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Item 2. Management’s Discussion and Analysis

2023-08-03 compared with 2023-05-04 · 738 added, 272 removed, 856 unchanged (54% of the section changed)

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

We faced a number of operational challenges in first-quarter 2023, including a significant weather event in Indonesia, civil unrest in Peru and productivity challenges in the U.S.

In addition, beginning January 1, 2023, PT Freeport Indonesia’s (PT-FI) commercial arrangement with PT Smelting (PT-FI’s 39.5% owned copper smelter and refinery in Gresik, Indonesia) converted from a concentrate sales agreement to a tolling arrangement, which resulted in a deferral of sales to future periods.

As a result of the transition, approximately 110 million pounds of copper and 110 thousand ounces of gold from PT-FI’s first-quarter 2023 production is deferred in inventory and will be sold in future periods.

We currently expect increasing sales volumes for the remainder of 2023.

We believe we have a strong balance sheet and a favorable outlook for cash flow generation to support continued organic growth and cash returns to shareholders.

Our organic growth pipeline is highlighted by our leach innovation initiatives, which are gaining momentum and are targeted to achieve an annual run rate of approximately 200 million pounds of copper per year by the end of 2023.

Our results for the second quarter and first six months of 2023 reflect solid operating performance and execution of our business strategy.

We continue to focus on managing costs efficiently and are advancing several important value-enhancing initiatives.

We remain confident in our long-lived and high-quality asset base and have a favorable long-term outlook for copper, which will enable solid performance in the future.

We believe we have a strong balance sheet and a positive outlook for cash flow generation to support continued organic growth and cash returns to shareholders.

Our near-term organic development pipeline is highlighted by our leach innovation initiatives, which we believe have the potential to provide substantial value from our existing leach material and reduce capital intensity for future projects.

We are currently targeting an annual run rate of approximately 200 million pounds of copper per year through these initiatives by the end of 2023, with potentially larger opportunities in the future.

We also continue to progress our underground development activities at Grasberg, supporting large-scale, long-lived, low-cost operations.

Refer to “Operations” for further discussion.

Net income attributable to common stockholders totaled $663 million in first-quarter 2023, compared with $1.5 billion in first-quarter 2022, primarily reflecting lower copper and gold sales volumes, a lower average realized price for copper and increased costs for maintenance and supplies and energy.

Refer to “Consolidated Results” for further discussion of these impacts, and for discussion of the change in our economic interest in PT-FI beginning January 1, 2023.

At March 31, 2023, we had consolidated debt of $9.6 billion and consolidated cash and cash equivalents of $6.9 billion, resulting in net debt of $2.8 billion ($1.3 billion excluding net debt for the Manyar smelter and precious metals refinery (PMR) in Indonesia - collectively, the Indonesia smelter projects).

In March 2023, we used approximately $1 billion of cash to fund the maturity of our 3.875% Senior Notes.

Net income attributable to common stockholders totaled $343 million in second-quarter 2023 and $1.0 billion for the first six months of 2023, compared with $840 million in second-quarter 2022 and $2.4 billion for the first six months of 2022, primarily reflecting lower copper sales volumes resulting from shipping delays associated with the renewal of PT Freeport Indonesia’s (PT-FI) export license, lower copper prices, the change in our economic interest in PT-FI (refer to Note 1) and increased costs for maintenance and supplies.

The results of the first six months of 2023 also reflect lower copper and gold sales volumes as a result of the deferral of sales recognition related to the PT Smelting tolling arrangement (refer to Note 9 for further discussion).

Refer to “Consolidated Results” for further discussion of these impacts.

On July 24, 2023, PT-FI was granted an export license through May 2024 for 1.7 million metric tons of copper concentrate.

Refer to Note 8 and “Operations – Indonesia Mining” for further discussion of Indonesia regulatory matters.

At June 30, 2023, we had consolidated debt of $9.5 billion and consolidated cash and cash equivalents of $6.7 billion, resulting in net debt of $2.8 billion ($0.9 billion excluding net debt for the Manyar smelter and precious metals refinery (PMR) in Indonesia - collectively, the Indonesia smelter projects).

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

At March 31, 2023, we had $3.0 billion of availability under our revolving credit facility, and PT-FI and Cerro Verde had $1.3 billion and $350 million, respectively, of availability under their respective revolving credit facilities.

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

Beginning in 2022 and through August 3, 2023, we purchased $1.3 billion aggregate principal amount of our senior notes in open-market transactions for a total cost of $1.2 billion, including $131 million aggregate principal amount in the second quarter and first six months of 2023.

At June 30, 2023, we had $3.0 billion of availability under our revolving credit facility, and PT-FI and Cerro Verde had $1.3 billion and $350 million, respectively, of availability under their respective revolving credit facilities.

Refer to Note 5 and “Capital Resources and Liquidity” for further discussion of our debt balances and transactions.

As further discussed in “Risk Factors” in Part I, Item 1A.

of our 2022 Form 10-K, 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.

Our projected 2023 financial results are also dependent on an extension of PT-FI's export license after June 10, 2023.

World market prices for these commodities have fluctuated historically and are affected by numerous factors beyond our control.

Refer to “Markets” below 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.

As discussed in Note 8, the Indonesia government issued a revised regulation on duties for various exported products, including copper concentrates.

Export duties that may be assessed under this revised regulation are not reflected in our projected financial results for the second half of 2023.

