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Item 2. Management’s Discussion and Analysis

2022-08-05 compared with 2022-05-05 · 727 added, 258 removed, 829 unchanged (54% of the section changed)

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

Our results for first-quarter 2022 reflect strong operating and financial performance, cash flow generation and cash returns to shareholders.

We remain focused on cost and capital management and are advancing our sustainability objectives.

We achieved a 24 percent increase in copper sales and a 59 percent increase in gold sales, compared to first-quarter 2021.

We plan to continue to execute our operating plans, which we expect will provide strong cash flows to support advancement of organic growth initiatives and continued cash returns to shareholders under our established financial policy, based on a favorable operational and market outlook.

As further discussed in “Operations,” first-quarter 2022 highlights include:

• Continued growth in operating rates at Lone Star toward achieving production of 300 million pounds of copper per year from oxide ores (compared with the initial design capacity of 200 million pounds per year).

• Strong performance from Cerro Verde's concentrator facilities, with milling rates averaging 394,400 metric tons of ore per day.

Subject to ongoing monitoring of COVID-19 protocols, milling rates are currently expected to average approximately 400,000 metric tons of ore per day for the remainder of 2022.

• Increased milling rates from the underground mines at the Grasberg minerals district, which averaged 186,500 metric tons of ore per day, a 50 percent increase from milling rates in first-quarter 2021.

Milling rates at the Grasberg minerals district are expected to average approximately 180,000 to 190,000 metric tons of ore per day for the remainder of 2022.

Net income attributable to common stock totaled $1.5 billion in first-quarter 2022, compared with $0.7 billion in first-quarter 2021, primarily reflecting higher copper and gold sales volumes and prices, partly offset by a higher provision for income taxes and increased energy and other input costs.

Our results for the first six months of 2022 reflect solid operating results, with strong margins and cash flow generation, despite the decline in copper prices that began in second-quarter 2022.

We believe the actions we have taken in recent years to build a strong balance sheet, successfully expand low-cost operations, and maintain flexible growth options while maintaining sufficient liquidity will allow us to continue to execute our business plans in a prudent manner, despite current economic uncertainty, while preserving substantial future asset values.

While we recognize the near-term volatility in our markets, we are optimistic about our portfolio of assets, our strong management and operating teams, and the long-term prospects for the copper markets we serve.

The London Metal Exchange (LME) copper settlement price averaged $4.43 per pound for the first six months of 2022 and reached a record high of $4.87 per pound in March 2022, supported by copper's increasingly important role in decarbonization technologies and limited mine supply.

Beginning in second-quarter 2022, a series of macro-economic factors (concerns about the global economy, higher U.S.

interest rates and currency exchange rates among other factors) led to a precipitous decline in copper prices.

The LME copper settlement price declined from $4.69 per pound at March 31, 2022, to $3.74 per pound at June 30, 2022, and was $$3.54 per pound on July 29, 2022.

Physical market fundamentals remain tight as evidenced by low levels of global exchange stocks.

Our global customer base reports healthy demand for copper.

We believe the outlook for copper fundamentals in the medium- and long-term remain favorable, with studies indicating that demand for copper may double in 15 years based on the global movement towards decarbonization.

We also believe substantial new mine supply development will be required to meet the goals of the global energy transition, and current prices for copper are insufficient to support new mine supply development, which is expected to add to future supply deficits.

Our management team and global organization have substantial experience and success in executing under volatile market conditions.

We believe we benefit from a diversified operations portfolio with an attractive cost structure, long-lived reserves, optionality in our project pipeline and a strong balance sheet and liquidity position.

We are closely monitoring market conditions and will adjust our operating plans to protect our liquidity and preserve our asset values, as necessary.

We expect to maintain a strong balance sheet and liquidity position as we focus on building long-term value in our business, executing our operating plans safely, responsibly and efficiently, and prudently managing costs and capital expenditures.

Net income attributable to common stock totaled $0.8 billion in second-quarter 2022, compared with $1.1 billion in second-quarter 2021, primarily reflecting lower copper prices and unfavorable adjustments to provisionally priced copper sales, partly offset by higher copper and gold sales volumes.

Net income attributable to common stock totaled $2.4 billion for the first six months of 2022, compared with $1.8 billion for the first six months of 2021, primarily reflecting higher copper and gold sales volumes, partly offset by a higher provision for income taxes and lower copper prices.

The results for the 2022 periods, compared with the 2021 periods, also reflect increased energy and other input costs.

Refer to “Consolidated Results” for further discussion.

At March 31, 2022, we had consolidated debt of $9.6 billion and consolidated cash and cash equivalents of $8.3 billion, resulting in net debt of $1.3 billion (including $0.6 billion of net debt for the Indonesia smelter projects).

At June 30, 2022, we had consolidated debt of $11.1 billion and consolidated cash and cash equivalents of $9.5 billion, resulting in net debt of $1.6 billion ($1.0 billion excluding net debt for the Indonesia smelter projects).

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

At March 31, 2022, we had no borrowings and $3.5 billion available under our revolving credit facility.

At March 31, 2022, we had $1.4 billion of current debt, including $995 million of senior notes maturing in March 2023 (with redemption rights at par in December 2022) and $325 million under Cerro Verde’s Term Loan maturing in June 2022.

In April 2022, PT Freeport Indonesia (PT-FI) completed the sale of $3.0 billion of senior notes primarily in connection with its financing plans for construction of additional domestic smelting capacity.

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

Through May 5, 2022, we acquired 28.7 million shares

of our common stock for a total cost of $1.2 billion ($41.64 average cost per share) and $1.8 billion remains available under the share repurchase program.

At June 30, 2022, we had $3.5 billion of availability under our revolving credit facility, and PT-FI and Cerro Verde have $1.3 billion and $350 million, respectively, of availability under their revolving credit facilities.

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

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

Despite uncertain market conditions in the near-term, we continue to believe the medium- and long-term outlook for our business is positive, supported by limitations on supplies of copper and the expected 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.

Copper prices, in particular, experienced a significant drop beginning in second-quarter 2022.

Refer to “Markets” below and “Risk Factors” in Part I, Item 1A.

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Projected molybdenum sales include 30 million pounds produced by our Molybdenum mines and 50 million pounds produced by our North America and South America copper mines.

Consolidated sales volumes in second-quarter 2022 are expected to approximate 1.0 billion pounds of copper, 405 thousand ounces of gold and 21 million pounds of molybdenum.

Consolidated sales volumes in third-quarter 2022 are expected to approximate 1.0 billion pounds of copper, 400 thousand ounces of gold and 21 million pounds of molybdenum.

Projected sales volumes are dependent on operational performance, weather-related conditions, timing of shipments, and other factors detailed in the “Cautionary Statement” below.

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Consolidated Unit Net Cash Costs

Assuming average prices of $1,950 per ounce of gold and $19.00 per pound of molybdenum for the remainder of 2022 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 $1.44 per pound of copper for the year 2022 (including $1.41 per pound of copper in second-quarter 2022).

The increase from the January 2022 estimate of $1.35 per pound of copper primarily reflects higher costs of energy and other consumables and currency exchange rates in South America, partly offset by higher gold volumes and commodity price assumptions.

We are experiencing significant cost inflation, principally associated with energy (which represents about 20 percent of our site operating costs) and other consumables such as sulfuric acid, explosives and steel.

Russia’s invasion of Ukraine has placed additional pressure on an already challenging global supply chain environment.

The impact of price changes during the remainder of 2022 on consolidated unit net cash costs for the year 2022 would approximate $0.03 per pound of copper for each $100 per ounce change in the average price of gold and $0.02 per pound of copper for each $2.00 per pound change in the average price of molybdenum.

Assuming average prices of $1,700 per ounce of gold and $16.00 per pound of molybdenum for the second half of 2022 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 $1.50 per pound of copper for the year 2022 (including $1.67 per pound of copper in third-quarter 2022).

The increase from previous estimates primarily reflects lower by-product credits caused by lower projected gold and molybdenum prices.

We also continue to experience significant cost inflation, principally associated with higher energy prices (which represents about 20 percent of our site operating costs) and increased costs for other consumables such as sulfuric acid, explosives and steel.

The impact of price changes during the second half of 2022 on consolidated unit net cash costs for the year 2022 would approximate $0.02 per pound of copper for each $100 per ounce change in the average price of gold and $0.01 per pound of copper for each $2.00 per pound change in the average price of molybdenum.

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

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and other factors.

Based on current sales volume and cost estimates, and assuming average prices of $4.75 per pound for copper, $1,950 per ounce for gold, and $19.00 per pound for molybdenum for the remainder of 2022, our consolidated operating cash flows are estimated to approximate $8.6 billion (net of $0.9 billion of working capital and other uses) for the year 2022.

Based on current sales volume and cost estimates, and assuming average prices of $3.25 per pound for copper, $1,700 per ounce for gold, and $16.00 per pound for molybdenum for the second half of 2022, our consolidated operating cash flows are estimated to approximate $4.5 billion (net of $1.4 billion of working capital and other uses) for the year 2022.

Estimated consolidated operating cash flows for the year 2022 also reflect an estimated income tax provision of $2.0 billion (refer to “Consolidated Results – Income Taxes” for further discussion of our projected income tax rate for the year 2022).

The impact of price changes for the remainder of 2022 on operating cash flows would approximate $300 million for each $0.10 per pound change in the average price of copper, $80 million for each $100 per ounce change in the average price of gold and $75 million for each $2.00 per pound change in the average price of molybdenum.

The impact of price changes for the second half of 2022 on operating cash flows would approximate $230 million for each $0.10 per pound change in the average price of copper, $80 million for each $100 per ounce change in the average price of gold and $50 million for each $2.00 per pound change in the average price of molybdenum.

Consolidated Capital Expenditures

Consolidated capital expenditures for the year 2022 are expected to approximate $4.6 billion ($3.2 billion excluding capital expenditures for the greenfield smelter and precious metals refinery (PMR) - collectively, the Indonesia smelter projects), and include $1.9 billion for major mining projects ($1.3 billion for planned projects primarily associated with underground mine development in the Grasberg minerals district and supporting mill and power capital costs and $0.6 billion for discretionary growth projects).

Capital expenditures for the Indonesia smelter projects are expected to approximate $1.4 billion for the year 2022.

Development of additional smelting capacity in Indonesia will result in the elimination of export duties, providing an

offset to the economic cost associated with the Indonesia smelter projects.

Capital expenditures for the Indonesia smelter projects are being funded with the net proceeds from PT-FI's unsecured senior notes issued in April 2022 and its available bank credit facilities.

Capital expenditures are expected to approximate $4.5 billion for the year 2022 (including $1.9 billion for major mining projects and $1.4 billion for the greenfield smelter and precious metals refinery (PMR) - collectively, the Indonesia smelter projects).

Projected capital expenditures for major mining projects include $1.3 billion for planned projects primarily associated with underground mine development in the Grasberg minerals district and supporting mill and power capital costs and $0.6 billion for discretionary growth projects.

We closely monitor market conditions and will adjust our operating plans, including capital expenditures, as necessary.

Capital expenditures for the Indonesia smelter projects are being funded with PT-FI's senior notes and its available revolving credit facility.

Construction of the additional domestic smelter capacity will result in the elimination of export duties, providing an offset to the economic cost associated with the Indonesia smelter projects.

Based on current development progress of additional smelting capacity, PT-FI expects export duties to be reduced from the current rate of 5 percent to 2.5 percent by the end of 2022, and eliminated in the second half of 2023.

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

During the period from January 2012 through March 2022, the London Metal Exchange (LME) copper settlement price varied from a low of $1.96 per pound in 2016 to a record high of $4.87 per pound in 2022;

During the period from January 2012 through June 2022, the LME copper settlement price varied from a low of $1.96 per pound in 2016 to a record high of $4.87 per pound in 2022;

the London Bullion Market Association (London) PM gold price fluctuated from a low of $1,049 per ounce in 2015 to a record high of $2,067 per ounce in 2020;

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of our 2021 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 2012 through March 2022.

During first-quarter 2022, LME copper settlement prices ranged from a low of $4.34 per pound to a record high of $4.87 per pound, averaged $4.53 per pound and settled at $4.69 per pound on March 31, 2022.

Copper prices have been supported by strong demand during the pandemic recovery, rising investor sentiment associated with copper’s prominent role in the global transition to cleaner energy, ongoing supply disruptions and falling inventories.

The LME copper settlement price was $4.45 per pound on April 29, 2022.

Long-term fundamentals for copper remain positive.

We believe future demand will be supported by copper’s role in the global transition to renewable power, electric vehicles and other carbon-reduction initiatives, and continued urbanization in developing countries.

The small number of approved, large-scale projects beyond those expected to commence operations in 2022 and 2023, the long lead times required to permit and build new mines and declining ore grades at existing operations continue to highlight the fundamental supply challenges for copper.

This graph presents London PM gold prices from January 2012 through March 2022.

During first-quarter 2022, London PM gold prices ranged from a low of $1,788 per ounce to a high of $2,039 per ounce, averaged $1,877 per ounce, and closed at $1,942 per ounce on March 31, 2022.

Many analysts expect future gold prices to be supported by the effects of elevated debt levels associated with large pandemic-related stimulus efforts, historically low U.S.

interest rates and a weaker U.S.

The London PM gold price was $1,911 per ounce on April 29, 2022.

This graph presents the Metals Week Molybdenum Dealer Oxide weekly average price from January 2012 through March 2022.

During first-quarter 2022, the weekly average price of molybdenum ranged from a low of $18.74 per pound to a high of $19.33 per pound, averaged $19.08 per pound, and was $19.30 per pound on March 31, 2022.

Molybdenum prices continue to be supported by supply constraints and increased demand, as mines in Chile continued to report low production, logistic challenges and geopolitical risk due to Russia’s invasion of Ukraine causing traders to increase inventories.

The Metals Week Molybdenum Dealer Oxide weekly average price was $19.22 per pound on April 29, 2022.

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 2012 through June 2022.

During second-quarter 2022, LME copper settlement prices ranged from a low of $3.74 per pound to a high of $4.73 per pound, averaged $4.31 per pound and settled at $3.74 per pound on June 30, 2022.

Beginning in June 2022, copper prices declined sharply as a result of a series of macro-economic factors, including concerns about the global economy, Chinese economic data, rising U.S.

interest rates and currency exchange rates related to the strength of the U.S.

The LME copper settlement price was $3.54 per pound on July 29, 2022.

Future copper prices may continue to be volatile and are expected to be influenced by, among other things, demand from China and economic activity, including the possibility of global recession.

We believe the weakness in current financial market sentiment is inconsistent with physical markets and longer-term fundamentals.

We continue to believe future demand will be supported by copper’s role in the global transition to renewable power, electric vehicles and other carbon-reduction initiatives, and continued urbanization in developing countries.

The small number of approved, large-scale projects scheduled beyond those that have been announced, the long lead times required to permit and build new mines and declining ore grades at existing operations continue to highlight the fundamental supply challenges for copper.

The current copper price weakness is expected to add to the already significant barriers to future copper supply development.

This graph presents London PM gold prices from January 2012 through June 2022.

During second-quarter 2022, London PM gold prices ranged from a low of $1,810 per ounce to a high of $1,977 per ounce, averaged $1,871 per ounce, and closed at $1,817 per ounce on June 30, 2022.

The strength of the U.S.

dollar has negatively impacted gold prices as the U.S.

dollar index reached a 20-year high in June 2022.

The London PM gold price was $1,753 per ounce on July 29, 2022.

This graph presents the Metals Week Molybdenum Dealer Oxide weekly average price from January 2012 through June 2022.

During second-quarter 2022, the weekly average price of molybdenum ranged from a low of $17.08 per pound to a high of $19.31 per pound, averaged $18.42 per pound, and was $17.08 per pound on June 30, 2022.

During second-quarter 2022, concerns about China’s zero-COVID-19 policies, inflation and anticipated lower summer steel production prompted price weakness that has continued into July 2022.

The Metals Week Molybdenum Dealer Oxide weekly average price was $15.15 per pound on July 29, 2022.

CONSOLIDATED RESULTS

Three Months Ended March 31,

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

2022 2021 2022 2021

SUMMARY FINANCIAL DATA

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$ 1,736 $ 2,067

$ 4,545 $ 3,599

Net income attributable to common stock c

Diluted net income per share of common stock $ 0.57 $ 0.73 $ 1.61 $ 1.21

Diluted weighted-average common shares outstanding

Diluted weighted-average shares of common stock outstanding 1,457 1,483 1,463 1,480

Operating cash flows f

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Capital expenditures

$ 863 $ 433 $ 1,586 $ 803

Cash and cash equivalents

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

Includes favorable adjustments to prior period provisionally priced concentrate and cathode copper sales totaling $102 million ($42 million to net income attributable to common stock or $0.03 per share) in first-quarter 2022 and $146 million ($57 million to net income attributable to common stock or $0.04 per share) in first-quarter 2021 (refer to Note 6 for further discussion).

Includes (unfavorable) favorable adjustments to prior period provisionally priced concentrate and cathode copper sales totaling $(355) million ($(154) million to net income attributable to common stock or $(0.10) per share) in second-quarter 2022, $173 million ($66 million to net income attributable to common stock or $0.05 per share) in second-quarter 2021, $65 million ($27 million to net income attributable to common stock or $0.02 per share) for the first six months of 2022 and $169 million ($65 million to net income attributable to common stock or $0.04 per share) for the first six months of 2021.

Refer to Note 6 for further discussion.

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

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

Includes net charges totaling $38 million ($0.03 per share), primarily associated with the settlement of an administrative fine and an adjustment to prior-period export duties at PT-FI.

These net charges, before income taxes and noncontrolling interests, were recorded to production and delivery ($43 million) and to revenues ($18 million).

Includes net charges totaling $38 million ($0.03 per share), primarily associated with contested matters at PT-FI (including an administrative fine levied by the Indonesia government and historical tax audits), employee separation charges in North America and asset retirement obligation adjustments.

These charges, before income taxes and noncontrolling interests, were recorded to production and delivery ($37 million), interest expense, net ($4 million) and other income, net ($5 million), partly offset by credits recorded to environmental obligations and shutdown costs ($3 million).

Working capital and other uses totaled $811 million in first-quarter 2022 and $336 million in first-quarter 2021.

Three Months Ended March 31,

Includes net charges totaling $14 million ($0.01 per share) in second-quarter 2022 and $52 million ($0.04 per share) for the first six months of 2022.

Net charges for second-quarter 2022 were primarily associated with environmental obligations and metals inventory adjustments, partly offset by a net gain on early extinguishment of debt.

Net charges for the first six months of 2022 also included the settlement of an administrative fine and an adjustment to prior-period export duties at PT-FI, and asset retirement obligation (ARO) adjustments.

Includes net charges totaling $56 million ($0.04 per share) in second-quarter 2021 and $94 million ($0.06 per share) for the first six months of 2021, primarily associated with contested matters at PT-FI (including historical tax audits and an administrative fine levied by the Indonesia government), nonrecurring labor-related costs at Cerro Verde and adjustments to environmental obligations and AROs.

Working capital and other sources (uses) totaled $100 million in second-quarter 2022, $523 million in second-quarter 2021, $(711) million for the first six months of 2022 and $187 million for the first six months of 2021.

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

2022 2021 2022 2021

SUMMARY OPERATING DATA

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Average realized price per pound $ 4.03 $ 4.34

Site production and delivery costs per pound a

$ 4.18 $ 4.25

Site production and delivery costs per pound a

$ 2.09 $ 2.02 b

$ 2.06 $ 1.94 b

Unit net cash costs per pound a

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Sales, excluding purchases

476 305 885 563

Average realized price per ounce $ 1,827 $ 1,794 $ 1,861 $ 1,785

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For reconciliations of per pound unit costs (credits) by operating division to production and delivery costs applicable to sales reported in our consolidated financial statements, refer to “Product Revenues and Production Costs.”

Consolidated revenues totaled $6.6 billion in first-quarter 2022 and $4.9 billion in first-quarter 2021.

Includes $0.07 per pound of copper in second-quarter 2021 and $0.04 per pound of copper for the first six months of 2021 associated with nonrecurring labor-related costs at Cerro Verde.

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

Consolidated revenues totaled $5.4 billion in second-quarter 2022, $5.7 billion in second-quarter 2021, $12.0 billion for the first six months of 2022 and $10.6 billion for the first six months of 2021.

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

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

Three Months Ended March 31

Three Months Ended June 30 Six Months Ended June 30

Consolidated revenues - 2021 period $ 5,748 $ 10,598

Higher (lower) sales volumes:

Copper 681 1,515

Molybdenum (34) (49)

Higher average realized prices:

(Lower) higher average realized prices:

Copper (337) (148)

Molybdenum 121 270

Adjustments for prior period provisionally priced copper sales (528) (104)

Higher Atlantic Copper revenues 31

Lower Atlantic Copper revenues (361) (330)

Lower revenues from purchased copper (206) (354)

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Sales Volumes.

Consolidated copper and gold sales volumes increased in first-quarter 2022, compared with first-quarter 2021, primarily reflecting the ramp-up of underground mining at PT-FI and timing of shipments in North America.

Consolidated copper and gold sales volumes increased in the 2022 periods, compared with the 2021 periods, primarily reflecting increased operating rates at the Grasberg minerals district and Cerro Verde.

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

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

Average realized prices in first-quarter 2022, compared with first-quarter 2021, were 18 percent higher for copper, 12 percent higher for gold and 66 percent higher for molybdenum.

Average realized copper prices include net favorable adjustments to current period provisionally priced copper sales ( i.e.

, provisionally priced sales at March 31, 2022 and 2021) totaling $116 million in first-quarter 2022 and $61 million in first-quarter 2021.

Average realized prices in second-quarter 2022, compared with second-quarter 2021, were 7 percent lower for copper, 2 percent higher for gold and 48 percent higher for molybdenum, and average realized prices for the first six months of 2022, compared with the first six months of 2021, were 2 percent lower for copper, 4 percent higher for gold and 56 percent higher for molybdenum.

Average realized copper prices include net (unfavorable) favorable adjustments to current period provisionally priced copper sales totaling $(365) million in second-quarter 2022, $(55) million in second-quarter 2021, $(567) million for the first six months of 2022 and $156 million for the first six months of 2021.

As discussed in Note 6, substantially all of our copper concentrate and cathode sales contracts provide final copper pricing in a specified future month (generally one to four months from the shipment date) based primarily on quoted LME monthly average copper prices.

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Prior Period Provisionally Priced Copper Sales.

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

, provisionally priced sales at December 31, 2021 and 2020) recorded in consolidated revenues totaled $102 million in first-quarter 2022 and $146 million in first-quarter 2021.

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

, provisionally priced sales at March 31, 2022 and 2021, and December 31, 2021 and 2020) recorded in consolidated revenues totaled $(355) million in second-quarter 2022, $173 million in second-quarter 2021, $65 million for the first six months of 2022 and $169 million for the first six months of 2021.

Refer to Notes 6 and 9 for a summary of total adjustments to prior period and current period provisionally priced sales.

At March 31, 2022, we had provisionally priced copper sales totaling 473 million pounds of copper (net of intercompany sales and noncontrolling interests) recorded at an average of $4.71 per pound, subject to final pricing over the next several months.

We estimate that each $0.05 change in the price realized from the March 31, 2022, provisional price recorded would have an approximate $15 million effect on our 2022 net income attributable to common stock.

Copper prices have declined from March 31, 2022, the LME copper settlement price averaged $4.62 per pound in April 2022 and approximated $4.30 per pound on May 4, 2022.

At June 30, 2022, we had provisionally priced copper sales totaling 447 million pounds of copper (net of intercompany sales and noncontrolling interests) recorded at an average of $3.75 per pound, subject to final pricing over the next several months.

We estimate that each $0.05 change in the price realized from the June 30, 2022, provisional price recorded would have an approximate $14 million effect on our 2022 net income attributable to common stock.

The LME copper price settled at $$3.54 per pound on July 29, 2022.

Atlantic Copper Revenues.

Atlantic Copper revenues totaled $718 million in first-quarter 2022, compared with $687 million in first-quarter 2021.

Higher revenues in first-quarter 2022, compared with first-quarter 2021, primarily reflect higher copper prices.

Atlantic Copper revenues totaled $433 million in second-quarter 2022 and $1.2 billion for the first six months of 2022, compared with $794 million in second-quarter 2021 and $1.5 billion for the first six months of 2021.

Lower revenues in the 2022 periods, compared with 2021 periods, primarily reflects reduced operations as a result of a scheduled major maintenance turnaround that began in second-quarter 2022.

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 15 million pounds in first-quarter 2022 and 53 million pounds in first-quarter 2021.

The volumes of copper purchases vary depending on cathode production from our operations and totaled 23 million pounds in second-quarter 2022, 68 million pounds in second-quarter 2021, 38 million pounds for the first six months of 2022 and 121 million pounds for the first six months of 2021.

The decrease in revenues associated with purchased copper in the 2022 periods, compared to the 2021 periods, reflects the impact of lower purchases and copper prices.

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.

The increase in the treatment charges in the 2022 periods primarily reflects higher copper sales volumes.

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.

Higher royalties and export duties in the 2022 periods, compared to the 2021 periods, are primarily associated with increased copper and gold sales volumes.

PT-FI currently pays duties on concentrate exports of 5 percent, declining to 2.5 percent when development progress for additional smelting capacity in Indonesia exceeds 30 percent, and eliminated when development progress for additional smelting capacity in Indonesia exceeds 50 percent.

Refer to “Operations – Indonesia Mining” for further discussion of the current progress on additional smelting capacity in Indonesia and to Note 9 for a summary of royalty expense and export duties.

Production and Delivery Costs

Consolidated production and delivery costs totaled $3.2 billion in first-quarter 2022 and $2.8 billion in first-quarter 2021.

Higher consolidated production and delivery costs in first-quarter 2022 primarily reflect higher volumes and increased energy, maintenance and other input costs.

Consolidated production and delivery costs totaled $3.0 billion in second-quarter 2022, $3.1 billion in second-quarter 2021, $6.2 billion for the first six months of 2022 and $5.9 billion for the first six months of 2021.

We continue to experience significant cost inflation, principally associated with higher energy prices (which represents approximately 20 percent of our site operating costs) and increased costs for other consumables such as sulfuric acid, explosives and steel.

These higher costs were partly offset by lower costs at Atlantic Copper related to reduced operations as a result of a scheduled major maintenance turnaround that began in second-quarter 2022.

Site Production and Delivery Costs Per Pound.

Site production and delivery costs for our copper mining operations primarily include labor, energy and commodity-based inputs, such as sulphuric acid, reagents, liners, tires and explosives.

Consolidated site production and delivery costs (before net noncash and other costs) for our copper mines averaged $2.03 per pound of copper in first-quarter 2022 and $1.86 per pound of copper in first-quarter 2021.

Higher consolidated site production and delivery costs per pound of copper for first-quarter 2022, compared with first-quarter 2021, primarily reflect higher mining and milling costs and increased energy and other input costs, partly offset by higher sales volumes.

Site production and delivery costs for our copper mining operations primarily include labor, energy and commodity-based inputs, such as sulfuric acid, explosives, steel, reagents, liners and tires.

Consolidated site production and delivery costs (before net noncash and other costs) for our copper mines averaged $2.09 per pound of copper in second-quarter 2022, $2.02 per pound of copper in second-quarter 2021, $2.06 for the first six months of 2022 and $1.94 for the first six months of 2021.

Higher consolidated site production and delivery costs per pound of copper for the second quarter and first six months of 2022, compared with the second quarter and first six months of 2021, primarily reflect higher costs associated with energy, input costs (including operating supplies such as sulfuric acid, explosives and steel) and maintenance.

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

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

Consolidated depreciation, depletion and amortization (DD&A) totaled $489 million in first-quarter 2022 and $419 million in first-quarter 2021.

Higher DD&A in first-quarter 2022 primarily reflects higher sales volumes and assets placed in service associated with the ramp-up of underground mining at PT-FI.

Consolidated depreciation, depletion and amortization (DD&A) totaled $507 million in second-quarter 2022, $483 million in second-quarter 2021, $996 million for the first six months of 2022 and $902 million for the first six months of 2021.

Higher DD&A in the 2022 periods primarily reflects higher sales volumes and assets placed in service associated with the ramp-up of underground mining at PT-FI.

Metals Inventory Adjustments

Metals inventory adjustments totaled $18 million for the second quarter and first six months of 2022 and $1 million for the first six months of 2021.

Metals inventory adjustments in the 2022 periods include net realizable value (NRV) inventory adjustments related to lower market prices for copper ($9 million) and a stockpile write-off at Cerro Verde ($9 million).

As discussed in “Markets,” there has been a sharp decline in the price of copper in recent months.

The LME copper settlement price was $3.74 per pound on June 30, 2022, and $3.54 per pound on July 29, 2022.

Prolonged or further declines in the prices of the commodities that we sell, particularly copper, could result in additional NRV inventory adjustments, which could be significant.

Interest Expense, Net

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

Consolidated interest costs (before capitalization) totaled $189 million in second-quarter 2022, $165 million in second-quarter 2021, $342 million for the first six months of 2022 and $325 million for the first six months of 2021.

Higher interest costs (before capitalization) in the 2022 periods are primarily related to PT-FI's senior notes that were issued in April 2022.

Nearly all of our outstanding debt is fixed rate.

Capitalized interest varies with the level of qualifying assets associated with our development projects and average interest rates on our borrowings.

Capitalized interest totaled $26 million in first-quarter 2022 and $15 million in first-quarter 2021.

The increase in capitalized interest in first-quarter 2022, compared with first-quarter 2021, is related to major mining projects primarily associated with underground development activities in the Grasberg minerals district and development of the greenfield smelter in Indonesia.

Capitalized interest totaled $33 million in second-quarter 2022, $17 million in second-quarter 2021, $59 million for the first six months of 2022 and $32 million for the first six months of 2021.

The increase in capitalized interest in the 2022 periods, compared with the 2021 periods, is related to major mining projects primarily associated with underground development activities in the Grasberg minerals district and development of the greenfield smelter in Indonesia.

Refer to “Capital Resources and Liquidity - Investing Activities” for discussion of capital expenditures associated with our major development projects.

Net Gain on Early Extinguishment of Debt

Net gain on extinguishment of debt totaled $8 million in the second quarter and first six months of 2022, consisting of $18 million associated with senior note purchases, partly offset by a charge of $10 million associated with the repayment of the PT-FI term loan.

Refer to Note 5 for further discussion.

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

Three Months Ended March 31,

Six Months Ended June 30,

Income (Loss) a

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Consolidated FCX $ 4,312 32 % $ (1,395) $ 3,326 31 % $ (1,046)

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

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

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

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

Assuming achievement of current sales volume and cost estimates and average prices of $4.75 per pound for copper, $1,950 per ounce for gold and $19.00 per pound for molybdenum for the remainder of 2022, we estimate our consolidated effective tax rate for the year 2022 would approximate 31 percent.

Assuming achievement of current sales volume and cost estimates and average prices of $3.25 per pound for copper, $1,700 per ounce for gold and $16.00 per pound for molybdenum for the second half of 2022, we estimate our consolidated effective tax rate for the year 2022 would approximate 34 percent (which would result in a 47 percent effective tax rate in third-quarter 2022).

The consolidated effective tax rate would decrease with higher prices - for example, we estimate that an increase in the average price of copper to $3.50 per pound for the second half of 2022 would result in an estimated effective tax rate of approximately 33 percent for the year 2022 (which would result in a 38 percent effective tax rate in third-quarter 2022).

Changes in projected sales volumes and average prices during 2022 would incur tax impacts at estimated effective rates of 39 percent for Peru, 38 percent for Indonesia and 0 percent for the U.S.

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In April 2022, we published our 2021 Annual Report on Sustainability, which is available on our website at fcx.com/sustainability.

We have a long history of environmental, social and governance (ESG) programs and are striving to continuously improve performance in these important areas.

This report marks our 21st year of reporting on our sustainability progress and our second year of reporting in alignment with the Value Reporting Foundation’s SASB Standards for the Metals & Mining industry.

We are committed to building upon our achievements in sustainability and we are focused on leading as a responsible copper producer.

We have a long history of environmental, social and governance (ESG) programs, and we are focused on leading as a responsible copper producer.

The Copper Mark.

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To achieve the Copper Mark, each site is required to complete an external assurance process to assess conformance with 32 ESG requirements.

During first-quarter 2022, our Chino and Tyrone sites were awarded the Copper Mark.

To date, we have achieved the Copper Mark at nine of our global sites (Chino, Tyrone, Bagdad, Morenci, Miami, El Paso, Cerro Verde, El Abra and Atlantic Copper), two sites have signed letters of commitment (Safford and Sierrita) and we expect to advance preparation for the validation process for PT-FI during 2022.

During second-quarter 2022, Safford and Sierrita were awarded the Copper Mark.

To date, we have achieved the Copper Mark at all 11 of our eligible copper producing sites in North America, South America and Europe, and PT-FI has signed a letter of commitment and initiated the validation process.

Leaching Innovation Initiatives

We have a long history of leach production and continue to pursue internal and external initiatives to advance sulfide leaching technologies, which are expected to allow us to recover additional copper from our large existing leach stockpiles.

We have several initiatives ongoing across our North America and South America operations that incorporate new applications, technologies and data analytics.

Initial results support the potential for incremental low-cost and low-carbon additions to our production and reserve profile.

We are advancing efforts to improve copper recovery from all ore types using leach processes.

Several initiatives ongoing across our North America and South America operations incorporate new applications, technologies and data analytics.

We believe these leach innovation initiatives provide potential opportunities to produce incremental copper from our large existing leach stockpiles and lower-grade material currently classified as waste.

Initial results support the potential for incremental low-cost additions to our production and reserve profile.

Feasibility and Optimization Studies

We are engaged in various studies associated with potential future expansion projects primarily in North and South America.

The cost of these studies are expensed as incurred.

We estimate the costs of these studies will approximate $200 million for the year 2022 (including approximately $60 million in second-quarter 2022), compared with approximately $60 million for the year 2021 .

We are engaged in various studies associated with potential future expansion projects primarily in North America and South America.

The costs for these studies are charged to production and delivery costs as incurred and totaled $31 million in second-quarter 2022, $11 million in second-quarter 2021, $50 million for the first six months of 2022 and $16 million for the first six months of 2021.

We estimate the costs of these studies will approximate $180 million for the year 2022 (including approximately $60 million in third-quarter 2022), compared with approximately $60 million for the year 2021, subject to market conditions and other factors.

North America Copper Mines

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We have substantial reserves and future opportunities in the U.S., primarily associated with existing mining operations.

We continue to increase Lone Star operating rates to achieve production of 300 million pounds of copper per year from oxide ores (compared with the initial design capacity of 200 million pounds per year).

Lone Star is increasing its operating rates to achieve targeted production of approximately 300 million pounds of copper per year in 2023 from oxide ores (compared with the initial design capacity of 200 million pounds per year).

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

We are also increasing exploration in the area to support metallurgical testing and mine development planning for a potential significant long-term investment to build additional scale on an economically attractive basis.

We are planning an expansion to double the concentrator capacity of our Bagdad operation in northwest Arizona and are engaging stakeholders.

We are commencing a feasibility study for this project during 2022.

We are planning an expansion to double the concentrator capacity of our Bagdad operation in northwest Arizona.

We are engaging stakeholders and have commenced a feasibility study, which is expected to be completed in 2023, for this project.

Operating Data.

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

Three Months Ended March 31,

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

2022 2021 2022 2021

Operating Data, Net of Joint Venture Interests

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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 381 million pounds in first-quarter 2022, compared with 308 million pounds of copper in first-quarter 2021, primarily reflecting timing of shipments.

Our consolidated copper sales volumes from North America totaled 389 million pounds in both second-quarter 2022 and second-quarter 2021, 770 million pounds for the first six months of 2022 and 697 million pounds for the first six months of 2021.

The changes in production and sales volumes for the 2022 periods, compared with the 2021 periods, primarily reflect timing of shipments.

North America copper sales are estimated to approximate 1.5 billion pounds for the year 2022.

