What changed in this filing

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Item 1. Financial Statements

2021-08-05 compared with 2021-05-05 · 263 added, 93 removed, 536 unchanged (40% of the section changed)

43 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2021 2020 2021 2020

(In millions, except per share amounts)

8 unchanged sentences

Environmental obligations and shutdown costs

Net loss on sales of assets — 11

Net (gain) loss on sales of assets ( 3 ) — ( 3 ) 11

Total costs and expenses 3,681 2,733 6,999 6,004

2 unchanged sentences

Net loss on early extinguishment of debt

— ( 9 ) — ( 41 )

Other income, net 9 20 20 40

Income (loss) before income taxes and equity in affiliated companies’ net (losses) earnings 1,398 ( 612 )

(Provision for) benefit from income taxes ( 443 ) 60

Equity in affiliated companies’ net (losses) earnings ( 2 ) 3

Income (loss) before income taxes and equity in affiliated companies’ net earnings 1,928 217 3,326 ( 395 )

Provision for income taxes ( 603 ) ( 96 ) ( 1,046 ) ( 36 )

Equity in affiliated companies’ net earnings 6 3 4 6

Net income (loss) 1,331 124 2,284 ( 425 )

Net (income) loss attributable to noncontrolling interests

Net income attributable to noncontrolling interests ( 248 ) ( 71 ) ( 483 ) ( 13 )

Net income (loss) attributable to common stockholders $ 1,083 $ 53 $ 1,801 $ ( 438 )

3 unchanged sentences

Weighted-average common shares outstanding:

1,467 1,453 1,465 1,453

1,483 1,458 1,480 1,453

Dividends declared per share of common stock $ 0.075 $ — $ 0.15 $ —

2 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2021 2020 2021 2020

(In millions)

4 unchanged sentences

Amortization of unrecognized amounts included in net periodic benefit costs 4 12 8 24

Foreign exchange losses ( 1 ) ( 5 )

Foreign exchange gains (losses) — 4 ( 1 ) ( 1 )

Other comprehensive income 4 16 6 23

Total comprehensive income (loss) 1,335 140 2,290 ( 402 )

Total comprehensive (income) loss attributable to noncontrolling interests

Total comprehensive income attributable to noncontrolling interests ( 248 ) ( 71 ) ( 482 ) ( 12 )

Total comprehensive income (loss) attributable to common stockholders

3 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Three Months Ended

Six Months Ended

(In millions)

1 unchanged sentence

Net income (loss) $ 2,284 $ ( 425 )

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

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

Depreciation, depletion and amortization 902 699

Metals inventory adjustments 1 83

Net loss on sales of assets — 11

Net (gain) loss on sales of assets ( 3 ) 11

Stock-based compensation 56 43

14 unchanged sentences

Accrued income taxes and timing of other tax payments 505 ( 33 )

Net cash provided by (used in) operating activities 1,075 ( 38 )

Net cash provided by operating activities 3,470 453

Cash flow from investing activities:

6 unchanged sentences

Proceeds from sales of assets 16 116

Acquisition of minority interest in PT Smelting ( 33 ) —

Other, net ( 13 ) ( 5 )

3 unchanged sentences

Repayments of debt ( 179 ) ( 1,527 )

Cash dividends paid on common stock — ( 73 )

Cash dividends and distributions paid:

Common stock ( 111 ) ( 73 )

Noncontrolling interests ( 93 ) —

Contributions from noncontrolling interests 88 74

9 unchanged sentences

CONSOLIDATED STATEMENTS OF EQUITY (Unaudited)

THREE MONTHS ENDED MARCH 31

THREE MONTHS ENDED JUNE 30

Stockholders’ Equity

9 unchanged sentences

(In millions)

Balance at March 31, 2021 1,597 $ 160 $ 26,080 $ ( 10,963 ) $ ( 580 ) 133 $ ( 3,777 ) $ 10,920 $ 8,653 $ 19,573

Exercised and issued stock-based awards 4 — 78 — — — — 78 — 78

Stock-based compensation, including the tender of shares — — 14 — — — — 14 ( 1 ) 13

Dividends — — ( 111 ) — — — — ( 111 ) — ( 111 )

Contributions from noncontrolling interests — — 23 — — — — 23 24 47

Net income attributable to common stockholders — — — 1,083 — — — 1,083 — 1,083

Net income attributable to noncontrolling interests

— — — — — — — — 248 248

Other comprehensive income — — — — 4 — — 4 — 4

Balance at June 30, 2021 1,601 $ 160 $ 26,084 $ ( 9,880 ) $ ( 576 ) 133 $ ( 3,777 ) $ 12,011 $ 8,924 $ 20,935

Stockholders’ Equity

Common Stock Accum-ulated Deficit Accumu-

Other Compre-

Loss Common Stock

Held in Treasury Total

Stock-holders’ Equity

Shares At Par

Value Capital in

Par Value Number

Interests Total

(In millions)

Balance at March 31, 2020 1,583 $ 158 $ 25,875 $ ( 12,771 ) $ ( 668 ) 131 $ ( 3,739 ) $ 8,855 $ 8,108 $ 16,963

Stock-based compensation, including the tender of shares — — 9 — — — — 9 1 10

Contributions from noncontrolling interests — — 21 — — — — 21 21 42

Net income attributable to common stockholders — — — 53 — — — 53 — 53

Net income attributable to noncontrolling interests — — — — — — — — 71 71

Other comprehensive income — — — — 16 — — 16 — 16

Balance at June 30, 2020 1,583 $ 158 $ 25,905 $ ( 12,718 ) $ ( 652 ) 131 $ ( 3,739 ) $ 8,954 $ 8,201 $ 17,155

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

Freeport-McMoRan Inc.

