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Item 2. Management’s Discussion and Analysis

2020-08-07 compared with 2020-05-07 · 712 added, 358 removed, 736 unchanged (59% of the section changed)

5 unchanged sentences

References to “Notes” are Notes included in our Notes to Consolidated Financial Statements (Unaudited).

Throughout MD&A, all references to losses or income per share are on a diluted basis.

Throughout MD&A, all references to income or losses per share are on a diluted basis.

We are a leading international mining company with headquarters in Phoenix, Arizona.

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and significant mining operations in North America and South America, including the large-scale Morenci minerals district in Arizona and the Cerro Verde operation in Peru.

In response to the global coronavirus (COVID-19) pandemic and resulting significant negative impact on the global economy, we have revised our operating plans.

These revised operating plans are designed to protect the health and well-being of our employees, their families and communities where they live, ensure safe and reliable operations, to serve customers and protect our strong liquidity position through reductions in costs and capital spending while preserving the long-term value of our assets.

We have proactively implemented operating protocols at each of our operating sites to contain and mitigate the risk of spread of COVID-19.

A series of actions have been implemented, including, but not limited to, physical distancing, travel restrictions, sanitizing, and frequent health screening and monitoring.

We are also incorporating testing procedures administered by medical providers at many of our facilities.

In April 2020, we suspended operations at our Chino copper mine in New Mexico because of the spread of COVID-19 among a limited number of employees.

Our protocols have been effective in mitigating and preventing a major outbreak of COVID-19 at our operating sites.

As the COVID-19 pandemic and related effects continue to evolve rapidly worldwide, we will continue to monitor, assess and update our COVID-19 related response, as needed.

We have assessed our near-term operating plans with a focus on maximizing cash flow and protecting liquidity in a weak and uncertain economic environment to preserve asset values for anticipated improved copper prices as economic conditions recover.

A series of actions are being implemented to significantly reduce costs and capital spending and adjust mine plans and corresponding mining and milling rates to maximize cash flow at lower prices.

Our revised operating plans are highlighted by:

(1) a $1.3 billion reduction in 2020 estimated operating costs;

(2) an $800 million reduction in 2020 estimated capital expenditures;

(3) a $100 million reduction in 2020 estimated exploration and administrative costs;

and (4) an approximate 400 million pound reduction in North America and South America 2020 estimated copper sales volumes.

These and other actions taken are discussed in more detail in “Operations.” The plans also incorporate the impact of lower input costs, principally energy and foreign exchange rates, and higher gold prices.

Our revised operating plans and estimates reflect current assumptions, and we will continue to closely monitor health and market conditions and make further adjustments to mine plans as required.

We continue to achieve important progress to establish large-scale, low-cost production from our underground ore bodies at Grasberg and are nearing completion of the initial phase of the Lone Star copper leach project (refer to “Operations” for further discussion).

Net (loss) income attributable to common stock totaled $(491) million in first-quarter 2020 and $31 million in first-quarter 2019 .

First-quarter 2020 results, compared with the 2019 period, primarily reflect net realizable value metals inventory adjustments, lower copper prices, and lower copper and gold sales volumes.

On April 24, 2020, we announced revised operating plans in response to the global COVID-19 pandemic and resulting negative impact on the global economy.

The April 2020 revised operating plans included significant reductions to operating costs, capital expenditures and exploration and administrative costs for the year 2020.

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

We continue to work closely with communities where we operate across the globe and have provided monetary support and in-kind contributions of medical supplies, equipment and food.

We continue to focus on safeguarding our business in an uncertain public health and economic environment, advancing the ramp-up of underground production at Grasberg to establish large-scale, low-cost copper and gold production, and advancing initiatives in North America and South America to position us for significant increases in cash flows in 2021 and beyond.

The ramp-up of underground production at the Grasberg minerals district continues to advance on schedule, and the Lone Star project in North America is substantially complete and on track to produce approximately 200 million pounds of copper per year beginning in the second half of 2020.

We 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.

Refer to “Operations” for further discussion.

With a focus on cost and capital management, our second-quarter 2020 results reflected strong execution of the April 2020 revised operating plans.

Our second-quarter 2020 consolidated sales exceeded the April 2020 estimates by 10 percent for copper and 12 percent for gold.

Net income (loss) attributable to common stock totaled $53 million in second-quarter 2020 , $(72) million in second-quarter 2019 , $(438) million for the first six months of 2020 and $(41) million for the first six months of 2019 .

The results for second-quarter 2020 , compared with second-quarter 2019 , primarily reflect lower unit net cash costs, partly offset by lower copper prices, lower copper and gold sales volumes and charges associated with the COVID-19 pandemic and revised operating plans.

The results for the first six months of 2020, compared with the first six months of 2019, primarily reflect lower copper and gold sales volumes, lower copper prices and charges associated with the COVID-19 pandemic and revised operating plans, partly offset by lower unit net cash costs.

The 2020 periods also included favorable metals inventory adjustments of $139 million in second-quarter 2020 and unfavorable metals inventory adjustments of $83 million for the first six months of 2020.

Refer to “Consolidated Results” for further discussion.

At March 31, 2020 , we had $1.6 billion in consolidated cash and cash equivalents and $10.1 billion in total debt.

We had no borrowings and $3.5 billion was available under our $3.5 billion, unsecured revolving credit facility at

March 31, 2020 .

We have a strong liquidity position to manage volatility, and following the April 2020 redemption of the remaining 4.00% Senior Notes, no senior notes maturing until 2022.

Refer to Note 5 for discussion of debt and “Capital Resources and Liquidity” for discussion of our first-quarter 2020 debt transactions.

Despite a rapid change in market conditions and unfavorable changes to the global economy as a result of the COVID-19 pandemic, which is negatively impacting our short-term outlook, we continue to view the long-term outlook for our business positively, supported by limitations on supplies of copper and by the requirements for copper in the world’s economy.

At June 30, 2020 , we had $1.5 billion in consolidated cash and cash equivalents and $9.9 billion in total debt.

At June 30, 2020 , we had no borrowings and $3.5 billion was available under our revolving credit facility.

We have a strong liquidity position to manage market volatility, especially in light of the fact that we have no senior note maturities until 2022.

In July 2020, we completed an offering of $1.5 billion of senior notes in two tranches in an underwritten registered public offering.

We used a portion of the net proceeds from the offering to purchase certain existing senior notes in connection with the early settlement of our previously announced tender offers.

Depending on the final tender results, we may use all or a portion of the the remaining net proceeds from the offering to purchase more of certain existing senior notes in the tender offers.

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

These transactions will further enhance financial flexibility and extend debt maturities.

Refer to Note 5 and “Capital Resources and Liquidity” for further discussion.

Despite the rapid change in market conditions and unfavorable changes to the global economy as a result of the COVID-19 pandemic, we continue to view the long-term outlook for our business positively, supported by limitations on supplies of copper and by the requirements for copper in the world’s economy.

Our financial results vary as a result of fluctuations in market prices primarily for copper, gold and, to a lesser extent, molybdenum, as well as other factors.

World market prices for these commodities have fluctuated historically and are affected by numerous factors beyond our control.

Refer to “Markets” below and “Risk Factors” in Part II, Item 1A.

Refer to “Markets” below and “Risk Factors” in Part I, Item 1A.

of our 2019 Form 10-K and Part II, Item 1A.

herein for further discussion.

Because we cannot control the prices of our products, the key measures that management focuses on in operating our business are sales volumes, unit net cash costs, operating cash flows and capital expenditures.

Following are consolidated operating and financial data for the year 2020 , comparing current estimates to the estimates reported in January 2020:

January 2020 Estimates

(Based on $2.30

(Based on $2.85 per pound of copper)

First-quarter 2020

Remainder of 2020

Total Percent Change

CONSOLIDATED OPERATING DATA

Sales, excluding purchases

Copper (billions of recoverable pounds)

Gold (thousands of recoverable ounces)

Consolidated Sales Volumes

Following are our projected consolidated sales volumes for the year 2020:

Copper (millions of recoverable pounds):

North America copper mines

South America mining

Indonesia mining

Gold (millions of recoverable ounces)

Molybdenum (millions of recoverable pounds)

Unit net cash costs per pound b

CONSOLIDATED FINANCIAL DATA (in billions)

Operating cash flows

Capital expenditures f

Operating cash flows less capital expenditures

Cash and cash equivalents

Total debt, including current portion

Projected molybdenum sales include 25 million pounds produced by our Molybdenum mines and 52 million pounds produced by our North America and South America copper mines.

Reflects per pound weighted-average unit net cash costs (net of by-product credits) for all copper mines, before net noncash and other costs.

For reconciliations of per pound unit costs by operating division to production and delivery costs applicable to sales reported in our consolidated financial statements, refer to “Product Revenues and Production Costs.”

Based on current sales volume and cost estimates, and assuming average prices of $1,600 per ounce of gold and $9.00 per pound of molybdenum for the remainder of 2020 .

The January 2020 estimates were based on average prices of $1,500 per ounce of gold and $10.00 per pound of molybdenum for the year 2020.

The impact of price changes for the remainder of 2020 on consolidated unit net cash costs and operating cash flows follows:

Change for Remainder of 2020

Consolidated Unit Net Cash Costs

Operating Cash Flows

(in millions)

+/- $0.10 per pound

+/- $50 per ounce

+/- $2 per pound

Excludes capital expenditures for the development of the new smelter in Indonesia (refer to “Operations - Indonesia Mining”).

The January 2020 estimates included $0.5 billion in debt associated with the new smelter for PT Freeport Indonesia (PT-FI).

Sales Volumes

For our projected consolidated sales volumes for the year 2020, see the table above.

Consolidated sales volumes for second-quarter 2020 under our revised operating plans are expected to approximate 690 million pounds of copper, 165 thousand ounces of gold and 19 million pounds of molybdenum.

Projected sales volumes for the remainder of 2020 are dependent on operational performance, impacts from COVID-19, weather-related conditions, timing of shipments, and other factors.

Consolidated sales volumes for third-quarter 2020 are expected to approximate 790 million pounds of copper, 220 thousand ounces of gold and 18 million pounds of molybdenum.

As PT-FI continues to ramp-up production from its significant underground ore bodies, metal production is expected to improve significantly in 2021, with estimated consolidated sales of 3.8 billion pounds of copper and 1.4 million ounces of gold.

Projected sales volumes are dependent on operational performance, impacts and the duration of the COVID-19 pandemic, weather-related conditions, timing of shipments and other factors.

For other important factors that could cause results to differ materially from projections, refer to “Cautionary Statement” and “Risk Factors” contained in Part I, Item 1A.

of our 2019 Form 10-K and “Risk Factors” contained in Part II, Item 1A.

As PT-FI continues to ramp-up production from its significant underground ore bodies, metal production is expected to improve significantly in 2021.

of our 2019 Form 10-K and Part II, Item 1A.

Consolidated Unit Net Cash Costs

Assuming average prices of $1,800 per ounce of gold and $7.00 per pound of molybdenum for the second half of 2020 and achievement of current sales volume and cost estimates, consolidated unit net cash costs (net of by-product credits) for our copper mines are expected to average $1.53 per pound of copper for the year 2020 , (including $1.40 per pound of copper for the second half of 2020 ).

The impact of price changes during the second half of 2020 on consolidated unit net cash costs for the year 2020 would approximate $0.01 per pound of copper for each $50 per ounce change in the average price of gold and $0.01 per pound of copper for each $2 per pound change in the average price of molybdenum.

Quarterly unit net cash costs vary with fluctuations in sales volumes and realized prices, primarily for gold and molybdenum.

We expect consolidated unit net cash costs to decline in 2021, following a ramp-up period at PT-FI.

Consolidated Operating Cash Flows

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and other factors.

As noted above, consolidated operating cash flows under our revised operating plans are estimated to approximate $1.8 billion (including $0.8 billion of working capital and other sources) for the year 2020 .

The substantial majority of operating cash flows for the year are expected to be generated in the second half of 2020.

Based on current sales volume and cost estimates, and assuming average prices of $2.85 per pound for copper, $1,800 per ounce for gold, and $7.00 per pound for molybdenum for the second half of 2020, our consolidated operating cash flows are estimated to approximate $2.6 billion (including $0.5 billion of working capital and other sources) for the year 2020 .

Estimated consolidated operating cash flows for the year 2020 also reflect an estimated income tax provision of $0.5 billion (refer to “Consolidated Results – Income Taxes” for further discussion of our projected income tax rate for the year 2020 ).

The impact of price changes during the second half of 2020 on operating cash flows for the year 2020 would approximate $165 million for each $0.10 per pound change in the average price of copper, $25 million for each $50 per ounce change in the average price of gold and $35 million for each $2 per pound change in the average price of molybdenum.

Consolidated Capital Expenditures

As noted in the table above, consolidated capital expenditures are expected to approximate $2.0 billion for the year 2020 , including $1.3 billion for major mining projects, primarily associated with underground development activities in the Grasberg minerals district and completion of the Lone Star copper leach project, and exclude estimates associated with the new smelter in Indonesia.

Approximately 60 percent of projected 2020 capital expenditures are expected to be incurred in the first half of 2020.

