What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-05 compared with 2021-08-05 · 367 added, 347 removed, 1264 unchanged (36% 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 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 $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.

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.

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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.

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

We believe we are well positioned to make investments in our business while providing shareholders with cash returns consistent with our financial policy.

Refer to Note 5 and “Capital Resources and Liquidity” for further discussion of our financial policy.

As further discussed in “Operations,” highlights for our mining operations during the first nine months of 2021 include:

• Continued success with the ramp-up of underground mining at PT Freeport Indonesia (PT-FI);

on track to reach annualized metal production targets by year-end 2021.

• Strong performance from Cerro Verde's concentrator facilities with milling rates averaging 381,500 metric tons of ore per day and rates are targeted to average approximately 400,000 metric tons of ore per day in 2022.

• Current operations at the Lone Star copper leach project, which was successfully completed in the second half of 2020, are exceeding the initial design capacity of 200 million pounds of copper annually by approximately 25 percent.

We are advancing climate initiatives and recently published our updated Climate Report in September 2021, which details the work underway across our global business to reduce greenhouse gas (GHG) emissions, improve energy efficiency, advance the use of renewable energy and enhance our resilience to future climate-related risks.

Net income (loss) attributable to common stock totaled $1.4 billion in third-quarter 2021, $0.3 billion in third-quarter 2020, $3.2 billion for the first nine months of 2021 and $(0.1) billion for the first nine months of 2020.

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

The first nine months of 2020 also reflect charges directly associated with the COVID-19 pandemic and revised operating plans, including employee separation costs, totaling $178 million, losses on early extinguishment of debt totaling $100 million and metals inventory adjustments totaling $90 million.

Refer to “Consolidated Results” for further discussion.

At September 30, 2021, we had consolidated debt of $9.7 billion and consolidated cash and cash equivalents of $7.7 billion, resulting in net debt of $2.0 billion.

This represents a reduction in net debt of $4.1 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).

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

In September 2021, we prepaid $200 million of the Cerro Verde Term Loan and in October 2021, we announced that in December 2021 we expect to redeem our outstanding $524 million principal amount of our 3.55% Senior Notes due 2022.

We have no other senior note maturities until March 2023.

In July 2021, PT-FI entered into a $1.0 billion, five-year, unsecured bank credit facility to advance projects associated with its obligation for additional domestic smelter capacity and a precious metals refinery (PMR) in Indonesia.

As of September 30, 2021, $158 million ($146 million net of debt issuance costs) was drawn under this facility.

Refer to Note 5 and “Capital Resources and Liquidity” for further discussion.

We continue to view the long-term outlook for our business positively, supported by limitations on supplies of copper and by the requirements for copper in the world’s economy.

We continue to view the long-term outlook for our business positively, supported by limitations on supplies of copper and the requirements for copper in the world’s economy.

Our financial results vary as a result of fluctuations in market prices primarily for copper, gold and, to a lesser extent, molybdenum, as well as other factors.

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Projected molybdenum sales include 28 million pounds produced by our Molybdenum mines and 57 million pounds produced by our North America and South America copper mines.

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.

For other important factors that could cause results to differ materially from projections, refer to “Cautionary Statement” and “Risk Factors” contained in Part I, Item 1A.

Consolidated sales volumes in fourth-quarter 2021 are expected to approximate 1.025 billion pounds of copper, 375 thousand ounces of gold and 22 million pounds of molybdenum.

Projected sales volumes are dependent on operational performance (including from underground mining at PT-FI), weather-related conditions, timing of shipments, and other factors detailed in the “Cautionary Statement” below.

For other important factors that could cause results to differ materially from projections, refer to “Risk Factors” contained in Part I, Item 1A.

of our 2020 Form 10-K.

Consolidated Unit Net Cash Costs

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.

Assuming average prices of $1,800 per ounce of gold and $19.00 per pound of molybdenum in fourth-quarter 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 $1.26 per pound of copper in fourth-quarter 2021).

The impact of price changes during fourth-quarter 2021 on consolidated unit net cash costs for the year 2021 would approximate $0.015 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 $4.25 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.

Based on current sales volume and cost estimates, and assuming average prices of $4.50 per pound for copper, $1,800 per ounce for gold, and $19.00 per pound for molybdenum in fourth-quarter 2021, our consolidated operating cash flows are estimated to approximate $7.5 billion 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 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.

The impact of price changes during fourth-quarter 2021 on operating cash flows would approximate $100 million for each $0.10 per pound change in the average price of copper, $25 million for each $100 per ounce change in the average price of gold and $15 million for each $2 per pound change in the average price of molybdenum.

Consolidated Capital Expenditures

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.

Consolidated capital expenditures for the year 2021 are expected to approximate $2.3 billion ($2.0 billion excluding capital expenditures for the new greenfield smelter and PMR (collectively, the Indonesia smelter project).

Consolidated capital expenditures for the year 2021 are expected to include $1.3 billion for major mining projects, primarily associated with underground development activities in the Grasberg minerals district.

All costs associated with the Indonesia smelter project 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.

Current capital expenditures for the Indonesia smelter project are being funded through PT-FI's $1.0 billion unsecured bank credit facility, with additional debt financing being evaluated.

World prices for copper, gold and molybdenum can fluctuate significantly.

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;

During the period from January 2011 through September 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 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.

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 September 2021.

During third-quarter 2021, LME copper settlement prices ranged from a low of $3.98 per pound to a high of $4.44 per pound, averaged $4.25 per pound and settled at $4.10 per pound on September 30, 2021.

Copper prices were volatile during the quarter as a result of a strong U.S.

dollar and prospects for slowing economic growth globally, and particularly in China, partly offset by falling exchange inventories and a positive long-term outlook supported by forecasts for a continued global economic recovery and copper’s prominent role in the clean energy transition.

The LME copper settlement price was $4.52 per pound on October 29, 2021.

We believe expectations for longer-term copper demand growth remain in place.

We expect future demand to be supported by the global transition to renewable energy and other carbon-reduction initiatives, and continued urbanization in developing countries.

The limited number of approved, large-scale projects scheduled, the long lead times required to permit and build new mines and declining ore grades at existing operations highlight the supply challenges for copper.

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 $1,826 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 $18.13 per pound on July 30, 2021.

The historically low inventories;

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 September 2021.

During third-quarter 2021, London PM gold prices ranged from a low of $1,723 per ounce to a high of $1,829 per ounce, averaged $1,790 per ounce, and closed at $1,743 per ounce on September 30, 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 and historically low U.S.

interest rates.

The London PM gold price was $1,769 per ounce on October 29, 2021.

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

During third-quarter 2021, the weekly average price of molybdenum ranged from a low of $17.84 per pound to a high of $20.01 per pound, averaged $19.09 per pound, and was $18.45 per pound on September 30, 2021.

Molybdenum prices have reacted to supply constraints and increased demand, 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 $19.34 per pound on October 29, 2021.

CONSOLIDATED RESULTS

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

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

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$ 6,083 $ 3,851 $ 16,681 $ 9,703

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

Operating income a

$ 2,462 $ 880 $ 6,061 $ 728

Net income (loss) attributable to common stock c

Diluted net income (loss) per share of common stock

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1,484 1,461 1,481 1,453

Operating cash flows m

Operating cash flows f

$ 1,965 $ 1,237 $ 5,435 $ 1,690

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$ 541 $ 436 $ 1,344 $ 1,573

At September 30:

Cash and cash equivalents

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$ 9,665 $ 10,030 $ 9,665 $ 10,030

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 $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.

