruments:
  
Copper futures and swap contracts$$15 
Derivatives not designated as hedging instruments:
  
Embedded derivatives in provisional sales/purchase contracts62 169 
Copper forward contracts— 
Total derivative assets$72 $184 
Commodity Derivative Liabilities:
Derivatives designated as hedging instruments:
Copper futures and swap contracts$$— 
Derivatives not designated as hedging instruments:
Embedded derivatives in provisional sales/purchase contracts103 21 
Copper forward contracts— 
Total derivative liabilities$108 $21 

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):
AssetsLiabilities
June 30,
2021
December 31, 2020June 30,
2021
December 31, 2020
Gross amounts recognized:
Embedded derivatives in provisional
sales/purchase contracts$62 $169 $103 $21 
Copper derivatives10 15 — 
72 184 108 21 
Less gross amounts of offset:
Embedded derivatives in provisional
sales/purchase contracts14 14 
Copper derivatives— — 
16 16 
Net amounts presented in balance sheet:
Embedded derivatives in provisional
sales/purchase contracts48 168 89 20 
Copper derivatives15 — 
$56 $183 $92 $20 
Balance sheet classification:
Trade accounts receivable$30 $168 $62 $— 
Other current assets15 — — 
Other assets— — — 
Accounts payable and accrued liabilities17 — 29 20 
Other liabilities— — — 
$56 $183 $92 $20 

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. As of June 30, 2021, the maximum amount of credit exposure associated with derivative transactions was $72 million.

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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 debt. The carrying value for cash and cash equivalents (which included time deposits of $0.2 billion at June 30, 2021, and $0.3 billion at December 31, 2020), 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 debt).

In addition, as of June 30, 2021, 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):
June 30,
2021
December 31, 2020
Balance sheet components:
Cash and cash equivalents$6,313 $3,657 
Restricted cash and restricted cash equivalents included in:
Other current assets116 97 
Other assets140 149 
Total cash, cash equivalents, restricted cash and restricted cash equivalents presented in the consolidated statements of cash flows$6,569 $3,903 
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NOTE 7. FAIR VALUE MEASUREMENT

Fair value accounting guidance includes a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). FCX did not have any significant transfers in or out of Level 3 during second-quarter 2021.

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 June 30, 2021
 CarryingFair Value
 AmountTotalNAVLevel 1Level 2Level 3
Assets    
Investment securities:a,b
U.S. core fixed income fund$29 $29 $29 $— $— $— 
Equity securities15 15 — 15 — — 
Total44 44 29 15 — — 
Legally restricted funds:a
    
U.S. core fixed income fund64 64 64 — — — 
Government bonds and notes54 54 — — 54 — 
Corporate bonds40 40 — — 40 — 
Government mortgage-backed securities29 29 — — 29 — 
Asset-backed securities12 12 — — 12 — 
Money market funds— — — 
Collateralized mortgage-backed securities— — — 
Municipal bonds— — — 
Total209 209 64 139 — 
Derivatives:    
Embedded derivatives in provisional sales/purchase contracts in a gross asset positionc
62 62 — — 62 — 
Copper futures and swap contractsc
— — 
Copper forward contractsc
— — 
       Total72 72 — 67 — 
Contingent consideration for the sale of the
Deepwater GOM oil and gas propertiesa
98 85 — — — 85 
Liabilities    
Derivatives:c
    
Embedded derivatives in provisional sales/purchase contracts in a gross liability position103 103 — — 103 — 
Copper futures and swap contractsc
— — — 
Copper forward contracts— — 
Total108 108 — 106 — 
Long-term debt, including current portiond
9,695 10,853 — — 10,853 — 

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At December 31, 2020
 CarryingFair Value
 AmountTotalNAVLevel 1Level 2Level 3
Assets    
Investment securities:a,b
U.S. core fixed income fund$29 $29 $29 $— $— $— 
Equity securities— — — 
Total36 36 29 — — 
Legally restricted funds:a
    
U.S. core fixed income fund 65 65 65 — — — 
Government bonds and notes49 49 — — 49 — 
Corporate bonds43 43 — — 43 — 
Government mortgage-backed securities30 30 — — 30 — 
Asset-backed securities16 16 — — 16 — 
Money market funds— — — 
Collateralized mortgage-backed securities— — — 
Municipal bonds— — — 
Total213 213 65 143 — 
Derivatives:    
Embedded derivatives in provisional sales/purchase contracts in a gross asset positionc
169 169 — — 169 — 
Copper futures and swap contractsc
15 15 — 13 — 
Total184 184 — 13 171 — 
Contingent consideration for the sale of the
   Deepwater GOM oil and gas propertiesa
108 88 — — — 88 
Liabilities    
Derivatives:c
Embedded derivatives in provisional sales/purchase contracts in a gross liability position21 21 — — 21 — 
Long-term debt, including current portiond
9,711 10,994 — — 10,994 — 
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 $116 million at June 30, 2021, and $97 million at December 31, 2020, and (ii) other assets of $139 million at June 30, 2021, and $148 million at December 31, 2020, primarily associated with an assurance bond to support PT-FI’s commitment for new domestic smelter development in Indonesia and PT-FI’s closure and reclamation guarantees.
c.Refer to Note 6 for further discussion and balance sheet classifications.
d.Recorded at cost except for debt assumed in acquisitions, which are recorded at fair value at the respective acquisition dates.

Valuation Techniques. 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.

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.

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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 London 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 December 2016, FCX’s sale of its Deepwater GOM oil and gas properties included up to $150 million in contingent consideration that was recorded at the total amount under the loss recovery approach. The contingent consideration is being received over time as cash flows are realized from a third-party production handling agreement for an offshore platform, with the related payments commencing in third-quarter 2018. The contingent consideration included in (i) other current assets totaled $18 million at June 30, 2021, and $12 million at December 31, 2020, and (ii) other assets totaled $80 million at June 30, 2021, and $96 million at December 31, 2020. 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 June 30, 2021, as compared with those techniques used at December 31, 2020.

A summary of the changes in the fair value of FCX’s Level 3 instrument, contingent consideration for the sale of the Deepwater GOM oil and gas properties, during the first six months of 2021 follows (in millions):
Fair value at January 1, 2021$88 
Net unrealized gain related to assets still held at the end of the period
Settlements
(10)
Fair value at June 30, 2021$85 

NOTE 8. CONTINGENCIES AND COMMITMENTS

Environmental
Newtown Creek. From the 1930s until 1964, Phelps Dodge Refining Corporation (PDRC), an indirect wholly owned subsidiary of FCX, operated a copper smelter, and from the 1930s until 1984 operated a copper refinery, on the banks of Newtown Creek (the creek), which is a 3.5-mile-long waterway that forms part of the boundary between Brooklyn and Queens in New York City. Heavy industrialization along the banks of the creek and discharges from the City of New York’s sewer system over more than a century resulted in significant environmental contamination of the waterway. In 2010, U.S. Environmental Protection Agency (EPA) notified PDRC, four other companies and the City of New York that EPA considers them to be potentially responsible parties (PRPs) under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980. The notified parties began working with EPA to identify other PRPs. In 2010, EPA designated the creek as a Superfund site, and in 2011, PDRC and five other parties (the Newtown Creek Group, NCG) entered an Administrative Order on Consent (AOC) to perform a remedial investigation/feasibility study (RI/FS) to assess the nature and extent of environmental contamination in the creek and identify potential remedial options. The parties RI/FS work under the AOC and their efforts to identify other PRPs are ongoing. The NCG submitted the initial draft RI to EPA in 2016 and currently expects the report to be finalized in 2021. The NCG currently anticipates a draft FS to be submitted to EPA for review and approval in 2024. EPA is not expected to propose a final creek-wide remedy until after the RI/FS is completed, with the actual
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remediation construction starting several years later. In July 2019, the NCG entered into an AOC to conduct a Focused Feasibility Study (FFS) of the first two miles of the creek to support an evaluation of an interim remedy for that section of the creek. In July 2021, EPA terminated the FFS, which effectively incorporates remediation of the lower creek with the site-wide remedy. FCX’s environmental liability balance for the creek was $308 million at June 30, 2021. The final costs of fulfilling this remedial obligation and the allocation of costs among PRPs are uncertain and subject to change based on the results of the RI/FS, the remedy ultimately selected by EPA and related allocation determinations. Changes to the overall cost of this remedial obligation and the portion ultimately allocated to PDRC could be material to FCX.