Consolidated capital expenditures are expected to approximate $2.0 billion for the year 2020 , including $1.3 billion for major projects, primarily associated with underground development activities in the Grasberg minerals district and completion of the Lone Star copper leach project, and exclude estimates associated with the new smelter in Indonesia.

A large portion of the capital expenditures relates to projects that are expected to add significant production and cash flow in future periods, enabling us to generate operating cash flows exceeding capital expenditures in future years.

We have cash on hand and the financial flexibility to fund these expenditures and will continue to be disciplined in deploying capital.

Corporate Items and Other

We are also implementing a series of actions to reduce administrative and centralized support costs in conjunction with our revised operating plans.

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

As part of the cost savings initiatives, the Board of Directors (the Board) approved a 25 percent reduction in the salary of each of our Chief Executive Officer and Chief Financial Officer through the end of 2020.

Each of these executives has also agreed to forgo substantially all their reduced cash salary for the remainder of 2020, which will be paid in an award of restricted stock units that will vest at the end of the year.

Selling, general and administrative expense for the remainder of 2020 is expected to be over 15 percent below the January 2020 estimates for the same period.

During second-quarter 2020, we implemented a series of actions to reduce administrative and centralized support costs in conjunction with our 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.

During second-quarter 2020, we recognized charges totaling approximately $82 million ($60 million in production and delivery costs, $15 million in selling, general and administrative costs, and $7 million in mining exploration and research expenses) associated with the employee separation program.

Annual savings associated with this program are expected to be in excess of $100 million.

As part of the cost savings initiatives initiated in second-quarter 2020, the Board of Directors (the Board) approved a 25 percent reduction in the salary of each of our Chief Executive Officer and Chief Financial Officer through the end of 2020.

Each of these executives also agreed to forgo substantially all their reduced cash salary for the remainder of 2020, which was substituted with an award of restricted stock units that will vest at the end of the year.

Selling, general and administrative expense, excluding costs of the employee separation program, are expected to approximate $355 million for the year 2020.

World prices for copper, gold and molybdenum can fluctuate significantly.

During the period from January 2010 through March 2020 , the London Metal Exchange (LME) copper settlement price varied from a low of $1.96 per pound in 2016 to a record high of $4.60 per pound in 2011;

During the period from January 2010 through June 2020 , the London Metal Exchange (LME) copper settlement price varied from a low of $1.96 per pound in 2016 to a record high of $4.60 per pound in 2011;

the London Bullion Market Association (LBMA) PM gold price fluctuated from a low of $1,049 per ounce in 2015 to a record high of $1,895 per ounce in 2011;

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Copper, gold and molybdenum prices are affected by numerous factors beyond our control as described further in “Risk Factors” contained in Part I, Item 1A.

of our 2019 Form 10-K and Part II, Item 1A.

This graph presents LME copper settlement prices and the combined reported stocks of copper at the LME, Commodity Exchange Inc., a division of the New York Mercantile Exchange, and the Shanghai Futures Exchange from January 2010 through March 2020 .

During first-quarter 2020 , LME copper settlement prices ranged from a low of $2.09 per pound to a high of $2.86 per pound, averaged $2.56 per pound and settled at $2.18 per pound on March 31, 2020.

In March 2020, copper prices declined sharply in reaction to the COVID-19 pandemic.

The outbreak has caused substantial disruption in global economies and markets.

The current and anticipated economic impacts of the pandemic have eclipsed the positive momentum that existed for copper prices at the start of 2020 following progress on the trade dispute between the U.S.

and China and other improving economic prospects.

The LME copper settlement price was $2.37 per pound on April 30, 2020 .

While we acknowledge significant economic challenges in the near-term, we continue to believe the underlying long-term fundamentals of the copper business remain positive, supported by the significant role of copper in the global economy and a challenging long-term supply environment attributable to difficulty in replacing existing large mines’ output with new production sources.

of our 2019 Form 10-K and Part II, 1A.

During second-quarter 2020 , LME copper settlement prices ranged from a low of $2.16 per pound to a high of $2.74 per pound, averaged $2.43 per pound and settled at $2.74 per pound on June 30, 2020.

In second-quarter 2020, copper prices recovered from the sharp decline that occurred during first-quarter 2020, reflecting the combination of supply curtailments related to the COVID-19 pandemic, and an improving economic outlook during second-quarter 2020.

The COVID-19 pandemic continues to cause substantial disruption and uncertainty in global economies and markets.

The LME copper settlement price was $2.92 per pound on July 31, 2020 .

While we acknowledge unfavorable changes to the global economy as a result of the ongoing COVID-19 pandemic, we continue to believe the underlying long-term fundamentals of the copper business remain positive, supported by the significant role of copper in the global economy and a challenging long-term supply environment attributable to difficulty in replacing existing large mines’ output with new production sources.

Future copper prices are expected to be volatile and are likely to be influenced by the world’s response to the COVID-19 pandemic, demand from China and emerging markets, as well as economic activity in the U.S.

and other industrialized countries, the timing of the development of new supplies of copper and the production levels of mines and copper smelters.

This graph presents LBMA PM gold prices from January 2010 through March 2020 .

During first-quarter 2020 , LBMA PM gold prices ranged from a low of $1,474 per ounce to a high of $1,684 per ounce, averaged $1,583 per ounce, and closed at $1,609 per ounce on March 31, 2020.

This graph presents LBMA PM gold prices from January 2010 through June 2020 .

During second-quarter 2020 , LBMA PM gold prices ranged from a low of $1,577 per ounce to a high of $1,772 per ounce, averaged $1,711 per ounce, and closed at $1,768 per ounce on June 30, 2020.

Concerns about the global economy related to the COVID-19 pandemic, historically low U.S.

interest rates and the anticipated effects of global stimulus efforts have driven increased demand for gold.

The LBMA PM gold price was $1,703 per ounce on April 30, 2020 .

This graph presents the Metals Week Molybdenum Dealer Oxide weekly average price from January 2010 through March 2020 .

During first-quarter 2020 , the weekly average price of molybdenum ranged from a low of $8.17 per pound to a high of $10.79 per pound, averaged $9.66 per pound, and was $8.17 per pound on March 31, 2020.

Molybdenum prices during first-quarter 2020 were also negatively impacted by economic uncertainty associated with the COVID-19 pandemic.

The Metals Week Molybdenum Dealer Oxide weekly average price was $8.41 per pound on April 30, 2020 .

The LBMA PM gold price was $1,965 per ounce on July 31, 2020 .

This graph presents the Metals Week Molybdenum Dealer Oxide weekly average price from January 2010 through June 2020 .

During second-quarter 2020 , the weekly average price of molybdenum ranged from a low of $7.65 per pound to a high of $9.05 per pound, averaged $8.40 per pound, and was $7.65 per pound on June 30, 2020.

Molybdenum prices continued to be negatively impacted by economic uncertainty associated with the COVID-19 pandemic during second-quarter 2020.

The Metals Week Molybdenum Dealer Oxide weekly average price was $7.18 per pound on July 31, 2020 .

CONSOLIDATED RESULTS

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

SUMMARY FINANCIAL DATA

(in millions, except per share amounts)

Operating (loss) income a,c,d,e

Net (loss) income attributable to common stock g,h

Diluted net (loss) income per share of common stock

Operating income (loss) a,c,d

Net income (loss) attributable to common stock h,i

Diluted net income (loss) per share of common stock

Diluted weighted-average common shares outstanding

Operating cash flows j

Operating cash flows l

Capital expenditures

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Total debt, including current portion

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

Includes (unfavorable) favorable adjustments to prior period provisionally priced concentrate and cathode copper sales totaling $(107) million ( $(45) million to net loss attributable to common stock or $(0.03) per share) in first-quarter 2020 and $70 million ( $29 million to net income attributable to common stock or $0.02 per share) in first-quarter 2019 (refer to Note 6).

Includes metals inventory adjustments totaling $222 million ( $182 million to net loss attributable to common stock or $0.12 per share) in first-quarter 2020 and $ 57 million ( $26 million to net income attributable to common stock or $0.02 per share) in first-quarter 2019 .

Includes net (losses) gains on sales of assets totaling $(11) million ( $(11) million to net loss attributable to common stock or $(0.01) per share) in first-quarter 2020 and $33 million ( $33 million to net income attributable to common stock or $0.02 per share) in first-quarter 2019 (refer to Note 7).

Includes net charges to environmental obligations and related litigation reserves totaling $14 million ( $14 million to net loss attributable to common stock or $0.01 per share) in first-quarter 2020 and $35 million ( $35 million to net income attributable to common stock or $0.02 per share) in first-quarter 2019 .

Includes charges totaling $22 million ( $10 million to net income attributable to common stock or $0.01 per share), primarily associated with weather-related issues at El Abra and for non-recurring employee costs at PT-FI.

Includes after-tax net losses on early extinguishment of debt totaling $32 million ( $0.02 per share) in first-quarter 2020 and $5 million (less than $0.01 per share) in first-quarter 2019 (refer to Note 5).

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

Includes favorable (unfavorable) adjustments to prior period provisionally priced concentrate and cathode copper sales totaling $55 million ( $19 million to net income attributable to common stock or $0.01 per share) in second-quarter 2020 , $(83) million ( $(35) million to net loss attributable to common stock or $(0.02) per share) in second-quarter 2019 , $(102) million ( $(43) million to net loss attributable to common stock or $(0.03) per share) for the first six months of 2020 and $58 million ( $23 million to net loss attributable to common stock or $0.02 per share) for the first six months of 2019 (refer to Note 6).

The second-quarter and first six months of 2020 also include reductions to revenues totaling $24 million ($24 million to net income (loss) attributable to common stock or $0.02 per share) related to forward sales contracts (refer to Note 6).

Includes metals inventory adjustments totaling $139 million ( $101 million to net income attributable to common stock or $0.07 per share) in second-quarter 2020 , $(2) million ( $(1) million to net loss attributable to common stock or less than $0.01 per share) in second-quarter 2019 , $(83) million ( $(81) million to net loss attributable to common stock or $(0.06) per share) for the first six months of 2020 and $ (59) million ( $(27) million to net loss attributable to common stock or $(0.02) per share) for the first six months of 2019 .

Includes net charges to environmental obligations and related litigation reserves totaling $1 million ( $1 million to net income attributable to common stock or less than $0.01 per share) in second-quarter 2020 , $9 million ( $9 million to net loss attributable to common stock or $0.01 per share) in second-quarter 2019 , $15 million ( $15 million to net loss attributable to common stock or $0.01 per share) for the first six months of 2020 and $44 million ( $44 million to net loss attributable to common stock or $0.03 per share) for the first six months of 2019 .

Includes charges totaling $196 million ($144 million to net income attributable to common stock or $0.10 per share) in second-quarter 2020 and $224 million ($153 million to net loss attributable to common stock or $0.11 per share) for the first six months of 2020 associated with the COVID-19 pandemic and revised operating plans, including employee separation costs.

These charges 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).

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

Includes net (losses) gains on sales of assets totaling $(8) million ( $(8) million to net loss attributable to common stock or $(0.01) per share) in second-quarter 2019 , $(11) million ( $(11) million to net loss attributable to common stock or $(0.01) per share) for the first six months of 2020 and $25 million ( $25 million to net loss attributable to common stock or $0.02 per share) for the first six months of 2019 (refer to Note 7 for discussion of adjustments to the estimated fair value of contingent consideration related to the 2016 sale of onshore California oil and gas properties).

Includes net tax credits of $53 million ( $0.04 per share) in second-quarter 2020 , $18 million ( $0.01 per share) in second-quarter 2019 , $52 million ( $0.04 per share) for the first six months of 2020 and $24 million ( $0.02 per share) for the first six months of 2019 .

Refer to “Income Taxes” for further discussion of these net tax credits.

We defer recognizing profits on intercompany sales until final sales to third parties occur.

Refer to “Operations – Smelting and Refining” for a summary of net impacts from changes in these deferrals.

Includes net charges totaling $17 million ($0.01 per share), primarily associated with (i) COVID-19 related net charges of $9 million associated with idle facility costs at Cerro Verde and contract cancellation costs at El Abra, and (ii) other net charges of $8 million, primarily related to a change in a tax position at Cerro Verde and asset impairments.

These charges, before income taxes and noncontrolling interests, were recorded to production and delivery ($25 million), depreciation, depletion and amortization ($8 million), interest expense, net ($7 million) and other income, net ($4 million).

Working capital and other sources (uses) totaled $119 million in first-quarter 2020 and $(56) million in first-quarter 2019 .

Three Months Ended March 31,

Includes after-tax net losses on early extinguishment of debt totaling $9 million ( $0.01 per share) in second-quarter 2020 , $41 million ( $0.03 per share) for the first six months of 2020 and $5 million (less than $0.01 per share) for the first six months of 2019 (refer to Note 5).

Includes other net credits (charges) totaling $10 million ( $0.01 per share) in second quarter 2020, $2 million (less than $0.01 per share) for the first six months of 2020 and $(10) million ($(0.01) per share) for the first six months of 2019.

Working capital and other sources totaled $22 million in second-quarter 2020 , $304 million in second-quarter 2019 , $141 million for the first six months of 2020 and $248 million for the first six months of 2019 .

Three Months Ended June 30,

Six Months Ended June 30,

SUMMARY OPERATING DATA

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Average realized price per pound

Site production and delivery costs per pound a

Unit net cash costs per pound a

Site production and delivery costs per pound b

Unit net cash costs per pound b

Gold (thousands of recoverable ounces)

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Average realized price per pound

Includes reductions to average realized prices of $0.03 per pound of copper in second-quarter 2020 and $0.02 per pound of copper for the first six months of 2020 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 (refer to Note 6).

There are no remaining forward sales contracts.

Reflects per pound weighted-average production and delivery costs and unit net cash costs (net of by-product credits) for all copper mines, before net noncash and other costs.

Consolidated revenues totaled $2.8 billion in first-quarter 2020 and $3.8 billion in first-quarter 2019 .

Consolidated revenues totaled $3.1 billion in second-quarter 2020 , $3.5 billion in second-quarter 2019 , $5.9 billion for the first six months of 2020 and $7.3 billion for the first six months of 2019 .

Revenues from our mining operations primarily include the sale of copper concentrate, copper cathode, copper rod, gold in concentrate and molybdenum.

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Following is a summary of changes in our consolidated revenues between periods (in millions):

Three Months Ended March 31

Three Months Ended June 30

Six Months Ended June 30

Consolidated revenues - 2019 period

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Lower treatment charges

Lower royalties and export duties

(Higher) lower royalties and export duties

Other, including intercompany eliminations

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Sales Volumes.

Consolidated copper and gold sales volumes decreased in first-quarter 2020, compared to first-quarter 2019, primarily reflecting anticipated lower mill rates at PT-FI as it continues to ramp-up production from its underground ore bodies and lower mill rates, recovery rates and ore grades at Cerro Verde, partly offset by higher mining rates in North America.

Consolidated copper and gold sales volumes decreased in the 2020 periods, compared to the 2019 periods, primarily reflecting lower operating rates at Cerro Verde associated with COVID-19 restrictions and timing of shipments.

Refer to “Operations” for further discussion of sales volumes at our mining operations.

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Our consolidated revenues can vary significantly as a result of fluctuations in the market prices of copper, gold and molybdenum.

Average realized prices for first-quarter 2020 , compared with first-quarter 2019 , were 16 percent lower for copper, 24 percent higher for gold and 13 percent lower for molybdenum.

Average realized copper prices include net (unfavorable) favorable adjustments to current period provisionally priced copper sales totaling $(131) million in first-quarter 2020 and $52 million in first-quarter 2019 .

Average realized prices for second-quarter 2020 , compared with second-quarter 2019 , were 7 percent lower for copper, 29 percent higher for gold and 20 percent lower for molybdenum, and average realized prices for the first six months of 2020 , compared with the first six months of 2019 , were 9 percent lower for copper, 30 percent higher for gold and 16 percent lower for molybdenum.

Average realized copper prices include net favorable (unfavorable) adjustments to current period provisionally priced copper sales totaling $107 million in second-quarter 2020 , $(39) million in second-quarter 2019 , $26 million for the first six months of 2020 and $(58) million for the first six months of 2019 .

As discussed in Note 6, substantially all of our copper concentrate and cathode sales contracts provide final copper pricing in a specified future month (generally one to four months from the shipment date) based primarily on quoted LME monthly average copper prices.

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in times of falling copper prices, the opposite occurs.

Average realized prices for the second quarter and first six months of 2020 also included reductions totaling $24 million related to forward sales contracts (refer to Note 6).

Prior Period Provisionally Priced Copper Sales.

Net (unfavorable) favorable adjustments to prior periods’ provisionally priced copper sales ( i.e.

, provisionally priced sales at December 31, 2019 and 2018) recorded in consolidated revenues totaled $(107) million in first-quarter 2020 and $70 million in first-quarter 2019 .

Net favorable (unfavorable) adjustments to prior periods’ provisionally priced copper sales ( i.e.

, provisionally priced sales at March 31, 2020 and 2019, and December 31, 2019 and 2018) recorded in consolidated revenues totaled $55 million in second-quarter 2020 and $(83) million in second-quarter 2019 , $(102) million for the first six months of 2020 and $58 million for the first six months of 2019 .

Refer to Notes 6 and 9 for a summary of total adjustments to prior period and current period provisionally priced sales.

At March 31, 2020 , we had provisionally priced copper sales totaling 187 million pounds of copper (net of intercompany sales and noncontrolling interests) recorded at an average of $2.24 per pound, subject to final pricing over the next several months.

We estimate that each $0.05 change in the price realized from the March 31, 2020 , provisional price recorded would have an approximate $6 million effect on our 2020 net income attributable to common stock.

The LME copper price settled at $2.37 per pound on April 30, 2020 .

At June 30, 2020 , we had provisionally priced copper sales totaling 183 million pounds of copper (net of intercompany sales and noncontrolling interests) recorded at an average of $2.73 per pound, subject to final pricing over the next several months.

We estimate that each $0.05 change in the price realized from the June 30, 2020 ,

provisional price recorded would have an approximate $6 million effect on our 2020 net income attributable to common stock.

The LME copper price settled at $2.92 per pound on July 31, 2020 .

Atlantic Copper Revenues.

Atlantic Copper revenues totaled $440 million in first-quarter 2020 and $576 million in first-quarter 2019 .

Lower revenues in first-quarter 2020 , compared with first-quarter 2019 , primarily reflect lower copper prices.

Atlantic Copper revenues totaled $466 million in second-quarter 2020 and $906 million for the first six months of 2020 , compared with $546 million in second-quarter 2019 and $1.1 billion for the first six months of 2019 .

Lower revenues in the 2020 periods, compared with the 2019 periods, primarily reflect lower copper prices.

Purchased Copper.

We purchase copper cathode primarily for processing by our Rod & Refining operations.

Purchased copper volumes totaled 88 million pounds in first-quarter 2020 and 117 million pounds in first-quarter 2019 .

The volumes of copper purchases vary depending on cathode production from our operations and totaled 71 million pounds in second-quarter 2020 , 114 million pounds in second-quarter 2019 , 159 million pounds for the first six months of 2020 and 231 million pounds for the first six months of 2019 .

Cobalt Revenues.

Cobalt revenues totaled $65 million in first-quarter 2020 and $161 million in first-quarter 2019.

Lower revenues in the first-quarter 2020, compared with first-quarter 2019, primarily reflect the sale of our cobalt refinery and related cobalt cathode precursor business in fourth-quarter 2019.

Cobalt revenues totaled $47 million in second-quarter 2020 and $112 million for the first six months of 2020 , compared with $131 million in second-quarter 2019 and $292 million for the first six months of 2019 .

Lower revenues in the 2020 periods, compared with the 2019 periods, primarily reflect the sale of our cobalt refinery and related cobalt cathode precursor business in fourth-quarter 2019.

Treatment Charges.

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

Revenues from our concentrate sales are recorded net of treatment charges ( i.e., fees paid to smelters that are generally negotiated annually), which will vary with the sales volumes and the price of copper.

Royalties and Export Duties.

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Production and Delivery Costs

Consolidated production and delivery costs totaled $2.5 billion in first-quarter 2020 and $2.9 billion in first-quarter 2019 .

Lower consolidated production and delivery costs in first-quarter 2020 primarily reflect lower copper sales volumes.

Consolidated production and delivery costs totaled $2.4 billion in second-quarter 2020 , $3.0 billion in second-quarter 2019 , $4.9 billion for the first six months of 2020 and $5.9 billion for the first six months of 2019 .

Lower consolidated production and delivery costs in the 2020 periods primarily reflects lower mining costs in Indonesia (reflecting lower mining and milling rates associated with the completion of mining the Grasberg open pit) and in South America (reflecting lower operating rates associated with COVID-19 restrictions).

The 2020 periods also included charges totaling $153 million in second-quarter 2020 and $173 million for the first six months of 2020 associated with the COVID-19 pandemic and revised operating plans, including employee separation costs.

Site Production and Delivery Costs Per Pound.

Site production and delivery costs for our copper mining operations primarily include labor, energy and commodity-based inputs, such as sulphuric acid, reagents, liners, tires and explosives.

Consolidated site production and delivery costs (before net noncash and other costs) for our copper mines averaged $2.19 per pound of copper in first-quarter 2020 and $2.17 per pound of copper in first-quarter 2019 .

Higher consolidated site production and delivery costs per pound in first-quarter 2020 , compared with first-quarter 2019 , primarily reflect higher unit costs in North America (reflecting higher mining and milling costs) and South America (reflecting lower volumes), partly offset by lower unit costs at PT-FI (reflecting lower mining and milling rates associated with the completion of mining the Grasberg open pit).

Consolidated site production and delivery costs (before net noncash and other costs) for our copper mines averaged $1.82 per pound of copper in second-quarter 2020 , $2.26 per pound of copper in second-quarter 2019 , $2.00 per pound of copper for the first six months of 2020 and $2.21 per pound of copper for the first six months of 2019 .

Lower consolidated site production and delivery costs per pound in the 2020 periods, compared with the 2019 periods, primarily reflect lower costs in Indonesia and South America (for the same reasons discussed in the paragraph above).

Refer to “Operations – Unit Net Cash Costs” for further discussion of unit net cash costs associated with our operating divisions and to “Product Revenues and Production Costs” for reconciliations of per pound costs by operating division to production and delivery costs applicable to sales reported in our consolidated financial statements.

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Depreciation will vary under the unit-of-production (UOP) method as a result of changes in sales volumes and the related UOP rates at our mining operations.

Consolidated depreciation, depletion and amortization (DD&A) totaled $341 million in first-quarter 2020 and $347 million in first-quarter 2019 .

Lower DD&A in first-quarter 2020, compared with first-quarter 2019, primarily reflects lower sales volumes.

Consolidated depreciation, depletion and amortization (DD&A) totaled $358 million in second-quarter 2020 , $352 million in second-quarter 2019 and $699 million for each of the first six months of 2020 and 2019.

Metals Inventory Adjustments

Net realizable value metals inventory adjustments totaled $222 million in first-quarter 2020 and $57 million in first-quarter 2019 .

Metals inventory adjustments in first-quarter 2020 were related to decreases in copper and molybdenum prices associated with the COVID-19 pandemic, and in first-quarter 2019 were related to decreases in cobalt prices.

Net realizable value metals inventory adjustments totaled a net credit of $139 million in second-quarter 2020 (primarily related to the reversal of net realizable value adjustments recorded on long-term copper inventories in first-quarter 2020), and charges of $2 million in second-quarter 2019 , $83 million for the first six months of 2020 and $59 million for the first six months of 2019 .

Metals inventory adjustments in the 2020 periods were related to

volatility in copper and molybdenum prices.

Charges for the first six months of 2019 were mostly related to decreases in cobalt prices.

Selling, general and administrative expenses

Selling, general and administrative expenses totaled $91 million in second-quarter 2020 , $92 million in second-quarter 2019 , $201 million for the first six months of 2020 and $199 million for the first six months of 2019 .

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

Selling, general and administrative expenses include charges totaling $15 million associated with the employee separation program.

Selling, general and administrative expense, excluding charges for the employee separation program, are expected to approximate $355 million for the year 2020.

Mining Exploration and Research Expenses

Consolidated exploration and research expenses for our mining operations totaled $16 million in first-quarter 2020 and $27 million in first-quarter 2019 .

Our revised operating plans prioritize existing mine operations and full resource potential of existing operations.

Exploration expenditures are being reduced and are expected to approximate $30 million for the year 2020, with activities focused on analyzing and incorporating data from historical drilling programs.

We have long-lived reserves and a significant resource position in our existing portfolio.

Consolidated exploration and research expenses for our mining operations totaled $18 million in second-quarter 2020 , $31 million in second-quarter 2019 , $34 million for the first six months of 2020 and $58 million for the first six months of 2019 .

Mining exploration and research expenses included employee separation charges totaling $7 million for each of the second quarter and first six months of 2020.

Our April 2020 revised operating plans prioritize existing mine operations.

Exploration expenditures for the year 2020 are expected to approximate $30 million , approximately 60 percent below 2019 expenditures.

Environmental Obligations and Shutdown Costs

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Shutdown costs include care-and-maintenance costs and any litigation, remediation or related expenditures associated with closed facilities or operations.

Net charges for environmental obligations and shutdown costs totaled $26 million in first-quarter 2020 and $42 million in first-quarter 2019 .

Net charges for environmental obligations and shutdown costs totaled $11 million in second-quarter 2020 , $23 million in second-quarter 2019 , $37 million for the first six months of 2020 and $65 million for the first six months of 2019 .

Interest Expense, Net

Consolidated interest costs (before capitalization) totaled $171 million in first-quarter 2020 and $178 million in first-quarter 2019 .

Consolidated interest costs decreased in first-quarter 2020, compared to first-quarter 2019, primarily reflecting the impact of lower average debt balances.

Refer to Note 5 for further discussion of our first-quarter 2020 debt transactions.

Capitalized interest varies with the level of expenditures for our development projects and average interest rates on our borrowings, and 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 .

Refer to Note 5 for further discussion of our 2020 debt transactions.

Capitalized interest varies with the level of expenditures for our development projects and average interest rates on our borrowings, and 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 .

Refer to “Capital Resources and Liquidity - Investing Activities” for discussion of capital expenditures associated with our major development projects.

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

Three Months Ended March 31,

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

Six Months Ended June 30,

Income (Loss) a

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Eliminations and other

Rate adjustment f

Rate adjustment g

Consolidated FCX

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

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

In addition to our North America mining operations, the U.S.

jurisdiction reflects corporate-level expenses, which include interest expense associated with senior notes, general and administrative expenses, and environmental obligations and shutdown costs.

Includes a tax credit of $6 million associated with the removal of a valuation allowance on deferred tax assets.

Includes a tax charge of $8 million ($7 million net of noncontrolling interest) associated with an unfavorable Indonesia Supreme Court ruling on a 2012 PT-FI income tax matter.

Includes a tax credit of $53 million associated with the reversal of a year-end 2019 tax charge related to the sale of our interest in the lower zone of the Timok exploration project in Serbia.

Also includes a tax credit of $6 million associated with the removal of a valuation allowance on deferred tax assets.

Includes tax credits totaling $18 million primarily associated with state law changes.

Includes a tax charge of $8 million ($7 million net of noncontrolling interest) associated with an unfavorable 2012 Indonesia Supreme Court ruling.

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

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

Our first-quarter 2020 consolidated effective income tax rate is a function of the combined effective tax rates for the jurisdictions in which we operate, excluding the U.S.

Our consolidated effective income tax rate is a function of the combined effective tax rates for the jurisdictions in which we operate, excluding the U.S.

jurisdiction.

Because our U.S.

jurisdiction generated net losses in first-quarter 2020 that will not result in a realized tax benefit, applicable accounting rules require us to adjust our estimated annual effective tax rate to exclude the impact of U.S.

Assuming achievement of current sales volume and cost estimates and average prices of $2.30 per pound for copper, $1,600 per ounce for gold and $9.00 per pound for molybdenum for the remainder of 2020 , we estimate our consolidated effective tax rate for the year 2020 would approximate 62 percent .

jurisdiction generated net losses in the first six months of 2020 that will not result in a realized tax benefit, applicable accounting rules require us to adjust our estimated annual effective tax rate to exclude the impact of U.S.

Assuming achievement of current sales volume and cost estimates and average prices of $2.85 per pound for copper, $1,800 per ounce for gold and $7.00 per pound for molybdenum for the second half of 2020 , we estimate our consolidated effective tax rate for the year 2020 would approximate 60 percent .

Changes in sales volumes and average prices during 2020 would incur tax impacts at estimated effective rates of 38 percent for Indonesia, 37 percent for Peru and 0 percent for the U.S.

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tax position, we do not record a financial statement impact for income or losses generated in the U.S.

We have revised our operating plans in response to the significant negative impacts of the COVID-19 pandemic on the global economy, and we will continue to closely monitor health and market conditions and make further adjustments to our mine plans as required.

Productivity and Innovation Initiatives

During 2019, we advanced initiatives in our North America and South America operations to enhance productivity through the use of new technologies, data science and a more interactive, multi-disciplined operating structure.

Capital projects associated with this initiative, which were expected to total $150 million for the year 2020, and were projected to add approximately 200 million pounds of copper per year beginning in 2022, have been suspended in response to current market conditions and capital preservation initiatives.

Under current market conditions, our data analytics tools will be utilized to drive cost performance, improve recoveries and other initiatives that do not require significant investment.

North America Copper Mines

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In addition to copper, certain of these mines produce molybdenum concentrate, gold and silver.

We are also nearing completion of a development project in eastern Arizona to commence production from the Lone Star leachable ores during the second half of 2020.

All of the North America mining operations are wholly owned, except for Morenci.

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Molybdenum concentrate, gold and silver are also produced by certain of our North America copper mines .

In April 2020, we entered into forward sales contracts for approximately 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.

Revised Operating Plans.

We have completed a review of mine plans at each of our operating sites in North America to target a lower cost mining configuration, defer all nonessential projects and preserve long-term value in the long-lived resources.

Under the revised plans, mining and milling rates for the year 2020 have been reduced by approximately 20 percent, resulting in a projected 12 percent decline in North America copper sales for the year 2020 (compared to the January 2020 estimate), lower unit net cash costs and lower capital spending requirements.

The plans take into account the impact of currently suspended operations at the Chino mine.

We are currently assessing options and future timing of restart of the Chino mine, which will consider health and market conditions.

We have also deferred approximately $0.3 billion in capital projects from 2020 to future periods for the North America copper mines.

Following extensive review, we have elected to complete the initial phase of the Lone Star copper leach project with a remaining investment of approximately $100 million in 2020.

The decision was supported by the advanced stage of the project (approximately 90 percent complete), expected quick return of the remaining investment and long-term value of the resource.

First production is expected during the second half of 2020.

Initial production from the Lone Star copper leach project following a ramp-up period is expected to average approximately 200 million pounds of copper per year and, subject to market conditions, the potential for future expansion options.

Following is selected summary consolidated operating data for the North America copper mines for 2020, including a comparison of April 2020 estimates to the estimates reported in January 2020:

January 2020 Estimates

First-quarter 2020

Remainder of 2020

Total Percent Change

Copper (millions of recoverable pounds)

Sales, excluding purchases

Unit net cash costs per pound of copper

For a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in our consolidated financial statements, refer to "Product Revenues and Production Costs."

Average unit net cash costs (net of by-product credits) for our North America copper mines are based on achievement of current sales volume and cost estimates and assuming an average molybdenum price of $9.00 per pound for the remainder of 2020 .

North America's average unit net cash costs for the year 2020 would change by approximately $0.03 per pound for each $2 per pound change in the average price of molybdenum for the remainder of 2020 .

The January 2020 estimates were based on an average price of $10.00 per pound of molybdenum for the year 2020.

Operating and Development Activities.

The April 2020 revised operating plans were effectively implemented across our North America operating sites and production, costs and capital management were in line or better than the April 2020 estimates.

The Lone Star project is substantially complete and on track to produce approximately 200 million pounds of copper per year beginning in the second half of 2020.

The April 2020 revised operating plans take into account the impact of currently suspended operations at the Chino mine.

We are currently assessing options and future timing of the restart of the Chino mine, which will take into account public health and market conditions.

Operating Data.

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

Three Months Ended

Three Months Ended June 30,

Six Months Ended June 30,

Operating Data, Net of Joint Venture Interests

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Copper production (millions of recoverable pounds)

Includes reductions to average realized prices of $0.06 per pound of copper in second-quarter 2020 and $0.03 per pound of copper for the first six months of 2020 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.

Refer to “Consolidated Results” for our consolidated molybdenum sales volumes, which include sales of molybdenum produced at the North America copper mines.

North America’s consolidated copper sales volumes of 355 million pounds in first-quarter 2020 were higher than first-quarter 2019 copper sales volumes of 320 million pounds, primarily reflecting higher mining rates.

North America’s consolidated copper sales volumes totaled 368 million pounds in second-quarter 2020 , 369 million pounds in second-quarter 2019 , 723 million pounds for the first six months of 2020 and 689 million pounds for the first six months of 2019 .

Higher sales volumes for the first six months of 2020 , compared with the first six months of 2019 , primarily reflect timing of shipments.

North America copper sales are estimated to approximate 1.4 billion pounds for the year 2020 , similar to the year 2019.

Unit Net Cash Costs.

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This measure is presented by other metals mining companies, although our measure may not be comparable to similarly titled measures reported by other companies.

Gross (Loss) Profit per Pound of Copper and Molybdenum

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

Gross Profit per Pound of Copper and Molybdenum

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

Refer to “Product Revenues and Production Costs” for an explanation of the “by-product” and “co-product” methods and a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in our consolidated financial statements.

Three Months Ended March 31,

Three Months Ended June 30,

By- Product Method

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on prior period open sales

Gross (loss) profit per pound

Gross profit per pound

Copper sales (millions of recoverable pounds)

Molybdenum sales (millions of recoverable pounds) a

Six Months Ended June 30,

By- Product Method

Co-Product Method

By- Product Method

Co-Product Method

Revenues, excluding adjustments

Site production and delivery, before net noncash and other costs shown below

By-product credits

Treatment charges

Unit net cash costs

Metals inventory adjustments

Noncash and other costs, net

Total unit costs

Other revenue adjustments, primarily for pricing on prior period open sales

Gross profit per pound

Copper sales (millions of recoverable pounds)

Molybdenum sales (millions of recoverable pounds) a

Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing.

Includes charges totaling $0.06 per pound of copper in second-quarter 2020 and $0.03 per pound of copper for the first six months of 2020 , primarily associated with the April 2020 revised operating plans (including employee separation costs) and the COVID-19 pandemic.

Our North America copper mines have varying cost structures because of differences in ore grades and characteristics, processing costs, by-product credits and other factors.

Average unit net cash costs (net of by-product credits) for the North America copper mines of $2.04 per pound of copper in first-quarter 2020 were higher than unit net cash costs of $1.91 per pound of copper in first-quarter 2019 , primarily reflecting higher mining and milling costs, partly offset by higher sales volumes.

Average unit net cash costs (net of by-product credits) of $1.78 per pound of copper in second-quarter 2020 were lower than unit net cash costs of $1.90 per pound of copper in second-quarter 2019 , primarily reflecting lower mining costs and cost reductions associated with the April 2020 revised operating plans.

Average unit net cash costs of $1.91 per pound for the first six months of 2020 approximated unit net cash costs of $1.90 per pound of copper for the first six months of 2019 .

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

Average unit net cash costs (net of by-product credits) for our North America copper mines are expected to approximate $1.81 per pound of copper for the year 2020 , based on achievement of current sales volume and cost estimates and assuming an average molybdenum price of $7.00 per pound for the second half of 2020 .

America’s average unit net cash costs for the year 2020 would change by approximately $0.02 per pound of copper for each $2 per pound change in the average price of molybdenum for the second half of 2020 .

South America Mining

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In addition to copper, the Cerro Verde mine produces molybdenum concentrate and silver.

Revised Operating Plans.

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 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.

Cerro Verde’s revised 2020 plans reflect limited operations during second-quarter 2020 and increased mining and milling rates in the second half of the year.

Subject to the timing of Peruvian government approvals associated with the COVID-19 pandemic, milling rates are currently expected to average approximately 400,000 metric tons per day in the second half of 2020.

Cerro Verde’s mine plans have been revised to target a lower cost mining configuration, defer all nonessential projects and preserve long-term value in the long-lived resource.

Compared with January 2020 estimates, mining and milling rates have been reduced by 13 percent (including the impact of the Peruvian

government order and mine plan optimization in the second half of 2020), resulting in a decline in projected copper sales from Cerro Verde of approximately 130 million pounds (13 percent) in 2020.

The revised mine plans also include significant reductions in capital spending and operating costs.

Operating plans at El Abra have also been revised to incorporate lower mining rates, operating costs and capital spending.

We have deferred approximately $0.2 billion in capital projects for South America mining, including the deferral of construction of a new leach pad at El Abra, from 2020 to future periods.

Following is selected summary consolidated operating data for South America mining for 2020, including a comparison of April 2020 estimates to the estimates reported in January 2020:

January 2020 Estimates

First-quarter 2020

Total Percent Change

Copper sales (millions of recoverable pounds)

Unit net cash costs per pound of copper

Average unit net cash costs (net of by-product credits) for South America mining are based on current sales volume and cost estimates and assuming an average price of $9.00 per pound of molybdenum for the remainder of 2020 .

The January estimates were based on an average of $10.00 per pound of molybdenum for the year 2020.

Projected sales volumes and average unit net cash costs for the South America operations are dependent on government approvals for Cerro Verde to return to full operations during the second half of 2020.

Operating and Development Activities.

Cerro Verde achieved significant progress 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.

Cerro Verde's operating rates averaged 251,800 metric tons of ore per day in second-quarter 2020, including an average of 316,800 metric tons of ore per day in June 2020 (which is approximately 80 percent of the 2019 annual average).

We currently expect operations during the second half of 2020 to average approximately 350,000 metric tons of ore per day.

We are continuing to operate El Abra consistent with the April 2020 revised operating plans while closely monitoring public health conditions in Chile.

Operating Data.

Following is summary consolidated operating data for South America mining:

Three Months Ended

Three Months Ended June 30,

Six Months Ended June 30,

Copper (millions of recoverable pounds)

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

Beginning on March 16, 2020, Cerro Verde mill operations were impacted as a result of the Peruvian government's issuance of a Supreme Decree and declaration of a National Emergency in its efforts to contain the outbreak of COVID-19.

The Cerro Verde mill operations averaged over 400,000 metric tons of ore per day from January 1, 2020, through March 15, 2020.

Lower consolidated copper sales volumes from South America of 247 million pounds in first-quarter 2020 , compared with 290 million pounds in first-quarter 2019 , primarily reflect anticipated lower recovery rates and ore grades and lower mill rates associated with Cerro Verde’s temporary transition to a care and maintenance status associated with the COVID-19 pandemic.

Cerro Verde mill operations were negatively impacted by COVID-19 restrictions.

South America’s consolidated copper sales volumes totaled 219 million pounds in second-quarter 2020 , 287 million pounds in second-quarter 2019 , 466 million pounds for the first six months of 2020 and 577 million pounds for the first six months of 2019 .

Lower sales volumes for the 2020 periods, compared to the 2019 periods, primarily reflect lower operating rates at Cerro Verde associated with COVID-19 restrictions.

Copper sales from South America mines are expected to approximate 950 million pounds for the year 2020 , compared with 1.2 billion pounds of copper for the year 2019 .

Unit Net Cash Costs.

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This measure is presented by other metals mining companies, although our measure may not be comparable to similarly titled measures reported by other companies.

Gross (Loss) Profit per Pound of Copper

The following table summarizes unit net cash costs and gross (loss) profit per pound of copper at the South America mining operations.

Gross Profit (Loss) per Pound of Copper

The following table summarizes unit net cash costs and gross profit (loss) per pound of copper at our South America mining operations.

Unit net cash costs per pound of copper are reflected under the by-product and co-product methods as the South America mining operations also had sales of molybdenum and silver.

Three Months Ended March 31,

Three Months Ended June 30,

Revenues, excluding adjustments

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on prior period open sales

Gross profit per pound

Copper sales (millions of recoverable pounds)

Six Months Ended June 30,

Revenues, excluding adjustments

Site production and delivery, before net noncash and other costs shown below

By-product credits

Treatment charges

Royalty on metals

Unit net cash costs

Metals inventory adjustments

Noncash and other costs, net

Total unit costs

Other revenue adjustments, primarily for pricing on prior period open sales

Gross (loss) profit per pound

Copper sales (millions of recoverable pounds)

Includes COVID-19 related costs of $0.08 per pound of copper, primarily associated with idle facility costs at Cerro Verde as a result of the Peruvian government issuance of a Supreme Decree and declaration of a National Emergency in its efforts to contain the outbreak of COVID-19 and contract cancellation costs at El Abra.

Includes charges of $0.04 per pound of copper associated with weather-related impacts at El Abra.

Includes charges totaling $0.30 per pound of copper in second-quarter 2020 and $0.18 per pound of copper for the first six months of 2020 , primarily associated with idle facility (Cerro Verde) and contract cancellation costs related to the COVID-19 pandemic, and employee separation costs associated with the April 2020 revised operating plans.

Our South America mines have varying cost structures because of differences in ore grades and characteristics, processing costs, by-product credits and other factors.

Average unit net cash costs (net of by-product credits) of $2.00 per pound of copper in first-quarter 2020 were higher than unit net cash costs of $1.59 per pound of copper in first-quarter 2019 , primarily reflecting lower sales volumes and lower by-product credits.

Average unit net cash costs (net of by-product credits) of $1.68 per pound of copper in second-quarter 2020 were lower than unit net cash costs of $1.83 per pound of copper in second-quarter 2019 , primarily reflecting reduced mining and milling activities at Cerro Verde, partly offset by lower sales volumes and lower by-product credits.

Average unit net cash costs (net of by-product credits) of $1.85 per pound for the first six months of 2020 were higher than unit net cash costs of $1.71 per pound for the first six months of 2019 , primarily reflecting lower sales volumes and lower by-product credits, partly offset by reduced mining and milling activities at Cerro Verde.

Revenues from Cerro Verde’s concentrate sales are recorded net of treatment charges, which will vary with Cerro Verde’s sales volumes and the price of copper.

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Refer to “Consolidated Results – Revenues” for further discussion of adjustments to prior period provisionally priced copper sales.

Average unit net cash costs (net of by-product credits) for South America mining are expected to approximate $1.92

per pound of copper for the year 2020 , based on current sales volume and cost estimates and assuming an average price of $7.00 per pound of molybdenum for the second half of 2020 .

Indonesia Mining

PT-FI’s assets include one of the world’s largest copper and gold deposits at the Grasberg minerals district in Papua, Indonesia.

PT-FI operates one of the world’s largest copper and gold mines at the Grasberg minerals district in Papua, Indonesia.

PT-FI produces copper concentrate that contains significant quantities of gold and silver.

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Substantially all of PT-FI’s copper concentrate is sold under long-term contracts.

During the first quarter of 2020 , 81 percent of PT-FI’s concentrate production was sold to PT Smelting (PT-FI’s 25-percent-owned smelter and refinery in Gresik, Indonesia).

In late March 2020, a shooting incident occurred near PT-FI’s administrative offices in the lowlands in Papua, Indonesia, resulting in the death of one PT-FI employee.

PT-FI continues to work with the Indonesian government to enhance security in and around the lowlands area and throughout the PT-FI project area.

Revised Operating Plans and Development Activities.

PT-FI has implemented a series of actions to prevent a spread of COVID-19 at its remote operating site in Papua, Indonesia.

While a limited number of COVID-19 cases have been confirmed through testing, PT-FI has been successful in maintaining the health of its workforce while continuing to make important progress in increasing production from its underground ore bodies.

During first-quarter 2020, PT-FI achieved additional progress in increasing mining rates by adding a total of 49 new drawbells at the Deep Mill Level Zone (DMLZ) and Grasberg Block Cave underground mines to build scale.

Combined average daily production from the DMLZ and Grasberg Block Cave underground mines averaged approximately 37,500 metric tons of ore per day, slightly above forecast and 44 percent above the fourth-quarter 2019 average.

PT-FI remains on track to continue to ramp-up production rates and expects 2021 production of 1.4 billion pounds of copper (more than 75 percent above the current April 2020 estimate for the year 2020) and 1.4 million ounces of gold (70 percent above the current April 2020 estimate for the year 2020).

PT-FI’s revised plans incorporate benefits of reduced input costs for energy, foreign exchange rates and recent increases in gold prices.

PT-FI has also deferred approximately $0.2 billion in capital projects from 2020 to future periods, primarily related to a delay in construction and installation of an additional milling circuit from 2022 to 2023, mostly reflecting limitations on work schedules and travel by international contractors during COVID-19 mitigation measures.

PT-FI's estimated annual capital spending on underground mine development projects is expected to average $0.8 billion per year for the three-year period 2020 through 2022, net of scheduled contributions from PT Indonesia Asahan Aluminium (Persero) (PT Inalum).

During the first six months of 2020 , 70 percent of PT-FI’s concentrate production was sold to PT Smelting (PT-FI’s 25-percent-owned smelter and refinery in Gresik, Indonesia).

Operating and Development Activities.

The ramp-up of underground production at the Grasberg minerals district in Indonesia continues to advance on schedule.

During second-quarter 2020, a total of 46 new drawbells were added at the Grasberg Block Cave and Deep Mill Level Zone (DMLZ) underground mines, bringing cumulative open drawbells to 261.

Combined average daily production from Grasberg Block Cave and DMLZ mines totaled 54,800 metric tons of ore per day during second-quarter 2020, approximately 9 percent above the April 2020 estimate and 46 percent above the first-quarter 2020 average (and increased to a combined daily production average of approximately 70,000 metric tons of ore per day at the end of June 2020).

PT-FI expects its 2021 copper and gold production to approximate 1.4 billion pounds of copper and 1.4 million ounces of gold, nearly double projected 2020 levels.

The successful completion of this ramp up is expected to enable PT-FI to generate average annual production for the next several years of 1.55 billion pounds of copper and 1.6 million ounces of gold at an average unit net cash cost of approximately $0.20 per pound of copper assuming an average price of $1,400 per ounce of gold and achievement of projected sales volumes and cost estimates.

PT-FI's estimated annual capital spending on underground mine development projects is expected to average approximately $0.9 billion per year for the three-year period 2020 through 2022, net of scheduled contributions from PT Indonesia Asahan Aluminium (Persero) (PT Inalum).

In accordance with applicable accounting guidance, aggregate costs (before scheduled contributions from PT Inalum), which are expected to average $1.0 billion per year for the three-year period 2020 through 2022, will be reflected as an investing activity in our cash flow statement, and contributions from PT Inalum will be reflected as a financing activity.

Indonesia Smelter.

As a result of disruptions to work and travel schedules of international contractors and current limitations on access to the proposed physical site in Gresik, Indonesia associated with COVID-19 mitigation measures, PT-FI notified the Indonesian government of delays in achieving the completion timeline of December 2023.

PT-FI is currently discussing with the Indonesian government a deferred schedule for the project as well as other alternatives in light of COVID-19 and global economic conditions.

Following is selected summary consolidated operating data for Indonesia mining for 2020, including a comparison of April 2020 estimates to the estimates reported in January 2020:

January 2020 Estimates

First-quarter 2020

Total Percent Change

Copper sales (millions of recoverable pounds)

Gold sales (thousands of recoverable ounces)

Unit net cash costs per pound of copper

Based on achievement of current sales volume and cost estimates, and assuming an average gold price of $1,600 per ounce for the remainder of 2020 .

The impact of price changes during the remainder of 2020 on PT-FI's average unit net cash costs for the year 2020 would approximate $0.05 per pound for each $50 per ounce change in the average price of gold.

The January 2020 estimates were based on an average price of $1,500 per ounce of gold for the year 2020.

PT-FI's projected sales volumes and unit net cash costs for the year 2020 are dependent on a number of factors, including operational performance and timing of shipments.

PT-FI has received a one-year extension of its export license through March 15, 2021.

Indonesian Smelter .

As a result of disruptions to work and travel schedules of international contractors and current restrictions on access to the proposed physical site in Gresik, Indonesia associated with COVID-19 mitigation measures, PT-FI has notified the Indonesian government of delays in achieving the completion timeline of December 2023.

PT-FI continues to discuss with the Indonesian government a deferred schedule for the project as well as other alternatives in light of COVID-19 and global economic conditions.

Operating Data.

Following is summary consolidated operating data for Indonesia mining:

Three Months Ended

Three Months Ended June 30,

Six Months Ended June 30,

Operating Data

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Ore extracted and milled (metric tons per day):

Grasberg open pit

Grasberg open pit a

DOZ underground mine b

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Recovery rates (percent):

Copper (millions of recoverable pounds)

Gold (thousands of recoverable ounces)

Represents ore from the Grasberg open-pit stockpile.

Includes ore from the Grasberg open-pit stockpile.

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

PT-FI’s consolidated sales of 127 million pounds of copper and 139 thousand ounces of gold in first-quarter 2020 were lower than first-quarter 2019 consolidated sales of 174 million pounds of copper and 235 thousand ounces of gold, reflecting anticipated lower mill rates as PT-FI continues to ramp-up production from its underground ore bodies.

Does not foot because of rounding.

PT-FI’s consolidated copper sales of 172 million pounds in second-quarter 2020 were higher than second-quarter 2019 consolidated copper sales of 151 million pounds, primarily reflecting higher ore grades, partly offset by anticipated lower mill rates as PT-FI continues to ramp-up production from its underground ore bodies.

PT-FI’s consolidated copper sales of 299 million pounds for the first six months of 2020 were lower than consolidated copper sales of 325 million pounds for first six months of 2019 , primarily reflecting timing of shipments, partly offset by higher ore grades.

PT-FI’s consolidated gold sales of 180 thousand ounces of gold in second-quarter 2020 and 319 thousand ounces of gold for the first six months of 2020 were lower than second-quarter 2019 consolidated sales of 185 thousand ounces of gold and 420 thousand ounces of gold for the first six months of 2019 , primarily reflecting timing of shipments, partly offset by higher ore grades.

Consolidated sales volumes from PT-FI are expected to approximate 770 million pounds of copper and 0.8 million ounces of gold in 2020 .

As PT-FI continues to ramp-up production from its underground ore bodies, metal production is expected to improve significantly in 2021.

Unit Net Cash Costs.

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Refer to “Product Revenues and Production Costs” for an explanation of “by-product” and “co-product” methods and a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in our consolidated financial statements.

Three Months Ended March 31,

Three Months Ended June 30,

By-Product Method

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Revenue adjustments, primarily for pricing on prior period open sales

PT Smelting intercompany profit

PT Smelting intercompany (loss) profit

Gross profit (loss) per pound/ounce

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Gold sales (thousands of recoverable ounces)

Includes credits of $0.11 per pound of copper associated with adjustments to prior year treatment and refining charges.

Six Months Ended June 30,

By-Product Method

Co-Product Method

By-Product Method

Co-Product Method

Revenues, excluding adjustments

Site production and delivery, before net noncash and other costs shown below

Gold and silver credits

Treatment charges

Export duties

Royalty on metals

Unit net cash costs

Noncash and other costs, net

Total unit costs

Other revenue adjustments, primarily for pricing on prior period open sales

PT Smelting intercompany profit

Gross profit per pound/ounce

Copper sales (millions of recoverable pounds)

Gold sales (thousands of recoverable ounces)

Includes COVID-19 related costs of $0.03 per pound of copper in second-quarter 2020 and $0.01 per pound of copper for the first six months of 2020.

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

A significant portion of PT-FI’s costs are fixed and unit costs vary depending on volumes and other factors.

PT-FI’s unit net cash costs (including gold and silver credits) of $1.31 per pound of copper in first-quarter 2020 were lower than unit net cash credits of $1.84 per pound of copper in first-quarter 2019 , primarily reflecting lower site production and delivery costs associated with lower mining and milling rates.

PT-FI’s unit net cash costs (including gold and silver credits) of $0.56 per pound of copper in second-quarter 2020 and $0.88 per pound for the first six months of 2020 were lower than unit net cash costs of $2.15 per pound of copper in second-quarter 2019 and $1.99 per pound for the first six months of 2019 , primarily reflecting reduced site production costs and higher gold prices.

The decrease in unit net cash costs in second-quarter 2020 also reflected higher copper sales volumes.

Treatment charges vary with the volume of metals sold and the price of copper, and royalties vary with the volume of metals sold and the prices of copper and gold.

PT-FI will continue to pay export duties until development progress for the new smelter in Indonesia exceeds 50 percent.

PT-FI export duties totaled $4 million in first-quarter 2020 and $17 million in first-quarter 2019 , and PT-FI’s royalties totaled $19 million in first-quarter 2020 and $28 million in first-quarter 2019 .

PT-FI’s export duties totaled $16 million in second-quarter 2020 , $10 million in second-quarter 2019 , $20 million for the first six months of 2020 and $27 million for the first six months of 2019 .

PT-FI’s royalties totaled $25 million in second-quarter 2020 , $17 million in second-quarter 2019 , $44 million for the first six months of 2020 and $45 million for the first six months of 2019 .

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

DD&A per pound of copper under the by-product method was $0.79 per pound in first-quarter 2020 , compared with $0.61 per pound in first-quarter 2019 , primarily reflecting lower copper sales volumes in first-quarter 2020 .

DD&A per pound of copper under the by-product method was $0.72 per pound in second-quarter 2020 , $0.65 per pound in second-quarter 2019 , $0.75 for the first six months of 2020 and $0.63 per pound for the first six months of 2019 .

The increase in the 2020 periods, compared with the 2019 periods, primarily reflects underground development assets placed in service.

Revenue adjustments primarily result from changes in prices on provisionally priced copper sales recognized in prior periods.

PT Smelting intercompany profit represents the change in the deferral of 25 percent of PT-FI’s profit on sales to PT Smelting.

PT Smelting intercompany (loss) profit represents the change in the deferral of 25 percent of PT-FI’s profit on sales to PT Smelting.

Refer to “Smelting and Refining” below for further discussion.

Assuming an average gold price of $1,800 per ounce for the second half of 2020 and achievement of current sales volume and cost estimates, unit net cash costs (including gold and silver credits) for PT-FI are expected to

approximate $0.54 per pound of copper for the year 2020 (including $0.34 per pound of copper for the second half of 2020 ).

The impact of price changes during the second half of 2020 on PT-FI's average unit net cash costs for the year 2020 would approximate $0.03 per pound of copper for each $50 per ounce change in the average price of gold.

PT-FI’s projected sales volumes and unit net cash costs for the year 2020 are dependent on a number of factors, including underground development progress, operational performance and timing of shipments.

In March 2020, PT-FI received a one-year extension of its export license through March 15, 2021.

Molybdenum Mines

We have two wholly owned molybdenum mines in Colorado – the Henderson underground mine and the Climax open-pit mine.

We operate two wholly owned molybdenum mines in Colorado – the Henderson underground mine and the Climax open-pit mine.

The Henderson and Climax mines produce high-purity, chemical-grade molybdenum concentrate, which is typically further processed into value-added molybdenum chemical products.

The majority of the molybdenum concentrate produced at the Henderson and Climax mines, as well as from our North America and South America copper mines, is processed at our own conversion facilities.

Revised Operating Plans.

In response to global market conditions, we intend to reduce production from the Climax open pit mine by approximately 50 percent for the remainder of 2020.

The Climax mine produced 17 million pounds of molybdenum in 2019.

Revised operating plans for the molybdenum business also include reductions in operating costs, administrative and centralized support costs and capital spending.

Production from the Molybdenum mines totaled 7 million pounds of molybdenum in first-quarter 2020 and 8 million pounds in first-quarter 2019 .

Production from the Molybdenum mines totaled 6 million pounds of molybdenum in second-quarter 2020 , 9 million pounds in second-quarter 2019 , 13 million pounds for the first six months of 2020 and 17 million pounds for the first six months of 2019 .

The decrease in the 2020 periods, compared with the 2019 periods, primarily reflects lower production in response to market conditions.

Refer to “Consolidated Results” for our consolidated molybdenum operating data, which includes sales of molybdenum produced at our Molybdenum mines and from our North America and South America copper mines.

Refer to “Outlook” for projected consolidated molybdenum sales volumes.

Operating and Development Activities .

The April 2020 revised operating plans for our molybdenum business have been effectively implemented, with site production and delivery costs declining by approximately 20 percent compared to first-quarter 2020.

Unit Net Cash Costs Per Pound of Molybdenum.

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This measure is presented by other metals mining companies, although our measure may not be comparable to similarly titled measures reported by other companies.

Average unit net cash costs for our Molybdenum mines of $10.03 per pound of molybdenum in first-quarter 2020 were higher than average unit net cash costs of $9.80 per pound in first-quarter 2019 .

Average unit net cash costs for our Molybdenum mines of $8.97 per pound of molybdenum in second-quarter 2020 were lower than unit net cash costs of $9.15 per pound in second-quarter 2019 , primarily reflecting lower operating costs associated with the April 2020 revised operating plans.

Average unit net cash costs of $9.52 per pound of molybdenum for the first six months of 2020 were higher than unit net cash costs of $9.45 per pound for the first six months of 2019 , primarily reflecting lower sales volumes, partly offset by lower operating costs associated with the April 2020 revised operating plans.

Average unit net cash costs for our Molybdenum mines do not include noncash and other costs, which include charges totaling $1.00 per pound of molybdenum in second-quarter 2020 and $0.48 per pound of molybdenum for the first six months of 2020, primarily associated with the April 2020 revised operating plans (including employee separation costs) and contract cancellation costs related to the COVID-19 pandemic.

Based on current sales volume and cost estimates, average unit net cash costs for the Molybdenum mines are expected to approximate $10.20 per pound of molybdenum for the year 2020 .

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Thus, higher treatment charges benefit our smelter operations and adversely affect our mining operations.

Our North America copper mines are less significantly affected by changes in treatment charges because these operations are largely integrated with our Miami smelter and El Paso refinery.

Our North America copper mines are less

significantly affected by changes in treatment charges because these operations are largely integrated with our Miami smelter and El Paso refinery.

Through this form of downstream integration, we are assured placement of a significant portion of our concentrate production.

Atlantic Copper smelts and refines copper concentrate and markets refined copper and precious metals in slimes.

During first-quarter 2020 , Atlantic Copper’s concentrate purchases include 23 percent from our copper mining operations and 77 percent from third parties.

During the first six months of 2020 , Atlantic Copper’s concentrate purchases include 20 percent from our copper mining operations and 80 percent from third parties.

PT-FI’s contract with PT Smelting provides for PT-FI to supply 100 percent of the copper concentrate requirements (subject to a minimum or maximum treatment charge rate) necessary for PT Smelting to produce 205,000 metric tons of copper annually on a priority basis.

PT-FI may also sell copper concentrate to PT Smelting at market rates

for quantities in excess of 205,000 metric tons of copper annually.

During first-quarter 2020 , PT-FI supplied substantially all of PT Smelting’s concentrate requirements.

PT Smelting has received a one-year extension of its anode slimes export license through March 10, 2021.

PT-FI may also sell copper concentrate to PT Smelting at market rates for quantities in excess of 205,000 metric tons of copper annually.

During the first six months of 2020 , PT-FI supplied substantially all of PT Smelting’s concentrate requirements.

In March 2020, PT Smelting received a one-year extension of its anode slimes export license through March 10, 2021.

We defer recognizing profits on sales from our mining operations to Atlantic Copper and on 25 percent of PT-FI’s sales to PT Smelting until final sales to third parties occur.

Changes in these deferrals attributable to variability in intercompany volumes resulted in net additions (reductions) to operating (loss) income totaling $11 million ( $7 million to net loss attributable to common stock) for first-quarter 2020 and $(31) million ( $(14) million to net income attributable to common stock) for first-quarter 2019 .

Our net deferred profits on our inventories at Atlantic Copper and PT Smelting to be recognized in future periods’ net income attributable to common stock totaled $2 million at March 31, 2020 .

Quarterly variations in ore grades, the timing of intercompany shipments and changes in product prices will result in variability in our net deferred profits and quarterly earnings.

In first-quarter 2020, Indonesia mining's results included the recognition of $25 million in pre-tax net intercompany profit associated with copper concentrate sales to PT Smelting.

Based on current price estimates and the impact of changes in operating costs and sales volumes associated with our revised operating plans, we currently expect second-quarter 2020 results to reflect net deferrals of pre-tax profits, which will be recognized in future periods as PT Smelting and Atlantic Copper sell final refined products to third parties.

Changes in these deferrals attributable to variability in intercompany volumes resulted in net (reductions) additions to operating income (loss) totaling $(17) million ( $(6) million to net income attributable to common stock) in second-quarter 2020 , $11 million ( $(2) million to net loss attributable to common stock) in second-quarter 2019 , $(6) million ( $1 million to net loss attributable to common stock) for the first six months of 2020 and $(20) million ( $(15) million to net loss attributable to common stock) for the first six months of 2019 .

Our net deferred profits on our inventories at Atlantic Copper and PT Smelting to be recognized in future periods’ net income attributable to common stock totaled $28 million at June 30, 2020 .

CAPITAL RESOURCES AND LIQUIDITY

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We believe that we have a high-quality portfolio of long-lived copper assets positioned to generate long-term value.

PT-FI has several projects in the Grasberg minerals district related to the development of its large-scale, long-lived, high-grade underground ore bodies and we are nearing completion of a project to develop the Lone Star leachable ores near our Safford operation in eastern Arizona.

PT-FI has several projects in the Grasberg minerals district related to the development of its large-scale, long-lived, high-grade underground ore bodies and we have substantially completed a project to develop the Lone Star leachable ores near our Safford operation in eastern Arizona.

We are also evaluating other opportunities to enhance net present values, and we continue to consider future development of our copper resources, the timing of which will be dependent on market conditions.

As discussed above, we assessed our 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;

in response, we revised our operating plans to include:

(1) a $1.3 billion reduction in 2020 estimated operating costs;

(2) an $800 million reduction in 2020 estimated capital expenditures;

(3) a $100 million reduction in 2020 estimated exploration and administrative costs;

and (4) an approximate 400 million pound reduction in North America and South America 2020 estimated copper sales volumes.

As presented in “Outlook,” our projected capital expenditures for the year 2020 under our revised operating plans are approximately $0.2 billion higher than projected operating cash flows, an improvement of 50 percent from the operating plans reported in January 2020, despite an 18 percent decline in estimated copper prices between the two operating plans.

We expect our capital expenditures to exceed operating cash flows in the first half of 2020 and to generate operating cash flows in excess of capital expenditures in the second half of 2020.

A large portion of the capital expenditures relate to projects that are expected to add significant production and cash flow in future periods, enabling us to generate operating cash flows exceeding capital expenditures in future years.

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

The revised operating plans are focused 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.

As presented in “Outlook,” projected operating cash flows for the year 2020 of $2.6 billion are expected to exceed projected capital expenditures for the year 2020 by $0.6 billion.

The increase in expected operating cash flows for the year 2020, compared to the April 2020 estimate, primarily reflects an increase in copper prices.

A large portion of the capital expenditures relate to projects that are expected to add significant production and cash flow in future periods.

We have cash on hand and the financial flexibility to fund these expenditures and will continue to be disciplined in deploying capital.

Subject to future commodity prices for copper, gold and molybdenum, we expect estimated consolidated operating cash flows in 2020, plus available cash and availability under our credit facility, to be sufficient to fund our budgeted capital expenditures and other cash requirements for the year.

At March 31, 2020, we had $5.1 billion in liquidity, comprised of $1.6 billion in consolidated cash and $3.5 billion of availability under our revolving credit facility, of which $3.28 billion matures April 2024 and $220 million matures April 2023.

With successful execution of the revised operating plans, we expect operating cash flows to improve significantly in 2021 and future years with substantial cash flow above capital expenditures as economic conditions improve.

We have a strong liquidity position to manage volatility, and following the April 2020 redemption (refer to Note 5 for and “Financing Activities” below), no senior notes maturing until 2022.

At June 30, 2020, we had $5.0 billion in liquidity, comprised of $1.5 billion in consolidated cash and $3.5 billion of availability under our revolving credit facility.

With continued successful execution of the revised operating plans, we expect operating cash flows to improve significantly in 2021.

In March 2020, we completed the sale of $1.3 billion in new 8-year and 10-year senior notes and used the net proceeds to purchase and redeem a portion of certain existing senior notes.

In July 2020, we completed the sale of $1.5 billion in new 8-year and 10-year senior notes.

We used the net proceeds from the July offering to purchase $1.3 billion of certain existing senior notes in connection with the early settlement of our tender offers.

Depending on our final tender results, we may use all or a portion of the remaining net proceeds from the offering to purchase more of certain senior notes in the tender offers.

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

Refer to Note 5 and below for further discussion.

These transactions will further enhance financial flexibility and extend debt maturities.

Following is a summary of the U.S.

and international components of consolidated cash and cash equivalents available to the parent company, net of noncontrolling interests’ share, taxes and other costs at March 31, 2020 (in billions):

and international components of consolidated cash and cash equivalents available to the parent company, net of noncontrolling interests’ share, taxes and other costs at June 30, 2020 (in billions):

Cash at domestic companies

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through dividends that are subject to applicable withholding taxes and noncontrolling interests’ share.

At March 31, 2020 , our consolidated debt totaled $10.1 billion , with a weighted-average interest rate of 4.5 percent.

At March 31, 2020 , we had no borrowings, $13 million in letters of credit issued and $3.5 billion of availability under our revolving credit facility and we were in compliance with our revolving credit facility covenants.

Refer to Note 5 for further discussion of debt, and “Financing Activities” below and for additional information regarding our debt arrangements, refer to Note 8 included in our 2019 Form 10-K.

At June 30, 2020 , our consolidated debt totaled $9.9 billion , with a weighted-average interest rate of 4.5 percent and no senior note maturities until 2022.

At June 30, 2020 , we had no borrowings, $13 million in letters of credit issued and $3.5 billion of availability under our revolving credit facility and were in compliance with our revolving credit facility covenants.

In June 2020, we amended our revolving credit facility to provide additional flexibility on certain financial covenants.

The key changes under the amendment include a suspension of the total leverage ratio through June 30, 2021, and a reduction in the interest expense coverage ratio to a minimum of 2.0x through December 31, 2021.

We 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 on the payment of dividends through December 31, 2021.

We retained the option to revert to the previous covenant requirements (which would, among other things, remove the dividend restriction) if we determine additional flexibility is no longer needed.

In March 2020, we completed the sale of $1.3 billion of senior notes, consisting of $700 million of 4.125% Senior Notes due 2028 and $600 million of 4.25% Senior Notes due 2030.

We used a portion of the net proceeds from these senior notes to purchase a portion of our 4.00% Senior Notes due 2021 and 3.55% Senior Notes due 2022.

In April 2020, we used the remaining net proceeds to fund the make-whole redemption of all of our remaining 4.00% Senior Notes due 2021.

In July 2020, we completed the sale of $1.5 billion of senior notes, consisting of $650 million of 4.375% Senior Notes due 2028 and $850 million of 4.625% Senior Notes due 2030.

We used $1.3 billion of the net proceeds from these senior notes to purchase a portion of our 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 our previously announced tender offers.

Depending on the final tender results, we may use all or a portion of the remaining net proceeds from the offering to purchase more of such series of notes in the tender offers.

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

Refer to Note 5 for further discussion of debt.

For additional information regarding our debt arrangements, refer to Note 8 included in our 2019 Form 10-K.

Operating Activities

We reported consolidated cash used in operating activities of $38 million (including $119 million of working capital and other sources) in first-quarter 2020 and generated consolidated operating cash flows of $534 million (net of $56 million in working capital and other uses) in first-quarter 2019 .

Lower operating cash flows in first-quarter 2020 compared with the first-quarter 2019 , primarily reflect lower copper and gold sales volumes and lower copper prices.

We generated consolidated operating cash flows of $453 million (including $141 million of working capital and other sources) for the first six months of 2020 and $1.1 billion (including $248 million in working capital and other sources) for the first six months of 2019 .

Lower operating cash flows for the first six months of 2020 compared with

the first six months of 2019 , primarily reflect lower copper prices and sales volumes, partly offset by reduced site production costs.

Investing Activities

Capital Expenditures.

Capital expenditures, including capitalized interest, totaled $0.6 billion in first-quarter 2020 , including approximately $0.3 billion for major mining projects primarily associated with underground development activities in the Grasberg minerals district and the Lone Star copper leach project.

Capital expenditures, including capitalized interest, totaled $0.6 billion in first-quarter 2019 , including approximately $0.4 billion for major mining projects.

Capital expenditures, including capitalized interest, totaled $1.1 billion for the first six months of 2020 , including approximately $0.6 billion for major projects primarily associated with underground development activities in the Grasberg minerals district and the Lone Star copper leach project.

Capital expenditures, including capitalized interest, totaled $1.25 billion for the first six months of 2019 , including approximately $0.7 billion for major projects.

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Proceeds from Sales of Assets.

Proceeds from sales of assets totaled $66 million in first-quarter 2020 , primarily related to contingent consideration associated with the 2016 sale of TF Holdings Limited, and $84 million in first-quarter 2019, including $50 million in contingent consideration received associated with the 2016 sale of onshore California oil and gas properties.

Proceeds from sales of assets totaled $116 million for the first six months of 2020 , primarily related to $60 million of contingent consideration associated with the 2016 sale of the Tenke Fungurume Mining assets in the Democratic Republic of Congo and the collection of $45 million related to the 2019 sale of the Timok exploration assets in Serbia.

Proceeds from sales of assets totaled $94 million for the first six months of 2019 , primarily associated with sales of oil and gas properties, including $50 million in contingent consideration associated with the 2016 sale of onshore California oil and gas properties.

Financing Activities

Debt Transactions.

Net borrowings of debt in first-quarter 2020 totaled $0.2 billion .

Net borrowings of debt for the first six months of 2020 totaled $58 million .

During first-quarter 2020, we completed the sale of $1.3 billion in senior notes and used the net proceeds to purchase a portion of our senior notes due 2021 and 2022.

On April 3, 2020, we used the remaining net proceeds to redeem the remainder of our senior notes due 2021.

We recorded losses on early extinguishment of debt totaling $32 million in first-quarter 2020 related to these transactions.

Net repayments of debt in first-quarter 2019 totaled $1.2 billion , consisting of the redemption of $1.0 billion aggregate principal amount of our 3.100% Senior Notes due 2020 and the repayment of $200 million under Cerro Verde’s credit facility.

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

Cash Dividends and Distributions Paid.

We paid cash dividends on our common stock totaling $73 million in each of the first quarters of 2020 and 2019.

The Board suspended the May 2020 quarterly cash dividend of $0.05 per share on our common stock, and under current market and economic conditions, the Board does not expect to declare common stock dividends during 2020.

The payment of future dividends will be assessed on an ongoing basis, taking into account our financial results, cash requirements, future prospects, global economic conditions, and other factors deemed relevant by the Board.

There were no cash dividends or distributions paid to noncontrolling interests in first-quarter 2020 and $9 million paid in first-quarter 2019 .

We paid cash dividends on our common stock totaling $73 million for the first six months of 2020 (associated with the $0.05 per share of common stock cash dividend declared in December 2019), and $146 million for the first six months of 2019 .

The Board does not expect to declare common stock dividends during 2020.

The declaration and payment of future dividends will be assessed on an ongoing basis, taking into account our financial results, cash requirements, future prospects, global economic conditions, and other factors deemed relevant by the Board.

See Note 5 for further discussion of the suspension of our quarterly dividends and the current restriction on payment of dividends under our revolving credit facility.

There were no cash dividends or distributions paid to noncontrolling interests for the first six months of 2020 and $79 million for the first six months of 2019 .

Cash dividends and distributions to noncontrolling interests vary based on the operating results and cash requirements of our consolidated subsidiaries.

Contributions from Noncontrolling Interests.

During first-quarter 2020, we received equity contributions totaling $32 million from PT Inalum for their share of capital spending on PT-FI underground mine development projects and costs for the new smelter in Indonesia.

During the first six months of 2020, we received equity contributions totaling $74 million from PT Inalum for their share of capital spending on PT-FI underground mine development projects and costs for the new smelter in Indonesia.

CONTRACTUAL OBLIGATIONS

As further discussed in Note 5, during first-quarter 2020, we completed the sale of $1.3 billion in new 8-year and 10-year senior notes at an average interest rate of 4.2 percent.

The net proceeds were used to purchase a portion of the senior notes due 2021 and 2022, and in early April 2020, to redeem the remainder of the senior notes due 2021.

During the first six-months of 2020, we completed the sale of $1.3 billion in new 8-year and 10-year senior notes at a weighted-average interest rate of 4.2 percent.

In July 2020, we completed the sale of $1.5 billion in new 8-year and 10-year senior notes at a weighted-average interest rate of 4.5 percent.

The net proceeds from these transactions were used or are expected to be used to purchase and redeem a portion of certain existing senior notes.

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

Refer to Note 5 for further discussion of these transactions.

There have been no other material changes in our contractual obligations since December 31, 2019.

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Refer to Note 12 in our 2019 Form 10-K, for further information regarding our environmental and asset retirement obligations.

In addition, as discussed in Note 8, we are moving toward implementing a new standard on tailings management.

Compliance with the standard will require incremental future costs.

Litigation and Other Contingencies

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of our 2019 Form 10-K, as updated by Note 8, for further information regarding legal proceedings, environmental and other matters.

NEW ACCOUNTING STANDARDS

Refer to Note 10 for a summary of recently adopted accounting standards.

NEW ACCOUNTING STANDARD

Refer to Note 10 for a summary of a recently adopted accounting standard.

PRODUCT REVENUES AND PRODUCTION COSTS

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These measures are presented by other metals mining companies, although our measures may not be comparable to similarly titled measures reported by other companies.

We present gross (loss) profit per pound of copper in the following tables using both a “by-product” method and a “co-product” method.

We use the by-product method in our presentation of gross (loss) profit per pound of copper because (i) the majority of our revenues are copper revenues, (ii) we mine ore, which contains copper, gold, molybdenum and other metals, (iii) it is not possible to specifically assign all of our costs to revenues from the copper, gold, molybdenum and other metals we produce and (iv) it is the method used by our management and Board to monitor our mining operations and to compare mining operations in certain industry publications.

We present gross profit (loss) per pound of copper in the following tables using both a “by-product” method and a “co-product” method.

We use the by-product method in our presentation of gross profit (loss) per pound of copper because (i) the majority of our revenues are copper revenues, (ii) we mine ore, which contains copper, gold, molybdenum and other metals, (iii) it is not possible to specifically assign all of our costs to revenues from the copper, gold, molybdenum and other metals we produce and (iv) it is the method used by our management and Board to monitor our mining operations and to compare mining operations in certain industry publications.

In the co-product method presentations, shared costs are allocated to the different products based on their relative revenue values, which will vary to the extent our metals sales volumes and realized prices change.

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

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

(In millions)

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Molybdenum sales (millions of recoverable pounds) a

Gross loss per pound of copper/molybdenum:

Gross profit per pound of copper/molybdenum:

Revenues, excluding adjustments

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on prior period open sales

Gross loss per pound

Gross profit per pound

Reconciliation to Amounts Reported

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North America copper mines

Other mining c

Other mining e

Corporate, other & eliminations

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Includes gold and silver product revenues and production costs.

Includes reductions to revenues and average realized prices totaling $24 million ($0.06 per pound of copper) 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.

Includes charges totaling $22 million ($0.06 per pound of copper) primarily associated with the April 2020 revised operating plans (including employee separation costs) and the COVID-19 pandemic.

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

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

Three Months Ended March 31, 2019

Three Months Ended June 30, 2019

(In millions)

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Net cash costs

Metals inventory adjustments

Noncash and other costs, net

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Unit net cash costs

Metals inventory adjustments

Noncash and other costs, net

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Production and Delivery

Metals Inventory Adjustments

Totals presented above

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

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

Six Months Ended June 30, 2020

(In millions)

Co-Product Method

Revenues, excluding adjustments

Site production and delivery, before net noncash

and other costs shown below

By-product credits

Treatment charges

Net cash costs

Metals inventory adjustments

Noncash and other costs, net

Other revenue adjustments, primarily for pricing

on prior period open sales

Copper sales (millions of recoverable pounds)

Molybdenum sales (millions of recoverable pounds) a

Gross profit per pound of copper/molybdenum:

Revenues, excluding adjustments

Site production and delivery, before net noncash

and other costs shown below

By-product credits

Treatment charges

Unit net cash costs

Metals inventory adjustments

Noncash and other costs, net

Total unit costs

Other revenue adjustments, primarily for pricing

on prior period open sales

Gross profit per pound

Reconciliation to Amounts Reported

Totals presented above

Treatment charges

Noncash and other costs, net

Other revenue adjustments, primarily for pricing

on prior period open sales

Eliminations and other

North America copper mines

Other mining e

Corporate, other & eliminations

As reported in our consolidated financial statements

Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing.

Includes gold and silver product revenues and production costs.

Includes reductions to revenues and average realized prices totaling $24 million ($0.03 per pound of copper) 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.

Includes charges totaling $22 million ($0.03 per pound of copper) primarily associated with the April 2020 revised operating plans (including employee separation costs) and the COVID-19 pandemic.

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

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

Six Months Ended June 30, 2019

(In millions)

Co-Product Method

Revenues, excluding adjustments

Site production and delivery, before net noncash

and other costs shown below

By-product credits

Treatment charges

Net cash costs

Metals inventory adjustments

Noncash and other costs, net

Other revenue adjustments, primarily for pricing

on prior period open sales

Copper sales (millions of recoverable pounds)

Molybdenum sales (millions of recoverable pounds) a

Gross profit per pound of copper/molybdenum:

Revenues, excluding adjustments

Site production and delivery, before net noncash

and other costs shown below

By-product credits

Treatment charges

Unit net cash costs

Metals inventory adjustments

Noncash and other costs, net

Total unit costs

Other revenue adjustments, primarily for pricing

on prior period open sales

Gross profit per pound

Reconciliation to Amounts Reported

Totals presented above

Treatment charges

Noncash and other costs, net

Other revenue adjustments, primarily for pricing

on prior period open sales

Eliminations and other

North America copper mines

Other mining c

Corporate, other & eliminations

As reported in our consolidated financial statements

Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing.

Includes gold and silver product revenues and production costs.

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

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

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

(In millions)

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on prior period open sales

Gross profit (loss)

Copper sales (millions of recoverable pounds)

Gross profit per pound of copper:

Revenues, excluding adjustments

Site production and delivery, before net noncash

and other costs shown below

By-product credits

Treatment charges

Royalty on metals

Unit net cash costs

Metals inventory adjustments

Noncash and other costs, net

Total unit costs

Other revenue adjustments, primarily for pricing

on prior period open sales

Gross profit per pound

Reconciliation to Amounts Reported

Totals presented above

Treatment charges

Royalty on metals

Noncash and other costs, net

Other revenue adjustments, primarily for pricing

on prior period open sales

Eliminations and other

South America mining

Other mining c

Corporate, other & eliminations

As reported in our consolidated financial statements

Includes silver sales of 0.6 million ounces ( $14.55 per ounce average realized price).

Also reflects sales of molybdenum produced by Cerro Verde to our molybdenum sales company at market-based pricing.

Includes charges totaling $66 million ($0.30 per pound of copper), primarily associated with idle facility (Cerro Verde) and contract cancellation costs related to the COVID-19 pandemic, and employee separation costs associated with the April 2020 revised operating plans.

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

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

Three Months Ended June 30, 2019

(In millions)

Co-Product Method

Revenues, excluding adjustments

Site production and delivery, before net noncash

and other costs shown below

By-product credits

Treatment charges

Royalty on metals

Net cash costs

Noncash and other costs, net

Other revenue adjustments, primarily for pricing

on prior period open sales

Copper sales (millions of recoverable pounds)

Gross profit per pound of copper:

Revenues, excluding adjustments

Site production and delivery, before net noncash

and other costs shown below

By-product credits

Treatment charges

Royalty on metals

Unit net cash costs

Noncash and other costs, net

Total unit costs

Other revenue adjustments, primarily for pricing

on prior period open sales

Gross profit per pound

Reconciliation to Amounts Reported

Totals presented above

Treatment charges

Royalty on metals

Noncash and other costs, net

Other revenue adjustments, primarily for pricing

on prior period open sales

Eliminations and other

South America mining

Other mining b

Corporate, other & eliminations

As reported in our consolidated financial statements

Includes silver sales of 1.2 million ounces ( $15.39 per ounce average realized price).

Also reflects sales of molybdenum produced by Cerro Verde to our molybdenum sales company at market-based pricing.

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

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

Six Months Ended June 30, 2020

(In millions)

Co-Product Method

Revenues, excluding adjustments

Site production and delivery, before net noncash

and other costs shown below

By-product credits

Treatment charges

Royalty on metals

Net cash costs

Metals inventory adjustments

Noncash and other costs, net

Other revenue adjustments, primarily for pricing

on prior period open sales

Copper sales (millions of recoverable pounds)

Gross loss per pound of copper:

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Also reflects sales of molybdenum produced by Cerro Verde to our molybdenum sales company at market-based pricing.

Includes COVID-19 related costs of $20 million ( $0.08 per pound of copper), primarily associated with idle facility costs at Cerro Verde as a result of the Peruvian government's issuance of a Supreme Decree and declaration of a National Emergency in its efforts to contain the outbreak of COVID-19 and contract cancellation costs at El Abra.

Includes charges totaling $86 million ($0.18 per pound of copper) primarily associated with idle facility (Cerro Verde) and contract cancellation costs related to the COVID-19 pandemic, and employee separation costs associated with the April 2020 revised operating plans.

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

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

Three Months Ended March 31, 2019

Six Months Ended June 30, 2019

(In millions)

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South America mining

Other mining c

Other mining b

Corporate, other & eliminations

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Also reflects sales of molybdenum produced by Cerro Verde to our molybdenum sales company at market-based pricing.

Includes charges of $12 million ( $0.04 per pound of copper) associated with weather-related impacts at El Abra.

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

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

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

(In millions)

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on prior period open sales

PT Smelting intercompany loss

Copper sales (millions of recoverable pounds)

Gold sales (thousands of recoverable ounces)

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

Revenues, excluding adjustments

Site production and delivery, before net noncash

and other costs shown below

Gold and silver credits

Treatment charges

Export duties

Royalty on metals

Unit net cash costs

Noncash and other costs, net

Total unit costs

Other revenue adjustments, primarily for pricing

on prior period open sales

PT Smelting intercompany loss

Gross profit per pound/ounce

Reconciliation to Amounts Reported

Totals presented above

Treatment charges

Export duties

Royalty on metals

Noncash and other costs, net

Other revenue adjustments, primarily for pricing

on prior period open sales

PT Smelting intercompany loss

Indonesia mining

Other mining c

Corporate, other & eliminations

As reported in our consolidated financial statements

Includes silver sales of 0.8 million ounces ( $17.09 per ounce average realized price).

Includes COVID-19 related costs totaling $4 million ($0.03 per pound of copper).

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

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

Three Months Ended June 30, 2019

(In millions)

Co-Product Method

Revenues, excluding adjustments

Site production and delivery, before net noncash

and other costs shown below

Gold and silver credits

Treatment charges

Export duties

Royalty on metals

Net cash costs

Noncash and other costs, net

Other revenue adjustments, primarily for pricing

on prior period open sales

PT Smelting intercompany profit

Gross profit (loss)

Copper sales (millions of recoverable pounds)

Gold sales (thousands of recoverable ounces)

Gross profit (loss) per pound of copper/per ounce of gold:

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

Revenues, excluding adjustments

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PT Smelting intercompany profit

Gross profit (loss) per pound/ounce

Gross loss per pound/ounce

Reconciliation to Amounts Reported

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Indonesia mining

Other mining b

Other mining c

Corporate, other & eliminations

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

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

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

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

Three Months Ended March 31, 2019

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

Six Months Ended June 30, 2020

(In millions)

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on prior period open sales

Copper sales (millions of recoverable pounds)

Gold sales (thousands of recoverable ounces)

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

Revenues, excluding adjustments

Site production and delivery, before net noncash

and other costs shown below

Gold and silver credits

Treatment charges

Export duties

Royalty on metals

Unit net cash costs

Noncash and other costs, net

Total unit costs

Other revenue adjustments, primarily for pricing

on prior period open sales

Gross profit per pound/ounce

Reconciliation to Amounts Reported

Totals presented above

Treatment charges

Export duties

Royalty on metals

Noncash and other costs, net

Other revenue adjustments, primarily for pricing

on prior period open sales

Indonesia mining

Other mining c

Corporate, other & eliminations

As reported in our consolidated financial statements

Includes silver sales of 1.3 million ounces ( $16.30 per ounce average realized price).

Includes COVID-19 related costs of $4 million ($0.01 per pound of copper).

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

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

Six Months Ended June 30, 2019

(In millions)

Co-Product Method

Revenues, excluding adjustments

Site production and delivery, before net noncash

and other costs shown below

Gold and silver credits

Treatment charges

Export duties

Royalty on metals

Net cash costs

Noncash and other costs, net

Other revenue adjustments, primarily for pricing

on prior period open sales

PT Smelting intercompany profit

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

Includes credits of $19 million ($0.11 per pound of copper) associated with adjustments to prior year treatment and refining charges.

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

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

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

Three Months Ended March 31,

Three Months Ended June 30,

(In millions)

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Reconciliation to Amounts Reported

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

Totals presented above

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Molybdenum mines

Other mining b

Other mining c

Corporate, other & eliminations

As reported in our consolidated financial statements

Three Months Ended March 31, 2019

Three Months Ended June 30, 2019

Totals presented above

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Molybdenum mines

Other mining b

Other mining c

Corporate, other & eliminations

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as a result, our consolidated average realized price per pound of molybdenum will differ from the amounts reported in this table.

Includes charges totaling $6 million ($1.00 per pound of molybdenum) primarily associated with the April 2020 revised operating plans (including employee separation costs) and contract cancellation costs related to the COVID-19 pandemic.

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

Also includes amounts associated with our molybdenum sales company, which includes sales of molybdenum produced by the Molybdenum mines and by certain of the North America and South America copper mines.

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

Six Months Ended June 30,

(In millions)

Revenues, excluding adjustments a

Site production and delivery, before net noncash

and other costs shown below

Treatment charges and other

Net cash costs

Metals inventory adjustments

Noncash and other costs, net

Gross (loss) profit

Molybdenum sales (millions of recoverable pounds) a

Gross (loss) profit per pound of molybdenum:

Revenues, excluding adjustments a

Site production and delivery, before net noncash

and other costs shown below

Treatment charges and other

Unit net cash costs

Metals inventory adjustments

Noncash and other costs, net

Total unit costs

Gross (loss) profit per pound

Reconciliation to Amounts Reported

Six Months Ended June 30, 2020

Totals presented above

Treatment charges and other

Noncash and other costs, net

Molybdenum mines

Other mining c

Corporate, other & eliminations

As reported in our consolidated financial statements

Six Months Ended June 30, 2019

Totals presented above

Treatment charges and other

Noncash and other costs, net

Molybdenum mines

Other mining c

Corporate, other & eliminations

As reported in our consolidated financial statements

Reflects sales of the Molybdenum mines’ production to our molybdenum sales company at market-based pricing.

On a consolidated basis, realizations are based on the actual contract terms for sales to third parties;

as a result, our consolidated average realized price per pound of molybdenum will differ from the amounts reported in this table.

Includes charges totaling $6 million ($0.48 per pound of molybdenum) primarily associated with the April 2020 revised operating plans (including employee separation costs) and contract cancellation costs related to the COVID-19 pandemic.

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

GUARANTOR SUMMARIZED FINANCIAL INFORMATION

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or (iii) the discharge of FCX’s obligations under the indentures in accordance with their terms.

The following summarized financial information includes information regarding FCX, as issuer, FM O&G LLC, as guarantor, and all other non-guarantor subsidiaries of FCX at March 31, 2020 , and December 31, 2019 , for the three months ended March 31, 2020 , and the year ended December 31, 2019 .

The following summarized financial information includes information regarding FCX, as issuer, FM O&G LLC, as guarantor, and all other non-guarantor subsidiaries of FCX at June 30, 2020 , and December 31, 2019 , and for six months ended June 30, 2020 .

Non-guarantor

As of March 31, 2020

As of June 30, 2020

Current assets

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Noncurrent liabilities

Three Months Ended March 31, 2020

Six Months Ended June 30, 2020

Operating loss

Net (loss) income

Year Ended December 31, 2019

Operating (loss) income

Net (loss) income

Net (loss) income equals net (loss) income to common stockholders because net (income) loss attributable to noncontrolling interests is zero for issuer and guarantor.

Net loss equals net loss attributable to common stockholders because net loss attributable to noncontrolling interests is zero for issuer and guarantor.

CAUTIONARY STATEMENT

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cost savings;

our expectations regarding our share of PT-FI's net (loss) income and future cash flows through 2022;

the consummation of the tender offers;

the use of proceeds from the notes offering;

our expectations regarding our share of PT-FI's net income (loss) and future cash flows through 2022;

PT-FI's development, financing, construction and completion of a new smelter in Indonesia;

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The words “anticipates,” “may,” “can,” “plans,” “believes,” “estimates,” “expects,” “projects,” "targets," “intends,” “likely,” “will,” “should,” “could,” “to be,” ”potential," “assumptions,” “guidance,” “future” and any similar expressions are intended to identify those assertions as forward-looking statements.

The declaration of dividends is at the discretion of the Board and will depend on our financial results, cash requirements, future prospects, and other factors deemed relevant by the Board.

The declaration of future dividends is at the discretion of the Board and will depend on our financial results, cash requirements, future prospects, and other factors deemed relevant by the Board.

In accordance with the June 2020 amendment to the revolving credit facility, we are currently restricted from declaring or paying common stock dividends.

We caution readers that forward-looking statements are not guarantees of future performance and actual results may differ materially from those anticipated, expected, projected or assumed in the forward-looking statements.

Important factors that can cause our actual results to differ materially from those anticipated in the forward-looking statements include, but are not limited to, the duration and scope of and uncertainties associated with the COVID-19 pandemic, and the impact thereof on commodity prices, our business and the global economy, which are evolving and beyond our control, and any related actions taken by governments and businesses (including the Peruvian government’s order);

Important factors that can cause our actual results to differ materially from those anticipated in the forward-looking statements include, but are not limited to, our ability to consummate the tender offers;

the duration and scope of and uncertainties associated with the COVID-19 pandemic, and the impact thereof on commodity prices, our business and the global economy, which are evolving and beyond our control, and any related actions taken by governments and businesses;

our ability to contain and mitigate the risk of spread or major outbreak of COVID-19 at our operating sites, including at PT-FI’s remote operating site in Papua;

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and other factors described in more detail as described further in “Risk Factors” contained in Part I, Item 1A.

of our 2019 Form 10-K and in Part II, Item 1A.

of our 2019 Form 10-K and Part II, Item 1A.

Investors are cautioned that many of the assumptions upon which our forward-looking statements are based are likely to change after the forward-looking statements are made, including for example commodity prices, which we cannot control, and production volumes and costs, some aspects of which we may not be able to control.

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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 2. Management’s Discussion and Analysis