CONSOLIDATED STATEMENTS OF EQUITY (Unaudited)

SIX MONTHS ENDED JUNE 30

Stockholders’ Equity

Common Stock Accum-ulated Deficit Accumu-

Other Compre-

Loss Common Stock

Held in Treasury Total

Stock-holders’ Equity

Shares At Par

Value Capital in

Par Value Number

Interests Total

(In millions)

Balance at December 31, 2020 1,590 $ 159 $ 26,037 $ ( 11,681 ) $ ( 583 ) 132 $ ( 3,758 ) $ 10,174 $ 8,494 $ 18,668

3 unchanged sentences

Contributions from noncontrolling interests

— — 43 — — — — 43 45 88

Net income attributable to common stockholders — — — 1,801 — — — 1,801 — 1,801

2 unchanged sentences

Other comprehensive income (loss) — — — — 7 — — 7 ( 1 ) 6

Balance at March 31, 2021 1,597 $ 160 $ 26,080 $ ( 10,963 ) $ ( 580 ) 133 $ ( 3,777 ) $ 10,920 $ 8,653 $ 19,573

Balance at June 30, 2021 1,601 $ 160 $ 26,084 $ ( 9,880 ) $ ( 576 ) 133 $ ( 3,777 ) $ 12,011 $ 8,924 $ 20,935

Stockholders’ Equity

14 unchanged sentences

Net loss attributable to common stockholders — — — ( 438 ) — — — ( 438 ) — ( 438 )

Net loss attributable to noncontrolling interests

Net income attributable to noncontrolling interests

— — — — — — — — 13 13

Other comprehensive income (loss) — — — — 24 — — 24 ( 1 ) 23

Balance at March 31, 2020 1,583 $ 158 $ 25,875 $ ( 12,771 ) $ ( 668 ) 131 $ ( 3,739 ) $ 8,855 $ 8,108 $ 16,963

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

Balance at June 30, 2020 1,583 $ 158 $ 25,905 $ ( 12,718 ) $ ( 652 ) 131 $ ( 3,739 ) $ 8,954 $ 8,201 $ 17,155

Freeport-McMoRan Inc.

5 unchanged sentences

All such adjustments are, in the opinion of management, of a normal recurring nature.

Operating results for the three-month period ended March 31, 2021, are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

Operating results for the six-month period ended June 30, 2021, are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

Trade Accounts Receivable Agreements.

In first-quarter 2021, PT Freeport Indonesia (PT-FI) entered into agreements to sell certain trade accounts receivables to unrelated third-party financial institutions.

The agreements were entered into in the normal course of business to fund the working capital for the additional quantity of copper to be supplied by PT-FI to PT Smelting (a smelter in Gresik, Indonesia owned 25 percent by PT-FI through April 30, 2020, and 39.5 percent thereafter.

See “Acquisition of Minority Interest in PT Smelting” below) beginning January 1, 2021.

The balances sold under the agreements were excluded from trade accounts receivable on the consolidated balance sheet at March 31, 2021.

The agreements were entered into in the normal course of business to fund the working capital for the additional quantity of copper to be supplied by PT-FI to PT Smelting (PT-FI’s 39.5 percent owned copper smelter and refinery in Gresik, Indonesia - see “Acquisition of Minority Interest in PT Smelting” below for further discussion).

The balances sold under the agreements were excluded from trade accounts receivable on the consolidated balance sheet at June 30, 2021.

Receivables are considered sold when (i) they are transferred beyond the reach of PT-FI and its creditors, (ii) the purchaser has the right to pledge or exchange the receivables, and (iii) PT-FI has no continuing involvement in the transferred receivables.

In addition, PT-FI provides no other forms of continued financial support to the purchaser of the receivables once the receivables are sold.

For the three-month period ended March 31, 2021, gross amounts sold under these arrangements totaled $ 52.5 million ($ 52.4 million net of discount).

Gross amounts sold under these arrangements totaled $ 135 million in second-quarter 2021 and $ 188 million for the six-month period ended June 30, 2021.

Discounts on the sold receivables totaled less than $1 million during 2021.

Acquisition of Minority Interest in PT Smelting.

1 unchanged sentence

The remaining shares of PT Smelting continue to be owned by Mitsubishi Materials Corporation.

PT-FI will continue to account for its investment in PT Smelting using the equity method since it does not have control over PT Smelting.

PT-FI has continued to account for its investment in PT Smelting using the equity method since it does not have control over PT Smelting.

Subsequent Events.

FCX evaluated events after March 31, 2021, and through the date the consolidated financial statements were issued, and determined any events or transactions occurring during this period that would require recognition or disclosure are appropriately addressed in these consolidated financial statements.

FCX evaluated events after June 30, 2021, and through the date the consolidated financial statements were issued, and took into account events and transactions occurring during this period requiring recognition or disclosure in these consolidated financial statements.

On July 26, 2021, FCX’s 56-percent-owned subsidiary, Koboltti Chemicals Holdings Limited, entered into an agreement to sell its specialty cobalt business based in Kokkola, Finland (Freeport Cobalt) to Jervois Mining Limited (Jervois) for $ 85 million (in cash and Jervois shares) plus net working capital, estimated to approximate $ 125 million at June 30, 2021.

In addition, FCX and its noncontrolling interest partners will have the right to receive up to $ 40 million in contingent cash consideration based on the future performance of the business.

FCX currently estimates its share of the proceeds, excluding contingent consideration, would approximate $ 100 million cash plus its pro rata 56 percent share of 9.9 percent of Jervois shares.

The transaction is subject to the completion of Jervois financing and other customary closing conditions and is expected to close in the third quarter of 2021.

FCX expects to record a gain on the transaction.

The operating results of Freeport Cobalt are not significant to FCX’s financial statements for the year ended December 31, 2020, or the three- and six-month periods ended June 30, 2021.

At June 30, 2021, Freeport Cobalt had total assets of $ 180 million and total liabilities of $ 28 million included on FCX's balance sheet.

The Freeport Cobalt operations do not represent an operating segment of FCX and did not meet the criteria to be classified as held for sale at June 30, 2021.

EARNINGS PER SHARE

3 unchanged sentences

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

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2021 2020 2021 2020

Net income (loss) $ 1,331 $ 124 $ 2,284 $ ( 425 )

Net (income) loss attributable to noncontrolling interests ( 235 ) 58

Net income attributable to noncontrolling interests ( 248 ) ( 71 ) ( 483 ) ( 13 )

Undistributed earnings allocated to participating securities ( 4 ) ( 3 ) ( 4 ) ( 3 )

1 unchanged sentence

Basic weighted-average shares of common stock outstanding

1,467 1,453 1,465 1,453

Add shares issuable upon exercise or vesting of dilutive stock options and restricted stock units (RSUs) 16 5 15 — a

Diluted weighted-average shares of common stock outstanding

1,483 1,458 1,480 1,453

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

4 unchanged sentences

Outstanding stock options with exercise prices greater than the average market price of FCX’s common stock during the period are excluded from the computation of diluted net income (loss) per share of common stock.

Stock options for 10 million shares of common stock in first-quarter 2021 and 40 million shares of common stock in first-quarter 2020, were excluded.

Stock options for 4 million shares of common stock in second-quarter 2021, 38 million shares of common stock in second-quarter 2020, 7 million shares of common stock for the first six months of 2021 and 39 million shares of common stock the first six months of 2020 were excluded.

INVENTORIES, INCLUDING LONG-TERM MILL AND LEACH STOCKPILES

The components of inventories follow (in millions):

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Current inventories:

13 unchanged sentences

$ 1,473 $ 1,463

Materials and supplies inventory was net of obsolescence reserves totaling $ 35 million at March 31, 2021, and $ 32 million at December 31, 2020.

Materials and supplies inventory was net of obsolescence reserves totaling $ 33 million at June 30, 2021, and $ 32 million at December 31, 2020.

Estimated metals in stockpiles not expected to be recovered within the next 12 months.

FCX recorded net realizable value inventory adjustments to decrease long-term metals inventory carrying values totaling $ 1 million in first-quarter 2021, associated with lower market prices for molybdenum, and $ 222 million in first-quarter 2020, associated with lower market prices for copper ($ 205 million) and molybdenum ($ 17 million) (refer to Note 9 for metals inventory adjustments by business segment).

FCX recorded net favorable adjustments to increase long-term metals inventory carrying values by $ 139 million in second-quarter 2020, including an increase to long-term copper inventories ($ 144 million), primarily related to the reversal of net realizable value adjustments recorded on long-term copper inventories in first-quarter 2020 because of higher copper market prices at June 30, 2020, and a decrease to long-term molybdenum inventories ($ 5 million) because of lower molybdenum market prices at June 30, 2020.

Net realizable value inventory adjustments to decrease metals inventory carrying values totaling $ 83 million were recorded in the first six months of 2020 associated with lower market prices for copper ($ 61 million) and molybdenum ($ 22 million).

Refer to Note 9 for metals inventory adjustments by business segment.

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

Three Months Ended

Six Months Ended

operations $ ( 4 )

1 unchanged sentence

Total $ ( 1,046 ) $ ( 36 )

FCX’s consolidated effective income tax rate was 32 percent for first-quarter 2021 and 10 percent for first-quarter 2020.

Includes a tax credit of $53 million associated with the reversal of a year-end 2019 tax charge related to the sale of FCX’s interest in the lower zone of the Timok exploration project in Serbia, after considering relevant tax law.

FCX’s consolidated effective income tax rate was 31 percent for the first six months of 2021 and ( 9 ) percent for the first six months of 2020.

Because FCX's U.S.

jurisdiction generated pre-tax losses in the first three months of 2020 that did not result in a realized tax benefit, applicable accounting rules required FCX to adjust its estimated annual effective tax rate to exclude the impact of U.S.

jurisdiction generated pre-tax losses for the first six months of 2020 that did not result in a realized tax benefit, applicable accounting rules required FCX to adjust its 2020 estimated annual effective tax rate to exclude the impact of U.S.

pre-tax losses.

2 unchanged sentences

Such measures include the American Rescue Plan Act of 2021 (ARPA), enacted on March 11, 2021, and the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), enacted on March 27, 2020.

None of these measures resulted in material impacts to FCX’s provision for income taxes for the three months ended March 31, 2021 and 2020.

None of these measures resulted in material impacts to FCX’s provision for income taxes for the six months ended June 30, 2021 and 2020.

However, certain provisions of the CARES Act provided FCX with the opportunity to accelerate collections of tax refunds, primarily those associated with the U.S.

1 unchanged sentence

FCX collected U.S.

alternative minimum tax credit refunds of $ 221 million in July 2020 and $ 24 million in October 2020.

FCX collected the remaining U.S.

alternative minimum tax credit refund of $ 23 million in March 2021.

alternative minimum tax credit refunds of $ 221 million in July 2020, $ 24 million in October 2020 and $ 23 million in March 2021.

FCX continues to evaluate income tax accounting considerations of COVID-19 measures as they develop, including any impact on its measurement of existing deferred tax assets and deferred tax liabilities.

8 unchanged sentences

Total debt 9,695 9,711

Less current portion of debt ( 656 ) ( 34 )

Less current portion of debt ( 1,057 ) a ( 34 )

Long-term debt $ 8,638 $ 9,677

Includes $ 0.5 billion for the 3.55% Senior Notes due March 2022 and $ 0.5 billion for the Cerro Verde Term Loan due June 2022.

Revolving Credit Facility.

At March 31, 2021, FCX had no borrowings outstanding and approximately $ 10 million in letters of credit issued under its revolving credit facility, resulting in availability of approximately $ 3.5 billion, of which approximately $ 1.5 billion could be used for additional letters of credit.

At June 30, 2021, FCX had no borrowings outstanding and $ 8 million in letters of credit issued under its revolving credit facility, resulting in availability of approximately $ 3.5 billion, of which approximately $ 1.5 billion could be used for additional letters of credit.

Availability under FCX’s revolving credit facility consists of $ 3.28 billion maturing April 2024 and $ 220 million maturing April 2023.

In March 2021, FCX delivered a Covenant Reversion Notice (as defined in the third amendment to the revolving credit facility dated June 3, 2020), which provided notification of its election to end the Covenant Increase Period (as defined in the third amendment to the revolving credit facility dated June 3, 2020).

As a result, the leverage ratio limit reverted to 5.25 x through the quarter ending June 30, 2021 (stepping down to 3.75 x beginning with the quarter ending September 30, 2021), and the interest expense coverage ratio minimum reverted to 2.25 x.

As a result, the leverage ratio limit reverted to 5.25 x through the quarter ended June 30, 2021 (and will step down to 3.75 x beginning with the quarter ending September 30, 2021), and the interest expense coverage ratio minimum reverted to 2.25 x.

Additionally, following FCX’s election to end the Covenant Increase Period, the additional limits on priority debt and liens, and the provisions related to minimum liquidity and restricted payments (which included restrictions on the payment of common stock dividends) are no longer applicable.

At March 31, 2021, FCX was in compliance with its revolving credit facility covenants.

At June 30, 2021, FCX was in compliance with its revolving credit facility covenants.

PT-FI Credit Facility.

In July 2021, PT-FI entered into a $ 1.0 billion, five-year, unsecured credit facility (consisting of a $ 667 million term loan and a $ 333 million revolving credit facility) to fund project costs in connection with the PT Smelting expansion and construction of a precious metals refinery, and for PT-FI’s general corporate purposes.

The term loan allows for borrowings up to $ 667 million within the first three years, and amortizes in four installments, with 15 percent of the outstanding balance due in January 2025, 15 percent due in July 2025, 35 percent due in January 2026 and the remaining 35 percent due in July 2026.

The $ 333 million revolving credit facility is available for drawings until June 2026.

Amounts drawn under the credit facility bear interest at the London Inter-bank Offered Rate plus a margin of 1.875 % or 2.125 %, as defined by the agreement.

PT-FI’s credit facility contains customary affirmative covenants and representations and also contains standard covenants that, among other things, restrict, subject to certain exceptions, the ability of PT-FI to incur additional indebtedness;

create liens on assets;

enter into sale and leaseback transactions;

and modify or amend the shareholders agreement or related governance structure.

The credit facility also contains financial ratios governing maximum total leverage and minimum interest expense coverage and certain environmental and social compliance requirements.

Senior Notes.

In March 2020, FCX completed the sale of $ 1.3 billion of senior notes.

FCX used a portion of the net proceeds from this offering to purchase or redeem its 4.00 % Senior Notes due 2021 and to purchase a portion of its 3.55 % Senior Notes due 2022 and the payment of accrued and unpaid interest, premiums, fees and expenses in connection with these transactions.

As a result of these transactions, FCX recorded a loss on early extinguishment of debt of $ 9 million in second-quarter 2020 and $ 41 million for the six months ended June 30, 2020.

Interest Expense, Net.

Consolidated interest costs (before capitalization) totaled $ 160 million in first-quarter 2021 and $ 171 million in first-quarter 2020.

Capitalized interest added to property, plant, equipment and mine development costs, net, 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.

Consolidated interest costs (before capitalization) totaled $ 165 million in second-quarter 2021, $ 159 million in second-quarter 2020, $ 325 million for the first six months of 2021 and $ 330 million for the first six months of 2020.

Capitalized interest added to property, plant, equipment and mine development costs, net, totaled $ 17 million in second-quarter 2021, $ 44 million in second-quarter 2020, $ 32 million for the first six months of 2021 and $ 88 million for the first six months of 2020.

The decrease in capitalized interest for the 2021 periods results from significant assets placed in service as PT-FI’s underground mining operations continue to ramp up.

Common Stock.

In February 2021, FCX’s Board of Directors (the Board) reinstated a cash dividend on FCX’s common stock.

On March 24, 2021, FCX declared a quarterly cash dividend of $ 0.075 per share on its common stock, which was paid on May 3, 2021, to common stockholders of record as of April 15, 2021.

On June 23, 2021, FCX declared a quarterly cash dividend of $ 0.075 per share on its common stock, which was paid on August 2, 2021, to common stockholders of record as of July 15, 2021.

FINANCIAL INSTRUMENTS

5 unchanged sentences

Derivative financial instruments used by FCX to manage its risks do not contain credit risk-related contingent provisions.

In April 2020, FCX entered into forward sales contracts for 150 million pounds of copper for settlement in May and June of 2020.

The forward sales provided for fixed pricing of $ 2.34 per pound of copper on approximately 60

percent of North America's sales volumes for May and June 2020.

These contracts resulted in hedging losses

totaling $ 24 million in second-quarter 2020 and for the six months ended June 30, 2020.

There were no remaining

forward sales contracts as of June 30, 2020.

A discussion of FCX’s other derivative contracts and programs follows:

7 unchanged sentences

Hedging gains or losses from these copper futures and swap contracts are recorded in revenues.

FCX did not have any significant gains or losses resulting from hedge ineffectiveness during the three-month periods ended March 31, 2021 and 2020.

At March 31, 2021, FCX held copper futures and swap contracts that qualified for hedge accounting for 66 million pounds at an average contract price of $ 3.73 per pound, with maturities through March 2023.

A summary of gains (losses) recognized in revenues for derivative financial instruments related to commodity contracts that are designated and qualify as fair value hedge transactions, including the unrealized gains (losses) on the related hedged item follows (in millions):

Three Months Ended

FCX did not have any significant gains or losses resulting from hedge ineffectiveness during the six-month periods ended June 30, 2021 and 2020.

At June 30, 2021, FCX held copper futures and swap contracts that qualified for hedge accounting for 80 million pounds at an average contract price of $ 4.20 per pound, with maturities through May 2023.

A summary of gains (losses) recognized in revenues for derivative financial instruments related to commodity contracts that are designated and qualify as fair value hedge transactions, including the unrealized (losses) gains on the related hedged item follows (in millions):

Three Months Ended Six Months Ended

June 30, June 30,

2021 2020 2021 2020

Copper futures and swap contracts:

Unrealized gains (losses):

Unrealized (losses) gains:

Derivative financial instruments $ ( 11 ) $ 40 $ ( 8 ) $ 7

13 unchanged sentences

Mark-to-market price fluctuations from these embedded derivatives are recorded through the settlement date and are reflected in revenues for sales contracts and in inventory for purchase contracts.

A summary of FCX’s embedded derivatives at March 31, 2021, follows:

A summary of FCX’s embedded derivatives at June 30, 2021, follows:

Open Positions Average Price

2 unchanged sentences

Embedded derivatives in provisional sales contracts:

Copper (millions of pounds) 486 $ 3.83 $ 3.99 August 2021

Gold (thousands of ounces) 151 1,755 1,689 June 2021

Copper (millions of pounds) 597 $ 4.31 $ 4.25 December 2021

Gold (thousands of ounces) 157 1,848 1,762 September 2021

Embedded derivatives in provisional purchase contracts:

Copper (millions of pounds) 123 3.77 3.99 July 2021

Copper (millions of pounds) 115 4.30 4.25 November 2021

Copper Forward Contracts.

1 unchanged sentence

These economic hedge transactions are intended to hedge against changes in copper prices, with the mark-to-market hedging gains or losses recorded in production and delivery costs.

At March 31, 2021, Atlantic Copper held net copper forward purchase contracts for 23 million pounds at an average contract price of $ 4.09 per pound, with maturities through May 2021.

At June 30, 2021, Atlantic Copper held net copper forward purchase contracts for 17 million pounds at an average contract price of $ 4.36 per pound, with maturities through August 2021.

Summary of Gains (Losses).

A summary of the realized and unrealized gains (losses) recognized in operating income for commodity contracts that do not qualify as hedge transactions, including embedded derivatives, follows (in millions):

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2021 2020 2021 2020

Embedded derivatives in provisional sales contracts:

2 unchanged sentences

Copper forward contracts b

( 5 ) ( 4 ) ( 13 ) 19

Amounts recorded in revenues.

11 unchanged sentences

Commodity Derivative Liabilities:

Derivatives designated as hedging instruments :

Copper futures and swap contracts $ 1 $ —

Derivatives not designated as hedging instruments :

6 unchanged sentences

Assets Liabilities

2021 December 31, 2020 March 31,

2021 December 31, 2020 June 30,

2021 December 31, 2020

18 unchanged sentences

Accounts payable and accrued liabilities 17 — 29 20

Other liabilities — — 1 —

$ 56 $ 183 $ 92 $ 20

1 unchanged sentence

To minimize the risk of such losses, FCX uses counterparties that meet certain credit requirements and periodically reviews the creditworthiness of these counterparties.

As of March 31, 2021, the maximum amount of credit exposure associated with derivative transactions was $ 128 million.

As of June 30, 2021, the maximum amount of credit exposure associated with derivative transactions was $ 72 million.

Other Financial Instruments.

Other financial instruments include cash and cash equivalents, restricted cash, restricted cash equivalents, accounts receivable, investment securities, legally restricted funds, accounts payable and accrued liabilities, dividends payable and long-term debt.

The carrying value for cash and cash equivalents (which included time deposits of $ 0.3 billion at March 31, 2021, and December 31, 2020), restricted cash, restricted cash equivalents, accounts receivable, accounts payable and accrued liabilities, and dividends payable approximates fair value because of their short-term nature and generally negligible credit losses (refer to Note 7 for the fair values of investment securities, legally restricted funds and long-term debt).

In addition, as of March 31, 2021, FCX has contingent consideration assets related to the sales of certain oil and gas properties (refer to Note 7 for the related fair values).

The carrying value for cash and cash equivalents (which included time deposits of $ 0.2 billion at June 30, 2021, and $ 0.3 billion at December 31, 2020), restricted cash, restricted cash equivalents, accounts receivable, accounts payable and accrued liabilities, and dividends payable approximates fair value because of their short-term nature and generally negligible credit losses (refer to Note 7 for the fair values of investment securities, legally restricted funds and debt).

In addition, as of June 30, 2021, FCX has contingent consideration assets related to the sales of certain oil and gas properties (refer to Note 7 for the related fair values).

Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents.

10 unchanged sentences

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

FCX did not have any significant transfers in or out of Level 3 during first-quarter 2021.

FCX did not have any significant transfers in or out of Level 3 during second-quarter 2021.

FCX’s financial instruments are recorded on the consolidated balance sheets at fair value except for contingent consideration associated with the sale of the Deepwater Gulf of Mexico (GOM) oil and gas properties (which was recorded under the loss recovery approach) and debt.

A summary of the carrying amount and fair value of FCX’s financial instruments (including those measured at net asset value (NAV) as a practical expedient), other than cash and cash equivalents, restricted cash, restricted cash equivalents, accounts receivable, accounts payable and accrued liabilities, and dividends payable (refer to Note 6) follows (in millions):

At March 31, 2021

At June 30, 2021

Carrying Fair Value

17 unchanged sentences

Copper futures and swap contracts c

18 18 — 15 3 —

Copper forward contracts c

4 unchanged sentences

Embedded derivatives in provisional sales/purchase contracts in a gross liability position 103 103 — — 103 —

Copper futures and swap contracts c

Copper forward contracts 4 4 — 1 3 —

31 unchanged sentences

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

Excludes time deposits (which approximated fair value) included in (i) other current assets of $ 106 million at March 31, 2021, and $ 97 million at December 31, 2020, and (ii) other assets of $ 148 million at both March 31, 2021 and December 31, 2020, primarily associated with an assurance bond to support PT-FI’s commitment for the development of a greenfield smelter in Indonesia and PT-FI’s closure and reclamation guarantees.

Excludes time deposits (which approximated fair value) included in (i) other current assets of $ 116 million at June 30, 2021, and $ 97 million at December 31, 2020, and (ii) other assets of $ 139 million at June 30, 2021, and $ 148 million at December 31, 2020, primarily associated with an assurance bond to support PT-FI’s commitment for new domestic smelter development in Indonesia and PT-FI’s closure and reclamation guarantees.

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

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The contingent consideration is being received over time as cash flows are realized from a third-party production handling agreement for an offshore platform, with the related payments commencing in third-quarter 2018.

The contingent consideration included in (i) other current assets totaled $ 18 million at March 31, 2021, and $ 12 million at December 31, 2020, and (ii) other assets totaled $ 86 million at March 31, 2021, and $ 96 million at December 31, 2020.

The contingent consideration included in (i) other current assets totaled $ 18 million at June 30, 2021, and $ 12 million at December 31, 2020, and (ii) other assets totaled $ 80 million at June 30, 2021, and $ 96 million at December 31, 2020.

The fair value of this contingent consideration was calculated based on a discounted cash flow model using inputs that include third-party estimates for reserves, production rates and production timing, and discount rates.

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Furthermore, while FCX believes its valuation techniques are appropriate and consistent with other market participants, the use of different techniques or assumptions to determine fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

There have been no changes in the techniques used at March 31, 2021, as compared with those techniques used at December 31, 2020.

A summary of the changes in the fair value of FCX’s Level 3 instrument, contingent consideration for the sale of the Deepwater GOM oil and gas properties, during the first three months of 2021 follows (in millions):

There have been no changes in the techniques used at June 30, 2021, as compared with those techniques used at December 31, 2020.

A summary of the changes in the fair value of FCX’s Level 3 instrument, contingent consideration for the sale of the Deepwater GOM oil and gas properties, during the first six months of 2021 follows (in millions):

Fair value at January 1, 2021 $ 88

Net unrealized gain related to assets still held at the end of the period 7

Fair value at March 31, 2021 $ 88

Fair value at June 30, 2021 $ 85

CONTINGENCIES AND COMMITMENTS

Environmental

Newtown Creek.

From the 1930s until 1964, Phelps Dodge Refining Corporation (PDRC), an indirect wholly owned subsidiary of FCX, operated a copper smelter, and from the 1930s until 1984 operated a copper refinery, on the banks of Newtown Creek (the creek), which is a 3.5-mile-long waterway that forms part of the boundary between Brooklyn and Queens in New York City.

Heavy industrialization along the banks of the creek and discharges from the City of New York’s sewer system over more than a century resulted in significant environmental contamination of the waterway.

In 2010, U.S.

Environmental Protection Agency (EPA) notified PDRC, four other companies and the City of New York that EPA considers them to be potentially responsible parties (PRPs) under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980.

The notified parties began working with EPA to identify other PRPs.

In 2010, EPA designated the creek as a Superfund site, and in 2011, PDRC and five other parties (the Newtown Creek Group, NCG) entered an Administrative Order on Consent (AOC) to perform a remedial investigation/feasibility study (RI/FS) to assess the nature and extent of environmental contamination in the creek and identify potential remedial options.

The parties ’ RI/FS work under the AOC and their efforts to identify other PRPs are ongoing.

The NCG submitted the initial draft RI to EPA in 2016 and currently expects the report to be finalized in 2021.

The NCG currently anticipates a draft FS to be submitted to EPA for review and approval in 2024.

EPA is not expected to propose a final creek-wide remedy until after the RI/FS is completed, with the actual

remediation construction starting several years later.

In July 2019, the NCG entered into an AOC to conduct a Focused Feasibility Study (FFS) of the first two miles of the creek to support an evaluation of an interim remedy for that section of the creek.

In July 2021, EPA terminated the FFS, which effectively incorporates remediation of the lower creek with the site-wide remedy.

FCX’s environmental liability balance for the creek was $ 308 million at June 30, 2021.

The final costs of fulfilling this remedial obligation and the allocation of costs among PRPs are uncertain and subject to change based on the results of the RI/FS, the remedy ultimately selected by EPA and related allocation determinations.

Changes to the overall cost of this remedial obligation and the portion ultimately allocated to PDRC could be material to FCX.

There were no significant updates to previously reported legal proceedings included in Note 12 of FCX’s 2020 Form 10-K, other than the matters discussed below.

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On February 13, 2019, Imerys Talc America (Imerys), the current owner of the talc business assets and liabilities previously owned by Cyprus Mines, filed for Chapter 11 bankruptcy protection.

On December 22, 2020, Imerys filed an amended bankruptcy plan disclosing a global settlement with Cyprus Mines and CAMC, which provides a framework for a full and comprehensive resolution of all current and future potential liabilities arising out of the Cyprus Mines talc business,

including claims against FCX, its affiliates, Cyprus Mines, and CAMC.

On January 21, 2021, in connection with the proposed global settlement, Imerys sought an injunction temporarily staying up to approximately 950 talc-related lawsuits against CAMC and Cyprus Mines.

On February 22, 2021, the bankruptcy court granted the requested preliminary injunction, which is currently in place until June 30, 2021.

The global settlement is subject to, among other things, bankruptcy court approvals of both the Imerys bankruptcy plan and the Cyprus Mines bankruptcy plan, and there can be no assurance that the global settlement will be successfully implemented.

A hearing to consider confirmation of the Imerys bankruptcy plan has been scheduled to be held in November 2021.

Consistent with the global settlement agreement, Cyprus Mines commenced its own bankruptcy process on February 11, 2021, and talc-related litigation against both Cyprus Mines and Cyprus Amax Minerals Company is stayed through 2021.

The global settlement is subject to, among other things, votes by claimants in both the Imerys and Cyprus Mines bankruptcy cases as well as bankruptcy court approvals in both cases, and there can be no assurance that the global settlement will be successfully implemented.

FCX has a $ 130 million liability balance at June 30, 2021, associated with the proposed settlement.

Other Matters

PT-FI and PT Smelting Export Licenses.

In March 2021, PT-FI received a one-year extension of its export license through March 15, 2022, and in January 2021, PT Smelting received a six-month extension of its anodes slimes export license, which currently expires July 18, 2021.

In March 2021, PT-FI received a one-year extension of its export license through March 15, 2022.

In July 2021, PT Smelting received a six-month extension of its anodes slimes export license, which currently expires December 30, 2021.

Development Progress of Greenfield Smelter at East Java .

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PT-FI believes that its communications during 2020 with the Indonesia government were not properly considered before the administrative fine was levied.

In June 2021, the Indonesia government issued a ministerial decree for the calculation of an administrative fine for lack of smelter development in light of the COVID-19 pandemic.

PT-FI 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 on the greenfield smelter.

During first-quarter 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.

During the first six months of 2021, PT-FI recorded charges totaling $ 16 million ($ 3 million in second-quarter 2021 and $ 13 million in first-quarter 2021) for a potential settlement of the administrative fine which is expected to include a revised construction schedule for the greenfield smelter.

No additional fine is expected for the construction period after July 2020 based on the revised schedule.

The final settlement could differ from the amounts recorded in 2021.

Chiyoda Contract.

In July 2021, PT-FI awarded a construction contract to Chiyoda for the construction of a new greenfield smelter in Gresik, Indonesia with an estimated contract cost of $ 2.8 billion.

BUSINESS SEGMENTS

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Intersegment sales may not be reflective of the actual prices ultimately realized because of a variety of factors, including additional processing, timing of sales to unaffiliated customers and transportation premiums.

FCX defers recognizing profits on sales from its mines to other segments, including Atlantic Copper Smelting & Refining, and until April 30, 2021 on 25 percent of PT-FI’s sales to PT Smelting, until final sales to third parties occur.

See Note 1 regarding PT-FI’s increased ownership in PT Smelting as of April 30, 2021.

FCX defers recognizing profits on sales from its mines to other segments, including Atlantic Copper Smelting & Refining, and on 39.5 percent of PT-FI’s sales to PT Smelting, until final sales to third parties occur.

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

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Product Revenues.

FCX’s revenues attributable to the products it sold for the first quarters of 2021 and 2020 follow (in millions):

Three Months Ended

FCX’s revenues attributable to the products it sold for the second quarters and first six months of 2021 and 2020 follow (in millions):

Three Months Ended Six Months Ended

June 30, June 30,

2021 2020 2021 2020

Concentrate $ 2,076 $ 749 $ 3,785 $ 1,598

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Purchased copper a

310 166 528 401

Gold 597 341 1,115 611

Molybdenum 288 194 532 437

203 115 456 272

Adjustments to revenues:

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Export duties d

( 44 ) ( 16 ) ( 73 ) ( 20 )

Revenues from contracts with customers 5,615 2,875 10,286 5,904

Embedded derivatives e

133 179 312 ( 52 )

Total consolidated revenues $ 5,748 $ 3,054 $ 10,598 $ 5,852

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Morenci Other Total Verde Other Total Mining Mines Refining & Refining nations Total

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

Unaffiliated customers $ 57 $ 55 $ 112 $ 825 $ 188 $ 1,013 $ 1,753 a

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Production and delivery 351 574 925 494 c

106 600 528 56 1,691 775 ( 1,508 ) d

Depreciation, depletion and amortization

40 61 101 82 12 94 247 17 1 8 15 483

Metals inventory adjustments

— — — — — — — 1 — — — 1

Selling, general and administrative expenses

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1 — 1 — — — — — — — 32 33

Net gain on sales of assets — — — — — — — — — — ( 3 ) ( 3 )

Operating income (loss) 385 441 826 367 70 437 1,007 16 3 6 ( 228 ) 2,067

Interest expense, net — — — 12 — 12 6 — — 2 128 148

Provision for (benefit from) income taxes — — — 173 21 194 315 — — — ( 66 ) 443

Total assets at March 31, 2021 2,629 5,283 7,912 8,723 1,738 10,461 17,551 1,753 235 997 4,734 43,643

Provision for income taxes — — — 145 17 162 404 — — — 37 603

Total assets at June 30, 2021 2,635 5,288 7,923 8,795 1,795 10,590 18,461 1,740 271 1,117 5,334 45,436

Capital expenditures 22 47 69 23 3 26 314 2 — 7 15 433

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

Unaffiliated customers $ 20 $ 16 $ 36 $ 471 $ 106 $ 577 $ 683 a

$ — $ 1,106 $ 464 $ 188 b

Intersegment 442 534 976 38 — 38 — 71 8 11 ( 1,104 ) —

Intersegment 447 505 952 e

52 — 52 35 58 8 2 ( 1,107 ) —

Production and delivery 348 439 787 334 104 438 378 61 1,138 446 ( 854 ) 2,394

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— — — — — — — — — — 11 11

Operating income (loss) 76 123 199 100 45 145 188 ( 19 ) ( 31 ) 8 ( 169 ) 321

Interest expense, net 1 — 1 20 — 20 1 — — 1 92 115

Provision for (benefit from) income taxes — — — 29 16 45 78 — — 1 ( 28 ) 96

Total assets at June 30, 2020 2,697 5,198 7,895 8,515 1,631 10,146 16,848 1,777 259 726 2,579 40,230

Capital expenditures 27 121 148 31 20 51 308 4 2 5 9 527

Includes PT-FI's sales to PT Smelting totaling $ 756 million in second-quarter 2021 and $ 433 million in second-quarter 2020.

Includes revenues from FCX's molybdenum sales company, which includes sales of molybdenum produced by the Molybdenum mines and by certain of the North America and South America copper mines.

Includes nonrecurring charges totaling $ 69 million associated with labor-related charges at Cerro Verde for agreements reached with 57 percent of its hourly employees.

Includes charges associated with the major maintenance turnaround at the Miami smelter totaling $ 19 million.

Includes hedging losses totaling $ 24 million related to forward sales contracts covering 150 million pounds of copper sales for May and June 2020 at a fixed price of $ 2.34 per pound.

(In millions)

Atlantic Corporate,

North America Copper Mines South America Mining Copper Other

Cerro Indonesia Molybdenum Rod & Smelting & Elimi- FCX

Morenci Other Total Verde Other Total Mining Mines Refining & Refining nations Total

Six months ended June 30, 2021

Unaffiliated customers $ 61 $ 83 $ 144 $ 1,742 $ 363 $ 2,105 $ 3,136 a

$ — $ 2,998 $ 1,481 $ 734 b

Intersegment 1,285 1,763 3,048 165 — 165 108 159 13 — ( 3,493 ) —

Production and delivery 620 1,054 1,674 930 c

209 1,139 983 113 3,007 1,448 ( 2,511 ) d

Depreciation, depletion and amortization 74 107 181 171 24 195 446 32 2 15 31 902

Metals inventory adjustments — — — — — — — 1 — — — 1

Selling, general and administrative expenses 1 1 2 4 — 4 53 — — 12 116 187

Mining exploration and research expenses — — — — — — — — — — 21 21

Environmental obligations and shutdown costs 1 — 1 — — — — — — — 37 38

Net gain on sales of assets — — — — — — — — — — ( 3 ) ( 3 )

Operating income (loss) 650 684 1,334 802 130 932 1,762 13 2 6 ( 450 ) 3,599

Interest expense, net — — — 25 — 25 7 — — 3 258 293

Provision for (benefit from) income taxes — — — 318 38 356 719 — — — ( 29 ) 1,046

Capital expenditures 32 63 95 43 4 47 624 3 1 13 20 803

Six months ended June 30, 2020

Unaffiliated customers $ 22 $ 23 $ 45 $ 847 $ 204 $ 1,051 $ 1,128 a

$ — $ 2,221 $ 893 $ 514 b

Intersegment 889 1,039 1,928 e

90 — 90 35 129 16 13 ( 2,211 ) —

Production and delivery 697 950 1,647 758 214 972 721 127 2,257 857 ( 1,642 ) 4,939

Depreciation, depletion and amortization 87 94 181 181 29 210 225 31 8 14 30 699

Metals inventory adjustments 4 52 56 — 3 3 — 5 1 — 18 83

Selling, general and administrative expenses 1 1 2 3 — 3 56 — — 10 130 201

Mining exploration and research expenses — 2 2 — — — — — — — 32 34

Environmental obligations and shutdown costs — — — — — — — — 1 — 36 37

Net loss on sales of assets — — — — — — — — — — 11 11

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(Benefit from) provision for income taxes — — — ( 23 ) ( 10 ) ( 33 ) 90 — — 1 ( 22 ) 36

Total assets at March 31, 2020 2,814 5,093 7,907 8,471 1,655 10,126 16,711 1,788 231 635 2,821 40,219

Capital expenditures 71 261 332 90 35 125 634 11 4 11 20 1,137

Includes PT-FI's sales to PT Smelting totaling $ 792 million in first-quarter 2021 and $ 380 million in first-quarter 2020.

Includes PT-FI's sales to PT Smelting totaling $ 1.5 billion for the first six months of 2021 and $ 813 million for the first six months of 2020.

Includes revenues from FCX's molybdenum sales company, which includes sales of molybdenum produced by the Molybdenum mines and by certain of the North America and South America copper mines.

Includes nonrecurring charges totaling $ 69 million associated with labor-related charges at Cerro Verde for agreements reached with 57 percent of its hourly employees.

Includes charges associated with the major maintenance turnaround at the Miami smelter totaling $ 87 million.

Includes hedging losses totaling $ 24 million related to forward sales contracts covering 150 million pounds of copper sales for May and June 2020 at a fixed price of $ 2.34 per pound.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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We have reviewed the accompanying consolidated balance sheet of Freeport-McMoRan Inc.

(the Company) as of March 31, 2021, the related consolidated statements of operations, comprehensive income (loss), equity and cash flows for the three-month periods ended March 31, 2021 and 2020, and the related notes (collectively referred to as the “consolidated interim financial statements”).

(the Company) as of June 30, 2021, the related consolidated statements of operations, comprehensive income (loss), and equity for the three- and six-month periods ended June 30, 2021 and 2020, the related consolidated statements of cash flows for the six-month periods ended June 30, 2021 and 2020, and the related notes (collectively referred to as the “consolidated interim financial statements”).

Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial statements for them to be in conformity with U.S.

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Phoenix, Arizona

August 5, 2021

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

What changed 10-Q

Item 1. Financial Statements