Based on current sales volume and metal price estimates, a 7.5% export duty on PT-FI sales during the second half of 2023 is estimated to impact consolidated revenues by approximately $250 million ($80 million to net income attributable to common stock) for the year 2023, including approximately $120 million ($40 million to net income attributable to common stock) in third-quarter 2023.

PT-FI is continuing to discuss the applicability of the revised regulation with the Indonesia government and will contest, and seek recovery of, any assessments.

Consolidated Sales Volumes

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Projected molybdenum sales include 50 million pounds produced by our North America and South America copper mines and 29 million pounds produced by our Molybdenum mines.

Consolidated sales volumes in second-quarter 2023 are expected to approximate 1.1 billion pounds of copper, 500 thousand ounces of gold and 20 million pounds of molybdenum.

Projected sales volumes are dependent on operational performance, weather-related conditions, timing of shipments, and other factors, including the extension of PT-FI's export license after June 10, 2023, detailed in the “Cautionary Statement” below.

Consolidated sales volumes in third-quarter 2023 are expected to approximate 1.0 billion pounds of copper, 420 thousand ounces of gold and 20 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.

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Consolidated Unit Net Cash Costs

Assuming average prices of $2,000 per ounce of gold and $18.00 per pound of molybdenum for the remainder of 2023 and achievement of current volume and cost estimates, consolidated unit net cash costs (net of by-product credits) for our copper mines are expected to average $1.55 per pound of copper for the year 2023 (including $1.51 per pound of copper in second-quarter 2023).

Assuming average prices of $1,950 per ounce of gold and $20.00 per pound of molybdenum for the remainder of 2023 and achievement of current volume and cost estimates, consolidated unit net cash costs (net of by-product credits) for our copper mines are expected to average $1.55 per pound of copper for the year 2023 (including $1.61 per pound of copper in third-quarter 2023).

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

The impact of price changes during the remainder of 2023 on consolidated unit net cash costs for the year 2023 would approximate $0.03 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 also vary with fluctuations in other volumes and realized prices, such as those for gold and molybdenum.

Estimated consolidated unit net cash costs for the second half of 2023 do not include a 7.5% export duty at PT-FI that may be assessed under the revised regulation (refer to Note 8 for further discussion).

Based on current sales volume and metal price estimates, the assessment of a 7.5% export duty on PT-FI sales during the second half of

2023 is estimated to increase consolidated unit net cash costs by $0.07 per pound of copper for the year 2023 (including $0.12 per pound of copper in third-quarter 2023).

Consolidated Operating Cash Flows

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and other factors.

Based on current sales volume and cost estimates, and assuming average prices of $4.00 per pound for copper, $2,000 per ounce for gold, and $18.00 per pound for molybdenum for the remainder of 2023, our consolidated operating cash flows are estimated to approximate $7.0 billion (including $0.3 billion of working capital and other sources) for the year 2023.

Based on current sales volume and cost estimates, and assuming average prices of $3.90 per pound for copper, $1,950 per ounce for gold, and $20.00 per pound for molybdenum for the remainder of 2023, our consolidated operating cash flows are estimated to approximate $6.4 billion (net of less than $0.1 billion of working capital and other uses) for the year 2023.

Estimated consolidated operating cash flows for the year 2023 also reflect an estimated income tax provision of $2.4 billion (refer to “Consolidated Results – Income Taxes” for further discussion of our projected income tax rate for the year 2023).

The impact of price changes for the remainder of 2023 on operating cash flows would approximate $240 million for each $0.10 per pound change in the average price of copper, $100 million for each $100 per ounce change in the average price of gold and $60 million for each $2.00 per pound change in the average price of molybdenum.

Estimated consolidated operating cash flows for the second half of 2023 do not include a 7.5% export duty at PT-FI that may be assessed under the revised regulation (refer to Note 8 for further discussion of the revised regulation).

Consolidated Capital Expenditures

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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 $0.7 billion for discretionary growth projects, primarily for development of Kucing Liar, a mill recovery project with the installation of a new copper cleaner circuit at PT-FI, and expansion projects at Bagdad and Lone Star.

We closely monitor market conditions and

will continue to adjust our operating plans, including capital expenditures, to protect our liquidity and preserve our asset values, as necessary.

We closely monitor market conditions and will continue to adjust our operating plans, including capital expenditures, to protect our liquidity and preserve our asset values, as necessary.

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

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

During the period from January 2013 through March 2023, the London Metal Exchange (LME) copper settlement price varied from a low of $1.96 per pound in 2016 to a record high of $4.87 per pound in 2022;

During the period from January 2013 through June 2023, the London Metal Exchange (LME) copper settlement price varied from a low of $1.96 per pound in 2016 to a record high of $4.87 per pound in 2022;

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

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of our 2022 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 2013 through March 2023.

During first-quarter 2023, LME copper settlement prices ranged from a low of $3.72 per pound to a high of $4.28 per pound, averaged $4.05 per pound and settled at $4.05 per pound on March 31, 2023.

Physical market tightness continues to provide significant support to the price of copper, and inventory levels remain low with slightly more than three days of global consumption available.

The LME copper settlement price was $3.89 per pound on April 28, 2023.

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 2013 through June 2023.

During second-quarter 2023, LME copper settlement prices ranged from a low of $3.59 per pound to a high of $4.12 per pound, averaged $3.84 per pound and settled at $3.72 per pound on June 30, 2023.

Volatility continued to be high across the copper market in second-quarter 2023, influenced by China’s weak economic data and wide-ranging views about the global economy.

Physical market tightness continues to provide significant support to the price of copper, and inventory levels remain low with slightly less than two and a half days of global consumption available.

The LME copper settlement price was $3.92 per pound on July 31, 2023.

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

The small number of approved, large-scale projects beyond those 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.

This graph presents London PM gold prices from January 2013 through March 2023.

During first-quarter 2023, London PM gold prices ranged from a low of $1,811 per ounce to a high of $1,994 per ounce, averaged $1,890 per ounce, and closed at $1,980 per ounce on March 31, 2023.

Forecasts are divided as analysts are weighing the liquidity concerns in the U.S.

banking sector and weakness of the U.S.

dollar against the expected central bank response to persistent inflation.

The London PM gold price was $1,983 per ounce on April 28, 2023.

This graph presents the Platts Metals Daily Molybdenum Dealer Oxide weekly average price from January 2013 through March 2023.

During first-quarter 2023, the weekly average price of molybdenum ranged from a low of $24.65 per pound to a high of $37.42 per pound and averaged $32.78 per pound.

As China increased exports, molybdenum prices declined significantly from the first quarter high.

This graph presents London PM gold prices from January 2013 through June 2023.

During second-quarter 2023, London PM gold prices ranged from a low of $1,900 per ounce to a high of $2,048 per ounce, averaged $1,976 per ounce, and closed at $1,912 per ounce on June 30, 2023.

Forecasts are divided as analysts evaluate climbing treasury yields, the strength of the U.S.

dollar, the potential lagged impact of a significant cumulative rate-hiking cycle, and elevated geopolitical risk.

The London PM gold price was $1,971 per ounce on July 31, 2023.

This graph presents the Platts Metals Daily Molybdenum Dealer Oxide weekly average price from January 2013 through June 2023.

During second-quarter 2023, the weekly average price of molybdenum ranged from a low of $17.09 per pound to a high of $22.75 per pound, averaged $21.25 per pound and was $21.96 per pound on June 30, 2023.

Following sharp price increases in early 2023, China increased exports of molybdenum and Chinese buyers moderated purchases, causing significant price declines near the end of first-quarter 2023.

During second-quarter 2023, buyers reentered the market and supply remained tight amidst level molybdenum demand supported by segments such as energy, aerospace and defense.

We believe long-term fundamentals for molybdenum are positive with favorable demand drivers and limited supply.

The Platts Metals Daily Molybdenum Dealer Oxide weekly average price was $24.65 per pound on March 31, 2023, and $21.20 per pound on April 28, 2023.

The Platts Metals Daily Molybdenum Dealer Oxide weekly average price was $22.89 per pound on July 31, 2023.

CONSOLIDATED RESULTS

Three Months Ended March 31,

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

2023 2022 2023 2022

SUMMARY FINANCIAL DATA

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$ 1,410 $ 1,736

Net income attributable to common stock c

$ 3,011 $ 4,545

Net income attributable to common stock c,d

Diluted net income per share of common stock $ 0.23 $ 0.57 $ 0.69 $ 1.61

Diluted weighted-average shares of common stock outstanding 1,442 1,457 1,443 1,463

Operating cash flows f

Operating cash flows g

$ 1,673 $ 1,621 $ 2,723 $ 3,312

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

Includes favorable adjustments to prior period provisionally priced concentrate and cathode copper sales totaling $210 million ($72 million to net income attributable to common stock or $0.05 per share) in first-quarter 2023 and $102 million ($42 million to net income attributable to common stock or less than $0.03 per share) in first-quarter 2022.

Includes (unfavorable) favorable adjustments to prior period provisionally priced concentrate and cathode copper sales totaling $(118) million ($(45) million to net income attributable to common stock or $(0.03) per share) in second-quarter 2023, $(355) million ($(154) million to net income attributable to common stock or $(0.10) per share) in second-quarter 2022, $182 million ($61 million to net income attributable to common stock or $0.04 per share) for the first six months of 2023 and $65 million ($27 million to net income attributable to common stock or $0.02 per share) for the first six months of 2022.

Refer to Note 6 for further discussion.

Beginning January 1, 2023, our economic and equity ownership interest in PT-FI is 48.76%.

Prior to January 1, 2023, our economic interest in PT-FI approximated 81%.

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

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

Includes net charges totaling $94 million ($0.06 per share) primarily associated with net adjustments to environmental obligations, contested tax matters and asset impairments in North America.

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

Working capital and other uses totaled $467 million in first-quarter 2023 and $811 million in first-quarter 2022.

Three Months Ended March 31,

Includes net charges totaling $157 million ($0.11 per share) in second-quarter 2023 and $251 million ($0.17 per share) for the first six months of 2023, primarily associated with charges for contested tax rulings by the Peruvian Supreme Court, environmental obligations, an accrual for a potential administrative fine in Indonesia and impairments and contract-cancellation costs.

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, 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 adjustments.

Working capital and other sources (uses) totaled $237 million in second-quarter 2023, $100 million in second-quarter 2022, $(230) million for the first six months of 2023 and $(711) million for the first six months of 2022.

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

2023 2022 2023 2022

SUMMARY OPERATING DATA

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Sales, excluding purchases 1,029 a

1,087 1,861 a

Average realized price per pound $ 3.84 $ 4.03

$ 3.91 $ 4.18

Site production and delivery costs per pound b

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Average realized price per pound $ 24.27 $ 19.44 $ 27.24 $ 19.37

Beginning on January 1, 2023, PT-FI’s commercial arrangement with PT Smelting converted from a concentrate sales agreement to a tolling arrangement, which resulted in a change in timing of sales.

As a result of the transition, approximately 110 million pounds of copper and 110 thousand ounces of gold from PT-FI's first-quarter 2023 production is deferred in inventory and will be sold in future periods.

Beginning on January 1, 2023, PT-FI’s commercial arrangement with PT Smelting converted from a copper concentrate sales agreement to a tolling arrangement, which resulted in a change in timing of sales.

At June 30, 2023, approximately 85 million pounds of copper and 40 thousand ounces of gold from PT-FI's production was deferred in inventory and will be sold as refined metal in future periods.

Reflects per pound weighted-average production and delivery costs and unit net cash costs (net of by-product credits) for all copper mines, before net noncash and other costs.

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

Consolidated revenues totaled $5.4 billion in first-quarter 2023 and $6.6 billion in first-quarter 2022.

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

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

Consolidated revenues totaled $5.7 billion in second-quarter 2023, $5.4 billion in second-quarter 2022, $11.1 billion for the first six months of 2023 and $12.0 billion for the first six months of 2022.

Revenues from our mining operations and processing facilities primarily include the sale of copper in 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 March 31

Three Months Ended June 30 Six Months Ended June 30

Consolidated revenues - 2022 period $ 5,416 $ 12,019

Lower sales volumes:

(Lower) higher sales volumes:

Copper (229) (1,040)

Gold 35 (223)

Molybdenum 17 17

(Lower) higher average realized prices:

Copper (196) (503)

Molybdenum 97 311

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Higher Atlantic Copper revenues 315 353

Higher revenues from purchased copper 134

Lower treatment charges 32

(Lower) higher revenues from purchased copper (32) 102

(Higher) lower treatment charges (3) 29

Lower royalties and export duties 105 220

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Sales Volumes.

Consolidated copper and gold sales volumes decreased in first-quarter 2023, compared with first-quarter 2022, primarily as a result of the deferral of sales recognition related to the PT Smelting tolling arrangement and the timing of shipments.

In addition, PT-FI experienced lower operating rates at the Grasberg minerals district associated with a significant weather event that temporarily disrupted operations during February 2023.

Consolidated copper sales volumes decreased in the second quarter and first six months of 2023, compared to second quarter and first six months of 2022, primarily as a result of shipping delays in Indonesia associated with the renewal of PT-FI's export license and lower ore grades in North America.

Lower copper and gold

sales volumes for the first six months of 2023, compared to the 2022 period, also reflects the deferral of sales recognition related to the PT Smelting tolling arrangement.

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 first-quarter 2023, compared with first-quarter 2022, were 12% lower for copper, 2% higher for gold and 57% higher for molybdenum.

Average realized copper prices include net favorable adjustments to current period provisionally priced copper sales totaling $21 million in first-quarter 2023 and $116 million in first-quarter 2022.

Average realized prices in second-quarter 2023, compared with second-quarter 2022, were 5% lower for copper, 6% higher for gold and 25% higher for molybdenum, and average realized prices for the first six months of 2023, compared with the first six months of 2022, were 6% lower for copper, 5% higher for gold and 41% higher for molybdenum.

Average realized copper prices include net unfavorable adjustments to current period provisionally priced copper sales totaling $52 million in second-quarter 2023, $365 million in second-quarter 2022, $121 million for the first six months of 2023 and $567 million for the first six months of 2022.

As discussed in Note 6, all of our copper concentrate and some 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.

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 copper 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.

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Prior Period Provisionally Priced Copper Sales.

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

, provisionally priced sales at December 31, 2022 and 2021) recorded in consolidated revenues totaled $210 million in first-quarter 2023 and $102 million in first-quarter 2022.

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

, provisionally priced sales at March 31, 2023 and 2022, and December 31, 2022 and 2021) recorded in consolidated revenues totaled $(118) million in second-quarter 2023, $(355) million in second-quarter 2022, $182 million for the first six months of 2023 and $65 million the first six months of 2022.

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

At March 31, 2023, we had provisionally priced copper sales totaling 262 million pounds of copper (net of intercompany sales and noncontrolling interests) recorded at an average of $4.08 per pound, subject to final pricing over the next several months.

We estimate that each $0.05 change in the price realized from the March 31, 2023, provisional price recorded would have an approximate $8 million effect on our 2023 net income attributable to common stock.

The LME copper price settled at $3.89 per pound on April 28, 2023.

Beginning January 1, 2023, PT-FI’s commercial arrangement with PT Smelting converted from a concentrate sales agreement to a tolling arrangement.

Under this arrangement PT-FI pays PT Smelting a tolling fee to smelt and refine its concentrate and PT-FI retains title to all products for sale to third parties ( i.e ., there are no further sales to PT Smelting).

PT-FI’s sale of copper cathodes under the tolling arrangement are priced in the month of shipment and are not subject to provisional pricing.

At June 30, 2023, we had provisionally priced copper sales totaling 271 million pounds of copper (net of intercompany sales and noncontrolling interests) recorded at an average of $3.77 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, 2023, provisional price recorded would have an approximate $8 million effect on our 2023 net income attributable to common stock.

The LME copper price settled at $3.92 per pound on July 31, 2023.

Atlantic Copper Revenues.

Atlantic Copper revenues totaled $756 million in first-quarter 2023, compared with $718 million in first-quarter 2022.

Higher revenues in first-quarter 2023, compared with first-quarter 2022, primarily reflects higher sales volumes.

Atlantic Copper revenues totaled $748 million in second-quarter 2023 and $1.5 billion for the first six months of 2023, compared with $433 million in second-quarter 2022 and $1.2 billion for the first six months of 2022.

Higher revenues in the 2023 periods, compared with 2022 periods, primarily reflects higher sales volumes in the 2023 periods, mostly reflecting the impact of reduced operations in second-quarter 2022 because of a scheduled major maintenance turnaround.

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 48 million pounds in first-quarter 2023 and 15 million pounds in first-quarter 2022.

The volumes of copper purchases vary depending on cathode production from our operations and totaled 19 million pounds in second-quarter 2023, 23 million pounds in second-quarter 2022, 67 million pounds for the first six months of 2023 and 38 million pounds for the first six months of 2022.

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 decrease in the treatment charges in first-quarter 2023 compared to first-quarter 2022 primarily reflects lower sales volumes and PT-FI’s commercial arrangement with PT Smelting converting from a concentrate sales agreement to a tolling arrangement.

Revenues from our copper 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 second-quarter 2023, compared to second-quarter 2022, primarily reflects higher treatment charges for South America copper concentrate, partly offset by lower copper concentrate sales volumes.

The decrease in the treatment charges for the first six months of 2023, compared with the first six months of 2022, primarily reflects lower copper concentrate sales volumes and PT-FI’s commercial arrangement with PT Smelting converting from a copper concentrate sales agreement to a tolling arrangement.

Costs incurred under the tolling arrangement are recorded as production costs in the consolidated statements of income (refer to Note 9).

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Royalties are primarily associated with PT-FI sales and vary with the volume of metal sold and the prices of copper and gold.

In late 2022, the export duty rate declined from 5% to 2.5% as a result of smelter development progress.

In March 2023, the Indonesia government verified that construction progress on the Manyar smelter exceeded 50%, allowing PT-FI’s export duties to be eliminated effective March 29, 2023.

Lower royalties and export duties during first-quarter 2023, compared with first-quarter 2022, reflect lower PT-FI copper and gold sales volumes and copper prices as well as a lower export duty rate of 2.5% in first-quarter 2023, compared to 5% in first-quarter 2022.

In late 2022, the export duty rate on PT-FI’s sales declined from 5% to 2.5% as a result of smelter development progress.

In March 2023, the Indonesia government verified that construction progress on the Manyar smelter exceeded 50%, which resulted in the elimination of export duties effective March 29, 2023.

Lower royalties and export duties during the 2023 periods, compared with the 2022 periods, reflect lower PT-FI copper sales volumes and the reduction in and subsequent elimination of export duties.

In July 2023, the Indonesia government issued a revised regulation on duties for various exported products, including copper concentrates.

PT-FI is continuing to discuss the applicability of the revised regulation with the Indonesia government and will contest, and seek recovery of, any assessments.

Refer to Note 8 and “Outlook” for further discussion.

Production and Delivery Costs

Consolidated production and delivery costs totaled $3.2 billion in both first-quarter 2023 and 2022, reflecting increased costs for energy (which represents approximately 21% of our site operating costs), unplanned maintenance and inflationary cost pressures on input costs, mostly offset by lower sales volumes.

Consolidated production and delivery costs totaled $3.5 billion in second-quarter 2023, $3.0 billion in second-quarter 2022, $6.7 billion for the first six months of 2023 and $6.2 billion for the first six months of 2022.

Higher costs in second-quarter 2023, compared to second-quarter 2022, primarily reflected increased costs at PT-FI associated with higher operating rates and increased underground maintenance costs.

Higher costs for the first six months of 2023, compared to the first six months of 2022, also reflected higher commodity-related costs across our operations.

Site Production and Delivery Costs Per Pound.

Site production and delivery costs for our copper mining operations primarily include labor, energy and other 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 $2.57 per pound of copper in first-quarter 2023 and $2.03 per pound of copper in first-quarter 2022.

Higher consolidated site production and delivery costs per pound of copper for first-quarter 2023, compared with first-quarter 2022, primarily reflect higher energy prices and increased costs for consumables such as sulfuric acid, explosives, key equipment parts and other supplies and services.

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.

Consolidated site production and delivery costs (before net noncash and other costs) for our copper mines averaged $2.39 per pound of copper in second-quarter 2023, $2.09 per pound of copper in second-quarter 2022, $2.47 per pound of copper for the first six months of 2023 and $2.06 per pound of copper for the first six months of 2022.

Refer to “Operations – Unit Net Cash Costs” 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.

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.

Lower consolidated depreciation, depletion and amortization (DD&A) of $399 million in first-quarter 2023, compared to $489 million in first-quarter 2022, primarily reflects lower sales volumes from PT-FI.

Consolidated depreciation, depletion and amortization (DD&A) totaled $547 million in second-quarter 2023, $507 million in second-quarter 2022, $946 million for the first six months of 2023 and $996 million for the first six months of 2022.

Environmental Obligations and Shutdown Costs

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Shutdown costs include care-and-maintenance costs and any litigation, remediation or related expenditures associated with closed facilities or operations.

Higher net charges for environmental obligations and shutdown costs in first-quarter 2023, compared to first-quarter 2022, primarily reflect net revisions to long-term historical environmental obligations totaling $56 million in first-quarter 2023.

Higher net charges for environmental obligations and shutdown costs in the 2023 periods, compared to the 2022 periods, primarily reflect net revisions to long-term historical environmental obligations totaling $60 million in second-quarter 2023 and $116 million for the first six months of 2023, compared to $13 million for both the second quarter and first six months of 2022.

Interest Expense, Net

Consolidated interest costs (before capitalization) totaled $207 million in first-quarter 2023 and $153 million in first-quarter 2022.

The increase in consolidated interest costs (before capitalization) for the 2023 period, compared to the 2022 period, is primarily related to interest associated with PT-FI’s $3.0 billion of senior notes that were issued in April 2022 and a charge of $25 million related to contested tax matters in Peru.

Consolidated interest costs (before capitalization) totaled $234 million in second-quarter 2023, $189 million in second-quarter 2022, $441 million for the first six months of 2023 and $342 million for the first six months of 2022.

The increase in consolidated interest costs (before capitalization) for the 2023 periods, compared to the 2022 periods, primarily reflects interest charges recognized for Cerro Verde’s contested tax rulings by the Peruvian Supreme Court, which totaled $50 million in second-quarter 2023 and $74 million for the first six months of 2023.

Higher consolidated interest costs (before capitalization) for the first six months of 2023 also reflected higher interest associated with PT-FI’s $3.0 billion of senior notes that were issued in April 2022.

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

Capitalized interest totaled $56 million in first-quarter 2023 and $26 million in first-quarter 2022.

The increase in capitalized interest costs for the 2023 period resulted from increased construction and development projects in process, primarily at our Indonesia smelter projects.

Capitalized interest totaled $62 million in second-quarter 2023, $33 million in

second-quarter 2022, $119 million for the first six months of 2023 and $59 million for the first six months of 2022.

The increase in capitalized interest costs in the 2023 periods, compared to the 2022 periods, resulted from increased construction and development projects in process, primarily for the Indonesia smelter projects.

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

Other Income, Net

Other income, net totaled $88 million in first-quarter 2023 and $31 million in first-quarter 2022.

The increase in other income, net for the 2023 period, compared to the 2022 period, is primarily related to higher interest income.

Other income, net totaled $24 million in second-quarter 2023, $11 million in second-quarter 2022, $112 million for the first six months of 2023 and $42 million for the first six months of 2022.

The increase in other income, net primarily reflects higher interest income of $66 million for the quarterly periods and $150 million for the six month periods, partly offset by a $69 million charge in the second quarter and first six months of 2023 associated with Cerro Verde’s contested tax rulings by the Peruvian Supreme Court.

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

Three Months Ended March 31,

Six Months Ended June 30,

Income (Loss) a

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$ 3 $ 909 1 % c

South America 499 39 % (194) 612 39 % (241)

South America 642 d

48 % (307) 776 39 % (302)

Indonesia 1,981 37 % (740) 2,625 39 % (1,020)

Eliminations and other (67) N/A 21 2 N/A (7)

Rate adjustment d

Rate adjustment e

— N/A (15) — N/A (61)

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

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

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

See below for discussion of the provisions of the U.S.

Inflation Reduction Act of 2022 (Act).

Inflation Reduction Act of 2022.

Includes net charges associated with Cerro Verde’s contested tax rulings by the Peruvian Supreme Court totaling $142 million for the first six months of 2023.

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

In August 2022, the Act was signed into law, which includes, among other provisions, a new Corporate Alternative Minimum Tax (CAMT) of 15% on the adjusted financial statement income (AFSI) of corporations with average AFSI exceeding $1.0 billion over a three-year period.

The provisions of the Act became applicable to us on January 1, 2023.

The provisions of the U.S.

Inflation Reduction Act of 2022 (the Act) became applicable to us on January 1, 2023.

The Act includes, among other provisions, a new Corporate Alternative Minimum Tax (CAMT) of 15% on the adjusted financial statement income (AFSI) of corporations with average AFSI exceeding $1.0 billion over a three-year period.

As limited guidance related to how the CAMT provisions of the Act should be applied or otherwise administered has been released by the U.S.

Department of the Treasury (Treasury), uncertainty remains regarding the application of the CAMT.

We have made interpretations of certain provisions of the Act, and based on these interpretations, determined that the provisions of the Act did not impact our first-quarter 2023 financial results.

Department of the Treasury (the Treasury), uncertainty remains regarding the application of the CAMT.

We have made interpretations of certain provisions of the Act, and based on these interpretations, determined that the provisions of the Act did not impact our 2023 financial results for the first six months of 2023.

However, future guidance released by the Treasury may differ from our interpretations, which could be material and may further limit our ability to realize future benefits from our U.S.

net operating losses.

Assuming achievement of current sales volume and cost estimates and average prices of $3.90 per pound for copper, $1,950 per ounce for gold and $20.00 per pound for molybdenum for the remainder of 2023, we estimate our consolidated effective tax rate for the year 2023 would approximate 36%.

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Noncontrolling Interests

Net income attributable to noncontrolling interests is primarily associated with PT-FI, Cerro Verde and El Abra and totaled $386 million in first-quarter 2023 (which represented 25% of our consolidated income before income taxes) and $377 million in first-quarter 2022 (which represented 14% of our consolidated income before income taxes).

Beginning January 1, 2023, our economic and equity ownership interest in PT-FI is 48.76%.

Prior to January 1, 2023, our economic interest in PT-FI approximated 81%.

As discussed in Note 3 of our 2022 Form 10-K, in accordance with provisions pertaining to PT-FI’s shareholders agreement, our first-quarter 2023 net income included a $35 million net benefit associated with PT-FI sales volumes that were attributed to us at our previous approximate 81% economic ownership interest.

Based on current sales volume and cost estimates and assuming average prices of $4.00 per pound of copper, $2,000 per ounce of gold and $18.00 per pound of molybdenum and taking into account the change in our economic interest in PT-FI, net income attributable to noncontrolling interests is estimated to approximate $2.2 billion for the year 2023 (which would represent 30% of our consolidated income before income taxes).

The actual amount will depend on many factors, including relative performance of each business segment, commodity prices, costs and other factors.

Net income attributable to noncontrolling interests is primarily associated with our noncontrolling shareholders at PT-FI, Cerro Verde and El Abra and totaled $388 million in second-quarter 2023, $198 million in second-quarter 2022, $774 million for the first six months of 2023 and $575 million for the first six months of 2022.

Our economic interest in PT-FI approximated 81% through 2022, and beginning January 1, 2023, our economic interest in PT-FI is 48.76%.

As discussed in Note 3 of our 2022 Form 10-K, in accordance with provisions pertaining to PT-FI’s shareholders agreement, first-quarter 2023 net income included a $35 million net benefit associated with PT-FI sales volumes that were attributed to us at our previous approximate 81% economic ownership interest.

Refer to Note 9 for net income attributable to noncontrolling interests for each of our business segments.

Responsible Production

2022 Annual Report on Sustainability.

In April 2023, we published our 2022 Annual Report on Sustainability, which is available on our website at fcx.com/sustainability , marking our 22nd year of reporting on our sustainability progress.

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

The Copper Mark.

We demonstrate our responsible production performance through the Copper Mark, a comprehensive assurance framework developed specifically for the copper industry.

To achieve the Copper Mark, each site is required to complete an independent external assurance process to assess conformance with 32 environmental, social and governance criteria.

Awarded sites must be revalidated every three years.

We have achieved the Copper Mark at all 12 of our copper producing sites globally.

In addition, following the extension of the Copper Mark framework to molybdenum producers in 2022, our two primary molybdenum mines and four copper mines that produce by-product molybdenum were awarded the Molybdenum Mark.

Based on current sales volume and cost estimates and assuming average prices of $3.90 per pound of copper, $1,950 per ounce of gold and $20.00 per pound of molybdenum and taking into account the change in our economic interest in PT-FI, net income attributable to noncontrolling interests is estimated to approximate $2.0 billion for the year 2023.

The actual amount will depend on many factors, including relative performance of each business segment, commodity prices, costs and other factors.

Leaching Innovation Initiatives

We are continuing to advance efforts to increase copper production through enhanced recoveries from our large existing leach stockpiles.

We have added covers to over 30% of our historical leach pads in an effort to increase temperatures and enhance recovery within the stockpiles.

We are also pursuing third-party and internal initiatives for additives to enhance recovery and have identified new areas of leach opportunities on existing stockpiles and are using data analytics to improve our operating practices.

The data analytics work is providing new insights to determine optimal operating protocols under various conditions of the stockpiles.

Based on results to date, we are gaining confidence in achieving our annual-run-rate target of approximately 200 million pounds of copper by the end of 2023, with potentially larger opportunities in the future.

We are advancing a series of initiatives across our North America and South America operations to incorporate new applications, technologies and data analytics to our leaching processes.

We believe these leach innovation initiatives provide opportunities to produce incremental copper from our large existing leach stockpiles.

Initial results support the potential for incremental low-cost additions to our production and reserve profile and we are targeting an annual run rate of approximately 200 million pounds of copper per year through these initiatives by the end of 2023.

We are pursuing new technology applications that have the potential for significant increases in recoverable metal beyond the initial target.

Feasibility and Optimization Studies

We are engaged in various studies associated with potential future expansion projects primarily at our mining operations.

The costs for these studies are charged to production and delivery costs as incurred and totaled $50 million in first-quarter 2023 and $20 million in first-quarter 2022.

We estimate the costs of these studies will

approximate $200 million for the year 2023 (including approximately $70 million in second-quarter 2023), compared with approximately $140 million for the year 2022, subject to market conditions and other factors.

The costs for these studies are charged to production and delivery costs as incurred and totaled $51 million in second-quarter 2023, $31 million in second-quarter 2022, $101 million for the first six months of 2023 and $50 million for the first six months of 2022.

We estimate the costs of these studies will approximate $200 million for the year 2023 (including approximately $60 million in third-quarter 2023), subject to market conditions and other factors.

North America Copper Mines

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

We are planning an expansion to double the concentrator capacity of the Bagdad operation in northwest Arizona and expect to complete a feasibility study in late 2023.

In parallel, we are advancing plans for expanded tailings infrastructure projects to support Bagdad's long-range plans.

At Safford/Lone Star, production from oxide ores is approaching 300 million pounds of copper per year, which reflects expansion of the initial design capacity of 200 million pounds of copper per year.

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The positive drilling results indicate potential opportunities to expand production to include sulfide ores in the future.

We are advancing metallurgical testing and mine development planning for a potential significant long-term investment for development of identified large sulfide resources.

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

We are conducting a feasibility study, which is expected to be completed in the second half of 2023.

In parallel, we are advancing plans for expanded tailings infrastructure projects to support Bagdad's long-range plans.