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

Includes (unfavorable) favorable adjustments to prior period provisionally priced concentrate and cathode copper sales totaling $(9) million ($(3) million to net income attributable to common stock or less than $0.01 per share) in third-quarter 2021, $71 million ($28 million to net income attributable to common stock or $0.02 per share) in third-quarter 2020, $169 million ($65 million to net income attributable to common stock or $0.05 per share) for the first nine months of 2021 and $(102) million ($(42) million to net loss attributable to common stock or $(0.03) per share) for the first nine months of 2020 (refer to Note 6 for further discussion).

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 $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,

Includes net credits (charges) totaling $79 million ($0.05 per share) in third-quarter 2021 and $(16) million ($(0.01) per share) for the first nine months of 2021.

Net credits in third-quarter 2021 were primarily associated with the release of valuation allowances at PT-FI and a gain on sale of our remaining cobalt business in Kokkola, Finland (Freeport Cobalt), partly offset by metals inventory adjustments.

The first nine months of 2021 also included net charges primarily associated with nonrecurring labor-related charges at Cerro Verde and contested matters at PT-FI (including historical tax audits and an administrative fine levied by the Indonesia government).

Includes net charges totaling $101 million ($0.07 per share) in third-quarter 2020 and $347 million ($0.24 per share) for the first nine months of 2020, primarily associated with the COVID-19 pandemic and revised operating plans (including employee separation costs), net losses on early extinguishment of debt and metals inventory adjustments.

Working capital and other sources totaled $180 million in third-quarter 2021, $178 million in third-quarter 2020, $367 million for the first nine months of 2021 and $319 million for the first nine months of 2020.

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

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Sales, excluding purchases 1,033 848 2,787 2,336

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

Average realized price per pound $ 4.20 $ 3.01

$ 4.22 $ 2.73

Site production and delivery costs per pound a

$ 1.88 $ 1.77 b

Unit net cash costs per pound a

$ 1.24 $ 1.32 $ 1.36 $ 1.55

Gold (thousands of recoverable ounces)

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Average realized price per pound $ 18.61 $ 9.23 $ 14.36 $ 10.30

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.”

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.

Excludes charges totaling $0.04 per pound of copper in third-quarter 2020 and $0.09 per pound of copper for the first nine months of 2020, 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.

Includes $0.03 per pound of copper associated with nonrecurring labor-related costs at Cerro Verde for agreements reached with approximately 65 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.

Consolidated revenues totaled $6.1 billion in third-quarter 2021, $3.9 billion in third-quarter 2020, $16.7 billion for the first nine months of 2021 and $9.7 billion for the first nine 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 June 30 Six Months Ended June 30

Three Months Ended September 30 Nine Months Ended September 30

Consolidated revenues - 2020 period $ 3,851 $ 9,703

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Molybdenum 1 38

Higher average realized prices:

Higher (lower) average realized prices:

Copper 1,229 4,152

Gold (58) (29)

Molybdenum 186 254

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Higher Atlantic Copper revenues 244 819

Higher revenues from purchased copper 144 127

(Lower) higher revenues from purchased copper (43) 84

Higher treatment charges (31) (74)

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Sales Volumes.

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.

Consolidated copper and gold sales volumes increased in the 2021 periods, compared to the 2020 periods, primarily reflecting 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 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.

Average realized prices for third-quarter 2021, compared with third-quarter 2020, were 40 percent higher for copper, 8 percent lower for gold and 102 percent higher for molybdenum and average realized prices for the first nine months of 2021, compared with the first nine months of 2020, were 55 percent higher for copper, 2 percent lower for gold and 39 percent higher for molybdenum.

Average realized copper prices include net (unfavorable) favorable adjustments to current period provisionally priced copper sales totaling $(93) million in third-quarter 2021, $23 million in third-quarter 2020, $54 million for the first nine months of 2021 and $120 million for the first nine 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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Prior Period Provisionally Priced Copper Sales.

Net favorable (unfavorable) adjustments to prior periods’ provisionally priced copper sales ( i.e.

, provisionally priced sales at March 31, 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.

Net (unfavorable) favorable adjustments to prior periods’ provisionally priced copper sales ( i.e.

, provisionally priced sales at June 30, 2021 and 2020, and December 31,

2020 and 2019) recorded in consolidated revenues totaled $(9) million in third-quarter 2021, $71 million in third-quarter 2020, $169 million for the first nine months of 2021 and $(102) million for the first nine 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 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.

At September 30, 2021, we had provisionally priced copper sales totaling 313 million pounds of copper (net of intercompany sales and noncontrolling interests) recorded at an average of $4.05 per pound, subject to final pricing over the next several months.

We estimate that each $0.05 change in the price realized from the September 30, 2021, provisional price recorded would have an approximate $10 million effect on our 2021 net income attributable to common stock.

The LME copper price settled at $4.52 per pound on October 29, 2021.

Atlantic Copper Revenues.

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.

Atlantic Copper revenues totaled $783 million in third-quarter 2021 and $2.3 billion for the first nine months of 2021, compared with $539 million in third-quarter 2020 and $1.4 billion for the first nine months of 2020.

Higher revenues in the 2021 periods, compared with the 2020 periods, primarily reflect higher copper prices.

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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 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.

The volumes of copper purchases vary depending on cathode production from our operations and totaled 28 million pounds in third-quarter 2021, 56 million pounds in third-quarter 2020, 149 million pounds for the first nine months of 2021 and 215 million pounds for the first nine months of 2020.

The decrease in revenues associated with purchased copper in third-quarter 2021, compared to third-quarter 2020, primarily reflects lower volumes.

The increase in revenues associated with purchased copper for the first nine months of 2021, compared to the first nine months of 2020 periods, reflects higher prices, partly offset by lower volumes.

Treatment Charges.

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Production and Delivery Costs

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.

Consolidated production and delivery costs totaled $3.0 billion in third-quarter 2021, $2.5 billion in third-quarter 2020, $8.9 billion for the first nine months of 2021 and $7.4 billion for the first nine months of 2020.

Higher consolidated production and delivery costs in the 2021 periods primarily reflect higher sales volumes, higher milling and mining costs associated with the return to pre-COVID-19 operating rates and higher maintenance and input costs.

The first nine months of 2021 also include nonrecurring labor-related charges at Cerro Verde totaling $74 million for agreements reached with approximately 65 percent of its hourly employees.

The first nine months of 2020 also include charges totaling $202 million 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 $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.

Consolidated site production and delivery costs (before net noncash and other costs) for our copper mines averaged $1.88 per pound of copper in third-quarter 2021, $1.77 per pound of copper in third-quarter 2020, $1.92 per pound of copper for both the first nine months of 2021 and 2020.

Consolidated site production and delivery costs per pound in the third quarter and first nine months of 2021 were higher, compared with the third quarter and first nine months of 2020, primarily reflecting higher mining and milling costs associated with the return to pre-COVID-19 operating rates and higher maintenance and input costs, partly offset by higher sales volumes and lower leach unit production costs associated with higher recoveries.

Consolidated site production and delivery costs per pound for the first nine months of 2021 included nonrecurring labor-related charges at Cerro Verde for agreements reached with approximately 65 percent of its hourly employees and the first nine months of 2020 excluded charges 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 $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.

Consolidated depreciation, depletion and amortization (DD&A) totaled $528 million in third-quarter 2021, $394 million in third-quarter 2020, $1.4 billion for the first nine months of 2021 and $1.1 billion for the first nine 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

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.

Charges for metals inventory adjustments totaled $14 million in third-quarter 2021, $9 million in third-quarter 2020, $15 million for the first nine months of 2021 and $92 million for the first nine months of 2020.

Metals inventory adjustments in the 2021 periods were primarily related to a leach stockpile adjustment.

Metals inventory adjustments in the 2020 periods were related to volatility in copper and molybdenum prices associated with the COVID-19 pandemic.

Net (Gain) Loss on Sale of Assets

Net (gain) loss on sales of assets totaled $(60) million in third-quarter 2021, $2 million in third-quarter 2020, $(63) million for the first nine months of 2021 and $13 million for the first nine months of 2020.

The gain on sales of assets in the 2021 periods primarily reflects the sale of Freeport Cobalt.

Refer to Note 1 for further discussion.

Interest Expense, Net

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.

Consolidated interest costs (before capitalization) totaled $157 million in third-quarter 2021, $160 million in third-quarter 2020, $482 million for the first nine months of 2021 and $490 million for the first nine 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 $19 million in third-quarter 2021, $40 million in third-quarter 2020, $51 million for the first nine months of 2021 and $128 million for the first nine 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):

Six Months Ended June 30,

Following is a summary of the approximate amounts used in the calculation of our consolidated income tax provision (in millions, except percentages):

Nine Months Ended September 30,

Income (Loss) a

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Indonesia 2,940 37 % (1,101) e

619 49 % (302) f

Eliminations and other (3) N/A 19 95 N/A (28)

Rate adjustment f

Rate adjustment g

— N/A (9) — N/A 17

Consolidated FCX $ 3,326 31 % g

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

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

Consolidated FCX $ 5,686 29 % h

$ (1,674) $ 328 102 % h,i

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

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

jurisdiction reflects corporate-level expenses, which include interest expense associated with senior notes, general and administrative expenses, and environmental obligations and shutdown costs.

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

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.

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

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

Includes net tax benefits totaling $83 million ($66 million net of noncontrolling interest), consisting of $69 million associated with the release of a portion of the valuation allowances recorded against PT Rio Tinto Indonesia (PT-FI’s wholly owned subsidiary) NOLs and $24 million primarily associated with the reversal of a tax reserve related to the treatment of prior year contractor support costs;

partly offset by a tax charge of $10 million associated with the audit of PT-FI's 2019 tax returns.

Includes tax charges totaling $29 million ($24 million net of noncontrolling interest), consisting of $21 million associated with establishing a tax reserve related to the treatment of prior year contractor support costs and $8 million associated with an unfavorable 2012 Indonesia Supreme Court ruling.

In accordance with applicable accounting rules, we adjust our interim provision for income taxes equal to our consolidated tax rate.

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 six months of 2020 that did not result in a realized tax benefit;

jurisdiction generated net losses in the first nine 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 $4.25 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.

Assuming achievement of current sales volume and cost estimates and average fourth-quarter 2021 prices of $4.50 per pound for copper, $1,800 per ounce for gold and $19.00 per pound for molybdenum, we estimate our consolidated effective tax rate for the year 2021 would approximate 30 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.

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estimated effective tax rate for the year 2021 includes approximately $190 million of valuation allowance reversal related to an expected $900 million use of U.S.

federal net operating losses during 2021.

federal NOLs during 2021.

Responsible Production

2020 Annual Report on Sustainability .

In April 2021, we published our 2020 Annual Report on Sustainability, which is available on our website at fcx.com.

We have a long history of environmental, social and governance (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.

2020 Climate Report .

In September 2021, we published our updated Climate Report, which details the work underway across our global business to reduce GHG emissions, improve energy efficiency, advance the use of renewable energy and enhance our resilience to future climate-related risks.

The updated Climate Report reflects our continued progress towards alignment with the current recommendations of the Task Force on Climate-related Financial Disclosures.

The Copper Mark.

We are committed to validating all of our copper producing sites with the Copper Mark.

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).

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.

Participating sites must complete an external assurance process to assess conformance with the Copper Mark’s 32 environmental, social and governance requirements, with a goal of being awarded the Copper Mark.

We have six sites which have been certified, with five additional sites in progress.

North America Copper Mines

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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.

Current operations at the Lone Star copper leach project, which was completed in the second half of 2020, are exceeding the initial design capacity of 200 million pounds annually by approximately 25 percent.

We continue to advance opportunities to increase Lone Star operating rates and are evaluating a potential additional incremental oxide expansion to increase volumes to over 300 million pounds of copper per year.

The oxide project advances the opportunity for development of the large-scale sulfide resources at Lone Star.

We are increasing exploration in the area to support metallurgical testing and mine development planning for a potential long-term investment in a concentrator.

We have substantial resources in North America, primarily associated with existing mining operations.

Evaluations of project options for future growth are being advanced.

In addition to Lone Star, we are reviewing and actively evaluating an additional concentrator to add new capacity at our long-lived Bagdad operation, and are utilizing data analytics and testing new applications to recover additional copper from existing leach stockpiles.

Operating Data.

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

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

Three Months Ended September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

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Sales, excluding purchases 375 379 1,072 1,102

Average realized price per pound $ 4.42 $ 2.42 a

$ 4.19 $ 2.50 a

Average realized price per pound $ 4.34 $ 3.01 $ 4.24 $ 2.67

Molybdenum (millions of recoverable pounds)

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Copper production (millions of recoverable pounds) 170 155 476 509

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 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.

Our consolidated copper sales volumes from North America totaled 375 million pounds in third-quarter 2021, 379 million pounds in third-quarter 2020, and 1.1 billion pounds for both the first nine months of 2021 and 2020.

North America copper sales are estimated to approximate 1.46 billion pounds for the year 2021, compared with 1.4 billion pounds for the year 2020.

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

Three Months Ended June 30,

Three Months Ended September 30,

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

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Copper Molyb-

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

$ 2.42 $ 8.33

Revenues, excluding adjustments $ 4.34 $ 4.34 $ 16.69 $ 3.01 $ 3.01 $ 7.72

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

0.08 0.23 0.10 b

Total unit costs 2.18 2.36 9.93 2.00 2.06 6.01

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Molybdenum sales (millions of recoverable pounds) a

Six months ended June 30,

Nine months ended September 30,

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

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Copper Molyb-

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

$ 2.50 $ 8.99

Revenues, excluding adjustments $ 4.24 $ 4.24 $ 13.09 $ 2.67 $ 2.67 $ 8.57

Site production and delivery, before net noncash

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Metals inventory adjustments 0.01 0.01 — 0.05 0.04 —

Noncash and other costs, net 0.11 0.11 0.06 0.09 c

Noncash and other costs, net 0.10 0.09 0.12 0.10 b

Total unit costs 2.25 2.38 8.25 2.22 2.25 7.74

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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.

Includes charges totaling $0.03 per pound of copper for both third-quarter 2020 and the first nine 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 $1.97 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.

Average unit net cash costs (net of by-product credits) for the North America copper mines of $1.82 per pound of copper in third-quarter 2021 and $1.88 per pound of copper for first nine months of 2021 were higher than unit net cash costs of $1.67 per pound in third-quarter 2020 and $1.82 per pound for the first nine months of 2020, primarily reflecting higher mining and milling costs associated with the return to pre-COVID-19 operating rates and higher maintenance and input costs, partly offset by higher by-product credits and lower leach unit production costs associated with higher recoveries.

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 $1.91 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.

Average unit net cash costs (net of by-product credits) for our North America copper mines are expected to approximate $1.85 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 $19.00 per pound in fourth-quarter 2021.

North America’s average unit net cash costs for the year 2021 would change by approximately $0.01 per pound for each $2 per pound change in the average price of molybdenum in fourth-quarter 2021.

South America Mining

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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.

Cerro Verde's collective labor agreement (CLA) expired on August 31, 2021, and as of September 30, 2021, approximately 65 percent of its hourly employees have signed new CLAs.

Cerro Verde incurred nonrecurring charges for the first nine months of 2021 totaling $74 million associated with these agreements.

Negotiations for new CLAs for Cerro Verde's remaining hourly employees are ongoing and may result in additional charges.

Operating and Development Activities.

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.

Milling rates at Cerro Verde's concentrator facilities averaged 381,500 metric tons of ore per day for the first nine months of 2021.

Subject to ongoing monitoring of COVID-19 protocols, Cerro Verde is targeting milling rates to average approximately 400,000 metric tons of ore per day in 2022.

El Abra is increasing operating rates to pre-COVID-19 pandemic levels.

Stacking rates at El Abra averaged 93,100 metric tons per day in third-quarter 2021, approximately 25 percent higher than third-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.

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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.

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

Technical and economic studies continue to be evaluated to determine the optimal scope and timing for the sulfide project, and we are engaging stakeholders and preparing data required for submission of a robust permit application.

We are monitoring potential changes in government regulatory and 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 June 30, Six months ended June 30,

Three Months Ended September 30, Nine months ended September 30,

2021 2020 2021 2020

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Ore milled (metric tons per day) 380,300 351,000 381,500 317,600 b

382,100 300,700 b

Average ore grade (percent):

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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.

Our consolidated copper sales volumes from South America totaled 280 million pounds in third-quarter 2021, 250 million pounds in third-quarter 2020, 769 million pounds for the first nine months of 2021 and 716 million pounds for the first nine months of 2020.

Higher copper sales volumes in third-quarter 2021, compared with third-quarter 2020, primarily reflect timing of shipments.

Higher copper sales volumes for the first nine months of 2021, compared with the first nine months of 2020, primarily reflect continued progress to return to pre-COVID-19 operating rates.

Copper sales from South America mining are expected to approximate 1.0 billion pounds for the year 2021, slightly higher than the year 2020.

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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

The following table summarizes unit net cash costs and gross profit (loss) per pound of copper at our South America mining operations.

Gross Profit per Pound of Copper

The following table summarizes unit net cash costs and gross profit per pound of copper at our South America mining operations.

Unit net cash costs per pound of copper are reflected under the by-product and co-product methods as the South America mining operations also had sales of molybdenum and silver.

Three Months Ended June 30,

Three Months Ended September 30,

Method Co-Product

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DD&A 0.40 0.36 0.42 0.39

Metals inventory adjustments — — (0.26) (0.26)

Noncash and other costs, net 0.07 0.06 0.04 b

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Copper sales (millions of recoverable pounds) 280 280 250 250

Six months ended June 30,

Nine months ended September 30,

Method Co-Product

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DD&A 0.40 0.36 0.44 0.41

Metals inventory adjustments — — 0.01 0.01

Noncash and other costs, net 0.07 0.06 0.16 b

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Revenue adjustments, primarily for pricing on prior period open sales 0.13 0.13 (0.10) (0.10)

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

Gross profit per pound $ 1.84 $ 1.74 $ 0.25 $ 0.25

Copper sales (millions of recoverable pounds) 769 769 716 716

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.

Includes $0.02 per pound of copper in third-quarter 2021 and $0.10 per pound of copper for the first nine months of 2021 associated with nonrecurring labor-related charges at Cerro Verde for agreements reached with approximately 65 percent of its hourly employees.

Third-quarter 2020 includes charges totaling $0.02 per pound of copper, primarily associated with the COVID-19 pandemic (including health and safety costs).

The first nine months of 2020 includes charges totaling $0.13 per pound of copper, primarily associated with idle facility (Cerro Verde) and contract cancellation costs related to the COVID-19 pandemic, and employee separation costs associated with 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 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.

Average unit net cash costs (net of by-product credits) for the South America copper mines were $1.90 per pound of copper in third-quarter 2021, $1.83 per pound of copper in third-quarter 2020, $2.03 per pound of copper for the first nine months of 2021 and $1.84 per pound of copper for the first nine months of 2020.

Higher unit net cash costs in the 2021 periods, compared with the 2020 periods, primarily reflect increased milling activities, profit-sharing costs and higher maintenance and input costs, partly offset by higher sales volumes and by-product credits.

The first nine months of 2021 also included nonrecurring labor-related charges at Cerro Verde ($0.10 per pound of copper) for new CLAs as discussed above.

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 $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.

Average unit net cash costs (net of by-product credits) for South America mining are expected to approximate $2.04 per pound of copper for the year 2021, based on current sales volume and cost estimates and assuming an average price of $19.00 per pound of molybdenum in fourth-quarter 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.

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

These measures have proven effective and have enabled PT-FI to operate reliably throughout the pandemic.

Substantially all of PT-FI’s copper concentrate is sold under long-term contracts.

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).

During the first nine months of 2021, 44 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.

Second-quarter 2021 highlights include:

Third-quarter 2021 highlights include:

• Production approximated 90 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.

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.

• A total of 27 new drawbells were constructed at the Grasberg Block Cave and Deep Mill Level Zone (DMLZ) underground mines, bringing cumulative open drawbells to 490.

• Combined average production from the Grasberg Block Cave and DMLZ underground mines approximated 136,200 metric tons of ore per day and PT-FI's milling rates averaged 157,400 metric tons of ore per day.

PT-FI’s milling rates averaged over 177,000 metric tons of ore per day for the month of September 2021.

PT-FI expects milling rates to average approximately 175,000 metric tons of ore per day in fourth-quarter 2021 and to continue at that rate until additional milling facilities are installed as currently planned in 2023, which PT-FI expects will result in mill capacity of approximately 240,000 metric tons of ore per day.

PT-FI expects 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.

For the year 2021, PT-FI production is expected 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.

Kucing Liar .

PT-FI is planning to commence long-term mine development activities for its Kucing Liar deposit to produce approximately 6 billion pounds of copper and 6 million ounces of gold over the life of the project.

Refer to our 2020 Form 10-K for further discussion of Kucing Liar.

Similar to PT-FI's experience with large-scale, block-cave mines, pre-production development activities will occur over an approximate 10-year timeframe.

At full operating rates, annual production from Kucing Liar is expected to exceed 500 million pounds of copper and 500,000 ounces of gold, providing PT-FI with sustained long-term, large-scale and low-cost production.

Capital investments for Kucing Liar over the next 10 years are expected to average approximately $400 million per year.

Kucing Liar will benefit from substantial shared infrastructure and PT-FI's experience and long-term success in block-cave mining.