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

Three Months Ended March 31,

Three Months Ended June 30,

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

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DD&A 0.27 0.24 0.81 0.26 0.25 0.55

Metals inventory adjustments 0.02 0.02 0.16 — — —

Noncash and other costs, net 0.09 0.08 0.32 0.08 0.08 0.06

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Molybdenum sales (millions of recoverable pounds) a

Six Months Ended June 30,

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

Copper Molyb-

Revenues, excluding adjustments $ 4.46 $ 4.46 $ 18.36 $ 4.19 $ 4.19 $ 11.12

Site production and delivery, before net noncash

and other costs shown below

2.44 2.25 11.68 2.09 1.96 6.76

By-product credits (0.35) — — (0.27) — —

Treatment charges 0.10 0.10 — 0.09 0.09 —

Unit net cash costs 2.19 2.35 11.68 1.91 2.05 6.76

DD&A 0.27 0.25 0.85 0.26 0.24 0.51

Metals inventory adjustments 0.01 0.01 0.08 — — —

Noncash and other costs, net 0.09 0.07 0.23 0.11 0.11 0.06

Total unit costs 2.56 2.68 12.84 2.28 2.40 7.33

Revenue adjustments, primarily for pricing

on prior period open sales

(0.01) (0.01) — 0.01 0.01 —

Gross profit per pound $ 1.89 $ 1.77 $ 5.52 $ 1.92 $ 1.80 $ 3.79

Copper sales (millions of recoverable pounds) 770 770 697 697

Molybdenum sales (millions of recoverable pounds) a

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

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 $2.13 per pound of copper in first-quarter 2022 were higher than unit net cash costs of $1.85 per pound in first-quarter 2021, primarily reflecting increased mining and milling rates and higher energy and other input costs, partly offset by higher sales volumes.

Our mining operations continue to experience significant cost inflation, principally associated with higher energy and other input costs.

In addition to these higher costs, average unit net cash costs (net of by-product credits) for the North America copper mines of $2.26 per pound of copper in second-quarter 2022 and $2.19 per pound for the first six months of 2022, compared with $1.97 per pound in second-quarter 2021 and $1.91 per pound for the first six months of 2021, reflect higher operating rates, partly offset by higher by-product credits.

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 $2.22 per pound of copper for the year 2022, based on achievement of current sales volume and cost estimates and assuming an average molybdenum price of $19.00 per pound for the remainder of 2022.

North America’s average unit net cash costs for the year 2022 would change by approximately $0.03 per pound for each $2.00 per pound change in the average price of molybdenum for the remainder of 2022.

Second-quarter 2022 revenue adjustments at our North America copper mines primarily reflect the impact of declining copper prices on provisionally priced copper sales, which include intercompany sales that are eliminated upon consolidation.

Average unit net cash costs (net of by-product credits) for our North America copper mines are expected to approximate $2.25 per pound of copper for the year 2022, based on achievement of current sales volume and cost estimates and assuming an average molybdenum price of $16.00 per pound for the second half of 2022.

North America’s average unit net cash costs for the year 2022 would change by approximately $0.02 per pound for each $2.00 per pound change in the average price of molybdenum for the second half of 2022.

South America Mining

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Operating and Development Activities.

During first-quarter 2022, milling rates at Cerro Verde's concentrator facilities averaged 394,400 metric tons of ore per day.

Subject to ongoing monitoring of COVID-19 protocols, milling rates at Cerro Verde are currently expected to average approximately 400,000 metric tons of ore per day for the remainder of 2022.

The first six months of 2022 reflected strong performance from Cerro Verde's concentrator facilities, including achievement of a quarterly record milling average of 427,100 metric tons of ore per day during second-quarter 2022.

Subject to ongoing monitoring of COVID-19 protocols, milling rates at Cerro Verde are currently expected to average over 400,000 metric tons of ore per day for the second half of 2022.

Operating rates at El Abra have returned to pre-COVID-19 levels and increased mining and stacking activities are expected to result in an approximate 30 percent increase in El Abra copper production for the year 2022, compared with the year 2021.

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

We are engaging stakeholders and preparing data required for submission of a robust permit application, while we continue to monitor potential changes in Chile’s regulatory and fiscal matters.

We are considering options to invest in water infrastructure to provide options to extend existing operations, while we continue to monitor potential changes in Chile’s regulatory and fiscal matters.

We will defer major investment decisions pending clarity on Chile’s regulatory and fiscal matters.

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Following is summary consolidated operating data for South America mining:

Three Months Ended March 31,

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

2022 2021 2022 2021

Copper (millions of recoverable pounds)

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

Our consolidated copper sales volumes from South America totaled 264 million pounds in first-quarter 2022, similar to copper sales volumes of 259 million pounds in first-quarter 2021.

Our consolidated copper sales volumes from South America totaled 288 million pounds in second-quarter 2022, 230 million pounds in second-quarter 2021, 552 million pounds for the first six months of 2022 and 489 million pounds for the first six months of 2021.

Higher copper sales volumes in the 2022 periods, compared with the 2021 periods, primarily reflect higher mining and milling rates at Cerro Verde.

Copper sales from South America mining are expected to approximate 1.2 billion pounds for the year 2022.

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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.

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.

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

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

Three Months Ended March 31,

Three Months Ended June 30,

Method Co-Product

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Revenues, excluding adjustments $ 3.83 $ 3.83 $ 4.31 $ 4.31

Site production and delivery, before net noncash and other costs shown below 2.43 2.22 2.01 1.90

Site production and delivery, before net noncash and other costs shown below 2.48 2.29 2.48 a

By-product credits (0.35) — (0.31) —

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DD&A 0.35 0.32 0.40 0.37

Metals inventory adjustments 0.04 b

Noncash and other costs, net 0.06 0.06 0.08 0.07

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Copper sales (millions of recoverable pounds) 288 288 230 230

Six Months Ended June 30,

Method Co-Product

Method By-Product

Method Co-Product

Revenues, excluding adjustments $ 4.00 $ 4.00 $ 4.28 $ 4.28

Site production and delivery, before net noncash and other costs shown below 2.45 2.26 2.23 a

By-product credits (0.38) — (0.26) —

Treatment charges 0.15 0.15 0.13 0.13

Royalty on metals 0.01 0.01 0.01 0.01

Unit net cash costs 2.23 2.42 2.11 2.23

DD&A 0.36 0.32 0.40 0.37

Metals inventory adjustments 0.02 b

Noncash and other costs, net 0.06 0.06 0.06 0.05

Total unit costs 2.67 2.82 2.57 2.65

Revenue adjustments, primarily for pricing on prior period open sales 0.06 0.06 0.20 0.20

Gross profit per pound $ 1.39 $ 1.24 $ 1.91 $ 1.83

Copper sales (millions of recoverable pounds) 552 552 489 489

Includes $0.30 per pound of copper in second-quarter 2021 and $0.14 per pound of copper for the first six months of 2021 associated with nonrecurring labor-related costs at Cerro Verde.

Primarily reflects a stockpile write-off at Cerro Verde.

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 South America mining of $2.16 per pound of copper in first-quarter 2022 were higher than unit net cash costs of $1.94 per pound of copper in first-quarter 2021, primarily reflecting higher acid, energy and other input costs, partly offset by higher by-product credits.

Our mining operations continue to experience significant cost inflation, principally associated with higher energy and other input costs.

In addition to higher overall costs, average unit net cash costs (net of by-product credits) for South America mining of $2.29 per pound of copper in second-quarter 2022 and $2.23 per pound of copper for the first six months of 2022, compared with $2.31 per pounds of copper in second-quarter 2021 and $2.11 per pound of copper for the first six months of 2021, reflect higher sales volumes and by-product credits.

Average unit net cash costs for the 2022 periods also reflect the impact of a change in estimate of copper recoveries in a leach stockpile at El Abra (refer to Note 3) and the 2021 periods reflect nonrecurring labor-related costs at Cerro Verde.

As discussed in Note 3, the change in estimate of recoverable copper in the existing leach stockpile at El Abra resulted in a 135-million-pound reduction to its work in-process inventory volumes, which resulted in a higher average cost per pound of copper.

Refer to “Consolidated Results - Metals Inventory Adjustments” for discussion of potential future NRV adjustments that may result because of prolonged or further declines in the price of copper.

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

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

Average unit net cash costs (net of by-product credits) for South America mining are expected to approximate $2.23 per pound of copper for the year 2022, based on current sales volume and cost estimates and assuming an average price of $19.00 per pound of molybdenum for the remainder of 2022.

Average unit net cash costs (net of by-product credits) for South America mining are expected to approximate $2.31 per pound of copper for the year 2022, based on current sales volume and cost estimates and assuming an average price of $16.00 per pound of molybdenum for the second half of 2022.

Indonesia Mining

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We have a 48.76 percent interest in PT-FI and manage its mining operations.

As further discussed in Note 2 of our 2021 Form 10-K, under the terms of the 2018 shareholders agreement, our economic interest in PT-FI approximates 81 percent through 2022, and 48.76 percent thereafter.

As further discussed in Note 2 of our 2021 Form

10-K, under the terms of the 2018 shareholders agreement, our economic interest in PT-FI approximates 81 percent through 2022, and 48.76 percent thereafter.

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

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

During first-quarter 2022, 37 percent of PT-FI’s concentrate production was sold to PT Smelting (PT-FI’s 39.5-percent owned copper smelter and refinery in Gresik, Indonesia).

During first six months of 2022, 37 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.

PT-FI currently has three underground operating mines in the Grasberg minerals district:

Grasberg Block Cave, DMLZ and Big Gossan.

Grasberg Block Cave, Deep Mill Level Zone (DMLZ) and Big Gossan.

In late 2021, PT-FI achieved quarterly copper and gold volumes approximating 100 percent of projected annualized levels of approximately 1.6 billion pounds of copper and 1.6 million ounces of gold.

Combined milling rates from PT-FI's underground mines averaged 186,500 metric tons of ore per day in first-quarter 2022, and PT-FI expects milling rates to average approximately 180,000 to 190,000 metric tons of ore per day for the remainder of 2022.

The installation of additional milling facilities at PT-FI is in progress and is currently expected to be completed in 2023, which will increase milling capacity to approximately 240,000 metric tons of ore per day.

PT-FI's estimated capital spending on the Grasberg Block Cave and DMLZ underground projects for the year 2022 is expected to approximate $1.0 billion, net of scheduled contributions from PT Indonesia Asahan

Aluminium (Persero) (PT Inalum, also known as MIND ID).

PT-FI is also advancing construction of a dual-fuel power plant and upgrades to the mill circuit to improve recoveries.

PT-FI's milling rates for ore produced from its underground mines averaged 191,800 metric tons of ore per day for the first six months of 2022, and PT-FI expects milling rates to average approximately 190,000 metric tons of ore per day for the second half of 2022.

The installation of additional milling facilities at PT-FI is currently expected to be completed in 2023, which would increase milling capacity to approximately 240,000 metric tons of ore per day and provide for continued annualized copper and gold production volumes of approximately 1.6 billion pounds of copper and 1.6 million ounces of gold.

PT-FI is also advancing a mill recovery project with the installation of a new copper cleaner circuit that is expected to be completed in the first half of 2024, and is expected to provide incremental metal production of approximately 60 million pounds of copper and 40 thousand ounces of gold per year.

For the year 2022, PT-FI's estimated capital spending on the Grasberg Block Cave and DMLZ underground projects, including construction of a dual-fuel power plant, is expected to approximate $1.0 billion, net of scheduled contributions from PT Indonesia Asahan Aluminium (Persero) (PT Inalum, also known as MIND ID).

In accordance with applicable accounting guidance, the aggregate costs (before scheduled contributions from PT Inalum), expected to approximate $1.2 billion for the year 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.

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PT-FI commenced long-term mine development activities for its Kucing Liar deposit during 2021, which is expected to produce over 6 billion pounds of copper and 5 million ounces of gold over the life of the project.

Pre-production development activities will occur over an approximate 10-year timeframe, and capital investments are expected to average approximately $400 million per year over the next 10 years.

Pre-production development activities will occur over an approximate 10-year timeframe, and capital investments are expected to average approximately $400 million per year (including approximately $200 million for the year 2022).

At full operating rates, annual production from Kucing Liar is expected to approximate 600 million pounds of copper and 500 thousand ounces of gold, providing PT-FI with sustained long-term, large-scale and low-cost production.

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

Export License .

In March 2022, PT-FI received a one-year extension of its export license through March 19, 2023, for two million metric tons of concentrate.

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.

Indonesia Smelter.

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

PT-FI continues to progress site preparation activities, early works and engineering procurement and construction activities.

The smelter construction is expected to be completed as soon as feasible in 2024, consistent with PT-FI’s revised smelter construction schedule.

The greenfield smelter construction, currently approximately 30 percent complete, is expected to be completed as soon as feasible in 2024.

• Expansion of PT Smelting's capacity by 30 percent to 1.3 million metric tons of concentrate per year, which is expected to be completed by the end of 2023.

PT-FI is funding the cost of the expansion, which is estimated to approximate $250 million, with a loan that will convert to equity, and increase ownership in PT Smelting to a majority ownership interest once the expansion is complete.

PT-FI completed agreements in November 2021 with the majority owner of PT Smelting to implement the expansion plans.

PT-FI is funding the cost of the expansion, estimated to approximate $250 million, with a loan that is expected to convert to equity, increasing ownership in PT Smelting from a 39.5 percent ownership interest to a majority ownership interest once the expansion is complete.

• Construction of a PMR to process gold and silver from the greenfield smelter and PT Smelting at an estimated cost of $400 million.

During first-quarter 2022, capital expenditures for the greenfield smelter and PMR (collectively, the Indonesia smelter projects) totaled $0.1 billion, and are expected to approximate $1.4 billion for the year 2022.

Capital expenditures for the Indonesia smelter projects, which are being funded with PT-FI’s senior notes and available revolving credit facility, totaled $0.3 billion for the first six months of 2022 and are expected to approximate $1.4 billion for the year 2022.

Construction of the additional domestic smelter capacity will result in the elimination of export duties, providing an offset to the economic cost associated with the Indonesia smelter projects.

As further discussed in “Capital Resources and Liquidity,” PT-FI completed the sale of $3.0 billion of senior notes in April 2022, which will be used together with PT-FI’s available bank credit facilities primarily to fund the Indonesia smelter projects.

Operating Data.

Following is summary consolidated operating data for Indonesia mining:

Three Months Ended March 31,

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

2022 2021 2022 2021

Copper (millions of recoverable pounds)

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Deep Ore Zone underground mine a and other

10,500 16,500 5,400 17,700

Total 197,000 143,000

191,800 133,600

Average ore grades:

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Ore body depleted in 2021.

Our consolidated sales from PT-FI totaled 379 million pounds of copper and 406 thousand ounces of gold in

first-quarter 2022, compared with consolidated sales of 258 million pounds of copper and 256 thousand ounces of gold in first-quarter 2021, primarily reflecting the ramp-up of underground mining in the Grasberg minerals district.

Our consolidated copper and gold sales from PT-FI totaled 410 million pounds and 474 thousand ounces in second-quarter 2022 and 789 million pounds and 880 thousand ounces for the first six months of 2022, compared with copper and gold sales of 310 million pounds and 302 thousand ounces in second-quarter 2021 and 568 million pounds and 558 thousand ounces for the first six months of 2021.

The increase in sales volumes for the 2022 periods, primarily reflects increased operating rates at the Grasberg minerals district.

Consolidated sales volumes from PT-FI are expected to approximate 1.5 billion pounds of copper and 1.7 million ounces of gold for the year 2022.

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

Three Months Ended March 31,

Three Months Ended June 30,

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

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Revenues, excluding adjustments $ 3.86 $ 3.86 $ 1,827 $ 4.27 $ 4.27 $ 1,795

Site production and delivery, before net noncash and other costs (credits) shown below 1.41 0.96 395 1.48 1.02 438

Site production and delivery, before net noncash and other costs shown below 1.43 0.91 433 1.54 1.07 449

Gold and silver credits (2.17) — — (1.93) — —

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DD&A 0.63 0.41 193 0.79 0.55 232

Noncash and other costs (credits), net 0.07 a

0.05 20 (0.03) b

Noncash and other costs, net 0.01 0.01 2 0.04 0.03 11

Total unit costs 0.62 1.79 837 1.08 2.10 870

Revenue adjustments, primarily for pricing on prior period open sales (0.49) (0.49) (17) 0.28 0.28 53

PT Smelting intercompany profit (loss) 0.06 0.04 19 (0.13) (0.09) (39)

Gross profit per pound/ounce $ 2.81 $ 1.62 $ 992 $ 3.34 $ 2.36 $ 939

Copper sales (millions of recoverable pounds) 410 410 310 310

Gold sales (thousands of recoverable ounces) 474 302

Six Months Ended June 30,

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

Copper Gold Copper Gold

Revenues, excluding adjustments $ 4.04 $ 4.04 $ 1,861 $ 4.29 $ 4.29 $ 1,785

Site production and delivery, before net noncash and other costs shown below 1.42 0.92 426 1.51 1.05 439

Gold and silver credits (2.17) — — (1.86) — —

Treatment charges 0.24 0.16 73 0.24 0.17 71

Export duties 0.21 0.14 63 0.13 0.09 37

Royalty on metals 0.26 0.17 72 0.25 0.18 68

Unit net cash (credits) costs (0.04) 1.39 634 0.27 1.49 615

DD&A 0.64 0.42 194 0.78 0.55 228

Noncash and other costs, net 0.04 0.03 11 0.01 — 1

Total unit costs 0.64 1.84 839 1.06 2.04 844

Revenue adjustments, primarily for pricing on prior period open sales 0.04 0.04 3 0.12 0.12 (8)

PT Smelting intercompany (loss) (0.03) (0.02) (10) (0.16) (0.11) (46)

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Gold sales (thousands of recoverable ounces) 880 558

Includes charges totaling $0.11 per pound of copper associated with the settlement of an administrative fine levied by the Indonesia government (refer to Note 8 for further discussion), and $0.05 per pound of copper associated with an adjustment to prior-period export duties, partly offset by credits totaling $0.08 per pound of copper associated with adjustments to prior year treatment and refining costs.

Includes credits totaling $0.12 per pound of copper associated with adjustments to prior year treatment and refining costs, partly offset by charges totaling $0.05 per pound of copper associated with a potential settlement of an administrative fine levied by the Indonesia government.

In first-quarter 2022, PT-FI’s gold and silver credits exceeded its cash costs, resulting in unit net cash credits of $0.06 per pound of copper, compared to unit net cash costs (net of gold and silver credits) of $0.29 per pound in first-quarter 2021, primarily reflecting higher sales volumes, partly offset by higher operating rates, energy and other input costs.

For the 2022 periods, PT-FI’s gold and silver credits exceeded its cash costs resulting in unit net cash credits of $0.02 per pound of copper in second-quarter 2022 and $0.04 per pound for the first six months of 2022, compared to unit net cash costs of $0.25 per pound in second-quarter 2021 and $0.27 per pound for the first six months of 2021.

Lower site production and delivery unit costs (before net noncash and other costs) in the 2022 periods primarily reflect higher sales volumes, partly offset by higher operating rates, energy and other input costs.

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 $79 million in first-quarter 2022 and $29 million in first-quarter 2021.

The increase in export duties in first-quarter 2022, compared with first-quarter 2021, primarily reflects higher sales volumes.

PT-FI’s royalties totaled $92 million in first-quarter 2022 and $61 million in first-quarter 2021.

The increase in export duties and royalties for first-quarter 2022, compared with first-quarter 2021, primarily reflects higher sales volumes and metals prices.

PT-FI’s export duties totaled $85 million in second-quarter 2022, $44 million in second-quarter 2021, $164 million for the first six months of 2022 and $73 million for the first six months of 2021.

The increase in export duties for the 2022 periods, compared with the 2021 periods, primarily reflects higher export sales volumes.

PT-FI’s royalties totaled $108 million in second-quarter 2022, $80 million in second-quarter 2021, $201 million for the first six months of 2022 and $140 million for the first six months of 2021.

The increase in royalties for the 2022 periods, compared with the 2021 periods, primarily reflects higher sales volumes.

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 $0.66 per pound in first-quarter 2022, compared with $0.77 per pound in first-quarter 2021.

The decrease in the rate per pound of copper primarily reflects depletion of the Deep Ore Zone underground mine and the ramp-up of underground mining in the Grasberg minerals district, which resulted in significantly higher copper production and sales volumes, partly offset by significant underground development assets placed into service.

The decrease in the DD&A rate per pound of copper for the 2022 periods, compared with the 2021 periods, primarily reflects depletion of the Deep Ore Zone underground mine during 2021 and higher volumes associated with increased operating rates, partly offset by 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).

PT Smelting intercompany profit (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 $1,950 per ounce for the remainder of 2022 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 $0.10 per pound of copper for the year 2022.

PT-FI’s unit net cash costs for the year 2022 would change by approximately $0.09 per pound of copper for each $100 per ounce change in the average price of gold for the remainder of 2022.

Assuming an average gold price of $1,700 per ounce for the second half of 2022 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 $0.18 per pound of copper for the year 2022.

PT-FI’s unit net cash costs for the year 2022 would change by approximately $0.07 per pound of copper for each $100 per ounce change in the average price of gold for the second half of 2022.

PT-FI’s projected sales volumes and unit net cash costs for the year 2022 are dependent on a number of factors, including operational performance and timing of shipments.

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 conversion facilities.

We operate two wholly owned molybdenum mines in Colorado – the Climax open-pit mine and the Henderson underground mine.

The Climax and Henderson 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 Climax and Henderson mines, as well as from our North America and South America copper mines, is processed at our conversion facilities.

Operating and Development Activities.

Production from the Molybdenum mines totaled 7 million pounds of molybdenum in both first-quarter 2022 and first-quarter 2021.

We plan on increasing mining rates at the Climax mine during 2022 to provide options to increase volumes in response to market demand for molybdenum.

Production from the Molybdenum mines totaled 8 million pounds of molybdenum in second-quarter 2022, 15 million pounds for the first six months of 2022, 7 million pounds in second-quarter 2021 and 14 million pounds for the first six months of 2021.

Refer to “Consolidated Results” for our consolidated molybdenum operating data, which includes sales of molybdenum produced at our Molybdenum mines and from our North America and South America copper mines.

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

Average unit net cash costs for our Molybdenum mines of $10.89 per pound of molybdenum in first-quarter 2022 were higher than average unit net cash costs of $8.98 per pound in first-quarter 2021, primarily reflecting higher mining rates at the Climax mine and increased development costs at the Henderson mine.

Average unit net cash costs for our Molybdenum mines of $10.62 per pound of molybdenum in second-quarter 2022 and $10.75 per pound for the first six months of 2022 were higher than average unit net cash costs of $8.14 per pound in second-quarter 2021 and $8.53 per pound for the first six months of 2021, primarily reflecting higher energy, outside service costs and other input costs, and increased development costs at the Henderson mine.

Based on current sales volume and cost estimates, average unit net cash costs for the Molybdenum mines are expected to approximate $11.75 per pound of molybdenum for the year 2022.

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Smelting and Refining

We wholly own and operate the Miami smelter in Arizona, the El Paso refinery in Texas and a smelter and refinery in Spain (Atlantic Copper).

We wholly own and operate the Miami smelter in Arizona, the El Paso refinery in Texas and Atlantic Copper, a smelter and refinery in Spain.

Additionally, PT-FI has a 39.5 percent ownership interest in PT Smelting and expects its ownership to increase to a majority interest upon completion of the expansion of PT Smelting’s smelting capacity.

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Atlantic Copper smelts and refines copper concentrate and markets refined copper and precious metals in slimes.

During first-quarter 2022, Atlantic Copper’s concentrate purchases included 12 percent from our copper mining operations and 88 percent from third parties.

During the first six months of 2022, Atlantic Copper’s concentrate purchases included 37 percent from our copper mining operations and 63 percent from third parties.

Atlantic Copper’s major maintenance turnarounds typically occur approximately every eight years, with shorter-term maintenance turnarounds in the interim.

In April 2022, Atlantic Copper began an approximately 60-day major maintenance turnaround, for which maintenance charges are expected to total approximately $25 million.

In second-quarter 2022, Atlantic Copper substantially completed a 78-day major maintenance turnaround and incurred maintenance charges and idle facility costs totaling $40 million.

Our Miami smelter completed a major maintenance turnaround in second-quarter 2021 and incurred maintenance charges and idle facility costs totaling $19 million in second-quarter 2021 and $87 million for the first six months of 2021.

Major maintenance turnarounds at the Miami smelter are anticipated to occur approximately every two or three years, with the next major maintenance turnaround scheduled for the first half of 2024.

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

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

During first-quarter 2022, PT-FI supplied all of PT Smelting’s concentrate requirements.

In November 2021, PT-FI entered into a tolling agreement with PT Smelting that will be effective January 1, 2023, and will replace the current concentrate sales agreements between PT-FI and PT Smelting.

In November 2021, PT-FI entered into a tolling agreement with PT Smelting that will be effective January 1, 2023, and will replace the current concentrate sales agreement, as amended.

Under the tolling agreement, PT-FI will pay PT Smelting to smelt and refine its concentrate and will retain title to all products for sale to third parties.

We defer recognizing profits on sales from our mining operations to Atlantic Copper and on 39.5 percent of PT-FI’s sales to PT Smelting (25.0 percent prior to April 30, 2021) 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 $46 million ($23 million to net income attributable to common stock) in first-quarter 2022 and $(85) million ($(63) million to net income attributable to common stock) in first-quarter 2021.

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 $183 million at March 31, 2022.

We defer recognizing profits on sales from our mining operations to Atlantic Copper and on 39.5 percent of PT-FI’s sales to PT Smelting until final sales to third parties occur.

Changes in these deferrals attributable to variability in intercompany volumes resulted in net (reductions) additions to operating income totaling $(7) million (less than $1 million to net income attributable to common stock) in second-quarter 2022, $(99) million ($(81) million to net income attributable to common stock) in second-quarter 2021, $40 million ($23 million to net income attributable to common stock) for the first six months of 2022 and $(185) million ($(145) million to net income attributable to common stock) for the first six months of 2021.

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 $157 million at June 30, 2022.

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.

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and other factors.

We generated significant cash flows during first-quarter 2022, reflecting strong operating and financial performance and favorable copper and gold prices.

With a favorable market outlook and a focus on executing our operating plans, we expect to continue to generate strong cash flows that will support advancement of organic growth initiatives and additional cash returns to shareholders under our established financial policy.

We believe that we have a high-quality portfolio of long-lived copper assets positioned to generate long-term value.

During first-quarter 2022, we continued to increase operating rates at Lone Star and from the underground mines at the Grasberg minerals district.

Pre-production development activities for the Kucing Liar deposit, which commenced during 2021, are progressing and we continue to evaluate 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 $8.6 billion for the year 2022 significantly exceed our expected consolidated capital expenditures of $4.6 billion (which includes $1.9 billion for major mining projects and $1.4 billion for the Indonesia smelter projects) and other cash requirements for the year, including share repurchases, noncontrolling interest distributions, income tax payments, common stock dividends (base and variable) and debt repayments.

We believe that our cash generating capability and financial condition, which includes $8.3 billion of consolidated

cash and cash equivalents at March 31, 2022, together with $3.5 billion available under our revolving

credit facility, will be adequate to meet our operating, investing and financing needs over the next several years.

Additionally, capital expenditures for the Indonesia smelter projects are being funded with the net proceeds from PT-FI’s unsecured senior notes issued in April 2022 and its available bank credit facilities.

Refer to “Outlook” for further discussion of projected operating cash flows and capital expenditures for the year 2022 and to “Debt” below and Note 5 for further discussion of PT-FI’s unsecured senior notes and unsecured bank credit facility.

We generated operating cash flows totaling $3.3 billion during the first six months of 2022, reflecting solid operating and financial performance.

We believe the actions we have taken in recent years to build a strong balance sheet, successfully expand low-cost operations and maintain flexible growth options while maintaining sufficient liquidity, will allow us to continue to execute our business plans in a prudent manner despite current economic uncertainty while preserving substantial future asset values.

We are closely monitoring market conditions and will be prepared to adjust our operating plans if required.

We will maintain a strong balance sheet and liquidity position as we focus on building

long-term value in our business, executing our operating plans safely, responsibly and efficiently, and prudently managing costs and capital expenditures.

Based on current sales volume, cost and metal price estimates discussed in “Outlook,” our projected consolidated operating cash flows for the year 2022 of $4.5 billion are expected to exceed projected capital expenditures of $3.1 billion, which includes $1.9 billion for major mining projects but excludes $1.4 billion of projected capital expenditures for the Indonesia smelter projects that are being funded with PT-FI’s senior notes and its available revolving credit facility.

We have cash on hand and the financial flexibility to fund these expenditures as well as our other cash requirements for the year, including noncontrolling interest distributions, income tax payments, debt repayments, common stock dividends (base and variable) and any share repurchases.

Our cash generating capability and financial condition at June 30, 2022, which includes $9.5 billion of consolidated cash and cash equivalents (including $2.4 billion from PT-FI’s senior notes), together with $3.5 billion of availability under our revolving credit facility, is expected to be adequate to meet our operating, investing and financing needs for the foreseeable future.

In addition, PT-FI and Cerro Verde have $1.3 billion and $350 million, respectively, of availability under their revolving credit facilities.

Refer to “Outlook” for further discussion of projected operating cash flows and capital expenditures for the year 2022 and to “Debt” below.

Financial Policy.

Our financial policy is aligned with our strategic objectives of maintaining a strong balance sheet and increasing cash returns to shareholders while advancing opportunities for future growth.

Under the financial policy up to 50 percent of cash flows, after planned capital spending (excluding Indonesia smelter project investments) and distributions to noncontrolling interests, will be directed to shareholder returns with the balance available for investments in future value enhancing growth projects and further debt reductions.

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

In February 2021, our Board of Directors (the Board) reinstated a cash dividend on our common stock (base dividend) at an annual rate of $0.30 per share.

In mid-2021, FCX achieved its net debt target in the range of $3.0 billion to $4.0 billion (excluding debt for additional smelting capacity in Indonesia).

In November 2021, the Board approved the implementation of the performance-based payout framework, including (i) a $3.0 billion share repurchase program and (ii) a variable cash dividend on common stock for 2022 at an expected 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 for 2022.

Based on current shares outstanding totaling 1.45 billion, the total common stock dividends (base and variable) for 2022 are expected to approximate $0.9 billion.

Refer to Note 5 and “Financing Activities” below for further discussion.

In March 2022, our Board declared dividends totaling $0.15 per share on our common stock (including a $0.075 per share quarterly base cash dividend and a $0.075 per share quarterly variable cash dividend), which were paid on May 2, 2022, to shareholders of record as of April 14, 2022.

Refer to Item 1A.

“Risk Factors” contained in Part I of our 2021 Form 10-K, and “Cautionary Statement” below for further discussion.

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 interest would be allocated to shareholder returns and the balance to debt reduction and investments in value enhancing growth projects, subject to us maintaining our net debt at a level not to exceed the net debt target of $3.0 billion to $4.0 billion (excluding project debt for additional smelting capacity in Indonesia).

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

At June 30, 2022, our net debt, excluding net debt for the Indonesia smelter projects, totaled $1.0 billion.

Refer to "Net Debt."

Following is a summary of the U.S.

and international components of consolidated cash and cash equivalents available to the parent company, net of noncontrolling interests’ share, taxes and other costs at March 31, 2022 (in billions):

and international components of consolidated cash and cash equivalents available to the parent company, net of noncontrolling interests’ share, taxes and other costs at June 30, 2022 (in billions):

Cash at domestic companies $ 5.1

Cash at international operations 2.9

Cash at international operations 4.4 a

Total consolidated cash and cash equivalents 9.5

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Net cash available $ 8.1

Includes $2.4 billion from PT-FI's senior notes that is expected to be used to finance its smelter projects.

Cash held at our international operations is generally used to support our foreign operations’ capital expenditures, operating expenses, debt repayments, working capital and other tax payments, or other cash needs.

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

At March 31, 2022, we had consolidated debt of $9.6 billion, with a related 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 April 2022, PT-FI completed the sale of $3.0 billion of unsecured senior notes, consisting of $750 million aggregate principal amount of 4.763% senior notes due April 2027, $1.5 billion aggregate principal amount of 5.315% senior notes due April 2032 and $750 million aggregate principal amount of 6.200% senior notes due April 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.

Refer to Note 5 for further discussion of the above items, and refer to Note 8 of our 2021 Form 10-K for additional information regarding our debt arrangements.

At June 30, 2022, we had consolidated debt of $11.1 billion, with a weighted-average interest rate of 5.0 percent.

Nearly all of our outstanding debt is fixed rate.

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

Additionally, at June 30, 2022, no amounts were drawn under PT-FI’s $1.3 billion revolving credit facility or Cerro Verde’s $350 million revolving credit facility.

Refer to Note 5 for further discussion.

Operating Activities

We reported consolidated cash provided by operating activities of $1.7 billion (net of $0.8 billion of working capital and other uses) in first-quarter 2022 and $1.1 billion (net of $0.3 billion of working capital and other uses) in first-quarter 2021.

Higher operating cash flows in first-quarter 2022, compared with first-quarter 2021, primarily reflect higher copper and gold sales volumes and prices.

Increased working capital uses in first-quarter 2022, compared with first-quarter 2021, primarily reflects timing of copper concentrate purchases by Atlantic Copper in anticipation of their major maintenance turnaround that began in April 2022, and additional income tax payments.

We reported consolidated cash provided by operating activities of $3.3 billion (net of $0.7 billion of working capital and other uses) for the first six months of 2022 and $3.5 billion (including $0.2 billion of working capital and other sources) for the first six months of 2021.

Lower operating cash flows for the first six months of 2022, compared with the first six months of 2021, primarily reflect an increase in income tax payments at our international operations, partly offset by higher copper and gold sales volumes and other working capital changes.

Investing Activities

Capital Expenditures.

Capital expenditures, including capitalized interest, totaled $0.7 billion in first-quarter 2022, including approximately $0.4 billion for major mining projects primarily associated with underground development activities in the Grasberg minerals district and $0.1 billion for the Indonesia smelter projects.

Capital expenditures for the Indonesia smelter projects are being funded with the net proceeds from PT-FI's unsecured senior notes issued in April 2022 and its available bank credit facilities.

Capital expenditures, including capitalized interest, totaled $1.6 billion for the first six months of 2022, including approximately $0.8 billion for major mining projects primarily associated with underground development activities in the Grasberg minerals district and $0.3 billion for the Indonesia smelter projects.

Capital expenditures for the Indonesia smelter projects are being funded by PT-FI's senior notes and its available revolving credit facility.

Refer to “Outlook” for further discussion of projected capital expenditures for the year 2022.

Capital expenditures, including capitalized interest, totaled $0.4 billion in first-quarter 2021, including approximately $0.3 billion for major mining projects primarily associated with underground development activities in the Grasberg minerals district.

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

Proceeds from Sales of Assets.

Proceeds from sales of assets totaled $96 million for the first six months of 2022 and $16 million for the first six months of 2021.

In May 2022, we sold all of the shares we owned in Jervois Global Limited for proceeds of $60 million (refer to Note 1).

Acquisition of Minority Interest in PT Smelting.

In April 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.

Loans to PT Smelting for Expansion.

PT-FI made loans to PT Smelting totaling $34 million during the first six months of 2022 to fund PT Smelting’s expansion project.

Financing Activities

Debt Transactions.

Net borrowings of debt totaled $170 million in first-quarter 2022 and $98 million in first-quarter 2021.

Refer to Note 5 for further discussion.

Net borrowings of debt totaled $1.7 billion for the first six months of 2022 and net payments of debt totaled $19 million for the first six months of 2021.

Net borrowings for the first six months of 2022 primarily reflected borrowings under PT-FI’s $3.0 billion senior note offering that was completed in April 2022, partly offset by the repayment of borrowings under PT-FI’s term loan ($0.6 billion) and Cerro Verde’s term loan ($0.3 billion).

In addition, during the second quarter and first six months of 2022, we completed open-market purchases of $582 million aggregate principal amount of FCX senior notes for a total cost of $558 million.

From July 1, 2022, through August 5, 2022, we purchased an additional $291 million aggregate principal amount of our senior notes in open-market transactions, for a total redemption value of $273 million.

Refer to Note 5 for further discussion of our debt.

Cash Dividends and Distributions Paid.

We paid cash dividends on our common stock totaling $220 million in first-quarter 2022 and none in first-quarter 2021.

We paid cash dividends on our common stock totaling $438 million for the first six months of 2022 and $111 million for the first six months of 2021.

The declaration and payment of dividends (base or variable) is 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.

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“Risk Factors” contained in Part I of our 2021 Form 10-K, “Cautionary Statement” below and discussion of our financial policy above.

Cash dividends and distributions paid to noncontrolling interests, primarily at PT-FI, totaled $204 million in first-quarter 2022 and none in first-quarter 2021.

Based on the estimates discussed in “Outlook,” we currently expect cash dividends and distributions paid to noncontrolling interests to exceed $1.6 billion in 2022.

Cash dividends and distributions paid to noncontrolling interests at our international operations totaled $513 million for the first six months of 2022 and $93 million for the first six months of 2021.

Based on the estimates discussed in “Outlook,” we currently expect cash dividends and distributions paid to noncontrolling interests to approximate $0.9

billion for the year 2022.

Cash dividends and distributions to noncontrolling interests vary based on the operating results and cash requirements of our consolidated subsidiaries.

Treasury Stock Purchases.

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

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

As of April 29, 2022, we had 1.45 billion shares of common stock outstanding.

During the first six months of 2022, we acquired 29.4 million shares of our common stock under our share repurchase program for a total cost of $1.2 billion ($40.32 average cost per share).

In July 2022, the Board authorized an increase in the share repurchase program from up to $3.0 billion to up to $5.0 billion.

Through August 5, 2022, we acquired 47.9 million shares of our common stock for a total cost of $1.8 billion ($38.35 average cost per share) and $3.2 billion remains available under the share repurchase program.

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

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Contributions from Noncontrolling Interests.

We received equity contributions totaling $47 million in first-quarter 2022 and $41 million in first-quarter 2021 from PT Inalum for their share of capital spending on underground mine development projects in the Grasberg minerals district.

We received equity contributions totaling $94 million for the first six months of 2022 and $88 million for the first six months of 2021 from PT Inalum for their share of capital spending on underground mine development projects in the Grasberg minerals district.

Stock-based awards.

Proceeds from exercised stock options totaled $101 million in first-quarter 2022 and $106 million in first-quarter 2021, and payments for related employee taxes totaled $55 million in first-quarter 2022 and $19 million in first-quarter 2021.

Proceeds from exercised stock options totaled $106 million for the first six months of 2022 and $184 million for the first six months of 2021, and payments for related employee taxes totaled $55 million for the first six months of 2022 and $19 million for the first six months of 2021.

See Note 10 in our 2021 Form 10-K for a discussion of stock-based awards.

CONTRACTUAL OBLIGATIONS

Refer to Note 5 for further discussion of PT-FI’s $3.0 billion unsecured senior notes issued in April 2022.

Refer to Note 5 for further discussion of PT-FI’s $3.0 billion aggregate principal amount of unsecured senior notes issued in April 2022, and the repayment of borrowings under PT-FI’s term loan and Cerro Verde’s term loan.

There have been no other material changes in our contractual obligations since December 31, 2021.

Refer to Part II, Items 7.

Refer to Note 13 and Part II, Items 7.

in our 2021 Form 10-K, for information regarding our contractual obligations.

CONTINGENCIES

Environmental and Asset Retirement Obligations

Environmental Liabilities and AROs

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.

Refer to Note 8 for further discussion of increases in our asset retirement obligation at the Bagdad mine.

There have been no other significant changes to our environmental and asset retirement obligations since December 31, 2021.

We perform a comprehensive annual review of our environmental liabilities and AROs and also review changes in facts and circumstances associated with these obligations at least quarterly.

Refer to Note 8 for further discussion of increases in our ARO at the Bagdad mine.

There have been no other significant changes to our environmental liabilities and AROs since December 31, 2021.

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.

Refer to Note 12 in our 2021 Form 10-K, for further information regarding our environmental and asset retirement obligations.

Refer to Note 12 in our 2021 Form 10-K, for further information regarding our environmental liabilities and AROs.

Litigation and Other Contingencies

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Refer to Note 12 and “Legal Proceedings” contained in Part I, Item 3.

of our 2021 Form 10-K, as updated by Note 8, for further information regarding legal proceedings, environmental and other matters.

of our 2021 Form 10-K, as updated by Note 8, for further information regarding AROs, legal proceedings, environmental and other matters.

NEW ACCOUNTING STANDARDS

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

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Current portion of debt $ 1,038 $ 372

Long-term debt, less current portion 10,054 9,078

Consolidated debt a

Consolidated debt

consolidated cash and cash equivalents 9,492 8,068

Net debt $ 1,600 $ 1,382

Includes $603 million at March 31, 2022, and $432 million at December 31, 2021, associated with the Indonesia smelter projects (refer to Note 5).

net debt for Indonesia smelter projects a

FCX net debt, excluding Indonesia smelter projects $ 1,015 $ 1,175

Includes consolidated debt of $3.0 billion and consolidated cash and cash equivalents of $2.4 billion as of June 30, 2022, and consolidated debt of $0.4 billion and consolidated cash and cash equivalents of $0.2 billion as of December 31, 2021.

PRODUCT REVENUES AND PRODUCTION COSTS

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Because these adjustments do not result from current period sales, these amounts have been reflected separately from revenues on current period sales.

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

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

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.

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

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

(In millions) By-Product Co-Product Method

7 unchanged sentences

DD&A 103 95 7 1 103

Metals inventory adjustments 7 6 1 — 7

Noncash and other costs, net 36 33 2 1 36

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DD&A 0.27 0.24 0.81

Metals inventory adjustments 0.02 0.02 0.16

Noncash and other costs, net 0.09 0.08 0.32

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Reconciliation to Amounts Reported

Revenues Production and Delivery DD&A

Revenues Production and Delivery DD&A Metals Inventory Adjustments

Totals presented above $ 1,871 $ 1,013 $ 103 $ 7

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

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

(In millions) By-Product Co-Product Method

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

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

Six Months Ended June 30, 2022

(In millions) By-Product Co-Product Method

Method Copper Molybdenum a

Revenues, excluding adjustments $ 3,440 $ 3,440 $ 282 $ 57 $ 3,779

Site production and delivery, before net noncash

and other costs shown below 1,883 1,735 179 39 1,953

By-product credits (269) — — — —

Treatment charges 77 75 — 2 77

Net cash costs 1,691 1,810 179 41 2,030

DD&A 207 192 13 2 207

Metals inventory adjustments 7 6 1 — 7

Noncash and other costs, net 65 60 4 1 65

Total costs 1,970 2,068 197 44 2,309

Other revenue adjustments, primarily for pricing

on prior period open sales (7) (7) — — (7)

Gross profit $ 1,463 $ 1,365 $ 85 $ 13 $ 1,463

Copper sales (millions of recoverable pounds) 770 770

Molybdenum sales (millions of recoverable pounds) a

Gross profit per pound of copper/molybdenum:

Revenues, excluding adjustments $ 4.46 $ 4.46 $ 18.36

Site production and delivery, before net noncash

and other costs shown below 2.44 2.25 11.68

By-product credits (0.35) — —

Treatment charges 0.10 0.10 —

Unit net cash costs 2.19 2.35 11.68

DD&A 0.27 0.25 0.85

Metals inventory adjustments 0.01 0.01 0.08

Noncash and other costs, net 0.09 0.07 0.23

Total unit costs 2.56 2.68 12.84

Other revenue adjustments, primarily for pricing

on prior period open sales (0.01) (0.01) —

Gross profit per pound $ 1.89 $ 1.77 $ 5.52

Reconciliation to Amounts Reported

Production Inventory

Revenues and Delivery DD&A Adjustments

Totals presented above $ 3,779 $ 1,953 $ 207 $ 7

Treatment charges (9) 68 — —

Noncash and other costs, net — 65 — —

Other revenue adjustments, primarily for pricing

on prior period open sales (7) — — —

Eliminations and other 43 49 — —

North America copper mines 3,806 2,135 207 7

Other mining c

11,708 7,461 757 11

Corporate, other & eliminations (3,495) (3,443) 32 —

As reported in our consolidated financial statements $ 12,019 $ 6,153 $ 996 $ 18

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

Includes gold and silver product revenues and production costs.

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

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

Six Months Ended June 30, 2021

(In millions) By-Product Co-Product Method

Method Copper Molybdenum a

Revenues, excluding adjustments $ 2,919

$ 2,919 $ 185 $ 67 $ 3,171

Site production and delivery, before net noncash

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

By-product credits (189) — — — —

Treatment charges 63 60 — 3 63

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

DD&A 181 169 8 4 181

Noncash and other costs, net 73 71 1 1 73

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

Other revenue adjustments, primarily for pricing

on prior period open sales 7 7 — — 7

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

Copper sales (millions of recoverable pounds) 697 697

Molybdenum sales (millions of recoverable pounds) a

Gross profit per pound of copper/molybdenum:

Revenues, excluding adjustments $ 4.19

$ 4.19 $ 11.12

Site production and delivery, before net noncash

and other costs shown below 2.09 1.96 6.76

By-product credits (0.27) — —

Treatment charges 0.09 0.09 —

Unit net cash costs 1.91 2.05 6.76

DD&A 0.26 0.24 0.51

Noncash and other costs, net 0.11 0.11 0.06

Total unit costs 2.28 2.40 7.33

Other revenue adjustments, primarily for pricing

on prior period open sales 0.01 0.01 —

Gross profit per pound $ 1.92 $ 1.80 $ 3.79

Reconciliation to Amounts Reported

Revenues and Delivery DD&A

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

Treatment charges (17) 46 —

Noncash and other costs, net — 73 —

Other revenue adjustments, primarily for pricing

on prior period open sales 7 — —

Eliminations and other 31 33 —

North America copper mines 3,192 1,674 181

Other mining c

10,165 6,690 690

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

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

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

Includes gold and silver product revenues and production costs.

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

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

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

(In millions) By-Product Co-Product Method

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DD&A 101 91 10 101

Metals inventory adjustments 11 10 1 11

Noncash and other costs, net 18

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DD&A 0.35 0.32

Metals inventory adjustments 0.04 0.03

Noncash and other costs, net 0.06

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Gross profit per pound $ 0.56 $ 0.44

Reconciliation to Amounts Reported Metals

Production Inventory

Revenues and Delivery DD&A Adjustments

Totals presented above $ 1,218 $ 727 $ 101 $ 11

Treatment charges (44) — — —

Royalty on metals (3) — — —

Noncash and other costs, net — 18 — —

Other revenue adjustments, primarily for pricing

on prior period open sales (154) — — —

Eliminations and other (1) (3) 1 —

South America mining 1,016 742 102 11

Other mining b

6,171 3,989 389 7

Corporate, other & eliminations (1,771) (1,728) 16 —

As reported in our consolidated financial statements $ 5,416 $ 3,003 $ 507 $ 18

Includes silver sales of 1.1 million ounces ($23.26 per ounce average realized price).

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

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

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

Three Months Ended June 30, 2021

(In millions) By-Product Co-Product Method

Method Copper Other a

Revenues, excluding adjustments $ 995 $ 995 $ 82 $ 1,077

Site production and delivery, before net noncash

and other costs shown below 573 b

By-product credits (72) — — —

Treatment charges 29 29 — 29

Royalty on metals 2 2 — 2

Net cash costs 532 562 52 614

DD&A 94 86 8 94

Noncash and other costs, net 18 17 1 18

Total costs 644 665 61 726

Other revenue adjustments, primarily for pricing

on prior period open sales 88 88 — 88

Gross profit $ 439 $ 418 $ 21 $ 439

Copper sales (millions of recoverable pounds) 230 230

Gross profit per pound of copper:

Revenues, excluding adjustments $ 4.31 $ 4.31

Site production and delivery, before net noncash

and other costs shown below 2.48 b

By-product credits (0.31) —

Treatment charges 0.13 0.13

Royalty on metals 0.01 0.01

Unit net cash costs 2.31 2.44

DD&A 0.40 0.37

Noncash and other costs, net 0.08 0.07

Total unit costs 2.79 2.88

Other revenue adjustments, primarily for pricing

on prior period open sales 0.38 0.38

Gross profit per pound $ 1.90 $ 1.81

Reconciliation to Amounts Reported

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South America mining 1,133 600 94

Other mining b

Other mining c

6,241 3,975 374

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

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

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

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

Three Months Ended March 31, 2021

Six Months Ended June 30, 2022

(In millions) By-Product Co-Product Method

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DD&A 198 179 19 198

Metals inventory adjustments 11 10 1 11

Noncash and other costs, net 35 33 2 35

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DD&A 0.36 0.32

Metals inventory adjustments 0.02 0.02

Noncash and other costs, net 0.06 0.06

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Reconciliation to Amounts Reported

Revenues and Delivery DD&A

Production Inventory

Revenues and Delivery DD&A Adjustments

Totals presented above $ 2,444 $ 1,379 $ 198 $ 11

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

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

Six Months Ended June 30, 2021

(In millions) By-Product Co-Product Method

Method Copper Other a

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

Site production and delivery, before net noncash

and other costs shown below 1,092 b

1,022 91 1,113

By-product credits (126) — — —

Treatment charges 64 64 — 64

Royalty on metals 4 4 — 4

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

DD&A 195 181 14 195

Noncash and other costs, net 28 26 2 28

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

Other revenue adjustments, primarily for pricing

on prior period open sales 99 99 — 99

Gross profit $ 935 $ 895 $ 40 $ 935

Copper sales (millions of recoverable pounds) 489 489

Gross profit per pound of copper:

Revenues, excluding adjustments $ 4.28 $ 4.28

Site production and delivery, before net noncash

and other costs shown below 2.23 b

By-product credits (0.26) —

Treatment charges 0.13 0.13

Royalty on metals 0.01 0.01

Unit net cash costs 2.11 2.23

DD&A 0.40 0.37

Noncash and other costs, net 0.06 0.05

Total unit costs 2.57 2.65

Other revenue adjustments, primarily for pricing

on prior period open sales 0.20 0.20

Gross profit per pound $ 1.91 $ 1.83

Reconciliation to Amounts Reported

Revenues and Delivery DD&A

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

Treatment charges (64) — —

Royalty on metals (4) — —

Noncash and other costs, net — 28 —

Other revenue adjustments, primarily for pricing

on prior period open sales 99 — —

Eliminations and other (1) (2) —

South America mining 2,270 1,139 195

Other mining c

11,087 7,225 676

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

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

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

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

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

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

Indonesia Mining Product Revenues, Production Costs and Unit Net Cash (Credits) Costs

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

(In millions) By-Product Co-Product Method

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DD&A 262 167 91 4 262

Noncash and other costs, net 3 2 1 — 3

Total costs 255 732 396 15 1,143

Other revenue adjustments, primarily for pricing

on prior period open sales (201) (201) (8) (1) (210)

PT Smelting intercompany profit 26 17 9 — 26

Gross profit $ 1,152 $ 666 $ 470 $ 16 $ 1,152

Copper sales (millions of recoverable pounds) 410 410

Gold sales (thousands of recoverable ounces) 474

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

Revenues, excluding adjustments $ 3.86 $ 3.86 $ 1,827

Site production and delivery, before net noncash

and other costs shown below 1.43 0.91 433

Gold and silver credits (2.17) — —

Treatment charges 0.24 0.15 72

Export duties 0.21 0.13 63

Royalty on metals 0.27 0.18 74

Unit net cash (credits) costs (0.02) 1.37 642

DD&A 0.63 0.41 193

Noncash and other costs, net 0.01 0.01 2

Total unit costs 0.62 1.79 837

Other revenue adjustments, primarily for pricing

on prior period open sales (0.49) (0.49) (17)

PT Smelting intercompany profit 0.06 0.04 19

Gross profit per pound/ounce $ 2.81 $ 1.62 $ 992

Reconciliation to Amounts Reported

Revenues and Delivery DD&A

Totals presented above $ 2,479 $ 587 $ 262

Treatment charges (98) — —

Export duties (85) — —

Royalty on metals (108) — —

Noncash and other costs, net — 3 —

Other revenue adjustments, primarily for pricing

on prior period open sales (210) — —

PT Smelting intercompany profit — (26) —

Indonesia mining 1,978 564 262

Other mining b

5,209 4,167 229

Corporate, other & eliminations (1,771) (1,728) 16

As reported in our consolidated financial statements $ 5,416 $ 3,003 $ 507

Includes silver sales of 1.6 million ounces ($20.71 per ounce average realized price).

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

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

Three Months Ended June 30, 2021

(In millions) By-Product Co-Product Method

Method Copper Gold Silver a

Revenues, excluding adjustments $ 1,323 $ 1,323 $ 543 $ 37 $ 1,903

Site production and delivery, before net noncash

and other costs shown below 476 331 136 9 476

Gold and silver credits (597) — — — —

Treatment charges 74 52 21 2 75

Export duties 44 30 13 1 44

Royalty on metals 80 59 20 1 80

Net cash costs 77 472 190 13 675

DD&A 247 172 70 5 247

Noncash and other costs, net 11 8 3 — 11

Total costs 335 652 263 18 933

Other revenue adjustments, primarily for pricing

on prior period open sales 87 87 16 2 105

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

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

Copper sales (millions of recoverable pounds) 310 310

Gold sales (thousands of recoverable ounces) 302

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

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

Site production and delivery, before net noncash

and other costs shown below 1.54 1.07 449

Gold and silver credits (1.93) — —

Treatment charges 0.24 0.16 70

Export duties 0.14 0.10 42

Royalty on metals 0.26 0.19 66

Unit net cash costs 0.25 1.52 627

DD&A 0.79 0.55 232

Noncash and other costs, net 0.04 0.03 11

Total unit costs 1.08 2.10 870

Other revenue adjustments, primarily for pricing

on prior period open sales 0.28 0.28 53

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

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

Reconciliation to Amounts Reported

Revenues and Delivery DD&A

Totals presented above $ 1,903 $ 476 $ 247

Treatment charges (75) — —

Export duties (44) — —

Royalty on metals (80) — —

Noncash and other costs, net — 11 —

Other revenue adjustments, primarily for pricing

on prior period open sales 105 — —

PT Smelting intercompany loss — 41 —

Indonesia mining 1,809 528 247

Other mining b

5,565 4,047 221

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

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

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

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

Indonesia Mining Product Revenues, Production Costs and Unit Net Cash (Credits) Costs

Six Months Ended June 30, 2022

(In millions) By-Product Co-Product Method

Method Copper Gold Silver a

Revenues, excluding adjustments $ 3,184 $ 3,184 $ 1,638 $ 69 $ 4,891

Site production and delivery, before net noncash

and other costs shown below 1,121 730 375 16 1,121

Gold and silver credits (1,710) — — — —

Treatment charges 191 124 64 3 191

Export duties 164 107 55 2 164

Royalty on metals 201 135 64 2 201

Net cash (credits) costs (33) 1,096 558 23 1,677

DD&A 510 332 171 7 510

Noncash and other costs, net 30 b

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Includes silver sales of 3.1 million ounces ($22.18 per ounce average realized price).

Includes charges of $41 million ($0.11 per pound of copper) associated with a settlement of an administrative fine levied by the Indonesia government and $18 million ($0.05 per pound of copper) associated with an adjustment to prior-period export duties, partly offset by credits of $30 million ($0.08 per pound of copper) associated with adjustments to prior year treatment and refining costs.

Includes credits of $30 million ($0.04 per pound of copper) associated with adjustments to prior year treatment and refining charges and a charge of $41 million ($0.05 per pound of copper) associated with a settlement of an administrative fine levied by the Indonesia government.

Also includes a charge of $18 million ($0.02 per pound of copper) to reserve for exposure associated with export duties in prior periods.

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

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

Three Months Ended March 31, 2021

Six Months Ended June 30, 2021

(In millions) By-Product Co-Product Method

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Site production and delivery, before net noncash

and other credits shown below 383 264 112 7 383

and other costs shown below 859 598 244 17 859

Gold and silver credits (1,059) — — — —

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DD&A 446 310 127 9 446

Noncash and other credits, net (8) b

(6) (2) — (8)

Noncash and other costs, net 3 b

Total costs 602 1,158 471 32 1,661

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Site production and delivery, before net noncash

and other costs shown below 1.48 1.02 438

and other credits shown below 1.51 1.05 439

Gold and silver credits (1.86) — —

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DD&A 0.78 0.55 228

Noncash and other credits, net (0.03) b

Noncash and other costs, net 0.01 b

Total unit costs 1.06 2.04 844

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Royalty on metals (140) — —

Noncash and other credits, net 31 23 —

Noncash and other costs, net 31 34 —

Other revenue adjustments, primarily for pricing

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

Includes credits of $31 million ($0.12 per pound of copper) associated with adjustments to prior year treatment and refining costs.

Also includes a charge of $13 million ($0.05 per pound of copper) associated with a potential settlement of an administrative fine levied by the Indonesia government.

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

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

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

Three Months Ended March 31,

Three Months Ended June 30,

(In millions) 2022 2021

6 unchanged sentences

Total costs 105 79

Gross profit (loss) $ 37 $ (3)

Gross profit $ 46 $ 16

Molybdenum sales (millions of recoverable pounds) a

Gross profit (loss) per pound of molybdenum:

Gross profit per pound of molybdenum:

Revenues, excluding adjustments a

7 unchanged sentences

Total unit costs 13.19 10.73

Gross profit (loss) per pound $ 5.19 $ (0.38)

Gross profit per pound $ 5.68 $ 2.04

Reconciliation to Amounts Reported

Three Months Ended March 31, 2022 Revenues and Delivery DD&A

Three Months Ended June 30, 2022 Revenues and Delivery DD&A

Totals presented above $ 151 $ 78 $ 18

6 unchanged sentences

As reported in our consolidated financial statements $ 5,416 $ 3,003 $ 507

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

Totals presented above $ 95 $ 54 $ 17

11 unchanged sentences

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

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

Six Months Ended June 30,

(In millions) 2022 2021

Revenues, excluding adjustments a

Site production and delivery, before net noncash

and other costs shown below 150 108

Treatment charges and other 13 12

Net cash costs 163 120

Metals inventory adjustments — 1

Noncash and other costs, net 5 5

Total costs 202 158

Gross profit $ 83 $ 13

Molybdenum sales (millions of recoverable pounds) a

Gross profit per pound of molybdenum:

Revenues, excluding adjustments a

$ 18.81 $ 12.12

Site production and delivery, before net noncash

and other costs shown below 9.90 7.68

Treatment charges and other 0.85 0.85

Unit net cash costs 10.75 8.53

DD&A 2.27 2.27

Metals inventory adjustments — 0.06

Noncash and other costs, net 0.34 0.36

Total unit costs 13.36 11.22

Gross profit per pound $ 5.45 $ 0.90

Reconciliation to Amounts Reported

Production Inventory

Six Months Ended June 30, 2022 Revenues and Delivery DD&A Adjustments

Totals presented above $ 285 $ 150 $ 34 $ —

Treatment charges and other (13) — — —

Noncash and other costs, net — 5 — —

Molybdenum mines 272 155 34 —

Other mining b

15,242 9,441 930 18

Corporate, other & eliminations (3,495) (3,443) 32 —

As reported in our consolidated financial statements $ 12,019 $ 6,153 $ 996 $ 18

Six Months Ended June 30, 2021

Totals presented above $ 171 $ 108 $ 32 $ 1

Treatment charges and other (12) — — —

Noncash and other costs, net — 5 — —

Molybdenum mines 159 113 32 1

Other mining b

13,198 8,251 839 —

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

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

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.

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

CAUTIONARY STATEMENT

1 unchanged sentence

Forward-looking statements are all statements other than statements of historical facts, such as plans, projections, or expectations relating to business outlook, strategy, goals or targets;

global market conditions;

ore grades and milling rates;

7 unchanged sentences

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

achievement of climate commitments and net zero aspirations;

achievement of climate commitments and net zero aspiration;

improvements in operating procedures and technology innovations;

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final resolution of settlements associated with ongoing legal proceedings;

and the ongoing implementation of our financial policy and future returns to shareholders, including dividend payments (base or variable) and share repurchases.

debt repurchases and the ongoing implementation of our financial policy 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,” “aspirations,” “future” and any similar expressions are intended to identify those assertions as forward-looking statements.

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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, supply of and demand for;

and prices of the commodities we produce, primarily copper;

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, supply of and demand for, and prices of the commodities we produce, primarily copper;

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

changes in general market, economic, tax, regulatory or industry conditions, including as a result of Russia’s invasion of Ukraine;

changes in general market, economic, tax, regulatory or industry conditions, including as a result of Russia’s invasion of Ukraine or potential global economic downturn or recession;

reductions in liquidity and access to capital;

26 unchanged sentences

This report on Form 10-Q also contains financial measures such as net debt and unit net cash costs (credits) per pound of copper and molybdenum, which are not recognized under U.S.

Refer to “Operations – Unit Net Cash Costs (Credits)” for further discussion of unit net cash costs (credits) 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 “Operations – Unit Net

Cash Costs (Credits)” for further discussion of unit net cash costs (credits) associated with our operating divisions, and to “Product Revenues and Production Costs” for reconciliations of per pound costs by operating division to production and delivery costs applicable to sales reported in our consolidated financial statements.

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

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis