FREEPORT-MCMORAN INC 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. In Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A), “we,” “us” and “our” refer to Freeport-McMoRan Inc. (FCX) and its consolidated subsidiaries. You should read this discussion in conjunction with our consolidated financial statements, the related MD&A and the discussion of our Business and Properties in our annual report on Form 10-K for the year ended December 31, 2020 (2020 Form 10-K), filed with the United States (U.S.) Securities and Exchange Commission (SEC). The results of operations reported and summarized below are not necessarily indicative of future operating results (refer to “Cautionary Statement” for further discussion). References to “Notes” are Notes included in our Notes to Consolidated Financial Statements (Unaudited). Throughout MD&A, all references to income or losses per share are on a diluted basis. OVERVIEW We are a leading international mining company with headquarters in Phoenix, Arizona. We operate large, long-lived, geographically diverse assets with significant proven and probable reserves of copper, gold and molybdenum. We are one of the world’s largest publicly traded copper producers. Our portfolio of assets includes the Grasberg minerals district in Indonesia, one of the world’s largest copper and gold deposits; and significant mining operations in North America and South America, including the large-scale Morenci minerals district in Arizona and the Cerro Verde operation in Peru. We continue to monitor the impact of the COVID-19 pandemic on our business and maintain our vigilant operating protocols to contain and mitigate the risk of spread of COVID-19 at each of our operating sites. To date, our protocols have been effective in mitigating and preventing a major outbreak of COVID-19 at our operating sites. We will continue to monitor, assess and update our COVID-19 response and to provide assistance to employees in obtaining vaccinations. 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. 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. 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. 27 Table of Contents 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 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. OUTLOOK 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. World market prices for these commodities have fluctuated historically and are affected by numerous factors beyond our control. Refer to “Markets” below and “Risk Factors” in Part I, Item 1A. of our 2020 Form 10-K for further discussion. Because we cannot control the prices of our products, the key measures that management focuses on in operating our business are sales volumes, unit net cash costs, operating cash flows and capital expenditures. Consolidated Sales Volumes Following are our projected consolidated sales volumes for the year 2021: Copper (millions of recoverable pounds): North America copper mines 1,455 South America mining 1,030 Indonesia mining 1,327 Total 3,812 Gold (millions of recoverable ounces) 1.3 Molybdenum (millions of recoverable pounds) 85 a a. 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 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 $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. 28 Table of Contents Consolidated Operating Cash Flows Our consolidated operating cash flows vary with sales volumes; prices realized from copper, gold and molybdenum sales; production costs; income taxes; other working capital changes; and other factors. Based on current sales volume and cost estimates, and assuming average prices of $4.50 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 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 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. 29 Table of Contents MARKETS World prices for copper, gold and molybdenum can fluctuate significantly. 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; and the Metals Week Molybdenum Dealer Oxide weekly average price ranged from a low of $4.46 per pound in 2015 to a high of $20.01 per pound in 2021. Copper, gold and molybdenum prices are affected by numerous factors beyond our control as described further in “Risk Factors” contained in Part I, Item 1A. of our 2020 Form 10-K. This graph presents LME copper settlement prices and the combined reported stocks of copper at the LME, Commodity Exchange Inc., and the Shanghai Futures Exchange from January 2011 through 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 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. 30 Table of Contents 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. 31 Table of Contents 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. 32 Table of Contents CONSOLIDATED RESULTS Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 SUMMARY FINANCIAL DATA (in millions, except per share amounts) Revenues a,b $ 6,083 $ 3,851 $ 16,681 $ 9,703 Operating income a $ 2,462 $ 880 $ 6,061 $ 728 Net income (loss) attributable to common stock c $ 1,399 d $ 329 e $ 3,200 d $ (109) e Diluted net income (loss) per share of common stock $ 0.94 $ 0.22 $ 2.16 $ (0.08) Diluted weighted-average common shares outstanding 1,484 1,461 1,481 1,453 Operating cash flows f $ 1,965 $ 1,237 $ 5,435 $ 1,690 Capital expenditures $ 541 $ 436 $ 1,344 $ 1,573 At September 30: Cash and cash equivalents $ 7,672 $ 2,403 $ 7,672 $ 2,403 Total debt, including current portion $ 9,665 $ 10,030 $ 9,665 $ 10,030 a. Refer to Note 9 for a summary of revenues and operating income by operating division. b. 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). c. 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. d. 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). e. 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. f. 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. 33 Table of Contents Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 SUMMARY OPERATING DATA Copper (millions of recoverable pounds) Production 987 844 2,810 2,342 Sales, excluding purchases 1,033 848 2,787 2,336 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 $ 1.92 c $ 1.92 b Unit net cash costs per pound a $ 1.24 $ 1.32 $ 1.36 $ 1.55 Gold (thousands of recoverable ounces) Production 374 237 976 584 Sales, excluding purchases 402 234 965 562 Average realized price per ounce $ 1,757 $ 1,902 $ 1,780 $ 1,810 Molybdenum (millions of recoverable pounds) Production 23 19 63 57 Sales, excluding purchases 20 20 63 59 Average realized price per pound $ 18.61 $ 9.23 $ 14.36 $ 10.30 a. Reflects per pound weighted-average production and delivery costs and unit net cash costs (net of by-product credits) for all copper mines, before net noncash and other costs. For reconciliations of per pound unit costs by operating division to production and delivery costs applicable to sales reported in our consolidated financial statements, refer to “Product Revenues and Production Costs.” b. Excludes 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. c. 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. Revenues 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. Refer to Note 9 for a summary of product revenues. Following is a summary of changes in our consolidated revenues between periods (in millions): Three Months Ended September 30 Nine Months Ended September 30 Consolidated revenues - 2020 period $ 3,851 $ 9,703 Higher sales volumes: Copper 554 1,231 Gold 319 730 Molybdenum 1 38 Higher (lower) average realized prices: Copper 1,229 4,152 Gold (58) (29) Molybdenum 186 254 Adjustments for prior period provisionally priced copper sales (80) 271 Higher Atlantic Copper revenues 244 819 (Lower) higher revenues from purchased copper (43) 84 Higher treatment charges (31) (74) Higher royalties and export duties (90) (242) Other, including intercompany eliminations 1 (256) Consolidated revenues - 2021 period $ 6,083 $ 16,681 34 Table of Contents Sales Volumes. 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. Realized Prices. Our consolidated revenues can vary significantly as a result of fluctuations in the market prices of copper, gold and molybdenum. Average realized prices for third-quarter 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. We record revenues and invoice customers at the time of shipment based on then-current LME prices, which results in an embedded derivative on provisionally priced concentrate and cathode sales that is adjusted to fair value through earnings each period, using the period-end forward prices, until final pricing on the date of settlement. To the extent final prices are higher or lower than what was recorded on a provisional basis, an increase or decrease to revenues is recorded each reporting period until the date of final pricing. Accordingly, in times of rising copper prices, our revenues benefit from adjustments to the final pricing of provisionally priced sales pursuant to contracts entered into in prior periods; in times of falling copper prices, the opposite occurs. Prior Period Provisionally Priced Copper Sales. Net (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 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 $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. Purchased Copper. We purchase copper cathode primarily for processing by our Rod & Refining operations. The volumes of copper purchases vary depending on cathode production from our operations and totaled 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. Revenues from our concentrate sales are recorded net of treatment charges ( i.e., fees paid to smelters that are generally negotiated annually), which will vary with the sales volumes and the price of copper. Royalties and Export Duties. Royalties are primarily on PT-FI sales and vary with the volume of metal sold and the prices of copper and gold. PT-FI will continue to pay export duties until development progress for new domestic smelting with an annual capacity of 2 million metric tons of concentrate exceeds 50 percent. Refer to “Operations – Indonesia Mining” for further discussion of the current progress on a greenfield smelter in Indonesia and to Note 9 for a summary of royalty expense and export duties. 35 Table of Contents Production and Delivery Costs 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 $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. Depreciation, Depletion and Amortization Depreciation will vary under the unit-of-production (UOP) method as a result of changes in sales volumes and the related UOP rates at our mining operations. Consolidated depreciation, depletion and amortization (DD&A) totaled $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 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 $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. 36 Table of Contents Income Taxes Following is a summary of the approximate amounts used in the calculation of our consolidated income tax provision (in millions, except percentages): Nine Months Ended September 30, 2021 2020 Income (Loss) a Effective Tax Rate Income Tax (Provision) Benefit Income (Loss) a Effective Tax Rate Income Tax (Provision) Benefit U.S. b $ 1,324 1 % $ (7) c $ (535) 10 % $ 56 d South America 1,425 40 % (576) 149 51 % (76) Indonesia 2,940 37 % (1,101) e 619 49 % (302) f Eliminations and other (3) N/A 19 95 N/A (28) Rate adjustment g — N/A (9) — N/A 17 Consolidated FCX $ 5,686 29 % h $ (1,674) $ 328 102 % h,i $ (333) a. Represents income (loss) before income taxes and equity in affiliated companies’ net (losses) earnings. b. In addition to our North America mining operations, the U.S. jurisdiction reflects corporate-level expenses, which include interest expense associated with senior notes, general and administrative expenses, and environmental obligations and shutdown costs. c. Includes valuation allowance release on prior year unbenefited net operating losses (NOLs). d. 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. e. 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. f. 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. g. In accordance with applicable accounting rules, we adjust our interim provision for income taxes equal to our consolidated tax rate. h. Our consolidated effective income tax rate is a function of the combined effective tax rates for the jurisdictions in which we operate. i. Our U.S. 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. net losses. 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. The net 0 percent U.S. 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 NOLs during 2021. 37 Table of Contents OPERATIONS Responsible Production 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. 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 We operate seven open-pit copper mines in North America – Morenci, Bagdad, Safford (including Lone Star), Sierrita and Miami in Arizona, and Chino and Tyrone in New Mexico. In addition to copper, certain of these mines produce molybdenum concentrate, gold and silver. All of the North America mining operations are wholly owned, except for Morenci. We record our 72 percent undivided joint venture interest in Morenci using the proportionate consolidation method. The North America copper mines include open-pit mining, sulfide ore concentrating, leaching and solution extraction/electrowinning (SX/EW) operations. A majority of the copper produced at our North America copper mines is cast into copper rod by our Rod & Refining segment. The remainder of our North America copper production is sold as copper cathode or copper concentrate, a portion of which is shipped to Atlantic Copper (our wholly owned smelter). Molybdenum concentrate, gold and silver are also produced by certain of our North America copper mines . Operating and Development Activities. Our North America operating sites continue to achieve strong execution of operating plans. 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. 38 Table of Contents Operating Data. Following is summary consolidated operating data for the North America copper mines: Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Operating Data, Net of Joint Venture Interests Copper (millions of recoverable pounds) Production 377 369 1,090 1,083 Sales, excluding purchases 375 379 1,072 1,102 Average realized price per pound $ 4.34 $ 3.01 $ 4.24 $ 2.67 Molybdenum (millions of recoverable pounds) Production a 9 7 26 24 100% Operating Data Leach operations Leach ore placed in stockpiles (metric tons per day) 579,100 692,000 656,900 708,100 Average copper ore grade (percent) 0.30 0.26 0.29 0.27 Copper production (millions of recoverable pounds) 270 286 797 786 Mill operations Ore milled (metric tons per day) 274,300 255,200 269,000 291,500 Average ore grade (percent): Copper 0.39 0.36 0.38 0.35 Molybdenum 0.03 0.03 0.03 0.02 Copper recovery rate (percent) 81.6 84.4 80.9 85.4 Copper production (millions of recoverable pounds) 170 155 476 509 a. Refer to “Consolidated Results” for our consolidated molybdenum sales volumes, which include sales of molybdenum produced at the North America copper mines. Our consolidated 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. Unit Net Cash Costs. Unit net cash costs per pound of copper is a measure intended to provide investors with information about the cash-generating capacity of our mining operations expressed on a basis relating to the primary metal product for our respective operations. We use this measure for the same purpose and for monitoring operating performance by our mining operations. This information differs from measures of performance determined in accordance with U.S. generally accepted accounting principles (GAAP) and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. This measure is presented by other metals mining companies, although our measure may not be comparable to similarly titled measures reported by other companies. 39 Table of Contents Gross Profit per Pound of Copper and Molybdenum The following table summarizes unit net cash costs and gross profit per pound at our North America copper mines. Refer to “Product Revenues and Production Costs” for an explanation of the “by-product” and “co-product” methods and a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in our consolidated financial statements. Three Months Ended September 30, 2021 2020 By- Product Method Co-Product Method By- Product Method Co-Product Method Copper Molyb- denum a Copper Molyb- denum a Revenues, excluding adjustments $ 4.34 $ 4.34 $ 16.69 $ 3.01 $ 3.01 $ 7.72 Site production and delivery, before net noncash and other costs shown below 2.12 1.93 8.97 1.76 1.67 5.52 By-product credits (0.39) — — (0.18) — — Treatment charges 0.09 0.09 — 0.09 0.08 — Unit net cash costs 1.82 2.02 8.97 1.67 1.75 5.52 DD&A 0.25 0.23 0.73 0.24 0.23 0.43 Metals inventory adjustments 0.03 0.03 — (0.01) (0.01) — Noncash and other costs, net 0.08 0.08 0.23 0.10 b 0.09 0.06 Total unit costs 2.18 2.36 9.93 2.00 2.06 6.01 Revenue adjustments, primarily for pricing on prior period open sales (0.02) (0.02) — — — — Gross profit per pound $ 2.14 $ 1.96 $ 6.76 $ 1.01 $ 0.95 $ 1.71 Copper sales (millions of recoverable pounds) 375 375 378 378 Molybdenum sales (millions of recoverable pounds) a 9 7 Nine months ended September 30, 2021 2020 By- Product Method Co-Product Method By- Product Method Co-Product Method Copper Molyb- denum a Copper Molyb- denum a Revenues, excluding adjustments $ 4.24 $ 4.24 $ 13.09 $ 2.67 $ 2.67 $ 8.57 Site production and delivery, before net noncash and other costs shown below 2.11 1.95 7.54 1.91 1.78 7.05 By-product credits (0.32) — — (0.19) — — Treatment charges 0.09 0.09 — 0.10 0.10 — Unit net cash costs 1.88 2.04 7.54 1.82 1.88 7.05 DD&A 0.26 0.24 0.59 0.25 0.23 0.57 Metals inventory adjustments 0.01 0.01 — 0.05 0.04 — Noncash and other costs, net 0.10 0.09 0.12 0.10 b 0.10 0.12 Total unit costs 2.25 2.38 8.25 2.22 2.25 7.74 Revenue adjustments, primarily for pricing on prior period open sales 0.01 0.01 — (0.01) (0.01) — Gross profit per pound $ 2.00 $ 1.87 $ 4.84 $ 0.44 $ 0.41 $ 0.83 Copper sales (millions of recoverable pounds) 1,072 1,072 1,100 1,100 Molybdenum sales (millions of recoverable pounds) a 26 24 a. Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing. b. Includes charges totaling $0.03 per pound of copper for both 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 $1.82 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. 40 Table of Contents Because certain assets are depreciated on a straight-line basis, North America’s average unit depreciation rate may vary with asset additions and the level of copper production and sales. Average unit net cash costs (net of by-product credits) for our North America copper mines are expected to approximate $1.85 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 We operate two copper mines in South America – Cerro Verde in Peru (in which we own a 53.56 percent interest) and El Abra in Chile (in which we own a 51 percent interest), which are consolidated in our financial statements. South America mining includes open-pit mining, sulfide ore concentrating, leaching and SX/EW operations. Production from our South America mines is sold as copper concentrate or cathode under long-term contracts. Our South America mines also sell a portion of their copper concentrate production to Atlantic Copper. In addition to copper, the Cerro Verde mine produces molybdenum concentrate and silver. Cerro Verde Labor Agreement. 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. 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. A new leach pad is under construction to accommodate planned stacking rates for the next several years. We continue to evaluate a large-scale expansion at El Abra to process additional sulfide material and to achieve higher copper recoveries. El Abra's large sulfide resource could potentially support a major mill project similar to facilities constructed at Cerro Verde in 2015. Technical and economic studies continue to be evaluated to determine the optimal scope and timing for the sulfide project, 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. 41 Table of Contents Operating Data. Following is summary consolidated operating data for South America mining: Three Months Ended September 30, Nine months ended September 30, 2021 2020 2021 2020 Copper (millions of recoverable pounds) Production 260 253 764 716 Sales 280 250 769 716 Average realized price per pound $ 4.12 $ 3.02 $ 4.21 $ 2.79 Molybdenum (millions of recoverable pounds) Production a 5 6 14 14 Leach operations Leach ore placed in stockpiles (metric tons per day) 171,600 172,400 171,900 165,600 Average copper ore grade (percent) 0.30 0.35 0.33 0.35 Copper production (millions of recoverable pounds) 62 55 188 180 Mill operations Ore milled (metric tons per day) 380,300 351,000 381,500 317,600 b Average ore grade (percent): Copper 0.31 0.33 0.30 0.35 Molybdenum 0.01 0.01 0.01 0.01 Copper recovery rate (percent) 86.1 88.4 86.3 83.5 Copper production (millions of recoverable pounds) 199 198 576 536 a. Refer to “Consolidated Results” for our consolidated molybdenum sales volumes, which include sales of molybdenum produced at Cerro Verde. b. Cerro Verde mill operations were negatively impacted by COVID-19 restrictions. Our consolidated copper sales volumes from South America totaled 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. Unit Net Cash Costs. Unit net cash costs per pound of copper is a measure intended to provide investors with information about the cash-generating capacity of our mining operations expressed on a basis relating to the primary metal product for our respective operations. We use this measure for the same purpose and for monitoring operating performance by our mining operations. This information differs from measures of performance determined in accordance with U.S. GAAP and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. This measure is presented by other metals mining companies, although our measure may not be comparable to similarly titled measures reported by other companies. Gross Profit per Pound of Copper The following table summarizes unit net cash costs and gross profit per pound of copper at our South America mining operations. Unit net cash costs per pound of copper are reflected under the by-product and co-product methods as the South America mining operations also had sales of molybdenum and silver. Refer to “Product Revenues and Production Costs” for an explanation of the “by-product” and “co-product” methods and a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in our consolidated financial statements. 42 Table of Contents Three Months Ended September 30, 2021 2020 By-Product Method Co-Product Method By-Product Method Co-Product Method Revenues, excluding adjustments $ 4.12 $ 4.12 $ 3.02 $ 3.02 Site production and delivery, before net noncash and other costs shown below 2.14 a 1.96 1.84 1.73 By-product credits (0.38) — (0.17) — Treatment charges 0.13 0.13 0.15 0.15 Royalty on metals 0.01 0.01 0.01 0.01 Unit net cash costs 1.90 2.10 1.83 1.89 DD&A 0.40 0.36 0.42 0.39 Noncash and other costs, net 0.07 0.06 0.04 b 0.04 Total unit costs 2.37 2.52 2.29 2.32 Revenue adjustments, primarily for pricing on prior period open sales (0.03) (0.03) 0.16 0.16 Gross profit per pound $ 1.72 $ 1.57 $ 0.89 $ 0.86 Copper sales (millions of recoverable pounds) 280 280 250 250 Nine months ended September 30, 2021 2020 By-Product Method Co-Product Method By-Product Method Co-Product Method Revenues, excluding adjustments $ 4.21 $ 4.21 $ 2.79 $ 2.79 Site production and delivery, before net noncash and other costs shown below 2.20 a 2.04 1.83 1.72 By-product credits (0.31) — (0.15) — Treatment charges 0.13 0.13 0.15 0.15 Royalty on metals 0.01 0.01 0.01 0.01 Unit net cash costs 2.03 2.18 1.84 1.88 DD&A 0.40 0.36 0.44 0.41 Noncash and other costs, net 0.07 0.06 0.16 b 0.15 Total unit costs 2.50 2.60 2.44 2.44 Revenue adjustments, primarily for pricing on prior period open sales 0.13 0.13 (0.10) (0.10) Gross profit per pound $ 1.84 $ 1.74 $ 0.25 $ 0.25 Copper sales (millions of recoverable pounds) 769 769 716 716 a. 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. b. 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 $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. 43 Table of Contents Revenues from Cerro Verde’s concentrate sales are recorded net of treatment charges, which will vary with Cerro Verde’s sales volumes and the price of copper. Because certain assets are depreciated on a straight-line basis, South America’s unit depreciation rate may vary with asset additions and the level of copper production and sales. Revenue adjustments primarily result from changes in prices on provisionally priced copper sales recognized in prior periods. Refer to “Consolidated Results – Revenues” for further discussion of adjustments to prior period provisionally priced copper sales. Average unit net cash costs (net of by-product credits) for South America mining are expected to approximate $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 PT-FI operates one of the world’s largest copper and gold mines at the Grasberg minerals district in Papua, Indonesia. PT-FI produces copper concentrate that contains significant quantities of gold and silver. We have a 48.76 percent interest in PT-FI and manage its mining operations. As further discussed in Note 2 of our 2020 Form 10-K, under the terms of the shareholders agreement, our economic interest in PT-FI approximates 81 percent through 2022. PT-FI’s results are consolidated in our financial statements. 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 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. 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 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. 44 Table of Contents 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 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. PT-FI is advancing agreements with the majority owner of PT Smelting to implement the expansion plans with a target completion date of year-end 2023. PT-FI would fund the cost of the expansion, estimated to approximate $250 million, and increase its ownership in PT Smelting to a majority ownership interest. • Construction of a 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 $1.0 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. 45 Table of Contents Operating Data. Following is summary consolidated operating data for Indonesia mining: Three Months Ended September 30, Nine months ended September 30, 2021 2020 2021 2020 Copper (millions of recoverable pounds) Production 350 222 956 543 Sales 378 219 946 518 Average realized price per pound $ 4.11 $ 3.00 $ 4.21 $ 2.79 Gold (thousands of recoverable ounces) Production 371 236 968 577 Sales 399 230 957 549 Average realized price per ounce $ 1,757 $ 1,902 $ 1,780 $ 1,810 Ore extracted and milled (metric tons per day): Grasberg Block Cave underground mine a 76,500 30,800 64,300 25,700 DMLZ underground mine a 59,700 29,100 53,500 25,100 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 Other 11,100 (400) 5,700 2,200 Total 157,400 87,300 141,600 80,500 Average ore grades: Copper (percent) 1.30 1.45 1.32 1.30 Gold (grams per metric ton) 1.05 1.20 1.04 1.08 Recovery rates (percent): Copper 90.1 92.3 90.0 92.0 Gold 78.6 79.3 77.8 78.2 a. Includes ore from development activities that result in metal production. b. 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. Unit Net Cash Costs. Unit net cash costs per pound of copper is a measure intended to provide investors with information about the cash-generating capacity of our mining operations expressed on a basis relating to the primary metal product for our respective operations. We use this measure for the same purpose and for monitoring operating performance by our mining operations. This information differs from measures of performance determined in accordance with U.S. GAAP and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. This measure is presented by other metals mining companies, although our measure may not be comparable to similarly titled measures reported by other companies. 46 Table of Contents Gross Profit per Pound of Copper and per Ounce of Gold The following table summarizes the unit net cash costs and gross profit per pound of copper and per ounce of gold at our Indonesia mining operations. Refer to “Product Revenues and Production Costs” for an explanation of “by-product” and “co-product” methods and a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in our consolidated financial statements. Three Months Ended September 30, 2021 2020 By-Product Method Co-Product Method By-Product Method Co-Product Method Copper Gold Copper Gold Revenues, excluding adjustments $ 4.11 $ 4.11 $ 1,757 $ 3.00 $ 3.00 $ 1,902 Site production and delivery, before net noncash and other costs shown below 1.46 0.99 424 1.71 1.01 639 Gold and silver credits (1.97) — — (2.16) — — Treatment charges 0.24 0.16 69 0.26 0.16 98 Export duties 0.19 0.13 54 0.11 0.06 40 Royalty on metals 0.25 0.18 63 0.21 0.12 79 Unit net cash costs 0.17 1.46 610 0.13 1.35 856 DD&A 0.74 0.50 215 0.68 0.40 256 Noncash and other costs, net — — — 0.11 a 0.06 40 Total unit costs 0.91 1.96 825 0.92 1.81 1,152 Revenue adjustments, primarily for pricing on prior period open sales — — 16 0.13 0.13 49 PT Smelting intercompany loss (0.04) (0.03) (12) (0.08) (0.05) (31) Gross profit per pound/ounce $ 3.16 $ 2.12 $ 936 $ 2.13 $ 1.27 $ 768 Copper sales (millions of recoverable pounds) 378 378 219 219 Gold sales (thousands of recoverable ounces) 399 230 Nine Months Ended September 30, 2021 2020 By-Product Method Co-Product Method By-Product Method Co-Product Method Copper Gold Copper Gold Revenues, excluding adjustments $ 4.21 $ 4.21 $ 1,780 $ 2.79 $ 2.79 $ 1,810 Site production and delivery, before net noncash and other costs shown below 1.49 1.03 434 2.05 1.19 773 Gold and silver credits (1.91) — — (2.02) — — Treatment charges 0.24 0.17 70 0.28 0.16 104 Export duties 0.15 0.10 45 0.08 0.05 31 Royalty on metals 0.26 0.18 66 0.18 0.10 68 Unit net cash costs 0.23 1.48 615 0.57 1.50 976 DD&A 0.76 0.52 222 0.72 0.42 273 Noncash and other costs, net 0.01 b 0.01 1 0.11 a 0.07 41 Total unit costs 1.00 2.01 838 1.40 1.99 1,290 Revenue adjustments, primarily for pricing on prior period open sales 0.08 0.08 (5) (0.03) (0.03) 8 PT Smelting intercompany loss (0.11) (0.08) (33) (0.04) (0.02) (13) Gross profit per pound/ounce $ 3.18 $ 2.20 $ 904 $ 1.32 $ 0.75 $ 515 Copper sales (millions of recoverable pounds) 946 946 518 518 Gold sales (thousands of recoverable ounces) 957 549 a. Includes COVID-19 related costs (including one-time incremental employee benefits and health and safety costs) totaling $0.05 per pound of copper in third-quarter 2020 and $0.03 per pound of copper for the first nine months of 2020. b. Includes 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. 47 Table of Contents 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 $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 $0.74 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. PT Smelting intercompany loss represents the change in the deferral of PT-FI’s profit on sales to PT Smelting (25 percent prior to April 30, 2021, and 39.5 percent thereafter). Refer to “Smelting and Refining” below for further discussion. Assuming an average gold price of $1,800 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 We operate two wholly owned molybdenum mines in Colorado – the Henderson underground mine and the Climax open-pit mine. The Henderson and Climax mines produce high-purity, chemical-grade molybdenum concentrate, which is typically further processed into value-added molybdenum chemical products. The majority of the molybdenum concentrate produced at the Henderson and Climax mines, as well as from our North America and South America copper mines, is processed at our own conversion facilities. Operating and Development Activities. Production from the Molybdenum mines 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. Refer to “Outlook” for projected consolidated molybdenum sales volumes. 48 Table of Contents Unit Net Cash Costs Per Pound of Molybdenum. Unit net cash costs per pound of molybdenum is a measure intended to provide investors with information about the cash-generating capacity of our mining operations expressed on a basis relating to the primary metal product for our respective operations. We use this measure for the same purpose and for monitoring operating performance by our mining operations. This information differs from measures of performance determined in accordance with U.S. GAAP and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. This measure is presented by other metals mining companies, although our measure may not be comparable to similarly titled measures reported by other companies. Average unit net cash costs for our Molybdenum mines of $8.54 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. Refer to “Product Revenues and Production Costs” for a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in our consolidated financial statements. Smelting and Refining We wholly own and operate a smelter in Arizona (Miami smelter), a refinery in Texas (El Paso refinery) and a smelter and refinery in Spain (Atlantic Copper). PT-FI 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. Treatment charges represent a cost to our mining operations and income to Atlantic Copper and PT Smelting. Thus, higher treatment charges benefit our smelter operations and adversely affect our mining operations. Our North America copper mines are less significantly affected by changes in treatment charges because these operations are largely integrated with our Miami smelter and El Paso refinery. Through this form of downstream integration, we are assured placement of a significant portion of our concentrate production. Our Miami smelter processes concentrate produced by our U.S. mines and also provides acid for copper leaching operations. 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 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 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 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. 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). 49 Table of Contents CAPITAL RESOURCES AND LIQUIDITY Our consolidated operating cash flows vary with sales volumes; prices realized from copper, gold and molybdenum sales; production costs; income taxes; other working capital changes; and other factors. We 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. 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. 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 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. 50 Table of Contents Cash Following is a summary of the U.S. and international components of consolidated cash and cash equivalents available to the parent company, net of noncontrolling interests’ share, taxes and other costs at September 30, 2021 (in billions): Cash at domestic companies $ 5.0 Cash at international operations 2.7 Total consolidated cash and cash equivalents 7.7 Noncontrolling interests’ share (0.9) Cash, net of noncontrolling interests’ share 6.8 Withholding taxes (0.1) Net cash available $ 6.7 Cash held at our international operations is generally used to support our foreign operations’ capital expenditures, operating expenses, debt repayment, working capital and other tax payments, or other cash needs. Management believes that sufficient liquidity is available in the U.S. from cash balances and availability from our revolving credit facility. We have not elected to permanently reinvest earnings from our foreign subsidiaries, and we have recorded deferred tax liabilities for foreign earnings that are available to be repatriated to the U.S. From time to time, our foreign subsidiaries distribute earnings to the U.S. through dividends that are subject to applicable withholding taxes and noncontrolling interests’ share. Debt At September 30, 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. 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 $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. 51 Table of Contents Investing Activities Capital Expenditures. 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. 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. On April 30, 2021, PT-FI acquired 14.5 percent of the outstanding common stock of PT Smelting for $33 million, increasing its ownership interest from 25 percent to 39.5 percent. Financing Activities Debt Transactions. Net 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 $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 $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 $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. 52 Table of Contents CONTRACTUAL OBLIGATIONS 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 Environmental and Asset Retirement Obligations Our current and historical operating activities are subject to stringent laws and regulations governing the protection of the environment. We perform a comprehensive annual review of our environmental and asset retirement obligations and also review changes in facts and circumstances associated with these obligations at least quarterly. There have been no material changes to our environmental and asset retirement obligations since December 31, 2020. Refer to Note 8 for updates associated with our Newtown Creek environmental obligation. Updated cost assumptions, including increases and decreases to cost estimates, changes in the anticipated scope and timing of remediation activities, and settlement of environmental matters may result in additional revisions to certain of our environmental obligations. 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. Litigation and Other Contingencies There have been no material changes to our contingencies associated with legal proceedings, environmental and other matters since December 31, 2020. Refer to Note 12 and “Legal Proceedings” contained in Part I, Item 3. of our 2020 Form 10-K, as updated by Note 8, for further information regarding legal proceedings, environmental and other matters. NEW ACCOUNTING STANDARDS There were no significant updates to previously reported accounting standards included in Note 1 of our 2020 Form 10-K. NET DEBT Net debt, which we define as consolidated debt less consolidated cash and cash equivalents, is intended to provide investors with information related to the performance-based payout framework in our financial policy, which requires achievement of a net debt target in the range of $3 billion to $4 billion (excluding project debt for additional smelting capacity in Indonesia). This information differs from consolidated debt determined in accordance with U.S. GAAP and should not be considered in isolation or as a substitute for consolidated debt determined in accordance with U.S. GAAP. Our net debt follows, which may not be comparable to similarly titled measures reported by other companies (in millions): September 30, 2021 December 31, 2020 Current portion of debt $ 897 $ 34 Long-term debt, less current portion 8,768 9,677 Consolidated debt 9,665 a 9,711 Less: consolidated cash and cash equivalents 7,672 3,657 Net debt $ 1,993 $ 6,054 a. Includes $146 million, net of debt issuance costs, for the PT-FI Term Loan (refer to Note 5). 53 Table of Contents PRODUCT REVENUES AND PRODUCTION COSTS Unit net cash costs per pound of copper and molybdenum are measures intended to provide investors with information about the cash-generating capacity of our mining operations expressed on a basis relating to the primary metal product for the respective operations. We use this measure for the same purpose and for monitoring operating performance by our mining operations. This information differs from measures of performance determined in accordance with U.S. GAAP and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. These measures are presented by other metals mining companies, although our measures may not be comparable to similarly titled measures reported by other companies. We present gross profit 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. We show revenue adjustments for prior period open sales as a separate line item. Because these adjustments do not result from current period sales, these amounts have been reflected separately from revenues on current period sales. Noncash and other costs, which are removed from site production and delivery costs in the calculation of unit net cash costs, consist of items such as stock-based compensation costs, long-lived asset impairments, idle facility costs, restructuring and/or unusual charges. As discussed above, gold, molybdenum and other metal revenues at copper mines are reflected as credits against site production and delivery costs in the by-product method. The following schedules are presentations under both the by-product and co-product methods together with reconciliations to amounts reported in our consolidated financial statements. 54 Table of Contents North America Copper Mines Product Revenues, Production Costs and Unit Net Cash Costs Three Months Ended September 30, 2021 (In millions) By-Product Co-Product Method Method Copper Molybdenum a Other b Total Revenues, excluding adjustments $ 1,627 $ 1,627 $ 152 $ 27 $ 1,806 Site production and delivery, before net noncash and other costs shown below 795 724 82 20 826 By-product credits (148) — — — — Treatment charges 35 33 — 2 35 Net cash costs 682 757 82 22 861 DD&A 94 85 7 2 94 Metals inventory adjustments 13 13 — — 13 Noncash and other costs, net 30 28 2 — 30 Total costs 819 883 91 24 998 Other revenue adjustments, primarily for pricing on prior period open sales (7) (7) — — (7) Gross profit $ 801 $ 737 $ 61 $ 3 $ 801 Copper sales (millions of recoverable pounds) 375 375 Molybdenum sales (millions of recoverable pounds) a 9 Gross profit per pound of copper/molybdenum: Revenues, excluding adjustments $ 4.34 $ 4.34 $ 16.69 Site production and delivery, before net noncash and other costs shown below 2.12 1.93 8.97 By-product credits (0.39) — — Treatment charges 0.09 0.09 — Unit net cash costs 1.82 2.02 8.97 DD&A 0.25 0.23 0.73 Metals inventory adjustments 0.03 0.03 — Noncash and other costs, net 0.08 0.08 0.23 Total unit costs 2.18 2.36 9.93 Other revenue adjustments, primarily for pricing on prior period open sales (0.02) (0.02) — Gross profit per pound $ 2.14 $ 1.96 $ 6.76 Reconciliation to Amounts Reported Revenues Production and Delivery DD&A Metals Inventory Adjustments Totals presented above $ 1,806 $ 826 $ 94 $ 13 Treatment charges (4) 31 — — Noncash and other costs, net — 30 — — Other revenue adjustments, primarily for pricing on prior period open sales (7) — — — Eliminations and other 16 17 — — North America copper mines 1,811 904 94 13 Other mining c 5,903 3,735 418 — Corporate, other & eliminations (1,631) (1,630) 16 1 As reported in our consolidated financial statements $ 6,083 $ 3,009 $ 528 $ 14 a. Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing. b. Includes gold and silver product revenues and production costs. c. Represents the combined total for our other segments, as presented in Note 9. 55 Table of Contents North America Copper Mines Product Revenues, Production Costs and Unit Net Cash Costs Three Months Ended September 30, 2020 (In millions) By-Product Co-Product Method Method Copper Molybdenum a Other b Total Revenues, excluding adjustments $ 1,138 $ 1,138 $ 63 $ 30 $ 1,231 Site production and delivery, before net noncash and other costs shown below 667 630 45 16 691 By-product credits (69) — — — — Treatment charges 33 32 — 1 33 Net cash costs 631 662 45 17 724 DD&A 92 85 4 3 92 Metals inventory adjustments (4) (4) — — (4) Noncash and other costs, net 37 c 35 — 2 37 Total costs 756 778 49 22 849 Other revenue adjustments, primarily for pricing on prior period open sales 1 1 — — 1 Gross profit $ 383 $ 361 $ 14 $ 8 $ 383 Copper sales (millions of recoverable pounds) 378 378 Molybdenum sales (millions of recoverable pounds) a 7 Gross profit per pound of copper/molybdenum: Revenues, excluding adjustments $ 3.01 $ 3.01 $ 7.72 Site production and delivery, before net noncash and other costs shown below 1.76 1.67 5.52 By-product credits (0.18) — — Treatment charges 0.09 0.08 — Unit net cash costs 1.67 1.75 5.52 DD&A 0.24 0.23 0.43 Metals inventory adjustments (0.01) (0.01) — Noncash and other costs, net 0.10 c 0.09 0.06 Total unit costs 2.00 2.06 6.01 Other revenue adjustments, primarily for pricing on prior period open sales — — — Gross profit per pound $ 1.01 $ 0.95 $ 1.71 Reconciliation to Amounts Reported Revenues Production and Delivery DD&A Metals Inventory Adjustments Totals presented above $ 1,231 $ 691 $ 92 $ (4) Treatment charges (4) 29 — — Noncash and other costs, net — 37 — — Other revenue adjustments, primarily for pricing on prior period open sales 1 — — — Eliminations and other 9 11 (1) — North America copper mines 1,237 768 91 (4) Other mining d 3,691 2,731 282 5 Corporate, other & eliminations (1,077) (1,034) 21 8 As reported in our consolidated financial statements $ 3,851 $ 2,465 $ 394 $ 9 a. Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing. b. Includes gold and silver product revenues and production costs. c. Includes charges totaling $10 million ($0.03 per pound of copper) primarily associated with the April 2020 revised operating plans (including employee separation costs) and the COVID-19 pandemic (including health and safety costs). d. Represents the combined total for our other segments, as presented in Note 9. 56 Table of Contents North America Copper Mines Product Revenues, Production Costs and Unit Net Cash Costs Nine months ended September 30, 2021 (In millions) By-Product Co-Product Method Method Copper Molybdenum a Other b Total Revenues, excluding adjustments $ 4,538 $ 4,538 337 93 4,968 Site production and delivery, before net noncash and other costs shown below 2,254 2,093 194 60 2,347 By-product credits (337) — — — — Treatment charges 98 93 — 5 98 Net cash costs 2,015 2,186 194 65 2,445 DD&A 275 254 15 6 275 Metals inventory adjustments 13 13 — — 13 Noncash and other costs, net 103 99 3 1 103 Total costs 2,406 2,552 212 72 2,836 Other revenue adjustments, primarily for pricing on prior period open sales 7 7 — — 7 Gross profit $ 2,139 $ 1,993 $ 125 $ 21 $ 2,139 Copper sales (millions of recoverable pounds) 1,072 1,072 Molybdenum sales (millions of recoverable pounds) a 26 Gross profit per pound of copper/molybdenum: Revenues, excluding adjustments $ 4.24 $ 4.24 $ 13.09 Site production and delivery, before net noncash and other costs shown below 2.11 1.95 7.54 By-product credits (0.32) — — Treatment charges 0.09 0.09 — Unit net cash costs 1.88 2.04 7.54 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 Total unit costs 2.25 2.38 8.25 Other revenue adjustments, primarily for pricing on prior period open sales 0.01 0.01 — Gross profit per pound $ 2.00 $ 1.87 $ 4.84 Reconciliation to Amounts Reported Metals Production Inventory Revenues and Delivery DD&A Adjustments Totals presented above $ 4,968 $ 2,347 $ 275 $ 13 Treatment charges (21) 77 — — Noncash and other costs, net — 103 — — Other revenue adjustments, primarily for pricing on prior period open sales 7 — — — Eliminations and other 49 51 — — North America copper mines 5,003 2,578 275 13 Other mining c 16,068 10,425 1,108 1 Corporate, other & eliminations (4,390) (4,141) 47 1 As reported in our consolidated financial statements $ 16,681 $ 8,862 $ 1,430 $ 15 a. Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing. b. Includes gold and silver product revenues and production costs. c. Represents the combined total for our other segments, as presented in Note 9. 57 Table of Contents North America Copper Mines Product Revenues, Production Costs and Unit Net Cash Costs Nine months ended September 30, 2020 (In millions) By-Product Co-Product Method Method Copper Molybdenum a Other b Total Revenues, excluding adjustments $ 2,939 $ 2,939 210 73 3,222 Site production and delivery, before net noncash and other costs shown below 2,106 1,963 173 44 2,180 By-product credits (209) — — — — Treatment charges 109 105 — 4 109 Net cash costs 2,006 2,068 173 48 2,289 DD&A 272 251 14 7 272 Metals inventory adjustments 52 49 — 3 52 Noncash and other costs, net 107 c 101 3 3 107 Total costs 2,437 2,469 190 61 2,720 Other revenue adjustments, primarily for pricing on prior period open sales (22) (22) — — (22) Gross profit $ 480 $ 448 $ 20 $ 12 $ 480 Copper sales (millions of recoverable pounds) 1,100 1,100 Molybdenum sales (millions of recoverable pounds) a 24 Gross profit per pound of copper/molybdenum: Revenues, excluding adjustments $ 2.67 $ 2.67 $ 8.57 Site production and delivery, before net noncash and other costs shown below 1.91 1.78 7.05 By-product credits (0.19) — — Treatment charges 0.10 0.10 — Unit net cash costs 1.82 1.88 7.05 DD&A 0.25 0.23 0.57 Metals inventory adjustments 0.05 0.04 — Noncash and other costs, net 0.10 c 0.10 0.12 Total unit costs 2.22 2.25 7.74 Other revenue adjustments, primarily for pricing on prior period open sales (0.01) (0.01) — Gross profit per pound $ 0.44 $ 0.41 $ 0.83 Reconciliation to Amounts Reported Metals Production Inventory Revenues and Delivery DD&A Adjustments Totals presented above $ 3,222 $ 2,180 $ 272 $ 52 Treatment charges (14) 95 — — Noncash and other costs, net — 107 — — Other revenue adjustments, primarily for pricing on prior period open sales (22) — — — Eliminations and other 24 33 — — North America copper mines 3,210 2,415 272 52 Other mining d 9,267 7,665 770 14 Corporate, other & eliminations (2,774) (2,676) 51 26 As reported in our consolidated financial statements $ 9,703 $ 7,404 $ 1,093 $ 92 a. Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing. b. Includes gold and silver product revenues and production costs. c. Includes 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). d. Represents the combined total for our other segments, as presented in Note 9. 58 Table of Contents South America Mining Product Revenues, Production Costs and Unit Net Cash Costs Three Months Ended September 30, 2021 (In millions) By-Product Co-Product Method Method Copper Other a Total Revenues, excluding adjustments $ 1,153 $ 1,153 $ 120 $ 1,273 Site production and delivery, before net noncash and other costs shown below 597 b 546 64 610 By-product credits (107) — — — Treatment charges 38 38 — 38 Royalty on metals 3 2 1 3 Net cash costs 531 586 65 651 DD&A 112 101 11 112 Noncash and other costs, net 20 19 1 20 Total costs 663 706 77 783 Other revenue adjustments, primarily for pricing on prior period open sales (8) (8) — (8) Gross profit $ 482 $ 439 $ 43 $ 482 Copper sales (millions of recoverable pounds) 280 280 Gross profit per pound of copper: Revenues, excluding adjustments $ 4.12 $ 4.12 Site production and delivery, before net noncash and other costs shown below 2.14 b 1.96 By-product credits (0.38) — Treatment charges 0.13 0.13 Royalty on metals 0.01 0.01 Unit net cash costs 1.90 2.10 DD&A 0.40 0.36 Noncash and other costs, net 0.07 0.06 Total unit costs 2.37 2.52 Other revenue adjustments, primarily for pricing on prior period open sales (0.03) (0.03) Gross profit per pound $ 1.72 $ 1.57 Reconciliation to Amounts Reported Production Revenues and Delivery DD&A Totals presented above $ 1,273 $ 610 $ 112 Treatment charges (38) — — Royalty on metals (3) — — Noncash and other costs, net — 20 — Other revenue adjustments, primarily for pricing on prior period open sales (8) — — Eliminations and other (1) — (1) South America mining 1,223 630 111 Other mining c 6,491 4,009 401 Corporate, other & eliminations (1,631) (1,630) 16 As reported in our consolidated financial statements $ 6,083 $ 3,009 $ 528 a. Includes silver sales of 1.0 million ounces ($24.34 per ounce average realized price). Also reflects sales of molybdenum produced by Cerro Verde to our molybdenum sales company at market-based pricing. b. Includes nonrecurring charges totaling $5 million ($0.02 per pound of copper) associated with labor related charges at Cerro Verde. c. Represents the combined total for our other segments, as presented in Note 9. 59 Table of Contents South America Mining Product Revenues, Production Costs and Unit Net Cash Costs Three Months Ended September 30, 2020 (In millions) By-Product Co-Product Method Method Copper Other a Total Revenues, excluding adjustments $ 754 $ 754 $ 53 $ 807 Site production and delivery, before net noncash and other costs shown below 459 432 38 470 By-product credits (42) — — — Treatment charges 40 40 — 40 Royalty on metals 1 1 — 1 Net cash costs 458 473 38 511 DD&A 105 98 7 105 Noncash and other costs, net 9 b 8 1 9 Total costs 572 579 46 625 Other revenue adjustments, primarily for pricing on prior period open sales 41 41 — 41 Gross profit $ 223 $ 216 $ 7 $ 223 Copper sales (millions of recoverable pounds) 250 250 Gross profit per pound of copper: Revenues, excluding adjustments $ 3.02 $ 3.02 Site production and delivery, before net noncash and other costs shown below 1.84 1.73 By-product credits (0.17) — Treatment charges 0.15 0.15 Royalty on metals 0.01 0.01 Unit net cash costs 1.83 1.89 DD&A 0.42 0.39 Noncash and other costs, net 0.04 b 0.04 Total unit costs 2.29 2.32 Other revenue adjustments, primarily for pricing on prior period open sales 0.16 0.16 Gross profit per pound $ 0.89 $ 0.86 Reconciliation to Amounts Reported Production Revenues and Delivery DD&A Totals presented above $ 807 $ 470 $ 105 Treatment charges (40) — — Royalty on metals (1) — — Noncash and other costs, net — 9 — Other revenue adjustments, primarily for pricing on prior period open sales 41 — — Eliminations and other (1) (2) — South America mining 806 477 105 Other mining c 4,122 3,022 268 Corporate, other & eliminations (1,077) (1,034) 21 As reported in our consolidated financial statements $ 3,851 $ 2,465 $ 394 a. Includes silver sales of 0.9 million ounces ($24.84 per ounce average realized price). Also reflects sales of molybdenum produced by Cerro Verde to our molybdenum sales company at market-based pricing. b. Includes charges totaling $5 million ($0.02 per pound of copper), primarily associated with the COVID-19 pandemic (including health and safety costs). c. Represents the combined total for our other segments, as presented in Note 9. 60 Table of Contents South America Mining Product Revenues, Production Costs and Unit Net Cash Costs Nine months ended September 30, 2021 (In millions) By-Product Co-Product Method Method Copper Other a Total Revenues, excluding adjustments $ 3,238 $ 3,238 $ 267 $ 3,505 Site production and delivery, before net noncash and other costs shown below 1,690 b 1,568 155 1,723 By-product credits (234) — — — Treatment charges 101 101 — 101 Royalty on metals 8 7 1 8 Net cash costs 1,565 1,676 156 1,832 DD&A 306 282 24 306 Noncash and other costs, net 49 45 4 49 Total costs 1,920 2,003 184 2,187 Other revenue adjustments, primarily for pricing on prior period open sales 98 98 — 98 Gross profit $ 1,416 $ 1,333 $ 83 $ 1,416 Copper sales (millions of recoverable pounds) 769 769 Gross profit per pound of copper: Revenues, excluding adjustments $ 4.21 $ 4.21 Site production and delivery, before net noncash and other costs shown below 2.20 b 2.04 By-product credits (0.31) — Treatment charges 0.13 0.13 Royalty on metals 0.01 0.01 Unit net cash costs 2.03 2.18 DD&A 0.40 0.36 Noncash and other costs, net 0.07 0.06 Total unit costs 2.50 2.60 Other revenue adjustments, primarily for pricing on prior period open sales 0.13 0.13 Gross profit per pound $ 1.84 $ 1.74 Reconciliation to Amounts Reported Production Revenues and Delivery DD&A Totals presented above $ 3,505 $ 1,723 $ 306 Treatment charges (101) — — Royalty on metals (8) — — Noncash and other costs, net — 49 — Other revenue adjustments, primarily for pricing on prior period open sales 98 — — Eliminations and other (1) (3) — South America mining 3,493 1,769 306 Other mining c 17,578 11,234 1,077 Corporate, other & eliminations (4,390) (4,141) 47 As reported in our consolidated financial statements $ 16,681 $ 8,862 $ 1,430 a. Includes silver sales of 2.7 million ounces ($25.81 per ounce average realized price). Also reflects sales of molybdenum produced by Cerro Verde to FCX's molybdenum sales company at market-based pricing. b. 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. c. Represents the combined total for our other segments, as presented in Note 9. 61 Table of Contents South America Mining Product Revenues, Production Costs and Unit Net Cash Costs Nine months ended September 30, 2020 (In millions) By-Product Co-Product Method Method Copper Other a Total Revenues, excluding adjustments $ 1,994 $ 1,994 $ 139 $ 2,133 Site production and delivery, before net noncash and other costs shown below 1,313 1,231 111 1,342 By-product credits (110) — — — Treatment charges 111 111 — 111 Royalty on metals 4 4 — 4 Net cash costs 1,318 1,346 111 1,457 DD&A 316 294 22 316 Metals inventory adjustments 3 3 — 3 Noncash and other costs, net 109 b 103 6 109 Total costs 1,746 1,746 139 1,885 Other revenue adjustments, primarily for pricing on prior period open sales (70) (70) — (70) Gross profit $ 178 $ 178 $ — $ 178 Copper sales (millions of recoverable pounds) 716 716 Gross profit per pound of copper: Revenues, excluding adjustments $ 2.79 $ 2.79 Site production and delivery, before net noncash and other costs shown below 1.83 1.72 By-product credits (0.15) — Treatment charges 0.15 0.15 Royalty on metals 0.01 0.01 Unit net cash costs 1.84 1.88 DD&A 0.44 0.41 Metals inventory adjustments — — Noncash and other costs, net 0.16 b 0.15 Total unit costs 2.44 2.44 Other revenue adjustments, primarily for pricing on prior period open sales (0.10) (0.10) Gross profit per pound $ 0.25 $ 0.25 Reconciliation to Amounts Reported Metals Production Inventory Revenues and Delivery DD&A Adjustments Totals presented above $ 2,133 $ 1,342 $ 316 $ 3 Treatment charges (111) — — — Royalty on metals (4) — — — Noncash and other costs, net — 109 — — Other revenue adjustments, primarily for pricing on prior period open sales (70) — — — Eliminations and other (1) (2) (1) — South America mining 1,947 1,449 315 3 Other mining c 10,530 8,631 727 63 Corporate, other & eliminations (2,774) (2,676) 51 26 As reported in our consolidated financial statements $ 9,703 $ 7,404 $ 1,093 $ 92 a. Includes silver sales of 2.5 million ounces ($19.58 per ounce average realized price). Also reflects sales of molybdenum produced by Cerro Verde to FCX's molybdenum sales company at market-based pricing. b. Includes charges totaling $91 million ($0.13 per pound of copper) primarily associated with idle facility (Cerro Verde) and contract cancellation costs related to the COVID-19 pandemic and employee separation costs associated with the April 2020 revised operating plans. c. Represents the combined total for our other segments, as presented in Note 9. 62 Table of Contents Indonesia Mining Product Revenues, Production Costs and Unit Net Cash Costs Three Months Ended September 30, 2021 (In millions) By-Product Co-Product Method Method Copper Gold Silver a Total Revenues, excluding adjustments $ 1,555 $ 1,555 $ 701 $ 37 $ 2,293 Site production and delivery, before net noncash and other costs shown below 553 375 169 9 553 Gold and silver credits (744) — — — — Treatment charges 90 61 27 2 90 Export duties 71 48 22 1 71 Royalty on metals 94 67 25 2 94 Net cash costs 64 551 243 14 808 DD&A 280 190 86 4 280 Total costs 344 741 329 18 1,088 Other revenue adjustments, primarily for pricing on prior period open sales (2) (2) 6 — 4 PT Smelting intercompany loss (16) (11) (5) — (16) Gross profit $ 1,193 $ 801 $ 373 $ 19 $ 1,193 Copper sales (millions of recoverable pounds) 378 378 Gold sales (thousands of recoverable ounces) 399 Gross profit per pound of copper/per ounce of gold: Revenues, excluding adjustments $ 4.11 $ 4.11 $ 1,757 Site production and delivery, before net noncash and other costs shown below 1.46 0.99 424 Gold and silver credits (1.97) — — Treatment charges 0.24 0.16 69 Export duties 0.19 0.13 54 Royalty on metals 0.25 0.18 63 Unit net cash costs 0.17 1.46 610 DD&A 0.74 0.50 215 Total unit costs 0.91 1.96 825 Other revenue adjustments, primarily for pricing on prior period open sales — — 16 PT Smelting intercompany loss (0.04) (0.03) (12) Gross profit per pound/ounce $ 3.16 $ 2.12 $ 936 Reconciliation to Amounts Reported Production Revenues and Delivery DD&A Totals presented above $ 2,293 $ 553 $ 280 Treatment charges (90) — — Export duties (71) — — Royalty on metals (94) — — Other revenue adjustments, primarily for pricing on prior period open sales 4 — — PT Smelting intercompany loss — 16 — Indonesia mining 2,042 569 280 Other mining b 5,672 4,070 232 Corporate, other & eliminations (1,631) (1,630) 16 As reported in our consolidated financial statements $ 6,083 $ 3,009 $ 528 a. Includes silver sales of 1.7 million ounces ($22.22 per ounce average realized price). b. Represents the combined total for our other segments, as presented in Note 9. 63 Table of Contents Indonesia Mining Product Revenues, Production Costs and Unit Net Cash Costs Three Months Ended September 30, 2020 (In millions) By-Product Co-Product Method Method Copper Gold Silver a Total Revenues, excluding adjustments $ 659 $ 659 $ 437 $ 24 $ 1,120 Site production and delivery, before net noncash and other costs shown below 376 221 147 8 376 Gold and silver credits (474) — — — — Treatment charges 58 34 23 1 58 Export duties 24 14 9 1 24 Royalty on metals 45 26 18 1 45 Net cash costs 29 295 197 11 503 DD&A 150 88 59 3 150 Noncash and other costs, net 24 b 14 9 1 24 Total costs 203 397 265 15 677 Other revenue adjustments, primarily for pricing on prior period open sales 28 28 11 2 41 PT Smelting intercompany loss (17) (10) (7) — (17) Gross profit $ 467 $ 280 $ 176 $ 11 $ 467 Copper sales (millions of recoverable pounds) 219 219 Gold sales (thousands of recoverable ounces) 230 Gross profit per pound of copper/per ounce of gold: Revenues, excluding adjustments $ 3.00 $ 3.00 $ 1,902 Site production and delivery, before net noncash and other costs shown below 1.71 1.01 639 Gold and silver credits (2.16) — — Treatment charges 0.26 0.16 98 Export duties 0.11 0.06 40 Royalty on metals 0.21 0.12 79 Unit net cash costs 0.13 1.35 856 DD&A 0.68 0.40 256 Noncash and other costs, net 0.11 b 0.06 40 Total unit costs 0.92 1.81 1,152 Other revenue adjustments, primarily for pricing on prior period open sales 0.13 0.13 49 PT Smelting intercompany loss (0.08) (0.05) (31) Gross profit per pound/ounce $ 2.13 $ 1.27 $ 768 Reconciliation to Amounts Reported Production Revenues and Delivery DD&A Totals presented above $ 1,120 $ 376 $ 150 Treatment charges (58) — — Export duties (24) — — Royalty on metals (53) (8) — Noncash and other costs, net — 24 — Other revenue adjustments, primarily for pricing on prior period open sales 41 — — PT Smelting intercompany loss — 17 — Indonesia mining 1,026 409 150 Other mining c 3,902 3,090 223 Corporate, other & eliminations (1,077) (1,034) 21 As reported in our consolidated financial statements $ 3,851 $ 2,465 $ 394 a. Includes silver sales of 1.0 million ounces ($24.29 per ounce average realized price). b. Includes COVID-19 related costs (including one-time incremental employee benefits and health and safety costs) totaling $10 million ($0.05 per pound of copper). c. Represents the combined total for our other segments, as presented in Note 9. 64 Table of Contents Indonesia Mining Product Revenues, Production Costs and Unit Net Cash Costs Nine months ended September 30, 2021 (In millions) By-Product Co-Product Method Method Copper Gold Silver a Total Revenues, excluding adjustments $ 3,989 $ 3,989 $ 1,703 $ 104 $ 5,796 Site production and delivery, before net noncash and other costs shown below 1,412 972 415 25 1,412 Gold and silver credits (1,803) — — — — Treatment charges 229 158 67 4 229 Export duties 145 99 43 3 145 Royalty on metals 234 167 63 4 234 Net cash costs 217 1,396 588 36 2,020 DD&A 726 499 213 14 726 Noncash and other costs, net 3 b 2 1 — 3 Total costs 946 1,897 802 50 2,749 Other revenue adjustments, primarily for pricing on prior period open sales 71 71 (4) — 67 PT Smelting intercompany loss (106) (73) (31) (2) (106) Gross profit $ 3,008 $ 2,090 $ 866 $ 52 $ 3,008 Copper sales (millions of recoverable pounds) 946 946 Gold sales (thousands of recoverable ounces) 957 Gross profit per pound of copper/per ounce of gold: Revenues, excluding adjustments $ 4.21 $ 4.21 $ 1,780 Site production and delivery, before net noncash and other costs shown below 1.49 1.03 434 Gold and silver credits (1.91) — — Treatment charges 0.24 0.17 70 Export duties 0.15 0.10 45 Royalty on metals 0.26 0.18 66 Unit net cash costs 0.23 1.48 615 DD&A 0.76 0.52 222 Noncash and other costs, net 0.01 b 0.01 1 Total unit costs 1.00 2.01 838 Other revenue adjustments, primarily for pricing on prior period open sales 0.08 0.08 (5) PT Smelting intercompany loss (0.11) (0.08) (33) Gross profit per pound/ounce $ 3.18 $ 2.20 $ 904 Reconciliation to Amounts Reported Production Revenues and Delivery DD&A Totals presented above $ 5,796 $ 1,412 $ 726 Treatment charges (229) — — Export duties (145) — — Royalty on metals (234) — — Noncash and other costs, net 31 34 — Other revenue adjustments, primarily for pricing on prior period open sales 67 — — PT Smelting intercompany loss — 106 — Indonesia mining 5,286 1,552 726 Other mining c 15,785 11,451 657 Corporate, other & eliminations (4,390) (4,141) 47 As reported in our consolidated financial statements $ 16,681 $ 8,862 $ 1,430 a. Includes silver sales of 4.3 million ounces ($24.50 per ounce average realized price). b. Includes credits of $31 million ($0.03 per pound of copper) associated with adjustments to prior year treatment and refining charges and charges of $16 million ($0.02 per pound of copper) associated with a potential settlement of an administrative fine levied by the Indonesia government. c. Represents the combined total for our other segments, as presented in Note 9. 65 Table of Contents Indonesia Mining Product Revenues, Production Costs and Unit Net Cash Costs Nine months ended September 30, 2020 (In millions) By-Product Co-Product Method Method Copper Gold Silver a Total Revenues, excluding adjustments $ 1,447 $ 1,447 $ 994 $ 48 $ 2,489 Site production and delivery, before net noncash and other costs shown below 1,062 617 424 21 1,062 Gold and silver credits (1,046) — — — — Treatment charges 143 83 57 3 143 Export duties 43 25 17 1 43 Royalty on metals 92 53 38 1 92 Net cash costs 294 778 536 26 1,340 DD&A 375 218 150 7 375 Noncash and other costs, net 56 b 33 22 1 56 Total costs 725 1,029 708 34 1,771 Other revenue adjustments, primarily for pricing on prior period open sales (20) (20) 4 — (16) PT Smelting intercompany loss (18) (11) (7) — (18) Gross profit $ 684 $ 387 $ 283 $ 14 $ 684 Copper sales (millions of recoverable pounds) 518 518 Gold sales (thousands of recoverable ounces) 549 Gross profit per pound of copper/per ounce of gold: Revenues, excluding adjustments $ 2.79 $ 2.79 $ 1,810 Site production and delivery, before net noncash and other costs shown below 2.05 1.19 773 Gold and silver credits (2.02) — — Treatment charges 0.28 0.16 104 Export duties 0.08 0.05 31 Royalty on metals 0.18 0.10 68 Unit net cash costs 0.57 1.50 976 DD&A 0.72 0.42 273 Noncash and other costs, net 0.11 b 0.07 41 Total unit costs 1.40 1.99 1,290 Other revenue adjustments, primarily for pricing on prior period open sales (0.03) (0.03) 8 PT Smelting intercompany loss (0.04) (0.02) (13) Gross profit per pound/ounce $ 1.32 $ 0.75 $ 515 Reconciliation to Amounts Reported Production Revenues and Delivery DD&A Totals presented above $ 2,489 $ 1,062 $ 375 Treatment charges (143) — — Export duties (43) — — Royalty on metals (98) (6) — Noncash and other costs, net — 56 — Other revenue adjustments, primarily for pricing on prior period open sales (16) — — PT Smelting intercompany loss — 18 — Indonesia mining 2,189 1,130 375 Other mining c 10,288 8,950 667 Corporate, other & eliminations (2,774) (2,676) 51 As reported in our consolidated financial statements $ 9,703 $ 7,404 $ 1,093 a. Includes silver sales of 2.3 million ounces ($20.73 per ounce average realized price). b. Includes COVID-19 related costs (including one-time incremental employee benefits and health and safety costs) of $14 million ($0.03 per pound of copper). c. Represents the combined total for our segments, as presented in Note 9. 