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:

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

During 2020, PT-FI notified the Indonesia government of schedule delays for construction of the greenfield smelter resulting from the COVID-19 pandemic and continues to review with the government a revised schedule for the project.

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

• 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 cost of $2.8 billion.

The smelter construction is expected to be completed as soon as feasible in 2024, which is subject to, among other things, pandemic-related disruptions.

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

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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.

• Construction of a PMR to process gold and silver from the new greenfield smelter and PT Smelting 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.

In July 2021, PT-FI entered into a $1.0 billion, five-year, unsecured bank credit facility to advance these projects.

As of September 30, 2021, $158 million ($146 million net of debt issuance costs) was drawn under this facility.

Additional debt financing is being evaluated to fund the projects.

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

Capital expenditures for the Indonesia smelter project totaled $0.1 billion for the first nine months of 2021, and are expected to approximate $0.3 billion for the year 2021.

Operating Data.

Following is summary consolidated operating data for Indonesia mining:

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

Three Months Ended September 30, Nine months ended September 30,

2021 2020 2021 2020

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59,700 29,100 53,500 25,100

DOZ underground mine 10,800 21,600 14,700 20,900

Deep Ore Zone underground mine b

2,700 20,700 10,600 20,900

Big Gossan underground mine 7,400 7,100 7,500 6,600

Grasberg open pit — — — 3,600 b

Other 11,100 (400) 5,700 2,200

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Includes ore from development activities that result in metal production.

Represents ore from the Grasberg open-pit stockpiles.

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.

Expected to cease production by December 31, 2021.

Our consolidated copper and gold sales from PT-FI totaled 378 million pounds and 399 thousand ounces in third-quarter 2021 and 946 million pounds and 957 thousand ounces for the first nine months of 2021, compared with copper and gold sales of 219 million pounds and 230 thousand ounces in third-quarter 2020 and 518 million pounds and 549 thousand ounces for the first nine months of 2020.

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

Consolidated sales volumes from PT-FI are expected to approximate 1.3 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.

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

Three Months Ended June 30,

Three Months Ended September 30,

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

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Noncash and other costs, net —

0.03 11 0.05 a

Total unit costs 0.91 1.96 825 0.92 1.81 1,152

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Gold sales (thousands of recoverable ounces) 399 230

Six Months Ended June 30,

Nine Months Ended September 30,

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

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Noncash and other costs, net 0.01 b

0.01 1 0.11 a

Total unit costs 1.00 2.01 838 1.40 1.99 1,290

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Gold sales (thousands of recoverable ounces) 957 549

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 COVID-19 related costs (including one-time incremental employee benefits and health and safety costs) totaling $0.05 per pound of copper in third-quarter 2020 and $0.03 per pound of copper for the first nine months of 2020.

Includes credits of $0.03 per pound of copper associated with adjustments to prior year treatment and refining charges and charges of $0.02 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 $0.25 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.

Because of the fixed nature of a large portion of PT-FI's costs, unit net cash costs depend on copper and gold volumes.

PT-FI’s unit net cash costs (net of gold and silver credits) of $0.17 per pound of copper in third-quarter 2021 were higher than $0.13 per pound in third-quarter, primarily reflecting lower by-product credits and higher export duties and royalties associated with higher copper prices, partly offset by higher volumes.

PT-FI’s unit net cash costs (net of gold and silver credits) of $0.23 per pound for the first nine months of 2021, were lower than $0.57 per pound for the first nine months of 2020, primarily reflecting higher sales volumes, partly offset by higher mining costs associated with the ramp-up of underground mining and higher export duties and royalties.

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 $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.

PT-FI’s export duties totaled $71 million in third-quarter 2021, $24 million in third-quarter 2020, $145 million for the first nine months of 2021 and $43 million for the first nine months of 2020.

PT-FI will continue to pay export duties until development progress for additional domestic smelting capacity of 2 million metric tons of concentrate per year exceeds 50 percent.

PT-FI’s royalties totaled $94 million in third-quarter 2021, $45 million in third-quarter 2020, $234 million for the first nine months of 2021 and $92 million for the first nine 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 $0.79 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.

DD&A per pound of copper under the by-product method was $0.74 per pound in third-quarter 2021 and $0.76 per pound for the first nine months of 2021, compared with $0.68 per pound in third-quarter 2020 and $0.72 per pound for the first nine months of 2020.

The increase in the rate per pound of copper for the 2021 periods, compared with the 2020 periods, primarily reflects the significant underground development assets placed into service.

Revenue adjustments primarily result from changes in prices on provisionally priced copper sales recognized in prior periods.

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

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.

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, impacts and duration of the COVID-19 pandemic and timing of shipments.

Assuming an average gold price of $1,800 per ounce in fourth-quarter 2021 and achievement of current sales volume and cost estimates, unit net cash costs (net of gold and silver credits) for PT-FI are expected to approximate $0.22 per pound of copper for the year 2021.

The impact of prices changes during fourth-quarter 2021 on PT-FI's unit net cash costs for the year 2021 would approximate $0.04 per pound of copper for each $100 per ounce change in the average price of gold.

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, timing of shipments and other factors detailed in the “Cautionary Statement” below.

Molybdenum Mines

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Operating and Development Activities.

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.

Production from the Molybdenum mines of 9 million pounds of molybdenum in third-quarter 2021 and 23 million pounds for the first nine months of 2021, was higher than production of 6 million pounds of molybdenum in third-quarter 2020 and 19 million pounds for the first nine months of 2020, primarily reflecting higher milling rates at the Climax mine as it returns to pre-COVID-19 levels.

FCX may increase rates at the Climax mine if necessary to satisfy increasing requirements for molybdenum.

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 $8.14 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.

Average unit net cash costs for our Molybdenum mines of $8.54 per pound of molybdenum for both the third quarter and first nine months of 2021 were lower than average unit net cash costs of $9.72 per pound in third-quarter 2020 and $9.58 per pound for the first nine 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 $9.10 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 a 39.5 percent ownership interest in a smelter and refinery in Gresik, Indonesia (PT Smelting).

PT-FI has a 39.5 percent ownership interest in 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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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.

During the first nine 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 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.

During the first nine months of 2021, Atlantic Copper’s concentrate purchases included 33 percent from our copper mining operations and 67 percent from third parties.

PT-FI’s contract with PT Smelting provides for PT-FI to supply 100 percent of the copper concentrate requirements (subject to a minimum or maximum treatment charge rate) necessary for PT Smelting to produce 205,000 metric tons of copper annually on a priority basis.

PT-FI may also sell copper concentrate to PT Smelting at market rates for quantities in excess of 205,000 metric tons of copper annually.

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

During the first nine 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.

Changes in these deferrals attributable to variability in intercompany volumes resulted in net additions (reductions) to operating income totaling $41 million ($48 million to net income attributable to common stock) in third-quarter 2021, $(21) million ($(21) million to net income attributable to common stock) in third-quarter 2020, $(144) million ($(97) million to net income attributable to common stock) for the first nine months of 2021 and $(27) million ($(20) million to net loss attributable to common stock) for the first nine 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 $156 million at September 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 estimate that approximately 40 percent of the net deferred profit balance will be recognized as income in the second half of 2021.

Based on current estimates, in fourth-quarter 2021, we do not expect a significant change in our net deferred profits on intercompany copper sales but project a net deferral of profits on intercompany molybdenum sales of approximately $40 million ($30 million to net income attributable to common stock).

CAPITAL RESOURCES AND LIQUIDITY

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and other factors.

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 generated significant cash flows during the first nine months of 2021, reflecting strong operating and financial performance.

With a favorable market outlook and a focus on executing our operating plans, we expect further increases in sales volumes and cash flows in 2022 and we believe we are well positioned to provide cash returns to shareholders consistent with our financial policy.

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 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.

The ramp-up of underground mining at PT-FI continues to be successful and is advancing on schedule, with production rates expected to reach the projected ultimate annualized levels by year-end 2021.

With the success of the Grasberg Block Cave and DMLZ underground projects, PT-FI is planning to commence long-term mine development activities for its Kucing Liar deposit.

We are also evaluating organic growth opportunities for expansion of certain of our operations in North America and South America, including at Bagdad, Lone Star and El Abra, the timing of which will be dependent on, among other things, market conditions.

Based on current sales volume, cost and metal price estimates discussed in “Outlook”, our projected consolidated operating cash flows of $7.5 billion for the year 2021 significantly exceed our expected consolidated capital expenditures of $2.3 billion (which include $0.3 billion of capital expenditures for the Indonesia smelter project) and other cash requirements for the year, including debt repayments, common stock dividends and noncontrolling interest distributions.

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 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.

Expenditures for the Indonesia smelter project are currently being funded by PT-FI’s new $1.0 billion unsecured bank credit facility and additional debt financing for this project is being evaluated.

Refer to “Outlook” for further discussion of projected operating cash flows and capital expenditures for 2021 and to “Debt” below and Note 5 for further discussion of PT-FI’s credit facility.

At September 30, 2021, we had $11.2 billion in liquidity, comprised of $7.7 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 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).

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 and increasing cash returns to shareholders while advancing opportunities for future growth.

The policy includes a base dividend and a performance-based payout framework whereby 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 maintaining the net debt target described below.

In February 2021, the Board reinstated a cash dividend on our common stock (base dividend) at an annual rate of $0.30 per share, and on November 1, 2021, the Board approved (i) a new share repurchase program authorizing repurchases of up to $3.0 billion of our common stock and (ii) a variable cash dividend on common stock for 2022 at an annual rate of $0.30 per share.

The combined annual rate of the base dividend and the variable dividend is expected to total $0.60 per share.

The Board intends to declare quarterly dividends for 2022 of $0.15 per share (including the $0.075 variable component), with the initial quarterly dividend expected to be paid on February 1, 2022.

Based on current shares outstanding totaling 1.47 billion, the total common stock dividend (base and variable) for 2022 currently expected to be paid approximates $0.9 billion.

Refer to “Cautionary Statement.”

Our performance-based payout framework is designed to maintain net debt at a level not to exceed the range of $3 billion to $4 billion (excluding project debt for additional smelting capacity in Indonesia).

The Board will review the structure and the amount of the performance-based payout framework at least annually.

Following is a summary of the U.S.

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

Cash at domestic companies $ 5.0

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

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

At September 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.

In September 2021, Cerro Verde elected to prepay $200 million on its term loan, reducing the outstanding balance to $325 million, which matures in June 2022.

In July 2021, PT-FI entered into a $1.0 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, and then the loan amortizes in four installments.

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

The facility matures in July 2026 and amounts drawn bear interest at the London Interbank Offered Rate plus a margin of 1.875% or 2.125%, as defined by the agreement.

As of September 30, 2021, $158 million ($146 million net of debt issuance costs) was drawn under the PT-FI Term Loan and no amounts were drawn under the revolving credit facility.

On October 21, 2021, we called for redemption on December 1, 2021, all of our outstanding $524 million principal amount of our 3.55% Senior Notes due 2022.

We have no other senior note maturities until March 2023.

Refer to Note 5 for further discussion of the above items, and refer to Note 8 of our 2020 Form 10-K for additional information regarding our debt arrangements.

Operating Activities

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.

We reported consolidated cash provided by operating activities of $5.4 billion (including $0.4 billion of working capital and other sources) for the first nine months of 2021 and $1.7 billion (including $0.3 billion from working capital and other sources) for the first nine months of 2020.

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

In third-quarter 2021, Cerro Verde paid the balance of its royalty dispute liabilities (payments totaled $356 million in third-quarter 2021 and $421 million for the first nine months of 2021).

Refer to Note 8 for further discussion.

Investing Activities

Capital Expenditures.

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.

Capital expenditures, including capitalized interest, totaled $1.3 billion for the first nine months of 2021, including approximately $0.9 billion for major mining projects primarily associated with underground development activities in the Grasberg minerals district and $0.1 billion for the Indonesia smelter project.

Capital expenditures for the Indonesia smelter project are currently being funded by PT-FI's $1.0 billion unsecured bank credit facility and additional debt financing for this project is being evaluated.

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 $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.

Capital expenditures, including capitalized interest, totaled $1.6 billion for the first nine months of 2020, including approximately $1.0 billion for major mining projects primarily associated with underground development activities in the Grasberg minerals district and the Lone Star copper leach project.

Proceeds from Sale of Freeport Cobalt.

On September 1, 2021, we completed the sale of Freeport Cobalt to Jervois Global Limited (Jervois) for $208 million, including net cash proceeds of $150 million and shares of Jervois.

Refer to Note 1 for further discussion.

Proceeds from Sales of Other Assets.

Proceeds from sales of other assets totaled $21 million for the first nine months of 2021 and $146 million for the first nine months of 2020.

Proceeds from sales of other assets for the first nine months of 2020 are primarily associated with the contingent consideration of $60 million from the 2016 sale of TF Holdings Limited, the collection of $45 million related to the 2019 sale of the Timok exploration assets in Serbia, and $31 million associated with the sale of royalty assets.

Acquisition of Minority Interest in PT Smelting.

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Debt Transactions.

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.

Net repayments of debt totaled $39 million for the first nine months of 2021, primarily associated with Cerro Verde’s election to prepay $200 million on its term loan at the end of September 2021, partly offset by borrowings of $158 million under the PT-FI credit facility.

Net proceeds from debt totaled $131 million for the first nine months of 2020, primarily reflecting the issuance of $2.8 billion of new senior notes in July 2020 and March 2020, partly offset by the use of proceeds to purchase and redeem senior notes maturing in 2021, 2022, 2023 and 2024.

Refer to Note 5 for further discussion.

Cash Dividends and Distributions Paid.

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.

The declaration and payment of future dividends is at the discretion of the Board and will be assessed on an ongoing basis, taking into account our financial results, cash requirements, future prospects, global economic conditions, and other factors deemed relevant by the Board.

Refer to “Cautionary Statement” and, for a discussion of the allocation of cash flows, the discussion above regarding the financial policy adopted by the Board in February 2021.

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.

We paid cash dividends on our common stock totaling $220 million for the first nine months of 2021 and $73 million for the first nine months of 2020.

On September 22, 2021, we declared a quarterly cash dividend of $0.075 per share on our common stock, which was paid on November 1, 2021, to shareholders of record as of October 15, 2021.

Refer to “Cautionary Statement” and the discussion above regarding our financial policy.

Cash dividends and distributions paid to noncontrolling interests at PT-FI and Cerro Verde totaled $187 million for the first nine months of 2021.

There were no cash dividends or distributions to noncontrolling interests paid during the first nine 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 $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.

We received equity contributions totaling $135 million for the first nine months of 2021 and $115 million for the first nine 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 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.

Following an increase in our stock price during 2021, proceeds from exercised stock options totaled $189 million and payments for related employee taxes totaled $19 million for the first nine months of 2021.

See Note 10 in our 2020 Form 10-K for a discussion of stock-based awards.

CONTRACTUAL OBLIGATIONS

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.

In July 2021, PT-FI awarded a 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 subject to, among other things, potential pandemic-related disruptions.

Besides PT-FI’s $1.0 billion credit facility and the Chiyoda contract, there have been no other material changes in our contractual obligations since December 31, 2020.

CONTINGENCIES

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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.

We are planning a detailed review in fourth-quarter 2021 of our asset retirement obligations in Indonesia, specifically around our historical overburden stockpiles related to previous open-pit mining operations.

Potential adjustments could be significant.

Refer to Note 12 in our 2020 Form 10-K, for further information regarding our environmental and asset retirement obligations.

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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

September 30, 2021 December 31, 2020

Current portion of debt $ 897 $ 34

Long-term debt, less current portion 8,768 9,677

Consolidated debt 9,695 9,711

Consolidated debt 9,665 a

consolidated cash and cash equivalents 7,672 3,657

Net debt $ 1,993 $ 6,054

Includes $146 million, net of debt issuance costs, for the PT-FI Term Loan (refer to Note 5).

PRODUCT REVENUES AND PRODUCTION COSTS

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These measures are presented by other metals mining companies, although our measures may not be comparable to similarly titled measures reported by other companies.

We present gross profit (loss) per pound of copper in the following tables using both a “by-product” method and a “co-product” method.

We use the by-product method in our presentation of gross profit (loss) per pound of copper because (i) the majority of our revenues are copper revenues, (ii) we mine ore, which contains copper, gold, molybdenum and other metals, (iii) it is not possible to specifically assign all of our costs to revenues from the copper, gold, molybdenum and other metals we produce and (iv) it is the method used by our management and Board to monitor our mining operations and to compare mining operations in certain industry publications.

We present gross profit per pound of copper in the following tables using both a “by-product” method and a “co-product” method.

We use the by-product method in our presentation of gross profit per pound of copper because (i) the majority of our revenues are copper revenues, (ii) we mine ore, which contains copper, gold, molybdenum and other metals, (iii) it is not possible to specifically assign all of our costs to revenues from the copper, gold, molybdenum and other metals we produce and (iv) it is the method used by our management and Board to monitor our mining operations and to compare mining operations in certain industry publications.

In the co-product method presentations, shared costs are allocated to the different products based on their relative revenue values, which will vary to the extent our metals sales volumes and realized prices change.

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

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

(In millions) By-Product Co-Product Method

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DD&A 94 85 7 2 94

Metals inventory adjustments 13 13 — — 13

Noncash and other costs, net 30

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DD&A 0.25 0.23 0.73

Metals inventory adjustments 0.03 0.03 —

Noncash and other costs, net 0.08

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Reconciliation to Amounts Reported

Revenues Production and Delivery DD&A

Revenues Production and Delivery DD&A Metals Inventory Adjustments

Totals presented above $ 1,806 $ 826 $ 94 $ 13

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

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

(In millions) By-Product Co-Product Method

Method Copper Molybdenum a

Revenues, excluding adjustments $ 888 c

$ 888 $ 71 $ 18 $ 977

Revenues, excluding adjustments $ 1,138 $ 1,138 $ 63 $ 30 $ 1,231

Site production and delivery, before net noncash

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Metals inventory adjustments (4) (4) — — (4)

Noncash and other costs, net 36 d

Noncash and other costs, net 37 c

756 778 49 22 849

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Gross profit per pound of copper/molybdenum:

Revenues, excluding adjustments $ 2.42 c

$ 2.42 $ 8.33

Revenues, excluding adjustments $ 3.01 $ 3.01 $ 7.72

Site production and delivery, before net noncash

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Metals inventory adjustments (0.01) (0.01) —

Noncash and other costs, net 0.09 d

Noncash and other costs, net 0.10 c

Total unit costs

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North America copper mines 1,237 768 91 (4)

Other mining e

Other mining d

3,691 2,731 282 5

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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.

Includes charges totaling $10 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 (including health and safety costs).

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

Nine months ended September 30, 2021

(In millions) By-Product Co-Product Method

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DD&A 275 254 15 6 275

Metals inventory adjustments 13 13 — — 13

Noncash and other costs, net 103 99 3 1 103

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DD&A 0.26 0.24 0.59

Metals inventory adjustments 0.01 0.01 —

Noncash and other costs, net 0.10 0.09 0.12

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Reconciliation to Amounts Reported

Revenues and Delivery DD&A

Production Inventory

Revenues and Delivery DD&A Adjustments

Totals presented above $ 4,968 $ 2,347 $ 275 $ 13

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

Six months ended June 30, 2020

Nine months ended September 30, 2020

(In millions) By-Product Co-Product Method

Method Copper Molybdenum a

Revenues, excluding adjustments $ 1,799 c

Revenues, excluding adjustments $ 2,939

$ 2,939 210 73 3,222

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Metals inventory adjustments 52 49 — 3 52

Noncash and other costs, net 69 d

Noncash and other costs, net 107 c

Total costs 2,437 2,469 190 61 2,720

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Gross profit per pound of copper/molybdenum:

Revenues, excluding adjustments $ 2.50 c

Revenues, excluding adjustments $ 2.67

$ 2.67 $ 8.57

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Metals inventory adjustments 0.05 0.04 —

Noncash and other costs, net 0.09 d

Noncash and other costs, net 0.10 c

Total unit costs 2.22 2.25 7.74

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North America copper mines 3,210 2,415 272 52

Other mining e

Other mining d

9,267 7,665 770 14

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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.

Includes charges totaling $32 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 (including health and safety costs).

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 June 30, 2021

Three Months Ended September 30, 2021

(In millions) By-Product Co-Product Method

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

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

(In millions) By-Product Co-Product Method

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DD&A 105 98 7 105

Metals inventory adjustments (57) (57) — (57)

Noncash and other costs, net 9 b

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on prior period open sales 41 41 — 41

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

Gross profit $ 223 $ 216 $ 7 $ 223

Copper sales (millions of recoverable pounds) 250 250

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DD&A 0.42 0.39

Metals inventory adjustments (0.26) (0.26)

Noncash and other costs, net 0.04 b

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Gross profit per pound $ 0.89 $ 0.86

Reconciliation to Amounts Reported Metals

Production Inventory

Revenues and Delivery DD&A Adjustments

Reconciliation to Amounts Reported

Revenues and Delivery DD&A

Totals presented above $ 807 $ 470 $ 105

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

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.

Includes charges totaling $5 million ($0.02 per pound of copper), primarily associated with the COVID-19 pandemic (including health and safety costs).

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

Nine months ended September 30, 2021

(In millions) By-Product Co-Product Method

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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.

Includes nonrecurring charges totaling $74 million ($0.10 per pound of copper) associated with labor related charges at Cerro Verde for agreements reached with approximately 65 percent of its hourly employees.

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

Nine months ended September 30, 2020

(In millions) By-Product Co-Product Method

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

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

Gross profit $ 178 $ 178 $ — $ 178

Copper sales (millions of recoverable pounds) 716 716

Gross loss per pound of copper:

Gross profit per pound of copper:

Revenues, excluding adjustments $ 2.79 $ 2.79

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on prior period open sales (0.10) (0.10)

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

Gross profit per pound $ 0.25 $ 0.25

Reconciliation to Amounts Reported

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

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

(In millions) By-Product Co-Product Method

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DD&A 280 190 86 4 280

Noncash and other costs, net 11 8 3 — 11

Total costs 344 741 329 18 1,088

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DD&A 0.74 0.50 215

Noncash and other costs, net 0.04 0.03 11

Total unit costs 0.91 1.96 825

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Royalty on metals (94) — —

Noncash and other costs, net — 11 —

Other revenue adjustments, primarily for pricing

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

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

(In millions) By-Product Co-Product Method

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Includes silver sales of 1.0 million ounces ($24.29 per ounce average realized price).

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

Includes COVID-19 related costs (including one-time incremental employee benefits and health and safety costs) totaling $10 million ($0.05 per pound of copper).

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, 2021

Nine months ended September 30, 2021

(In millions) By-Product Co-Product Method

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

Six months ended June 30, 2020

Nine months ended September 30, 2020

(In millions) By-Product Co-Product Method

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on prior period open sales (20) (20) 4 — (16)

PT Smelting intercompany loss (18) (11) (7) — (18)

Gross profit $ 684 $ 387 $ 283 $ 14 $ 684

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on prior period open sales (0.03) (0.03) 8

PT Smelting intercompany loss (0.04) (0.02) (13)

Gross profit per pound/ounce $ 1.32 $ 0.75 $ 515

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on prior period open sales (16) — —

PT Smelting intercompany loss — 18 —

Indonesia mining 2,189 1,130 375

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Includes silver sales of 2.3 million ounces ($20.73 per ounce average realized price).

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

Includes COVID-19 related costs (including one-time incremental employee benefits and health and safety costs) of $14 million ($0.03 per pound of copper).

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 June 30,

Three Months Ended September 30,

(In millions) 2021 2020

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Production Inventory

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

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

Totals presented above $ 158 $ 67 $ 19 $ —

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Molybdenum mines 151 70 19 —

Other mining c

Other mining b

7,563 4,569 493 13

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As reported in our consolidated financial statements $ 6,083 $ 3,009 $ 528 $ 14

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Totals presented above $ 47 $ 47 $ 13 $ 3

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Molybdenum mines 42 51 13 3

Other mining c

Other mining b

4,886 3,448 360 (2)

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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.

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

Six months ended June 30,

Nine months ended September 30,

(In millions) 2021 2020

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Production Inventory

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

Nine months ended September 30, 2021 Revenues and Delivery DD&A Adjustments

Totals presented above $ 329 $ 175 $ 51 $ 1

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As reported in our consolidated financial statements $ 16,681 $ 8,862 $ 1,430 $ 15

Six months ended June 30, 2020

Nine months ended September 30, 2020

Totals presented above $ 187 $ 164 $ 44 $ 8

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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.

Includes charges totaling $7 million ($0.36 per pound of molybdenum) primarily associated with contract cancellation costs related to the COVID-19 pandemic and employee separation costs associated with April 2020 revised operating plans.

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

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

FCX FM O&G LLC Non-guarantor Consolidated

Issuer Guarantor Subsidiaries Eliminations FCX

As of June 30, 2021

As of September 30, 2021

Current assets $ 151 $ 745 $ 13,815 $ (920) $ 13,791

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

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Revenues $ — $ 41 $ 16,640 $ — $ 16,681

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operating plans;

our financial policy;

our expectations regarding PT-FI's ramp-up of underground mining activities and future cash flows through 2022;

PT-FI's development, financing, construction and completion of new domestic smelting capacity in Indonesia totaling 2 million metric tons of concentrate per year by December 2023;

the implementation of our financial policy;

PT-FI's ramp-up of underground mining activities and future cash flows through 2022;

PT-FI's development, financing, construction and completion of new domestic smelting capacity in Indonesia in accordance with the terms of the special mining license (IUPK);

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;

execution of our energy and climate strategies and the underlying assumptions and estimated impacts on our business related thereto;

improvements in operating procedures and technology;

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execution of the settlement agreements associated with the Louisiana coastal erosion cases and talc-related litigation;

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

and future returns to shareholders, including dividend payments, share purchases and sales.

descriptions of our objectives, strategies, plans, goals or targets and future returns to shareholders, including dividend payments (base or variable) and share repurchases.

The words “anticipates,” “may,” “can,” “plans,” “believes,” “estimates,” “expects,” “projects,” "targets," “intends,” “likely,” “will,” “should,” “could,” “to be,” ”potential," “assumptions,” “guidance,” “future” and any similar expressions are intended to identify those assertions as forward-looking statements.

The declaration of future dividends is at the discretion of the Board and will depend on our financial results, cash requirements, future prospects, global economic conditions, and other factors deemed relevant by the Board.

The timing and amount of any share repurchases will be at the discretion of management and will depend on a variety of factors including, but not limited to, our operating performance, cash flow and financial position, the market price of the shares and general economic and market conditions.

The share repurchase program may be modified, increased, suspended or terminated at any time at the Board’s discretion.

The declaration and payment of dividends (base or variable) is also at the discretion of the Board and will depend on our financial results, cash requirements, business prospects, global economic conditions and other factors deemed relevant by the Board.

We caution readers that forward-looking statements are not guarantees of future performance and actual results may differ materially from those anticipated, expected, projected or assumed in the forward-looking statements.

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changes in our cash requirements, financial position, financing plans or investment plans;

ability to continue to maintain our net debt at a level not to exceed the net debt target in our financial policy;

changes in general market, economic, tax, regulatory or industry conditions;

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;

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 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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risks associated with underground mining;

satisfaction of requirements in accordance with PT-FI's special mining license to extend mining rights from 2031 through 2041;

satisfaction of requirements in accordance with PT-FI's IUPK to extend mining rights from 2031 through 2041;

the Indonesia government's approval of a deferred schedule for completion of new domestic smelting capacity in Indonesia;

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environmental risks;

litigation results;

litigation results and completion of settlement agreements;

cybersecurity incidents;

changes in general market, economic and industry conditions;

financial condition of our customers, suppliers, vendors, partners and affiliates, particularly during weak economic conditions and extended periods of volatile commodity prices;

financial condition of our customers, suppliers, vendors, partners and affiliates;

reductions in liquidity and access to capital;

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.

our ability to consummate the redemption of senior notes and other factors described in more detail under the heading “Risk Factors” contained in Part I, Item 1A.

of our 2020 Form 10-K.

Investors are cautioned that many of the assumptions upon which our forward-looking statements are based are likely to change after the date the forward-looking statements are made, including for example commodity prices, which we cannot control, and production volumes and costs, some aspects of which we may not be able to control.

Investors are cautioned that many of the assumptions upon which our forward-looking statements are based are likely to change after the date the forward-looking statements are made, including for example commodity prices, which we cannot control, and production volumes and costs or technological solutions and innovation, some aspects of which we may not be able to control.

Further, we may make changes to our business plans that could affect our results.

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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