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, 2020 (2020 Form 10-K), filed with the United States (U.S.) Securities and Exchange Commission (SEC). The results of operations reported and summarized below are not necessarily indicative of future operating results (refer to “Cautionary Statement” for further discussion). References to “Notes” are Notes included in our Notes to Consolidated Financial Statements (Unaudited). Throughout MD&A, all references to income or losses per share are on a diluted basis. OVERVIEW We are a leading international mining company with headquarters in Phoenix, Arizona. We operate large, long-lived, geographically diverse assets with significant proven and probable reserves of copper, gold and molybdenum. We are one of the world’s largest publicly traded copper producers. Our portfolio of assets includes the Grasberg minerals district in Indonesia, one of the world’s largest copper and gold deposits; and significant mining operations in North America and South America, including the large-scale Morenci minerals district in Arizona and the Cerro Verde operation in Peru. Our financial results for first-quarter 2021 reflect solid operational execution, building a strong foundation for near-term growth in volumes and cash flows and we have a favorable operational and market outlook. We believe that we have a high-quality portfolio of long-lived copper assets positioned to generate long-term value. The ramp-up of underground mining at PT Freeport Indonesia (PT-FI) is advancing on schedule and Cerro Verde's concentrator facilities exceeded planned milling rates, averaging 390,100 metric tons of ore per day. Our Lone Star copper leach project, which was successfully completed in the second half of 2020, is on track to achieve expected annual copper production of approximately 200 million pounds beginning in 2021. Refer to “Operations” for further discussion. Net income (loss) attributable to common stock totaled $718 million in first-quarter 2021 and $(491) million in first-quarter 2020. First-quarter 2021 results, compared with first-quarter 2020, primarily reflect higher copper prices and volumes, partly offset by a higher provision for income taxes. The first-quarter 2020 net loss included unfavorable metals inventory adjustments totaling $182 million . Refer to “Consolidated Results” for further discussion. At March 31, 2021, we had $4.6 billion in consolidated cash and cash equivalents and $9.8 billion in total debt, with no borrowings and $3.5 billion available under our revolving credit facility. In 2022, we have scheduled debt maturities associated with our 3.55% Senior Notes ($0.5 billion) and the Cerro Verde Term Loan ($0.5 billion). Refer to Note 5 and “Capital Resources and Liquidity” for further discussion. OUTLOOK We continue to view the long-term outlook for our business positively, supported by limitations on supplies of copper and by the requirements for copper in the world’s economy. Our financial results vary as a result of fluctuations in market prices primarily for copper, gold and, to a lesser extent, molybdenum, as well as other factors. World market prices for these commodities have fluctuated historically and are affected by numerous factors beyond our control. Refer to “Markets” below and “Risk Factors” in Part I, Item 1A. of our 2020 Form 10-K for further discussion. Because we cannot control the prices of our products, the key measures that management focuses on in operating our business are sales volumes, unit net cash costs, operating cash flows and capital expenditures. 22 Table of Contents Consolidated Sales Volumes Following are our projected consolidated sales volumes for the year 2021: Copper (millions of recoverable pounds): North America copper mines 1,465 South America mining 1,045 Indonesia mining 1,340 Total 3,850 Gold (millions of recoverable ounces) 1.3 Molybdenum (millions of recoverable pounds) 85 a a. Projected molybdenum sales include 25 million pounds produced by our Molybdenum mines and 60 million pounds produced by our North America and South America copper mines. Consolidated sales volumes in second-quarter 2021 are expected to approximate 975 million pounds of copper, 330 thousand ounces of gold and 21 million pounds of molybdenum. 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 2020 Form 10-K. Consolidated Unit Net Cash Costs Assuming average prices of $1,750 per ounce of gold and $11.00 per pound of molybdenum for the remainder of 2021 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 $1.33 per pound of copper for the year 2021 (including $1.42 per pound of copper in second-quarter 2021). The impact of price changes for the remainder of 2021 on consolidated unit net cash costs for the year 2021 would approximate $0.03 per pound of copper for each $100 per ounce change in the average price of gold and $0.02 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. 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 $4.00 per pound for copper, $1,750 per ounce for gold, and $11.00 per pound for molybdenum for the remainder of 2021, our consolidated operating cash flows are estimated to approximate $6.5 billion (net of $0.1 billion of working capital and other uses) for the year 2021. Estimated consolidated operating cash flows for the year 2021 also reflect an estimated income tax provision of $2.3 billion (refer to “Consolidated Results – Income Taxes” for further discussion of our projected income tax rate for the year 2021). The impact of price changes for the remainder of 2021 on operating cash flows would approximate $265 million for each $0.10 per pound change in the average price of copper, $70 million for each $100 per ounce change in the average price of gold and $90 million for each $2 per pound change in the average price of molybdenum. Consolidated Capital Expenditures Consolidated capital expenditures are expected to approximate $2.3 billion for the year 2021, including $1.4 billion for major projects, primarily associated with underground development activities in the Grasberg minerals district and exclude estimates associated with Indonesia smelter development. We expect capital expenditures for the development of a greenfield smelter in East Java, Indonesia to approximate $0.1 billion in 2021. PT-FI plans to finance the smelter development with debt which, pursuant to the shareholders agreement, would be shared 51 percent by PT Indonesia Asahan Aluminium (Persero) (PT Inalum, also known as MIND ID) and 49 percent by FCX. 23 Table of Contents MARKETS World prices for copper, gold and molybdenum can fluctuate significantly. During the period from January 2011 through March 2021, 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 (London) 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 $17.88 per pound in 2011. 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 2020 Form 10-K. This graph presents LME copper settlement prices and the combined reported stocks of copper at the LME, Commodity Exchange Inc., and the Shanghai Futures Exchange from January 2011 through March 2021. During first-quarter 2021, LME copper settlement prices ranged from a low of $3.52 per pound to a high of $4.36 per pound, averaged $3.86 per pound and settled at $4.01 per pound on March 31, 2021. Copper prices, which increased in 2020 as China’s economy began to recover from the COVID-19 pandemic, have continued to rise in 2021 on improved investor sentiment towards commodities, supported by forecasts for a strong post-pandemic recovery and copper’s prominent role in the clean energy transition. The LME copper settlement price was $4.51 per pound on April 30, 2021. Expectations for longer-term copper demand growth remain in place. We expect future demand to be supported by the global transition to renewable energy and other carbon-reduction initiatives, and continued urbanization in developing countries. The limited number of approved, large-scale projects scheduled, the long lead times required to permit and build new mines and declining ore grades at existing operations highlight the supply challenges for copper. 24 Table of Contents This graph presents London PM gold prices from January 2011 through March 2021. During first-quarter 2021, London PM gold prices ranged from a low of $1,684 per ounce to a high of $1,943 per ounce, averaged $1,794 per ounce, and closed at $1,691 per ounce on March 31, 2021. While the global economic recovery has put downward pressure on gold prices, many analysts expect gold prices to remain supported by the effects of elevated debt levels associated with large pandemic-related stimulus efforts, historically low U.S. interest rates and a weaker U.S. dollar. The London PM gold price was $1,767 per ounce on April 30, 2021. 25 Table of Contents This graph presents the Metals Week Molybdenum Dealer Oxide weekly average price from January 2011 through March 2021. During first-quarter 2021, the weekly average price of molybdenum ranged from a low of $10.09 per pound to a high of $12.46 per pound, averaged $11.33 per pound, and was $11.05 per pound on March 31, 2021. Molybdenum prices have reacted to supply concerns as mines in both Chile and Peru reported lower production and logistics challenges continued globally. The Metals Week Molybdenum Dealer Oxide weekly average price was $11.44 per pound on April 30, 2021. 26 Table of Contents CONSOLIDATED RESULTS Three Months Ended March 31, 2021 2020 SUMMARY FINANCIAL DATA (in millions, except per share amounts) Revenues a,b $ 4,850 $ 2,798 Operating income (loss) a,c,d $ 1,532 e $ (473) f Net income (loss) attributable to common stock g $ 718 h $ (491) i,j Diluted net income (loss) per share of common stock $ 0.48 $ (0.34) Diluted weighted-average common shares outstanding 1,477 1,452 Operating cash flows k $ 1,075 $ (38) Capital expenditures $ 370 $ 610 At March 31: Cash and cash equivalents $ 4,580 $ 1,602 Total debt, including current portion $ 9,809 $ 10,074 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 $146 million ($57 million to net income attributable to common stock or $0.04 per share) in first-quarter 2021 and $(107) million ($(45) million to net loss attributable to common stock or $(0.03) per share) in first-quarter 2020 (refer to Note 6). c. Includes net unfavorable metals inventory adjustments totaling $1 million ($1 million to net income attributable to common stock or less than $0.01 per share) in first-quarter 2021 and $222 million ($182 million to net loss attributable to common stock or $0.12 per share) in first-quarter 2020. d. Includes net credits (charges) associated with environmental obligations and related litigation reserves totaling $3 million ($3 million to net income attributable to common stock or less than $0.01 per share) in first-quarter 2021 and $(14) million ($(14) million to net loss attributable to common stock or $(0.01) per share) in first-quarter 2020. e. Includes net charges totaling $23 million ($20 million to net income attributable to common stock or $0.01 per share), primarily associated with employee separation charges, international tax matters and asset retirement obligation adjustments. f. Includes net losses on sales of assets totaling $11 million ($11 million to net loss attributable to common stock or $0.01 per share). g. 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. h. Includes net charges associated with contested matters at PT-FI totaling $20 million ($0.01 per share) associated with an administrative fine levied by the Indonesia government and historical tax audits. These charges, before income taxes and noncontrolling interests, were recorded to production and delivery ($13 million), interest expense, net ($4 million) and other income, net ($5 million). i. Includes after-tax net losses on early extinguishment of debt totaling $32 million ($0.02 per share). j. Includes net charges totaling $17 million ($0.01 per share), primarily associated with (i) COVID-19-related net charges of $9 million associated with idle facility costs at Cerro Verde and contract cancellation costs at El Abra, and (ii) other net charges of $8 million, primarily related to a change in a tax position at Cerro Verde and asset impairments. These charges, before income taxes and noncontrolling interests, were recorded to production and delivery ($25 million), depreciation, depletion and amortization ($8 million), interest expense, net ($7 million) and other income, net ($4 million). k. Working capital and other (uses) sources totaled $(336) million in first-quarter 2021 and $119 million in first-quarter 2020. 27 Table of Contents Three Months Ended March 31, 2021 2020 SUMMARY OPERATING DATA Copper (millions of recoverable pounds) Production 910 731 Sales, excluding purchases 825 729 Average realized price per pound $ 3.94 $ 2.43 Site production and delivery costs per pound a $ 1.86 $ 2.19 b Unit net cash costs per pound a $ 1.39 $ 1.90 Gold (thousands of recoverable ounces) Production 297 156 Sales, excluding purchases 258 144 Average realized price per ounce $ 1,713 $ 1,606 Molybdenum (millions of recoverable pounds) Production 20 19 Sales, excluding purchases 21 21 Average realized price per pound $ 11.62 $ 11.10 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 COVID-19 related costs of $0.03 per pound of copper, primarily associated with idle facility costs at Cerro Verde and contract cancellation costs at El Abra. Revenues Consolidated revenues totaled $4.9 billion in first-quarter 2021 and $2.8 billion in first-quarter 2020. 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 March 31 Consolidated revenues - 2020 period $ 2,798 Higher (lower) sales volumes: Copper 233 Gold 183 Molybdenum (6) Higher average realized prices: Copper 1,245 Gold 28 Molybdenum 11 Adjustments for prior period provisionally priced copper sales 253 Higher Atlantic Copper revenues 247 Lower revenues from purchased copper (17) Higher treatment charges (17) Higher royalties and export duties (68) Other, including intercompany eliminations (40) Consolidated revenues - 2021 period $ 4,850 Sales Volumes. Consolidated copper and gold sales volumes increased in first-quarter 2021, compared to first-quarter 2020, primarily reflecting continued progress of the ramp-up of underground mining at PT-FI, partly offset by timing of shipments. Refer to “Operations” for further discussion of sales volumes at our mining operations. Realized Prices. Our consolidated revenues can vary significantly as a result of fluctuations in the market prices of copper, gold and molybdenum. Average realized prices for first-quarter 2021, compared with first-quarter 2020, were 62 percent higher for copper, 7 percent higher for gold and 5 percent higher for molybdenum. 28 Table of Contents Average realized copper prices include net favorable (unfavorable) adjustments to current period provisionally priced copper sales totaling $61 million in first-quarter 2021 and $(131) million in first-quarter 2020. 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. Prior Period Provisionally Priced Copper Sales. Net favorable (unfavorable) adjustments to prior periods’ provisionally priced copper sales ( i.e. , provisionally priced sales at December 31, 2020 and 2019) recorded in consolidated revenues totaled $146 million in first-quarter 2021 and $(107) million in first-quarter 2020. Refer to Notes 6 and 9 for a summary of total adjustments to prior period and current period provisionally priced sales. At March 31, 2021, we had provisionally priced copper sales totaling 276 million pounds of copper (net of intercompany sales and noncontrolling interests) recorded at an average of $3.99 per pound, subject to final pricing over the next several months. We estimate that each $0.05 change in the price realized from the March 31, 2021, provisional price recorded would have an approximate $8 million effect on our 2021 net income attributable to common stock. The LME copper price settled at $4.51 per pound on April 30, 2021. Atlantic Copper Revenues. Atlantic Copper revenues totaled $687 million in first-quarter 2021, compared with $440 million in first-quarter 2020. Higher revenues in first-quarter 2021, compared with first-quarter 2020, primarily reflect higher copper prices. Purchased Copper. We purchase copper cathode primarily for processing by our Rod & Refining operations. The volumes of copper purchases vary depending on cathode production from our operations and totaled 53 million pounds in first-quarter 2021 and 88 million pounds in first-quarter 2020. Treatment Charges. Revenues from our concentrate sales are recorded net of treatment charges ( i.e., fees paid to smelters that are generally negotiated annually), which will vary with the sales volumes and the price of copper. Royalties and Export Duties. Royalties are primarily on PT-FI sales and vary with the volume of metal sold and the prices of copper and gold. PT-FI will continue to pay export duties until development progress for a greenfield smelter in Indonesia exceeds 50 percent. Refer to “Operations – Indonesia Mining” for further discussion of the current progress on a greenfield 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 $2.8 billion in first-quarter 2021 and $2.5 billion in first-quarter 2020. Higher consolidated production and delivery costs in first-quarter 2021 primarily reflect higher sales volumes. 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 $1.86 per pound of copper in first-quarter 2021 and $2.19 per pound of copper in first-quarter 2020. Consolidated site production and delivery costs per pound of copper for first-quarter 2020 exclude certain charges associated with the COVID-19 pandemic totaling $0.03 per pound of copper. Lower consolidated site production and delivery costs per pound in the 2021 periods, compared with the 2020 periods, primarily reflect higher sales volumes and lower mining costs. 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. 