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. Our operating sites continue to focus on strong execution of our April 2020 revised operating plans in response to the global COVID-19 pandemic and resulting negative impact on the global economy. Protecting the health of our workforce and communities where we operate is a top priority and we continue to provide monetary support and in-kind contributions of medical supplies, equipment and food. During third-quarter 2020, we continued to focus on safeguarding our business in an uncertain public health and economic environment. The ramp-up of underground mining at PT Freeport Indonesia (PT-FI) is advancing on schedule, production from the recently completed Lone Star copper leach project is ramping up and remains on track to produce approximately 200 million pounds of copper annually and Cerro Verde continues to make progress toward restoring operations (operating rates averaged 351,000 metric tons of ore per day during third-quarter 2020, approximately 90 percent of the 2019 annual average). Refer to “Operations” for further discussion. Our third-quarter 2020 results reflect strong cash flows and effective cost and capital expenditures management. Consolidated sales volumes exceeded our July 2020 estimates by 7 percent for copper and 6 percent for gold. Net income (loss) attributable to common stock totaled $329 million in third-quarter 2020, $(207) million in third-quarter 2019, $(109) million for the first nine months of 2020 and $(248) million for the first nine months of 2019. The results for third-quarter 2020, compared with third-quarter 2019, primarily reflect higher copper and gold prices, higher copper sales volumes, and lower production and delivery costs. The results for the first nine months of 2020, compared with the first nine months of 2019, primarily reflect lower production and delivery costs and higher gold prices, partly offset by lower copper, gold and molybdenum sales volumes and lower molybdenum prices. The 2020 periods were also impacted by a higher income tax provision. Refer to “Consolidated Results” for further discussion. At September 30, 2020, we had $2.4 billion in consolidated cash and cash equivalents and $10.0 billion in total debt. At September 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, and have no senior note maturities until 2022. In July 2020, we completed the sale of $650 million of 4.375% Senior Notes due 2028 and $850 million of 4.625% Senior Notes due 2030 for proceeds, net of underwriting fees, totaling $1.485 billion. We used $1.4 billion of the net proceeds to purchase a portion of our senior notes due 2022, 2023 and 2024, and the payment of accrued and unpaid interest, premiums, fees and expenses in connection with these transactions. The remaining net proceeds from this offering will be used for general corporate purposes, which may include repurchases or redemptions of outstanding senior notes. In connection with our financings from August 2019 through July 2020, we’ve issued a total of $4.0 billion in new senior notes and used most of the net proceeds to purchase and redeem outstanding senior notes. As a result, we have extended maturities and strengthened our financial flexibility. Refer to Note 5 and “Capital Resources and Liquidity” for further discussion. 27 Table of Contents OUTLOOK Despite volatile 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 1,435 South America mining 950 Indonesia mining 790 Total 3,175 Gold (millions of recoverable ounces) 0.8 Molybdenum (millions of recoverable pounds) 80 a a. Projected molybdenum sales include 25 million pounds produced by our Molybdenum mines and 55 million pounds produced by our North America and South America copper mines. Consolidated sales volumes in fourth-quarter 2020 are expected to approximate 840 million pounds of copper, 270 thousand ounces of gold and 21 million pounds of molybdenum. Metal production and sales are expected to improve significantly in 2021 with projected consolidated sales of 3.85 billion pounds of copper and 1.4 million ounces of gold for the year 2021. Projected sales volumes are dependent on operational performance, continued progress of the ramp-up of underground mining at PT-FI, impacts and 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 $1,900 per ounce of gold and $8.00 per pound of molybdenum in fourth-quarter 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 $1.49 per pound of copper for the year 2020 (including $1.32 per pound of copper in fourth-quarter 2020). The impact of price changes during fourth-quarter 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 be lower in 2021, as the underground mines at PT-FI reach planned operating rates. 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 $3.00 per pound for copper, $1,900 per ounce for gold, and $8.00 per pound for molybdenum during fourth-quarter 2020, our consolidated operating cash flows are estimated to approximate $2.9 billion (including $0.6 billion from 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 $0.7 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 fourth-quarter 2020 on operating cash flows for the year 2020 would approximate $90 million for each $0.10 per pound change in the average price of copper, $13 million for each $50 per ounce change in the average price of gold and $14 million for each $2 per pound change in the 28 Table of Contents average price of molybdenum. With anticipated increases in copper and gold sales volumes and decreases in unit net cash costs, operating cash flows in 2021 are expected to be significantly higher than 2020 levels. 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 the now completed Lone Star copper leach project. 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 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, furloughs and an employee separation program, and reductions in third party service costs, facilities costs, travel and other expenses. Annual savings associated with the employee separation program are expected to be in excess of $100 million. As part of the cost savings initiatives introduced 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 expenses are expected to approximate $350 million ($335 million excluding charges associated with the employee separation program) for the year 2020. MARKETS World prices for copper, gold and molybdenum can fluctuate significantly. During the period from January 2010 through September 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 $2,067 per ounce in 2020; 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 September 2020. During third-quarter 2020, LME copper settlement prices ranged from a low of $2.73 per pound to a high of $3.10 per pound, averaged $2.96 per pound and settled at $3.00 per pound on September 30, 2020. In third-quarter 2020, copper prices continued their upward momentum following the sharp decline that occurred in first-quarter 2020, reflecting a positive economic outlook lead by China’s continued recovery, decreasing inventories and supply curtailments related to the COVID-19 pandemic. The COVID-19 pandemic continues to cause substantial disruption and uncertainty in global economies and markets. The LME copper settlement price was $3.04 per pound on October 30, 2020. While we acknowledge the global economic turmoil associated with 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 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 September 2020. During third-quarter 2020, LBMA PM gold prices ranged from a low of $1,771 per ounce to a high of $2,067 per ounce, averaged $1,909 per ounce, and closed at $1,887 per ounce on September 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 $1,882 per ounce on October 30, 2020. 31 Table of Contents This graph presents the Metals Week Molybdenum Dealer Oxide weekly average price from January 2010 through September 2020. During third-quarter 2020, the weekly average price of molybdenum ranged from a low of $7.01 per pound to a high of $8.37 per pound, averaged $7.68 per pound, and was $8.32 per pound on September 30, 2020. Molybdenum prices gradually improved in third-quarter 2020 as a result of increases in spot sale activity in Europe and China after being negatively impacted by economic uncertainty associated with the COVID-19 pandemic. The Metals Week Molybdenum Dealer Oxide weekly average price was $8.73 per pound on October 30, 2020. CONSOLIDATED RESULTS Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 SUMMARY FINANCIAL DATA (in millions, except per share amounts) Revenues a,b $ 3,851 c $ 3,153 d $ 9,703 c $ 10,491 d Operating income (loss) a,e,f,g $ 880 c,h,i $ (38) j $ 728 c,h,i $ 316 j Net income (loss) attributable to common stock k,l,m $ 329 c $ (207) $ (109) c $ (248) Diluted net income (loss) per share of common stock $ 0.22 $ (0.15) $ (0.08) $ (0.17) Diluted weighted-average common shares outstanding 1,461 1,452 1,453 1,451 Operating cash flows n $ 1,237 $ 224 $ 1,690 $ 1,312 Capital expenditures $ 436 $ 666 $ 1,573 $ 1,917 At September 30: Cash and cash equivalents $ 2,403 $ 2,247 $ 2,403 $ 2,247 Total debt, including current portion $ 10,030 $ 9,919 $ 10,030 $ 9,919 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 $71 million ($28 million to net income attributable to common stock or $0.02 per share) in third-quarter 2020, $(42) million ($(17) million to net loss attributable to common stock or $(0.01) per share) in third-quarter 2019, $(102) million ($(42) 32 Table of Contents million to net loss attributable to common stock or $(0.03) per share) for the first nine months of 2020 and $58 million ($23 million to net loss attributable to common stock or $0.02 per share) for the first nine months of 2019 (refer to Note 6). The first nine months of 2020 also include reductions to revenues totaling $24 million ($24 million to net loss attributable to common stock or $0.02 per share) related to forward sales contracts (refer to Note 6). c. Includes other net credits totaling $18 million ($19 million to net income attributable to common stock or $0.01 per share) in third-quarter 2020 and $20 million ($22 million to net loss attributable to common stock or $0.02 per share) for the first nine months of 2020, primarily associated with the sale of royalty assets and accrual adjustments at PT-FI, partly offset by charges associated with a PT-FI royalty adjustment and asset impairments. These net (charges) credits were recorded to revenues ($(9) million for third-quarter 2020 and $(7) million for the first nine months of 2020), production and delivery ($(4) million for third-quarter 2020 and $(9) million for the first nine months of 2020), interest expense ($(5) million for the first nine months of 2020) and to other income ($31 million for third-quarter 2020 and $41 million for the first nine months of 2020). d. Includes charges totaling $166 million ($82 million to net loss attributable to common stock or $0.06 per share) primarily associated with an unfavorable Indonesia Supreme Court ruling related to certain disputed PT-FI export duties. e. Includes net unfavorable metals inventory adjustments totaling $9 million ($9 million to net income attributable to common stock or $0.01 per share) in third-quarter 2020, $41 million ($40 million to net loss attributable to common stock or $0.03 per share) in third-quarter 2019, $92 million ($90 million to net loss attributable to common stock or $0.06 per share) for the first nine months of 2020 and $100 million ($67 million to net loss attributable to common stock or $0.04 per share) for the first nine months of 2019. f. Includes net charges to environmental obligations and related litigation reserves totaling $7 million ($7 million to net income attributable to common stock or less than $0.01 per share) in third-quarter 2020, $19 million ($19 million to net loss attributable to common stock or $0.01 per share) in third-quarter 2019, $22 million ($22 million to net loss attributable to common stock or $0.02 per share) for the first nine months of 2020 and $63 million ($63 million to net loss attributable to common stock or $0.04 per share) for the first nine months of 2019. g. Includes net (losses) gains on sales of assets totaling $(2) million ($(2) million to net income attributable to common stock or less than $(0.01) per share) in third-quarter 2020, $(12) million ($(12) million to net loss attributable to common stock or $(0.01) per share) in third-quarter 2019, $(13) million ($(13) million to net loss attributable to common stock or $(0.01) per share) for the first nine months of 2020 and $13 million ($13 million to net loss attributable to common stock or $0.01 per share) for the first nine 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 charges directly related to the COVID-19 pandemic totaling $17 million ($8 million to net income attributable to common stock or $0.01 per share) in third-quarter 2020 and $129 million ($60 million to net loss attributable to common stock or $0.04 per share) for the first nine months of 2020, which were recorded primarily to production and delivery ($16 million in third-quarter 2020 and $110 million for the first nine months of 2020) and to depreciation, depletion and amortization ($18 million for the first nine months of 2020). Charges for third-quarter 2020 primarily included health and safety related costs and one-time incremental employee benefits. Charges for the first nine months of 2020 also included idle facility costs (Cerro Verde), contract cancellation and other charges directly related to the COVID-19 pandemic. i. Includes charges associated with our April 2020 revised operating plans (primarily related to employee separation charges) totaling $17 million ($17 million to net income attributable to common stock or $0.01 per share) in third-quarter 2020 and $129 million ($118 million to net loss attributable to common stock or $0.08 per share) for the first nine months of 2020. These charges were recorded to production and delivery ($14 million in third-quarter 2020 and $92 million for the first nine months of 2020), depreciation, depletion and amortization ($3 million in third-quarter 2020 and $14 million for the first nine months of 2020), selling, general and administrative expenses ($15 million for the first nine months of 2020), and mining exploration and research expenses ($8 million for the first nine months of 2020). j. Includes other net charges totaling $13 million ($8 million to net loss attributable to common stock or $0.01 per share) in third-quarter 2019 primarily associated with asset impairment. The first nine months of 2019 includes net charges totaling $65 million ($32 million to net loss attributable to common stock or $0.02 per share) primarily associated with an adjustment to the settlement of the historical surface water tax disputes in Indonesia, weather-related issues at El Abra and for oil and gas inventory adjustments, partly offset by a credit for an asset retirement obligation adjustment. k. Includes net tax (charges) credits totaling $(17) million ($(0.01) per share) in third-quarter 2020, $(19) million ($(0.01) per share) in third-quarter 2019, $35 million ($0.02 per share) for the first nine months of 2020 and $5 million (less than $0.01 per share) for the first nine months of 2019. Refer to “Income Taxes” for further discussion of these net tax (charges) credits. l. 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. m. Includes after-tax net losses on early extinguishment of debt totaling $59 million ($0.04 per share) in third-quarter 2020, $21 million ($0.01 per share) in third-quarter 2019, $100 million ($0.07 per share) for the first nine months of 2020 and $26 million ($0.02 per share) for the first nine months of 2019 (refer to Note 5 for discussion of our 2020 debt transactions). n. Working capital and other sources totaled $178 million in third-quarter 2020, $26 million in third-quarter 2019, $319 million for the first nine months of 2020 and $274 million for the first nine months of 2019. 33 Table of Contents Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 SUMMARY OPERATING DATA Copper (millions of recoverable pounds) Production 844 864 2,342 2,420 Sales, excluding purchases 848 795 2,336 2,386 Average realized price per pound $ 3.01 $ 2.62 $ 2.73 $ 2.71 Site production and delivery costs per pound a $ 1.77 b $ 2.05 $ 1.92 b $ 2.16 Unit net cash costs per pound a $ 1.32 $ 1.59 $ 1.55 $ 1.76 Gold (thousands of recoverable ounces) Production 237 333 584 659 Sales, excluding purchases 234 243 562 674 Average realized price per ounce $ 1,902 $ 1,487 $ 1,810 $ 1,380 Molybdenum (millions of recoverable pounds) Production 19 21 57 69 Sales, excluding purchases 20 22 59 68 Average realized price per pound $ 9.23 $ 12.89 $ 10.30 $ 12.92 a. 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.” b. Excludes $0.04 per pound of copper in third-quarter and $0.09 per pound of copper for the first nine months of 2020 associated with the COVID-19 pandemic (including costs for health and safety, idle facility and contract cancellation) and our April 2020 revised operating plans (including employee separation costs). Revenues Consolidated revenues totaled $3.9 billion in third-quarter 2020, $3.2 billion in third-quarter 2019, $9.7 billion for the first nine months of 2020 and $10.5 billion for the first nine 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. Following is a summary of changes in our consolidated revenues between periods (in millions): Three Months Ended September 30 Nine Months Ended September 30 Consolidated revenues - 2019 period $ 3,153 $ 10,491 Higher (lower) sales volumes: Copper 140 (135) Gold (13) (155) Molybdenum (34) (125) Higher (lower) average realized prices: Copper 331 47 Gold 97 242 Molybdenum (72) (154) Adjustments for prior period provisionally priced copper sales 113 (160) Higher (lower) Atlantic Copper revenues 102 (114) Lower revenues from purchased copper (44) (304) Lower cobalt revenues (65) (245) (Higher) lower treatment charges (7) 42 Lower royalties and export duties 119 129 Other, including intercompany eliminations 31 144 Consolidated revenues - 2020 period $ 3,851 $ 9,703 Sales Volumes. Consolidated copper sales volumes increased in third-quarter 2020, compared to third-quarter 2019, primarily reflecting higher copper ore grades in Indonesia, partly offset by lower sales from North America and South America as a result of lower mining rates associated with our April 2020 revised operating plans. Consolidated copper sales volumes slightly decreased for the first nine months of 2020, compared to the first nine 34 Table of Contents months of 2019, primarily reflecting lower operating rates at Cerro Verde associated with COVID-19 restrictions, partly offset by higher ore grades in Indonesia. Consolidated gold sales volumes decreased in the 2020 periods, compared to the 2019 periods, primarily reflecting lower mining and milling rates associated with the ramp-up of underground mining at PT-FI. 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 third-quarter 2020, compared with third-quarter 2019, were 15 percent higher for copper, 28 percent higher for gold and 28 percent lower for molybdenum, and average realized prices for the first nine months of 2020, compared with the first nine months of 2019, were 1 percent higher for copper, 31 percent higher for gold and 20 percent lower for molybdenum. Average realized copper prices include net favorable (unfavorable) adjustments to current period provisionally priced copper sales totaling $23 million in third-quarter 2020, $(15) million in third-quarter 2019, $120 million for the first nine months of 2020 and $(115) million for the first nine 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 first nine 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 June 30, 2020 and 2019, and December 31, 2019 and 2018) recorded in consolidated revenues totaled $71 million in third-quarter 2020 and $(42) million in third-quarter 2019, $(102) million for the first nine months of 2020 and $58 million for the first nine 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 September 30, 2020, we had provisionally priced copper sales totaling 226 million pounds of copper (net of intercompany sales and noncontrolling interests) recorded at an average of $3.03 per pound, subject to final pricing over the next several months. We estimate that each $0.05 change in the price realized from the September 30, 2020, provisional price recorded would have an approximate $7 million effect on our 2020 net income attributable to common stock. The LME copper price settled at $3.04 per pound on October 30, 2020. Atlantic Copper Revenues. Atlantic Copper revenues totaled $539 million in third-quarter 2020 and $1.4 billion for the first nine months of 2020, compared with $437 million in third-quarter 2019 and $1.6 billion for the first nine months of 2019. Higher revenues in third-quarter 2020, compared with third-quarter 2019, primarily reflect higher copper sales volumes and prices, and the impact of a scheduled short-term general maintenance turnaround in third-quarter 2019. Lower revenues for the first nine months of 2020, compared with the first nine months of 2019, primarily reflect lower gold sales volumes. 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 56 million pounds in third-quarter 2020, 79 million pounds in third-quarter 2019, 215 million pounds for the first nine months of 2020 and 310 million pounds for the first nine months of 2019. Cobalt Revenues. Cobalt revenues totaled $51 million in third-quarter 2020 and $162 million for the first nine months of 2020, compared with $116 million in third-quarter 2019 and $407 million for the first nine 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. 35 Table of Contents 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 $2.5 billion in third-quarter 2020, $2.7 billion in third-quarter 2019, $7.4 billion for the first nine months of 2020 and $8.6 billion for the first nine months of 2019. Lower consolidated production and delivery costs in the 2020 periods primarily reflect lower mining and milling rates in Indonesia (associated with the ramp-up of underground mining at PT-FI) and in North America (associated with our April 2020 revised operating plans). The first nine months of 2020 also reflect lower mining rates at Cerro Verde associated with COVID-19 restrictions. The 2020 periods include charges totaling $30 million in the third quarter and $202 million for the first nine months 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 $1.77 per pound of copper in third-quarter 2020, $2.05 per pound of copper in third-quarter 2019, $1.92 per pound of copper for the first nine months of 2020 and $2.16 per pound of copper for the first nine months of 2019. Consolidated site production and delivery costs per pound of copper exclude certain charges associated with the COVID-19 pandemic and our April 2020 revised operating plans totaling $0.04 per pound of copper in third-quarter 2020 and $0.09 per pound of copper for the first nine months of 2020. Lower consolidated site production and delivery costs per pound in the 2020 periods, compared with the 2019 periods, primarily reflect lower costs in Indonesia, North America 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 $394 million in third-quarter 2020, $322 million in third-quarter 2019, $1.1 billion for the first nine months of 2020 and $1.0 billion for the first nine months of 2019. Higher DD&A in the 2020 periods primarily relates to assets placed in service associated with the ramp-up of underground mining at PT-FI. Metals Inventory Adjustments Unfavorable net realizable value metals inventory adjustments totaled $9 million in third-quarter 2020, $41 million in third-quarter 2019, $92 million for the first nine months of 2020 and $100 million for the first nine months of 2019. Metals inventory adjustments in the 2020 periods were related to volatility in copper and molybdenum prices. Metals inventory adjustments in the 2019 periods were mostly related to volatility in copper and cobalt prices. Selling, general and administrative expenses Selling, general and administrative expenses totaled $72 million in third-quarter 2020, $101 million in third-quarter 2019, $273 million for the first nine months of 2020 and $300 million for the first nine 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, furloughs and an employee separation program, and reductions in third party service costs, facilities costs, travel and other expenses. Selling, general and administrative expenses are expected to approximate $350 million for the year 2020 ($335 million excluding charges associated with the employee separation program). Mining Exploration and Research Expenses Consolidated exploration and research expenses for our mining operations totaled $8 million in third-quarter 2020, $25 million in third-quarter 2019, $42 million for the first nine months of 2020 and $83 million for the first nine months of 2019. Exploration expenditures for the year 2020 are expected to approximate $31 million ($23 million excluding charges associated with the employee separation program), approximately 60 percent below 2019 expenditures. 36 Table of Contents 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 $21 million in third-quarter 2020, $20 million in third-quarter 2019, $58 million for the first nine months of 2020 and $85 million for the first nine months of 2019. Interest Expense, Net Consolidated interest costs (before capitalization) totaled $160 million in third-quarter 2020, $163 million in third-quarter 2019, $490 million for the first nine months of 2020 and $508 million for the first nine months of 2019. Refer to Note 5 for 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 $40 million in each of third-quarter 2020 and third-quarter 2019, $128 million for the first nine months of 2020 and $107 million for the first nine 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 (in millions, except percentages): Nine Months Ended September 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 $ (535) 10% $ 56 c $ (384) 7% $ 26 d South America 149 51% (76) 335 44% (149) Indonesia 619 49% (302) e 135 37% (50) f PT-FI export duty matter — N/A — (155) 38% 59 Adjustment to deferred taxes — N/A — — N/A (49) g Eliminations and other 95 N/A (28) 9 N/A (31) Rate adjustment h — N/A 17 — N/A 13 Consolidated FCX $ 328 102% i $ (333) $ (60) 302% $ (181) a. Represents income (loss) from continuing operations before income taxes and equity in affiliated companies’ net earnings. 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 $12 million associated with the settlement of state income tax examinations and $12 million associated with state law changes. e. Includes a tax charge of $21 million ($17 million net of noncontrolling interest) associated with establishing a tax reserve related to the treatment of prior year contractor support costs. Also 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 charge of $5 million ($4 million net of noncontrolling interest) for non-deductible penalties related to PT-FI's surface water tax settlement. g. Includes net tax charges totaling $49 million ($15 million net of noncontrolling interests) primarily to adjust deferred taxes on historical balance sheet items in accordance with tax accounting principles. h. In accordance with applicable accounting rules, we adjust our interim provision for income taxes equal to our consolidated tax rate. i. 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 nine 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. 37 Table of Contents Assuming achievement of current sales volume and cost estimates and average prices of $3.00 per pound for copper, $1,900 per ounce for gold and $8.00 per pound for molybdenum in fourth-quarter 2020, we estimate our consolidated effective tax rate for the year 2020 would approximate 54 percent. Changes in sales volumes and average prices during 2020 would incur tax impacts at estimated effective rates of 38 percent for Indonesia, 38 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 During third-quarter 2020, we announced our commitment to the Copper Mark. The Copper Mark is a new, comprehensive assurance framework that demonstrates the industry’s responsible production practices and contribution to the United Nations Sustainable Development Goals. It is the first and only framework developed specifically for the copper industry and enables each site to demonstrate to customers, investors and other stakeholders their responsible production performance. We have commenced the validation process for six of our copper operating sites and have future plans to validate all of our copper operating sites against the Copper Mark requirements. North America Copper Mines We operate seven open-pit copper mines in North America – Morenci, Bagdad, Safford (including Lone Star), 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. Our North America operating sites continue to focus on strong execution of our April 2020 revised operating plans. We completed the Lone Star copper leach project in third-quarter 2020, with production ramping-up and remaining on track to produce approximately 200 million pounds of copper annually . We reviewed options for restarting the Chino mine and currently expect to restart Chino at a reduced rate of approximately 50 percent of capacity (approximately 100 million pounds of copper per year) beginning in 2021. 38 Table of Contents Operating Data. Following is summary consolidated operating data for the North America copper mines: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Operating Data, Net of Joint Venture Interests Copper (millions of recoverable pounds) Production 369 390 1,083 1,096 Sales, excluding purchases 379 395 1,102 1,084 Average realized price per pound $ 3.01 $ 2.65 $ 2.67 a $ 2.74 Molybdenum (millions of recoverable pounds) Production b 7 8 24 24 100% Operating Data Leach operations Leach ore placed in stockpiles (metric tons per day) 692,000 756,900 708,100 753,400 Average copper ore grade (percent) 0.26 0.24 0.27 0.23 Copper production (millions of recoverable pounds) 286 270 786 741 Mill operations Ore milled (metric tons per day) 255,200 337,700 291,500 324,600 Average ore grade (percent): Copper 0.36 0.33 0.35 0.34 Molybdenum 0.03 0.02 0.02 0.02 Copper recovery rate (percent) 84.4 88.5 85.4 87.9 Copper production (millions of recoverable pounds) 155 198 509 569 a. Includes reductions to average realized prices of $0.02 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. There are no remaining forward sales contracts. b. Refer to “Consolidated Results” for our consolidated molybdenum sales volumes, which include sales of molybdenum produced at the North America copper mines. Our consolidated copper sales volumes from North America totaled 379 million pounds in third-quarter 2020, 395 million pounds in third-quarter 2019 and 1.1 billion pounds for both the first nine months of 2020 and 2019. Lower copper sales volumes in third-quarter 2020, compared to third-quarter 2019, primarily reflect lower mining rates associated with our April 2020 revised operating plans, partly offset by production from Lone Star. 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. 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. 39 Table of Contents Three Months Ended September 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 $ 3.01 $ 3.01 $ 7.72 $ 2.65 $ 2.65 $ 11.98 Site production and delivery, before net noncash and other costs shown below 1.76 1.67 5.52 2.03 1.88 9.28 By-product credits (0.18) — — (0.22) — — Treatment charges 0.09 0.08 — 0.11 0.11 — Unit net cash costs 1.67 1.75 5.52 1.92 1.99 9.28 DD&A 0.24 0.23 0.43 0.22 0.22 0.76 Metals inventory adjustments (0.01) (0.01) — 0.10 0.10 — Noncash and other costs, net 0.10 b 0.09 0.06 0.08 0.06 0.45 Total unit costs 2.00 2.06 6.01 2.32 2.37 10.49 Revenue adjustments, primarily for pricing on prior period open sales — — — (0.03) (0.03) — Gross profit per pound $ 1.01 $ 0.95 $ 1.71 $ 0.30 $ 0.25 $ 1.49 Copper sales (millions of recoverable pounds) 378 378 394 394 Molybdenum sales (millions of recoverable pounds) a 7 8 Nine Months Ended September 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 $ 2.67 c $ 2.67 $ 8.57 $ 2.74 $ 2.74 $ 12.03 Site production and delivery, before net noncash and other costs shown below 1.91 1.78 7.05 2.05 1.87 9.56 By-product credits (0.19) — — (0.25) — — Treatment charges 0.10 0.10 — 0.11 0.11 — Unit net cash costs 1.82 1.88 7.05 1.91 1.98 9.56 DD&A 0.25 0.23 0.57 0.24 0.22 0.75 Metals inventory adjustments 0.05 0.04 — 0.04 0.04 — Noncash and other costs, net 0.10 b 0.10 0.12 0.05 0.05 0.29 Total unit costs 2.22 2.25 7.74 2.24 2.29 10.60 Other revenue adjustments, primarily for pricing on prior period open sales (0.01) (0.01) — — — — Gross profit per pound $ 0.44 $ 0.41 $ 0.83 $ 0.50 $ 0.45 $ 1.43 Copper sales (millions of recoverable pounds) 1,100 1,100 1,084 1,084 Molybdenum sales (millions of recoverable pounds) a 24 24 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 charges totaling $0.03 per pound of copper for both the third quarter and first nine months of 2020, primarily associated with our April 2020 revised operating plans (including employee separation costs) and the COVID-19 pandemic (including health and safety costs). c. Includes reductions to average realized prices of $0.02 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. There are no remaining forward sales contracts. Our North America copper mines have varying cost structures because of differences in ore grades and characteristics, processing costs, by-product credits and other factors. Average unit net cash costs (net of by-product credits) for the North America copper mines were $1.67 per pound of copper in third-quarter 2020 and $1.82 per pound for the first nine months of 2020, compared with $1.92 per pound in third-quarter 2019 and $1.91 per pound for the first nine months of 2019. The decrease in the 2020 periods, compared to the 2019 periods, primarily reflects lower mining rates and input costs, and cost reductions associated with our April 2020 revised operating plans, partly offset by lower by-product credits. 40 Table of Contents 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 $8.00 per pound in fourth-quarter 2020. North America’s average unit net cash costs for the year 2020 would change by approximately $0.01 per pound of copper for each $2 per pound change in the average price of molybdenum in fourth-quarter 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 continued to make progress toward restoring operations during third-quarter 2020, with operating rates averaging 351,000 metric tons of ore per day (approximately 90 percent of the 2019 annual average). We are continuing to operate El Abra consistent with our April 2020 revised operating plans (third-quarter 2020 operating rates were approximately 60 percent of the 2019 annual average) while closely monitoring public health conditions in Chile. Operating Data. Following is summary consolidated operating data for South America mining: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Copper (millions of recoverable pounds) Production 253 283 716 863 Sales 250 261 716 838 Average realized price per pound $ 3.02 $ 2.61 $ 2.79 $ 2.67 Molybdenum (millions of recoverable pounds) Production a 6 6 14 21 Leach operations Leach ore placed in stockpiles (metric tons per day) 172,400 257,300 165,600 205,300 Average copper ore grade (percent) 0.35 0.36 0.35 0.36 Copper production (millions of recoverable pounds) 55 70 180 192 Mill operations Ore milled (metric tons per day) 351,000 381,200 317,600 b 391,800 Average ore grade (percent): Copper 0.33 0.35 0.35 0.36 Molybdenum 0.01 0.02 0.01 0.02 Copper recovery rate (percent) 88.4 81.5 83.5 83.5 Copper production (millions of recoverable pounds) 198 213 536 671 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. Our consolidated copper sales volumes from South America totaled 250 million pounds in third-quarter 2020, 261 million pounds in third-quarter 2019, 716 million pounds for the first nine months of 2020 and 838 million pounds for the first nine months of 2019. Lower copper sales volumes for third-quarter 2020, compared to third-quarter 2019, primarily reflect lower mining rates associated with our April 2020 revised operating plans at El Abra and COVID-19 protocols at Cerro Verde. Lower copper sales volumes for the first nine months of 2020, compared to the first nine months of 2019, primarily reflect lower milling rates associated with COVID-19 restrictions at Cerro Verde. 41 Table of Contents 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 per Pound of Copper The following table summarizes unit net cash costs and gross profit 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 September 30, 2020 2019 By-Product Method Co-Product Method By-Product Method Co-Product Method Revenues, excluding adjustments $ 3.02 $ 3.02 $ 2.61 $ 2.61 Site production and delivery, before net noncash and other costs shown below 1.84 1.73 1.89 1.71 By-product credits (0.17) — (0.26) — Treatment charges 0.15 0.15 0.17 0.17 Royalty on metals 0.01 0.01 0.01 — Unit net cash costs 1.83 1.89 1.81 1.88 DD&A 0.42 0.39 0.42 0.38 Metals inventory adjustments — — 0.01 0.01 Noncash and other costs, net 0.04 a 0.04 0.08 0.08 Total unit costs 2.29 2.32 2.32 2.35 Revenue adjustments, primarily for pricing on prior period open sales 0.16 0.16 (0.11) (0.11) Gross profit per pound $ 0.89 $ 0.86 $ 0.18 $ 0.15 Copper sales (millions of recoverable pounds) 250 250 261 261 Nine Months Ended September 30, 2020 2019 By-Product Method Co-Product Method By-Product Method Co-Product Method Revenues, excluding adjustments $ 2.79 $ 2.79 $ 2.67 $ 2.67 Site production and delivery, before net noncash and other costs shown below 1.83 1.72 1.84 1.66 By-product credits (0.15) — (0.29) — Treatment charges 0.15 0.15 0.18 0.18 Royalty on metals 0.01 0.01 0.01 0.01 Unit net cash costs 1.84 1.88 1.74 1.85 DD&A 0.44 0.41 0.41 0.36 Noncash and other costs, net 0.16 a 0.15 0.08 0.08 Total unit costs 2.44 2.44 2.23 2.29 Other revenue adjustments, primarily for pricing on prior period open sales (0.10) (0.10) 0.04 0.04 Gross profit per pound $ 0.25 $ 0.25 $ 0.48 $ 0.42 Copper sales (millions of recoverable pounds) 716 716 838 838 42 Table of Contents a. Third-quarter 2020 includes charges totaling $0.02 per pound of copper, primarily associated with the COVID-19 pandemic (including health and safety costs). The first nine months of 2020 includes charges totaling $0.13 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 our 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) for the South America copper mines were $1.83 per pound of copper in third-quarter 2020 and $1.84 per pound for the first nine months of 2020, compared to $1.81 per pound in third-quarter 2019 and $1.74 per pound for the first nine months of 2019. The slight increase in third-quarter 2020, compared to third-quarter 2019, primarily reflects lower by-product credits and sales volumes, partly offset by lower mining rates. The increase for the first nine months of 2020, compared to the first nine months of 2019, primarily reflects lower sales volumes and 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 $1.88 per pound of copper for the year 2020, based on current sales volume and cost estimates and assuming an average price of $8.00 per pound of molybdenum in fourth-quarter 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 nine months of 2020, 74 percent of PT-FI’s concentrate production was sold to PT Smelting (PT-FI’s 25-percent-owned smelter and refinery in Gresik, Indonesia). Operating and Development Activities. The ramp-up of underground production at the Grasberg minerals district in Indonesia continues to advance on schedule. During third-quarter 2020, a total of 55 new drawbells were added at the Grasberg Block Cave and Deep Mill Level Zone (DMLZ) underground mines, bringing cumulative open drawbells to over 300. Combined average production from the Grasberg Block Cave and DMLZ mines approximated 60,000 metric tons of ore per day during third-quarter 2020, 9 percent above the second-quarter 2020 average but approximately 15 percent below the July 2020 estimate, primarily reflecting unplanned downtime and a brief labor-related work stoppage. However, metal volume targets were achieved during third-quarter 2020 as a result of higher ore grades. For the month of September 2020, combined average production from the Grasberg Block Cave and DMLZ mines totaled approximately 75,000 metric tons of ore per day and the ramp-up schedule remains on track. PT-FI expects its 2021 production to approximate 1.4 billion pounds of copper and 1.4 million ounces of gold, which is 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 43 Table of Contents 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 September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Operating Data Copper (millions of recoverable pounds) Production 222 191 543 461 Sales 219 139 518 464 Average realized price per pound $ 3.00 $ 2.59 $ 2.79 $ 2.70 Gold (thousands of recoverable ounces) Production 236 329 577 645 Sales 230 239 549 659 Average realized price per ounce $ 1,902 $ 1,487 $ 1,810 $ 1,380 Operating Data Ore extracted and milled (metric tons per day): Grasberg Block Cave underground mine a 30,800 10,600 25,700 7,700 DMLZ underground mine a 29,100 9,800 25,100 8,100 DOZ underground mine a 20,700 24,500 20,900 25,300 Big Gossan underground mine a 7,100 7,000 6,600 6,000 Grasberg open pit b — 70,000 2,200 75,500 Total 87,300 c 121,900 80,500 122,600 Average ore grades: Copper (percent) 1.45 0.92 1.30 0.77 Gold (grams per metric ton) 1.20 1.23 1.08 0.85 Recovery rates (percent): Copper 92.3 89.4 92.0 87.6 Gold 79.3 75.6 78.2 73.5 a. Reflects ore extracted, including ore from development activities that result in metal production. b. Includes ore from the Grasberg open-pit stockpile. c. Does not foot because of changes in stockpile ore. Our consolidated copper sales volumes from PT-FI totaled 219 million pounds in third-quarter 2020, 139 million pounds in third-quarter 2019, 518 million pounds for the first nine months of 2020 and 464 million pounds for first nine months of 2019. Higher sales volumes for third-quarter 2020, compared to third-quarter 2019, primarily reflect higher copper ore grades and timing of shipments in third-quarter 2019, partly offset by anticipated lower mining and milling rates associated with the ramp-up of underground mining at PT-FI. Higher sales volumes for the first nine months of 2020, compared to the first nine months of 2019, primarily reflect higher copper ore grades, partly offset by anticipated lower mining and milling rates associated with the ramp-up of underground mining at PT-FI. Our consolidated gold sales volumes from PT-FI totaled 230 thousand ounces in third-quarter 2020, 239 thousand ounces in third-quarter 2019, 549 thousand ounces for the first nine months of 2020 and 659 thousand ounces for the first nine months of 2019. Lower sales volumes for third-quarter 2020, compared to third-quarter 2019, primarily reflects lower mining and milling rates, partly offset by timing of shipments in third-quarter 2019. Lower sales volumes for the first nine months of 2020, compared to the first nine months of 2019, primarily reflect lower mining and milling rates, partly offset by higher gold ore grades. 44 Table of Contents Consolidated sales volumes from PT-FI are expected to approximate 790 million pounds of copper and 0.8 million ounces of gold in 2020. As the ramp-up of underground mining at PT-FI continues to advance, metal production is expected to improve significantly in 2021, compared with 2020 and 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 per Pound of Copper and per Ounce of Gold The following table summarizes the unit net cash costs and gross profit 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 September 30, 2020 2019 By-Product Method Co-Product Method By-Product Method Co-Product Method Copper Gold Copper Gold Revenues, excluding adjustments $ 3.00 $ 3.00 $ 1,902 $ 2.59 $ 2.59 $ 1,487 Site production and delivery, before net noncash and other costs shown below 1.71 1.01 639 2.44 1.21 695 Gold and silver credits (2.16) — — (2.64) — — Treatment charges 0.26 0.16 98 0.25 0.13 72 Export duties 0.11 0.06 40 0.05 0.03 15 Royalty on metals 0.21 0.12 79 0.17 0.08 46 Unit net cash costs 0.13 1.35 856 0.27 1.45 828 DD&A 0.68 0.40 256 0.55 0.27 158 Noncash and other costs, net 0.11 a 0.06 40 1.39 b 0.69 395 Total unit costs 0.92 1.81 1,152 2.21 2.41 1,381 Revenue adjustments, primarily for pricing on prior period open sales 0.13 0.13 49 (0.05) (0.05) 8 PT Smelting intercompany loss (0.08) (0.05) (31) (0.24) (0.12) (69) Gross profit per pound/ounce $ 2.13 $ 1.27 $ 768 $ 0.09 $ 0.01 $ 45 Copper sales (millions of recoverable pounds) 219 219 139 139 Gold sales (thousands of recoverable ounces) 230 239 45 Table of Contents Nine Months Ended September 30, 2020 2019 By-Product Method Co-Product Method By-Product Method Co-Product Method Copper Gold Copper Gold Revenues, excluding adjustments $ 2.79 $ 2.79 $ 1,810 $ 2.70 $ 2.70 $ 1,380 Site production and delivery, before net noncash and other costs shown below 2.05 1.19 773 3.00 1.72 879 Gold and silver credits (2.02) — — (2.02) — — Treatment charges 0.28 0.16 104 0.27 0.15 79 Export duties 0.08 0.05 31 0.07 0.04 22 Royalty on metals 0.18 0.10 68 0.15 0.09 41 Unit net cash costs 0.57 1.50 976 1.47 2.00 1,021 DD&A 0.72 0.42 273 0.61 0.35 177 Noncash and other costs, net 0.11 a 0.07 41 0.52 b 0.29 152 Total unit costs 1.40 1.99 1,290 2.60 2.64 1,350 Revenue adjustments, primarily for pricing on prior period open sales (0.03) (0.03) 8 0.04 0.04 3 PT Smelting intercompany loss (0.04) (0.02) (13) (0.05) (0.03) (14) Gross profit per pound/ounce $ 1.32 $ 0.75 $ 515 $ 0.09 $ 0.07 $ 19 Copper sales (millions of recoverable pounds) 518 518 464 464 Gold sales (thousands of recoverable ounces) 549 659 a. Includes COVID-19 related costs (including one-time incremental employee benefits and health and safety costs) totaling $0.05 per pound of copper in third-quarter 2020 and $0.03 per pound of copper for the first nine months of 2020. b. Includes charges totaling $1.19 per pound of copper in third-quarter 2019 and $0.36 per pound of copper for the first nine months of 2019, primarily associated with an unfavorable Indonesia Supreme Court ruling related to certain disputed PT-FI export duties. The first nine months also includes charges totaling $0.06 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. Because of the fixed nature of a large portion of PT-FI's costs, unit net cash costs can vary significantly from quarter to quarter depending on copper and gold volumes. PT-FI’s unit net cash costs (including gold and silver credits) of $0.13 per pound of copper in third-quarter 2020 and $0.57 per pound for the first nine months of 2020 were lower than unit net cash costs of $0.27 per pound of copper in third-quarter 2019 and $1.47 per pound for the first nine months of 2019, primarily reflecting higher copper sales volumes and lower mining and milling rates. 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’s export duties totaled $24 million in third-quarter 2020, $8 million in third-quarter 2019, $43 million for the first nine months of 2020 and $35 million for the first nine months of 2019. PT-FI will continue to pay export duties until development progress for the new smelter in Indonesia exceeds 50 percent. PT-FI’s royalties totaled $45 million in third-quarter 2020, $23 million in third-quarter 2019, $92 million for the first nine months of 2020 and $68 million for the first nine 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 $0.68 per pound in third-quarter 2020, $0.55 per pound in third-quarter 2019, $0.72 for the first nine months of 2020 and $0.61 per pound for the first nine 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 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 $1,900 per ounce in fourth-quarter 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 46 Table of Contents approximate $0.45 per pound of copper for the year 2020. The impact of price changes during fourth-quarter 2020 on PT-FI's average unit net cash costs for the year 2020 would approximate $0.02 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 continued progress of the ramp-up of underground mining, 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. Operating and Development Activities. Production from the Molybdenum mines totaled 6 million pounds of molybdenum in third-quarter 2020, 7 million pounds in third-quarter 2019, 19 million pounds for the first nine months of 2020 and 24 million pounds for the first nine months of 2019. The decrease in the 2020 periods, compared with the 2019 periods, primarily reflects lower operating rates pursuant to our April 2020 revised operating plans in response to current 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. 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 were $9.72 per pound of molybdenum in third-quarter 2020 and $9.58 per pound for the first nine months of 2020, compared to $11.64 per pound in third-quarter 2019 and $10.13 per pound for the first nine months of 2019. The decrease in the 2020 periods, compared to the 2019 periods, primarily reflects lower operating costs associated with our 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 $0.05 per pound of molybdenum in third-quarter 2020 and $0.36 per pound of molybdenum for the first nine months of 2020. Charges for third-quarter 2020 were primarily associated with employee separation costs related to our April 2020 revised operating plans, and charges for the first nine months of 2020 were primarily associated with our 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 $9.75 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 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. 47 Table of Contents Atlantic Copper smelts and refines copper concentrate and markets refined copper and precious metals in slimes. During the first nine 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 nine months of 2020, PT-FI supplied most 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 to operating income (loss) totaling $21 million ($21 million to net income attributable to common stock) in third-quarter 2020, $4 million ($4 million to net loss attributable to common stock) in third-quarter 2019, $27 million ($20 million to net loss attributable to common stock) for the first nine months of 2020 and $24 million ($20 million to net loss attributable to common stock) for the first nine 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 $57 million at September 30, 2020. Quarterly variations in ore grades, the timing of intercompany shipments and changes in product prices will result in variability in our net deferred profits and quarterly earnings. 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 completed the Lone Star copper leach project 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. During second quarter 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,” for the year 2020, projected operating cash flows of $2.9 billion are expected to exceed projected capital expenditures of $2.0 billion. 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. With anticipated increases in copper and gold sales volumes and decreases in unit net cash costs, operating cash flows in 2021 are expected to be significantly higher than 2020 levels. At September 30, 2020, we had $5.9 billion in liquidity, comprised of $2.4 billion in consolidated cash and $3.5 billion of availability under our revolving credit facility. In connection with our financings from August 2019 through July 2020, we’ve issued a total of $4.0 billion in new senior notes and used most of the net proceeds to purchase and redeem outstanding senior notes. As a result, we have extended maturities and strengthened our financial flexibility. With continued strong financial performance and successful execution of our operating plans, management expects to recommend to the Board the resumption of common stock dividends during 2021 and anticipates an ongoing ability to increase cash returns to shareholders in the future. As further discussed in Note 5, we are currently restricted from declaring or paying common stock dividends under our revolving credit facility. 48 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 September 30, 2020 (in billions): Cash at domestic companies $ 1.6 Cash at international operations 0.8 Total consolidated cash and cash equivalents 2.4 Noncontrolling interests’ share (0.3) Cash, net of noncontrolling interests’ share 2.1 Withholding taxes — a Net cash available $ 2.1 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 September 30, 2020, our consolidated debt totaled $10.0 billion, with a weighted-average interest rate of 4.6 percent and no senior note maturities until 2022. At September 30, 2020, we had no borrowings, $13 million in letters of credit issued and $3.5 billion of availability under our revolving credit facility. Availability under our revolving credit facility consists of $3.28 billion maturing April 2024 and $220 million maturing April 2023. 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. At September 30, 2020, we were in compliance with our revolving credit facility covenants. 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 and used $1.4 billion of the net proceeds to purchase senior notes maturing in 2022, 2023 and 2024. The remaining net proceeds from this offering will be used for general corporate purposes, which may include repurchases or redemptions of outstanding senior notes. 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 and used the net proceeds to purchase and redeem senior notes maturing in 2021 and 2022. We may reduce outstanding debt obligations, including senior notes, through prepayments, redemptions or repurchases from time to time, subject to market conditions. 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 $1.7 billion (including $0.3 billion from working capital and other sources) for the first nine months of 2020 and $1.3 billion (including $0.3 billion from working capital and other sources) for the first nine months of 2019. Higher operating cash flows for the first nine months of 2020 compared with the first nine months of 2019, primarily reflect lower production and delivery costs associated with lower mining rates, and cost reductions associated with our April 2020 revised operating plans. 49 Table of Contents Investing Activities Capital Expenditures. Capital expenditures, including capitalized interest, totaled $1.6 billion for the first nine months of 2020, including approximately $1.0 billion for major projects primarily associated with underground development activities in the Grasberg minerals district and the now completed Lone Star copper leach project. Capital expenditures, including capitalized interest, totaled $1.9 billion for the first nine months of 2019, including approximately $1.1 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 $146 million for the first nine 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, the collection of $45 million related to the 2019 sale of the Timok exploration assets in Serbia and $31 million associated with the third-quarter 2020 sale of royalty assets. Proceeds from sales of assets totaled $102 million for the first nine 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 proceeds from debt for the first nine months of 2020 totaled $131 million, primarily reflecting the issuance of $2.8 billion of new senior notes in July 2020 and March 2020, partly offset by the use of proceeds to purchase and redeem senior notes maturing in 2021, 2022, 2023 and 2024. Refer to Note 5 for further discussion. Net repayments of debt for the first nine 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 nine months of 2020 (associated with the $0.05 per share common stock cash dividend declared in December 2019), and $218 million for the first nine months of 2019. The Board does not expect to declare common stock dividends during 2020. With continued strong financial performance and successful execution of our operating plans, management expects to recommend to the Board the resumption of common stock dividends during 2021 and anticipates an ongoing ability to increase cash returns to shareholders in the future. The declaration and payment of future dividends is at the discretion of the Board and will be assessed on an ongoing basis, taking into account 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 nine months of 2020 and $79 million for the first nine 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 nine months of 2020, we received equity contributions totaling $115 million from PT Inalum for their share of capital spending on PT-FI underground mine development projects and costs for the new smelter in Indonesia. CONTRACTUAL OBLIGATIONS As discussed above, during the first nine-months of 2020, we completed the sale of $2.8 billion of new 8-year and 10-year senior notes at a weighted-average interest rate of 4.36 percent. 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. 50 Table of Contents 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. On August 5, 2020, the co-conveners of the Global Tailings Review, which included the International Council on Mining and Metals (ICMM), an industry group of which we are a founding member, published the first Global Industry Standard on Tailings Management (the Standard). The Standard includes 77 requirements across six key areas including the design, construction, operation and monitoring of tailings facilities, management and governance, emergency response and long-term recovery, and public disclosure. As a member of ICMM, which has endorsed the Standard, we will move toward implementing it and will begin undertaking an extensive, multi-year analysis of our tailings facilities to ensure conformance with the Standard. We are assessing the costs of complying with the new standard. 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. 51 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, 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. 52 Table of Contents North America Copper Mines Product Revenues, Production Costs and Unit Net Cash Costs Three Months Ended September 30, 2020 (In millions) By-Product Co-Product Method Method Copper Molybdenum a Other b Total Revenues, excluding adjustments $ 1,138 $ 1,138 $ 63 $ 30 $ 1,231 Site production and delivery, before net noncash and other costs shown below 667 630 45 16 691 By-product credits (69) — — — — Treatment charges 33 32 — 1 33 Net cash costs 631 662 45 17 724 DD&A 92 85 4 3 92 Metals inventory adjustments (4) (4) — — (4) Noncash and other costs, net 37 c 35 — 2 37 Total costs 756 778 49 22 849 Other revenue adjustments, primarily for pricing on prior period open sales 1 1 — — 1 Gross profit $ 383 $ 361 $ 14 $ 8 $ 383 Copper sales (millions of recoverable pounds) 378 378 Molybdenum sales (millions of recoverable pounds) a 7 Gross profit per pound of copper/molybdenum: Revenues, excluding adjustments $ 3.01 $ 3.01 $ 7.72 Site production and delivery, before net noncash and other costs shown below 1.76 1.67 5.52 By-product credits (0.18) — — Treatment charges 0.09 0.08 — Unit net cash costs 1.67 1.75 5.52 DD&A 0.24 0.23 0.43 Metals inventory adjustments (0.01) (0.01) — Noncash and other costs, net 0.10 c 0.09 0.06 Total unit costs 2.00 2.06 6.01 Other revenue adjustments, primarily for pricing on prior period open sales — — — Gross profit per pound $ 1.01 $ 0.95 $ 1.71 Reconciliation to Amounts Reported Revenues Production and Delivery DD&A Metals Inventory Adjustments Totals presented above $ 1,231 $ 691 $ 92 $ (4) Treatment charges (4) 29 — — Noncash and other costs, net — 37 — — Other revenue adjustments, primarily for pricing on prior period open sales 1 — — — Eliminations and other 9 11 (1) — North America copper mines 1,237 768 91 (4) Other mining d 3,691 2,731 282 5 Corporate, other & eliminations (1,077) (1,034) 21 8 As reported in our consolidated financial statements $ 3,851 $ 2,465 $ 394 $ 9 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 charges totaling $10 million ($0.03 per pound of copper) primarily associated with our April 2020 revised operating plans (including employee separation costs) and the COVID-19 pandemic (including health and safety costs). d. 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 Three Months Ended September 30, 2019 (In millions) By-Product Co-Product Method Method Copper Molybdenum a Other b Total Revenues, excluding adjustments $ 1,044 $ 1,044 $ 93 $ 20 $ 1,157 Site production and delivery, before net noncash and other costs shown below 800 742 72 12 826 By-product credits (87) — — — — Treatment charges 44 43 — 1 44 Net cash costs 757 785 72 13 870 DD&A 90 83 6 1 90 Metals inventory adjustments 38 38 — — 38 Noncash and other costs, net 31 27 3 1 31 Total costs 916 933 81 15 1,029 Other revenue adjustments, primarily for pricing on prior period open sales (11) (11) — — (11) Gross profit $ 117 $ 100 $ 12 $ 5 $ 117 Copper sales (millions of recoverable pounds) 394 394 Molybdenum sales (millions of recoverable pounds) a 8 Gross profit per pound of copper/molybdenum: Revenues, excluding adjustments $ 2.65 $ 2.65 $ 11.98 Site production and delivery, before net noncash and other costs shown below 2.03 1.88 9.28 By-product credits (0.22) — — Treatment charges 0.11 0.11 — Unit net cash costs 1.92 1.99 9.28 DD&A 0.22 0.22 0.76 Metals inventory adjustments 0.10 0.10 — Noncash and other costs, net 0.08 0.06 0.45 Total unit costs 2.32 2.37 10.49 Other revenue adjustments, primarily for pricing on prior period open sales (0.03) (0.03) — Gross profit per pound $ 0.30 $ 0.25 $ 1.49 Reconciliation to Amounts Reported Revenues Production and Delivery DD&A Metals Inventory Adjustments Totals presented above $ 1,157 $ 826 $ 90 $ 38 Treatment charges (16) 28 — — Noncash and other costs, net — 31 — — Other revenue adjustments, primarily for pricing on prior period open sales (11) — — — Eliminations and other 10 11 1 — North America copper mines 1,140 896 91 38 Other mining c 2,813 2,544 211 3 Corporate, other & eliminations (800) (770) 20 — As reported in our consolidated financial statements $ 3,153 $ 2,670 $ 322 $ 41 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. 54 Table of Contents North America Copper Mines Product Revenues, Production Costs and Unit Net Cash Costs Nine Months Ended September 30, 2020 (In millions) By-Product Co-Product Method Method Copper Molybdenum a Other b Total Revenues, excluding adjustments $ 2,939 c $ 2,939 $ 210 $ 73 $ 3,222 Site production and delivery, before net noncash and other costs shown below 2,106 1,963 173 44 2,180 By-product credits (209) — — — — Treatment charges 109 105 — 4 109 Net cash costs 2,006 2,068 173 48 2,289 DD&A 272 251 14 7 272 Metals inventory adjustments 52 49 — 3 52 Noncash and other costs, net 107 d 101 3 3 107 Total costs 2,437 2,469 190 61 2,720 Other revenue adjustments, primarily for pricing on prior period open sales (22) (22) — — (22) Gross profit $ 480 $ 448 $ 20 $ 12 $ 480 Copper sales (millions of recoverable pounds) 1,100 1,100 Molybdenum sales (millions of recoverable pounds) a 24 Gross profit per pound of copper/molybdenum: Revenues, excluding adjustments $ 2.67 c $ 2.67 $ 8.57 Site production and delivery, before net noncash and other costs shown below 1.91 1.78 7.05 By-product credits (0.19) — — Treatment charges 0.10 0.10 — Unit net cash costs 1.82 1.88 7.05 DD&A 0.25 0.23 0.57 Metals inventory adjustments 0.05 0.04 — Noncash and other costs, net 0.10 d 0.10 0.12 Total unit costs 2.22 2.25 7.74 Other revenue adjustments, primarily for pricing on prior period open sales (0.01) (0.01) — Gross profit per pound $ 0.44 $ 0.41 $ 0.83 Reconciliation to Amounts Reported Metals Production Inventory Revenues and Delivery DD&A Adjustments Totals presented above $ 3,222 $ 2,180 $ 272 $ 52 Treatment charges (14) 95 — — Noncash and other costs, net — 107 — — Other revenue adjustments, primarily for pricing on prior period open sales (22) — — — Eliminations and other 24 33 — — North America copper mines 3,210 2,415 272 52 Other mining e 9,267 7,665 770 14 Corporate, other & eliminations (2,774) (2,676) 51 26 As reported in our consolidated financial statements $ 9,703 $ 7,404 $ 1,093 $ 92 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 ($0.02 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 $32 million ($0.03 per pound of copper) primarily associated with our April 2020 revised operating plans (including employee separation costs) and the COVID-19 pandemic (including health and safety costs). e. Represents the combined total for our other segments, as presented in Note 9. 55 Table of Contents North America Copper Mines Product Revenues, Production Costs and Unit Net Cash Costs Nine Months Ended September 30, 2019 (In millions) By-Product Co-Product Method Method Copper Molybdenum a Other b Total Revenues, excluding adjustments $ 2,964 $ 2,964 $ 284 $ 63 $ 3,311 Site production and delivery, before net noncash and other costs shown below 2,216 2,030 226 39 2,295 By-product credits (268) — — — — Treatment charges 120 116 — 4 120 Net cash costs 2,068 2,146 226 43 2,415 DD&A 260 237 18 5 260 Metals inventory adjustments 39 39 — — 39 Noncash and other costs, net 64 55 7 2 64 Total costs 2,431 2,477 251 50 2,778 Other revenue adjustments, primarily for pricing on prior period open sales 4 4 — — 4 Gross profit $ 537 $ 491 $ 33 $ 13 $ 537 Copper sales (millions of recoverable pounds) 1,084 1,084 Molybdenum sales (millions of recoverable pounds) a 24 Gross profit per pound of copper/molybdenum: Revenues, excluding adjustments $ 2.74 $ 2.74 $ 12.03 Site production and delivery, before net noncash and other costs shown below 2.05 1.87 9.56 By-product credits (0.25) — — Treatment charges 0.11 0.11 — Unit net cash costs 1.91 1.98 9.56 DD&A 0.24 0.22 0.75 Metals inventory adjustments 0.04 0.04 — Noncash and other costs, net 0.05 0.05 0.29 Total unit costs 2.24 2.29 10.60 Other revenue adjustments, primarily for pricing on prior period open sales — — — Gross profit per pound $ 0.50 $ 0.45 $ 1.43 Reconciliation to Amounts Reported Metals Production Inventory Revenues and Delivery DD&A Adjustments Totals presented above $ 3,311 $ 2,295 $ 260 $ 39 Treatment charges (48) 72 — — Noncash and other costs, net — 64 — — Other revenue adjustments, primarily for pricing on prior period open sales 4 — — — Eliminations and other 27 32 1 — North America copper mines 3,294 2,463 261 39 Other mining c 9,501 8,294 701 3 Corporate, other & eliminations (2,304) (2,158) 59 58 As reported in our consolidated financial statements $ 10,491 $ 8,599 $ 1,021 $ 100 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. 56 Table of Contents South America Mining Product Revenues, Production Costs and Unit Net Cash Costs Three Months Ended September 30, 2020 (In millions) By-Product Co-Product Method Method Copper Other a Total Revenues, excluding adjustments $ 754 $ 754 $ 53 $ 807 Site production and delivery, before net noncash and other costs shown below 459 432 38 470 By-product credits (42) — — — Treatment charges 40 40 — 40 Royalty on metals 1 1 — 1 Net cash costs 458 473 38 511 DD&A 105 98 7 105 Noncash and other costs, net 9 b 8 1 9 Total costs 572 579 46 625 Other revenue adjustments, primarily for pricing on prior period open sales 41 41 — 41 Gross profit $ 223 $ 216 $ 7 $ 223 Copper sales (millions of recoverable pounds) 250 250 Gross profit per pound of copper: Revenues, excluding adjustments $ 3.02 $ 3.02 Site production and delivery, before net noncash and other costs shown below 1.84 1.73 By-product credits (0.17) — Treatment charges 0.15 0.15 Royalty on metals 0.01 0.01 Unit net cash costs 1.83 1.89 DD&A 0.42 0.39 Noncash and other costs, net 0.04 b 0.04 Total unit costs 2.29 2.32 Other revenue adjustments, primarily for pricing on prior period open sales 0.16 0.16 Gross profit per pound $ 0.89 $ 0.86 Reconciliation to Amounts Reported Production Revenues and Delivery DD&A Totals presented above $ 807 $ 470 $ 105 Treatment charges (40) — — Royalty on metals (1) — — Noncash and other costs, net — 9 — Other revenue adjustments, primarily for pricing on prior period open sales 41 — — Eliminations and other (1) (2) — South America mining 806 477 105 Other mining c 4,122 3,022 268 Corporate, other & eliminations (1,077) (1,034) 21 As reported in our consolidated financial statements $ 3,851 $ 2,465 $ 394 a. Includes silver sales of 0.9 million ounces ($24.84 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 $5 million ($0.02 per pound of copper), primarily associated with the COVID-19 pandemic (including health and safety costs). c. 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 Three Months Ended September 30, 2019 (In millions) By-Product Co-Product Method Method Copper Other a Total Revenues, excluding adjustments $ 681 $ 681 $ 80 $ 761 Site production and delivery, before net noncash and other costs shown below 494 446 61 507 By-product credits (67) — — — Treatment charges 45 45 — 45 Royalty on metals 1 1 — 1 Net cash costs 473 492 61 553 DD&A 109 98 11 109 Metals inventory adjustments 2 2 — 2 Noncash and other costs, net 22 20 2 22 Total costs 606 612 74 686 Other revenue adjustments, primarily for pricing on prior period open sales (29) (29) — (29) Gross profit $ 46 $ 40 $ 6 $ 46 Copper sales (millions of recoverable pounds) 261 261 Gross profit per pound of copper: Revenues, excluding adjustments $ 2.61 $ 2.61 Site production and delivery, before net noncash and other costs shown below 1.89 1.71 By-product credits (0.26) — Treatment charges 0.17 0.17 Royalty on metals 0.01 — Unit net cash costs 1.81 1.88 DD&A 0.42 0.38 Metals inventory adjustments 0.01 0.01 Noncash and other costs, net 0.08 0.08 Total unit costs 2.32 2.35 Other revenue adjustments, primarily for pricing on prior period open sales (0.11) (0.11) Gross profit per pound $ 0.18 $ 0.15 Reconciliation to Amounts Reported Metals Production Inventory Revenues and Delivery DD&A Adjustments Totals presented above $ 761 $ 507 $ 109 $ 2 Treatment charges (45) — — — Royalty on metals (1) — — — Noncash and other costs, net — 22 — — Other revenue adjustments, primarily for pricing on prior period open sales (29) — — — Eliminations and other — (1) — — South America mining 686 528 109 2 Other mining b 3,267 2,912 193 39 Corporate, other & eliminations (800) (770) 20 — As reported in our consolidated financial statements $ 3,153 $ 2,670 $ 322 $ 41 a. Includes silver sales of 0.9 million ounces ($16.78 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. 58 Table of Contents South America Mining Product Revenues, Production Costs and Unit Net Cash Costs Nine Months Ended September 30, 2020 (In millions) By-Product Co-Product Method Method Copper Other a Total Revenues, excluding adjustments $ 1,994 $ 1,994 $ 139 $ 2,133 Site production and delivery, before net noncash and other costs shown below 1,313 1,231 111 1,342 By-product credits (110) — — — Treatment charges 111 111 — 111 Royalty on metals 4 4 — 4 Net cash costs 1,318 1,346 111 1,457 DD&A 316 294 22 316 Metals inventory adjustments 3 3 — 3 Noncash and other costs, net 109 b 103 6 109 Total costs 1,746 1,746 139 1,885 Other revenue adjustments, primarily for pricing on prior period open sales (70) (70) — (70) Gross profit $ 178 $ 178 $ — $ 178 Copper sales (millions of recoverable pounds) 716 716 Gross profit per pound of copper: Revenues, excluding adjustments $ 2.79 $ 2.79 Site production and delivery, before net noncash and other costs shown below 1.83 1.72 By-product credits (0.15) — Treatment charges 0.15 0.15 Royalty on metals 0.01 0.01 Unit net cash costs 1.84 1.88 DD&A 0.44 0.41 Metals inventory adjustments — — Noncash and other costs, net 0.16 b 0.15 Total unit costs 2.44 2.44 Other revenue adjustments, primarily for pricing on prior period open sales (0.10) (0.10) Gross profit per pound $ 0.25 $ 0.25 Reconciliation to Amounts Reported Metals Production Inventory Revenues and Delivery DD&A Adjustments Totals presented above $ 2,133 $ 1,342 $ 316 $ 3 Treatment charges (111) — — — Royalty on metals (4) — — — Noncash and other costs, net — 109 — — Other revenue adjustments, primarily for pricing on prior period open sales (70) — — — Eliminations and other (1) (2) (1) — South America mining 1,947 1,449 315 3 Other mining c 10,530 8,631 727 63 Corporate, other & eliminations (2,774) (2,676) 51 26 As reported in our consolidated financial statements $ 9,703 $ 7,404 $ 1,093 $ 92 a. Includes silver sales of 2.5 million ounces ($19.58 per ounce average realized price). Also reflects sales of molybdenum produced by Cerro Verde to our molybdenum sales company at market-based pricing. b. Includes charges totaling $91 million ($0.13 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 our April 2020 revised operating plans. c. Represents the combined total for our other segments, as presented in Note 9. 59 Table of Contents South America Mining Product Revenues, Production Costs and Unit Net Cash Costs Nine Months Ended September 30, 2019 (In millions) By-Product Co-Product Method Method Copper Other a Total Revenues, excluding adjustments $ 2,236 $ 2,236 $ 284 $ 2,520 Site production and delivery, before net noncash and other costs shown below 1,546 1,395 189 1,584 By-product credits (246) — — — Treatment charges 153 153 — 153 Royalty on metals 5 4 1 5 Net cash costs 1,458 1,552 190 1,742 DD&A 342 305 37 342 Metals inventory adjustments 2 2 — 2 Noncash and other costs, net 68 65 3 68 Total costs 1,870 1,924 230 2,154 Other revenue adjustments, primarily for pricing on prior period open sales 37 37 — 37 Gross profit $ 403 $ 349 $ 54 $ 403 Copper sales (millions of recoverable pounds) 838 838 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 1.84 1.66 By-product credits (0.29) — Treatment charges 0.18 0.18 Royalty on metals 0.01 0.01 Unit net cash costs 1.74 1.85 DD&A 0.41 0.36 Metals inventory adjustments — — Noncash and other costs, net 0.08 0.08 Total unit costs 2.23 2.29 Other revenue adjustments, primarily for pricing on prior period open sales 0.04 0.04 Gross profit per pound $ 0.48 $ 0.42 Reconciliation to Amounts Reported Metals Production Inventory Revenues and Delivery DD&A Adjustments Totals presented above $ 2,520 $ 1,584 $ 342 $ 2 Treatment charges (153) — — — Royalty on metals (5) — — — Noncash and other costs, net — 68 — — Other revenue adjustments, primarily for pricing on prior period open sales 37 — — — Eliminations and other (1) (4) — — South America mining 2,398 1,648 342 2 Other mining b 10,397 9,109 620 40 Corporate, other & eliminations (2,304) (2,158) 59 58 As reported in our consolidated financial statements $ 10,491 $ 8,599 $ 1,021 $ 100 a. Includes silver sales of 3.4 million ounces ($15.90 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. 60 Table of Contents Indonesia Mining Product Revenues, Production Costs and Unit Net Cash Costs Three Months Ended September 30, 2020 (In millions) By-Product Co-Product Method Method Copper Gold Silver a Total Revenues, excluding adjustments $ 659 $ 659 $ 437 $ 24 $ 1,120 Site production and delivery, before net noncash and other costs shown below 376 221 147 8 376 Gold and silver credits (474) — — — — Treatment charges 58 34 23 1 58 Export duties 24 14 9 1 24 Royalty on metals 45 26 18 1 45 Net cash costs 29 295 197 11 503 DD&A 150 88 59 3 150 Noncash and other costs, net 24 b 14 9 1 24 Total costs 203 397 265 15 677 Other revenue adjustments, primarily for pricing on prior period open sales 28 28 11 2 41 PT Smelting intercompany loss (17) (10) (7) — (17) Gross profit $ 467 $ 280 $ 176 $ 11 $ 467 Copper sales (millions of recoverable pounds) 219 219 Gold sales (thousands of recoverable ounces) 230 Gross profit per pound of copper/per ounce of gold: Revenues, excluding adjustments $ 3.00 $ 3.00 $ 1,902 Site production and delivery, before net noncash and other costs shown below 1.71 1.01 639 Gold and silver credits (2.16) — — Treatment charges 0.26 0.16 98 Export duties 0.11 0.06 40 Royalty on metals 0.21 0.12 79 Unit net cash costs 0.13 1.35 856 DD&A 0.68 0.40 256 Noncash and other costs, net 0.11 b 0.06 40 Total unit costs 0.92 1.81 1,152 Other revenue adjustments, primarily for pricing on prior period open sales 0.13 0.13 49 PT Smelting intercompany loss (0.08) (0.05) (31) Gross profit per pound/ounce $ 2.13 $ 1.27 $ 768 Reconciliation to Amounts Reported Production Revenues and Delivery DD&A Totals presented above $ 1,120 $ 376 $ 150 Treatment charges (58) — — Export duties (24) — — Royalty on metals (53) (8) — Noncash and other costs, net — 24 — Other revenue adjustments, primarily for pricing on prior period open sales 41 — — PT Smelting intercompany loss — 17 — Indonesia mining 1,026 409 150 Other mining c 3,902 3,090 223 Corporate, other & eliminations (1,077) (1,034) 21 As reported in our consolidated financial statements $ 3,851 $ 2,465 $ 394 a. Includes silver sales of 1.0 million ounces ($24.29 per ounce average realized price). b. Includes COVID-19 related costs (including one-time incremental employee benefits and health and safety costs) totaling $10 million ($0.05 per pound of copper). 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 Three Months Ended September 30, 2019 (In millions) By-Product Co-Product Method Method Copper Gold Silver a Total Revenues, excluding adjustments $ 360 $ 360 $ 356 $ 8 $ 724 Site production and delivery, before net noncash and other costs shown below 338 168 166 4 338 Gold and silver credits (367) — — — — Treatment charges 35 17 17 1 35 Export duties 8 4 4 — 8 Royalty on metals 23 12 11 — 23 Net cash costs 37 201 198 5 404 DD&A 77 38 38 1 77 Noncash and other costs, net 192 b 95 95 2 192 Total costs 306 334 331 8 673 Other revenue adjustments, primarily for pricing on prior period open sales (8) (8) 2 1 (5) PT Smelting intercompany loss (34) (17) (17) — (34) Gross profit $ 12 $ 1 $ 10 $ 1 $ 12 Copper sales (millions of recoverable pounds) 139 139 Gold sales (thousands of recoverable ounces) 239 Gross profit per pound of copper/per ounce of gold: Revenues, excluding adjustments $ 2.59 $ 2.59 $ 1,487 Site production and delivery, before net noncash and other costs shown below 2.44 1.21 695 Gold and silver credits (2.64) — — Treatment charges 0.25 0.13 72 Export duties 0.05 0.03 15 Royalty on metals 0.17 0.08 46 Unit net cash costs 0.27 1.45 828 DD&A 0.55 0.27 158 Noncash and other costs, net 1.39 b 0.69 395 Total unit costs 2.21 2.41 1,381 Other revenue adjustments, primarily for pricing on prior period open sales (0.05) (0.05) 8 PT Smelting intercompany loss (0.24) (0.12) (69) Gross profit per pound/ounce $ 0.09 $ 0.01 $ 45 Reconciliation to Amounts Reported Production Revenues and Delivery DD&A Totals presented above $ 724 $ 338 $ 77 Treatment charges (35) — — Export duties (8) — — Royalty on metals (23) — — Noncash and other costs, net (165) 27 — Other revenue adjustments, primarily for pricing on prior period open sales (5) — — PT Smelting intercompany loss — 34 — Indonesia mining 488 399 77 Other mining c 3,465 3,041 225 Corporate, other & eliminations (800) (770) 20 As reported in our consolidated financial statements $ 3,153 $ 2,670 $ 322 a. Includes silver sales of 0.5 million ounces ($17.30 per ounce average realized price). b. Includes charges totaling $166 million ($1.19 per pound of copper) primarily associated with an unfavorable Indonesia Supreme Court ruling related to certain disputed PT-FI export duties. c. Represents the combined total for our other segments, as presented in Note 9. 62 Table of Contents Indonesia Mining Product Revenues, Production Costs and Unit Net Cash Costs Nine Months Ended September 30, 2020 (In millions) By-Product Co-Product Method Method Copper Gold Silver a Total Revenues, excluding adjustments $ 1,447 $ 1,447 $ 994 $ 48 $ 2,489 Site production and delivery, before net noncash and other costs shown below 1,062 617 424 21 1,062 Gold and silver credits (1,046) — — — — Treatment charges 143 83 57 3 143 Export duties 43 25 17 1 43 Royalty on metals 92 53 38 1 92 Net cash costs 294 778 536 26 1,340 DD&A 375 218 150 7 375 Noncash and other costs, net 56 b 33 22 1 56 Total costs 725 1,029 708 34 1,771 Other revenue adjustments, primarily for pricing on prior period open sales (20) (20) 4 — (16) PT Smelting intercompany loss (18) (11) (7) — (18) Gross profit $ 684 $ 387 $ 283 $ 14 $ 684 Copper sales (millions of recoverable pounds) 518 518 Gold sales (thousands of recoverable ounces) 549 Gross profit per pound of copper/per ounce of gold: Revenues, excluding adjustments $ 2.79 $ 2.79 $ 1,810 Site production and delivery, before net noncash and other costs shown below 2.05 1.19 773 Gold and silver credits (2.02) — — Treatment charges 0.28 0.16 104 Export duties 0.08 0.05 31 Royalty on metals 0.18 0.10 68 Unit net cash costs 0.57 1.50 976 DD&A 0.72 0.42 273 Noncash and other costs, net 0.11 b 0.07 41 Total unit costs 1.40 1.99 1,290 Other revenue adjustments, primarily for pricing on prior period open sales (0.03) (0.03) 8 PT Smelting intercompany loss (0.04) (0.02) (13) Gross profit per pound/ounce $ 1.32 $ 0.75 $ 515 Reconciliation to Amounts Reported Production Revenues and Delivery DD&A Totals presented above $ 2,489 $ 1,062 $ 375 Treatment charges (143) — — Export duties (43) — — Royalty on metals (98) (6) — Noncash and other costs, net — 56 — Other revenue adjustments, primarily for pricing on prior period open sales (16) — — PT Smelting intercompany loss — 18 — Indonesia mining 2,189 1,130 375 Other mining c 10,288 8,950 667 Corporate, other & eliminations (2,774) (2,676) 51 As reported in our consolidated financial statements $ 9,703 $ 7,404 $ 1,093 a. Includes silver sales of 2.3 million ounces ($20.73 per ounce average realized price). b. Includes COVID-19 related costs (including one-time incremental employee benefits and health and safety costs) of $14 million ($0.03 per pound of copper). c. Represents the combined total for our segments, as presented in Note 9. 63 Table of Contents Indonesia Mining Product Revenues, Production Costs and Unit Net Cash Costs Nine Months Ended September 30, 2019 (In millions) By-Product Co-Product Method Method Copper Gold Silver a Total Revenues, excluding adjustments $ 1,252 $ 1,252 $ 910 $ 26 $ 2,188 Site production and delivery, before net noncash and other costs shown below 1,393 797 580 16 1,393 Gold and silver credits (938) — — — — Treatment charges 125 72 52 1 125 Export duties 35 20 14 1 35 Royalty on metals 68 40 27 1 68 Net cash costs 683 929 673 19 1,621 DD&A 281 161 117 3 281 Noncash and other costs, net 240 b 137 100 3 240 Total costs 1,204 1,227 890 25 2,142 Other revenue adjustments, primarily for pricing on prior period open sales 18 18 2 — 20 PT Smelting intercompany loss (23) (13) (9) (1) (23) Gross profit $ 43 $ 30 $ 13 $ — $ 43 Copper sales (millions of recoverable pounds) 464 464 Gold sales (thousands of recoverable ounces) 659 Gross profit per pound of copper/per ounce of gold: Revenues, excluding adjustments $ 2.70 $ 2.70 $ 1,380 Site production and delivery, before net noncash and other costs shown below 3.00 1.72 879 Gold and silver credits (2.02) — — Treatment charges 0.27 0.15 79 Export duties 0.07 0.04 22 Royalty on metals 0.15 0.09 41 Unit net cash costs 1.47 2.00 1,021 DD&A 0.61 0.35 177 Noncash and other costs, net 0.52 b 0.29 152 Total unit costs 2.60 2.64 1,350 Other revenue adjustments, primarily for pricing on prior period open sales 0.04 0.04 3 PT Smelting intercompany loss (0.05) (0.03) (14) Gross profit per pound/ounce $ 0.09 $ 0.07 $ 19 Reconciliation to Amounts Reported Production Revenues and Delivery DD&A Totals presented above $ 2,188 $ 1,393 $ 281 Treatment charges (125) — — Export duties (35) — — Royalty on metals (68) — — Noncash and other costs, net (147) 93 — Other revenue adjustments, primarily for pricing on prior period open sales 20 — — PT Smelting intercompany loss — 23 — Indonesia mining 1,833 1,509 281 Other mining c 10,962 9,248 681 Corporate, other & eliminations (2,304) (2,158) 59 As reported in our consolidated financial statements $ 10,491 $ 8,599 $ 1,021 a. Includes silver sales of 1.6 million ounces ($15.58 per ounce average realized price). b. Includes charges totaling $166 million ($0.36 per pound of copper) primarily associated with an unfavorable Indonesia Supreme Court ruling related to certain disputed PT-FI export duties. Also includes charges totaling $28 million ($0.06 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. 64 Table of Contents Molybdenum Mines Product Revenues, Production Costs and Unit Net Cash Costs Three Months Ended September 30, (In millions) 2020 2019 Revenues, excluding adjustments a $ 47 $ 96 Site production and delivery, before net noncash and other costs shown below 47 83 Treatment charges and other 5 6 Net cash costs 52 89 DD&A 13 16 Metals inventory adjustments 3 1 Noncash and other costs, net 4 b 2 Total costs 72 108 Gross loss $ (25) $ (12) Molybdenum sales (millions of recoverable pounds) a 6 7 Gross loss per pound of molybdenum: Revenues, excluding adjustments a $ 8.83 $ 12.57 Site production and delivery, before net noncash and other costs shown below 8.88 10.79 Treatment charges and other 0.84 0.85 Unit net cash costs 9.72 11.64 DD&A 2.38 2.06 Metals inventory adjustments 0.67 0.17 Noncash and other costs, net 0.54 b 0.26 Total unit costs 13.31 14.13 Gross loss per pound $ (4.48) $ (1.56) Reconciliation to Amounts Reported Metals Production Inventory Three Months Ended September 30, 2020 Revenues and Delivery DD&A Adjustments Totals presented above $ 47 $ 47 $ 13 $ 3 Treatment charges and other (5) — — — Noncash and other costs, net — 4 — — Molybdenum mines 42 51 13 3 Other mining c 4,886 3,448 360 (2) Corporate, other & eliminations (1,077) (1,034) 21 8 As reported in our consolidated financial statements $ 3,851 $ 2,465 $ 394 $ 9 Three Months Ended September 30, 2019 Totals presented above $ 96 $ 83 $ 16 $ 1 Treatment charges and other (6) — — — Noncash and other costs, net — 2 — — Molybdenum mines 90 85 16 1 Other mining c 3,863 3,355 286 40 Corporate, other & eliminations (800) (770) 20 — As reported in our consolidated financial statements $ 3,153 $ 2,670 $ 322 $ 41 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 $0.3 million ($0.05 per pound of molybdenum) primarily for employee separation costs associated with our April 2020 revised operating plans. 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 Molybdenum Mines Product Revenues, Production Costs and Unit Net Cash Costs Nine Months Ended September 30, (In millions) 2020 2019 Revenues, excluding adjustments a $ 187 $ 311 Site production and delivery, before net noncash and other costs shown below 164 229 Treatment charges and other 16 21 Net cash costs 180 250 DD&A 44 50 Metals inventory adjustments 8 1 Noncash and other costs, net 14 b 5 Total costs 246 306 Gross (loss) profit $ (59) $ 5 Molybdenum sales (millions of recoverable pounds) a 19 24 Gross (loss) profit per pound of molybdenum: Revenues, excluding adjustments a $ 9.92 $ 12.61 Site production and delivery, before net noncash and other costs shown below 8.73 9.28 Treatment charges and other 0.85 0.85 Unit net cash costs 9.58 10.13 DD&A 2.31 2.05 Metals inventory adjustments 0.44 0.05 Noncash and other costs, net 0.72 b 0.19 Total unit costs 13.05 12.42 Gross (loss) profit per pound $ (3.13) $ 0.19 Reconciliation to Amounts Reported Metals Production Inventory Nine Months Ended September 30, 2020 Revenues and Delivery DD&A Adjustments Totals presented above $ 187 $ 164 $ 44 $ 8 Treatment charges and other (16) — — — Noncash and other costs, net — 14 — — Molybdenum mines 171 178 44 8 Other mining c 12,306 9,902 998 58 Corporate, other & eliminations (2,774) (2,676) 51 26 As reported in our consolidated financial statements $ 9,703 $ 7,404 $ 1,093 $ 92 Nine Months Ended September 30, 2019 Totals presented above $ 311 $ 229 $ 50 $ 1 Treatment charges and other (21) — — — Noncash and other costs, net — 5 — — Molybdenum mines 290 234 50 1 Other mining c 12,505 10,523 912 41 Corporate, other & eliminations (2,304) (2,158) 59 58 As reported in our consolidated financial statements $ 10,491 $ 8,599 $ 1,021 $ 100 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 $7 million ($0.36 per pound of molybdenum) primarily associated with our 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. 66 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 our 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 our subsidiary or our affiliate; (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 of our obligations under the revolving credit facility or any other senior debt or, in each case, any refinancing thereof; or (iii) the discharge of our obligations under the indentures in accordance with their terms. The following summarized financial data includes information regarding FCX, as issuer, FM O&G LLC, as guarantor, and all our other non-guarantor subsidiaries at September 30, 2020, and December 31, 2019, and for nine months ended September 30, 2020. FCX FM O&G LLC Non-guarantor Consolidated Issuer Guarantor Subsidiaries Eliminations FCX As of September 30, 2020 Current assets $ 11 $ 679 $ 8,077 $ (696) $ 8,071 Noncurrent assets 1,202 6 32,986 (1,166) 33,028 Current liabilities 107 26 3,680 (717) 3,096 Noncurrent liabilities 9,383 11,157 15,871 (15,970) 20,441 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 Nine Months Ended September 30, 2020 Revenues $ — $ 18 $ 9,685 $ — $ 9,703 Operating (loss) income (21) (29) 786 (8) 728 Net (loss) income (109) a (225) a (29) 370 7 a. Net loss equals net loss attributable to common stockholders because net loss attributable to noncontrolling interests is zero for issuer and guarantor. 67 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; business outlook; production and sales volumes; unit net cash costs; cash flows; capital expenditures; liquidity; operating costs; operating plans; our financial policy; cost savings; our expectations regarding our share of PT-FI's net income and future cash flows through 2022; PT-FI's development, financing, construction and completion of a new smelter in Indonesia; our aim to deliver responsibly produced copper and our Copper Mark ambitions and plans to validate all of our operating sites; 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, global economic conditions, 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 through December 31, 2021, unless we, at our option, revert to the previous covenant requirements, which would also eliminate the restriction on the declaration or payment of 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, changes in our credit rating; changes in our cash requirements, financial position, financing plans or investment plans; changes in general market, economic, tax, regulatory or industry conditions; 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 special mining license 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, including labor-related work stoppages; weather- and climate-related risks; environmental risks; litigation and potential settlement 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; our ability to comply with Copper Mark requirements and any changes to such requirements; and other factors described in more detail as described under the heading “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. 68 Table of Contents