Litigation
There were no significant updates to previously reported legal proceedings included in Note 12 of FCX’s 2020 Form 10-K, other than the matters discussed below.

Asbestos and Talc Claims. As previously disclosed, since approximately 1990, various FCX affiliates have been named as defendants in a large number of lawsuits alleging personal injury from, among other things, exposure to asbestos or talc allegedly contained in industrial products, and more recently alleging the presence of asbestos contamination in talc-based cosmetic and personal care products. 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 the targets of such lawsuits. Cyprus Mines and subsidiaries were engaged in talc mining and processing from 1964 until 1992 when Cyprus Mines exited its talc business. On February 13, 2019, Imerys Talc America (Imerys), the current owner of the talc business assets and liabilities previously owned by Cyprus Mines, filed for Chapter 11 bankruptcy protection. On December 22, 2020, Imerys filed an amended bankruptcy plan disclosing a global settlement with Cyprus Mines and CAMC, which provides a framework for a full and comprehensive resolution of all current and future potential liabilities arising out of the Cyprus Mines talc business, including claims against FCX, its affiliates, Cyprus Mines and CAMC. A hearing to consider confirmation of the Imerys bankruptcy plan has been scheduled to be held in November 2021. Consistent with the global settlement agreement, Cyprus Mines commenced its own bankruptcy process on February 11, 2021, and talc-related litigation against both Cyprus Mines and Cyprus Amax Minerals Company is stayed through 2021. The global settlement is subject to, among other things, votes by claimants in both the Imerys and Cyprus Mines bankruptcy cases as well as bankruptcy court approvals in both cases, and there can be no assurance that the global settlement will be successfully implemented. FCX has a $130 million liability balance at June 30, 2021, associated with the proposed settlement.

Other Matters
PT-FI and PT Smelting Export Licenses. In March 2021, PT-FI received a one-year extension of its export license through March 15, 2022. In July 2021, PT Smelting received a six-month extension of its anodes slimes export license, which currently expires December 30, 2021.

Development Progress of Greenfield Smelter at East Java. On January 7, 2021, the Indonesia government levied an administrative fine of $149 million for the period from March 30, 2020, through September 30, 2020 (additional fines could be levied on exports after September 30, 2020), on PT-FI for failing to achieve physical development progress on the greenfield smelter as of July 31, 2020. PT-FI responded to the Indonesia government objecting to the fine because of events outside of its control that caused a delay in development progress for the greenfield smelter at East Java. PT-FI believes that its communications during 2020 with the Indonesia government were not properly considered before the administrative fine was levied. In June 2021, the Indonesia government issued a ministerial decree for the calculation of an administrative fine for lack of smelter development in light of the COVID-19 pandemic. PT-FI is continuing to discuss this matter with the Indonesia government as well as provide additional documentation to support its position on the cause of delays in development progress on the greenfield smelter. During the first six months of 2021, PT-FI recorded charges totaling $16 million ($3 million in second-quarter 2021 and $13 million in first-quarter 2021) for a potential settlement of the administrative fine which is expected to include a revised construction schedule for the greenfield smelter. No additional fine is expected for the construction period after July 2020 based on the revised schedule. The final settlement could differ from the amounts recorded in 2021.

Chiyoda Contract. In July 2021, PT-FI awarded a construction contract to Chiyoda for the construction of a new greenfield smelter in Gresik, Indonesia with an estimated contract cost of $2.8 billion.

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NOTE 9. BUSINESS SEGMENTS
FCX has organized its mining operations into four primary divisions – North America copper mines, South America mining, Indonesia mining and Molybdenum mines, and operating segments that meet certain thresholds are reportable segments. Separately disclosed in the following tables are FCX’s reportable segments, which include the Morenci, Cerro Verde and Grasberg (Indonesia Mining) copper mines, the Rod & Refining operations and Atlantic Copper Smelting & Refining.

Intersegment sales between FCX’s business segments are based on terms similar to arms-length transactions with third parties at the time of the sale. Intersegment sales may not be reflective of the actual prices ultimately realized because of a variety of factors, including additional processing, timing of sales to unaffiliated customers and transportation premiums.

FCX defers recognizing profits on sales from its mines to other segments, including Atlantic Copper Smelting & Refining, and on 39.5 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.

Product Revenues. FCX’s revenues attributable to the products it sold for the second quarters and first six months of 2021 and 2020 follow (in millions):
Three Months EndedSix Months Ended
June 30,June 30,
 2021202020212020
Copper:
Concentrate$2,076 $749 $3,785 $1,598 
Cathode1,535 1,124 2,769 1,961 
Rod and other refined copper products833 303 1,517 845 
Purchased coppera
310 166 528 401 
Gold597 341 1,115 611 
Molybdenum288 194 532 437 
Otherb
203 115 456 272 
Adjustments to revenues:
Treatment charges(101)(75)(198)(155)
Royalty expensec
(82)(26)(145)(46)
Export dutiesd
(44)(16)(73)(20)
Revenues from contracts with customers5,615 2,875 10,286 5,904 
Embedded derivativese
133 179 312 (52)
Total consolidated revenues$5,748 $3,054 $10,598 $5,852 
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)
 AtlanticCorporate,
North America Copper MinesSouth America MiningCopperOther
CerroIndonesiaMolybdenumRod &Smelting& Elimi-FCX
MorenciOtherTotalVerdeOtherTotalMiningMinesRefining& RefiningnationsTotal
Three Months Ended June 30, 2021           
Revenues:            
Unaffiliated customers$57 $55 $112 $825 $188 $1,013 $1,753 
a
$— $1,689 $794 $387 
b
$5,748 
Intersegment721 1,021 1,742 120 — 120 56 89 — (2,013)— 
Production and delivery351 574 925 494 
c
106 600 528 56 1,691 775 (1,508)
d
3,067 
Depreciation, depletion and amortization
40 61 101 82 12 94 247 17 15 483 
Selling, general and administrative expenses
— — 27 — — 52 87 
Mining exploration and research expenses— — — — — — — — — — 14 14 
Environmental obligations and shutdown costs
— — — — — — — — 32 33 
Net gain on sales of assets— — — — — — — — — — (3)(3)
Operating income (loss)385 441 826 367 70 437 1,007 16 (228)2,067 
Interest expense, net— — — 12 — 12 — — 128 148 
Provision for income taxes— — — 145 17 162 404 — — — 37 603 
Total assets at June 30, 20212,635 5,288 7,923 8,795 1,795 10,590 18,461 1,740 271 1,117 5,334 45,436 
Capital expenditures22 47 69 23 26 314 — 15 433 
Three Months Ended June 30, 2020            
Revenues:            
Unaffiliated customers$20 $16 $36 $471 $106 $577 $683 
a
$— $1,106 $464 $188 
b
$3,054 
Intersegment447 505 952 
e
52 — 52 35 58 (1,107)— 
Production and delivery348 439 787 334 104 438 378 61 1,138 446 (854)2,394 
Depreciation, depletion and amortization
43 46 89 88 14 102 124 15 15 358 
Metals inventory adjustments
— (89)(89)— (57)(57)— — (139)
Selling, general and administrative expenses
— — 28 — — 56 91 
Mining exploration and research expenses— — — — — — — — 17 18 
Environmental obligations and shutdown costs
— — — — — — — — — — 11 11 
Operating income (loss)76 123 199 100 45 145 188 (19)(31)(169)321 
Interest expense, net— 20 — 20 — — 92 115 
Provision for (benefit from) income taxes— — — 29 16 45 78 — — (28)96 
Total assets at June 30, 20202,697 5,198 7,895 8,515 1,631 10,146 16,848 1,777 259 726 2,579 40,230 
Capital expenditures27 121 148 31 20 51 308 527 
a.Includes PT-FI's sales to PT Smelting totaling $756 million in second-quarter 2021 and $433 million in second-quarter 2020.
b.Includes revenues from FCX's molybdenum sales company, which includes sales of molybdenum produced by the Molybdenum mines and by certain of the North America and South America copper mines.
c.Includes nonrecurring charges totaling $69 million associated with labor-related charges at Cerro Verde for agreements reached with 57 percent of its hourly employees.
d.Includes charges associated with the major maintenance turnaround at the Miami smelter totaling $19 million.
e.Includes hedging losses totaling $24 million related to forward sales contracts covering 150 million pounds of copper sales for May and June 2020 at a fixed price of $2.34 per pound.

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(In millions)     
AtlanticCorporate,
North America Copper MinesSouth America MiningCopperOther
CerroIndonesiaMolybdenumRod &Smelting& Elimi-FCX
MorenciOtherTotalVerdeOtherTotalMiningMinesRefining& RefiningnationsTotal
Six months ended June 30, 2021           
Revenues:            
Unaffiliated customers$61 $83 $144 $1,742 $363 $2,105 $3,136 
a
$— $2,998 $1,481 $734 
b
$10,598 
Intersegment1,285 1,763 3,048 165 — 165 108 159 13 — (3,493)— 
Production and delivery620 1,054 1,674 930 
c
209 1,139 983 113 3,007 1,448 (2,511)
d
5,853 
Depreciation, depletion and amortization74 107 181 171 24 195 446 32 15 31 902 
Metals inventory adjustments— — — — — — — — — — 
Selling, general and administrative expenses— 53 — — 12 116 187 
Mining exploration and research expenses— — — — — — — — — — 21 21 
Environmental obligations and shutdown costs— — — — — — — — 37 38 
Net gain on sales of assets— — — — — — — — — — (3)(3)
Operating income (loss)650 684 1,334 802 130 932 1,762 13 (450)3,599 
Interest expense, net— — — 25 — 25 — — 258 293 
Provision for (benefit from) income taxes— — — 318 38 356 719 — — — (29)1,046 
Capital expenditures32 63 95 43 47 624 13 20 803 
Six months ended June 30, 2020           
Revenues:            
Unaffiliated customers$22 $23 $45 $847 $204 $1,051 $1,128 
a
$— $2,221 $893 $514 
b
$5,852 
Intersegment889 1,039 1,928 
e
90 — 90 35 129 16 13 (2,211)— 
Production and delivery697 950 1,647 758 214 972 721 127 2,257 857 (1,642)4,939 
Depreciation, depletion and amortization87 94 181 181 29 210 225 31 14 30 699 
Metals inventory adjustments52 56 — — — 18 83 
Selling, general and administrative expenses— 56 — — 10 130 201 
Mining exploration and research expenses— — — — — — — — 32 34 
Environmental obligations and shutdown costs— — — — — — — — — 36 37 
Net loss on sales of assets— — — — — — — — — — 11 11 
Operating income (loss)122 (37)85 (5)(42)(47)161 (34)(30)25 (312)(152)
Interest expense, net— 48 — 48 — — 186 242 
(Benefit from) provision for income taxes— — — (23)(10)(33)90 — — (22)36 
Capital expenditures71 261 332 90 35 125 634 11 11 20 1,137 
a.Includes PT-FI's sales to PT Smelting totaling $1.5 billion for the first six months of 2021 and $813 million for the first six months of 2020.
b.Includes revenues from FCX's molybdenum sales company, which includes sales of molybdenum produced by the Molybdenum mines and by certain of the North America and South America copper mines.
c.Includes nonrecurring charges totaling $69 million associated with labor-related charges at Cerro Verde for agreements reached with 57 percent of its hourly employees.
d.Includes charges associated with the major maintenance turnaround at the Miami smelter totaling $87 million.
e.Includes hedging losses totaling $24 million related to forward sales contracts covering 150 million pounds of copper sales for May and June 2020 at a fixed price of $2.34 per pound.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

Results of Review of Interim Financial Statements
We have reviewed the accompanying consolidated balance sheet of Freeport-McMoRan Inc. (the Company) as of June 30, 2021, the related consolidated statements of operations, comprehensive income (loss), and equity for the three- and six-month periods ended June 30, 2021 and 2020, the related consolidated statements of cash flows for the six-month periods ended June 30, 2021 and 2020, 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, 2020, 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 16, 2021, 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, 2020, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
Basis for Review Results
These financial statements are the responsibility of the Company's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.


/s/ Ernst & Young LLP

Phoenix, Arizona
August 5, 2021
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Table of Contents                 
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, 2020 (2020 Form 10-K), filed with the United States (U.S.) Securities and Exchange Commission (SEC). The results of operations reported and summarized below are not necessarily indicative of future operating results (refer to “Cautionary Statement” for further discussion). References to “Notes” are Notes included in our Notes to Consolidated Financial Statements (Unaudited). Throughout MD&A, all references to income or losses per share are on a diluted basis.

OVERVIEW

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

Our results for the first six months of 2021 reflect strong operating and financial performance, and cash flow generation. We achieved the balance sheet targets outlined in our financial policy adopted earlier this year, and believe that we are well positioned to increase cash returns to shareholders and for investments in long-term future growth. We continue to execute our operating plans in a safe, efficient and responsible manner and remain focused on building long-term value through solid management of our portfolio of long-lived and high-quality copper assets.

The ramp-up of underground mining at PT Freeport Indonesia (PT-FI) is advancing on schedule and Cerro Verde's concentrator facilities have performed well with milling rates averaging 382,100 metric tons of ore per day for the first six months of 2021. Our Lone Star copper leach project, which was successfully completed in the second half of 2020, has achieved design capacity approximating 200 million pounds of copper annually with potential for further increases. Refer to “Operations” for further discussion.

Net income (loss) attributable to common stock totaled $1.1 billion in second-quarter 2021, $53 million in second-quarter 2020, $1.8 billion for the first six months of 2021 and $(438) million for the first six months of 2020. Results for the 2021 periods, compared with the 2020 periods, reflect higher copper prices and volumes, partly offset by a higher provision for income taxes. The results for the 2020 periods also reflect charges directly associated with the COVID-19 pandemic and revised operating plans, including employee separation costs, totaling $144 million in second-quarter 2020 and $153 million for the first six months of 2020. Refer to “Consolidated Results” for further discussion.

We continue to monitor the impact of the COVID-19 pandemic on our business and maintain our vigilant operating protocols to contain and mitigate the risk of spread of COVID-19 at each of our operating sites. To date, our protocols have been effective in mitigating and preventing a major outbreak of COVID-19 at our operating sites. We will continue to monitor, assess and update our COVID-19 response and to provide assistance to employees in obtaining vaccinations.

At June 30, 2021, we had consolidated debt of $9.7 billion and consolidated cash and cash equivalents of $6.3 billion, resulting in net debt of $3.4 billion. This represents a reduction in net debt of $2.7 billion from year-end 2020. Refer to “Net Debt” for reconciliations of debt and cash and cash equivalents to net debt.

At June 30, 2021, we had no borrowings and $3.5 billion available under our revolving credit facility. We have $1.1 billion in debt maturities through 2022, including our 3.55% Senior Notes ($0.5 billion) and the Cerro Verde Term Loan ($0.5 billion). Refer to Note 5 and “Capital Resources and Liquidity” for further discussion.

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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 I, Item 1A. of our 2020 Form 10-K 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.

Consolidated Sales Volumes
Following are our projected consolidated sales volumes for the year 2021:
Copper (millions of recoverable pounds):
 
North America copper mines1,465 
South America mining1,050 
Indonesia mining1,335 
Total3,850 
Gold (millions of recoverable ounces)
1.3 
Molybdenum (millions of recoverable pounds)