29 Table of Contents 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 $419 million in first-quarter 2021 and $341 million in first-quarter 2020. Higher DD&A in first-quarter 2021 primarily related 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 $1 million in first-quarter 2021 and $222 million in first-quarter 2020. Metals inventory adjustments in 2020 were related to volatility in copper and molybdenum prices associated with the COVID-19 pandemic. Interest Expense, Net Consolidated interest costs (before capitalization) totaled $160 million in first-quarter 2021 and $171 million in first-quarter 2020. Capitalized interest varies with the level of qualifying assets associated with our development projects and average interest rates on our borrowings, and totaled $15 million in first-quarter 2021 and $44 million in first-quarter 2020. The decrease in capitalized interest in first-quarter 2021, compared with first-quarter 2020, is primarily related to significant assets at PT-FI’s underground mines being placed in service. Refer to “Capital Resources and Liquidity - Investing Activities” for discussion of capital expenditures associated with our major development projects. Income Taxes Following is a summary of the approximate amounts used in the calculation of our consolidated income tax (provision) benefit (in millions, except percentages): Three Months Ended March 31, 2021 2020 Income (Loss) a Effective Tax Rate Income Tax (Provision) Benefit Income (Loss) a Effective Tax Rate Income Tax (Provision) Benefit U.S. b $ 185 — % $ — c $ (451) 1 % $ 4 d South America 493 39 % (194) (202) 39 % 78 Indonesia 757 42 % (315) (19) (63) % (12) e Eliminations and other (37) N/A 4 60 N/A (11) Rate adjustment f — N/A 62 — N/A 1 Consolidated FCX $ 1,398 32 % g $ (443) $ (612) 10 % g,h $ 60 a. Represents income (loss) before income taxes and equity in affiliated companies’ net (losses) 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 valuation allowance release on prior year unbenefited net operating losses. d. Includes a tax credit of $6 million associated with the removal of a valuation allowance on deferred tax assets. e. Includes a tax charge of $8 million ($7 million net of noncontrolling interest) associated with an unfavorable 2012 Indonesia Supreme Court ruling. f. In accordance with applicable accounting rules, we adjust our interim provision for income taxes equal to our consolidated tax rate. g. Our consolidated effective income tax rate is a function of the combined effective tax rates for the jurisdictions in which we operate. h. Our U.S. jurisdiction generated net losses in the first three months of 2020 that did not result in a realized tax benefit; applicable accounting rules required us to adjust our estimated annual effective tax rate to exclude the impact of U.S. net losses. Assuming achievement of current sales volume and cost estimates and average prices of $4.00 per pound for copper, $1,750 per ounce for gold and $11.00 per pound for molybdenum for the remainder of 2021, we estimate our consolidated effective tax rate for the year 2021 would approximate 32 percent. Changes in projected sales volumes and average prices during 2021 would incur tax impacts at estimated effective rates of 40 percent for Peru, 38 percent for Indonesia and 0 percent for the U.S. 30 Table of Contents OPERATIONS Responsible Production 2020 Annual Report on Sustainability. In April 2021, we published our 2020 Annual Report on Sustainability, which is available on our website at fcx.com. We have a long history of environmental, social and governance programs and are continuously striving to improve and embrace evolving stakeholder expectations. This report marks our 20th year of reporting on our sustainability progress and our first year reporting in alignment with the Sustainability Accounting Standards Board (SASB) Metals & Mining industry framework. We are committed to building upon our achievements in sustainability and seek to contribute positively to society by supplying the world with responsibly produced copper. The Copper Mark. In April 2021, the Morenci operations were awarded the Copper Mark - a new, robust assurance framework demonstrating the copper industry's responsible production practices and contribution to the United Nations Sustainable Development Goals. We now have six sites that have achieved the Copper Mark (the Morenci operations, Miami smelter and mine, and El Paso refinery in North America; Cerro Verde and El Abra mines in South America; and Atlantic Copper smelter and refinery in Spain). We have future plans to validate all of our copper producing sites against the Copper Mark requirement. 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 operating plans. We successfully completed the initial development of the Lone Star copper leach project in the second half of 2020, and we are on track to achieve expected annual copper production of approximately 200 million pounds beginning in 2021. We are advancing studies for potential near-term incremental oxide expansions and long-term development options for our large-scale sulfide resources at Lone Star. During first-quarter 2021, mining activities at the Chino mine were restarted at a rate of approximately 100 million pounds of copper per year (approximately 50 percent of capacity). We have substantial resources in the U.S., primarily associated with existing mining operations, and will continue to assess options for further growth. 31 Table of Contents Operating Data. Following is summary consolidated operating data for the North America copper mines: Three Months Ended March 31, 2021 2020 Operating Data, Net of Joint Venture Interests Copper (millions of recoverable pounds) Production 353 346 Sales, excluding purchases 308 355 Average realized price per pound $ 3.88 $ 2.56 Molybdenum (millions of recoverable pounds) Production a 8 8 100% Operating Data Leach operations Leach ore placed in stockpiles (metric tons per day) 705,100 728,100 Average copper ore grade (percent) 0.28 0.27 Copper production (millions of recoverable pounds) 262 235 Mill operations Ore milled (metric tons per day) 268,000 333,400 Average ore grade (percent): Copper 0.37 0.32 Molybdenum 0.03 0.02 Copper recovery rate (percent) 78.7 87.0 Copper production (millions of recoverable pounds) 151 178 a. Refer to “Consolidated Results” for our consolidated molybdenum sales volumes, which include sales of molybdenum produced at the North America copper mines. Our consolidated production volumes from North America in first-quarter 2021 approximated first-quarter 2020. Consolidated copper sales volumes of 308 million pounds in first-quarter 2021 were lower than first-quarter 2020 copper sales volumes of 355 million pounds, primarily reflecting the timing of shipments. North America copper sales are estimated to approximate 1.5 billion pounds for the year 2021 compared to 1.4 billion pounds for the year 2020. 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. generally accepted accounting principles (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. 32 Table of Contents Gross Profit (Loss) per Pound of Copper and Molybdenum The following table summarizes unit net cash costs and gross profit (loss) per pound at our North America copper mines. Refer to “Product Revenues and Production Costs” for an explanation of the “by-product” and “co-product” methods and a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in our consolidated financial statements. Three Months Ended March 31, 2021 2020 By- Product Method Co-Product Method By- Product Method Co-Product Method Copper Molyb- denum a Copper Molyb- denum a Revenues, excluding adjustments $ 3.88 $ 3.88 $ 10.49 $ 2.56 $ 2.56 $ 9.69 Site production and delivery, before net noncash and other costs shown below 2.04 1.89 6.67 2.15 1.97 8.93 By-product credits (0.30) — — (0.22) — — Treatment charges 0.11 0.10 — 0.11 0.10 — Unit net cash costs 1.85 1.99 6.67 2.04 2.07 8.93 DD&A 0.26 0.24 0.46 0.26 0.24 0.73 Metals inventory adjustments — — — 0.41 0.40 — Noncash and other costs, net 0.13 0.13 0.06 0.10 0.09 0.23 Total unit costs 2.24 2.36 7.19 2.81 2.80 9.89 Revenue adjustments, primarily for pricing on prior period open sales 0.02 0.02 — (0.06) (0.06) — Gross profit (loss) per pound $ 1.66 $ 1.54 $ 3.30 $ (0.31) $ (0.30) $ (0.20) Copper sales (millions of recoverable pounds) 308 308 354 354 Molybdenum sales (millions of recoverable pounds) a 8 8 a. Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing. Our North America copper mines have varying cost structures because of differences in ore grades and characteristics, processing costs, by-product credits and other factors. Average unit net cash costs (net of by-product credits) for the North America copper mines of $1.85 per pound of copper in first-quarter 2021 were lower than unit net cash costs of $2.04 per pound in first-quarter 2020, primarily reflecting lower mining costs and higher by-product credits, partly offset by lower sales volumes. 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 $1.92 per pound of copper for the year 2021, based on achievement of current sales volume and cost estimates and assuming an average molybdenum price of $11.00 per pound for the remainder of 2021. North America’s average unit net cash costs for the year 2021 would change by approximately $0.04 per pound for each $2 per pound change in the average price of molybdenum for the remainder of 2021. 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. During first-quarter 2021, Cerro Verde's concentrator facilities exceeded planned milling rates and averaged 390,100 metric tons of ore per day. Operating plan assumptions, which reflect strict COVID-19 restrictions and protocols, include an estimated milling rate of 360,000 metric tons of ore per day for the remainder of 2021, with plans to return to pre-COVID-19 pandemic levels of approximately 400,000 metric tons of ore per day in 2022. 33 Table of Contents El Abra is implementing plans to increase operating rates during 2021 to pre-COVID-19 pandemic levels, subject to ongoing monitoring of public health conditions in Chile. Stacking rates at El Abra are expected to increase to over 100,000 metric tons of ore per day by mid-2022, resulting in incremental annual production of approximately 70 million pounds of copper. We continue to evaluate a large-scale expansion at El Abra to process additional sulfide material and to achieve higher copper recoveries. El Abra's large sulfide resource could potentially support a major mill project similar to facilities constructed at Cerro Verde in 2015. Technical and economic studies continue to be evaluated to determine the optimal scope and timing for the sulfide project in parallel with extending the life of the current leaching operation. Operating Data. Following is summary consolidated operating data for South America mining: Three Months Ended March 31, 2021 2020 Copper (millions of recoverable pounds) Production 259 245 Sales 259 247 Average realized price per pound $ 3.96 $ 2.33 Molybdenum (millions of recoverable pounds) Production a 5 4 Leach operations Leach ore placed in stockpiles (metric tons per day) 153,800 182,500 Average copper ore grade (percent) 0.36 0.37 Copper production (millions of recoverable pounds) 61 63 Mill operations Ore milled (metric tons per day) 390,100 349,600 b Average ore grade (percent): Copper 0.31 0.35 Molybdenum 0.01 0.01 Copper recovery rate (percent) 87.6 78.4 Copper production (millions of recoverable pounds) 198 182 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 impacted as a result of the Peruvian government's issuance of a Supreme Decree and declaration of a National Emergency in mid-March 2020 associated with its efforts to contain the outbreak of COVID-19. Our consolidated copper sales volumes from South America of 259 million pounds in first-quarter 2021 were higher than first-quarter 2020 copper sales volumes of 247 million pounds, primarily reflecting higher milling rates at Cerro Verde. Copper sales from South America mining are expected to approximate 1.0 billion pounds for the year 2021, consistent with the year 2020. 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. 34 Table of Contents Gross Profit (Loss) per Pound of Copper The following table summarizes unit net cash costs and gross profit (loss) per pound of copper at our South America mining operations. Unit net cash costs per pound of copper are reflected under the by-product and co-product methods as the South America mining operations also had sales of molybdenum and silver. Refer to “Product Revenues and Production Costs” for an explanation of the “by-product” and “co-product” methods and a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in our consolidated financial statements. Three Months Ended March 31, 2021 2020 By-Product Method Co-Product Method By-Product Method Co-Product Method Revenues, excluding adjustments $ 3.96 $ 3.96 $ 2.33 $ 2.33 Site production and delivery, before net noncash and other costs shown below 2.01 1.90 2.00 1.85 By-product credits (0.21) — (0.17) — Treatment charges 0.13 0.13 0.16 0.16 Royalty on metals 0.01 0.01 0.01 0.01 Unit net cash costs 1.94 2.04 2.00 2.02 DD&A 0.39 0.37 0.44 0.40 Metals inventory adjustments — — 0.24 0.24 Noncash and other costs, net 0.04 0.03 0.12 a 0.11 Total unit costs 2.37 2.44 2.80 2.77 Revenue adjustments, primarily for pricing on prior period open sales 0.32 0.32 (0.30) (0.30) Gross profit (loss) per pound $ 1.91 $ 1.84 $ (0.77) $ (0.74) Copper sales (millions of recoverable pounds) 259 259 247 247 a. Includes COVID-19 related costs of $0.08 per pound of copper, primarily associated with idle facility costs at Cerro Verde and contract cancellation costs at El Abra. 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 of $1.94 per pound of copper in first-quarter 2021 were lower than unit net cash costs of $2.00 per pound in first-quarter 2020, primarily reflecting higher sales volumes and by-product credits and lower mining costs, partly offset by higher profit sharing costs. 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 $1.94 per pound of copper for the year 2021, based on current sales volume and cost estimates and assuming an average price of $11.00 per pound of molybdenum for the remainder of 2021. 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 2020 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 first-quarter 2021, 55 percent of PT-FI’s concentrate production was sold to PT Smelting. 35 Table of Contents Operating and Development Activities. The ramp-up of underground production at the Grasberg minerals district in Indonesia continues to advance on schedule. First-quarter 2021 highlights include: • Production approximated 75 percent of the projected ultimate annualized level. • A total of 50 new drawbells were constructed at the Grasberg Block Cave and Deep Mill Level Zone (DMLZ) underground mines, bringing cumulative open drawbells to over 420. • Combined average production from the Grasberg Block Cave and DMLZ underground mines approximated 98,500 metric tons of ore per day. 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 attractive unit net cash cost, providing significant margins and cash flows. PT-FI expects production for the year 2021 to approximate 1.3 billion pounds of copper and 1.3 million ounces of gold, which is nearly double 2020 levels. PT-FI's estimated annual capital spending on underground mine development projects is expected to average approximately $0.9 billion per year for the two-year period 2021 through 2022, net of scheduled contributions from PT Inalum. In accordance with applicable accounting guidance, aggregate costs (before scheduled contributions from PT Inalum), which are expected to average $1.1 billion per year for the two-year period 2021 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. Additional Indonesia Smelter Capacity. In connection with PT-FI’s 2018 agreement with the Indonesia government associated with the extension of its long-term mining rights, PT-FI committed to construct new domestic smelting capacity totaling 2 million metric tons of concentrate per year by December 2023. Prior to the COVID-19 pandemic, PT-FI selected a site for a greenfield smelter in East Java and initiated ground preparation and commenced engineering and commercial negotiations. During 2020, PT-FI notified the Indonesia government of schedule delays resulting from the COVID-19 pandemic and continues to discuss with the government a revised schedule for the greenfield smelter project at East Java. On January 7, 2021, the Indonesia government levied an administrative fine of $149 million on PT-FI for failing to achieve physical development progress on the greenfield smelter as of July 31, 2020. PT-FI does not think the fine is warranted and is continuing to discuss this matter with the Indonesia government as well as provide additional documentation to support its position on the cause of delays in development progress for the greenfield smelter project. During the first quarter of 2021, PT-FI recorded a $13 million charge for a potential settlement of the administrative fine, which is expected to include a revised construction schedule for the greenfield smelter. The final settlement could differ from the amount recorded in first-quarter 2021. Refer to Note 8 for further discussion. In addition, PT-FI has explored alternatives to the greenfield smelter and has advanced discussions with the other shareholders of the existing Indonesia smelter (PT Smelting) regarding an expansion to increase smelter concentrate treatment capacity by approximately 30 percent (300,000 metric tons of concentrate per year). This additional capacity provided by the PT Smelting expansion is expected to reduce the commitment to additional smelter capacity in Indonesia from 2 million metric tons of concentrate per year to 1.7 million metric tons. Commercial and financial arrangements for the PT Smelting expansion are being advanced and engineering is in progress. The current estimate for the cost of the expansion, which would be funded by PT-FI, approximates $250 million. We currently expect the expansion of PT Smelting to be completed by the end of 2023. As part of its exploration of alternatives to the greenfield smelter at East Java, PT-FI has also engaged in discussions with a third party to develop the greenfield smelter capacity at an alternate location in Indonesia to fulfill its remaining smelter commitment. To date, commercial discussions have not resulted in a mutually acceptable agreement. In the interim, PT-FI is continuing planning for the development of a greenfield smelter and related refinery in East Java with a capacity to process approximately 1.7 million metric tons of concentrate per year. The estimated capital cost associated with this project approximates $3 billion. Under this option, PT-FI would finance development of the greenfield smelter with debt which, pursuant to the shareholders agreement, would be shared 51 percent by PT Inalum and 49 percent by us. Construction of the greenfield smelter capacity would result in the elimination of export duties, providing an offset to the economic cost associated with such smelter development. 36 Table of Contents Operating Data. Following is summary consolidated operating data for Indonesia mining: Three Months Ended March 31, 2021 2020 Operating Data Copper (millions of recoverable pounds) Production 298 140 Sales 258 127 Average realized price per pound $ 4.00 $ 2.28 Gold (thousands of recoverable ounces) Production 294 152 Sales 256 139 Average realized price per ounce $ 1,713 $ 1,606 Operating Data Ore extracted and milled (metric tons per day): Grasberg Block Cave underground mine a 51,800 19,000 DMLZ underground mine a 46,700 18,500 DOZ underground mine 18,600 20,200 Big Gossan underground mine 6,800 6,800 Grasberg open pit — 7,500 b Total 124,100 c 72,000 Average ore grades: Copper (percent) 1.41 1.15 Gold (grams per metric ton) 1.08 0.99 Recovery rates (percent): Copper 91.3 91.8 Gold 78.9 76.7 a. Reflects ore extracted, including ore from development activities that result in metal production. b. Represents ore from the Grasberg open-pit stockpiles. c. Does not foot because of rounding. Our consolidated sales from PT-FI of 258 million pounds of copper and 256 thousand ounces of gold in first-quarter 2021 were higher than first-quarter 2020 consolidated sales of 127 million pounds of copper and 139 thousand ounces of gold, primarily reflecting higher mining rates and ore grades. Consolidated sales volumes from PT-FI are expected to approximate 1.34 billion pounds of copper and 1.3 million ounces of gold in 2021, compared with 0.8 billion pounds of copper and 0.8 million ounces of gold in 2020. 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. 37 Table of Contents Gross Profit (Loss) per Pound of Copper and per Ounce of Gold The following table summarizes the unit net cash costs and gross profit (loss) per pound of copper and per ounce of gold at our Indonesia mining operations. Refer to “Product Revenues and Production Costs” for an explanation of “by-product” and “co-product” methods and a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in our consolidated financial statements. Three Months Ended March 31, 2021 2020 By-Product Method Co-Product Method By-Product Method Co-Product Method Copper Gold Copper Gold Revenues, excluding adjustments $ 4.00 $ 4.00 $ 1,713 $ 2.28 $ 2.28 $ 1,606 Site production and delivery, before net noncash and other (credits) costs shown below 1.48 1.02 438 2.68 1.49 1,052 Gold and silver credits (1.79) — — (1.85) — — Treatment charges 0.25 0.17 74 0.30 0.17 118 Export duties 0.11 0.08 33 0.03 0.02 11 Royalty on metals 0.24 0.16 71 0.15 0.09 50 Unit net cash costs 0.29 1.43 616 1.31 1.77 1,231 DD&A 0.77 0.53 228 0.79 0.44 310 Noncash and other (credits) costs, net (0.03) a (0.02) (10) 0.21 0.12 82 Total unit costs 1.03 1.94 834 2.31 2.33 1,623 Revenue adjustments, primarily for pricing on prior period open sales 0.25 0.25 (19) (0.16) (0.16) 33 PT Smelting intercompany (loss) profit (0.20) (0.14) (56) 0.20 0.11 77 Gross profit (loss) per pound/ounce $ 3.02 $ 2.17 $ 804 $ 0.01 $ (0.10) $ 93 Copper sales (millions of recoverable pounds) 258 258 127 127 Gold sales (thousands of recoverable ounces) 256 139 a. Primarily includes credits of $0.12 per pound of copper associated with adjustments to prior year treatment and refining costs and charges of $0.05 per pound of copper associated with a potential settlement of an administrative fine levied by the Indonesia government. 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 $0.29 per pound of copper in first-quarter 2021 were significantly lower than unit net cash costs of $1.31 per pound in first-quarter 2020, primarily reflecting higher sales volumes. Treatment charges vary with the volume of metals sold and the price of copper, and royalties vary with the volume of metals sold and the prices of copper and gold. PT-FI’s export duties totaled $29 million in first-quarter 2021 and $4 million in first-quarter 2020. PT-FI will continue to pay export duties until development progress for the greenfield smelter in Indonesia exceeds 50 percent. PT-FI’s royalties totaled $61 million in first-quarter 2021 and $19 million in first-quarter 2020. The increase in export duties and royalties for first-quarter 2021, compared with first-quarter 2020, primarily reflects higher sales volumes and metals prices. 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 $0.77 per pound in first-quarter 2021, compared with $0.79 per pound in first-quarter 2020. The decrease in the rate per pound of copper primarily reflects the ramp up of underground mining, which resulted in significantly higher copper production and sales volumes, partly offset by increased underground development assets placed into service. Revenue adjustments primarily result from changes in prices on provisionally priced copper sales recognized in prior periods. PT Smelting intercompany (loss) profit represents the change in the deferral of 25 percent of PT-FI’s profit on sales to PT Smelting. Refer to “Smelting and Refining” below for further discussion. 38 Table of Contents Assuming an average gold price of $1,750 per ounce for the remainder of 2021 and achievement of current sales volume and cost estimates, unit net cash costs (including gold and silver credits) for PT-FI are expected to approximate $0.21 per pound of copper for the year 2021. PT-FI's unit net cash costs for the year 2021 would change by approximately $0.08 per pound for each $100 per ounce change in the average price of gold for the remainder of 2021. PT-FI’s projected sales volumes and unit net cash costs for the year 2021 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 2021, PT-FI received a one-year extension of its export license through March 15, 2022. Export licenses are valid for one year periods, subject to review and approval by the Indonesia government every six months, depending on smelter construction progress. Refer to “Risk Factors” in our 2020 Form 10-K for a discussion of the ongoing discussions with the Indonesia government regarding a deferred schedule for the completion of the greenfield smelter project as well as other alternatives in light of the ongoing COVID-19 pandemic and volatile global economic conditions. 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 7 million pounds of molybdenum in both first-quarter 2021 and first-quarter 2020. 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 of $8.98 per pound of molybdenum in first-quarter 2021 were lower than average unit net cash costs of $10.03 per pound in first-quarter 2020, primarily reflecting higher ore grades and lower input and labor costs. Based on current sales volume and cost estimates, average unit net cash costs for the Molybdenum mines are expected to approximate $9.50 per pound of molybdenum for the year 2021. 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). PT-FI also has an ownership interest in a smelter and refinery in Gresik, Indonesia (PT Smelting). Effective April 30, 2021, PT-FI's ownership increased from 25 percent to 39.5 percent of PT Smelting (refer to Note 1). 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. During first-quarter 2021, we incurred charges totaling $68 million associated with a major maintenance turnaround at our Miami smelter. 39 Table of Contents Atlantic Copper smelts and refines copper concentrate and markets refined copper and precious metals in slimes. During first-quarter 2021, Atlantic Copper’s concentrate purchases included 27 percent from our copper mining operations and 73 percent from third parties. PT-FI’s contract with PT Smelting provides for PT-FI to supply 100 percent of the copper concentrate requirements (subject to a minimum or maximum treatment charge rate) necessary for PT Smelting to produce 205,000 metric tons of copper annually on a priority basis. PT-FI may also sell copper concentrate to PT Smelting at market rates for quantities in excess of 205,000 metric tons of copper annually. During first-quarter 2021, PT-FI supplied the substantial majority of PT Smelting’s concentrate requirements. In January 2021, PT Smelting received a six-month extension of its anode slimes export license through July 18, 2021. We defer recognizing profits on sales from our mining operations to Atlantic Copper and on PT-FI’s sales to PT Smelting (on 25 percent through April 30, 2021, and on 39.5 percent after April 30, 2021) until final sales to third parties occur. Changes in these deferrals attributable to variability in intercompany volumes resulted in net (reductions) additions to operating income (loss) totaling $(85) million ($(63) million to net income attributable to common stock) in first-quarter 2021 and $11 million ($7 million to net loss attributable to common stock) in first-quarter 2020. 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 $121 million at March 31, 2021. 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. We currently expect second-quarter 2021 results to reflect an increase in net deferred profits, totaling an approximate $60 million reduction to net income, mostly associated with an anticipated increase in sales to Atlantic Copper, which will be recognized in future periods as Atlantic Copper sells final refined products to third parties. 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. In addition to the strong execution of operation plans, our first-quarter 2021 results and cash flows benefited from higher copper prices. 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. 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. We believe that our cash generating capability and financial condition, together with our credit facility, will be adequate to meet our operating, investing and financing needs. Subject to future commodity prices for copper, gold, and molybdenum, we expect estimated consolidated operating cash flows of $6.5 billion in 2021, plus available cash, to be sufficient to fund our capital expenditures of $2.3 billion in 2021, as well as projected spending on the greenfield smelter in Indonesia and other cash requirements for the year, including common stock dividends and noncontrolling interest distributions. Refer to “Outlook” for further discussion of projected operating cash flows and capital expenditures for 2021. At March 31, 2021, we had $8.1 billion in liquidity, comprised of $4.6 billion in consolidated cash and $3.5 billion of availability under our revolving credit facility. In February 2021, our Board of Directors (Board) adopted a financial policy for the allocation of cash flows aligned with our strategic objectives of maintaining a strong balance sheet, increasing cash returns to shareholders and advancing opportunities for future growth. The policy includes a base dividend of $0.30 per share per year and a performance-based payout framework to be implemented following achievement of a net debt (total consolidated debt less total consolidated cash and cash equivalents) target in the range of $3 billion to $4 billion, excluding project debt for additional smelting capacity in Indonesia. Under the performance-based payout framework, up to 50 percent of available cash flows generated after planned capital spending and distributions to noncontrolling interests would be allocated to shareholder returns and the balance to debt reduction and investments in value enhancing growth projects, subject to the Board’s discretion. Available cash flows for such performance-based payout distributions in excess of the base dividend will be assessed at least annually (refer to “Cautionary Statement”). As of March 31, 2021, our consolidated debt of $9.8 billion less our consolidated cash of $4.6 billion resulted in net debt of $5.2 billion. Using current commodity prices for copper, gold and molybdenum, and based on current sales volumes and cost estimates, we currently expect to achieve a net debt target of $3 billion to $4 billion by the end of 40 Table of Contents 2021. 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. 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 March 31, 2021 (in billions): Cash at domestic companies $ 3.5 Cash at international operations 1.1 Total consolidated cash and cash equivalents 4.6 Noncontrolling interests’ share (0.5) Cash, net of noncontrolling interests’ share 4.1 Withholding taxes — a Net cash available $ 4.1 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 March 31, 2021, our consolidated debt totaled $9.8 billion, with a weighted-average interest rate of 4.6 percent. We had no borrowings outstanding and approximately $10 million in letters of credit issued under our revolving credit facility, resulting in availability of approximately $3.5 billion. In March 2021, we delivered a covenant reversion notice, which provided notification of our election to end the covenant increase period for our revolving credit facility. Refer to Note 5 for further discussion. Our 3.55% Senior Notes are due March 2022 ($524 million principal amount) and the Cerro Verde Term Loan matures in June 2022 ($525 million principal amount). We have no other senior note maturities until March 2023. Refer to Note 5 for further discussion of debt. For additional information regarding our debt arrangements, refer to Note 8 included in our 2020 Form 10-K. Operating Activities We reported consolidated cash provided by (used in) operating activities of $1.1 billion (net of $0.3 billion of working capital and other uses) in first-quarter 2021 and $(38) million (including $0.1 billion from working capital and other sources) in first-quarter 2020. Higher operating cash flows in first-quarter 2021 compared with first-quarter 2020, primarily reflect higher copper prices and sales volumes, partly offset by increases in accounts receivable and inventories. Investing Activities Capital Expenditures. Capital expenditures, including capitalized interest, totaled $0.4 billion in first-quarter 2021, including approximately $0.3 billion for major projects primarily associated with underground development activities in the Grasberg minerals district. Capital expenditures, including capitalized interest, totaled $0.6 billion in first-quarter 2020, including approximately $0.3 billion for major projects. Refer to “Outlook” for further discussion of projected capital expenditures for the year 2021. Proceeds from Sales of Assets. Proceeds from sales of assets totaled $5 million in first-quarter 2021 and $66 million in first-quarter 2020, primarily associated with the contingent consideration of $60 million from the 2016 sale of TF Holdings Limited. 41 Table of Contents Financing Activities Debt Transactions. Net borrowings of debt totaled $0.1 billion in first-quarter 2021 and $0.2 billion in first-quarter 2020. During first-quarter 2020, we completed the sale of $1.3 billion in senior notes and used the proceeds to purchase a portion of our senior notes due 2021 and 2022. On April 3, 2020, we used the remaining net proceeds to redeem the remainder of our senior notes due 2021. We recorded losses on early extinguishment of debt totaling $32 million in first-quarter 2020 related to these transactions. Refer to Note 5 for further discussion. Cash Dividends and Distributions Paid. We paid cash dividends on our common stock totaling $73 million in first-quarter 2020 associated with the $0.05 per share common stock cash dividend declared in December 2019. On March 24, 2021, we declared a quarterly cash dividend of $0.075 per share on our common stock, which was paid on May 3, 2021, to shareholders of record as of April 15, 2021. 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. Refer to “Cautionary Statement” and, for a discussion of the allocation of cash flows, the discussion above regarding the financial policy adopted by the Board in February 2021. There were no cash dividends or distributions paid to noncontrolling interests in the first quarters of 2021 or 2020. Cash dividends and distributions to noncontrolling interests vary based on the operating results and cash requirements of our consolidated subsidiaries. Contributions from Noncontrolling Interests. We received equity contributions totaling $41 million in first-quarter 2021 and $32 million in first-quarter 2020 from PT Inalum for their share of capital spending on PT-FI underground mine development projects and development of increased smelter capacity in Indonesia. Stock-based awards. Following an increase in our stock price, proceeds from exercised stock options totaled $106 million and payments for related employee taxes totaled $19 million during first-quarter 2021. See Note 10 in our 2020 Form 10-K for a discussion of stock-based awards. CONTRACTUAL OBLIGATIONS Refer to Note 5 for a discussion of the covenant reversion notice for our revolving credit facility that was delivered in March 2021. There have been no other material changes in our contractual obligations since December 31, 2020. Refer to Part II, Items 7. and 7A. in our 2020 Form 10-K, for information regarding our contractual obligations. CONTINGENCIES Environmental and Asset Retirement Obligations Our current and historical operating activities are subject to stringent laws and regulations governing the protection of the environment. We perform a comprehensive annual review of our environmental and asset retirement obligations and also review changes in facts and circumstances associated with these obligations at least quarterly. There have been no material changes to our environmental and asset retirement obligations since December 31, 2020. 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 2020 Form 10-K, for further information regarding our environmental and asset retirement obligations. 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, 2020. Refer to Note 12 and “Legal Proceedings” contained in Part I, Item 3. of our 2020 Form 10-K, as updated by Note 8, for further information regarding legal proceedings, environmental and other matters. 42 Table of Contents NEW ACCOUNTING STANDARDS There were no significant updates to previously reported accounting standards included in Note 1 of our 2020 Form 10-K. 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 (credits), 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 (credits). 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. 43 Table of Contents North America Copper Mines Product Revenues, Production Costs and Unit Net Cash Costs Three Months Ended March 31, 2021 (In millions) By-Product Co-Product Method Method Copper Molybdenum a Other b Total Revenues, excluding adjustments $ 1,193 $ 1,193 $ 88 $ 34 $ 1,315 Site production and delivery, before net noncash and other costs shown below 627 580 56 21 657 By-product credits (92) — — — — Treatment charges 33 31 — 2 33 Net cash costs 568 611 56 23 690 DD&A 80 74 4 2 80 Noncash and other costs, net 41 40 — 1 41 Total costs 689 725 60 26 811 Other revenue adjustments, primarily for pricing on prior period open sales 7 7 — — 7 Gross profit $ 511 $ 475 $ 28 $ 8 $ 511 Copper sales (millions of recoverable pounds) 308 308 Molybdenum sales (millions of recoverable pounds) a 8 Gross profit per pound of copper/molybdenum: Revenues, excluding adjustments $ 3.88 $ 3.88 $ 10.49 Site production and delivery, before net noncash and other costs shown below 2.04 1.89 6.67 By-product credits (0.30) — — Treatment charges 0.11 0.10 — Unit net cash costs 1.85 1.99 6.67 DD&A 0.26 0.24 0.46 Noncash and other costs, net 0.13 0.13 0.06 Total unit costs 2.24 2.36 7.19 Other revenue adjustments, primarily for pricing on prior period open sales 0.02 0.02 — Gross profit per pound $ 1.66 $ 1.54 $ 3.30 Reconciliation to Amounts Reported Revenues Production and Delivery DD&A Totals presented above $ 1,315 $ 657 $ 80 Treatment charges (5) 28 — Noncash and other costs, net — 41 — Other revenue adjustments, primarily for pricing on prior period open sales 7 — — Eliminations and other 21 23 — North America copper mines 1,338 749 80 Other mining c 4,645 3,040 323 Corporate, other & eliminations (1,133) (1,003) 16 As reported in our consolidated financial statements $ 4,850 $ 2,786 $ 419 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. 44 Table of Contents North America Copper Mines Product Revenues, Production Costs and Unit Net Cash Costs Three Months Ended March 31, 2020 (In millions) By-Product Co-Product Method Method Copper Molybdenum a Other b Total Revenues, excluding adjustments $ 906 $ 906 $ 77 $ 25 $ 1,008 Site production and delivery, before net noncash and other costs shown below 760 698 71 18 787 By-product credits (75) — — — — Treatment charges 38 36 — 2 38 Net cash costs 723 734 71 20 825 DD&A 92 84 6 2 92 Metals inventory adjustments 145 142 — 3 145 Noncash and other costs, net 34 29 2 3 34 Total costs 994 989 79 28 1,096 Other revenue adjustments, primarily for pricing on prior period open sales (22) (22) — — (22) Gross loss $ (110) $ (105) $ (2) $ (3) $ (110) Copper sales (millions of recoverable pounds) 354 354 Molybdenum sales (millions of recoverable pounds) a 8 Gross loss per pound of copper/molybdenum: Revenues, excluding adjustments $ 2.56 $ 2.56 $ 9.69 Site production and delivery, before net noncash and other costs shown below 2.15 1.97 8.93 By-product credits (0.22) — — Treatment charges 0.11 0.10 — Unit net cash costs 2.04 2.07 8.93 DD&A 0.26 0.24 0.73 Metals inventory adjustments 0.41 0.40 — Noncash and other costs, net 0.10 0.09 0.23 Total unit costs 2.81 2.80 9.89 Other revenue adjustments, primarily for pricing on prior period open sales (0.06) (0.06) — Gross loss per pound $ (0.31) $ (0.30) $ (0.20) Reconciliation to Amounts Reported Revenues Production and Delivery DD&A Metals Inventory Adjustments Totals presented above $ 1,008 $ 787 $ 92 $ 145 Treatment charges (8) 30 — — Noncash and other costs, net — 34 — — Other revenue adjustments, primarily for pricing on prior period open sales (22) — — — Eliminations and other 7 9 — — North America copper mines 985 860 92 145 Other mining c 2,591 2,473 234 64 Corporate, other & eliminations (778) (788) 15 13 As reported in our consolidated financial statements $ 2,798 $ 2,545 $ 341 $ 222 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. 45 Table of Contents South America Mining Product Revenues, Production Costs and Unit Net Cash Costs Three Months Ended March 31, 2021 (In millions) By-Product Co-Product Method Method Copper Other a Total Revenues, excluding adjustments $ 1,026 $ 1,026 $ 65 $ 1,091 Site production and delivery, before net noncash and other costs shown below 520 491 39 530 By-product credits (55) — — — Treatment charges 35 35 — 35 Royalty on metals 2 2 — 2 Net cash costs 502 528 39 567 DD&A 101 95 6 101 Noncash and other costs, net 10 9 1 10 Total costs 613 632 46 678 Other revenue adjustments, primarily for pricing on prior period open sales 83 83 — 83 Gross profit $ 496 $ 477 $ 19 $ 496 Copper sales (millions of recoverable pounds) 259 259 Gross profit per pound of copper: Revenues, excluding adjustments $ 3.96 $ 3.96 Site production and delivery, before net noncash and other costs shown below 2.01 1.90 By-product credits (0.21) — Treatment charges 0.13 0.13 Royalty on metals 0.01 0.01 Unit net cash costs 1.94 2.04 DD&A 0.39 0.37 Noncash and other costs, net 0.04 0.03 Total unit costs 2.37 2.44 Other revenue adjustments, primarily for pricing on prior period open sales 0.32 0.32 Gross profit per pound $ 1.91 $ 1.84 Reconciliation to Amounts Reported Production Revenues and Delivery DD&A Totals presented above $ 1,091 $ 530 $ 101 Treatment charges (35) — — Royalty on metals (2) — — Noncash and other costs, net — 10 — Other revenue adjustments, primarily for pricing on prior period open sales 83 — — Eliminations and other — (1) — South America mining 1,137 539 101 Other mining b 4,846 3,250 302 Corporate, other & eliminations (1,133) (1,003) 16 As reported in our consolidated financial statements $ 4,850 $ 2,786 $ 419 a. Includes silver sales of 0.9 million ounces ($26.13 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. 46 Table of Contents South America Mining Product Revenues, Production Costs and Unit Net Cash Costs Three Months Ended March 31, 2020 (In millions) By-Product Co-Product Method Method Copper Other a Total Revenues, excluding adjustments $ 575 $ 575 $ 54 $ 629 Site production and delivery, before net noncash and other costs shown below 494 457 49 506 By-product credits (42) — — — Treatment charges 40 40 — 40 Royalty on metals 1 1 — 1 Net cash costs 493 498 49 547 DD&A 107 98 9 107 Metals inventory adjustments 60 60 — 60 Noncash and other costs, net 30 b 28 2 30 Total costs 690 684 60 744 Other revenue adjustments, primarily for pricing on prior period open sales (75) (75) — (75) Gross loss $ (190) $ (184) $ (6) $ (190) Copper sales (millions of recoverable pounds) 247 247 Gross profit per pound of copper: Revenues, excluding adjustments $ 2.33 $ 2.33 Site production and delivery, before net noncash and other costs shown below 2.00 1.85 By-product credits (0.17) — Treatment charges 0.16 0.16 Royalty on metals 0.01 0.01 Unit net cash costs 2.00 2.02 DD&A 0.44 0.40 Metals inventory adjustments 0.24 0.24 Noncash and other costs, net 0.12 b 0.11 Total unit costs 2.80 2.77 Other revenue adjustments, primarily for pricing on prior period open sales (0.30) (0.30) Gross loss per pound $ (0.77) $ (0.74) Reconciliation to Amounts Reported Metals Production Inventory Revenues and Delivery DD&A Adjustments Totals presented above $ 629 $ 506 $ 107 $ 60 Treatment charges (40) — — — Royalty on metals (1) — — — Noncash and other costs, net — 30 — — Other revenue adjustments, primarily for pricing on prior period open sales (75) — — — Eliminations and other (1) (2) 1 — South America mining 512 534 108 60 Other mining c 3,064 2,799 218 149 Corporate, other & eliminations (778) (788) 15 13 As reported in our consolidated financial statements $ 2,798 $ 2,545 $ 341 $ 222 a. Includes silver sales of 0.9 million ounces ($17.71 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 COVID-19 related costs of $20 million ($0.08 per pound of copper), primarily associated with idle facility costs at Cerro Verde and contract cancellation costs at El Abra. c. Represents the combined total for our other segments, as presented in Note 9. 47 Table of Contents Indonesia Mining Product Revenues, Production Costs and Unit Net Cash Costs Three Months Ended March 31, 2021 (In millions) By-Product Co-Product Method Method Copper Gold Silver a Total Revenues, excluding adjustments $ 1,032 $ 1,032 $ 437 $ 30 $ 1,499 Site production and delivery, before net noncash and other credits shown below 383 264 112 7 383 Gold and silver credits (462) — — — — Treatment charges 65 45 19 1 65 Export duties 29 20 8 1 29 Royalty on metals 61 42 18 1 61 Net cash costs 76 371 157 10 538 DD&A 199 137 58 4 199 Noncash and other credits, net (8) b (6) (2) — (8) Total costs 267 502 213 14 729 Other revenue adjustments, primarily for pricing on prior period open sales 65 65 (5) — 60 PT Smelting intercompany loss (49) (34) (14) (1) (49) Gross profit $ 781 $ 561 $ 205 $ 15 $ 781 Copper sales (millions of recoverable pounds) 258 258 Gold sales (thousands of recoverable ounces) 256 Gross profit per pound of copper/per ounce of gold: Revenues, excluding adjustments $ 4.00 $ 4.00 $ 1,713 Site production and delivery, before net noncash and other credits shown below 1.48 1.02 438 Gold and silver credits (1.79) — — Treatment charges 0.25 0.17 74 Export duties 0.11 0.08 33 Royalty on metals 0.24 0.16 71 Unit net cash costs 0.29 1.43 616 DD&A 0.77 0.53 228 Noncash and other credits, net (0.03) b (0.02) (10) Total unit costs 1.03 1.94 834 Other revenue adjustments, primarily for pricing on prior period open sales 0.25 0.25 (19) PT Smelting intercompany loss (0.20) (0.14) (56) Gross profit per pound/ounce $ 3.02 $ 2.17 $ 804 Reconciliation to Amounts Reported Production Revenues and Delivery DD&A Totals presented above $ 1,499 $ 383 $ 199 Treatment charges (65) — — Export duties (29) — — Royalty on metals (61) — — Noncash and other credits, net 31 23 — Other revenue adjustments, primarily for pricing on prior period open sales 60 — — PT Smelting intercompany loss — 49 — Indonesia mining 1,435 455 199 Other mining c 4,548 3,334 204 Corporate, other & eliminations (1,133) (1,003) 16 As reported in our consolidated financial statements $ 4,850 $ 2,786 $ 419 a. Includes silver sales of 1.2 million ounces ($24.61 per ounce average realized price). b. Primarily includes credits of $31 million ($0.12 per pound of copper) associated with adjustments to prior year treatment and refining costs and charges of $13 million ($0.05 per pound of copper) associated with a potential settlement of an administrative fine levied by the Indonesia government. c. Represents the combined total for our other segments, as presented in Note 9. 48 Table of Contents Indonesia Mining Product Revenues, Production Costs and Unit Net Cash Costs Three Months Ended March 31, 2020 (In millions) By-Product Co-Product Method Method Copper Gold Silver a Total Revenues, excluding adjustments $ 290 $ 290 $ 223 $ 8 $ 521 Site production and delivery, before net noncash and other costs shown below 341 190 146 5 341 Gold and silver credits (236) — — — — Treatment charges 38 21 16 1 38 Export duties 4 2 2 — 4 Royalty on metals 19 12 7 — 19 Net cash costs 166 225 171 6 402 DD&A 101 56 43 2 101 Noncash and other costs, net 27 15 12 — 27 Total costs 294 296 226 8 530 Other revenue adjustments, primarily for pricing on prior period open sales (20) (20) 5 — (15) PT Smelting intercompany profit 25 14 11 — 25 Gross profit (loss) $ 1 $ (12) $ 13 $ — $ 1 Copper sales (millions of recoverable pounds) 127 127 Gold sales (thousands of recoverable ounces) 139 Gross profit (loss) per pound of copper/per ounce of gold: Revenues, excluding adjustments $ 2.28 $ 2.28 $ 1,606 Site production and delivery, before net noncash and other costs shown below 2.68 1.49 1,052 Gold and silver credits (1.85) — — Treatment charges 0.30 0.17 118 Export duties 0.03 0.02 11 Royalty on metals 0.15 0.09 50 Unit net cash costs 1.31 1.77 1,231 DD&A 0.79 0.44 310 Noncash and other costs, net 0.21 0.12 82 Total unit costs 2.31 2.33 1,623 Other revenue adjustments, primarily for pricing on prior period open sales (0.16) (0.16) 33 PT Smelting intercompany profit 0.20 0.11 77 Gross profit (loss) per pound/ounce $ 0.01 $ (0.10) $ 93 Reconciliation to Amounts Reported Production Revenues and Delivery DD&A Totals presented above $ 521 $ 341 $ 101 Treatment charges (38) — — Export duties (4) — — Royalty on metals (19) — — Noncash and other costs, net — 27 — Other revenue adjustments, primarily for pricing on prior period open sales (15) — — PT Smelting intercompany profit — (25) — Indonesia mining 445 343 101 Other mining b 3,131 2,990 225 Corporate, other & eliminations (778) (788) 15 As reported in our consolidated financial statements $ 2,798 $ 2,545 $ 341 a. Includes silver sales of 0.6 million ounces ($14.09 per ounce average realized price). b. Represents the combined total for our other segments, as presented in Note 9. 49 Table of Contents Molybdenum Mines Product Revenues, Production Costs and Unit Net Cash Costs Three Months Ended March 31, (In millions) 2021 2020 Revenues, excluding adjustments a $ 76 $ 77 Site production and delivery, before net noncash and other costs shown below 54 64 Treatment charges and other 6 6 Net cash costs 60 70 DD&A 15 16 Metals inventory adjustments 1 4 Noncash and other costs, net 3 2 Total costs 79 92 Gross loss $ (3) $ (15) Molybdenum sales (millions of recoverable pounds) a 7 7 Gross loss per pound of molybdenum: Revenues, excluding adjustments a $ 11.38 $ 10.97 Site production and delivery, before net noncash and other costs shown below 8.13 9.17 Treatment charges and other 0.85 0.86 Unit net cash costs 8.98 10.03 DD&A 2.23 2.29 Metals inventory adjustments 0.13 0.51 Noncash and other costs, net 0.42 0.30 Total unit costs 11.76 13.13 Gross loss per pound $ (0.38) $ (2.16) Reconciliation to Amounts Reported Metals Production Inventory Three Months Ended March 31, 2021 Revenues and Delivery DD&A Adjustments Totals presented above $ 76 $ 54 $ 15 $ 1 Treatment charges and other (6) — — — Noncash and other costs, net — 3 — — Molybdenum mines 70 57 15 1 Other mining b 5,913 3,732 388 — Corporate, other & eliminations (1,133) (1,003) 16 — As reported in our consolidated financial statements $ 4,850 $ 2,786 $ 419 $ 1 Three Months Ended March 31, 2020 Totals presented above $ 77 $ 64 $ 16 $ 4 Treatment charges and other (6) — — — Noncash and other costs, net — 2 — — Molybdenum mines 71 66 16 4 Other mining b 3,505 3,267 310 205 Corporate, other & eliminations (778) (788) 15 13 As reported in our consolidated financial statements $ 2,798 $ 2,545 $ 341 $ 222 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. 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. 50 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 March 31, 2021, and December 31, 2020, and for three months ended March 31, 2021. FCX FM O&G LLC Non-guarantor Consolidated Issuer Guarantor Subsidiaries Eliminations FCX As of March 31, 2021 Current assets $ 187 $ 681 $ 10,880 $ (892) $ 10,856 Noncurrent assets 273 6 32,756 (248) 32,787 Current liabilities 735 32 4,752 (908) 4,611 Noncurrent liabilities 8,960 11,283 14,467 (15,251) 19,459 As of December 31, 2020 Current assets $ 65 $ 697 $ 9,287 $ (746) $ 9,303 Noncurrent assets 785 6 32,806 (756) 32,841 Current liabilities 187 31 3,964 (765) 3,417 Noncurrent liabilities 9,433 11,208 15,075 (15,657) 20,059 Three Months Ended March 31, 2021 Revenues $ — $ 14 $ 4,836 $ — $ 4,850 Operating (loss) income (12) 4 1,540 — 1,532 Net income (loss) 718 a (45) a 955 (675) 953 a. Net income (loss) equals net income (loss) attributable to common stockholders because net income attributable to noncontrolling interests is zero for issuer and guarantor. 51 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; our expectations regarding PT-FI's ramp-up of underground mining activities and future cash flows through 2022; PT-FI's development, financing, construction and completion of new domestic smelting capacity in Indonesia totaling 2 million metric tons of concentrate per year by December 2023; our commitments to deliver responsibly produced copper, including plans to implement and validate all of our operating sites under specific frameworks; 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; mineralization and reserve estimates; execution of the settlement agreements associated with the Louisiana coastal erosion cases and talc-related litigation; descriptions of our objectives, strategies, plans, goals or targets, including our net debt target; 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. 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, 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 Indonesia government's extension of PT-FI's export license after March 15, 2022; 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 Indonesia government's approval of a deferred schedule for completion of new domestic smelting capacity 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 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 volatile commodity prices; reductions in liquidity and access to capital; our ability to comply with its responsible production commitments under specific frameworks and any changes to such frameworks; and other factors described in more detail under the heading “Risk Factors” contained in Part I, Item 1A. of our 2020 Form 10-K. Investors are cautioned that many of the assumptions upon which our forward-looking statements are based are likely to change after the date 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 undertake no obligation to update any forward-looking statements, which speak only as of the date made, notwithstanding any changes in our assumptions, changes in business plans, actual experience or other changes. This report on Form 10-Q also contains financial measures such as net debt and unit net cash costs per pound of copper and molybdenum, which are not recognized under U.S. GAAP. Net debt equals consolidated debt less consolidated cash. 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. 52 Table of Contents