What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-05 compared with 2021-05-05 · 784 added, 281 removed, 827 unchanged (56% of the section changed)

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

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.

Our results for the first six months of 2021 reflect strong operating and financial performance, and cash flow generation.

We achieved the balance sheet targets outlined in our financial policy adopted earlier this year, and believe that we are well positioned to increase cash returns to shareholders and for investments in long-term future growth.

We continue to execute our operating plans in a safe, efficient and responsible manner and remain focused on building long-term value through solid management of our portfolio of long-lived and high-quality copper assets.

The ramp-up of underground mining at PT Freeport Indonesia (PT-FI) is advancing on schedule and Cerro Verde's concentrator facilities have performed well with milling rates averaging 382,100 metric tons of ore per day for the first six months of 2021.

Our Lone Star copper leach project, which was successfully completed in the second half of 2020, has achieved design capacity approximating 200 million pounds of copper annually with potential for further increases.

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 .

Net income (loss) attributable to common stock totaled $1.1 billion in second-quarter 2021, $53 million in second-quarter 2020, $1.8 billion for the first six months of 2021 and $(438) million for the first six months of 2020.

Results for the 2021 periods, compared with the 2020 periods, reflect higher copper prices and volumes, partly offset by a higher provision for income taxes.

The results for the 2020 periods also reflect charges directly associated with the COVID-19 pandemic and revised operating plans, including employee separation costs, totaling $144 million in second-quarter 2020 and $153 million for the first six months of 2020.

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).

We continue to monitor the impact of the COVID-19 pandemic on our business and maintain our vigilant operating protocols to contain and mitigate the risk of spread of COVID-19 at each of our operating sites.

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

We will continue to monitor, assess and update our COVID-19 response and to provide assistance to employees in obtaining vaccinations.

At June 30, 2021, we had consolidated debt of $9.7 billion and consolidated cash and cash equivalents of $6.3 billion, resulting in net debt of $3.4 billion.

This represents a reduction in net debt of $2.7 billion from year-end 2020.

Refer to “Net Debt” for reconciliations of debt and cash and cash equivalents to net debt.

At June 30, 2021, we had no borrowings and $3.5 billion available under our revolving credit facility.

We have $1.1 billion in debt maturities through 2022, including 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.

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Projected molybdenum sales include 28 million pounds produced by our Molybdenum mines and 58 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.

Consolidated sales volumes in third-quarter 2021 are expected to approximate 1.035 billion pounds of copper, 360 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.

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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.

Assuming average prices of $1,800 per ounce of gold and $16.00 per pound of molybdenum for the second half 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 $1.35 per pound of copper for the year 2021 (including $1.33 per pound of copper in third-quarter 2021).

The impact of price changes for the second half of 2021 on consolidated unit net cash costs for the year 2021 would approximate $0.02 per pound of copper for each $100 per ounce change in the average price of gold and $0.01 per pound of copper for each $2 per pound change in the average price of molybdenum.

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

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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.

Based on current sales volume and cost estimates, and assuming average prices of $4.25 per pound for copper, $1,800 per ounce for gold, and $16.00 per pound for molybdenum for the second half of 2021, our consolidated operating cash flows are estimated to approximate $7.5 billion (including $0.4 billion of working capital and other sources) for the year 2021.

Estimated consolidated operating cash flows for the year 2021 also reflect an estimated income tax provision of $2.5 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.

The impact of price changes for the second half of 2021 on operating cash flows would approximate $200 million for each $0.10 per pound change in the average price of copper, $50 million for each $100 per ounce change in the average price of gold and $55 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.

Consolidated capital expenditures, excluding estimated expenditures associated with Indonesia smelter development, are expected to approximate $2.2 billion for the year 2021, including $1.4 billion for major projects, primarily associated with underground development activities in the Grasberg minerals district.

Indonesia smelter development expenditures are currently expected to approximate $0.4 billion for the year 2021 (including $0.3 billion during the second half of 2021).

All costs of smelter development in Indonesia will be shared 49 percent by FCX and 51 percent by PT Indonesia Asahan Aluminium (Persero) (PT Inalum, also known as MIND ID), and will be largely offset by a phase-out of the 5 percent export duty currently paid to the Indonesia government as well as the tax deductibility of smelter costs by PT-FI.

PT-FI plans to use its $1 billion, five-year, unsecured credit facility (refer to Note 5) and additional debt financing to fund these projects.

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;

During the period from January 2011 through June 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 $4.86 per pound in 2021;

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;

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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.

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 June 2021.

During second-quarter 2021, LME copper settlement prices ranged from a low of $3.98 per pound to a high of $4.86 per pound, averaged $4.40 per pound and settled at $4.26 per pound on June 30, 2021.

As China's economy began to recover from the COVID-19 pandemic, copper prices increased throughout 2020 and reached a record high during second-quarter 2021 before moderating in June 2021 as a result of a strengthening U.S.

dollar and China's announcement that it would begin selling stockpiled metal commodities, including copper, to curb rising commodity costs.

The LME copper settlement price was $4.42 per pound on July 30, 2021.

Expectations for longer-term copper demand growth remain in place.

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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.

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.

This graph presents London PM gold prices from January 2011 through June 2021.

During second-quarter 2021, London PM gold prices ranged from a low of $1,726 per ounce to a high of $1,903 per ounce, averaged $1,816 per ounce, and closed at $1,763 per ounce on June 30, 2021.

While the continued 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.

The London PM gold price was $1,767 per ounce on April 30, 2021.

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.

The London PM gold price was $1,826 per ounce on July 30, 2021.

This graph presents the Metals Week Molybdenum Dealer Oxide weekly average price from January 2011 through June 2021.

During second-quarter 2021, the weekly average price of molybdenum ranged from a low of $10.99 per pound to a high of $19.90 per pound, averaged $13.81 per pound, and was $18.95 per pound on June 30, 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.

The Metals Week Molybdenum Dealer Oxide weekly average price was $18.13 per pound on July 30, 2021.

CONSOLIDATED RESULTS

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

SUMMARY FINANCIAL DATA

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$ 5,748 $ 3,054 $ 10,598 $ 5,852

Operating income (loss) a,c,d

Net income (loss) attributable to common stock g

Operating income (loss) a,c

$ 2,067 d,e,f

$ 3,599 d,e,f,g

Net income (loss) attributable to common stock h

$ (438) j,k,l

Diluted net income (loss) per share of common stock

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Diluted weighted-average common shares outstanding

Operating cash flows k

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

Operating cash flows m

$ 2,395 $ 491 $ 3,470 $ 453

Capital expenditures

$ 433 $ 527 $ 803 $ 1,137

Cash and cash equivalents

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

Includes favorable (unfavorable) adjustments to prior period provisionally priced concentrate and cathode copper sales totaling $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).

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.

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.

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.

Includes net losses on sales of assets totaling $11 million ($11 million to net loss attributable to common stock or $0.01 per share).

Includes favorable (unfavorable) adjustments to prior period provisionally priced concentrate and cathode copper sales totaling $173 million ($66 million to net income attributable to common stock or $0.05 per share) in second-quarter 2021, $55 million ($19 million to net income attributable to common stock or $0.01 per share) in second-quarter 2020, $169 million ($65 million to net income attributable to common stock or $0.04 per share) for the first six months of 2021 and $(102) million ($(43) million to net loss attributable to common stock or $(0.03) per share) for the first six months of 2020 (refer to Note 6 for further discussion).

Includes net charges associated with environmental obligations and related litigation reserves totaling $20 million ($20 million to net income attributable to common stock or $0.01 per share) in second-quarter 2021, $1 million ($1 million to net income attributable to common stock or less than $0.01 per share) in second-quarter 2020, $17 million ($17 million to net income attributable to common stock or $0.01 per share) for the first six months of 2021 and $15 million ($15 million to net loss attributable to common stock or $0.01 per share) for the first six months of 2020.

The second quarter and first six months of 2021 include nonrecurring labor-related charges totaling $69 million ($22 million to net income attributable to common stock or $0.01 per share) at Cerro Verde for agreements reached with 57 percent of its hourly employees.

Refer to “Operations – South America Mining” for further discussion.

Includes net gains (losses) on sales of assets totaling $3 million ($3 million to net income attributable to common stock or less than $0.01 per share) for the second quarter and first six months of 2021 and $(11) million ($(11) million to net loss attributable to common stock or $0.01 per share) for the first six months of 2020.

Second-quarter 2021 includes net credits totaling $10 million ($10 million to net income attributable to common stock or $0.01 per share) associated with asset retirement obligation adjustments.

The first six months of 2021 also include other 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.

Includes metals inventory adjustments totaling $139 million ($101 million to net income attributable to common stock or $0.07 per share) in second-quarter 2020, $(1) million ($(1) million to net income attributable to common stock or less than $(0.01) per share) for the first six months of 2021 and $(83) million ($(81) million to net loss attributable to common stock or $(0.06) per share) for the first six months of 2020.

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

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

Includes net charges 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).

