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Item 1. Financial Statements

2022-05-05 compared with 2021-11-05 · 145 added, 395 removed, 466 unchanged (54% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS (Unaudited)

September 30,

2022 December 31,

38 unchanged sentences

Freeport-McMoRan Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

Three Months Ended

(In millions, except per share amounts)

3 unchanged sentences

Depreciation, depletion and amortization 489 419

Metals inventory adjustments 14 9 15 92

Total cost of sales 3,639 3,206

2 unchanged sentences

Environmental obligations and shutdown costs

Net (gain) loss on sales of assets ( 60 ) 2 ( 63 ) 13

Total costs and expenses 3,794 3,318

1 unchanged sentence

Interest expense, net ( 127 ) ( 145 )

Net loss on early extinguishment of debt

— ( 59 ) — ( 100 )

Other income, net 31 11

Income before income taxes and equity in affiliated companies’ net (losses) earnings 2,360 723 5,686 328

Income before income taxes and equity in affiliated companies’ net earnings (losses) 2,713 1,398

Provision for income taxes ( 824 ) ( 443 )

Equity in affiliated companies’ net (losses) earnings ( 9 ) 6 ( 5 ) 12

Equity in affiliated companies’ net earnings (losses) 15 ( 2 )

Net income 1,904 953

Net income attributable to noncontrolling interests ( 377 ) ( 235 )

Net income (loss) attributable to common stockholders $ 1,399 $ 329 $ 3,200 $ ( 109 )

Net income (loss) per share attributable to common stockholders:

Net income attributable to common stockholders $ 1,527 $ 718

Net income per share attributable to common stockholders:

$ 1.05 $ 0.49

1 unchanged sentence

Weighted-average common shares outstanding:

1,469 1,453 1,466 1,453

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

Dividends declared per share of common stock $ 0.15 $ 0.075

1 unchanged sentence

Freeport-McMoRan Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

Three Months Ended

(In millions)

Net income $ 1,904 $ 953

Other comprehensive income (loss), net of taxes:

Other comprehensive income, net of taxes:

Defined benefit plans:

Actuarial losses arising during the period — ( 1 )

Prior service costs arising during the period ( 1 ) —

Amortization of unrecognized amounts included in net periodic benefit costs 2 4

Foreign exchange losses — ( 1 )

Other comprehensive income (loss) 4 ( 76 ) 10 ( 53 )

Total comprehensive income (loss) 1,727 356 4,017 ( 46 )

Other comprehensive income 1 2

Total comprehensive income 1,905 955

Total comprehensive income attributable to noncontrolling interests ( 377 ) ( 234 )

Total comprehensive income (loss) attributable to common stockholders

$ 1,403 $ 253 $ 3,211 $ ( 161 )

Total comprehensive income attributable to common stockholders $ 1,528 $ 721

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

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Nine Months Ended

September 30,

Three Months Ended

(In millions)

3 unchanged sentences

Depreciation, depletion and amortization 489 419

Metals inventory adjustments 15 92

Net (gain) loss on sales of assets ( 63 ) 13

Stock-based compensation 49 41

3 unchanged sentences

Pension plan contributions ( 25 ) ( 21 )

Net loss on early extinguishment of debt — 100

Deferred income taxes 48 38

14 unchanged sentences

Indonesia mining ( 379 ) ( 290 )

Indonesia smelter development ( 79 ) ( 94 )

Indonesia smelter projects ( 130 ) ( 20 )

Molybdenum mines ( 1 ) ( 1 )

Other ( 27 ) ( 12 )

Proceeds from sale of Freeport Cobalt 150 —

Proceeds from sales of other assets 21 146

Acquisition of minority interest in PT Smelting ( 33 ) —

Proceeds from sales of assets 20 5

Loans to PT Smelting for expansion ( 9 ) —

Other, net ( 2 ) ( 3 )

6 unchanged sentences

Noncontrolling interests ( 204 ) —

Treasury stock purchases ( 541 ) —

Contributions from noncontrolling interests 47 41

9 unchanged sentences

CONSOLIDATED STATEMENTS OF EQUITY (Unaudited)

THREE MONTHS ENDED SEPTEMBER 30

THREE MONTHS ENDED MARCH 31

Stockholders’ Equity

9 unchanged sentences

(In millions)

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

Balance at December 31, 2021 1,603 $ 160 $ 25,875 $ ( 7,375 ) $ ( 388 ) 146 $ ( 4,292 ) $ 13,980 $ 9,039 $ 23,019

Exercised and issued stock-based awards 9 1 107 — — — — 108 — 108

Stock-based compensation, including the tender of shares — — 48 — — 2 ( 62 ) ( 14 ) ( 10 ) ( 24 )

Treasury stock purchases — — — — — 12 ( 541 ) ( 541 ) — ( 541 )

Dividends — — ( 218 ) — — — — ( 218 ) ( 254 ) ( 472 )

4 unchanged sentences

Other comprehensive income — — — — 1 — — 1 — 1

Balance at September 30, 2021 1,601 $ 160 $ 26,023 $ ( 8,481 ) $ ( 572 ) 133 $ ( 3,777 ) $ 13,353 $ 9,178 $ 22,531

Stockholders’ Equity

Common Stock Accum-ulated Deficit Accumu-

Other Compre-

Loss Common Stock

Held in Treasury Total

Stock-holders’ Equity

Shares At Par

Value Capital in

Par Value Number

Interests Total

(In millions)

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

Exercised and issued stock-based awards 1 — 1 — — — — 1 — 1

Stock-based compensation, including the tender of shares — — 8 — — — — 8 — 8

Change in ownership interests — — — — — — — — 1 1

Contributions from noncontrolling interests — — 20 — — — — 20 21 41

Net income attributable to common stockholders — — — 329 — — — 329 — 329

Net income attributable to noncontrolling interests — — — — — — — — 103 103

Other comprehensive loss — — — — ( 76 ) — — ( 76 ) — ( 76 )

Balance at September 30, 2020 1,584 $ 158 $ 25,934 $ ( 12,389 ) $ ( 728 ) 131 $ ( 3,739 ) $ 9,236 $ 8,326 $ 17,562

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

Freeport-McMoRan Inc.

CONSOLIDATED STATEMENTS OF EQUITY (Unaudited)

NINE MONTHS ENDED SEPTEMBER 30

Balance at March 31, 2022 1,612 $ 161 $ 25,835 $ ( 5,848 ) $ ( 387 ) 160 $ ( 4,895 ) $ 14,866 $ 9,176 $ 24,042

Stockholders’ Equity

14 unchanged sentences

Contributions from noncontrolling interests — — 20 — — — — 20 21 41

— — 66 — — — — 66 69 135

Net income attributable to common stockholders — — — 718 — — — 718 — 718

Net income attributable to noncontrolling interests — — — — — — — — 235 235

— — — — — — — — 807 807

Other comprehensive income (loss) — — — — 3 — — 3 ( 1 ) 2

Balance at September 30, 2021 1,601 $ 160 $ 26,023 $ ( 8,481 ) $ ( 572 ) 133 $ ( 3,777 ) $ 13,353 $ 9,178 $ 22,531

Stockholders’ Equity

Common Stock Accum-ulated Deficit Accumu-

Other Compre-

Loss Common Stock

Held in Treasury Total

Stock-holders’ Equity

Shares At Par

Value Capital in

Par Value Number

Interests Total

(In millions)

Balance at December 31, 2019 1,582 $ 158 $ 25,830 $ ( 12,280 ) $ ( 676 ) 131 $ ( 3,734 ) $ 9,298 $ 8,150 $ 17,448

Exercised and issued stock-based awards 2 — 2 — — — — 2 — 2

Stock-based compensation, including the tender of shares — — 46 — — — ( 5 ) 41 1 42

Change in ownership interests — — — — — — — — 1 1

Contributions from noncontrolling interests — — 56 — — — — 56 59 115

Net loss attributable to common stockholders — — — ( 109 ) — — — ( 109 ) — ( 109 )

Net income attributable to noncontrolling interests

— — — — — — — — 116 116

Other comprehensive loss — — — — ( 52 ) — — ( 52 ) ( 1 ) ( 53 )

Balance at September 30, 2020 1,584 $ 158 $ 25,934 $ ( 12,389 ) $ ( 728 ) 131 $ ( 3,739 ) $ 9,236 $ 8,326 $ 17,562

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

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

Freeport-McMoRan Inc.

5 unchanged sentences

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

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

Trade Accounts Receivable Agreements.

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

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

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

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

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

Gross amounts sold under these arrangements totaled $ 131 million in third-quarter 2021 and $ 319 million for the nine-month period ended September 30, 2021.

Discounts on the sold receivables totaled less than $ 1 million in third-quarter 2021 and $ 1 million for the nine-month period ended September 30, 2021.

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.

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

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

Sale of Freeport Cobalt.

On September 1, 2021, FCX’s 56 -percent-owned subsidiary, Koboltti Chemicals Holdings Limited (KCHL), completed the sale of its remaining cobalt business based in Kokkola, Finland (Freeport Cobalt) to Jervois Global Limited (Jervois) for $ 208 million (subject to post-closing adjustments), consisting of cash consideration of $ 173 million and 7 percent of Jervois shares (valued at $ 35 million).

At closing, Freeport Cobalt’s assets included cash of approximately $ 20 million and other net assets of $ 125 million.

FCX recorded a gain of $ 60 million ($ 34 million to net income attributable to common stock) in third-quarter 2021.

In addition, KCHL will have the right to receive contingent consideration of up to $ 40 million based on the future performance of Freeport Cobalt.

Any gain related to the contingent consideration will be recognized when received.

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

Operating results for the three-month period ended March 31, 2022, are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

Subsequent Events.

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

FCX evaluated events after March 31, 2022, and through the date the consolidated financial statements were issued, and determined any events and transactions occurring during this period that would require recognition or disclosure are appropriately addressed in these consolidated financial statements.

EARNINGS PER SHARE

FCX calculates its basic net income per share of common stock under the two-class method and calculates its diluted net income (loss) per share of common stock using the more dilutive of the two-class method or the treasury-stock method.

Basic net income (loss) per share of common stock was computed by dividing net income (loss) attributable to common stockholders (after deducting accumulated dividends and undistributed earnings to participating securities) by the weighted-average shares of common stock outstanding during the period.

Diluted net income (loss) per share of common stock was calculated by including the basic weighted-average shares of common stock outstanding adjusted for the effects of all potential dilutive shares of common stock.

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

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

FCX calculates its basic net income per share of common stock under the two-class method and calculates its diluted net income per share of common stock using the more dilutive of the two-class method or the treasury-stock method.

Basic net income per share of common stock was computed by dividing net income attributable to common stockholders (after deducting accumulated dividends and undistributed earnings to participating securities) by the weighted-average shares of common stock outstanding during the period.

Diluted net income per share of common stock was calculated by including the basic weighted-average shares of common stock outstanding adjusted for the effects of all potential dilutive shares of common stock, unless their effect would be antidilutive.

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

Three Months Ended

Net income $ 1,904 $ 953

1 unchanged sentence

Undistributed earnings allocated to participating securities ( 5 ) ( 4 )

Net income (loss) attributable to common stockholders $ 1,395 $ 326 $ 3,194 $ ( 112 )

Net income attributable to common stockholders $ 1,522 $ 714

Basic weighted-average shares of common stock outstanding

1,469 1,453 1,466 1,453

Add shares issuable upon exercise or vesting of dilutive stock options and restricted stock units (RSUs) 15 8 a

Add shares issuable upon exercise or vesting of dilutive stock options and restricted stock units (RSUs) 14 15

Diluted weighted-average shares of common stock outstanding

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

Basic net income (loss) per share attributable to common stockholders $ 0.95 $ 0.22 $ 2.18 $ ( 0.08 )

Diluted net income (loss) per share attributable to common stockholders $ 0.94 $ 0.22 $ 2.16 $ ( 0.08 )

Excludes approximately 2 million shares in third-quarter 2020 and 13 million shares for the first nine months of 2020 associated with outstanding stock options with exercise prices less than the average market price of FCX’s common stock and RSUs that were anti-dilutive.

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

Stock options for 4 million shares of common stock in third-quarter 2021, 28 million shares of common stock in third-quarter 2020, 6 million shares of common stock for the first nine months of 2021 and 35 million shares of common stock the first nine months of 2020 were excluded.

Basic net income per share attributable to common stockholders $ 1.05 $ 0.49

Diluted net income per share attributable to common stockholders $ 1.04 $ 0.48

Stock options for 2 million shares of common stock in first-quarter 2022 and 10 million shares of common stock in first-quarter 2021, were excluded.

INVENTORIES, INCLUDING LONG-TERM MILL AND LEACH STOCKPILES

The components of inventories follow (in millions):

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Current inventories:

13 unchanged sentences

$ 1,377 $ 1,387

Materials and supplies inventory was net of obsolescence reserves totaling $ 37 million at September 30, 2021, and $ 32 million at December 31, 2020.

Materials and supplies inventory was net of obsolescence reserves totaling $ 39 million at March 31, 2022, and $ 36 million at December 31, 2021.

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

FCX recorded charges for metals inventory adjustments totaling $ 15 million for the first nine months of 2021 primarily related to a leach stockpile adjustment.

Net realizable value inventory adjustments to decrease metals inventory carrying values totaled $ 92 million for the first nine months of 2020 associated with lower market prices for copper ($ 58 million) and molybdenum ($ 34 million).

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

Morenci Stockpile Recoveries.

In accordance with FCX's policy, processes and recovery rates for mill and leach stockpiles are monitored regularly, and recovery rate estimates are adjusted periodically as additional information becomes available and as related technology changes.

Adjustments to recovery rates will typically result in a future impact to the value of the material removed from the stockpiles at a revised weighted-average cost per pound of recoverable copper.

Expected copper recovery rates for leach stockpiles are determined using small-scale laboratory tests, small- to large-scale column testing (which simulates the production process), historical trends and other factors, including mineralogy of the ore and rock type.

Total copper recovery in leach stockpiles can vary significantly from a low percentage to more than 90 percent depending on several variables, including processing methodology, processing variables, mineralogy and particle size of the rock.

For newly placed material on active stockpiles, as much as 80 percent of the total copper recovery may occur during the first year, and the remaining copper may be recovered over many years.

Over the last three years, FCX's Morenci mine has experienced improved recoveries and following an analysis of column testing results to date, Morenci concluded it had sufficient evidence to increase its estimated recovery rate for certain of its leach stockpiles effective July 1, 2021.

As a result of the revised recovery rate, Morenci increased its estimated recoverable copper in leach stockpiles, net to its joint venture interest, by 191 million pounds.

The effect of this change in estimate reduced site production and delivery costs and increased net income by $ 52 million ($ 0.04 per share) in the third quarter and first nine months of 2021.

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

Nine Months Ended

September 30,

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

Three Months Ended

operations $ ( 3 )

International operations ( 1,667 ) b

International operations ( 821 ) ( 443 )

Total $ ( 824 ) $ ( 443 )

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

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 RTI), PT-FI’s wholly owned subsidiary, net operating losses (NOLs) and $ 24 million primarily associated with the reversal of a tax reserve related to the treatment of prior year contractor support costs;

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

Includes a tax charge of $ 21 million ($ 17 million net of noncontrolling interests) associated with establishing a tax reserve related to the treatment of prior year contractor support costs.

FCX’s consolidated effective income tax rate was 29 percent for the first nine months of 2021 and 102 percent for the first nine months of 2020.

Because FCX's U.S.

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

pre-tax losses.

FCX’s consolidated effective income tax rate was 30 percent for first-quarter 2022 and 32 percent for first-quarter 2021.

Variations in the relative proportions of jurisdictional income result in fluctuations to FCX’s consolidated effective income tax rate.

As discussed in Note 8, Cerro Verde paid the balance of its royalty dispute liabilities during third-quarter 2021, which resulted in a $ 252 million reduction of unrecognized tax benefits (including a $ 137 million reduction of accrued interest and penalties), but did not have an impact on FCX’s provision for income taxes for the third quarter or nine months ended September 30, 2021.

In connection with the negative impacts of the COVID-19 pandemic on the global economy, governments throughout the world announced measures that are intended to provide tax and other financial relief.

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

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

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

alternative minimum tax.

FCX collected U.S.

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

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

FCX will recognize any impact from COVID-19 related changes to tax laws in the period in which the new legislation is enacted.

As previously disclosed in our 2020 Form 10-K, PT-FI received unfavorable Indonesia Tax Court decisions in 2018 with respect to its appeal of capitalized mine development costs on its 2012 and 2014 corporate income tax returns.

PT-FI appealed those decisions to the Indonesia Supreme Court.

On October 31, 2019, the Indonesia Supreme Court communicated an unfavorable ruling regarding the treatment of mine development costs on PT-FI’s 2014 tax return.

During the fourth quarter of 2019, PT-FI met with the Indonesia Tax Office and developed a framework for resolution of the disputed matters and progress of the framework for resolution continued in 2020 and through the nine months ended September 30, 2021.

During October 2021, PT-FI participated in discussions with the Indonesian tax office regarding progress on the framework for resolution of disputes arising from the audits of tax years 2012 through 2016.

As a result of these discussions and the revised positions taken by both the Indonesian tax office and PT-FI, FCX believes it can no longer conclude a resolution of all of the disputed tax items at a more-likely-than-not threshold.

Because of these recent events, FCX continues to evaluate its uncertain tax positions and may record a material tax charge during fourth-quarter 2021.

This tax charge may be offset by a tax benefit related to the additional release of valuation allowance associated with PT Rio Tinto net operating loss carryforwards that PT-FI may deem realizable.

continue to engage with the Indonesian tax office in pursuit of certain aspects of the original framework for resolution.

DEBT AND FINANCIAL POLICY

DEBT AND EQUITY

The components of debt follow (in millions):

September 30,

2022 December 31, 2021

2 unchanged sentences

Issued by Freeport Minerals Corporation 355 355

Cerro Verde Term Loan 325 523

PT-FI Term Loan 603 432

Cerro Verde Term Loan 325 325

Total debt 9,621 9,450

1 unchanged sentence

Long-term debt $ 8,256 $ 9,078

Includes $ 524 million for the 3.55% Senior Notes, which will be redeemed on December 1, 2021, and $ 325 million for the Cerro Verde Term Loan due June 2022.

Includes $ 325 million for the Cerro Verde Term Loan due June 2022 and $ 995 million for the FCX 3.875% Senior Notes due March 2023.

Revolving Credit Facility.

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

At March 31, 2022, FCX had no borrowings outstanding and $ 8 million in letters of credit issued under its revolving credit facility, resulting in availability of approximately $ 3.5 billion, of which approximately $ 1.5 billion could be used for additional letters of credit.

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

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

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

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

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

At March 31, 2022, FCX was in compliance with its revolving credit facility covenants.

PT-FI Credit Facility.

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

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

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

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

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

create liens on assets;

enter into sale and leaseback transactions;

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

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

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.

Senior Notes.

On October 21, 2021, FCX called for redemption all of its outstanding $ 524 million principal amount of 3.55 % Senior Notes due 2022.

The notes will be redeemed on December 1, 2021, at a redemption price equal to 100 percent of the principal amount of the notes outstanding, plus accrued and unpaid interest to, but not including, the redemption date.

Annual interest costs associated with the 3.55 % Senior Notes approximate $ 19 million.

FCX has no other senior note maturities until March 2023.

As further discussed in the 2020 Form 10-K, in the first nine months of 2020, FCX redeemed in full or purchased a portion of its 4.00 % Senior Notes due 2021, 3.55 % Senior Notes due 2022, 3.875 % Senior Notes due 2023 and 4.55 % Senior Notes due 2024.

As a result of these transactions, FCX recorded a loss on early extinguishment of debt of $ 59 million in third-quarter 2020 and $ 100 million for the nine months ended September 30, 2020.

Cerro Verde Term Loan.

In September 2021, Cerro Verde prepaid $ 200 million on its term loan.

The $ 325 million balance of the loan is due June 2022.

At March 31, 2022, $ 614 million ($ 603 million net of debt issuance costs) was drawn under the term loan, no amounts were drawn under the revolving credit facility and PT-FI was in compliance with its credit facility covenants.

Senior Notes issued by PT-FI.

In April 2022, PT-FI completed the sale of $ 3.0 billion of unsecured senior notes, consisting of $ 750 million of 4.763% Senior Notes due 2027, $ 1.5 billion of 5.315% Senior Notes due 2032 and $ 750 million of 6.200% Senior Notes due 2052.

PT-FI intends to use the proceeds, net of underwriting fees, of $ 2.99 billion to finance its smelter projects, to refinance the PT-FI Term Loan and for general corporate purposes.

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 added to property, plant, equipment and mine development costs, net, 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 for the 2021 periods results from assets placed in service as PT-FI’s underground mining operations continue to ramp up.

Financial Policy.

In February 2021, FCX’s Board of Directors (Board) adopted a financial policy for the allocation of cash flows aligned with FCX’s 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 FCX maintaining its net debt at a level not to exceed the net debt target of $ 3 billion to $ 4 billion (excluding project debt for additional smelting capacity in Indonesia).

In February 2021, the Board reinstated a cash dividend on FCX’s common stock (base dividend), and on November 1, 2021, the Board approved (i) a new share repurchase program authorizing repurchases of up to $ 3.0 billion of FCX common stock, and (ii) a variable cash dividend on FCX’s common stock for 2022.

The timing and amount of any share repurchases will be at the discretion of management and will depend on a variety of factors.

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 FCX's financial results, cash requirements, business prospects, global economic conditions and other factors deemed relevant by the Board.

On September 22, 2021, FCX declared a quarterly cash dividend (base dividend) of $ 0.075 per share

on its common stock, which was paid on November 1, 2021, to common stockholders of record as of October 15, 2021.

Consolidated interest costs (before capitalization) totaled $ 153 million in first-quarter 2022 and $ 160 million in first-quarter 2021.

Capitalized interest added to property, plant, equipment and mine development costs, net, totaled $ 26 million in first-quarter 2022 and $ 15 million in first-quarter 2021.

The increase in capitalized interest costs for the 2022 period resulted from increased construction and development projects in process.

Share Repurchase Program.

In first-quarter 2022, FCX acquired 12.3 million shares of its common stock under the share repurchase program for a total cost of $ 541 million ($ 44.02 average cost per share).

Through May 5, 2022, FCX acquired 28.7 million shares of its common stock for a total cost of $ 1.2 billion ($ 41.64 average cost per share) and $ 1.8 billion remains available for repurchases under the program.

On March 23, 2022, FCX declared quarterly cash dividends totaling $ 0.15 per share ($ 0.075 per share base dividend and $ 0.075 per share variable dividend) on its common stock, which were paid on May 2, 2022, to common stockholders of record as of April 14, 2022.

The declaration and payment of dividends (base or variable) and timing and amount of any share repurchases is at

the discretion of FCX’s Board of Directors (Board) and management, respectively, and is subject to a number of factors, including maintaining FCX’s net debt target, capital availability, FCX’s financial results, cash requirements, business prospects, global economic conditions, changes in laws, contractual restrictions and other factors deemed relevant by FCX’s Board or management, as applicable.

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

FINANCIAL INSTRUMENTS

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

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

The forward sales provided for fixed pricing of $ 2.34 per pound of copper on approximately 60 percent of North America's sales volumes for May and June 2020.

These contracts resulted in hedging losses totaling $ 24 million in second-quarter 2020 and for the six months ended June 30, 2020.

There were no remaining forward sales contracts as of June 30, 2020.

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

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

Derivatives Designated as Hedging Instruments – Fair Value Hedges

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

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

At September 30, 2021, FCX held copper futures and swap contracts that qualified for hedge accounting for 84 million pounds at an average contract price of $ 4.23 per pound, with maturities through May 2023.

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

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

FCX did not have any significant gains or losses resulting from hedge ineffectiveness during the three-month periods ended March 31, 2022 and 2021.

At March 31, 2022, FCX held copper futures and swap contracts that qualified for hedge accounting for 84 million pounds at an average contract price of $ 4.47 per pound, with maturities through February 2024.

Three Months Ended

Copper futures and swap contracts:

Unrealized (losses) gains:

Unrealized gains (losses):

Derivative financial instruments $ 12 $ 3

Hedged item – firm sales commitments ( 12 ) ( 3 )

Realized gains (losses):

Realized gains:

Matured derivative financial instruments 14 24

10 unchanged sentences

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

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

A summary of FCX’s embedded derivatives at March 31, 2022, follows:

Open Positions Average Price

2 unchanged sentences

Embedded derivatives in provisional sales contracts:

Copper (millions of pounds) 548 $ 4.28 $ 4.05 February 2022

Gold (thousands of ounces) 196 1,790 1,738 January 2022

Copper (millions of pounds) 753 $ 4.49 $ 4.71 August 2022

Gold (thousands of ounces) 206 1,925 1,936 June 2022

Embedded derivatives in provisional purchase contracts:

Copper (millions of pounds) 116 4.31 4.05 February 2022

Copper (millions of pounds) 65 4.43 4.71 July 2022

Copper Forward Contracts.

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

At September 30, 2021, Atlantic Copper held net copper forward purchase contracts for 9 million pounds at an average contract price of $ 4.23 per pound, with maturities through November 2021.

Summary of (Losses) Gains.

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

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

At March 31, 2022, Atlantic Copper held net copper forward purchase contracts for 4 million pounds at an average contract price of $ 4.60 per pound, with maturities through May 2022.

Summary of Gains (Losses).

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

Three Months Ended

Embedded derivatives in provisional sales contracts:

2 unchanged sentences

Copper forward contracts b

1 ( 7 ) ( 12 ) 12

Amounts recorded in revenues.

2 unchanged sentences

A summary of the fair values of unsettled commodity derivative financial instruments follows (in millions):

September 30,

2022 December 31, 2021

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Commodity Derivative Liabilities:

Derivatives designated as hedging instruments :

Copper futures and swap contracts $ 14 $ —

Derivatives not designated as hedging instruments :

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Assets Liabilities

September 30,

2021 December 31, 2020 September 30,

2022 December 31, 2021 March 31,

2022 December 31, 2021

3 unchanged sentences

Copper derivatives 26 13 2 1

37 184 152 21

Less gross amounts of offset:

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Other current assets 23 12 — —

Other assets 1 — — —

Accounts payable and accrued liabilities 2 10 10 10

Other liabilities — — 2 —

$ 191 $ 73 $ 18 $ 24

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

As of September 30, 2021, the maximum amount of credit exposure associated with derivative transactions was $ 37 million.

As of March 31, 2022, the maximum amount of credit exposure associated with derivative transactions was $ 195 million.

Other Financial Instruments.

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

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

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

The carrying value for these financial instruments classified as current assets or liabilities approximates fair value because of their short-term nature and generally negligible credit losses.

Refer to Note 7 for the fair values of investment securities, legally restricted funds and debt.

In addition, as of March 31, 2022, FCX has contingent consideration assets related to the sales of certain oil and gas properties (refer to Note 7 for the related fair values).

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

The following table provides a reconciliation of total cash, cash equivalents, restricted cash and restricted cash equivalents presented in the consolidated statements of cash flows (in millions):

September 30,

2022 December 31, 2021

Balance sheet components:

Cash and cash equivalents $ 7,672 $ 3,657

Cash and cash equivalents a

$ 8,338 $ 8,068

Restricted cash and restricted cash equivalents included in:

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Total cash, cash equivalents, restricted cash and restricted cash equivalents presented in the consolidated statements of cash flows $ 8,588 $ 8,314

Includes time deposits of $ 0.2 billion at each of March 31, 2022, and December 31, 2021.

FAIR VALUE MEASUREMENT

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

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

FCX did not have any significant transfers in or out of Level 3 during first-quarter 2022.

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

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

At September 30, 2021

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

At March 31, 2022

Carrying Fair Value

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Collateralized mortgage-backed securities 3 3 — — 3 —

Municipal bonds 1 1 — — 1 —

Total 198 198 62 8 128 —

1 unchanged sentence

169 169 — — 169 —

Copper forward contracts c

Copper futures and swap contracts c

24 24 — 18 6 —

Copper forward contracts c

Total 195 195 — 19 176 —

3 unchanged sentences

Embedded derivatives in provisional sales/purchase contracts in a gross liability position 20 20 — — 20 —

Copper futures and swap contracts c

14 14 — 14 — —

Copper forward contracts 2 2 — 1 1 —

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Investment securities:

core fixed income fund $ 29 $ 29 $ 29 $ — $ — $ —

Equity securities $ 50 $ 50 $ — $ 50 $ — $ —

core fixed income fund 29 29 29 — — —

Total 79 79 29 50 — —

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Money market funds 8 8 — 8 — —

Collateralized mortgage-backed securities 4 4 — — 4 —

Municipal bonds 1 1 — — 1 —

4 unchanged sentences

12 12 — 9 3 —

Copper forward contracts c

Total 77 77 — 10 67 —

3 unchanged sentences

Embedded derivatives in provisional sales/purchase contracts in a gross liability position 27 27 — — 27 —

Copper forward contracts 1 1 — 1 — —

Total 28 28 — 1 27 —

Long-term debt, including current portion d

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

Excludes time deposits (which approximated fair value) included in (i) other current assets of $ 114 million at September 30, 2021, and $ 97 million at December 31, 2020, and (ii) other assets of $ 132 million at September 30, 2021, and $ 148 million at December 31, 2020, primarily associated with an assurance bond to support PT-FI’s commitment for additional domestic smelter development in Indonesia and PT-FI’s closure and reclamation guarantees.

Excludes time deposits (which approximated fair value) included in (i) other current assets of $ 117 million at March 31, 2022, and $ 114 million at December 31, 2021, and (ii) other assets of $ 133 million at March 31, 2022, and $ 132 million at December 31, 2021, primarily associated with an assurance bond to support PT-FI’s commitment for additional domestic smelter development in Indonesia and PT-FI’s closure and reclamation guarantees.

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

1 unchanged sentence

Valuation Techniques.

Equity securities are valued at the closing price reported on the active market on which the individual securities are traded and, as such, are classified within Level 1 of the fair value hierarchy.

core fixed income fund is valued at NAV.

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There are no restrictions on redemptions (which are usually within one business day of notice).

Equity securities are valued at the closing price reported on the active market on which the individual securities are traded and, as such, are classified within Level 1 of the fair value hierarchy.

Fixed income securities (government securities, corporate bonds, asset-backed securities, collateralized mortgage-backed securities and municipal bonds) are valued using a bid-evaluation price or a mid-evaluation price.

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

The contingent consideration included in (i) other current assets totaled $ 20 million at September 30, 2021, and $ 12 million at December 31, 2020, and (ii) other assets totaled $ 74 million at September 30, 2021, and $ 96 million at December 31, 2020.

The contingent consideration included in (i) other current assets totaled $ 20 million at March 31, 2022, and December 31, 2021, and (ii) other assets totaled $ 64 million at March 31, 2022, and $ 70 million at December 31, 2021.

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

3 unchanged sentences

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

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

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

There have been no changes in the techniques used at March 31, 2022, as compared with those techniques used at December 31, 2021.

A summary of the changes in the fair value of FCX’s Level 3 instrument, contingent consideration for the sale of the Deepwater GOM oil and gas properties, during the first three months of 2022 follows (in millions):

Fair value at January 1, 2022 $ 81

Net unrealized gain related to assets still held at the end of the period 12

Fair value at September 30, 2021 $ 85

Net unrealized loss related to assets still held at the end of the period ( 1 )

Fair value at March 31, 2022 $ 74

CONTINGENCIES AND COMMITMENTS

Environmental

Newtown Creek.

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

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

In 2010, U.S.

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

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

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

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

The final draft RI, which addressed all remaining EPA comments, was submitted in October 2021 and NCG expects EPA’s formal acceptance after their review.

NCG expects to submit the draft FS in late 2025

and currently expects EPA to select a creek-wide remedy in 2026, with the actual remediation construction starting several years later.

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

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

FCX’s environmental liability balance for the creek was $ 313 million at September 30, 2021.

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

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

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

Asbestos and Talc Claims .

As previously disclosed, since approximately 1990, various FCX affiliates have been named as defendants in a large number of lawsuits alleging personal injury from, among other things, exposure to asbestos or talc allegedly contained in industrial products, and more recently alleging the presence of asbestos contamination in talc-based cosmetic and personal care products.

Cyprus Amax Minerals Company (CAMC), an indirect wholly owned subsidiary of FCX, and Cyprus Mines Corporation (Cyprus Mines), a wholly owned subsidiary of CAMC, are among the targets of such lawsuits.

Cyprus Mines and subsidiaries were engaged in talc mining and processing from 1964 until 1992 when Cyprus Mines exited its talc business.

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

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

The hearing to consider confirmation of the Imerys bankruptcy plan previously scheduled to be held in November 2021 has been cancelled following a recent decision by the bankruptcy judge to invalidate a substantial number of votes in favor of the plan.

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

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

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

Louisiana Parishes Coastal Erosion Cases.

As discussed in Note 12 of FCX's 2020 Form 10-K, certain FCX affiliates were named as defendants, along with numerous co-defendants, in 13 cases out of a total of 42 cases filed in Louisiana state courts by six south Louisiana parishes (Cameron, Jefferson, Plaquemines, St.

John the Baptist and Vermilion), alleging that certain oil and gas exploration and production operations and sulphur mining and production operations in coastal Louisiana contaminated and damaged coastal wetlands and caused significant land loss along the Louisiana coast.

In 2019, affiliates of FCX reached an agreement in principle to settle all 13 cases.

The maximum out-of-pocket settlement payment will be $ 23.5 million with the initial payment of $ 15 million to be paid upon execution of the settlement agreement.

The settlement agreement must be executed by all parties, including authorized representatives of the six south Louisiana parishes originally plaintiffs in the suit and certain other non-plaintiff Louisiana parishes and the state of Louisiana.

The agreement in principle does not include any admission of liability by FCX or its affiliates.

FCX recorded a charge in 2019 for the initial payment of $ 15 million, which will be paid upon execution of the settlement agreement.

The settlement agreement has been executed by the FCX affiliates, the state of Louisiana and 8 of the 12 Louisiana parishes.

FCX is continuing its efforts to finalize the settlement.

Asset Retirement Obligations (ARO)

Arizona Environmental and Reclamation Programs.

FCX’s Arizona operations are subject to regulatory oversight by the Arizona Department of Environmental Quality (ADEQ).

ADEQ has adopted regulations for its aquifer protection permit (APP) program that require permits for, among other things, certain facilities, activities and structures used for mining, leaching, concentrating and smelting, and require compliance with aquifer water quality standards during operations and closure.

An application for an APP requires a proposed closure strategy that will meet applicable groundwater protection requirements following cessation of operations and an estimate of the implementation cost, with a more detailed closure plan required at the time operations cease.

A permit applicant must demonstrate its financial ability to meet the closure costs approved by ADEQ.

Closure costs for facilities covered by APPs are required to be updated every six years and financial assurance mechanisms are required to be updated every two years .

During first-quarter 2022, Bagdad increased its ARO liability and asset retirement cost asset by $ 45 million associated with an updated closure strategy that Bagdad submitted to ADEQ for approval.

Morenci is also preparing an update to its closure strategy for submission to ADEQ, which is expected to result in increased costs that could be significant.

FCX will continue updating its closure strategy and closure cost estimates at other Arizona sites, and any such updates may also result in increased costs that could be significant.

There were no significant updates to previously reported legal proceedings included in Note 12 of FCX’s 2021 Form 10-K.

Other Matters

PT-FI and PT Smelting Export Licenses.

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

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

Cerro Verde Royalty Dispute.

SUNAT (National Superintendency of Customs and Administration), the Peru national tax authority, assessed mining royalties on ore processed by the Cerro Verde concentrator for the period December 2006 to December 2013.

Cerro Verde contested each of these assessments because it believes that its 1998 stability agreement exempts from royalties all minerals extracted from its mining concession, irrespective of the method used for processing such minerals.

Since 2014, Cerro Verde has been paying the disputed assessments for the period from December 2006 through December 2013 under installment payment programs provided under Peru law.

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) and is proceeding with international arbitration as previously disclosed in FCX’s 2020 Form 10-K.

Development Progress of Greenfield Smelter at East Java .

On January 7, 2021, the Indonesia government levied an administrative fine of $ 149 million for the period from March 30, 2020, through September 30, 2020 (additional fines could be levied on exports after September 30, 2020), on PT-FI for failing to achieve physical development progress on the greenfield smelter as of July 31, 2020.

PT-FI responded to the Indonesia government objecting to the fine because of events outside of its control that caused a delay in development progress for the greenfield smelter at East Java.

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

Smelter Development Progress .

On January 7, 2021, the Indonesia government levied an administrative fine of $ 149 million for the period from March 30, 2020, through September 30, 2020, on PT-FI for failing to achieve physical development progress on its greenfield smelter as of July 31, 2020.

On January 13, 2021, PT-FI responded to the Indonesia government objecting to the fine because of events outside of its control causing a delay of the greenfield smelter’s development progress.

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

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

PT-FI is continuing to discuss this matter with the Indonesia government as well as provide additional documentation to support its position on the cause of delays in development progress on the greenfield smelter.

During the first nine months of 2021, PT-FI recorded charges totaling $ 16 million for a potential settlement of the administrative fine which is expected to include a revised construction schedule for the greenfield smelter.

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

The final settlement could differ from the amounts recorded.

Chiyoda Contract.

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

During 2021, PT-FI recorded charges totaling $ 16 million for a potential settlement of the administrative fine.

On January 25, 2022, the Indonesia government submitted a new estimate of the administrative fine totaling $ 57 million.

In March 2022, PT-FI paid the administrative fine and recorded a charge of $ 41 million in first-quarter 2022.

Based on PT-FI’s revised smelter construction schedule, PT-FI does not believe any additional fines should be applied and will dispute any attempts by the Indonesia government to levy additional fines, which could be significant.

PT-FI Export License.

Export licenses are valid for a one-year period, subject to review and approval by the Indonesia government every six months, depending on smelter construction progress.

In March 2022, PT-FI obtained a one-year extension of its concentrate export license through March 19, 2023, for two million metric tons of concentrate, the approval of which was based on PT-FI’s revised smelter construction schedule as modified to reflect impacts of the ongoing COVID-19 pandemic.

BUSINESS SEGMENTS

FCX has organized its mining operations into four primary divisions – North America copper mines, South America mining, Indonesia mining and Molybdenum mines – and operating segments that meet certain thresholds are reportable segments.

Separately disclosed in the following tables are FCX’s reportable segments, which include the Morenci, Cerro Verde and Grasberg (Indonesia Mining) copper mines, the Rod & Refining operations and Atlantic Copper Smelting & Refining.

Separately disclosed in the following tables are FCX’s reportable segments, which include the Morenci and Cerro Verde copper mines, the Grasberg minerals district (Indonesia Mining), the Rod & Refining operations and Atlantic Copper Smelting & Refining.

Intersegment sales between FCX’s business segments are based on terms similar to arms-length transactions with third parties at the time of the sale.

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Product Revenues.

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

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

FCX’s revenues attributable to the products it sold for the first quarters of 2022 and 2021 follow (in millions):

Three Months Ended

Concentrate $ 2,691 $ 1,709

2 unchanged sentences

Purchased copper a

124 167 652 568

Gold 741 497 1,856 1,108

Molybdenum 378 244

210 159 666 431

Other 188 253

Adjustments to revenues:

Treatment charges ( 133 ) ( 97 )

Royalty expense c

Royalty expense b

( 95 ) ( 63 )

Export duties d

Export duties c

( 98 ) ( 29 )

Revenues from contracts with customers 6,363 4,671

Embedded derivatives e

( 111 ) 109 201 57

Embedded derivatives d

Total consolidated revenues $ 6,603 $ 4,850

FCX purchases copper cathode primarily for processing by its Rod & Refining operations.

Primarily includes revenues associated with cobalt and silver.

Reflects royalties on sales from PT-FI and Cerro Verde that will vary with the volume of metal sold and prices.

Reflects PT-FI export duties.

Reflects PT-FI export duties, including a first-quarter 2022 charge of $ 18 million associated with an adjustment to prior-period export duties.

Refer to Note 6 for discussion of embedded derivatives related to FCX’s provisionally priced concentrate and cathode sales contracts.

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

Three Months Ended September 30, 2021

Three Months Ended March 31, 2022

Unaffiliated customers $ 90 $ 55 $ 145 $ 1,106 $ 160 $ 1,266 $ 2,326 a

4 unchanged sentences

44 61 105 87 10 97 248 16 1 6 16 489

Metals inventory adjustments

13 — 13 — — — — — — — 1 14

Selling, general and administrative expenses

3 unchanged sentences

— — — — — — — — — — 16 16

Net gain on sales of assets — — — — — — — — — — ( 60 ) c

Operating income (loss) 394 433 827 567 38 605 1,503 37 ( 3 ) ( 18 ) ( 142 ) 2,809

Interest expense, net — — — 3 — 3 2 — — 2 120 127

Provision for (benefit from) income taxes — — — 197 24 221 382 d

— — ( 1 ) 26 628

Total assets at September 30, 2021 2,586 5,244 7,830 8,554 1,843 10,397 18,592 1,726 278 1,067 7,027 46,917

Capital expenditures 42 74 116 41 6 47 328 1 1 5 43 e

Three Months Ended September 30, 2020

Provision for (benefit from) income taxes — — — 227 14 241 586 — — — ( 3 ) 824

Total assets at March 31, 2022 2,773 5,284 8,057 8,678 1,925 10,603 19,338 1,702 299 1,045 7,788 48,832

Capital expenditures 73 57 130 33 23 56 379 1 2 11 144 c

Three Months Ended March 31, 2021

Unaffiliated customers $ 4 $ 28 $ 32 $ 917 $ 175 $ 1,092 $ 1,383 a

2 unchanged sentences

45 — 45 52 70 7 — ( 1,480 ) —

Production and delivery 308 460 768 394 83 477 409 51 1,272 522 ( 1,034 ) 2,465

Production and delivery 269 480 749 436 103 539 455 58 1,316 673 ( 1,003 ) d

Depreciation, depletion and amortization

34 46 80 89 12 101 199 15 1 7 16 419

Metals inventory adjustments

— ( 4 ) ( 4 ) — — — — 3 2 — 8 9

Selling, general and administrative expenses

3 unchanged sentences

— — — — — — — — — — 5 5

Net loss on sales of assets — — — — — — — — — — 2 2

Operating income (loss) 265 243 508 435 60 495 755 ( 3 ) ( 1 ) — ( 222 ) 1,532

1 unchanged sentence

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

Total assets at September 30, 2020 2,654 5,137 7,791 8,569 1,640 10,209 16,858 1,770 251 877 3,343 41,099

Capital expenditures 21 45 66 26 5 31 297 3 1 6 32 e

Includes PT-FI's sales to PT Smelting totaling $ 795 million in third-quarter 2021 and $ 506 million in third-quarter 2020.

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

Represents the gain on the sale of FCX’s remaining cobalt business located in Kokkola, Finland (Freeport Cobalt).

Includes net tax benefits of $ 69 million associated with the release of a portion of the valuation allowances recorded against PT RTI NOLs.

Includes capital expenditures for the new greenfield smelter and precious metals refinery (collectively, the Indonesia smelter project) of $ 31 million in third-quarter 2021 and $ 27 million in third-quarter 2020.

(In millions)

Atlantic Corporate,

North America Copper Mines South America Mining Copper Other

Cerro Indonesia Molybdenum Rod & Smelting & Elimi- FCX

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

Nine months ended September 30, 2021

Unaffiliated customers $ 77 $ 147 $ 224 $ 2,721 $ 512 $ 3,233 $ 5,097 a

$ — $ 4,695 $ 2,264 $ 1,168 b

Intersegment 1,996 2,783 4,779 260 — 260 189 310 20 — ( 5,558 ) —

Production and delivery 932 1,646 2,578 1,463 c

306 1,769 1,552 183 4,708 2,213 ( 4,141 ) d

Depreciation, depletion and amortization 114 161 275 272 34 306 726 51 3 22 47 1,430

Metals inventory adjustments 13 — 13 — — — — 1 — — 1 15

Selling, general and administrative expenses 1 2 3 6 — 6 81 — — 17 182 289

Mining exploration and research expenses — 1 1 — — — — — — — 35 36

Environmental obligations and shutdown costs — ( 1 ) ( 1 ) — — — — — — — 52 51

Net gain on sales of assets — — — — — — — — — — ( 63 ) e

Operating income (loss) 1,013 1,121 2,134 1,240 172 1,412 2,927 75 4 12 ( 503 ) 6,061

Interest expense, net — 1 1 31 — 31 8 — — 4 387 431

Provision for (benefit from) income taxes — — — 515 62 577 1,101 f

— — ( 1 ) ( 3 ) 1,674

Capital expenditures 74 137 211 84 10 94 904 4 2 18 111 g

Nine months ended September 30, 2020

Unaffiliated customers $ 26 $ 35 $ 61 $ 1,479 $ 312 $ 1,791 $ 2,151 a

$ — $ 3,491 $ 1,429 $ 780 b

Intersegment 1,473 1,676 3,149

156 — 156 38 171 24 16 ( 3,554 ) —

Production and delivery 1,005 1,410 2,415 1,152 297 1,449 1,130 178 3,529 1,379 ( 2,676 ) 7,404

Depreciation, depletion and amortization 129 143 272 273 42 315 375 44 14 22 51 1,093

Metals inventory adjustments 4 48 52 — 3 3 — 8 3 — 26 92

Selling, general and administrative expenses 2 1 3 5 — 5 81 — — 15 169 273

Mining exploration and research expenses — 2 2 — — — — — — — 40 42

Environmental obligations and shutdown costs — ( 3 ) ( 3 ) — — — — — 1 — 60 58

Net loss on sales of assets — — — — — — — — — — 13 13

Operating income (loss) 359 110 469 205 ( 30 ) 175 603 ( 59 ) ( 32 ) 29 ( 457 ) 728

Interest expense, net 2 — 2 69 — 69 2 — — 4 285 362

Provision for (benefit from) income taxes — — — 82 ( 6 ) 76 302 — — 1 ( 46 ) 333

Capital expenditures 92 306 398 116 40 156 865 14 5 17 118 g

Includes PT-FI's sales to PT Smelting totaling $ 2.3 billion for the first nine months of 2021 and $ 1.3 billion for the first nine months of 2020.

Total assets at March 31, 2021 2,629 5,283 7,912 8,723 1,738 10,461 17,273 1,753 235 997 5,012 43,643

Capital expenditures 10 16 26 20 1 21 290 1 1 6 25 c

Includes PT-FI's sales to PT Smelting totaling $ 917 million in first-quarter 2022 and $ 792 million in first-quarter 2021.

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

Includes nonrecurring charges totaling $ 74 million associated with labor-related charges at Cerro Verde for agreements reached with approximately 65 percent of its hourly employees.

Includes capital expenditures for the greenfield smelter and PMR.

Includes charges associated with the major maintenance turnaround at the Miami Smelter totaling $ 68 million.

Includes a $ 60 million gain on the sale of Freeport Cobalt.

Includes net tax benefits of $ 69 million associated with the release of a portion of the valuation allowances recorded against PT RTI NOLs.

Includes capital expenditures for the Indonesia smelter project of $ 79 million for the first nine months of 2021 and $ 94 million for the first nine months of 2020.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

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

(the Company) as of March 31, 2022, the related consolidated statements of income, comprehensive income, equity and cash flows for the three-month periods ended March 31, 2022 and 2021, and the related notes (collectively referred to as the “consolidated interim financial statements”).

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

generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2020, the related consolidated statements of operations, comprehensive income (loss), cash flows and equity for the year then ended, and the related notes (not presented herein);

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2021, the related consolidated statements of operations, comprehensive income (loss), equity and cash flows for the year then ended, and the related notes (not presented herein);

and in our report dated February 15, 2022, we expressed an unqualified audit opinion on those consolidated financial statements.

10 unchanged sentences

Phoenix, Arizona

November 5, 2021

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

What changed 10-Q

Item 1. Financial Statements