66 Table of Contents Molybdenum Mines Product Revenues, Production Costs and Unit Net Cash Costs Three Months Ended September 30, (In millions) 2021 2020 Revenues, excluding adjustments a $ 158 $ 47 Site production and delivery, before net noncash and other costs shown below 67 47 Treatment charges and other 7 5 Net cash costs 74 52 DD&A 19 13 Metals inventory adjustments — 3 Noncash and other costs, net 3 4 Total costs 96 72 Gross profit (loss) $ 62 $ (25) Molybdenum sales (millions of recoverable pounds) a 9 6 Gross profit (loss) per pound of molybdenum: Revenues, excluding adjustments a $ 18.13 $ 8.83 Site production and delivery, before net noncash and other costs shown below 7.70 8.88 Treatment charges and other 0.84 0.84 Unit net cash costs 8.54 9.72 DD&A 2.14 2.38 Metals inventory adjustments — 0.67 Noncash and other costs, net 0.30 0.54 Total unit costs 10.98 13.31 Gross profit (loss) per pound $ 7.15 $ (4.48) Reconciliation to Amounts Reported Metals Production Inventory Three Months Ended September 30, 2021 Revenues and Delivery DD&A Adjustments Totals presented above $ 158 $ 67 $ 19 $ — Treatment charges and other (7) — — — Noncash and other costs, net — 3 — — Molybdenum mines 151 70 19 — Other mining b 7,563 4,569 493 13 Corporate, other & eliminations (1,631) (1,630) 16 1 As reported in our consolidated financial statements $ 6,083 $ 3,009 $ 528 $ 14 Three Months Ended September 30, 2020 Totals presented above $ 47 $ 47 $ 13 $ 3 Treatment charges and other (5) — — — Noncash and other costs, net — 4 — — Molybdenum mines 42 51 13 3 Other mining b 4,886 3,448 360 (2) Corporate, other & eliminations (1,077) (1,034) 21 8 As reported in our consolidated financial statements $ 3,851 $ 2,465 $ 394 $ 9 a. Reflects sales of the Molybdenum mines’ production to our molybdenum sales company at market-based pricing. On a consolidated basis, realizations are based on the actual contract terms for sales to third parties; as a result, our consolidated average realized price per pound of molybdenum will differ from the amounts reported in this table. b. Represents the combined total for our other segments, as presented in Note 9. Also includes amounts associated with our molybdenum sales company, which includes sales of molybdenum produced by the Molybdenum mines and by certain of the North America and South America copper mines. 67 Table of Contents Molybdenum Mines Product Revenues, Production Costs and Unit Net Cash Costs Nine months ended September 30, (In millions) 2021 2020 Revenues, excluding adjustments a $ 329 $ 187 Site production and delivery, before net noncash and other costs shown below 175 164 Treatment charges and other 19 16 Net cash costs 194 180 DD&A 51 44 Metals inventory adjustments 1 8 Noncash and other costs, net 8 14 b Total costs 254 246 Gross profit (loss) $ 75 $ (59) Molybdenum sales (millions of recoverable pounds) a 23 19 Gross profit (loss) per pound of molybdenum: Revenues, excluding adjustments a $ 14.41 $ 9.92 Site production and delivery, before net noncash and other costs shown below 7.69 8.73 Treatment charges and other 0.85 0.85 Unit net cash costs 8.54 9.58 DD&A 2.21 2.31 Metals inventory adjustments 0.04 0.44 Noncash and other costs, net 0.34 0.72 b Total unit costs 11.13 13.05 Gross profit (loss) per pound $ 3.28 $ (3.13) Reconciliation to Amounts Reported Metals Production Inventory Nine months ended September 30, 2021 Revenues and Delivery DD&A Adjustments Totals presented above $ 329 $ 175 $ 51 $ 1 Treatment charges and other (19) — — — Noncash and other costs, net — 8 — — Molybdenum mines 310 183 51 1 Other mining c 20,761 12,820 1,332 13 Corporate, other & eliminations (4,390) (4,141) 47 1 As reported in our consolidated financial statements $ 16,681 $ 8,862 $ 1,430 $ 15 Nine months ended September 30, 2020 Totals presented above $ 187 $ 164 $ 44 $ 8 Treatment charges and other (16) — — — Noncash and other costs, net — 14 — — Molybdenum mines 171 178 44 8 Other mining c 12,306 9,902 998 58 Corporate, other & eliminations (2,774) (2,676) 51 26 As reported in our consolidated financial statements $ 9,703 $ 7,404 $ 1,093 $ 92 a. Reflects sales of the Molybdenum mines’ production to our molybdenum sales company at market-based pricing. On a consolidated basis, realizations are based on the actual contract terms for sales to third parties; as a result, our consolidated average realized price per pound of molybdenum will differ from the amounts reported in this table. b. Includes charges totaling $7 million ($0.36 per pound of molybdenum) primarily associated with contract cancellation costs related to the COVID-19 pandemic and employee separation costs associated with April 2020 revised operating plans. c. Represents the combined total for our other segments, as presented in Note 9. Also includes amounts associated with our molybdenum sales company, which includes sales of molybdenum produced by the Molybdenum mines and by certain of the North America and South America copper mines. 68 Table of Contents GUARANTOR SUMMARIZED FINANCIAL INFORMATION All of the senior notes issued by FCX are fully and unconditionally guaranteed on a senior basis jointly and severally by Freeport-McMoRan Oil & Gas LLC (FM O&G LLC), as guarantor, which is a 100-percent-owned subsidiary of FCX Oil & Gas LLC (FM O&G) and FCX. The guarantee is an unsecured obligation of the guarantor and ranks equal in right of payment with all existing and future indebtedness of FM O&G LLC, including indebtedness under our revolving credit facility. The guarantee ranks senior in right of payment with all of FM O&G LLC’s future subordinated obligations and is effectively subordinated in right of payment to any debt of FM O&G LLC’s subsidiaries. The indentures provide that FM O&G LLC’s guarantee obligations may be released or terminated upon: (i) the sale of all or substantially all of the equity interests or assets of FM O&G LLC to a third party that is not our subsidiary or our affiliate; (ii) FM O&G LLC no longer having any obligations under any FM O&G senior notes or any refinancing thereof and no longer being a co-borrower or guarantor of any of our obligations under the revolving credit facility or any other senior debt or, in each case, any refinancing thereof; or (iii) the discharge of our obligations under the indentures in accordance with their terms. The following summarized financial data includes information regarding FCX, as issuer, FM O&G LLC, as guarantor, and all our other non-guarantor subsidiaries at September 30, 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 September 30, 2021 Current assets $ 151 $ 745 $ 13,815 $ (920) $ 13,791 Noncurrent assets 432 6 33,078 (390) 33,126 Current liabilities 717 39 5,635 (868) 5,523 Noncurrent liabilities 9,050 11,405 13,975 (15,567) 18,863 As of December 31, 2020 Current assets $ 65 $ 697 $ 9,287 $ (746) $ 9,303 Noncurrent assets 785 6 32,806 (756) 32,841 Current liabilities 187 31 3,964 (765) 3,417 Noncurrent liabilities 9,433 11,208 15,075 (15,657) 20,059 Nine Months Ended September 30, 2021 Revenues $ — $ 41 $ 16,640 $ — $ 16,681 Operating (loss) income (33) 10 6,069 15 6,061 Net income (loss) 3,200 a (133) a 4,262 (3,322) 4,007 a. Net income (loss) equals net income (loss) attributable to common stockholders because net income attributable to noncontrolling interests is zero for issuer and guarantor. 69 Table of Contents CAUTIONARY STATEMENT Our discussion and analysis contains forward-looking statements in which we discuss our potential future performance. Forward-looking statements are all statements other than statements of historical facts, such as plans, projections, or expectations relating to ore grades and milling rates; business outlook; production and sales volumes; unit net cash costs; cash flows; capital expenditures; liquidity; operating costs; operating plans; 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; exploration efforts and results; development and production activities, rates and costs; tax rates; export quotas and duties; the impact of copper, gold and molybdenum price changes; the impact of deferred intercompany profits on earnings; mineralization and reserve estimates; execution of the settlement agreements associated with the Louisiana coastal erosion cases and talc-related litigation; descriptions of our objectives, strategies, plans, goals or targets 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 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. Important factors that can cause our actual results to differ materially from those anticipated in the forward-looking statements include, but are not limited to, changes in our credit rating; changes in our cash requirements, financial position, financing plans or investment plans; 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 any related actions taken by governments and businesses; our ability to contain and mitigate the risk of spread or major outbreak of COVID-19 at our operating sites, including at PT-FI’s remote operating site in Papua; supply of and demand for, and prices of, copper, gold and molybdenum; mine sequencing; changes in mine plans or operational modifications, delays, deferrals or cancellations; production rates; timing of shipments; results of feasibility studies; potential inventory adjustments; potential impairment of long-lived mining assets; the potential effects of violence in Indonesia generally and in the province of Papua; the Indonesia government's extension of PT-FI's export license after March 15, 2022; risks associated with underground mining; satisfaction of requirements in accordance with PT-FI's 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; expected results from improvements in operating procedures and technology, including innovation initiatives; industry risks; regulatory changes; political and social risks; labor relations, including labor-related work stoppages and costs; weather- and climate-related risks; environmental risks; 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; 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; 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 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. We caution investors that we undertake no obligation to update any forward-looking statements, which speak only as of the date made, notwithstanding any changes in our assumptions, changes in business plans, actual experience or other changes. 70 Table of Contents This report on Form 10-Q also contains financial measures such as net debt and unit net cash costs per pound of copper and molybdenum, which are not recognized under U.S. GAAP. Refer to “Operations – Unit Net Cash Costs” for further discussion of unit net cash costs associated with our operating divisions, and to “Product Revenues and Production Costs” for reconciliations of per pound costs by operating division to production and delivery costs applicable to sales reported in our consolidated financial statements. Refer to “Net Debt” for reconciliations of debt and consolidated cash and cash equivalents to net debt.