Includes after-tax net losses on early extinguishment of debt totaling $32 million ($0.02 per share).

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

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

Working capital and other (uses) sources totaled $(336) million in first-quarter 2021 and $119 million in first-quarter 2020.

Three Months Ended March 31,

Includes net charges associated with contested matters at PT-FI totaling $32 million ($28 million to net income attributable to common stock or 0.02 per share) in second-quarter 2021 and $54 million ($48 million to net income attributable to common stock or 0.03 per share) for the first six months of 2021.

These charges were recorded to production and delivery ($17 million in second-quarter 2021 and $30 million for the first six months of 2021), interest expense, net ($4 million in second-quarter 2021 and $8 million for the first six months of 2021) and other income, net ($11 million in second-quarter 2021 and $16 million for the first six months of 2021).

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

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

These charges were recorded to production and delivery ($153 million in second-quarter 2020 and $173 million for the first six months of 2020);

depreciation, depletion and amortization ($21 million in second-quarter 2020 and $29 million for

the first six months of 2020);

selling, general and administrative ($15 million for each of the second quarter and first six months of 2020) and mining exploration and research expense ($7 million for each of the second quarter and first six months of 2020).

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

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

Working capital and other sources totaled $523 million in second-quarter 2021, $22 million in second-quarter 2020, $187 million for the first six months of 2021 and $141 million for the first six months of 2020.

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

SUMMARY OPERATING DATA

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Sales, excluding purchases 929 759 1,754 1,488

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

Average realized price per pound $ 4.34 $ 2.55 a

$ 4.25 $ 2.53 a

Site production and delivery costs per pound b

Unit net cash costs per pound b

$ 1.48 $ 1.47 $ 1.44 $ 1.68

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Sales, excluding purchases

305 184 563 328

Average realized price per ounce $ 1,794 $ 1,749 $ 1,785 $ 1,709

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Average realized price per pound $ 13.11 $ 10.53 $ 12.38 $ 10.84

Includes reductions to average realized prices of $0.03 per pound of copper in second-quarter 2020 and $0.02 per pound of copper for the first six months of 2020 related to forward sales contracts covering 150 million pounds of copper sales for May and June 2020 at a fixed price of $2.34 per pound.

There are no remaining forward sales contracts.

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

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.”

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.

Consolidated revenues totaled $4.9 billion in first-quarter 2021 and $2.8 billion in first-quarter 2020.

Includes $0.07 per pound of copper in second-quarter 2021 and $0.04 per pound of copper for the first six months of 2021 associated with nonrecurring labor-related charges at Cerro Verde for agreements reached with 57 percent of its hourly employees.

Refer to “Operations – South America Mining” for further discussion.

Excludes charges totaling $0.20 per pound of copper in second-quarter 2020 and $0.12 per pound of copper for the first six months of 2020, primarily associated with idle facility and contract cancellations costs related to the COVID-19 pandemic and employee separation costs associated with the April 2020 revised operating plans.

Consolidated revenues totaled $5.7 billion in second-quarter 2021, $3.1 billion in second-quarter 2020, $10.6 billion for the first six months of 2021 and $5.9 billion for the first six months of 2020.

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

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

Three Months Ended March 31

Three Months Ended June 30 Six Months Ended June 30

Consolidated revenues - 2020 period $ 3,054 $ 5,852

Higher (lower) sales volumes:

Higher sales volumes:

Copper 435 674

Molybdenum 43 38

Higher average realized prices:

Copper 1,664 3,017

Molybdenum 56 66

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Higher Atlantic Copper revenues 328 575

Lower revenues from purchased copper (17)

Higher revenues from purchased copper 144 127

Higher treatment charges (26) (43)

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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.

Consolidated copper and gold sales volumes increased in the 2021 periods, compared to the 2020 periods, primarily reflecting continued progress of the ramp-up of underground mining at PT-FI.

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

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

Average realized prices for first-quarter 2021, compared with first-quarter 2020, were 62 percent higher for copper, 7 percent higher for gold and 5 percent higher for molybdenum.

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.

Average realized prices for second-quarter 2021, compared with second-quarter 2020, were 70 percent higher for copper, 3 percent higher for gold and 25 percent higher for molybdenum and average realized prices for the first six months of 2021, compared with the first six months of 2020, were 68 percent higher for copper, 4 percent higher for gold and 14 percent higher for molybdenum.

Average realized copper prices include net (unfavorable) favorable adjustments to current period provisionally priced copper sales totaling $(55) million in second-quarter 2021, $107 million in second-quarter 2020, $156 million for the first six months of 2021 and $26 million for the first six months of 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.

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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.

, provisionally priced sales at March 31, 2021 and 2020, and December 31,

2020 and 2019) recorded in consolidated revenues totaled $173 million in second-quarter 2021, $55 million in second-quarter 2020, $169 million for the first six months of 2021 and $(102) million for the first six months of 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.

At June 30, 2021, we had provisionally priced copper sales totaling 368 million pounds of copper (net of intercompany sales and noncontrolling interests) recorded at an average of $4.25 per pound, subject to final pricing over the next several months.

We estimate that each $0.05 change in the price realized from the June 30, 2021, provisional price recorded would have an approximate $12 million effect on our 2021 net income attributable to common stock.

The LME copper price settled at $4.42 per pound on July 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.

Atlantic Copper revenues totaled $794 million in second-quarter 2021 and $1.5 billion for the first six months of 2021, compared with $466 million in second-quarter 2020 and $906 million for the first six months of 2020.

Higher revenues in the 2021 periods, compared with the 2020 periods, 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.

The volumes of copper purchases vary depending on cathode production from our operations and totaled 68 million pounds in second-quarter 2021, 71 million pounds in second-quarter 2020, 121 million pounds for the first six months of 2021 and 159 million pounds for the first six months of 2020.

The increase in revenues associated with purchased copper in the 2021 periods, compared to the 2020 periods, reflects higher copper prices.

Treatment Charges.

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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.

PT-FI will continue to pay export duties until development progress for new domestic smelting with an annual capacity of 2 million metric tons of concentrate 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.

Consolidated production and delivery costs totaled $3.1 billion in second-quarter 2021, $2.4 billion in second-quarter 2020, $5.9 billion for the first six months of 2021 and $4.9 billion for the first six months of 2020.

Higher consolidated production and delivery costs in the 2021 periods primarily reflect higher sales volumes, higher milling and mining costs and nonrecurring labor-related charges at Cerro Verde for agreements reached with 57 percent of its hourly employees.

The 2020 periods also include charges associated with the COVID-19 pandemic and revised operating plans.

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.

Consolidated site production and delivery costs (before net noncash and other costs) for our copper mines averaged $2.02 per pound of copper in second-quarter 2021, $1.82 per pound of copper in second-quarter 2020, $1.94 per pound of copper for the first six months of 2021 and $2.00 per pound of copper for the first six months of 2020.

Consolidated site production and delivery costs per pound in the second quarter and first six months of 2021, compared with the second quarter and first six months of 2020, primarily reflected higher mining and milling costs and nonrecurring labor-related charges at Cerro Verde, partly offset by higher sales volumes.

Consolidated site production and delivery costs for the 2020 periods excluded charges primarily associated with the COVID-19 pandemic and the April 2020 revised operating plans.

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

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

Consolidated depreciation, depletion and amortization (DD&A) totaled $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.

Consolidated depreciation, depletion and amortization (DD&A) totaled $483 million in second-quarter 2021, $358 million in second-quarter 2020, $902 million for the first six months of 2021 and $699 million for the first six months of 2020.

Higher DD&A in the 2021 periods is primarily related to assets placed in service and higher sales volumes 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.

Net realizable value metals inventory adjustments totaled a net credit of $139 million in second-quarter 2020 and net charges of $1 million for the first six months of 2021 and $83 million for the first six months of 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.

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 varies with the level of qualifying assets associated with our development projects and average interest rates on our borrowings, and 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 in the 2021 periods, compared with the 2020 periods, 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.

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

Six Months Ended June 30,

Income (Loss) a

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$ (1,046) $ (395) (9) % g,h

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

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

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

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Includes valuation allowance release on prior year unbenefited net operating losses.

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

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

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

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

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

jurisdiction generated net losses in the first three months of 2020 that did not result in a realized tax benefit;

jurisdiction generated net losses in the first six 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.

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.

Assuming achievement of current sales volume and cost estimates and average prices of $4.25 per pound for copper, $1,800 per ounce for gold and $16.00 per pound for molybdenum for the second half of 2021, we estimate

our consolidated effective tax rate for the year 2021 would approximate 31 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.

The net 0 percent U.S.

estimated effective tax rate for the year 2021 includes approximately $175 million of valuation allowance reversal related to an expected $850 million use of U.S.

federal net operating losses during 2021.

Responsible Production

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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 have a long history of environmental, social and governance (ESG) programs and are continuously striving to improve and respond to evolving stakeholder expectations.

This report marked our 20th year of reporting on our sustainability progress and our first year reporting in alignment with the Sustainability Accounting Standards Board Metals & Mining 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;

The Copper Mark is a robust assurance framework that demonstrates the copper industry's responsible production practices and contribution to the United Nations Sustainable Development Goals.

To date, we 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.

In June 2021, we commenced the Copper Mark assessment process at five additional operating sites, including Bagdad, Chino, Tyrone, Safford and Sierrita.

Each of these sites will complete an external assurance process to assess conformance with the Copper Mark’s 32 ESG requirements, with a goal of being awarded the Copper Mark.

We have future plans to validate all of our copper producing sites with the Copper Mark requirements.

North America Copper Mines

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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.

Our North America operating sites continue to achieve 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 current operations are exceeding initial design capacity approximating 200 million pounds annually.

We continue to advance opportunities to increase operating rates and for development of the large-scale sulfide resource at Lone Star, including evaluating a potential additional incremental oxide expansion to increase volumes to over 300 million pounds of copper per year.

We have substantial resources in the U.S., primarily associated with existing mining operations.

Evaluation of project options for future growth are under way.

In addition to Lone Star, we are actively advancing studies to add new capacity at our long-lived Bagdad operation in northwest Arizona.

Operating Data.

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

Three Months Ended March 31,

Three Months Ended June 30, Six months ended June 30,

2021 2020 2021 2020

Operating Data, Net of Joint Venture Interests

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Sales, excluding purchases 389 368 697 723

Average realized price per pound $ 3.88 $ 2.56

Average realized price per pound $ 4.42 $ 2.42 a

$ 4.19 $ 2.50 a

Molybdenum (millions of recoverable pounds)

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Copper production (millions of recoverable pounds) 155 176 306 354

Includes reductions to average realized prices of $0.06 per pound of copper in second-quarter 2020 and $0.03 per pound of copper for the first six months of 2020 related to forward sales contracts covering 150 million pounds of copper sales for May and June 2020 at a fixed price of $2.34 per pound.

There are no remaining forward sales contracts.

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.

Our consolidated copper sales volumes from North America totaled 389 million pounds in second-quarter 2021, 368 million pounds in second-quarter 2020, 697 million pounds for the first six months of 2021 and 723 million pounds for the first six months of 2020.

The changes in sales volumes for the 2021 periods, compared with the 2020 periods, primarily reflect timing of shipments.

North America copper sales are estimated to approximate 1.47 billion pounds for the year 2021, compared with 1.4 billion pounds for the year 2020.

Unit Net Cash Costs.

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

Gross 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.

Gross Profit per Pound of Copper and Molybdenum

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

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

Three Months Ended March 31,

Three Months Ended June 30,

By- Product Method Co-Product Method By- Product Method Co-Product Method

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Copper Molyb-

Revenues, excluding adjustments $ 3.88 $ 3.88 $ 10.49 $ 2.56 $ 2.56 $ 9.69

Revenues, excluding adjustments $ 4.42 $ 4.42 $ 11.75 $ 2.42 b

$ 2.42 $ 8.33

Site production and delivery, before net noncash

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Noncash and other costs, net 0.08

0.08 0.06 0.09 c

Total unit costs 2.31 2.43 7.47 1.87 1.90 7.39

Revenue adjustments, primarily for pricing

on prior period open sales

0.02 0.02 — 0.02 0.02 —

Gross profit per pound $ 2.13 $ 2.01 $ 4.28 $ 0.57 $ 0.54 $ 0.94

Copper sales (millions of recoverable pounds) 389 389 368 368

Molybdenum sales (millions of recoverable pounds) a

Six months ended June 30,

By- Product Method Co-Product Method By- Product Method Co-Product Method

Copper Molyb-

Revenues, excluding adjustments $ 4.19 $ 4.19 $ 11.12 $ 2.50 b

$ 2.50 $ 8.99

Site production and delivery, before net noncash

and other costs shown below

2.09 1.96 6.76 2.00 1.85 7.81

By-product credits (0.27) — — (0.19) — —

Treatment charges 0.09 0.09 — 0.10 0.10 —

Unit net cash costs 1.91 2.05 6.76 1.91 1.95 7.81

DD&A 0.26 0.24 0.51 0.25 0.23 0.64

Metals inventory adjustments — — — 0.08 0.07 —

Noncash and other costs, net 0.11 0.11 0.06 0.09 c

Total unit costs 2.28 2.40 7.33 2.33 2.34 8.60

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0.01 0.01 — (0.03) (0.03) —

Gross profit (loss) per pound $ 1.66 $ 1.54 $ 3.30 $ (0.31) $ (0.30) $ (0.20)

Gross profit per pound $ 1.92 $ 1.80 $ 3.79 $ 0.14 $ 0.13 $ 0.39

Copper sales (millions of recoverable pounds) 697 697 722 722

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

There are no remaining forward sales contracts.

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

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

Average unit net cash costs (net of by-product credits) for the North America copper mines of $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.

Average unit net cash costs (net of by-product credits) for the North America copper mines of $1.97 per pound of copper in second-quarter 2021 were higher than unit net cash costs of $1.78 per pound in second-quarter 2020, primarily reflecting costs associated with higher mining and milling rates and higher maintenance and input costs, partly offset by higher by-product credits.

Average unit net cash costs (net of by-product credits) of $1.91 per pound of copper for first six months of 2021 approximated average unit net cash costs for the first six months of 2020.

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.

Average unit net cash costs (net of by-product credits) for our North America copper mines are expected to approximate $1.91 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 $16.00 per pound for the second half of 2021.

North America’s average unit net cash costs for the year 2021 would change by approximately $0.02 per pound for each $2 per pound change in the average price of molybdenum for the second half of 2021.

South America Mining

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

Cerro Verde Labor Agreement.

During second-quarter 2021, Cerro Verde reached agreements with 57 percent of its hourly employees (including early agreement of a new four-year collective labor agreement (CLA) with one of its three unions) and incurred nonrecurring charges totaling $69 million associated with these agreements.

Negotiations for new CLAs for Cerro Verde's remaining hourly employees are ongoing.

The current CLA is scheduled to expire on August 31, 2021.

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.

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.

Cerro Verde's concentrator facilities have continued to perform well with milling rates averaging 382,100 metric tons of ore per day for the first six months of 2021.

Cerro Verde expects milling rates to return to pre-COVID-19 pandemic levels of approximately 400,000 metric tons of ore per day in 2022.

El Abra continues to implement plans to increase operating rates to pre-COVID-19 pandemic levels, subject to ongoing monitoring of public health conditions in Chile.

Stacking rates at El Abra averaged 94,200 metric tons per day in second-quarter 2021, approximately 25 percent higher than second-quarter 2020.

Increased stacking rates are expected to result in incremental annual production of approximately 70 million pounds of copper beginning in mid-2022, compared with 2020 levels.

A new leach pad is under construction to accommodate planned stacking rates for the next several years.

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.

Technical and economic studies continue to be evaluated to determine the optimal scope and timing for the sulfide project.

We are monitoring potential changes in government fiscal matters in Chile and will defer major investment decisions pending clarity on these matters.

Operating Data.

Following is summary consolidated operating data for South America mining:

Three Months Ended March 31,

Three Months Ended June 30, Six months ended June 30,

2021 2020 2021 2020

Copper (millions of recoverable pounds)

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Ore milled (metric tons per day) 374,100 251,800 b

382,100 300,700 b

Average ore grade (percent):

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

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.

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

Our consolidated copper sales volumes from South America totaled 230 million pounds in second-quarter 2021, 219 million pounds in second-quarter 2020, 489 million pounds for the first six months of 2021 and 466 million pounds for the first six months of 2020.

Higher copper sales volumes in the 2021 periods, compared with the 2020 periods, primarily reflect higher milling rates at Cerro Verde, partly offset by timing of shipments.

Copper sales from South America mining are expected to approximate 1.05 billion pounds for the year 2021, slightly higher than the year 2020.

Unit Net Cash Costs.

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Three Months Ended March 31,

Three Months Ended June 30,

Method Co-Product

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Revenues, excluding adjustments $ 4.31 $ 4.31 $ 2.67 $ 2.67

Site production and delivery, before net noncash and other costs shown below 2.01 1.90 2.00 1.85

Site production and delivery, before net noncash and other costs shown below 2.48 a

2.30 1.64 1.57

By-product credits (0.31) — (0.11) —

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Metals inventory adjustments — — (0.26) (0.26)

Noncash and other costs, net 0.04 0.03 0.12 a

Noncash and other costs, net 0.08 0.07 0.32 b

Total unit costs 2.79 2.88 2.21 2.20

Revenue adjustments, primarily for pricing on prior period open sales 0.38 0.38 0.20 0.20

Gross profit per pound $ 1.90 $ 1.81 $ 0.66 $ 0.67

Copper sales (millions of recoverable pounds) 230 230 219 219

Six months ended June 30,

Method Co-Product

Method By-Product

Method Co-Product

Revenues, excluding adjustments $ 4.28 $ 4.28 $ 2.57 $ 2.57

Site production and delivery, before net noncash and other costs shown below 2.23 a

2.09 1.84 1.72

By-product credits (0.26) — (0.14) —

Treatment charges 0.13 0.13 0.15 0.15

Royalty on metals 0.01 0.01 — —

Unit net cash costs 2.11 2.23 1.85 1.87

DD&A 0.40 0.37 0.45 0.42

Metals inventory adjustments — — 0.01 0.01

Noncash and other costs, net 0.06 0.05 0.21 b

Total unit costs 2.57 2.65 2.52 2.50

Revenue adjustments, primarily for pricing on prior period open sales 0.20 0.20 (0.15) (0.15)

Gross profit (loss) per pound $ 1.91 $ 1.83 $ (0.10) $ (0.08)

Copper sales (millions of recoverable pounds) 489 489 466 466

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.

Includes $0.30 per pound of copper in second-quarter 2021 and $0.14 per pound of copper for the first six months of 2021 associated with nonrecurring labor-related charges at Cerro Verde Verde for agreements reached with 57 percent of its hourly employees.

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

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

Average unit net cash costs (net of by-product credits) 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.

Average unit net cash costs (net of by-product credits) for the South America copper mines were $2.31 per pound of copper in second-quarter 2021, $1.68 per pound of copper in second-quarter 2020, $2.11 per pound of copper for the first six months of 2021 and $1.85 per pound of copper for the first six months of 2020.

Higher unit net cash costs in the 2021 periods, compared with the 2020 periods, primarily reflect increased mining and milling activities and non-recurring labor-related costs at Cerro Verde ($0.30 per pound in second-quarter 2021 and $0.14 per pound for the first six months of 2021), partly offset by higher volumes.

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

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

Average unit net cash costs (net of by-product credits) for South America mining are expected to approximate $1.94 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.

Average unit net cash costs (net of by-product credits) for South America mining are expected to approximate $2.02 per pound of copper for the year 2021, based on current sales volume and cost estimates and assuming an average price of $16.00 per pound of molybdenum for the second half of 2021.

Indonesia Mining

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PT-FI’s results are consolidated in our financial statements.

PT-FI continues to operate with protocols designed to protect the health and safety of its workforce during the COVID-19 pandemic.

During second-quarter 2021, PT-FI began to administer vaccines to its workforce and expects this program to accelerate through the second half of 2021.

Following an increase in COVID-19 cases in Indonesia, PT-FI has recently reinstituted heightened protocols and travel restrictions to protect the health of its workforce and the surrounding community.

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.

During first six months of 2021, 46 percent of PT-FI’s concentrate production was sold to PT Smelting (PT-FI’s 39.5-percent owned copper smelter and refinery in Gresik, Indonesia).

Operating and Development Activities.

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

First-quarter 2021 highlights include:

• Production approximated 75 percent of the projected ultimate annualized level.

Second-quarter 2021 highlights include:

• Production approximated 78 percent of the projected ultimate annualized level and is expected to reach 100 percent by year-end 2021.

• A total of 41 new drawbells were constructed at the Grasberg Block Cave and Deep Mill Level Zone (DMLZ) underground mines, bringing cumulative open drawbells to over 460.

• Combined average production from the Grasberg Block Cave and DMLZ underground mines approximated 118,300 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.

During second-quarter 2021, Grasberg Block Cave achieved a daily record of 107,000 metric tons of ore per day.

The successful completion of this ramp up is expected to enable PT-FI to generate average annual production of 1.55 billion pounds of copper and 1.6 million ounces of gold for the next several years 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, 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 2021 and 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 2021 and 2022, will be reflected as an investing activity in our cash flow statement, and contributions from PT Inalum will be reflected as a financing activity.

Indonesia Smelter.

As discussed in Note 13 of our 2020 Form 10-K, PT-FI committed to construct new domestic smelting capacity totaling 2 million metric tons of concentrate per year by December 2023.

To fulfill its obligation for new domestic smelter capacity in Indonesia, PT-FI is planning the following:

• Expansion of annual capacity at PT Smelting by 300,000 metric tons of concentrate, a 30 percent increase.

PT-FI is advancing agreements with the majority owner of PT Smelting to implement the expansion plans with a target completion date of year-end 2023.

PT-FI would fund the cost of the expansion, estimated to approximate $250 million, and increase its ownership in PT Smelting to a majority ownership interest.

• Construction of a new greenfield smelter in Gresik, Indonesia with a capacity to process approximately 1.7 million metric tons of concentrate per year.

In July 2021, PT-FI awarded a construction contract to Chiyoda with an estimated contract cost of $2.8 billion.

The smelter construction is expected to be completed as soon as feasible in 2024, which is dependent on no further pandemic-related disruptions.

• Construction of a precious metals refinery to process gold and silver from PT Smelting and the new greenfield smelter in Gresik, at an estimated cost of $250 million.

All costs of smelter development in Indonesia will be shared 49 percent by FCX and 51 percent by PT Inalum, and will be largely offset by a phase-out of the 5 percent export duty currently paid to the Indonesia government as well as the tax deductibility of smelter costs by PT-FI.

In July 2021, PT-FI entered into a $1 billion, five-year, unsecured credit facility to advance these project and additional debt financing is being evaluated.

Refer to Note 5 and “Capital Resources and Liquidity” for further discussion of the credit facility.

Operating Data.

Following is summary consolidated operating data for Indonesia mining:

Three Months Ended March 31,

Operating Data

Three Months Ended June 30, Six months ended June 30,

2021 2020 2021 2020

Copper (millions of recoverable pounds)

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Average realized price per ounce $ 1,795 $ 1,748 $ 1,785 $ 1,709

Operating Data

Ore extracted and milled (metric tons per day):

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Grasberg open pit — — — 3,600 b

Total 124,100 c

Other 5,700 (400) 3,000 —

Total 143,000 81,900

133,600 77,000

Average ore grades:

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Gold 75.9 78.3 77.4 77.6

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

Includes ore from development activities that result in metal production.

Represents ore from the Grasberg open-pit stockpiles.

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.

Our consolidated copper and gold sales from PT-FI totaled 310 million pounds and 302 thousand ounces in second quarter 2021 and 568 million pounds and 558 thousand ounces for the first six months of 2021, compared with copper and gold sales of 172 million pounds and 180 thousand ounces in second-quarter 2020 and 299 million pounds and 319 thousand ounces for the first six months of 2020.

The increase in sales volumes for the 2021 periods primarily reflects the ramp-up of underground mining at PT-FI.

Consolidated sales volumes from PT-FI are expected to approximate 1.33 billion pounds of copper and 1.3 million ounces of gold for the year 2021, compared with 0.8 billion pounds of copper and 0.8 million ounces of gold for the year 2020.

Unit Net Cash Costs.

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

Gross 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.

Gross Profit per Pound of Copper and per Ounce of Gold

The following table summarizes the unit net cash costs and gross profit per pound of copper and per ounce of gold at our Indonesia mining operations.

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

Three Months Ended March 31,

Three Months Ended June 30,

By-Product Method Co-Product Method By-Product Method Co-Product Method

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Revenues, excluding adjustments $ 4.27 $ 4.27 $ 1,795 $ 2.67 $ 2.67 $ 1,748

Site production and delivery, before net noncash and other (credits) costs shown below 1.48 1.02 438 2.68 1.49 1,052

Site production and delivery, before net noncash and other costs shown below 1.54 1.07 449 2.00 1.17 766

Gold and silver credits (1.93) — — (1.95) — —

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DD&A 0.79 0.55 232 0.72 0.42 276

Noncash and other (credits) costs, net (0.03) a

(0.02) (10) 0.21

Noncash and other costs, net 0.04

0.03 11 0.05 a

Total unit costs 1.08 2.10 870 1.33 1.91 1,264

Revenue adjustments, primarily for pricing on prior period open sales 0.28 0.28 53 0.07 0.07 41

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

PT Smelting intercompany loss (0.13) (0.09) (39) (0.15) (0.09) (57)

Gross profit per pound/ounce $ 3.34 $ 2.36 $ 939 $ 1.26 $ 0.74 $ 468

Copper sales (millions of recoverable pounds) 310 310 172 172

Gold sales (thousands of recoverable ounces) 302 180

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.

Six Months Ended June 30,

By-Product Method Co-Product Method By-Product Method Co-Product Method

Copper Gold Copper Gold

Revenues, excluding adjustments $ 4.29 $ 4.29 $ 1,785 $ 2.54 $ 2.54 $ 1,709

Site production and delivery, before net noncash and other costs shown below 1.51 1.05 439 2.29 1.31 884

Gold and silver credits (1.86) — — (1.91) — —

Treatment charges 0.24 0.17 71 0.28 0.17 110

Export duties 0.13 0.09 37 0.07 0.04 25

Royalty on metals 0.25 0.18 68 0.15 0.08 58

Unit net cash costs 0.27 1.49 615 0.88 1.60 1,077

DD&A 0.78 0.55 228 0.75 0.43 289

Noncash and other costs, net 0.01 b

Total unit costs 1.06 2.04 844 1.75 2.09 1,411

Revenue adjustments, primarily for pricing on prior period open sales 0.12 0.12 (8) (0.07) (0.07) 14

PT Smelting intercompany loss (0.16) (0.11) (46) — — —

Gross profit per pound/ounce $ 3.19 $ 2.26 $ 887 $ 0.72 $ 0.38 $ 312

Copper sales (millions of recoverable pounds) 568 568 299 299

Gold sales (thousands of recoverable ounces) 558 319

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

Includes credits of $0.05 per pound of copper associated with adjustments to prior year treatment and refining charges and charges of $0.03 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.

PT-FI’s unit net cash costs (including gold and silver credits) of $0.25 per pound of copper in second-quarter 2021 and $0.27 per pound for the first six months of 2021, were lower than $0.56 per pound in second-quarter 2020 and $0.88 per pound for the first six months of 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.

PT-FI’s export duties totaled $44 million in second-quarter 2021, $16 million in second-quarter 2020, $73 million for the first six months of 2021 and $20 million for the first six months of 2020.

PT-FI will continue to pay export duties until development progress for new domestic smelting with an annual capacity of 2 million metric tons of concentrate exceeds 50 percent.

PT-FI’s royalties totaled $80 million in second-quarter 2021, $25 million in second-quarter 2020, $140 million for the first six months of 2021 and $44 million for the first six months of 2020.

The increase in export duties and royalties for the 2021 periods, compared with the 2020 periods, primarily reflect higher sales volumes and copper 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.

DD&A per pound of copper under the by-product method was $0.79 per pound in second-quarter 2021 and $0.78 per pound for the first six months of 2021, compared with $0.72 per pound in second-quarter 2020 and $0.75 per pound for the first six months of 2020.

The increase in the rate per pound of copper for the 2021 periods, compared with the 2020 periods, primarily reflects the impact of an ongoing ramp up of underground mining, which resulted in significantly higher copper production and sales volumes and a related unit of production depreciation rate increase resulting from significant 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.

PT Smelting intercompany loss represents the change in the deferral of PT-FI’s profit on sales to PT Smelting (25 percent prior to April 30, 2021, and 39.5 percent thereafter).

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

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.

Assuming an average gold price of $1,800 per ounce for the second half 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 $0.19 per pound of copper for the year 2021.

PT-FI's unit net cash costs for the year 2021 would change by approximately $0.06 per pound for each $100 per ounce change in the average price of gold for the second half of 2021.

Molybdenum Mines

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Operating and Development Activities.

Production from the Molybdenum mines totaled 7 million pounds of molybdenum in both first-quarter 2021 and first-quarter 2020.

Production from the Molybdenum mines of 7 million pounds of molybdenum in second-quarter 2021 and 14 million pounds for the first six months of 2021, was slightly higher than production of 6 million pounds of molybdenum in second-quarter 2020 and 13 million pounds for the first six months of 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.

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

Average unit net cash costs for our Molybdenum mines of $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.

Average unit net cash costs for our Molybdenum mines of $8.14 per pound of molybdenum in second-quarter 2021 and $8.53 per pound for the first six months of 2021 were lower than average unit net cash costs of $8.97 per pound in second-quarter 2020 and $9.52 per pound for the first six months of 2020, primarily reflecting higher volumes.

Based on current sales volume and cost estimates, average unit net cash costs for the Molybdenum mines are expected to approximate $9.65 per pound of molybdenum for the year 2021.

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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).

PT-FI also has a 39.5 percent ownership interest in a smelter and refinery in Gresik, Indonesia (PT Smelting).

Treatment charges for smelting and refining copper concentrate consist of a base rate per pound of copper and per ounce of gold and are generally fixed.

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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.

Our Miami smelter processes concentrate produced by our U.S.

mines and also provides acid for copper leaching operations.

During the first six months of 2021, we incurred charges totaling $87 million associated with a major maintenance turnaround at our Miami smelter, which were higher than original estimates as a result of extended downtime to address additional required maintenance work, the COVID-19 pandemic and weather events.

The next major maintenance turnaround is scheduled for the first half of 2024.

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.

During the first six months of 2021, Atlantic Copper’s concentrate purchases included 38 percent from our copper mining operations and 62 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.

During the first six months of 2021, PT-FI supplied the substantial majority of PT Smelting’s concentrate requirements.

In July 2021, PT Smelting received a six-month extension of its anodes slimes export license, which currently expires December 30, 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 thereafter) 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 $(99) million ($(81) million to net income attributable to common stock) in second-quarter 2021 and $(17) million ($(6) million to net income attributable to common stock) in second-quarter 2020, $(185) million ($(145) million to net income attributable to common stock) for the first six months of 2021 and $(6) million ($1 million to net loss attributable to common stock) for the first six months of 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 $207 million at June 30, 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.

We currently estimate that approximately 40 percent of the net deferred profit balance will be recognized as income in the second half of 2021.

CAPITAL RESOURCES AND LIQUIDITY

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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 generated significant cash flows during the first six months of 2021, reflecting strong operating and financial performance and favorable market conditions.

This strong performance allowed us to achieve the balance sheet targets outlined in our financial policy discussed below earlier than originally projected.

Accordingly, we are well positioned to increase cash returns to shareholders and for investments in long-term growth.

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.

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 that are progressing on schedule.

We are also evaluating opportunities in North America and South America 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 availability under our revolving credit facility, will be adequate to meet our operating, investing and financing needs.

Subject to future commodity prices for copper, gold, and molybdenum, our projected consolidated operating cash flows of $7.5 billion for the year 2021 significantly exceed our expected consolidated capital expenditures of $2.2 billion (which excludes capital expenditures for smelter development in Indonesia) and other cash requirements for the year, including common stock dividends and noncontrolling interest distributions.

We plan to fund our smelter development projects in Indonesia with PT-FI’s new $1 billion, unsecured bank credit facility (see “Debt” below and Note 5) and additional debt financing.

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.

At June 30, 2021, we had $9.8 billion in liquidity, comprised of $6.3 billion in consolidated cash and $3.5 billion of availability under our revolving credit facility.

Financial Policy.

In February 2021, our Board adopted a new 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 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

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.

Available cash flows for performance-based payout distributions in excess of the base dividend will be assessed by the Board at least annually.

With the recent achievement of our net debt target, we expect the Board to consider the amount of additional cash returns to shareholders following its 2021 annual results.

As of June 30, 2021, our consolidated net debt totaled $3.4 billion, a $2.7 billion reduction from December 31, 2020 (refer to “Net Debt” for further discussion).

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):

and international components of consolidated cash and cash equivalents available to the parent company, net of noncontrolling interests’ share, taxes and other costs at June 30, 2021 (in billions):

Cash at domestic companies $ 4.1

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Cash, net of noncontrolling interests’ share 5.5

Withholding taxes — a

Withholding taxes (0.1)

Net cash available $ 5.4

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.

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

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.

At June 30, 2021, our consolidated debt totaled $9.7 billion, with a weighted-average interest rate of 4.6 percent.

We had no borrowings outstanding and $8 million in letters of credit issued under our revolving credit facility, resulting in availability of approximately $3.5 billion.

On July 19, 2021, PT-FI entered into a $1 billion, five-year, unsecured bank credit facility (consisting of a $667 million term loan and a $333 million revolving credit facility ) .

Amounts may be drawn under the term loan within the first three years.

The loans mature in July 2026 and bear interest at the London Interbank Offered Rate plus a margin of 1.875% or 2.125%, as defined in the agreement.

Refer to Note 5 for further discussion of the above items.

We have $1.1 billion in maturities through June 2022, including our 3.55% Senior Notes ($0.5 billion due March 2022) and the final maturity of the Cerro Verde Term Loan ($0.5 billion due June 2022).

We do not have any other senior note maturities until 2023.

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.

We reported consolidated cash provided by operating activities of $3.5 billion (including $0.2 billion of working capital and other sources) for the first six months of 2021 and $453 million (including $0.1 billion from working capital and other sources) for the first six months of 2020.

Higher operating cash flows for the first six months of 2021, compared with the first six months of 2020, primarily reflect higher copper prices and sales volumes.

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.

Capital expenditures, including capitalized interest, totaled $0.8 billion for the first six months of 2021, including approximately $0.6 billion for major projects primarily associated with underground development activities in the Grasberg minerals district.

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

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.

Proceeds from sales of assets totaled $16 million for the first six months of 2021 and $116 million for the first six months of 2020, primarily associated with the contingent consideration of $60 million from the 2016 sale of TF Holdings Limited and the collection of $45 million related to the 2019 sale of the Timok exploration assets in Serbia.

Acquisition of Minority Interest in PT Smelting.

On April 30, 2021, PT-FI acquired 14.5 percent of the outstanding common stock of PT Smelting for $33 million, increasing its ownership interest from 25 percent to 39.5 percent.

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.

Net repayments of debt totaled $19 million for the first six months of 2021 and net borrowings totaled $58 million for the first six months of 2020.

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

We recorded losses on early extinguishment of debt totaling $41 million for the first six months of 2020 related to these transactions.

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.

We paid cash dividends on our common stock totaling $111 million for the first six months of 2021 and $73 million for the first six months of 2020.

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

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 paid to noncontrolling interests totaled $93 million for the first six months of 2021.

There were no cash dividends or distributions to noncontrolling interests paid during the first six months of 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.

We received equity contributions totaling $88 million for the first six months of 2021 and $74 million for the first six months of 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.

Following an increase in our stock price during 2021, proceeds from exercised stock options totaled $184 million and payments for related employee taxes totaled $19 million for the first six months of 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.

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.

The smelter construction is expected to be completed as soon as feasible in 2024, which is dependent on no further pandemic-related disruptions.

There have been no other material changes in our contractual obligations since December 31, 2020.

Refer to Part II, Items 7.

in our 2020 Form 10-K, for information regarding our contractual obligations.

CONTINGENCIES

3 unchanged sentences

There have been no material changes to our environmental and asset retirement obligations since December 31, 2020.

Refer to Note 8 for updates associated with our Newtown Creek environmental obligation.

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.

1 unchanged sentence

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.

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.

2 unchanged sentences

There were no significant updates to previously reported accounting standards included in Note 1 of our 2020 Form 10-K.

Net debt, which we define as consolidated debt less consolidated cash and cash equivalents, is intended to provide investors with information related to the performance-based payout framework in our financial policy, which requires achievement of a net debt target in the range of $3 billion to $4 billion (excluding project debt for additional smelting capacity in Indonesia).

This information differs from consolidated debt determined in accordance with U.S.

GAAP and should not be considered in isolation or as a substitute for consolidated debt determined in accordance with U.S.

Our net debt follows, which may not be comparable to similarly titled measures reported by other companies (in millions):

June 30, 2021 December 31, 2020

Current portion of debt $ 1,057 $ 34

Long-term debt, less current portion 8,638 9,677

Consolidated debt 9,695 9,711

consolidated cash and cash equivalents 6,313 3,657

Net debt $ 3,382 $ 6,054

PRODUCT REVENUES AND PRODUCTION COSTS

9 unchanged sentences

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).

Noncash and other costs, which are removed from site production and delivery costs in the calculation of unit net cash costs, consist of items such as stock-based compensation costs, long-lived asset impairments, idle facility costs, restructuring and/or unusual charges.

As discussed above, gold, molybdenum and other metal revenues at copper mines are reflected as credits against site production and delivery costs in the by-product method.

1 unchanged sentence

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

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

(In millions) By-Product Co-Product Method

44 unchanged sentences

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

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

(In millions) By-Product Co-Product Method

Method Copper Molybdenum a

Revenues, excluding adjustments $ 906 $ 906 $ 77 $ 25 $ 1,008

Revenues, excluding adjustments $ 888 c

$ 888 $ 71 $ 18 $ 977

Site production and delivery, before net noncash

6 unchanged sentences

Metals inventory adjustments (89) (89) — — (89)

Noncash and other costs, net 34 29 2 3 34

Noncash and other costs, net 36 d

686 699 63 13 775

1 unchanged sentence

on prior period open sales 6 6 — — 6

Gross loss $ (110) $ (105) $ (2) $ (3) $ (110)

Gross profit $ 208 $ 195 $ 8 $ 5 $ 208

Copper sales (millions of recoverable pounds) 368 368

Molybdenum sales (millions of recoverable pounds) a

Gross loss per pound of copper/molybdenum:

Revenues, excluding adjustments $ 2.56 $ 2.56 $ 9.69

Gross profit per pound of copper/molybdenum:

Revenues, excluding adjustments $ 2.42 c

$ 2.42 $ 8.33

Site production and delivery, before net noncash

6 unchanged sentences

Metals inventory adjustments (0.24) (0.24) —

Noncash and other costs, net 0.10 0.09 0.23

Noncash and other costs, net 0.09 d

Total unit costs

2 unchanged sentences

on prior period open sales 0.02 0.02 —

Gross loss per pound $ (0.31) $ (0.30) $ (0.20)

Gross profit per pound $ 0.57 $ 0.54 $ 0.94

Reconciliation to Amounts Reported

7 unchanged sentences

North America copper mines 988 787 89 (89)

Other mining e

2,985 2,461 254 (55)

Corporate, other & eliminations (919) (854) 15 5

As reported in our consolidated financial statements $ 3,054 $ 2,394 $ 358 $ (139)

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

Includes gold and silver product revenues and production costs.

Includes reductions to revenues and average realized prices totaling $24 million ($0.06 per pound of copper) related to forward sales contracts covering 150 million pounds of copper sales for May and June 2020 at a fixed price of $2.34 per pound.

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

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

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

Six months ended June 30, 2021

(In millions) By-Product Co-Product Method

Method Copper Molybdenum a

Revenues, excluding adjustments $ 2,919 $ 2,919 185 67 3,171

Site production and delivery, before net noncash

and other costs shown below 1,459 1,369 113 40 1,522

By-product credits (189) — — — —

Treatment charges 63 60 — 3 63

Net cash costs 1,333 1,429 113 43 1,585

DD&A 181 169 8 4 181

Noncash and other costs, net 73 71 1 1 73

Total costs 1,587 1,669 122 48 1,839

Other revenue adjustments, primarily for pricing

on prior period open sales 7 7 — — 7

Gross profit $ 1,339 $ 1,257 $ 63 $ 19 $ 1,339

Copper sales (millions of recoverable pounds) 697 697

Molybdenum sales (millions of recoverable pounds) a

Gross profit per pound of copper/molybdenum:

Revenues, excluding adjustments $ 4.19 $ 4.19 $ 11.12

Site production and delivery, before net noncash

and other costs shown below 2.09 1.96 6.76

By-product credits (0.27) — —

Treatment charges 0.09 0.09 —

Unit net cash costs 1.91 2.05 6.76

DD&A 0.26 0.24 0.51

Noncash and other costs, net 0.11 0.11 0.06

Total unit costs 2.28 2.40 7.33

Other revenue adjustments, primarily for pricing

on prior period open sales 0.01 0.01 —

Gross profit per pound $ 1.92 $ 1.80 $ 3.79

Reconciliation to Amounts Reported

Revenues and Delivery DD&A

Totals presented above $ 3,171 $ 1,522 $ 181

Treatment charges (17) 46 —

Noncash and other costs, net — 73 —

Other revenue adjustments, primarily for pricing

on prior period open sales 7 — —

Eliminations and other 31 33 —

North America copper mines 3,192 1,674 181

Other mining c

5 unchanged sentences

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

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

Six months ended June 30, 2020

(In millions) By-Product Co-Product Method

Method Copper Molybdenum a

Revenues, excluding adjustments $ 1,799 c

$ 1,799 147 44 1,990

Site production and delivery, before net noncash

and other costs shown below 1,439 1,333 128 28 1,489

By-product credits (141) — — — —

Treatment charges 76 73 — 3 76

Net cash costs 1,374 1,406 128 31 1,565

DD&A 180 166 10 4 180

Metals inventory adjustments 56 54 — 2 56

Noncash and other costs, net 69 d

Total costs 1,679 1,691 140 39 1,870

Other revenue adjustments, primarily for pricing

on prior period open sales (22) (22) — — (22)

Gross profit $ 98 $ 86 $ 7 $ 5 $ 98

Copper sales (millions of recoverable pounds) 722 722

Molybdenum sales (millions of recoverable pounds) a

Gross profit per pound of copper/molybdenum:

Revenues, excluding adjustments $ 2.50 c

$ 2.50 $ 8.99

Site production and delivery, before net noncash

and other costs shown below 2.00 1.85 7.81

By-product credits (0.19) — —

Treatment charges 0.10 0.10 —

Unit net cash costs 1.91 1.95 7.81

DD&A 0.25 0.23 0.64

Metals inventory adjustments 0.08 0.07 —

Noncash and other costs, net 0.09 d

Total unit costs 2.33 2.34 8.60

Other revenue adjustments, primarily for pricing

on prior period open sales (0.03) (0.03) —

Gross profit per pound $ 0.14 $ 0.13 $ 0.39

Reconciliation to Amounts Reported

Production Inventory

Revenues and Delivery DD&A Adjustments

Totals presented above $ 1,990 $ 1,489 $ 180 $ 56

Treatment charges (10) 66 — —

Noncash and other costs, net — 69 — —

Other revenue adjustments, primarily for pricing

on prior period open sales (22) — — —

Eliminations and other 15 23 1 —

North America copper mines 1,973 1,647 181 56

Other mining e

5,576 4,934 488 9

Corporate, other & eliminations (1,697) (1,642) 30 18

As reported in our consolidated financial statements $ 5,852 $ 4,939 $ 699 $ 83

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

Includes gold and silver product revenues and production costs.

Includes reductions to revenues and average realized prices totaling $24 million ($0.03 per pound of copper) related to forward sales contracts covering 150 million pounds of copper sales for May and June 2020 at a fixed price of $2.34 per pound.

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

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

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

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

(In millions) By-Product Co-Product Method

2 unchanged sentences

Site production and delivery, before net noncash

and other costs shown below 520 491 39 530

and other costs shown below 573 b

By-product credits (72) — — —

12 unchanged sentences

Site production and delivery, before net noncash

and other costs shown below 2.01 1.90

and other costs shown below 2.48 b

By-product credits (0.31) —

18 unchanged sentences

South America mining 1,133 600 94

Other mining b

Other mining c

6,241 3,975 374

3 unchanged sentences

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

Includes nonrecurring charges totaling $69 million ($0.30 per pound of copper) associated with labor-related charges at Cerro Verde.

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

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

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

(In millions) By-Product Co-Product Method

13 unchanged sentences

on prior period open sales 44 44 — 44

Gross loss $ (190) $ (184) $ (6) $ (190)

Gross profit (loss) $ 145 $ 146 $ (1) $ 145

Copper sales (millions of recoverable pounds) 219 219

13 unchanged sentences

on prior period open sales 0.20 0.20

Gross loss per pound $ (0.77) $ (0.74)

Gross profit per pound $ 0.66 $ 0.67

Reconciliation to Amounts Reported Metals

15 unchanged sentences

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

Includes COVID-19 related costs of $20 million ($0.08 per pound of copper), primarily associated with idle facility costs at Cerro Verde and contract cancellation costs at El Abra.

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

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

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

Six months ended June 30, 2021

(In millions) By-Product Co-Product Method

Method Copper Other a

Revenues, excluding adjustments $ 2,093 $ 2,093 $ 147 $ 2,240

Site production and delivery, before net noncash

and other costs shown below 1,092 b

1,022 91 1,113

By-product credits (126) — — —

Treatment charges 64 64 — 64

Royalty on metals 4 4 — 4

Net cash costs 1,034 1,090 91 1,181

DD&A 195 181 14 195

Noncash and other costs, net 28 26 2 28

Total costs 1,257 1,297 107 1,404

Other revenue adjustments, primarily for pricing

on prior period open sales 99 99 — 99

Gross profit $ 935 $ 895 $ 40 $ 935

Copper sales (millions of recoverable pounds) 489 489

Gross profit per pound of copper:

Revenues, excluding adjustments $ 4.28 $ 4.28

Site production and delivery, before net noncash

and other costs shown below 2.23 b

By-product credits (0.26) —

Treatment charges 0.13 0.13

Royalty on metals 0.01 0.01

Unit net cash costs 2.11 2.23

DD&A 0.40 0.37

Noncash and other costs, net 0.06 0.05

Total unit costs 2.57 2.65

Other revenue adjustments, primarily for pricing

on prior period open sales 0.20 0.20

Gross profit per pound $ 1.91 $ 1.83

Reconciliation to Amounts Reported

Revenues and Delivery DD&A

Totals presented above $ 2,240 $ 1,113 $ 195

Treatment charges (64) — —

Royalty on metals (4) — —

Noncash and other costs, net — 28 —

Other revenue adjustments, primarily for pricing

on prior period open sales 99 — —

Eliminations and other (1) (2) —

South America mining 2,270 1,139 195

Other mining c

11,087 7,225 676

Corporate, other & eliminations (2,759) (2,511) 31

As reported in our consolidated financial statements $ 10,598 $ 5,853 $ 902

Includes silver sales of 1.7 million ounces ($26.67 per ounce average realized price).

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

Includes nonrecurring charges totaling $69 million ($0.14 per pound of copper) associated with labor-related charges at Cerro Verde.

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

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

Six months ended June 30, 2020

(In millions) By-Product Co-Product Method

Method Copper Other a

Revenues, excluding adjustments $ 1,199 $ 1,199 $ 86 $ 1,285

Site production and delivery, before net noncash

and other costs shown below 853 800 73 873

By-product credits (66) — — —

Treatment charges 72 72 — 72

Royalty on metals 2 2 — 2

Net cash costs 861 874 73 947

DD&A 210 195 15 210

Metals inventory adjustments 3 3 — 3

Noncash and other costs, net 100 b

Total costs 1,174 1,167 93 1,260

Other revenue adjustments, primarily for pricing

on prior period open sales (70) (70) — (70)

Gross loss $ (45) $ (38) $ (7) $ (45)

Copper sales (millions of recoverable pounds) 466 466

Gross loss per pound of copper:

Revenues, excluding adjustments $ 2.57 $ 2.57

Site production and delivery, before net noncash

and other costs shown below 1.84 1.72

By-product credits (0.14) —

Treatment charges 0.15 0.15

Royalty on metals — —

Unit net cash costs 1.85 1.87

DD&A 0.45 0.42

Metals inventory adjustments 0.01 0.01

Noncash and other costs, net 0.21 b

Total unit costs 2.52 2.50

Other revenue adjustments, primarily for pricing

on prior period open sales (0.15) (0.15)

Gross loss per pound $ (0.10) $ (0.08)

Reconciliation to Amounts Reported

Production Inventory

Revenues and Delivery DD&A Adjustments

Totals presented above $ 1,285 $ 873 $ 210 $ 3

Treatment charges (72) — — —

Royalty on metals (2) — — —

Noncash and other costs, net — 100 — —

Other revenue adjustments, primarily for pricing

on prior period open sales (70) — — —

Eliminations and other — (1) — —

South America mining 1,141 972 210 3

Other mining c

6,408 5,609 459 62

Corporate, other & eliminations (1,697) (1,642) 30 18

As reported in our consolidated financial statements $ 5,852 $ 4,939 $ 699 $ 83

Includes silver sales of 1.5 million ounces ($16.37 per ounce average realized price).

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

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

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

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

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

(In millions) By-Product Co-Product Method

2 unchanged sentences

Site production and delivery, before net noncash

and other credits shown below 383 264 112 7 383

and other costs shown below 476 331 136 9 476

Gold and silver credits (597) — — — —

4 unchanged sentences

DD&A 247 172 70 5 247

Noncash and other credits, net (8) b

Noncash and other costs, net 11 8 3 — 11

Total costs 335 652 263 18 933

Other revenue adjustments, primarily for pricing

on prior period open sales 87 87 16 2 105

PT Smelting intercompany loss (41) (28) (12) (1) (41)

Gross profit $ 1,034 $ 730 $ 284 $ 20 $ 1,034

Copper sales (millions of recoverable pounds) 310 310

Gold sales (thousands of recoverable ounces) 302

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

Revenues, excluding adjustments $ 4.27 $ 4.27 $ 1,795

Site production and delivery, before net noncash

and other costs shown below 1.54 1.07 449

Gold and silver credits (1.93) — —

Treatment charges 0.24 0.16 70

Export duties 0.14 0.10 42

Royalty on metals 0.26 0.19 66

Unit net cash costs 0.25 1.52 627

DD&A 0.79 0.55 232

Noncash and other costs, net 0.04 0.03 11

Total unit costs 1.08 2.10 870

Other revenue adjustments, primarily for pricing

on prior period open sales 0.28 0.28 53

PT Smelting intercompany loss (0.13) (0.09) (39)

Gross profit per pound/ounce $ 3.34 $ 2.36 $ 939

Reconciliation to Amounts Reported

Revenues and Delivery DD&A

Totals presented above $ 1,903 $ 476 $ 247

Treatment charges (75) — —

Export duties (44) — —

Royalty on metals (80) — —

Noncash and other costs, net — 11 —

Other revenue adjustments, primarily for pricing

on prior period open sales 105 — —

PT Smelting intercompany loss — 41 —

Indonesia mining 1,809 528 247

Other mining b

5,565 4,047 221

Corporate, other & eliminations (1,626) (1,508) 15

As reported in our consolidated financial statements $ 5,748 $ 3,067 $ 483

Includes silver sales of 1.4 million ounces ($26.08 per ounce average realized price).

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

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

Three Months Ended June 30, 2020

(In millions) By-Product Co-Product Method

Method Copper Gold Silver a

Revenues, excluding adjustments $ 458 $ 458 $ 315 $ 13 $ 786

Site production and delivery, before net noncash

and other costs shown below 345 201 138 6 345

Gold and silver credits (336) — — — —

Treatment charges 47 27 19 1 47

Export duties 16 10 6 — 16

Royalty on metals 25 13 12 — 25

Net cash costs 97 251 175 7 433

DD&A 124 72 50 2 124

Noncash and other costs, net 8 b

Total costs 229 328 228 9 565

8 unchanged sentences

Site production and delivery, before net noncash

and other credits shown below 1.48 1.02 438

and other costs shown below 2.00 1.17 766

Gold and silver credits (1.95) — —

4 unchanged sentences

DD&A 0.72 0.42 276

Noncash and other credits, net (0.03) b

Noncash and other costs, net 0.05 b

Total unit costs 1.33 1.91 1,264

9 unchanged sentences

Royalty on metals (25) — —

Noncash and other credits, net 31 23 —

Noncash and other costs, net — 8 —

Other revenue adjustments, primarily for pricing

7 unchanged sentences

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

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.

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

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

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

Three Months Ended March 31, 2020

Six months ended June 30, 2021

(In millions) By-Product Co-Product Method

9 unchanged sentences

DD&A 446 310 127 9 446

Noncash and other costs, net 27

Noncash and other costs, net 3 b

Total costs 602 1,158 471 32 1,661

1 unchanged sentence

on prior period open sales 72 72 (4) — 68

PT Smelting intercompany profit 25 14 11 — 25

Gross profit (loss) $ 1 $ (12) $ 13 $ — $ 1

PT Smelting intercompany loss (90) (63) (25) (2) (90)

Gross profit $ 1,815 $ 1,286 $ 495 $ 34 $ 1,815

Copper sales (millions of recoverable pounds) 568 568

Gold sales (thousands of recoverable ounces) 558

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

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

Revenues, excluding adjustments $ 4.29 $ 4.29 $ 1,785

7 unchanged sentences

DD&A 0.78 0.55 228

Noncash and other costs, net 0.21

Noncash and other costs, net 0.01 b

Total unit costs 1.06 2.04 844

1 unchanged sentence

on prior period open sales 0.12 0.12 (8)

PT Smelting intercompany profit 0.20 0.11 77

Gross profit (loss) per pound/ounce $ 0.01 $ (0.10) $ 93

PT Smelting intercompany loss (0.16) (0.11) (46)

Gross profit per pound/ounce $ 3.19 $ 2.26 $ 887

Reconciliation to Amounts Reported

7 unchanged sentences

on prior period open sales 68 — —

PT Smelting intercompany profit — (25) —

PT Smelting intercompany loss — 90 —

Indonesia mining 3,244 983 446

Other mining b

Other mining c

10,113 7,381 425

2 unchanged sentences

Includes silver sales of 2.6 million ounces ($26.05 per ounce average realized price).

Includes credits of $31 million ($0.05 per pound of copper) associated with adjustments to prior year treatment and refining charges and charges of $16 million ($0.03 per pound of copper) associated with a potential settlement of an administrative fine levied by the Indonesia government.

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

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

Six months ended June 30, 2020

(In millions) By-Product Co-Product Method

Method Copper Gold Silver a

Revenues, excluding adjustments $ 760 $ 760 $ 545 $ 22 $ 1,327

Site production and delivery, before net noncash

and other costs shown below 686 393 282 11 686

Gold and silver credits (572) — — — —

Treatment charges 85 49 35 1 85

Export duties 20 11 8 1 20

Royalty on metals 44 25 19 — 44

Net cash costs 263 478 344 13 835

DD&A 225 129 92 4 225

Noncash and other costs, net 35 b

Total costs 523 627 450 18 1,095

Other revenue adjustments, primarily for pricing

on prior period open sales (20) (20) 5 — (15)

Gross profit $ 217 $ 113 $ 100 $ 4 $ 217

Copper sales (millions of recoverable pounds) 299 299

Gold sales (thousands of recoverable ounces) 319

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

Revenues, excluding adjustments $ 2.54 $ 2.54 $ 1,709

Site production and delivery, before net noncash

and other costs shown below 2.29 1.31 884

Gold and silver credits (1.91) — —

Treatment charges 0.28 0.17 110

Export duties 0.07 0.04 25

Royalty on metals 0.15 0.08 58

Unit net cash costs 0.88 1.60 1,077

DD&A 0.75 0.43 289

Noncash and other costs, net 0.12 b

Total unit costs 1.75 2.09 1,411

Other revenue adjustments, primarily for pricing

on prior period open sales (0.07) (0.07) 14

Gross profit per pound/ounce $ 0.72 $ 0.38 $ 312

Reconciliation to Amounts Reported

Revenues and Delivery DD&A

Totals presented above $ 1,327 $ 686 $ 225

Treatment charges (85) — —

Export duties (20) — —

Royalty on metals (44) — —

Noncash and other costs, net — 35 —

Other revenue adjustments, primarily for pricing

on prior period open sales (15) — —

Indonesia mining 1,163 721 225

Other mining c

6,386 5,860 444

Corporate, other & eliminations (1,697) (1,642) 30

As reported in our consolidated financial statements $ 5,852 $ 4,939 $ 699

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

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

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

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

Three Months Ended March 31,

Three Months Ended June 30,

(In millions) 2021 2020

7 unchanged sentences

Total costs 79 82

Gross loss $ (3) $ (15)

Gross profit (loss) $ 16 $ (19)

Molybdenum sales (millions of recoverable pounds) a

Gross loss per pound of molybdenum:

Gross profit (loss) per pound of molybdenum:

Revenues, excluding adjustments a

8 unchanged sentences

Total unit costs 10.73 12.76

Gross loss per pound $ (0.38) $ (2.16)

Gross profit (loss) per pound $ 2.04 $ (3.07)

Reconciliation to Amounts Reported

Production Inventory

Three Months Ended March 31, 2021 Revenues and Delivery DD&A Adjustments

Three Months Ended June 30, 2021 Revenues and Delivery DD&A Adjustments

Totals presented above $ 95 $ 54 $ 17 $ —

2 unchanged sentences

Molybdenum mines 89 56 17 —

Other mining b

Other mining c

7,285 4,519 451 —

1 unchanged sentence

As reported in our consolidated financial statements $ 5,748 $ 3,067 $ 483 $ —

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

Totals presented above $ 63 $ 53 $ 15 $ 1

2 unchanged sentences

Molybdenum mines 58 61 15 1

Other mining b

Other mining c

3,915 3,187 328 (145)

4 unchanged sentences

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

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

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

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

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

Six months ended June 30,

(In millions) 2021 2020

Revenues, excluding adjustments a

Site production and delivery, before net noncash

and other costs shown below 108 117

Treatment charges and other 12 11

Net cash costs 120 128

Metals inventory adjustments 1 5

Noncash and other costs, net 5 10 b

Total costs 158 174

Gross profit (loss) $ 13 $ (34)

Molybdenum sales (millions of recoverable pounds) a

Gross profit (loss) per pound of molybdenum:

Revenues, excluding adjustments a

$ 12.12 $ 10.36

Site production and delivery, before net noncash

and other costs shown below 7.68 8.67

Treatment charges and other 0.85 0.85

Unit net cash costs 8.53 9.52

DD&A 2.27 2.29

Metals inventory adjustments 0.06 0.35

Noncash and other costs, net 0.36 0.79 b

Total unit costs 11.22 12.95

Gross profit (loss) per pound $ 0.90 $ (2.59)

Reconciliation to Amounts Reported

Production Inventory

Six months ended June 30, 2021 Revenues and Delivery DD&A Adjustments

Totals presented above $ 171 $ 108 $ 32 $ 1

Treatment charges and other (12) — — —

Noncash and other costs, net — 5 — —

Molybdenum mines 159 113 32 1

Other mining c

13,198 8,251 839 —

Corporate, other & eliminations (2,759) (2,511) 31 —

As reported in our consolidated financial statements $ 10,598 $ 5,853 $ 902 $ 1

Six months ended June 30, 2020

Totals presented above $ 140 $ 117 $ 31 $ 5

Treatment charges and other (11) — — —

Noncash and other costs, net — 10 — —

Molybdenum mines 129 127 31 5

Other mining c

7,420 6,454 638 60

Corporate, other & eliminations (1,697) (1,642) 30 18

As reported in our consolidated financial statements $ 5,852 $ 4,939 $ 699 $ 83

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

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

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

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

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

GUARANTOR SUMMARIZED FINANCIAL INFORMATION

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or (iii) the discharge of 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.

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 June 30, 2021, and December 31, 2020, and for the six months ended June 30, 2021.

FCX FM O&G LLC Non-guarantor Consolidated

Issuer Guarantor Subsidiaries Eliminations FCX

As of March 31, 2021

As of June 30, 2021

Current assets $ 163 $ 704 $ 12,625 $ (893) $ 12,599

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Noncurrent liabilities 9,433 11,208 15,075 (15,657) 20,059

Three Months Ended March 31, 2021

Six Months Ended June 30, 2021

Revenues $ — $ 28 $ 10,570 $ — $ 10,598

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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;

expectations regarding negotiations with hourly employees at Cerro Verde including completion of new CLAs;

our commitments to deliver responsibly produced copper, including plans to implement and validate all of our operating sites under specific frameworks;

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descriptions of our objectives, strategies, plans, goals or targets, including our net debt target;

and future dividend payments, share purchases and sales.

and future returns to shareholders, including 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.

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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;

the duration and scope of and uncertainties associated with the COVID-19 pandemic (including new and emerging strains and variants of COVID-19), 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;

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political and social risks;

labor relations, including labor-related work stoppages;

labor relations, including labor-related work stoppages and costs;

weather- and climate-related risks;

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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;

our ability to comply with our 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.

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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.

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.

Refer to “Net Debt” for reconciliations of debt and consolidated cash and cash equivalents to net debt.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis