FREEPORT-MCMORAN INC 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. In Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A), “we,” “us” and “our” refer to Freeport-McMoRan Inc. (FCX) and its consolidated subsidiaries. You should read this discussion in conjunction with our consolidated financial statements, the related MD&A and the discussion of our Business and Properties in our annual report on Form 10-K for the year ended December 31, 2021 (2021 Form 10-K), filed with the United States (U.S.) Securities and Exchange Commission (SEC). The results of operations reported and summarized below are not necessarily indicative of future operating results (refer to “Cautionary Statement” for further discussion). References to “Notes” are Notes included in our Notes to Consolidated Financial Statements (Unaudited). Throughout MD&A, all references to income or losses per share are on a diluted basis. OVERVIEW We are a leading international mining company with headquarters in Phoenix, Arizona. We operate large, long-lived, geographically diverse assets with significant proven and probable mineral reserves of copper, gold and molybdenum. We are one of the world’s largest publicly traded copper producers. Our portfolio of assets includes the Grasberg minerals district in Indonesia, one of the world’s largest copper and gold deposits; and significant mining operations in North America and South America, including the large-scale Morenci minerals district in Arizona and the Cerro Verde operation in Peru. 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. 24 Table of Contents 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 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. OUTLOOK 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. of our 2021 Form 10-K for further discussion. Because we cannot control the prices of our products, the key measures that management focuses on in operating our business are sales volumes, unit net cash costs, operating cash flows and capital expenditures. Consolidated Sales Volumes Following are our projected consolidated sales volumes for the year 2022: Copper (millions of recoverable pounds): North America copper mines 1,505 South America mining 1,160 Indonesia mining 1,549 Total 4,214 Gold (millions of recoverable ounces) 1.7 Molybdenum (millions of recoverable pounds) 80 a a. 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 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. For other important factors that could cause results to differ materially from projections, refer to “Risk Factors” contained in Part I, Item 1A. of our 2021 Form 10-K. Consolidated Unit Net Cash Costs 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. 25 Table of Contents Consolidated Operating Cash Flows Our consolidated operating cash flows vary with sales volumes; prices realized from copper, gold and molybdenum sales; production costs; income taxes; other working capital changes; and other factors. Based on current sales volume and cost estimates, and assuming average prices of $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 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 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. 26 Table of Contents MARKETS World prices for copper, gold and molybdenum can fluctuate significantly. 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; and the Metals Week Molybdenum Dealer Oxide weekly average price ranged from a low of $4.46 per pound in 2015 to a high of $20.01 per pound in 2021. Copper, gold and molybdenum prices are affected by numerous factors beyond our control as described further in “Risk Factors” contained in Part I, Item 1A. of our 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 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. dollar. 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. 27 Table of Contents 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. 28 Table of Contents 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. 29 Table of Contents CONSOLIDATED RESULTS Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 SUMMARY FINANCIAL DATA (in millions, except per share amounts) Revenues a,b $ 5,416 $ 5,748 $ 12,019 $ 10,598 Operating income a $ 1,736 $ 2,067 $ 4,545 $ 3,599 Net income attributable to common stock c $ 840 d $ 1,083 e $ 2,367 d $ 1,801 e Diluted net income per share of common stock $ 0.57 $ 0.73 $ 1.61 $ 1.21 Diluted weighted-average shares of common stock outstanding 1,457 1,483 1,463 1,480 Operating cash flows f $ 1,621 $ 2,395 $ 3,312 $ 3,470 Capital expenditures $ 863 $ 433 $ 1,586 $ 803 At June 30: Cash and cash equivalents $ 9,492 $ 6,313 $ 9,492 $ 6,313 Total debt, including current portion $ 11,092 $ 9,695 $ 11,092 $ 9,695 a. Refer to Note 9 for a summary of revenues and operating income by operating division. b. Includes (unfavorable) favorable adjustments to prior period provisionally priced concentrate and cathode copper sales totaling $(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. c. We defer recognizing profits on intercompany sales until final sales to third parties occur. Refer to “Operations – Smelting and Refining” for a summary of net impacts from changes in these deferrals. d. Includes net 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. e. 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. f. 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. 30 Table of Contents Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 SUMMARY OPERATING DATA Copper (millions of recoverable pounds) Production 1,075 913 2,084 1,823 Sales, excluding purchases 1,087 929 2,111 1,754 Average realized price per pound $ 4.03 $ 4.34 $ 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 $ 1.41 $ 1.48 $ 1.37 $ 1.44 Gold (thousands of recoverable ounces) Production 476 305 891 602 Sales, excluding purchases 476 305 885 563 Average realized price per ounce $ 1,827 $ 1,794 $ 1,861 $ 1,785 Molybdenum (millions of recoverable pounds) Production 23 20 44 40 Sales, excluding purchases 20 22 39 43 Average realized price per pound $ 19.44 $ 13.11 $ 19.37 $ 12.38 a. Reflects per pound weighted-average production and delivery costs and unit net cash costs (net of by-product credits) for all copper mines, before net noncash and other costs. For reconciliations of per pound unit costs (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.” b. 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. Revenues 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. Refer to Note 9 for a summary of product revenues. Following is a summary of changes in our consolidated revenues between periods (in millions): Three Months Ended June 30 Six Months Ended June 30 Consolidated revenues - 2021 period $ 5,748 $ 10,598 Higher (lower) sales volumes: Copper 681 1,515 Gold 305 575 Molybdenum (34) (49) (Lower) higher average realized prices: Copper (337) (148) Gold 16 67 Molybdenum 121 270 Adjustments for prior period provisionally priced copper sales (528) (104) Lower Atlantic Copper revenues (361) (330) Lower revenues from purchased copper (206) (354) Higher treatment charges (38) (74) Higher royalties and export duties (69) (170) Other, including intercompany eliminations 118 223 Consolidated revenues - 2022 period $ 5,416 $ 12,019 Sales Volumes. 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. 31 Table of Contents Realized Prices. Our consolidated revenues can vary significantly as a result of fluctuations in the market prices of copper, gold and molybdenum. Average realized prices 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. We record revenues and invoice customers at the time of shipment based on then-current LME prices, which results in an embedded derivative on provisionally priced concentrate and cathode sales that is adjusted to fair value through earnings each period, using the period-end forward prices, until final pricing on the date of settlement. To the extent final prices are higher or lower than what was recorded on a provisional basis, an increase or decrease to revenues is recorded each reporting period until the date of final pricing. Accordingly, in times of rising copper prices, our revenues benefit from adjustments to the final pricing of provisionally priced sales pursuant to contracts entered into in prior periods; in times of falling copper prices, the opposite occurs. Prior Period Provisionally Priced Copper Sales. Net (unfavorable) favorable adjustments to prior periods’ provisionally priced copper sales ( i.e. , provisionally priced sales at 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 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 $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 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. 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. 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. 32 Table of Contents Production and Delivery 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 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. Depreciation, Depletion and Amortization Depreciation will vary under the unit-of-production (UOP) method as a result of changes in sales volumes and the related UOP rates at our mining operations. Consolidated depreciation, depletion and amortization (DD&A) totaled $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 $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 $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. 33 Table of Contents Income Taxes Following is a summary of the approximate amounts used in the calculation of our consolidated income tax provision (in millions, except percentages): Six Months Ended June 30, 2022 2021 Income (Loss) a Effective Tax Rate Income Tax (Provision) Benefit Income (Loss) a Effective Tax Rate Income Tax (Provision) Benefit U.S. b $ 909 1 % c $ (5) $ 743 — % c $ (3) South America 776 39 % (302) 923 39 % (356) Indonesia 2,625 39 % (1,020) 1,759 41 % (719) Eliminations and other 2 N/A (7) (99) N/A 5 Rate adjustment d — N/A (61) — N/A 27 Consolidated FCX $ 4,312 32 % $ (1,395) $ 3,326 31 % $ (1,046) a. Represents income before income taxes and equity in affiliated companies’ net earnings. b. In addition to our North America mining operations, the U.S. jurisdiction reflects corporate-level expenses, which include interest expense associated with senior notes, general and administrative expenses, and environmental obligations and shutdown costs. c. Includes valuation allowance release on prior year unbenefited net operating losses. d. 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 $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. OPERATIONS Responsible Production 2021 Annual Report on Sustainability. 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 we are focused on leading as a responsible copper producer. The Copper Mark. We are committed to validating all of our copper producing sites with the Copper Mark, a comprehensive assurance framework designed to demonstrate the copper industry's responsible production practices. To achieve the Copper Mark, each site is required to complete an external assurance process to assess conformance with 32 ESG requirements. 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 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. 34 Table of Contents Feasibility and Optimization Studies 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 We operate seven open-pit copper mines in North America – Morenci, Bagdad, Safford (including Lone Star), Sierrita and Miami in Arizona, and Chino and Tyrone in New Mexico. All of the North America mining operations are wholly owned, except for Morenci. We record our 72 percent undivided joint venture interest in Morenci using the proportionate consolidation method. The North America copper mines include open-pit mining, sulfide-ore concentrating, leaching and solution extraction/electrowinning (SX/EW) operations. A majority of the copper produced at our North America copper mines is cast into copper rod by our Rod & Refining segment. The remainder of our North America copper production is sold as copper cathode or copper concentrate, a portion of which is shipped to Atlantic Copper (our wholly owned smelter). Molybdenum concentrate, gold and silver are also produced by certain of our North America copper mines . Operating and Development Activities. We have substantial reserves and future opportunities in the U.S., primarily associated with existing mining operations. 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. We are engaging stakeholders and have commenced a feasibility study, which is expected to be completed in 2023, for this project. 35 Table of Contents Operating Data. Following is summary consolidated operating data for the North America copper mines: Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Operating Data, Net of Joint Venture Interests Copper (millions of recoverable pounds) Production 382 360 736 713 Sales, excluding purchases 389 389 770 697 Average realized price per pound $ 4.36 $ 4.42 $ 4.46 $ 4.19 Molybdenum (millions of recoverable pounds) Production a 8 9 15 17 100% Operating Data Leach operations Leach ore placed in stockpiles (metric tons per day) 722,900 688,000 715,800 696,500 Average copper ore grade (percent) 0.29 0.30 0.29 0.29 Copper production (millions of recoverable pounds) 254 265 499 527 Mill operations Ore milled (metric tons per day) 306,900 264,700 299,200 266,300 Average ore grade (percent): Copper 0.39 0.36 0.38 0.37 Molybdenum 0.02 0.03 0.02 0.03 Copper recovery rate (percent) 83.2 82.4 82.1 80.5 Copper production (millions of recoverable pounds) 195 155 364 306 a. Refer to “Consolidated Results” for our consolidated molybdenum sales volumes, which include sales of molybdenum produced at the North America copper mines. Our consolidated copper sales volumes from North America totaled 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. Unit Net Cash Costs. Unit net cash costs per pound of copper is a measure intended to provide investors with information about the cash-generating capacity of our mining operations expressed on a basis relating to the primary metal product for our respective operations. We use this measure for the same purpose and for monitoring operating performance by our mining operations. This information differs from measures of performance determined in accordance with U.S. generally accepted accounting principles (GAAP) and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. This measure is presented by other metals mining companies, although our measure may not be comparable to similarly titled measures reported by other companies. Gross Profit per Pound of Copper and Molybdenum The following table summarizes unit net cash costs and gross profit per pound at our North America copper mines. Refer to “Product Revenues and Production Costs” for an explanation of the “by-product” and “co-product” methods and a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in our consolidated financial statements. 36 Table of Contents Three Months Ended June 30, 2022 2021 By- Product Method Co-Product Method By- Product Method Co-Product Method Copper Molyb- denum a Copper Molyb- denum a Revenues, excluding adjustments $ 4.36 $ 4.36 $ 18.75 $ 4.42 $ 4.42 $ 11.75 Site production and delivery, before net noncash and other costs shown below 2.50 2.30 12.42 2.14 2.03 6.86 By-product credits (0.35) — — (0.25) — — Treatment charges 0.11 0.11 — 0.08 0.07 — Unit net cash costs 2.26 2.41 12.42 1.97 2.10 6.86 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 Total unit costs 2.64 2.75 13.71 2.31 2.43 7.47 Revenue adjustments, primarily for pricing on prior period open sales (0.10) (0.10) — 0.02 0.02 — Gross profit per pound $ 1.62 $ 1.51 $ 5.04 $ 2.13 $ 2.01 $ 4.28 Copper sales (millions of recoverable pounds) 389 389 389 389 Molybdenum sales (millions of recoverable pounds) a 8 9 Six Months Ended June 30, 2022 2021 By- Product Method Co-Product Method By- Product Method Co-Product Method Copper Molyb- denum a Copper Molyb- denum a 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 15 17 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. 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. 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. 37 Table of Contents 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 We operate two copper mines in South America – Cerro Verde in Peru (in which we own a 53.56 percent interest) and El Abra in Chile (in which we own a 51 percent interest), which are consolidated in our financial statements. South America mining includes open-pit mining, sulfide-ore concentrating, leaching and SX/EW operations. Production from our South America mines is sold as copper concentrate or cathode under long-term contracts. Our South America mines also sell a portion of their copper concentrate production to Atlantic Copper. In addition to copper, the Cerro Verde mine produces molybdenum concentrate and silver. Operating and Development Activities. 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. El Abra's large sulfide resource supports a potential major mill project similar to the large-scale concentrator constructed at Cerro Verde in 2015. Technical and economic studies continue to be evaluated to determine the optimal scope and timing for the sulfide project. We are 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. Operating Data. Following is summary consolidated operating data for South America mining: Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Copper (millions of recoverable pounds) Production 286 245 560 504 Sales 288 230 552 489 Average realized price per pound $ 3.83 $ 4.31 $ 4.00 $ 4.28 Molybdenum (millions of recoverable pounds) Production a 7 4 14 9 Leach operations Leach ore placed in stockpiles (metric tons per day) 157,700 190,200 148,800 172,100 Average copper ore grade (percent) 0.37 0.33 0.36 0.34 Copper production (millions of recoverable pounds) 71 65 132 126 Mill operations Ore milled (metric tons per day) 427,100 374,100 410,800 382,100 Average ore grade (percent): Copper 0.31 0.29 0.32 0.30 Molybdenum 0.01 0.01 0.02 0.01 Copper recovery rate (percent) 84.4 85.2 85.5 86.4 Copper production (millions of recoverable pounds) 215 179 428 377 a. Refer to “Consolidated Results” for our consolidated molybdenum sales volumes, which include sales of molybdenum produced at Cerro Verde. 38 Table of Contents 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. Unit Net Cash Costs. Unit net cash costs per pound of copper is a measure intended to provide investors with information about the cash-generating capacity of our mining operations expressed on a basis relating to the primary metal product for our respective operations. We use this measure for the same purpose and for monitoring operating performance by our mining operations. This information differs from measures of performance determined in accordance with U.S. GAAP and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. This measure is presented by other metals mining companies, although our measure may not be comparable to similarly titled measures reported by other companies. Gross Profit per Pound of Copper The following table summarizes unit net cash costs and gross profit per pound of copper at our South America mining operations. Refer to “Product Revenues and Production Costs” for an explanation of the “by-product” and “co-product” methods and a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in our consolidated financial statements. Three Months Ended June 30, 2022 2021 By-Product Method Co-Product Method By-Product Method Co-Product Method Revenues, excluding adjustments $ 3.83 $ 3.83 $ 4.31 $ 4.31 Site production and delivery, before net noncash and other costs shown below 2.48 2.29 2.48 a 2.30 By-product credits (0.35) — (0.31) — 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 2.29 2.45 2.31 2.44 DD&A 0.35 0.32 0.40 0.37 Metals inventory adjustments 0.04 b 0.03 — — Noncash and other costs, net 0.06 0.06 0.08 0.07 Total unit costs 2.74 2.86 2.79 2.88 Revenue adjustments, primarily for pricing on prior period open sales (0.53) (0.53) 0.38 0.38 Gross profit per pound $ 0.56 $ 0.44 $ 1.90 $ 1.81 Copper sales (millions of recoverable pounds) 288 288 230 230 39 Table of Contents Six Months Ended June 30, 2022 2021 By-Product Method Co-Product Method By-Product Method Co-Product Method 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 2.09 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 0.02 — — 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 a. 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. b. 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. 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. Because certain assets are depreciated on a straight-line basis, South America’s unit depreciation rate may vary with asset additions and the level of copper production and sales. Revenue adjustments primarily result from changes in prices on provisionally priced copper sales recognized in prior periods. Refer to “Consolidated Results – Revenues” for further discussion of adjustments to prior period provisionally priced copper sales. Average unit net cash costs (net of by-product credits) for South America mining are expected to approximate $2.31 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 PT-FI operates one of the world’s largest copper and gold mines at the Grasberg minerals district in Papua, Indonesia. PT-FI produces copper concentrate that contains significant quantities of gold and silver. We have a 48.76 percent interest in PT-FI and manage its mining operations. As further discussed in Note 2 of our 2021 Form 40 Table of Contents 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 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, 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. 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. Kucing Liar . 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 (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. Indonesia Smelter. In connection with PT-FI’s 2018 agreement with the Indonesia government to secure the extension of its long-term mining rights, PT-FI committed to construct additional domestic smelting capacity totaling 2 million metric tons of concentrate per year by the end of 2023 (subject to force majeure provisions). PT-FI is actively engaged in the following projects for additional domestic smelting capacity: • Construction of a greenfield smelter in Gresik, Indonesia with a capacity to process approximately 1.7 million metric tons of copper concentrate per year. In July 2021, PT-FI awarded a construction contract to a third-party contractor with an estimated cost of $2.8 billion. 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 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. 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. 41 Table of Contents 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. Operating Data. Following is summary consolidated operating data for Indonesia mining: Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Copper (millions of recoverable pounds) Production 407 308 788 606 Sales 410 310 789 568 Average realized price per pound $ 3.86 $ 4.27 $ 4.04 $ 4.29 Gold (thousands of recoverable ounces) Production 473 303 885 597 Sales 474 302 880 558 Average realized price per ounce $ 1,827 $ 1,795 $ 1,861 $ 1,785 Ore extracted and milled (metric tons per day): Grasberg Block Cave underground mine 101,800 64,400 101,100 58,100 DMLZ underground mine 77,300 53,900 77,800 50,300 Big Gossan underground mine 7,400 8,200 7,500 7,500 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: Copper (percent) 1.22 1.28 1.22 1.34 Gold (grams per metric ton) 1.08 1.00 1.05 1.03 Recovery rates (percent): Copper 89.8 88.8 89.6 90.0 Gold 79.0 75.9 78.2 77.4 a. Ore body depleted in 2021. 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. Unit Net Cash (Credits) Costs. Unit net cash (credits) costs per pound of copper is a measure intended to provide investors with information about the cash-generating capacity of our mining operations expressed on a basis relating to the primary metal product for our respective operations. We use this measure for the same purpose and for monitoring operating performance by our mining operations. This information differs from measures of performance determined in accordance with U.S. GAAP and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. This measure is presented by other metals mining companies, although our measure may not be comparable to similarly titled measures reported by other companies. Gross Profit per Pound of Copper and per Ounce of Gold The following table summarizes the unit net cash (credits) costs and gross profit per pound of copper and per ounce of gold at our Indonesia mining operations. Refer to “Product Revenues and Production Costs” for an explanation of “by-product” and “co-product” methods and a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in our consolidated financial statements. 42 Table of Contents Three Months Ended June 30, 2022 2021 By-Product Method Co-Product Method By-Product Method Co-Product Method Copper Gold Copper Gold 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 shown below 1.43 0.91 433 1.54 1.07 449 Gold and silver credits (2.17) — — (1.93) — — Treatment charges 0.24 0.15 72 0.24 0.16 70 Export duties 0.21 0.13 63 0.14 0.10 42 Royalty on metals 0.27 0.18 74 0.26 0.19 66 Unit net cash (credits) costs (0.02) 1.37 642 0.25 1.52 627 DD&A 0.63 0.41 193 0.79 0.55 232 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, 2022 2021 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) Gross profit per pound/ounce $ 3.41 $ 2.22 $ 1,015 $ 3.19 $ 2.26 $ 887 Copper sales (millions of recoverable pounds) 789 789 568 568 Gold sales (thousands of recoverable ounces) 880 558 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. 43 Table of Contents 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. 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 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 $1,700 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 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 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. Refer to “Outlook” for projected consolidated molybdenum sales volumes. Unit Net Cash Costs Per Pound of Molybdenum. Unit net cash costs per pound of molybdenum is a measure intended to provide investors with information about the cash-generating capacity of our mining operations expressed on a basis relating to the primary metal product for our respective operations. We use this measure for the same purpose and for monitoring operating performance by our mining operations. This information differs from measures of performance determined in accordance with U.S. GAAP and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. This measure is presented by other metals mining companies, although our measure may not be comparable to similarly titled measures reported by other companies. Average unit net cash costs for our Molybdenum mines of $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. 44 Table of Contents Refer to “Product Revenues and Production Costs” for a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in our consolidated financial statements. Smelting and Refining We wholly own and operate 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. Treatment charges for smelting and refining copper concentrate consist of a base rate per pound of copper and per ounce of gold and are generally fixed. Treatment charges represent a cost to our mining operations and income to Atlantic Copper and PT Smelting. Thus, higher treatment charges benefit our smelter operations and adversely affect our mining operations. Our North America copper mines are less significantly affected by changes in treatment charges because these operations are largely integrated with our Miami smelter and El Paso refinery. Through this form of downstream integration, we are assured placement of a significant portion of our concentrate production. Atlantic Copper smelts and refines copper concentrate and markets refined copper and precious metals in slimes. 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 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. 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 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. CAPITAL RESOURCES AND LIQUIDITY Our consolidated operating cash flows vary with sales volumes; prices realized from copper, gold and molybdenum sales; production costs; income taxes; other working capital changes; and other factors. We generated 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 45 Table of Contents 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. 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." Cash Following is a summary of the U.S. and international components of consolidated cash and cash equivalents available to the parent company, net of noncontrolling interests’ share, taxes and other costs at June 30, 2022 (in billions): Cash at domestic companies $ 5.1 Cash at international operations 4.4 a Total consolidated cash and cash equivalents 9.5 Noncontrolling interests’ share (1.1) Cash, net of noncontrolling interests’ share 8.4 Withholding taxes (0.3) Net cash available $ 8.1 a. 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. Management believes that sufficient liquidity is available in the U.S. from cash balances and availability from our revolving credit facility. We have not elected to permanently reinvest earnings from our foreign subsidiaries, and we have recorded deferred tax liabilities for foreign earnings that are available to be repatriated to the U.S. From time to time, our foreign subsidiaries distribute earnings to the U.S. through dividends that are subject to applicable withholding taxes and noncontrolling interests’ share. 46 Table of Contents Debt 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 $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 $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 $0.8 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 $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 $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. Refer to Note 5, Item 1A. “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 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 47 Table of Contents 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. 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. The share repurchase program may be modified, increased, suspended or terminated at any time at the Board’s discretion. Refer to Item 1A. “Risk Factors” contained in Part I of our 2021 Form 10-K, “Cautionary Statement” below and discussion of our financial policy above. Contributions from Noncontrolling Interests. 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 $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 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 Note 13 and Part II, Items 7. and 7A. in our 2021 Form 10-K, for information regarding our contractual obligations. CONTINGENCIES 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 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 liabilities and AROs. Litigation and Other Contingencies There have been no material changes to our contingencies associated with legal proceedings, environmental and other matters since December 31, 2021. 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 AROs, legal proceedings, environmental and other matters. NEW ACCOUNTING STANDARDS There were no significant updates to previously reported accounting standards included in Note 1 of our 2021 Form 10-K. 48 Table of Contents NET DEBT Net debt, which we define as consolidated debt less consolidated cash and cash equivalents, is intended to provide investors with information related to the performance-based payout framework in our financial policy, which requires achievement of a net debt target in the range of $3 billion to $4 billion (excluding project debt for additional smelting capacity in Indonesia). This information differs from consolidated debt determined in accordance with U.S. GAAP and should not be considered in isolation or as a substitute for consolidated debt determined in accordance with U.S. GAAP. Our net debt follows, which may not be comparable to similarly titled measures reported by other companies (in millions): 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 11,092 9,450 Less: consolidated cash and cash equivalents 9,492 8,068 Net debt $ 1,600 $ 1,382 Less: net debt for Indonesia smelter projects a 585 207 FCX net debt, excluding Indonesia smelter projects $ 1,015 $ 1,175 a. 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 Unit net cash costs (credits) per pound of copper and molybdenum are measures intended to provide investors with information about the cash-generating capacity of our mining operations expressed on a basis relating to the primary metal product for the respective operations. We use this measure for the same purpose and for monitoring operating performance by our mining operations. This information differs from measures of performance determined in accordance with U.S. GAAP and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. These measures are presented by other metals mining companies, although our measures may not be comparable to similarly titled measures reported by other companies. We present gross profit per pound of copper in the following tables using both a “by-product” method and a “co-product” method. We use the by-product method in our presentation of gross profit per pound of copper because (i) the majority of our revenues are copper revenues, (ii) we mine ore, which contains copper, gold, molybdenum and other metals, (iii) it is not possible to specifically assign all of our costs to revenues from the copper, gold, molybdenum and other metals we produce and (iv) it is the method used by our management and Board to monitor our mining operations and to compare mining operations in certain industry publications. In the co-product method presentations, shared costs are allocated to the different products based on their relative revenue values, which will vary to the extent our metals sales volumes and realized prices change. We show revenue adjustments for prior period open sales as a separate line item. Because these adjustments do not result from current period sales, these amounts have been reflected separately from revenues on current period sales. Noncash and other costs, 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. The following schedules are presentations under both the by-product and co-product methods together with reconciliations to amounts reported in our consolidated financial statements. 49 Table of Contents North America Copper Mines Product Revenues, Production Costs and Unit Net Cash Costs Three Months Ended June 30, 2022 (In millions) By-Product Co-Product Method Method Copper Molybdenum a Other b Total Revenues, excluding adjustments $ 1,697 $ 1,697 $ 144 $ 30 $ 1,871 Site production and delivery, before net noncash and other costs shown below 975 897 95 21 1,013 By-product credits (136) — — — — Treatment charges 41 40 — 1 41 Net cash costs 880 937 95 22 1,054 DD&A 103 95 7 1 103 Metals inventory adjustments 7 6 1 — 7 Noncash and other costs, net 36 33 2 1 36 Total costs 1,026 1,071 105 24 1,200 Other revenue adjustments, primarily for pricing on prior period open sales (37) (37) — — (37) Gross profit $ 634 $ 589 $ 39 $ 6 $ 634 Copper sales (millions of recoverable pounds) 389 389 Molybdenum sales (millions of recoverable pounds) a 8 Gross profit per pound of copper/molybdenum: Revenues, excluding adjustments $ 4.36 $ 4.36 $ 18.75 Site production and delivery, before net noncash and other costs shown below 2.50 2.30 12.42 By-product credits (0.35) — — Treatment charges 0.11 0.11 — Unit net cash costs 2.26 2.41 12.42 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 Total unit costs 2.64 2.75 13.71 Other revenue adjustments, primarily for pricing on prior period open sales (0.10) (0.10) — Gross profit per pound $ 1.62 $ 1.51 $ 5.04 Reconciliation to Amounts Reported Revenues Production and Delivery DD&A Metals Inventory Adjustments Totals presented above $ 1,871 $ 1,013 $ 103 $ 7 Treatment charges (5) 36 — — Noncash and other costs, net — 36 — — Other revenue adjustments, primarily for pricing on prior period open sales (37) — — — Eliminations and other 26 32 (1) — North America copper mines 1,855 1,117 102 7 Other mining c 5,332 3,614 389 11 Corporate, other & eliminations (1,771) (1,728) 16 — As reported in our consolidated financial statements $ 5,416 $ 3,003 $ 507 $ 18 a. Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing. b. Includes gold and silver product revenues and production costs. c. Represents the combined total for our other segments as presented in Note 9. 50 Table of Contents North America Copper Mines Product Revenues, Production Costs and Unit Net Cash Costs Three Months Ended June 30, 2021 (In millions) By-Product Co-Product Method Method Copper Molybdenum a Other b Total Revenues, excluding adjustments $ 1,717 $ 1,717 $ 97 $ 32 $ 1,846 Site production and delivery, before net noncash and other costs shown below 833 789 56 18 863 By-product credits (99) — — — — Treatment charges 31 29 — 2 31 Net cash costs 765 818 56 20 894 DD&A 102 95 5 2 102 Noncash and other costs, net 31 30 1 — 31 Total costs 898 943 62 22 1,027 Other revenue adjustments, primarily for pricing on prior period open sales 8 8 — — 8 Gross profit $ 827 $ 782 $ 35 $ 10 $ 827 Copper sales (millions of recoverable pounds) 389 389 Molybdenum sales (millions of recoverable pounds) a 9 Gross profit per pound of copper/molybdenum: Revenues, excluding adjustments $ 4.42 $ 4.42 $ 11.75 Site production and delivery, before net noncash and other costs shown below 2.14 2.03 6.86 By-product credits (0.25) — — Treatment charges 0.08 0.07 — Unit net cash costs 1.97 2.10 6.86 DD&A 0.26 0.25 0.55 Noncash and other costs, net 0.08 0.08 0.06 Total unit costs 2.31 2.43 7.47 Other revenue adjustments, primarily for pricing on prior period open sales 0.02 0.02 — Gross profit per pound $ 2.13 $ 2.01 $ 4.28 Reconciliation to Amounts Reported Revenues Production and Delivery DD&A Totals presented above $ 1,846 $ 863 $ 102 Treatment charges (12) 19 — Noncash and other costs, net — 31 — Other revenue adjustments, primarily for pricing on prior period open sales 8 — — Eliminations and other 12 12 (1) North America copper mines 1,854 925 101 Other mining c 5,520 3,650 367 Corporate, other & eliminations (1,626) (1,508) 15 As reported in our consolidated financial statements $ 5,748 $ 3,067 $ 483 a. Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing. b. Includes gold and silver product revenues and production costs. c. Represents the combined total for our other segments as presented in Note 9. 51 Table of Contents 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 Other b Total 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 15 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 Metals 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 a. Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing. b. Includes gold and silver product revenues and production costs. c. Represents the combined total for our other segments as presented in Note 9. 52 Table of Contents 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 Other b Total 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 17 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 Production 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 a. Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing. b. Includes gold and silver product revenues and production costs. c. Represents the combined total for our other segments as presented in Note 9. 53 Table of Contents South America Mining Product Revenues, Production Costs and Unit Net Cash Costs Three Months Ended June 30, 2022 (In millions) By-Product Co-Product Method Method Copper Other a Total Revenues, excluding adjustments $ 1,102 $ 1,102 $ 116 $ 1,218 Site production and delivery, before net noncash and other costs shown below 712 658 69 727 By-product credits (101) — — — Treatment charges 44 44 — 44 Royalty on metals 3 3 — 3 Net cash costs 658 705 69 774 DD&A 101 91 10 101 Metals inventory adjustments 11 10 1 11 Noncash and other costs, net 18 17 1 18 Total costs 788 823 81 904 Other revenue adjustments, primarily for pricing on prior period open sales (154) (154) — (154) Gross profit $ 160 $ 125 $ 35 $ 160 Copper sales (millions of recoverable pounds) 288 288 Gross profit per pound of copper: Revenues, excluding adjustments $ 3.83 $ 3.83 Site production and delivery, before net noncash and other costs shown below 2.48 2.29 By-product credits (0.35) — Treatment charges 0.15 0.15 Royalty on metals 0.01 0.01 Unit net cash costs 2.29 2.45 DD&A 0.35 0.32 Metals inventory adjustments 0.04 0.03 Noncash and other costs, net 0.06 0.06 Total unit costs 2.74 2.86 Other revenue adjustments, primarily for pricing on prior period open sales (0.53) (0.53) 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 a. 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. b. Represents the combined total for our other segments as presented in Note 9. 54 Table of Contents 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 Total Revenues, excluding adjustments $ 995 $ 995 $ 82 $ 1,077 Site production and delivery, before net noncash and other costs shown below 573 b 531 52 583 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 2.30 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 Production Revenues and Delivery DD&A Totals presented above $ 1,077 $ 583 $ 94 Treatment charges (29) — — Royalty on metals (2) — — Noncash and other costs, net — 18 — Other revenue adjustments, primarily for pricing on prior period open sales 88 — — Eliminations and other (1) (1) — South America mining 1,133 600 94 Other mining c 6,241 3,975 374 Corporate, other & eliminations (1,626) (1,508) 15 As reported in our consolidated financial statements $ 5,748 $ 3,067 $ 483 a. Includes silver sales of 0.8 million ounces ($27.33 per ounce average realized price). Also reflects sales of molybdenum produced by Cerro Verde to our molybdenum sales company at market-based pricing. b. Includes nonrecurring charges totaling $69 million ($0.30 per pound of copper) associated with labor related costs at Cerro Verde. c. Represents the combined total for our other segments as presented in Note 9. 55 Table of Contents South America Mining Product Revenues, Production Costs and Unit Net Cash Costs Six Months Ended June 30, 2022 (In millions) By-Product Co-Product Method Method Copper Other a Total Revenues, excluding adjustments $ 2,204 $ 2,204 $ 240 $ 2,444 Site production and delivery, before net noncash and other costs shown below 1,352 1,244 135 1,379 By-product credits (213) — — — Treatment charges 84 84 — 84 Royalty on metals 6 5 1 6 Net cash costs 1,229 1,333 136 1,469 DD&A 198 179 19 198 Metals inventory adjustments 11 10 1 11 Noncash and other costs, net 35 33 2 35 Total costs 1,473 1,555 158 1,713 Other revenue adjustments, primarily for pricing on prior period open sales 35 35 — 35 Gross profit $ 766 $ 684 $ 82 $ 766 Copper sales (millions of recoverable pounds) 552 552 Gross profit per pound of copper: Revenues, excluding adjustments $ 4.00 $ 4.00 Site production and delivery, before net noncash and other costs shown below 2.45 2.26 By-product credits (0.38) — Treatment charges 0.15 0.15 Royalty on metals 0.01 0.01 Unit net cash costs 2.23 2.42 DD&A 0.36 0.32 Metals inventory adjustments 0.02 0.02 Noncash and other costs, net 0.06 0.06 Total unit costs 2.67 2.82 Other revenue adjustments, primarily for pricing on prior period open sales 0.06 0.06 Gross profit per pound $ 1.39 $ 1.24 Reconciliation to Amounts Reported Metals Production Inventory Revenues and Delivery DD&A Adjustments Totals presented above $ 2,444 $ 1,379 $ 198 $ 11 Treatment charges (84) — — — Royalty on metals (6) — — — Noncash and other costs, net — 35 — — Other revenue adjustments, primarily for pricing on prior period open sales 35 — — — Eliminations and other 1 (2) 1 — South America mining 2,390 1,412 199 11 Other mining b 13,124 8,184 765 7 Corporate, other & eliminations (3,495) (3,443) 32 — As reported in our consolidated financial statements $ 12,019 $ 6,153 $ 996 $ 18 a. Includes silver sales of 2.1 million ounces ($23.31 per ounce average realized price). Also reflects sales of molybdenum produced by Cerro Verde to our molybdenum sales company at market-based pricing. b. Represents the combined total for our other segments as presented in Note 9. 56 Table of Contents 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 Total 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 2.09 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 Production 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 a. 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. b. Includes nonrecurring charges totaling $69 million ($0.14 per pound of copper) associated with labor related costs at Cerro Verde. c. Represents the combined total for our other segments as presented in Note 9. 57 Table of Contents Indonesia Mining Product Revenues, Production Costs and Unit Net Cash (Credits) Costs Three Months Ended June 30, 2022 (In millions) By-Product Co-Product Method Method Copper Gold Silver a Total Revenues, excluding adjustments $ 1,582 $ 1,582 $ 865 $ 32 $ 2,479 Site production and delivery, before net noncash and other costs shown below 587 374 205 8 587 Gold and silver credits (888) — — — — Treatment charges 98 63 34 1 98 Export duties 85 54 30 1 85 Royalty on metals 108 72 35 1 108 Net cash (credits) costs (10) 563 304 11 878 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 Production 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 a. Includes silver sales of 1.6 million ounces ($20.71 per ounce average realized price). b. Represents the combined total for our other segments as presented in Note 9. 58 Table of Contents 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 Total 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 Production 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 a. Includes silver sales of 1.4 million ounces ($26.08 per ounce average realized price). b. Represents the combined total for our other segments as presented in Note 9. 59 Table of Contents 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 Total 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 20 10 — 30 Total costs 507 1,448 739 30 2,217 Other revenue adjustments, primarily for pricing on prior period open sales 32 32 3 — 35 PT Smelting intercompany loss (27) (17) (9) (1) (27) Gross profit $ 2,682 $ 1,751 $ 893 $ 38 $ 2,682 Copper sales (millions of recoverable pounds) 789 789 Gold sales (thousands of recoverable ounces) 880 Gross profit per pound of copper/per ounce of gold: Revenues, excluding adjustments $ 4.04 $ 4.04 $ 1,861 Site production and delivery, before net noncash and other costs shown below 1.42 0.92 426 Gold and silver credits (2.17) — — Treatment charges 0.24 0.16 73 Export duties 0.21 0.14 63 Royalty on metals 0.26 0.17 72 Unit net cash (credits) costs (0.04) 1.39 634 DD&A 0.64 0.42 194 Noncash and other costs, net 0.04 b 0.03 11 Total unit costs 0.64 1.84 839 Other revenue adjustments, primarily for pricing on prior period open sales 0.04 0.04 3 PT Smelting intercompany loss (0.03) (0.02) (10) Gross profit per pound/ounce $ 3.41 $ 2.22 $ 1,015 Reconciliation to Amounts Reported Production Revenues and Delivery DD&A Totals presented above $ 4,891 $ 1,121 $ 510 Treatment charges (191) — — Export duties (164) — — Royalty on metals (201) — — Noncash and other costs, net 12 42 — Other revenue adjustments, primarily for pricing on prior period open sales 35 — — PT Smelting intercompany loss — 27 — Indonesia mining 4,382 1,190 510 Other mining c 11,132 8,406 454 Corporate, other & eliminations (3,495) (3,443) 32 As reported in our consolidated financial statements $ 12,019 $ 6,153 $ 996 a. Includes silver sales of 3.1 million ounces ($22.18 per ounce average realized price). b. 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. c. Represents the combined total for our other segments as presented in Note 9. 60 Table of Contents Indonesia 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 Gold Silver a Total Revenues, excluding adjustments $ 2,435 $ 2,435 $ 995 $ 68 $ 3,498 Site production and delivery, before net noncash and other costs shown below 859 598 244 17 859 Gold and silver credits (1,059) — — — — Treatment charges 140 97 40 3 140 Export duties 73 51 21 1 73 Royalty on metals 140 100 38 2 140 Net cash costs 153 846 343 23 1,212 DD&A 446 310 127 9 446 Noncash and other costs, net 3 b 2 1 — 3 Total costs 602 1,158 471 32 1,661 Other revenue adjustments, primarily for pricing on prior period open sales 72 72 (4) — 68 PT Smelting intercompany loss (90) (63) (25) (2) (90) Gross profit $ 1,815 $ 1,286 $ 495 $ 34 $ 1,815 Copper sales (millions of recoverable pounds) 568 568 Gold sales (thousands of recoverable ounces) 558 Gross profit per pound of copper/per ounce of gold: Revenues, excluding adjustments $ 4.29 $ 4.29 $ 1,785 Site production and delivery, before net noncash and other credits shown below 1.51 1.05 439 Gold and silver credits (1.86) — — Treatment charges 0.24 0.17 71 Export duties 0.13 0.09 37 Royalty on metals 0.25 0.18 68 Unit net cash costs 0.27 1.49 615 DD&A 0.78 0.55 228 Noncash and other costs, net 0.01 b — 1 Total unit costs 1.06 2.04 844 Other revenue adjustments, primarily for pricing on prior period open sales 0.12 0.12 (8) PT Smelting intercompany loss (0.16) (0.11) (46) Gross profit per pound/ounce $ 3.19 $ 2.26 $ 887 Reconciliation to Amounts Reported Production Revenues and Delivery DD&A Totals presented above $ 3,498 $ 859 $ 446 Treatment charges (140) — — Export duties (73) — — Royalty on metals (140) — — Noncash and other costs, net 31 34 — Other revenue adjustments, primarily for pricing on prior period open sales 68 — — PT Smelting intercompany loss — 90 — Indonesia mining 3,244 983 446 Other mining c 10,113 7,381 425 Corporate, other & eliminations (2,759) (2,511) 31 As reported in our consolidated financial statements $ 10,598 $ 5,853 $ 902 a. Includes silver sales of 2.6 million ounces ($26.05 per ounce average realized price). b. 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. c. Represents the combined total for our other segments as presented in Note 9. 61 Table of Contents Molybdenum Mines Product Revenues, Production Costs and Unit Net Cash Costs Three Months Ended June 30, (In millions) 2022 2021 Revenues, excluding adjustments a $ 151 $ 95 Site production and delivery, before net noncash and other costs shown below 78 54 Treatment charges and other 7 6 Net cash costs 85 60 DD&A 18 17 Noncash and other costs, net 2 2 Total costs 105 79 Gross profit $ 46 $ 16 Molybdenum sales (millions of recoverable pounds) a 8 7 Gross profit per pound of molybdenum: Revenues, excluding adjustments a $ 18.87 $ 12.77 Site production and delivery, before net noncash and other costs shown below 9.77 7.29 Treatment charges and other 0.85 0.85 Unit net cash costs 10.62 8.14 DD&A 2.27 2.29 Noncash and other costs, net 0.30 0.30 Total unit costs 13.19 10.73 Gross profit per pound $ 5.68 $ 2.04 Reconciliation to Amounts Reported Production Three Months Ended June 30, 2022 Revenues and Delivery DD&A Totals presented above $ 151 $ 78 $ 18 Treatment charges and other (7) — — Noncash and other costs, net — 2 — Molybdenum mines 144 80 18 Other mining b 7,043 4,651 473 Corporate, other & eliminations (1,771) (1,728) 16 As reported in our consolidated financial statements $ 5,416 $ 3,003 $ 507 Three Months Ended June 30, 2021 Totals presented above $ 95 $ 54 $ 17 Treatment charges and other (6) — — Noncash and other costs, net — 2 — Molybdenum mines 89 56 17 Other mining b 7,285 4,519 451 Corporate, other & eliminations (1,626) (1,508) 15 As reported in our consolidated financial statements $ 5,748 $ 3,067 $ 483 a. Reflects sales of the Molybdenum mines’ production to our molybdenum sales company at market-based pricing. On a consolidated basis, realizations are based on the actual contract terms for sales to third parties; as a result, our consolidated average realized price per pound of molybdenum will differ from the amounts reported in this table. b. Represents the combined total for our other segments as presented in Note 9. Also includes amounts associated with our molybdenum sales company, which includes sales of molybdenum produced by the Molybdenum mines and by certain of the North America and South America copper mines. 62 Table of Contents Molybdenum Mines Product Revenues, Production Costs and Unit Net Cash Costs Six Months Ended June 30, (In millions) 2022 2021 Revenues, excluding adjustments a $ 285 $ 171 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 DD&A 34 32 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 15 14 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 Metals 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 a. Reflects sales of the Molybdenum mines’ production to our molybdenum sales company at market-based pricing. On a consolidated basis, realizations are based on the actual contract terms for sales to third parties; as a result, our consolidated average realized price per pound of molybdenum will differ from the amounts reported in this table. b. Represents the combined total for our other segments as presented in Note 9. Also includes amounts associated with our molybdenum sales company, which includes sales of molybdenum produced by the Molybdenum mines and by certain of the North America and South America copper mines. 63 Table of Contents CAUTIONARY STATEMENT Our discussion and analysis contains forward-looking statements in which we discuss our potential future performance. Forward-looking statements are all statements other than statements of historical facts, such as plans, projections, or expectations relating to business outlook, strategy, goals or targets; global market conditions; ore grades and milling rates; production and sales volumes; unit net cash costs; capital expenditures; operating costs; operating plans; cash flows; liquidity; PT-FI’s financing, construction and completion of additional domestic smelting capacity in Indonesia in accordance with the terms of the special mining license (IUPK); our commitments to deliver responsibly produced copper, including plans to implement and validate all of our operating sites under the Copper Mark and to comply with other disclosure frameworks; 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 aspiration; improvements in operating procedures and technology innovations; exploration efforts and results; development and production activities, rates and costs; future organic growth opportunities; tax rates; export quotas and duties; the impact of copper, gold and molybdenum price changes; the impact of deferred intercompany profits on earnings; mineral reserve and mineral resource estimates; final resolution of settlements associated with ongoing legal proceedings; 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. The declaration and payment of dividends (base or variable) and timing and amount of any share repurchases is at the discretion of the Board and management, respectively, and is subject to a number of factors, including maintaining our net debt target, capital availability, our financial results, cash requirements, business prospects, global economic conditions, changes in laws, contractual restrictions and other factors deemed relevant by the Board or management, as applicable. The share repurchase program may be modified, increased, suspended or terminated at any time at the Board’s discretion. 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; 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 or potential global economic downturn or recession; reductions in liquidity and access to capital; the ongoing COVID-19 pandemic and any future public health crisis; political and social risks; operational risks inherent in mining, with higher inherent risks in underground mining; fluctuations in price and availability of commodities purchased; constraints on supply, logistics and transportation services; mine sequencing; changes in mine plans or operational modifications, delays, deferrals or cancellations; production rates; timing of shipments; results of technical, economic or feasibility studies; potential inventory adjustments; potential impairment of long-lived mining assets; the potential effects of violence in Indonesia generally and in the province of Papua; the Indonesia government's extension of PT-FI's export license after March 19, 2023; satisfaction of requirements in accordance with PT-FI's IUPK to extend mining rights from 2031 through 2041; the Indonesia government's approval of a deferred schedule for completion of additional domestic smelting capacity in Indonesia; cybersecurity incidents; labor relations, including labor-related work stoppages and costs; the results of the human health assessment to evaluate the potential impacts of tailings and mining waste, and compliance with applicable environmental, health and safety laws and regulations; weather- and climate-related risks; environmental risks and litigation results; our ability to comply with our responsible production commitments under specific frameworks and any changes to such frameworks and other factors described in more detail under the heading “Risk Factors” contained in Part I, Item 1A. of our 2021 Form 10-K. Investors are cautioned that many of the assumptions upon which our forward-looking statements are based are likely to change after the date the forward-looking statements are made, including for example commodity prices, which we cannot control, and production volumes and costs or technological solutions and innovation, some aspects of which we may not be able to control. Further, we may make changes to our business plans that could affect our results. We caution investors that we undertake no obligation to update any forward-looking statements, which speak only as of the date made, notwithstanding any changes in our assumptions, changes in business plans, actual experience or other changes. 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. GAAP. Refer to “Operations – Unit Net 64 Table of Contents 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.