What changed in this filing

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Item 1. Financial Statements

2020-08-07 compared with 2020-05-07 · 213 added, 133 removed, 484 unchanged (42% of the section changed)

38 unchanged sentences

Three Months Ended

Six Months Ended

(In millions, except per share amounts)

9 unchanged sentences

Total costs and expenses

Operating (loss) income

Operating income (loss)

Interest expense, net

1 unchanged sentence

Other income, net

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

Benefit from (provision for) income taxes

Equity in affiliated companies’ net earnings (losses)

Net (loss) income from continuing operations

Income (loss) from continuing operations before income taxes and equity in affiliated companies’ net earnings

(Provision for) benefit from income taxes

Equity in affiliated companies’ net earnings

Net income (loss) from continuing operations

Net gain from discontinued operations

Net (loss) income

Net loss (income) attributable to noncontrolling interests

Net (loss) income attributable to common stockholders

Basic and diluted net (loss) income per share attributable to common stockholders:

Net income (loss)

Net (income) loss attributable to noncontrolling interests

Net income (loss) attributable to common stockholders

Basic and diluted net income (loss) per share attributable to common stockholders:

Continuing operations

4 unchanged sentences

Freeport-McMoRan Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Unaudited)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

Three Months Ended

Six Months Ended

(In millions)

Net (loss) income

Net income (loss)

Other comprehensive income, net of taxes:

1 unchanged sentence

Amortization of unrecognized amounts included in net periodic benefit costs

Foreign exchange losses

Foreign exchange gains (losses)

Other comprehensive income

Total comprehensive (loss) income

Total comprehensive loss (income) attributable to noncontrolling interests

Total comprehensive (loss) income attributable to common stockholders

Total comprehensive income (loss)

Total comprehensive (income) loss attributable to noncontrolling interests

Total comprehensive income (loss) attributable to common stockholders

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

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Three Months Ended

Six Months Ended

(In millions)

1 unchanged sentence

Net (loss) income

Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Depreciation, depletion and amortization

8 unchanged sentences

Deferred income taxes

PT Freeport Indonesia (PT-FI) surface water tax settlement

Charges for Cerro Verde royalty dispute

5 unchanged sentences

Accrued income taxes and timing of other tax payments

Net cash (used in) provided by operating activities

Net cash provided by operating activities

Cash flow from investing activities:

20 unchanged sentences

CONSOLIDATED STATEMENTS OF EQUITY (Unaudited)

THREE MONTHS ENDED MARCH 31

THREE MONTHS ENDED JUNE 30

Stockholders’ Equity

4 unchanged sentences

(In millions)

Balance at March 31, 2020

Stock-based compensation, including the tender of shares

Contributions from noncontrolling interests

Net income attributable to common stockholders

Net income attributable to noncontrolling interests

Other comprehensive income

Balance at June 30, 2020

Stockholders’ Equity

Accum-ulated Deficit

Other Compre-

Held in Treasury

Stock-holders’ Equity

(In millions)

Balance at March 31, 2019

Stock-based compensation, including the tender of shares

Contributions from noncontrolling interests

Net loss attributable to common stockholders

Net loss attributable to noncontrolling interests

Other comprehensive income

Balance at June 30, 2019

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

Freeport-McMoRan Inc.

CONSOLIDATED STATEMENTS OF EQUITY (Unaudited)

SIX MONTHS ENDED JUNE 30

Stockholders’ Equity

Accum-ulated Deficit

Other Compre-

Held in Treasury

Stock-holders’ Equity

(In millions)

Balance at December 31, 2019

3 unchanged sentences

Net loss attributable to common stockholders

Net loss attributable to noncontrolling interests

Net income attributable to noncontrolling interests

Other comprehensive income (loss)

Balance at March 31, 2020

Balance at June 30, 2020

Stockholders’ Equity

7 unchanged sentences

Stock-based compensation, including the tender of shares

Changes in noncontrolling interests

Net income attributable to common stockholders

Change in ownership interests

Contributions from noncontrolling interests

Net loss attributable to common stockholders

Net income attributable to noncontrolling interests

Other comprehensive income

Balance at March 31, 2019

Balance at June 30, 2019

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

6 unchanged sentences

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 .

Operating results for the six -month period ended June 30, 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.

In April 2020, FCX announced revised operating plans in response to the global COVID-19 pandemic and resulting negative impact on the global economy.

FCX proactively implemented operating protocols at each of its operating sites to contain and mitigate the risk of spread of COVID-19.

FCX also continues to work closely with communities where it operates across the globe and has provided monetary support and in-kind contributions of medical supplies, equipment and food.

FCX achieved significant progress at Cerro Verde during second-quarter 2020 to restore operations following COVID-19 restrictions imposed by the Peruvian government in March 2020.

Strict health protocols have been implemented and a plan for Cerro Verde to restore operations was approved by the Peruvian government in second-quarter 2020.

FCX is currently assessing options and future timing of restart of the Chino mine in New Mexico, which will take into account public health and market conditions.

During second-quarter 2020, FCX implemented a series of actions to reduce administrative and centralized support costs in conjunction with its April 2020 revised operating plans.

Cost savings initiatives included a temporary reduction in certain employee benefits, the initiation of furloughs and an employee separation program, and reductions in third party service costs, facilities costs, travel and other expenses.

FCX recognized charges totaling $ 196 million in second-quarter 2020 and $ 224 million for the first six months of 2020 associated with the COVID-19 pandemic and revised operating plans, including employee separation charges.

These charges, none of which were capitalized into inventory, were recorded to production and delivery ( $ 153 million in second-quarter 2020 and $ 173 million for the first six months of 2020);

depreciation, depletion and amortization ( $ 21 million in second-quarter 2020 and $ 29 million for the first six months of 2020);

selling, general and administrative ( $ 15 million for each of the second quarter and first six months of 2020) and mining exploration and research expense ( $ 7 million for each of the second quarter and first six months of 2020).

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):

FCX calculates its basic net income (loss) per share of common stock under the two-class method and calculates its diluted net income (loss) per share of common stock using the more dilutive of the two-class method or the treasury-stock method.

Basic net income (loss) per share of common stock was computed by dividing net income (loss) attributable to common stockholders (after deducting accumulated dividends and undistributed earnings to participating securities) by the weighted-average shares of common stock outstanding during the period.

Diluted net income (loss) per share of common stock was calculated by including the basic weighted-average shares of common stock outstanding adjusted for the effects of all potential dilutive shares of common stock, unless their effect would be anti-dilutive.

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

Three Months Ended

Net (loss) income from continuing operations

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

Six Months Ended

Net income (loss) from continuing operations

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

Undistributed earnings allocated to participating securities

Net (loss) income from continuing operations attributable to common stockholders

Net income (loss) from continuing operations attributable to common stockholders

Net income from discontinued operations attributable to common stockholders

Net (loss) income attributable to common stockholders

Net income (loss) attributable to common stockholders

Basic weighted-average shares of common stock outstanding

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

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

Diluted weighted-average shares of common stock outstanding

Basic and diluted net (loss) income per share attributable to common stockholders:

Basic and diluted net income (loss) per share attributable to common stockholders:

Continuing operations

Discontinued operations

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 .

Excludes approximately 10 million shares in second-quarter 2019 , 10 million shares for the first six months of 2020 and 12 million shares for the first six months of 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 income (loss) per share of common stock.

Stock options for 38 million shares of common stock in second-quarter 2020 , 43 million shares of common stock in second-quarter 2019 , 39 million shares of common stock for first six months of 2020 and 41 million shares of common stock for the first six months of 2019 were excluded.

INVENTORIES, INCLUDING LONG-TERM MILL AND LEACH STOCKPILES

14 unchanged sentences

Total long-term mill and leach stockpiles b

Materials and supplies inventory was net of obsolescence reserves totaling $ 25 million at March 31, 2020 , and $ 24 million at December 31, 2019 .

Materials and supplies inventory was net of obsolescence reserves totaling $ 31 million at June 30, 2020 , and $ 24 million at December 31, 2019 .

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).

During second-quarter 2020, FCX recorded net favorable adjustments to increase long-term metals inventory carrying values by $ 139 million , 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 totaled $ 83 million for the first six months of 2020 associated with lower market prices for copper ( $ 61 million ) and molybdenum ( $ 22 million ).

Net realizable value inventory adjustments to decrease metals inventory carrying values totaled $ 2 million in second-quarter 2019 and $ 59 million for the first six months of 2019, primarily for cobalt inventories because of lower cobalt market prices (refer to Note 9 for metals inventory adjustments by business segment).

G eographic sources of FCX’s benefit from (provision for) income taxes follow (in millions):

Three Months Ended

Six Months Ended

International operations

FCX’s consolidated effective income tax rate was 10 percent for first-quarter 2020 and 57 percent for first-quarter 2019 .

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.

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

FCX’s consolidated effective income tax rate was ( 9 ) percent for the first six months of 2020 and 101 percent for the first six months of 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.

jurisdiction generated net losses in the first six months of 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.

Variations in the relative proportions of jurisdictional income result in fluctuations to FCX’s consolidated effective income tax rate.

1 unchanged sentence

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.

None of these measures, including the CARES Act, resulted in material impacts to FCX’s provision for income taxes for the six months ended June 30, 2020.

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 collected $ 221 million of U.S.

alternative minimum tax credit refunds in July 2020, and expects to collect the outstanding balance ( $ 47 million ) within the next 12 months.

FCX continues to evaluate income tax accounting considerations of additional 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.

9 unchanged sentences

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.

At June 30, 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.

In June 2020 , FCX, PT-FI and Freeport-McMoRan Oil & Gas LLC (FM O&G LLC) amended the $ 3.5 billion unsecured revolving credit facility.

The key changes under the amendment include (i) a suspension of the total leverage ratio through June 30, 2021 , followed by a limit of 5.25 x beginning with the quarter ending September 30, 2021 , and stepping down to 3.75 x beginning January 1, 2022 ;

and (ii) a reduction in the interest expense coverage ratio to a minimum of 2.00 x through December 31, 2021 , reverting to 2.25 x beginning January 1, 2022 .

FCX also agreed to a minimum liquidity covenant of $ 1 billion (consisting of consolidated unrestricted cash and availability under the revolving credit facility) applicable to each quarter through June 30, 2021 , and additional restrictions on priority debt and liens, and the payment of common stock dividends through December 31, 2021 .

FCX retained the option to revert to the previous covenant requirements if it is determined additional flexibility is no longer needed.

At June 30, 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 .

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 proceeds, net of underwriting fees, totaling $ 1.29 billion .

Interest on these senior notes is payable semiannually on March 1 and September 1 of each year.

1 unchanged sentence

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

FCX 4.00% Senior Notes due 2021

FCX 3.55% Senior Notes due 2022

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.

On April 3, 2020, FCX used the remaining net proceeds to fund the make-whole redemption of all of its remaining 4.00 % Senior Notes due 2021 and the payment of accrued and unpaid interest, premiums, fees and expenses in connection with the transaction.

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.

On July 27, 2020, FCX completed the sale of $ 650 million of 4.375 % Senior Notes due 2028 and $ 850 million of 4.625 % Senior Notes due 2030 for proceeds, net of underwriting fees, totaling $ 1.49 billion .

Interest on these senior notes is payable semiannually on February 1 and August 1 of each year.

These senior notes rank equally with FCX’s other existing and future unsecured and unsubordinated indebtedness.

FCX used $ 1.3 billion of the net proceeds from this offering to purchase a portion of its 3.55 % Senior Notes due 2022, 3.875 % Senior Notes due 2023 and 4.55 % Senior Notes due 2024, in connection with the early settlement of its previously announced tender offers, and the payment of accrued and unpaid interest, premiums, fees and expenses in connection with these transactions.

Depending on the final tender results, FCX may use all or a portion of the remaining net proceeds from this offering to purchase more of certain existing senior notes in the tender offers and expects the final settlement of the tender offers, if any, to occur on August 11, 2020.

Any net proceeds not used for the tender offers will be used for general corporate purposes, which may include repurchases or redemptions of FCX’s notes.

FCX expects to record a loss on early extinguishment of debt of approximately $ 60 million in third-quarter 2020 related to the early settlement of the tender offers.

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 .

Consolidated interest costs (before capitalization) totaled $ 159 million in second-quarter 2020 , $ 167 million in second-quarter 2019 , $ 330 million for the first six months of 2020 and $ 345 million for the first six months of 2019 .

Capitalized interest added to property, plant, equipment and mine development costs, net, totaled $ 44 million in second-quarter 2020 , $ 35 million in second-quarter 2019 , $ 88 million for the first six months of 2020 and $ 67 million for the first six months of 2019 .

Common Stock.

2 unchanged sentences

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.

As noted above, in accordance with the June 2020 amendment to the revolving credit facility, FCX is restricted from declaring or paying common stock dividends through December 31, 2021, unless FCX, at its option, reverts to the previous covenant requirements which would also eliminate the restriction on the declaration or payment of common stock dividends.

FINANCIAL INSTRUMENTS

6 unchanged sentences

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.

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 follow.

4 unchanged sentences

(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 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):

FCX did not have any significant gains or losses resulting from hedge ineffectiveness during the six -month periods ended June 30, 2020 and 2019 .

At June 30, 2020 , FCX held copper futures and swap contracts that qualified for hedge accounting for 54 million pounds at an average contract price of $ 2.50 per pound, with maturities through December 2021 .

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 gains (losses) on the related hedged item follows (in millions):

Three Months Ended

Six Months Ended

Copper futures and swap contracts:

Unrealized (losses) gains:

Unrealized gains (losses):

Derivative financial instruments

Hedged item – firm sales commitments

Realized (losses) gains:

Realized losses:

Matured derivative financial instruments

7 unchanged sentences

FCX applies the normal purchases and normal sales scope exception in accordance with derivatives and hedge accounting guidance to the host contract in its concentrate or cathode sales agreements since these contracts do not allow for net settlement and always result in physical delivery.

The embedded derivative does not qualify for hedge accounting and is adjusted to fair value through earnings each period, using the period-end LME or COMEX copper forward prices

and the adjusted LBMA gold prices, until the date of final pricing.

The embedded derivative does not qualify for hedge accounting and is adjusted to fair value through earnings each period, using the period-end LME or COMEX copper forward prices and the adjusted LBMA gold prices, until the date of final pricing.

Similarly, FCX purchases copper 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:

A summary of FCX’s embedded derivatives at June 30, 2020 , follows:

Open Positions

3 unchanged sentences

Copper (millions of pounds)

November 2020

Gold (thousands of ounces)

1 unchanged sentence

Copper (millions of pounds)

September 2020

Copper Forward Contracts.

1 unchanged sentence

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):

At June 30, 2020 , Atlantic Copper held net copper forward purchase contracts for 16 million pounds at an average contract price of $ 2.62 per pound, with maturities through August 2020 .

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 Ended

Six Months Ended

Embedded derivatives in provisional sales contracts:

31 unchanged sentences

Less gross amounts of offset:

Embedded derivatives in provisional

sales/purchase contracts

Copper derivatives

10 unchanged sentences

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 .

As of June 30, 2020 , the maximum amount of credit exposure associated with derivative transactions was $ 88 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).

The carrying value for cash and cash equivalents (which included time deposits of $ 0.3 billion at June 30, 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 June 30, 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.

9 unchanged sentences

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 did not have any significant transfers in or out of Level 3 during second-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

At June 30, 2020

Investment securities:

3 unchanged sentences

core fixed income fund

Government mortgage-backed securities

Corporate bonds

Government mortgage-backed securities

Government bonds and notes

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Embedded derivatives in provisional sales/purchase contracts in a gross asset position c

Copper futures and swap contracts c

Copper forward contracts c

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Embedded derivatives in provisional sales/purchase contracts in a gross liability position

Copper futures and swap contracts c

Copper forward contracts

Long-term debt, including current portion d

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

Excludes time deposits (which approximated fair value) included in (i) other current assets of $ 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.

Excludes time deposits (which approximated fair value) included in (i) other current assets of $ 132 million at June 30, 2020 , and $ 100 million at December 31, 2019 , and (ii) other assets of $ 131 million at June 30, 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.

Refer to Note 6 for further discussion and balance sheet classifications.

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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.

Also, contingent consideration of $ 50 million was realized in 2018 and collected in first-quarter 2019 (included in proceeds from sales of assets 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.

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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 contingent consideration included in (i) other current assets totaled $ 12 million at June 30, 2020 , and $ 18 million at December 31, 2019 , and (ii) other assets totaled $ 103 million at June 30, 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.

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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 .

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):

There have been no changes in the techniques used at June 30, 2020 , as compared with those techniques used at December 31, 2019 .

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 2020 follows (in millions):

Fair value at January 1, 2020

Net unrealized loss related to assets still held at the end of the period

Fair value at March 31, 2020

Fair value at June 30, 2020

CONTINGENCIES AND COMMITMENTS

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.

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, which were updated in Note 8 of FCX’s quarterly report on Form 10-Q for the quarter ended March 31, 2020.

Louisiana Parishes Coastal Erosion Cases.

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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.

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 (J&J) 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.

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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

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.

Other cases remain

scheduled for trial in 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.

Cyprus Mines and CAMC also have contractual indemnification rights against J&J, which J&J disputes.

In June 2020, Cyprus Mines and CAMC filed a complaint in the Imerys bankruptcy case asserting that J&J was required to indemnify Cyprus Mines and CAMC for liabilities related to J&J products.

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.

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However, there can be no assurance that future developments will not alter this conclusion.

Environmental

On August 5, 2020, the co-conveners of the Global Tailings Review, which included the International Council on Mining and Metals (ICMM), an industry group of which FCX is a founding member, published the first Global Industry Standard on Tailings Management (the Standard).

The Standard includes 77 requirements across six key areas including the design, construction, operation and monitoring of tailings facilities, management and governance, emergency response and long-term recovery, and public disclosure.

As a member of ICMM, which has endorsed the Standard, FCX will move toward implementing it and will begin undertaking an extensive, multi-year analysis of its tailings facilities to ensure conformance with the Standard.

Compliance with the new Standard will require incremental future costs.

Other Matters

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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.

The parties were unable to find an amicable resolution and, on February 28, 2020, FCX and Cerro Verde filed international arbitration proceedings against the Peruvian government.

In April 2020, SMM Cerro Verde Netherlands B.V.

(SMM), another shareholder of Cerro Verde, filed a parallel arbitration proceeding under a different investment treaty against the Peruvian government.

BUSINESS SEGMENTS

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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.

Beginning in fourth-quarter 2019, the Bagdad copper mine became a reportable segment.

As a result, FCX revised its segment disclosure for the three and six months ended June 30, 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.

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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):

FCX’s revenues attributable to the products it sold for the second quarters and first six months of 2020 and 2019 follow (in millions):

Three Months Ended

Six Months Ended

Rod and other refined copper products

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South America Mining

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

Unaffiliated customers

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Environmental obligations and shutdown costs

Operating income (loss)

Interest expense, net

Provision for (benefit from) income taxes

Total assets at June 30, 2020

Capital expenditures

Three Months Ended June 30, 2019

Unaffiliated customers

Production and delivery

Depreciation, depletion and amortization

Metals inventory adjustments

Selling, general and administrative expenses

Mining exploration and research expenses

Environmental obligations and shutdown costs

Net loss on sales of assets

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Interest expense, net

Provision for (benefit from) income taxes

Total assets at June 30, 2019

Capital expenditures

Includes PT-FI's sales to PT Smelting totaling $ 433 million in second-quarter 2020 and $ 470 million in second-quarter 2019 .

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.

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.

(In millions)

North America Copper Mines

South America Mining

Six Months Ended June 30, 2020

Unaffiliated customers

Production and delivery

Depreciation, depletion and amortization

Metals inventory adjustments

Selling, general and administrative expenses

Mining exploration and research expenses

Environmental obligations and shutdown costs

Net loss on sales of assets

Operating income (loss)

Interest expense, net

(Benefit from) provision for income taxes

Total assets at March 31, 2020

Capital expenditures

Three Months Ended March 31, 2019

Six Months Ended June 30, 2019

Unaffiliated customers

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Provision for (benefit from) income taxes

Total assets at March 31, 2019

Capital expenditures

Includes PT-FI's sales to PT Smelting totaling $ 380 million in first-quarter 2020 and $ 409 million in first-quarter 2019 .

Includes PT-FI's sales to PT Smelting totaling $ 813 million for the first six months of 2020 and $ 879 million for the first six months of 2019 .

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.

NEW ACCOUNTING STANDARDS

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.

NEW ACCOUNTING STANDARD

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.

In June 2016, the Financial Accounting Standards Board issued an Accounting Standards Update (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.

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.

FCX evaluated events after June 30, 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.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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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”).

(the Company) as of June 30, 2020 , the related consolidated statements of operations, comprehensive income (loss), and equity for the three- and six-month periods ended June 30, 2020 and 2019 , the consolidated statements of cash flows for the six -month periods ended June 30, 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);

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 (loss) income, 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.

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Phoenix, Arizona

August 7, 2020

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements