FREEPORT-MCMORAN INC 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. In Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A), “we,” “us” and “our” refer to Freeport-McMoRan Inc. (FCX) and its consolidated subsidiaries. You should read this discussion in conjunction with our consolidated financial statements, the related MD&A and the discussion of our Business and Properties in our annual report on Form 10-K for the year ended December 31, 2019 (2019 Form 10-K), filed with the United States (U.S.) Securities and Exchange Commission (SEC). The results of operations reported and summarized below are not necessarily indicative of future operating results (refer to “Cautionary Statement” for further discussion). References to “Notes” are Notes included in our Notes to Consolidated Financial Statements (Unaudited). Throughout MD&A, all references to income or losses per share are on a diluted basis. OVERVIEW We are a leading international mining company with headquarters in Phoenix, Arizona. We operate large, long-lived, geographically diverse assets with significant proven and probable reserves of copper, gold and molybdenum. We are one of the world’s largest publicly traded copper producers. Our portfolio of assets includes the Grasberg minerals district in Indonesia, one of the world’s largest copper and gold deposits; and significant mining operations in North America and South America, including the large-scale Morenci minerals district in Arizona and the Cerro Verde operation in Peru. 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 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. 27 Table of Contents 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. OUTLOOK 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 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. Consolidated Sales Volumes Following are our projected consolidated sales volumes for the year 2020: Copper (millions of recoverable pounds): North America copper mines 1,430 South America mining 950 Indonesia mining 770 Total 3,150 Gold (millions of recoverable ounces) 0.8 Molybdenum (millions of recoverable pounds) 77 a a. 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. 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 Part II, Item 1A. herein. 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. 28 Table of Contents Consolidated Operating Cash Flows Our consolidated operating cash flows vary with sales volumes; prices realized from copper, gold and molybdenum sales; production costs; income taxes; other working capital changes; and other factors. 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 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 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. MARKETS World prices for copper, gold and molybdenum can fluctuate significantly. 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; and the Metals Week Molybdenum Dealer Oxide weekly average price ranged from a low of $4.46 per pound in 2015 to a high of $18.60 per pound in 2010. 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, 1A. herein. 29 Table of Contents 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 June 2020 . 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. 30 Table of Contents 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 $1,965 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 . 31 Table of Contents CONSOLIDATED RESULTS Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 SUMMARY FINANCIAL DATA (in millions, except per share amounts) Revenues a,b $ 3,054 $ 3,546 $ 5,852 $ 7,338 Operating income (loss) a,c,d $ 321 e $ 33 f,g $ (152 ) e,g $ 354 f,g Net income (loss) attributable to common stock h,i $ 53 j,k $ (72 ) $ (438 ) j,k $ (41 ) j,k Diluted net income (loss) per share of common stock $ 0.03 $ (0.05 ) $ (0.30 ) $ (0.03 ) Diluted weighted-average common shares outstanding 1,458 1,451 1,453 1,451 Operating cash flows l $ 491 $ 554 $ 453 $ 1,088 Capital expenditures $ 527 $ 629 $ 1,137 $ 1,251 At June 30: Cash and cash equivalents $ 1,465 $ 2,623 $ 1,465 $ 2,623 Total debt, including current portion $ 9,914 $ 9,916 $ 9,914 $ 9,916 a. Refer to Note 9 for a summary of revenues and operating income (loss) by operating division. b. 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). c. 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 . d. 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 . e. 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). f. 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. g. 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). h. 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. i. 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. 32 Table of Contents j. 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). k. 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. l. 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, 2020 2019 2020 2019 SUMMARY OPERATING DATA Copper (millions of recoverable pounds) Production 767 776 1,498 1,556 Sales, excluding purchases 759 807 1,488 1,591 Average realized price per pound $ 2.55 a $ 2.75 $ 2.53 a $ 2.78 Site production and delivery costs per pound b $ 1.82 $ 2.26 $ 2.00 $ 2.21 Unit net cash costs per pound b $ 1.47 $ 1.92 $ 1.68 $ 1.85 Gold (thousands of recoverable ounces) Production 191 160 347 326 Sales, excluding purchases 184 189 328 431 Average realized price per ounce $ 1,749 $ 1,351 $ 1,709 $ 1,315 Molybdenum (millions of recoverable pounds) Production 19 25 38 48 Sales, excluding purchases 18 24 39 46 Average realized price per pound $ 10.53 $ 13.15 $ 10.84 $ 12.93 a. 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. b. 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. 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.” Revenues 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. Refer to Note 9 for a summary of product revenues. 33 Table of Contents Following is a summary of changes in our consolidated revenues between periods (in millions): Three Months Ended June 30 Six Months Ended June 30 Consolidated revenues - 2019 period $ 3,546 $ 7,338 Lower sales volumes: Copper (132 ) (287 ) Gold (8 ) (135 ) Molybdenum (85 ) (90 ) (Lower) higher average realized prices: Copper (152 ) (372 ) Gold 73 129 Molybdenum (46 ) (82 ) Adjustments for prior period provisionally priced copper sales 138 (160 ) Lower Atlantic Copper revenues (80 ) (216 ) Lower revenues from purchased copper (158 ) (261 ) Lower cobalt revenues (84 ) (180 ) Lower treatment charges 25 50 (Higher) lower royalties and export duties (13 ) 10 Other, including intercompany eliminations 30 108 Consolidated revenues - 2020 period $ 3,054 $ 5,852 Sales Volumes. 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. Realized Prices. Our consolidated revenues can vary significantly as a result of fluctuations in the market prices of copper, gold and molybdenum. 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. We record revenues and invoice customers at the time of shipment based on then-current LME prices, which results in an embedded derivative on provisionally priced concentrate and cathode sales that is adjusted to fair value through earnings each period, using the period-end forward prices, until final pricing on the date of settlement. To the extent final prices are higher or lower than what was recorded on a provisional basis, an increase or decrease to revenues is recorded each reporting period until the date of final pricing. Accordingly, in times of rising copper prices, our revenues benefit from adjustments to the final pricing of provisionally priced sales pursuant to contracts entered into in prior periods; 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 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 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 , 34 Table of Contents 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 $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. 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 $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 ( 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. Royalties are primarily on PT-FI sales and vary with the volume of metal 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. Refer to “Operations – Indonesia Mining” for further discussion of the new smelter in Indonesia and to Note 9 for a summary of royalty expense and export duties. Production and Delivery Costs 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 $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. Depreciation, Depletion and Amortization 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 $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 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 35 Table of Contents 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. 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. 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 $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 Environmental obligation costs reflect net revisions to our long-term environmental obligations, which vary from period to period because of changes to environmental laws and regulations, the settlement of environmental matters and/or circumstances affecting our operations that could result in significant changes in our estimates. 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 $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 $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. Income Taxes 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, 2020 2019 Income (Loss) a Effective Tax Rate Income Tax (Provision) Benefit Income (Loss) a Effective Tax Rate Income Tax (Provision) Benefit U.S. b $ (581 ) 10% $ 58 c $ (183 ) 10% $ 19 d South America (57 ) 58% 33 294 40% (117 ) Indonesia 169 54% (91 ) e (13 ) 69% 9 f Eliminations and other 74 N/A (16 ) (9 ) N/A (10 ) Rate adjustment g — N/A (20 ) — N/A 9 Consolidated FCX $ (395 ) (9)% h $ (36 ) $ 89 101% $ (90 ) a. Represents income (loss) from continuing operations before income taxes and equity in affiliated companies’ net earnings. 36 Table of Contents b. 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. c. 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. d. Includes tax credits totaling $18 million primarily associated with state law changes. e. Includes a tax charge of $8 million ($7 million net of noncontrolling interest) associated with an unfavorable 2012 Indonesia Supreme Court ruling. f. 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). g. In accordance with applicable accounting rules, we adjust our interim provision for income taxes to equal our consolidated tax rate. h. 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 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. net losses. 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. Variations in the relative proportions of jurisdictional income result in fluctuations to our consolidated effective income tax rate. Because of our U.S. tax position, we do not record a financial statement impact for income or losses generated in the U.S. OPERATIONS North America Copper Mines We operate seven open-pit copper mines in North America – Morenci, Bagdad, Safford, Sierrita and Miami in Arizona, and Chino and Tyrone in New Mexico. In addition to copper, certain of these mines produce molybdenum concentrate, gold and silver. All of the North America mining operations are wholly owned, except for Morenci. We record our 72 percent undivided joint venture interest in Morenci using the proportionate consolidation method. The North America copper mines include open-pit mining, sulfide ore concentrating, leaching and solution extraction/electrowinning (SX/EW) operations. A majority of the copper produced at our North America copper mines is cast into copper rod by our Rod & Refining segment. The remainder of our North America copper production is sold as copper cathode or copper concentrate, a portion of which is shipped to Atlantic Copper (our wholly owned smelter). Molybdenum concentrate, gold and silver are also produced by certain of our North America copper mines . 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. 37 Table of Contents Operating Data. Following is summary consolidated operating data for the North America copper mines: Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Operating Data, Net of Joint Venture Interests Copper (millions of recoverable pounds) Production 368 370 714 706 Sales, excluding purchases 368 369 723 689 Average realized price per pound $ 2.42 a $ 2.78 $ 2.50 a $ 2.80 Molybdenum (millions of recoverable pounds) Production b 9 9 17 16 100% Operating Data Leach operations Leach ore placed in stockpiles (metric tons per day) 744,000 797,600 736,100 751,600 Average copper ore grade (percent) 0.28 0.23 0.28 0.23 Copper production (millions of recoverable pounds) 265 245 500 471 Mill operations Ore milled (metric tons per day) 286,200 320,300 309,800 317,900 Average ore grade (percent): Copper 0.37 0.36 0.34 0.34 Molybdenum 0.02 0.02 0.02 0.02 Copper recovery rate (percent) 84.6 87.4 85.8 87.6 Copper production (millions of recoverable pounds) 176 195 354 371 a. 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. b. 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 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. Unit net cash costs per pound of copper is a measure intended to provide investors with information about the cash-generating capacity of our mining operations expressed on a basis relating to the primary metal product for our respective operations. We use this measure for the same purpose and for monitoring operating performance by our mining operations. This information differs from measures of performance determined in accordance with U.S. GAAP and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. This measure is presented by other metals mining companies, although our measure may not be comparable to similarly titled measures reported by other companies. 38 Table of Contents 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 June 30, 2020 2019 By- Product Method Co-Product Method By- Product Method Co-Product Method Copper Molyb- denum a Copper Molyb- denum a Revenues, excluding adjustments $ 2.42 b $ 2.42 $ 8.33 $ 2.78 $ 2.78 $ 12.39 Site production and delivery, before net noncash and other costs shown below 1.85 1.73 6.76 2.05 1.88 9.53 By-product credits (0.17 ) — — (0.26 ) — — Treatment charges 0.10 0.10 — 0.11 0.10 — Unit net cash costs 1.78 1.83 6.76 1.90 1.98 9.53 DD&A 0.24 0.22 0.55 0.24 0.22 0.77 Metals inventory adjustments (0.24 ) (0.24 ) — — — — Noncash and other costs, net 0.09 c 0.09 0.08 0.03 0.02 0.23 Total unit costs 1.87 1.90 7.39 2.17 2.22 10.53 Revenue adjustments, primarily for pricing on prior period open sales 0.02 0.02 — (0.04 ) (0.04 ) — Gross profit per pound $ 0.57 $ 0.54 $ 0.94 $ 0.57 $ 0.52 $ 1.86 Copper sales (millions of recoverable pounds) 368 368 369 369 Molybdenum sales (millions of recoverable pounds) a 9 9 Six Months Ended June 30, 2020 2019 By- Product Method Co-Product Method By- Product Method Co-Product Method Copper Molyb- denum a Copper Molyb- denum a Revenues, excluding adjustments $ 2.50 b $ 2.50 $ 8.99 $ 2.80 $ 2.80 $ 12.06 Site production and delivery, before net noncash and other costs shown below 2.00 1.85 7.81 2.05 1.87 9.69 By-product credits (0.19 ) — — (0.26 ) — — Treatment charges 0.10 0.10 — 0.11 0.11 — Unit net cash costs 1.91 1.95 7.81 1.90 1.98 9.69 DD&A 0.25 0.23 0.64 0.25 0.22 0.75 Metals inventory adjustments 0.08 0.07 — — — — Noncash and other costs, net 0.09 c 0.09 0.15 0.05 0.04 0.22 Total unit costs 2.33 2.34 8.60 2.20 2.24 10.66 Other revenue adjustments, primarily for pricing on prior period open sales (0.03 ) (0.03 ) — 0.01 0.01 — Gross profit per pound $ 0.14 $ 0.13 $ 0.39 $ 0.61 $ 0.57 $ 1.40 Copper sales (millions of recoverable pounds) 722 722 689 689 Molybdenum sales (millions of recoverable pounds) a 17 16 a. Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing. b. 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. c. 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. 39 Table of Contents 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) 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 . North 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 We operate two copper mines in South America – Cerro Verde in Peru (in which we own a 53.56 percent interest) and El Abra in Chile (in which we own a 51 percent interest), which are consolidated in our financial statements. South America mining includes open-pit mining, sulfide ore concentrating, leaching and SX/EW operations. Production from our South America mines is sold as copper concentrate or cathode under long-term contracts. Our South America mines also sell a portion of their copper concentrate production to Atlantic Copper. In addition to copper, the Cerro Verde mine produces molybdenum concentrate and silver. 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 June 30, Six Months Ended June 30, 2020 2019 2020 2019 Copper (millions of recoverable pounds) Production 218 281 463 580 Sales 219 287 466 577 Average realized price per pound $ 2.67 $ 2.72 $ 2.57 $ 2.75 Molybdenum (millions of recoverable pounds) Production a 4 7 8 15 Leach operations Leach ore placed in stockpiles (metric tons per day) 141,900 187,000 162,200 178,400 Average copper ore grade (percent) 0.33 0.38 0.35 0.36 Copper production (millions of recoverable pounds) 62 63 125 122 Mill operations Ore milled (metric tons per day) 251,800 b 407,700 300,700 b 397,200 Average ore grade (percent): Copper 0.39 0.34 0.36 0.36 Molybdenum 0.01 0.02 0.01 0.02 Copper recovery rate (percent) 83.9 81.7 80.8 84.5 Copper production (millions of recoverable pounds) 156 218 338 458 40 Table of Contents a. Refer to “Consolidated Results” for our consolidated molybdenum sales volumes, which include sales of molybdenum produced at Cerro Verde. b. 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. Unit net cash costs per pound of copper is a measure intended to provide investors with information about the cash-generating capacity of our mining operations expressed on a basis relating to the primary metal product for our respective operations. We use this measure for the same purpose and for monitoring operating performance by our mining operations. This information differs from measures of performance determined in accordance with U.S. GAAP and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. 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 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. 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 June 30, 2020 2019 By-Product Method Co-Product Method By-Product Method Co-Product Method Revenues, excluding adjustments $ 2.67 $ 2.67 $ 2.72 $ 2.72 Site production and delivery, before net noncash and other costs shown below 1.64 1.57 1.92 1.74 By-product credits (0.11 ) — (0.28 ) — Treatment charges 0.15 0.15 0.18 0.18 Royalty on metals — — 0.01 0.01 Unit net cash costs 1.68 1.72 1.83 1.93 DD&A 0.47 0.44 0.41 0.37 Metals inventory adjustments (0.26 ) (0.26 ) — — Noncash and other costs, net 0.32 a 0.30 0.07 0.07 Total unit costs 2.21 2.20 2.31 2.37 Revenue adjustments, primarily for pricing on prior period open sales 0.20 0.20 (0.20 ) (0.20 ) Gross profit per pound $ 0.66 $ 0.67 $ 0.21 $ 0.15 Copper sales (millions of recoverable pounds) 219 219 287 287 41 Table of Contents Six Months Ended June 30, 2020 2019 By-Product Method Co-Product Method By-Product Method Co-Product Method Revenues, excluding adjustments $ 2.57 $ 2.57 $ 2.75 $ 2.75 Site production and delivery, before net noncash and other costs shown below 1.84 1.72 1.82 1.64 By-product credits (0.14 ) — (0.31 ) — Treatment charges 0.15 0.15 0.19 0.19 Royalty on metals — — 0.01 0.01 Unit net cash costs 1.85 1.87 1.71 1.84 DD&A 0.45 0.42 0.40 0.35 Metals inventory adjustments 0.01 0.01 — — Noncash and other costs, net 0.21 a 0.20 0.08 0.08 Total unit costs 2.52 2.50 2.19 2.27 Other revenue adjustments, primarily for pricing on prior period open sales (0.15 ) (0.15 ) 0.06 0.06 Gross (loss) profit per pound $ (0.10 ) $ (0.08 ) $ 0.62 $ 0.54 Copper sales (millions of recoverable pounds) 466 466 577 577 a. 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 $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. Because certain assets are depreciated on a straight-line basis, South America’s unit depreciation rate may vary with asset additions and the level of copper production and sales. Revenue adjustments primarily result from changes in prices on provisionally priced copper sales recognized in prior periods. 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 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. We have a 48.76 percent interest in PT-FI and manage its mining operations. As further discussed in Note 2 of our 2019 Form 10-K, under the terms of the shareholders agreement, our economic interest in PT-FI approximates 81 percent through 2022. PT-FI’s results are consolidated in our financial statements. Substantially all of PT-FI’s copper concentrate is sold under long-term contracts. 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). 42 Table of Contents 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. 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 June 30, Six Months Ended June 30, 2020 2019 2020 2019 Operating Data Copper (millions of recoverable pounds) Production 181 125 321 270 Sales 172 151 299 325 Average realized price per pound $ 2.67 $ 2.71 $ 2.54 $ 2.77 Gold (thousands of recoverable ounces) Production 189 154 341 316 Sales 180 185 319 420 Average realized price per ounce $ 1,748 $ 1,350 $ 1,709 $ 1,314 Operating Data Ore extracted and milled (metric tons per day): Grasberg open pit a — 54,000 3,600 78,300 DOZ underground mine b 21,600 21,100 20,900 25,700 Grasberg Block Cave underground mine b 27,200 7,400 23,100 6,200 DMLZ underground mine b 27,600 7,700 23,100 7,200 Big Gossan underground mine b 5,900 5,400 6,300 5,500 Total 81,900 c 95,600 77,000 122,900 Average ore grades: Copper (percent) 1.27 0.80 1.21 0.69 Gold (grams per metric ton) 1.04 0.79 1.02 0.66 Recovery rates (percent): Copper 91.7 88.3 91.7 86.3 Gold 78.3 74.9 77.6 71.6 a. Includes ore from the Grasberg open-pit stockpile. 43 Table of Contents b. Reflects ore extracted, including ore from development activities that result in metal production. c. 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. Unit net cash costs per pound of copper is a measure intended to provide investors with information about the cash-generating capacity of our mining operations expressed on a basis relating to the primary metal product for our respective operations. We use this measure for the same purpose and for monitoring operating performance by our mining operations. This information differs from measures of performance determined in accordance with U.S. GAAP and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. 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 Profit (Loss) per Pound of Copper and per Ounce of Gold The following table summarizes the unit net cash costs and gross profit (loss) per pound of copper and per ounce of gold at our Indonesia mining operations. 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 June 30, 2020 2019 By-Product Method Co-Product Method By-Product Method Co-Product Method Copper Gold Copper Gold Revenues, excluding adjustments $ 2.67 $ 2.67 $ 1,748 $ 2.71 $ 2.71 $ 1,350 Site production and delivery, before net noncash and other costs shown below 2.00 1.17 766 3.40 2.09 1,041 Gold and silver credits (1.95 ) — — (1.69 ) — — Treatment charges 0.27 0.16 105 0.26 0.16 80 Export duties 0.09 0.05 35 0.07 0.04 20 Royalty on metals 0.15 0.08 65 0.11 0.08 28 Unit net cash costs 0.56 1.46 971 2.15 2.37 1,169 DD&A 0.72 0.42 276 0.65 0.40 199 Noncash and other costs, net 0.05 a 0.03 17 0.30 b 0.18 91 Total unit costs 1.33 1.91 1,264 3.10 2.95 1,459 Revenue adjustments, primarily for pricing on prior period open sales 0.07 0.07 41 (0.13 ) (0.13 ) (7 ) PT Smelting intercompany (loss) profit (0.15 ) (0.09 ) (57 ) 0.06 0.03 16 Gross profit (loss) per pound/ounce $ 1.26 $ 0.74 $ 468 $ (0.46 ) $ (0.34 ) $ (100 ) Copper sales (millions of recoverable pounds) 172 172 151 151 Gold sales (thousands of recoverable ounces) 180 185 44 Table of Contents Six Months Ended June 30, 2020 2019 By-Product Method Co-Product Method By-Product Method Co-Product Method Copper Gold Copper Gold Revenues, excluding adjustments $ 2.54 $ 2.54 $ 1,709 $ 2.77 $ 2.77 $ 1,314 Site production and delivery, before net noncash and other costs shown below 2.29 1.31 884 3.24 1.99 944 Gold and silver credits (1.91 ) — — (1.75 ) — — Treatment charges 0.28 0.17 110 0.28 0.17 81 Export duties 0.07 0.04 25 0.08 0.05 24 Royalty on metals 0.15 0.08 58 0.14 0.09 38 Unit net cash costs 0.88 1.60 1,077 1.99 2.30 1,087 DD&A 0.75 0.43 289 0.63 0.38 183 Noncash and other costs, net 0.12 a 0.06 45 0.14 b 0.09 43 Total unit costs 1.75 2.09 1,411 2.76 2.77 1,313 Other revenue adjustments, primarily for pricing on prior period open sales (0.07 ) (0.07 ) 14 0.05 0.05 5 PT Smelting intercompany profit — — — 0.04 0.02 10 Gross profit per pound/ounce $ 0.72 $ 0.38 $ 312 $ 0.10 $ 0.07 $ 16 Copper sales (millions of recoverable pounds) 299 299 325 325 Gold sales (thousands of recoverable ounces) 319 420 a. 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. b. 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 $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’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 $0.72 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 (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 45 Table of Contents 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 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. 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. Unit net cash costs per pound of molybdenum is a measure intended to provide investors with information about the cash-generating capacity of our mining operations expressed on a basis relating to the primary metal product for our respective operations. We use this measure for the same purpose and for monitoring operating performance by our mining operations. This information differs from measures of performance determined in accordance with U.S. GAAP and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. 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 $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 . Refer to “Product Revenues and Production Costs” for a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in our consolidated financial statements. Smelting and Refining We wholly own and operate a smelter in Arizona (Miami smelter), a refinery in Texas (El Paso refinery) and a smelter and refinery in Spain (Atlantic Copper). Additionally, PT-FI owns 25 percent of a smelter and refinery in Gresik, Indonesia (PT Smelting). Treatment charges for smelting and refining copper concentrate consist of a base rate per pound of copper and per ounce of gold and are generally fixed. Treatment charges represent a cost to our mining operations and income to Atlantic Copper and PT Smelting. Thus, higher treatment charges benefit our smelter operations and adversely affect our mining operations. Our North America copper mines are less 46 Table of Contents 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 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 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 (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 Our consolidated operating cash flows vary with sales volumes; prices realized from copper, gold and molybdenum sales; production costs; income taxes; other working capital changes; and other factors. 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 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. 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. 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. 47 Table of Contents Cash 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 June 30, 2020 (in billions): Cash at domestic companies $ 0.8 Cash at international operations 0.7 Total consolidated cash and cash equivalents 1.5 Noncontrolling interests’ share (0.3 ) Cash, net of noncontrolling interests’ share 1.2 Withholding taxes — a Net cash available $ 1.2 a. Rounds to less than $0.1 billion. Cash held at our international operations is generally used to support our foreign operations’ capital expenditures, operating expenses, debt repayment, working capital and other tax payments, or other cash needs. Management believes that sufficient liquidity is available in the U.S. from cash balances and availability from our revolving credit facility. We have not elected to permanently reinvest earnings from our foreign subsidiaries, and we have recorded deferred tax liabilities for foreign earnings that are available to be repatriated to the U.S. From time to time, our foreign subsidiaries distribute earnings to the U.S. through dividends that are subject to applicable withholding taxes and noncontrolling interests’ share. Debt 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 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 48 Table of Contents 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 $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. 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. Refer to “Outlook” for further discussion of projected capital expenditures for the year 2020 . Proceeds from Sales of Assets. 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 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. 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 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 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. 49 Table of Contents CONTRACTUAL OBLIGATIONS 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. Refer to Part II, Items 7. and 7A. in our 2019 Form 10-K, for information regarding our contractual obligations. CONTINGENCIES Environmental and Asset Retirement Obligations Our current and historical operating activities are subject to stringent laws and regulations governing the protection of the environment. We perform a comprehensive annual review of our environmental and asset retirement obligations and also review changes in facts and circumstances associated with these obligations at least quarterly. There have been no material changes to our environmental and asset retirement obligations since December 31, 2019 . Updated cost assumptions, including increases and decreases to cost estimates, changes in the anticipated scope and timing of remediation activities, and settlement of environmental matters may result in additional revisions to certain of our environmental obligations. 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 Other than as discussed in Note 8, there have been no material changes to our contingencies associated with legal proceedings, environmental and other matters since December 31, 2019 . Refer to Note 12 and “Legal Proceedings” contained in Part I, Item 3. of our 2019 Form 10-K, as updated by Note 8, for further information regarding legal proceedings, environmental and other matters. NEW ACCOUNTING STANDARD Refer to Note 10 for a summary of a recently adopted accounting standard. 50 Table of Contents PRODUCT REVENUES AND PRODUCTION COSTS Unit net cash costs per pound of copper and molybdenum are measures intended to provide investors with information about the cash-generating capacity of our mining operations expressed on a basis relating to the primary metal product for the respective operations. We use this measure for the same purpose and for monitoring operating performance by our mining operations. This information differs from measures of performance determined in accordance with U.S. GAAP and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. 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 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. We show revenue adjustments for prior period open sales as a separate line item. Because these adjustments do not result from current period sales, these amounts have been reflected separately from revenues on current period sales. Noncash and other costs, which are removed from site production and delivery costs in the calculation of unit net cash costs, consist of items such as stock-based compensation costs, inventory adjustments, long-lived asset impairments, idle facility costs, restructuring and/or unusual charges. As discussed above, gold, molybdenum and other metal revenues at copper mines are reflected as credits against site production and delivery costs in the by-product method. The following schedules are presentations under both the by-product and co-product methods together with reconciliations to amounts reported in our consolidated financial statements. 51 Table of Contents North America Copper Mines Product Revenues, Production Costs and Unit Net Cash Costs Three Months Ended June 30, 2020 (In millions) By-Product Co-Product Method Method Copper Molybdenum a Other b Total Revenues, excluding adjustments $ 888 c $ 888 $ 71 $ 18 $ 977 Site production and delivery, before net noncash and other costs shown below 678 636 57 10 703 By-product credits (64 ) — — — — Treatment charges 37 36 — 1 37 Net cash costs 651 672 57 11 740 DD&A 88 82 5 1 88 Metals inventory adjustments (89 ) (89 ) — — (89 ) Noncash and other costs, net 36 d 34 1 1 36 Total costs 686 699 63 13 775 Other revenue adjustments, primarily for pricing on prior period open sales 6 6 — — 6 Gross profit $ 208 $ 195 $ 8 $ 5 $ 208 Copper sales (millions of recoverable pounds) 368 368 Molybdenum sales (millions of recoverable pounds) a 9 Gross profit per pound of copper/molybdenum: Revenues, excluding adjustments $ 2.42 c $ 2.42 $ 8.33 Site production and delivery, before net noncash and other costs shown below 1.85 1.73 6.76 By-product credits (0.17 ) — — Treatment charges 0.10 0.10 — Unit net cash costs 1.78 1.83 6.76 DD&A 0.24 0.22 0.55 Metals inventory adjustments (0.24 ) (0.24 ) — Noncash and other costs, net 0.09 d 0.09 0.08 Total unit costs 1.87 1.90 7.39 Other revenue adjustments, primarily for pricing on prior period open sales 0.02 0.02 — Gross profit per pound $ 0.57 $ 0.54 $ 0.94 Reconciliation to Amounts Reported Revenues Production and Delivery DD&A Metals Inventory Adjustments Totals presented above $ 977 $ 703 $ 88 $ (89 ) Treatment charges (2 ) 35 — — Noncash and other costs, net — 36 — — Other revenue adjustments, primarily for pricing on prior period open sales 6 — — — Eliminations and other 7 13 1 — North America copper mines 988 787 89 (89 ) Other mining e 2,985 2,461 254 (55 ) Corporate, other & eliminations (919 ) (854 ) 15 5 As reported in our consolidated financial statements $ 3,054 $ 2,394 $ 358 $ (139 ) a. Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing. b. Includes gold and silver product revenues and production costs. c. 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. d. 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. e. Represents the combined total for our other segments, as presented in Note 9. 52 Table of Contents North America Copper Mines Product Revenues, Production Costs and Unit Net Cash Costs Three Months Ended June 30, 2019 (In millions) By-Product Co-Product Method Method Copper Molybdenum a Other b Total Revenues, excluding adjustments $ 1,026 $ 1,026 $ 103 $ 20 $ 1,149 Site production and delivery, before net noncash and other costs shown below 758 692 79 13 784 By-product credits (97 ) — — — — Treatment charges 40 39 — 1 40 Net cash costs 701 731 79 14 824 DD&A 88 79 7 2 88 Metals inventory adjustments 1 1 — — 1 Noncash and other costs, net 9 7 2 — 9 Total costs 799 818 88 16 922 Other revenue adjustments, primarily for pricing on prior period open sales (16 ) (16 ) — — (16 ) Gross profit $ 211 $ 192 $ 15 $ 4 $ 211 Copper sales (millions of recoverable pounds) 369 369 Molybdenum sales (millions of recoverable pounds) a 9 Gross profit per pound of copper/molybdenum: Revenues, excluding adjustments $ 2.78 $ 2.78 $ 12.39 Site production and delivery, before net noncash and other costs shown below 2.05 1.88 9.53 By-product credits (0.26 ) — — Treatment charges 0.11 0.10 — Unit net cash costs 1.90 1.98 9.53 DD&A 0.24 0.22 0.77 Metals inventory adjustments — — — Noncash and other costs, net 0.03 0.02 0.23 Total unit costs 2.17 2.22 10.53 Other revenue adjustments, primarily for pricing on prior period open sales (0.04 ) (0.04 ) — Gross profit per pound $ 0.57 $ 0.52 $ 1.86 Reconciliation to Amounts Reported Revenues Production and Delivery DD&A Metals Inventory Adjustments Totals presented above $ 1,149 $ 784 $ 88 $ 1 Treatment charges (19 ) 21 — — Noncash and other costs, net — 9 — — Other revenue adjustments, primarily for pricing on prior period open sales (16 ) — — — Eliminations and other 6 10 (1 ) — North America copper mines 1,120 824 87 1 Other mining c 3,173 2,899 246 — Corporate, other & eliminations (747 ) (718 ) 19 1 As reported in our consolidated financial statements $ 3,546 $ 3,005 $ 352 $ 2 a. Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing. b. Includes gold and silver product revenues and production costs. c. Represents the combined total for our other segments, as presented in Note 9. 53 Table of Contents North America Copper Mines Product Revenues, Production Costs and Unit Net Cash Costs Six Months Ended June 30, 2020 (In millions) By-Product Co-Product Method Method Copper Molybdenum a Other b Total Revenues, excluding adjustments $ 1,799 c $ 1,799 $ 147 $ 44 $ 1,990 Site production and delivery, before net noncash and other costs shown below 1,439 1,333 128 28 1,489 By-product credits (141 ) — — — — Treatment charges 76 73 — 3 76 Net cash costs 1,374 1,406 128 31 1,565 DD&A 180 166 10 4 180 Metals inventory adjustments 56 54 — 2 56 Noncash and other costs, net 69 d 65 2 2 69 Total costs 1,679 1,691 140 39 1,870 Other revenue adjustments, primarily for pricing on prior period open sales (22 ) (22 ) — — (22 ) Gross profit $ 98 $ 86 $ 7 $ 5 $ 98 Copper sales (millions of recoverable pounds) 722 722 Molybdenum sales (millions of recoverable pounds) a 17 Gross profit per pound of copper/molybdenum: Revenues, excluding adjustments $ 2.50 c $ 2.50 $ 8.99 Site production and delivery, before net noncash and other costs shown below 2.00 1.85 7.81 By-product credits (0.19 ) — — Treatment charges 0.10 0.10 — Unit net cash costs 1.91 1.95 7.81 DD&A 0.25 0.23 0.64 Metals inventory adjustments 0.08 0.07 — Noncash and other costs, net 0.09 d 0.09 0.15 Total unit costs 2.33 2.34 8.60 Other revenue adjustments, primarily for pricing on prior period open sales (0.03 ) (0.03 ) — Gross profit per pound $ 0.14 $ 0.13 $ 0.39 Reconciliation to Amounts Reported Metals Production Inventory Revenues and Delivery DD&A Adjustments Totals presented above $ 1,990 $ 1,489 $ 180 $ 56 Treatment charges (10 ) 66 — — Noncash and other costs, net — 69 — — Other revenue adjustments, primarily for pricing on prior period open sales (22 ) — — — Eliminations and other 15 23 1 — North America copper mines 1,973 1,647 181 56 Other mining e 5,576 4,934 488 9 Corporate, other & eliminations (1,697 ) (1,642 ) 30 18 As reported in our consolidated financial statements $ 5,852 $ 4,939 $ 699 $ 83 a. Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing. b. Includes gold and silver product revenues and production costs. c. 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. d. 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. e. Represents the combined total for our other segments, as presented in Note 9. 54 Table of Contents North America Copper Mines Product Revenues, Production Costs and Unit Net Cash Costs Six Months Ended June 30, 2019 (In millions) By-Product Co-Product Method Method Copper Molybdenum a Other b Total Revenues, excluding adjustments $ 1,931 $ 1,931 $ 190 $ 43 $ 2,164 Site production and delivery, before net noncash and other costs shown below 1,416 1,288 153 28 1,469 By-product credits (180 ) — — — — Treatment charges 76 73 — 3 76 Net cash costs 1,312 1,361 153 31 1,545 DD&A 170 155 12 3 170 Metals inventory adjustments 1 1 — — 1 Noncash and other costs, net 32 28 3 1 32 Total costs 1,515 1,545 168 35 1,748 Other revenue adjustments, primarily for pricing on prior period open sales 4 4 — — 4 Gross profit $ 420 $ 390 $ 22 $ 8 $ 420 Copper sales (millions of recoverable pounds) 689 689 Molybdenum sales (millions of recoverable pounds) a 16 Gross profit per pound of copper/molybdenum: Revenues, excluding adjustments $ 2.80 $ 2.80 $ 12.06 Site production and delivery, before net noncash and other costs shown below 2.05 1.87 9.69 By-product credits (0.26 ) — — Treatment charges 0.11 0.11 — Unit net cash costs 1.90 1.98 9.69 DD&A 0.25 0.22 0.75 Metals inventory adjustments — — — Noncash and other costs, net 0.05 0.04 0.22 Total unit costs 2.20 2.24 10.66 Other revenue adjustments, primarily for pricing on prior period open sales 0.01 0.01 — Gross profit per pound $ 0.61 $ 0.57 $ 1.40 Reconciliation to Amounts Reported Metals Production Inventory Revenues and Delivery DD&A Adjustments Totals presented above $ 2,164 $ 1,469 $ 170 $ 1 Treatment charges (32 ) 44 — — Noncash and other costs, net — 32 — — Other revenue adjustments, primarily for pricing on prior period open sales 4 — — — Eliminations and other 18 22 — — North America copper mines 2,154 1,567 170 1 Other mining c 6,688 5,750 490 — Corporate, other & eliminations (1,504 ) (1,388 ) 39 58 As reported in our consolidated financial statements $ 7,338 $ 5,929 $ 699 $ 59 a. Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing. b. Includes gold and silver product revenues and production costs. c. Represents the combined total for our other segments, as presented in Note 9. 55 Table of Contents South America Mining Product Revenues, Production Costs and Unit Net Cash Costs Three Months Ended June 30, 2020 (In millions) By-Product Co-Product Method Method Copper Other a Total Revenues, excluding adjustments $ 586 $ 586 $ 32 $ 618 Site production and delivery, before net noncash and other costs shown below 360 343 24 367 By-product credits (25 ) — — — Treatment charges 32 32 — 32 Royalty on metals 1 1 — 1 Net cash costs 368 376 24 400 DD&A 103 98 5 103 Metals inventory adjustments (57 ) (57 ) — (57 ) Noncash and other costs, net 71 b 67 4 71 Total costs 485 484 33 517 Other revenue adjustments, primarily for pricing on prior period open sales 44 44 — 44 Gross profit (loss) $ 145 $ 146 $ (1 ) $ 145 Copper sales (millions of recoverable pounds) 219 219 Gross profit per pound of copper: Revenues, excluding adjustments $ 2.67 $ 2.67 Site production and delivery, before net noncash and other costs shown below 1.64 1.57 By-product credits (0.11 ) — Treatment charges 0.15 0.15 Royalty on metals — — Unit net cash costs 1.68 1.72 DD&A 0.47 0.44 Metals inventory adjustments (0.26 ) (0.26 ) Noncash and other costs, net 0.32 b 0.30 Total unit costs 2.21 2.20 Other revenue adjustments, primarily for pricing on prior period open sales 0.20 0.20 Gross profit per pound $ 0.66 $ 0.67 Reconciliation to Amounts Reported Metals Production Inventory Revenues and Delivery DD&A Adjustments Totals presented above $ 618 $ 367 $ 103 $ (57 ) Treatment charges (32 ) — — — Royalty on metals (1 ) — — — Noncash and other costs, net — 71 — — Other revenue adjustments, primarily for pricing on prior period open sales 44 — — — Eliminations and other — — (1 ) — South America mining 629 438 102 (57 ) Other mining c 3,344 2,810 241 (87 ) Corporate, other & eliminations (919 ) (854 ) 15 5 As reported in our consolidated financial statements $ 3,054 $ 2,394 $ 358 $ (139 ) a. 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. b. 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. c. Represents the combined total for our other segments, as presented in Note 9. 56 Table of Contents South America Mining Product Revenues, Production Costs and Unit Net Cash Costs Three Months Ended June 30, 2019 (In millions) By-Product Co-Product Method Method Copper Other a Total Revenues, excluding adjustments $ 781 $ 781 $ 92 $ 873 Site production and delivery, before net noncash and other costs shown below 550 498 64 562 By-product credits (80 ) — — — Treatment charges 52 52 — 52 Royalty on metals 2 2 — 2 Net cash costs 524 552 64 616 DD&A 119 107 12 119 Noncash and other costs, net 21 20 1 21 Total costs 664 679 77 756 Other revenue adjustments, primarily for pricing on prior period open sales (57 ) (57 ) — (57 ) Gross profit $ 60 $ 45 $ 15 $ 60 Copper sales (millions of recoverable pounds) 287 287 Gross profit per pound of copper: Revenues, excluding adjustments $ 2.72 $ 2.72 Site production and delivery, before net noncash and other costs shown below 1.92 1.74 By-product credits (0.28 ) — Treatment charges 0.18 0.18 Royalty on metals 0.01 0.01 Unit net cash costs 1.83 1.93 DD&A 0.41 0.37 Noncash and other costs, net 0.07 0.07 Total unit costs 2.31 2.37 Other revenue adjustments, primarily for pricing on prior period open sales (0.20 ) (0.20 ) Gross profit per pound $ 0.21 $ 0.15 Reconciliation to Amounts Reported Production Revenues and Delivery DD&A Totals presented above $ 873 $ 562 $ 119 Treatment charges (52 ) — — Royalty on metals (2 ) — — Noncash and other costs, net — 21 — Other revenue adjustments, primarily for pricing on prior period open sales (57 ) — — Eliminations and other (1 ) (2 ) — South America mining 761 581 119 Other mining b 3,532 3,142 214 Corporate, other & eliminations (747 ) (718 ) 19 As reported in our consolidated financial statements $ 3,546 $ 3,005 $ 352 a. 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. b. Represents the combined total for our other segments, as presented in Note 9. 57 Table of Contents South America Mining Product Revenues, Production Costs and Unit Net Cash Costs Six Months Ended June 30, 2020 (In millions) By-Product Co-Product Method Method Copper Other a Total Revenues, excluding adjustments $ 1,199 $ 1,199 $ 86 $ 1,285 Site production and delivery, before net noncash and other costs shown below 853 800 73 873 By-product credits (66 ) — — — Treatment charges 72 72 — 72 Royalty on metals 2 2 — 2 Net cash costs 861 874 73 947 DD&A 210 195 15 210 Metals inventory adjustments 3 3 — 3 Noncash and other costs, net 100 b 95 5 100 Total costs 1,174 1,167 93 1,260 Other revenue adjustments, primarily for pricing on prior period open sales (70 ) (70 ) — (70 ) Gross loss $ (45 ) $ (38 ) $ (7 ) $ (45 ) Copper sales (millions of recoverable pounds) 466 466 Gross loss per pound of copper: Revenues, excluding adjustments $ 2.57 $ 2.57 Site production and delivery, before net noncash and other costs shown below 1.84 1.72 By-product credits (0.14 ) — Treatment charges 0.15 0.15 Royalty on metals — — Unit net cash costs 1.85 1.87 DD&A 0.45 0.42 Metals inventory adjustments 0.01 0.01 Noncash and other costs, net 0.21 b 0.20 Total unit costs 2.52 2.50 Other revenue adjustments, primarily for pricing on prior period open sales (0.15 ) (0.15 ) Gross loss per pound $ (0.10 ) $ (0.08 ) Reconciliation to Amounts Reported Metals Production Inventory Revenues and Delivery DD&A Adjustments Totals presented above $ 1,285 $ 873 $ 210 $ 3 Treatment charges (72 ) — — — Royalty on metals (2 ) — — — Noncash and other costs, net — 100 — — Other revenue adjustments, primarily for pricing on prior period open sales (70 ) — — — Eliminations and other — (1 ) — — South America mining 1,141 972 210 3 Other mining c 6,408 5,609 459 62 Corporate, other & eliminations (1,697 ) (1,642 ) 30 18 As reported in our consolidated financial statements $ 5,852 $ 4,939 $ 699 $ 83 a. Includes silver sales of 1.5 million ounces ( $16.37 per ounce average realized price). Also reflects sales of molybdenum produced by Cerro Verde to our molybdenum sales company at market-based pricing. b. 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. c. Represents the combined total for our other segments, as presented in Note 9. 58 Table of Contents South America Mining Product Revenues, Production Costs and Unit Net Cash Costs Six Months Ended June 30, 2019 (In millions) By-Product Co-Product Method Method Copper Other a Total Revenues, excluding adjustments $ 1,584 $ 1,584 $ 204 $ 1,788 Site production and delivery, before net noncash and other costs shown below 1,053 949 129 1,078 By-product credits (179 ) — — — Treatment charges 108 108 — 108 Royalty on metals 3 3 — 3 Net cash costs 985 1,060 129 1,189 DD&A 233 207 26 233 Noncash and other costs, net 46 45 1 46 Total costs 1,264 1,312 156 1,468 Other revenue adjustments, primarily for pricing on prior period open sales 37 37 — 37 Gross profit $ 357 $ 309 $ 48 $ 357 Copper sales (millions of recoverable pounds) 577 577 Gross profit per pound of copper: Revenues, excluding adjustments $ 2.75 $ 2.75 Site production and delivery, before net noncash and other costs shown below 1.82 1.64 By-product credits (0.31 ) — Treatment charges 0.19 0.19 Royalty on metals 0.01 0.01 Unit net cash costs 1.71 1.84 DD&A 0.40 0.35 Noncash and other costs, net 0.08 0.08 Total unit costs 2.19 2.27 Other revenue adjustments, primarily for pricing on prior period open sales 0.06 0.06 Gross profit per pound $ 0.62 $ 0.54 Reconciliation to Amounts Reported Production Revenues and Delivery DD&A Totals presented above $ 1,788 $ 1,078 $ 233 Treatment charges (108 ) — — Royalty on metals (3 ) — — Noncash and other costs, net — 46 — Other revenue adjustments, primarily for pricing on prior period open sales 37 — — Eliminations and other (2 ) (4 ) — South America mining 1,712 1,120 233 Other mining b 7,130 6,197 427 Corporate, other & eliminations (1,504 ) (1,388 ) 39 As reported in our consolidated financial statements $ 7,338 $ 5,929 $ 699 a. Includes silver sales of 2.5 million ounces ( $15.58 per ounce average realized price). Also reflects sales of molybdenum produced by Cerro Verde to our molybdenum sales company at market-based pricing. b. Represents the combined total for our other segments, as presented in Note 9. 59 Table of Contents Indonesia Mining Product Revenues, Production Costs and Unit Net Cash Costs Three Months Ended June 30, 2020 (In millions) By-Product Co-Product Method Method Copper Gold Silver a Total Revenues, excluding adjustments $ 458 $ 458 $ 315 $ 13 $ 786 Site production and delivery, before net noncash and other costs shown below 345 201 138 6 345 Gold and silver credits (336 ) — — — — Treatment charges 47 27 19 1 47 Export duties 16 10 6 — 16 Royalty on metals 25 13 12 — 25 Net cash costs 97 251 175 7 433 DD&A 124 72 50 2 124 Noncash and other costs, net 8 b 5 3 — 8 Total costs 229 328 228 9 565 Other revenue adjustments, primarily for pricing on prior period open sales 12 12 7 1 20 PT Smelting intercompany loss (25 ) (15 ) (10 ) — (25 ) Gross profit $ 216 $ 127 $ 84 $ 5 $ 216 Copper sales (millions of recoverable pounds) 172 172 Gold sales (thousands of recoverable ounces) 180 Gross profit per pound of copper/per ounce of gold: Revenues, excluding adjustments $ 2.67 $ 2.67 $ 1,748 Site production and delivery, before net noncash and other costs shown below 2.00 1.17 766 Gold and silver credits (1.95 ) — — Treatment charges 0.27 0.16 105 Export duties 0.09 0.05 35 Royalty on metals 0.15 0.08 65 Unit net cash costs 0.56 1.46 971 DD&A 0.72 0.42 276 Noncash and other costs, net 0.05 b 0.03 17 Total unit costs 1.33 1.91 1,264 Other revenue adjustments, primarily for pricing on prior period open sales 0.07 0.07 41 PT Smelting intercompany loss (0.15 ) (0.09 ) (57 ) Gross profit per pound/ounce $ 1.26 $ 0.74 $ 468 Reconciliation to Amounts Reported Production Revenues and Delivery DD&A Totals presented above $ 786 $ 345 $ 124 Treatment charges (47 ) — — Export duties (16 ) — — Royalty on metals (25 ) — — Noncash and other costs, net — 8 — Other revenue adjustments, primarily for pricing on prior period open sales 20 — — PT Smelting intercompany loss — 25 — Indonesia mining 718 378 124 Other mining c 3,255 2,870 219 Corporate, other & eliminations (919 ) (854 ) 15 As reported in our consolidated financial statements $ 3,054 $ 2,394 $ 358 a. Includes silver sales of 0.8 million ounces ( $17.09 per ounce average realized price). b. Includes COVID-19 related costs totaling $4 million ($0.03 per pound of copper). c. Represents the combined total for our other segments, as presented in Note 9. 60 Table of Contents Indonesia Mining Product Revenues, Production Costs and Unit Net Cash Costs Three Months Ended June 30, 2019 (In millions) By-Product Co-Product Method Method Copper Gold Silver a Total Revenues, excluding adjustments $ 412 $ 412 $ 250 $ 8 $ 670 Site production and delivery, before net noncash and other costs shown below 516 317 193 6 516 Gold and silver credits (256 ) — — — — Treatment charges 40 25 14 1 40 Export duties 10 6 4 — 10 Royalty on metals 17 12 5 — 17 Net cash costs 327 360 216 7 583 DD&A 99 61 37 1 99 Noncash and other costs, net 45 b 28 17 — 45 Total costs 471 449 270 8 727 Other revenue adjustments, primarily for pricing on prior period open sales (19 ) (19 ) (2 ) — (21 ) PT Smelting intercompany profit 7 4 3 — 7 Gross loss $ (71 ) $ (52 ) $ (19 ) $ — $ (71 ) Copper sales (millions of recoverable pounds) 151 151 Gold sales (thousands of recoverable ounces) 185 Gross loss per pound of copper/per ounce of gold: Revenues, excluding adjustments $ 2.71 $ 2.71 $ 1,350 Site production and delivery, before net noncash and other costs shown below 3.40 2.09 1,041 Gold and silver credits (1.69 ) — — Treatment charges 0.26 0.16 80 Export duties 0.07 0.04 20 Royalty on metals 0.11 0.08 28 Unit net cash costs 2.15 2.37 1,169 DD&A 0.65 0.40 199 Noncash and other costs, net 0.30 b 0.18 91 Total unit costs 3.10 2.95 1,459 Other revenue adjustments, primarily for pricing on prior period open sales (0.13 ) (0.13 ) (7 ) PT Smelting intercompany profit 0.06 0.03 16 Gross loss per pound/ounce $ (0.46 ) $ (0.34 ) $ (100 ) Reconciliation to Amounts Reported Production Revenues and Delivery DD&A Totals presented above $ 670 $ 516 $ 99 Treatment charges (40 ) — — Export duties (10 ) — — Royalty on metals (17 ) — — Noncash and other costs, net — 45 — Other revenue adjustments, primarily for pricing on prior period open sales (21 ) — — PT Smelting intercompany profit — (7 ) — Indonesia mining 582 554 99 Other mining c 3,711 3,169 234 Corporate, other & eliminations (747 ) (718 ) 19 As reported in our consolidated financial statements $ 3,546 $ 3,005 $ 352 a. Includes silver sales of 0.5 million ounces ( $14.57 per ounce average realized price). b. 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. c. Represents the combined total for our other segments, as presented in Note 9. 61 Table of Contents Indonesia Mining Product Revenues, Production Costs and Unit Net Cash Costs Six Months Ended June 30, 2020 (In millions) By-Product Co-Product Method Method Copper Gold Silver a Total Revenues, excluding adjustments $ 760 $ 760 $ 545 $ 22 $ 1,327 Site production and delivery, before net noncash and other costs shown below 686 393 282 11 686 Gold and silver credits (572 ) — — — — Treatment charges 85 49 35 1 85 Export duties 20 11 8 1 20 Royalty on metals 44 25 19 — 44 Net cash costs 263 478 344 13 835 DD&A 225 129 92 4 225 Noncash and other costs, net 35 b 20 14 1 35 Total costs 523 627 450 18 1,095 Other revenue adjustments, primarily for pricing on prior period open sales (20 ) (20 ) 5 — (15 ) Gross profit $ 217 $ 113 $ 100 $ 4 $ 217 Copper sales (millions of recoverable pounds) 299 299 Gold sales (thousands of recoverable ounces) 319 Gross profit per pound of copper/per ounce of gold: Revenues, excluding adjustments $ 2.54 $ 2.54 $ 1,709 Site production and delivery, before net noncash and other costs shown below 2.29 1.31 884 Gold and silver credits (1.91 ) — — Treatment charges 0.28 0.17 110 Export duties 0.07 0.04 25 Royalty on metals 0.15 0.08 58 Unit net cash costs 0.88 1.60 1,077 DD&A 0.75 0.43 289 Noncash and other costs, net 0.12 b 0.06 45 Total unit costs 1.75 2.09 1,411 Other revenue adjustments, primarily for pricing on prior period open sales (0.07 ) (0.07 ) 14 Gross profit per pound/ounce $ 0.72 $ 0.38 $ 312 Reconciliation to Amounts Reported Production Revenues and Delivery DD&A Totals presented above $ 1,327 $ 686 $ 225 Treatment charges (85 ) — — Export duties (20 ) — — Royalty on metals (44 ) — — Noncash and other costs, net — 35 — Other revenue adjustments, primarily for pricing on prior period open sales (15 ) — — Indonesia mining 1,163 721 225 Other mining c 6,386 5,860 444 Corporate, other & eliminations (1,697 ) (1,642 ) 30 As reported in our consolidated financial statements $ 5,852 $ 4,939 $ 699 a. Includes silver sales of 1.3 million ounces ( $16.30 per ounce average realized price). b. Includes COVID-19 related costs of $4 million ($0.01 per pound of copper). c. Represents the combined total for our segments, as presented in Note 9. 62 Table of Contents Indonesia Mining Product Revenues, Production Costs and Unit Net Cash Costs Six Months Ended June 30, 2019 (In millions) By-Product Co-Product Method Method Copper Gold Silver a Total Revenues, excluding adjustments $ 900 $ 900 $ 552 $ 17 $ 1,469 Site production and delivery, before net noncash and other costs shown below 1,054 646 396 12 1,054 Gold and silver credits (571 ) — — — — Treatment charges 91 56 34 1 91 Export duties 27 17 10 — 27 Royalty on metals 45 28 16 1 45 Net cash costs 646 747 456 14 1,217 DD&A 204 125 77 2 204 Noncash and other costs, net 48 b 29 18 1 48 Total costs 898 901 551 17 1,469 Other revenue adjustments, primarily for pricing on prior period open sales 18 18 2 — 20 PT Smelting intercompany profit 11 7 4 — 11 Gross profit $ 31 $ 24 $ 7 $ — $ 31 Copper sales (millions of recoverable pounds) 325 325 Gold sales (thousands of recoverable ounces) 420 Gross profit per pound of copper/per ounce of gold: Revenues, excluding adjustments $ 2.77 $ 2.77 $ 1,314 Site production and delivery, before net noncash and other costs shown below 3.24 1.99 944 Gold and silver credits (1.75 ) — — Treatment charges 0.28 0.17 81 Export duties 0.08 0.05 24 Royalty on metals 0.14 0.09 38 Unit net cash costs 1.99 2.30 1,087 DD&A 0.63 0.38 183 Noncash and other costs, net 0.14 b 0.09 43 Total unit costs 2.76 2.77 1,313 Other revenue adjustments, primarily for pricing on prior period open sales 0.05 0.05 5 PT Smelting intercompany profit 0.04 0.02 10 Gross profit per pound/ounce $ 0.10 $ 0.07 $ 16 Reconciliation to Amounts Reported Production Revenues and Delivery DD&A Totals presented above $ 1,469 $ 1,054 $ 204 Treatment charges (72 ) 19 — Export duties (27 ) — — Royalty on metals (45 ) — — Noncash and other costs, net — 48 — Other revenue adjustments, primarily for pricing on prior period open sales 20 — — PT Smelting intercompany profit — (11 ) — Indonesia mining 1,345 1,110 204 Other mining c 7,497 6,207 456 Corporate, other & eliminations (1,504 ) (1,388 ) 39 As reported in our consolidated financial statements $ 7,338 $ 5,929 $ 699 a. Includes silver sales of 1.1 million ounces ( $14.66 per ounce average realized price). b. 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. c. Represents the combined total for our other segments, as presented in Note 9. 63 Table of Contents Molybdenum Mines Product Revenues, Production Costs and Unit Net Cash Costs Three Months Ended June 30, (In millions) 2020 2019 Revenues, excluding adjustments a $ 63 $ 117 Site production and delivery, before net noncash and other costs shown below 53 76 Treatment charges and other 5 8 Net cash costs 58 84 DD&A 15 18 Metals inventory adjustments 1 — Noncash and other costs, net 8 b 2 Total costs 82 104 Gross (loss) profit $ (19 ) $ 13 Molybdenum sales (millions of recoverable pounds) a 6 9 Gross (loss) profit per pound of molybdenum: Revenues, excluding adjustments a $ 9.69 $ 12.74 Site production and delivery, before net noncash and other costs shown below 8.12 8.31 Treatment charges and other 0.85 0.84 Unit net cash costs 8.97 9.15 DD&A 2.29 2.07 Metals inventory adjustments 0.16 — Noncash and other costs, net 1.34 b 0.15 Total unit costs 12.76 11.37 Gross (loss) profit per pound $ (3.07 ) $ 1.37 Reconciliation to Amounts Reported Metals Production Inventory Three Months Ended June 30, 2020 Revenues and Delivery DD&A Adjustments Totals presented above $ 63 $ 53 $ 15 $ 1 Treatment charges and other (5 ) — — — Noncash and other costs, net — 8 — — Molybdenum mines 58 61 15 1 Other mining c 3,915 3,187 328 (145 ) Corporate, other & eliminations (919 ) (854 ) 15 5 As reported in our consolidated financial statements $ 3,054 $ 2,394 $ 358 $ (139 ) Three Months Ended June 30, 2019 Totals presented above $ 117 $ 76 $ 18 $ — Treatment charges and other (8 ) — — — Noncash and other costs, net — 2 — — Molybdenum mines 109 78 18 — Other mining c 4,184 3,645 315 1 Corporate, other & eliminations (747 ) (718 ) 19 1 As reported in our consolidated financial statements $ 3,546 $ 3,005 $ 352 $ 2 a. 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. b. 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. c. 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. 64 Table of Contents Molybdenum Mines Product Revenues, Production Costs and Unit Net Cash Costs Six Months Ended June 30, (In millions) 2020 2019 Revenues, excluding adjustments a $ 140 $ 215 Site production and delivery, before net noncash and other costs shown below 117 146 Treatment charges and other 11 15 Net cash costs 128 161 DD&A 31 34 Metals inventory adjustments 5 — Noncash and other costs, net 10 b 3 Total costs 174 198 Gross (loss) profit $ (34 ) $ 17 Molybdenum sales (millions of recoverable pounds) a 13 17 Gross (loss) profit per pound of molybdenum: Revenues, excluding adjustments a $ 10.36 $ 12.63 Site production and delivery, before net noncash and other costs shown below 8.67 8.60 Treatment charges and other 0.85 0.85 Unit net cash costs 9.52 9.45 DD&A 2.29 2.04 Metals inventory adjustments 0.35 — Noncash and other costs, net 0.79 b 0.15 Total unit costs 12.95 11.64 Gross (loss) profit per pound $ (2.59 ) $ 0.99 Reconciliation to Amounts Reported Metals Production Inventory Six Months Ended June 30, 2020 Revenues and Delivery DD&A Adjustments Totals presented above $ 140 $ 117 $ 31 $ 5 Treatment charges and other (11 ) — — — Noncash and other costs, net — 10 — — Molybdenum mines 129 127 31 5 Other mining c 7,420 6,454 638 60 Corporate, other & eliminations (1,697 ) (1,642 ) 30 18 As reported in our consolidated financial statements $ 5,852 $ 4,939 $ 699 $ 83 Six Months Ended June 30, 2019 Totals presented above $ 215 $ 146 $ 34 $ — Treatment charges and other (15 ) — — — Noncash and other costs, net — 3 — — Molybdenum mines 200 149 34 — Other mining c 8,642 7,168 626 1 Corporate, other & eliminations (1,504 ) (1,388 ) 39 58 As reported in our consolidated financial statements $ 7,338 $ 5,929 $ 699 $ 59 a. 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. b. 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. c. 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. 65 Table of Contents GUARANTOR SUMMARIZED FINANCIAL INFORMATION All of the senior notes issued by FCX are fully and unconditionally guaranteed on a senior basis jointly and severally by Freeport-McMoRan Oil & Gas LLC (FM O&G LLC), as guarantor, which is a 100 -percent-owned subsidiary of FCX Oil & Gas LLC (FM O&G) and FCX. The guarantee is an unsecured obligation of the guarantor and ranks equal in right of payment with all existing and future indebtedness of FM O&G LLC, including indebtedness under FCX’s revolving credit facility. The guarantee ranks senior in right of payment with all of FM O&G LLC’s future subordinated obligations and is effectively subordinated in right of payment to any debt of FM O&G LLC’s subsidiaries. The indentures provide that FM O&G LLC’s guarantee obligations may be released or terminated upon: (i) the sale of all or substantially all of the equity interests or assets of FM O&G LLC to a third party that is not a subsidiary or an affiliate of FCX; (ii) FM O&G LLC no longer having any obligations under any FM O&G senior notes or any refinancing thereof and no longer being a co-borrower or guarantor of any obligations of FCX under the revolving credit facility or any other senior debt or, in each case, any refinancing thereof; 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 June 30, 2020 , and December 31, 2019 , and for six months ended June 30, 2020 . FCX FM O&G LLC Non-guarantor Consolidated Issuer Guarantor Subsidiaries Eliminations FCX As of June 30, 2020 Current assets $ 249 $ 646 $ 6,921 $ (661 ) $ 7,155 Noncurrent assets 1,427 6 33,027 (1,385 ) 33,075 Current liabilities 175 24 3,402 (695 ) 2,906 Noncurrent liabilities 9,211 11,073 15,964 (16,079 ) 20,169 As of December 31, 2019 Current assets $ 154 $ 657 $ 7,778 $ (674 ) $ 7,915 Noncurrent assets 1,620 22 32,692 (1,440 ) 32,894 Current liabilities 323 42 3,550 (706 ) 3,209 Noncurrent liabilities 9,180 10,892 15,975 (15,895 ) 20,152 Six Months Ended June 30, 2020 Revenues $ — $ 14 $ 5,838 $ — $ 5,852 Operating loss (18 ) (22 ) (103 ) (9 ) (152 ) Net (loss) income (438 ) a (159 ) a (494 ) 666 (425 ) a. Net loss equals net loss attributable to common stockholders because net loss attributable to noncontrolling interests is zero for issuer and guarantor. 66 Table of Contents CAUTIONARY STATEMENT Our discussion and analysis contains forward-looking statements in which we discuss our potential future performance. Forward-looking statements are all statements other than statements of historical facts, such as plans, projections, or expectations relating to ore grades and milling rates; forecasts or expectations regarding business outlook; production and sales volumes; unit net cash costs; cash flows; capital expenditures; liquidity; operating costs; operating plans; cost savings; 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; improvements in operating procedures and technology; exploration efforts and results; development and production activities, rates and costs; tax rates; export quotas and duties; the impact of copper, gold and molybdenum price changes; the impact of deferred intercompany profits on earnings; reserve estimates; execution of the settlement agreement associated with the Louisiana coastal erosion cases; and future dividend payments, share purchases and sales. 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 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, 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; supply of and demand for, and prices of, copper, gold and molybdenum; mine sequencing; changes in mine plans or operational modifications, delays, deferrals or cancellations; production rates; timing of shipments; results of feasibility studies; potential inventory adjustments; potential impairment of long-lived mining assets; the potential effects of violence in Indonesia generally and in the province of Papua; the Indonesian government's extension of PT-FI's export license after March 15, 2021; risks associated with underground mining; satisfaction of requirements in accordance with PT-FI's IUPK to extend mining rights from 2031 through 2041; the Indonesian government's approval of a deferred schedule for completion of the new smelter in Indonesia; expected results from improvements in operating procedures and technology, including innovation initiatives; industry risks; regulatory changes; political and social risks; labor relations; weather- and climate-related risks; environmental risks; litigation results; cybersecurity incidents; changes in general market, economic and industry conditions; financial condition of our customers, suppliers, vendors, partners and affiliates, particularly during weak economic conditions and extended periods of low commodity prices; reductions in liquidity and access to capital; 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 Part II, Item 1A. herein. 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. Further, we may make changes to our business plans that could affect our results. We caution investors that we do not intend to update forward-looking statements more frequently than quarterly notwithstanding any changes in our assumptions, changes in business plans, actual experience or other changes, and we undertake no obligation to update any forward-looking statements. 67 Table of Contents