The timing of future developments will be dependent on market conditions, labor and supply chain considerations and other economic factors.

We are advancing metallurgical testing and mine planning for a potential significant long-term investment for development of identified large sulfide resources.

A tight labor market and increased competition from other employers in North America continue to represent strategic challenges that are impacting production and our ability to further expand current mining rates.

The timing of all future developments will be dependent on market conditions, labor and supply chain considerations and other economic factors.

Operating Data.

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

Three Months Ended March 31,

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

2023 2022 2023 2022

Operating Data, Net of Joint Venture Interests

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Refer to “Consolidated Results” for our consolidated molybdenum sales volumes, which include sales of molybdenum produced at the North America copper mines.

Our consolidated copper sales volumes from North America of 332 million pounds in first-quarter 2023 were lower than first-quarter 2022 copper sales volumes of 381 million pounds, primarily reflecting the timing of shipments in first-quarter 2022 and reduced production in first-quarter 2023 associated with lower mining rates, lower ore grades and unplanned maintenance, partly offset by incremental copper associated with leach initiatives.

Our consolidated copper sales volumes from North America totaled 339 million pounds in second-quarter 2023, 389 million pounds in second-quarter 2022, 671 million pounds for the first six months of 2023 and 770 million pounds for the first six months of 2022.

Lower copper sales volumes in the 2023 periods, compared with the 2022 periods, primarily reflect lower ore grades and the timing of shipments, partly offset by incremental copper associated with leach initiatives.

North America copper sales are estimated to approximate 1.4 billion pounds for the year 2023.

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

Three Months Ended March 31,

Three Months Ended June 30,

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

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DD&A 0.29 0.26 1.15 0.27 0.24 0.81

Metals inventory adjustments — — — 0.02 0.02 0.16

Noncash and other costs, net 0.15 b

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Molybdenum sales (millions of recoverable pounds) a

Six Months Ended June 30,

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

Copper Molyb-

Revenues, excluding adjustments $ 4.03 $ 4.03 $ 25.52 $ 4.46 $ 4.46 $ 18.36

Site production and delivery, before net noncash

and other costs shown below

2.92 2.55 17.81 2.44 2.25 11.68

By-product credits (0.57) — — (0.35) — —

Treatment charges 0.13 0.12 — 0.10 0.10 —

Unit net cash costs 2.48 2.67 17.81 2.19 2.35 11.68

DD&A 0.30 0.26 1.24 0.27 0.25 0.85

Metals inventory adjustments — — — 0.01 0.01 0.08

Noncash and other costs, net 0.19 b

0.16 1.06 0.09 b

Total unit costs 2.97 3.09 20.11 2.56 2.68 12.84

Revenue adjustments, primarily for pricing

on prior period open sales

0.02 0.02 — (0.01) (0.01) —

Gross profit per pound $ 1.08 $ 0.96 $ 5.41 $ 1.89 $ 1.77 $ 5.52

Copper sales (millions of recoverable pounds) 676 676 770 770

Molybdenum sales (millions of recoverable pounds) a

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

Includes charges totaling $0.08 per pound of copper in first-quarter 2023 and $0.02 per pound of copper in first-quarter 2022 for feasibility and optimization studies.

First-quarter 2023 also includes charges totaling $0.05 per pound of copper related to asset impairments.

Includes charges totaling $0.08 per pound of copper in second-quarter 2023, $0.05 per pound of copper in second-quarter 2022, $0.08 per pound of copper for the first six months of 2023 and $0.04 per pound of copper for the first six months of 2022 for feasibility and optimization studies.

Our North America copper mines have varying cost structures because of differences in ore grades and characteristics, processing costs, by-product credits and other factors.

Average unit net cash costs (net of by-product credits) for the North America copper mines of $2.45 per pound of copper in first-quarter 2023 were higher than first-quarter 2022 unit net cash costs of $2.13 per pound of copper, primarily reflecting lower volumes and increased costs for maintenance and supplies, labor and energy, partly offset by higher molybdenum by-product credits.

Average unit net cash costs (net of by-product credits) for the North America copper mines of $2.51 per pound of copper in second-quarter 2023 and $2.48 per pound for the first six months of 2023 were higher than second-quarter 2022 unit net cash costs of $2.26 per pound and $2.19 per pound for the first six months for 2022, reflecting the impact of lower volumes and increased

costs of maintenance, supplies and labor, partly offset by higher molybdenum by-product credits and lower costs of energy.

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.

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

Average unit net cash costs (net of by-product credits) for our North America copper mines are expected to approximate $2.62 per pound of copper for the year 2023, based on achievement of current volume and cost estimates and assuming an average molybdenum price of $18.00 per pound for the remainder of 2023.

North America’s average unit net cash costs for the year 2023 would change by approximately $0.03 per pound for each $2 per pound change in the average price of molybdenum for the remainder of 2023.

Average unit net cash costs (net of by-product credits) for our North America copper mines are expected to approximate $2.56 per pound of copper for the year 2023, based on achievement of current volume and cost estimates and assuming an average molybdenum price of $20.00 per pound for the second half of 2023.

North America’s average unit net cash costs for the year 2023 would change by approximately $0.02 per pound for each $2 per pound change in the average price of molybdenum for the second half of 2023.

South America Mining

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

We are advancing plans to invest in water

infrastructure to provide options to extend existing operations, while continuing to monitor potential changes in Chile's regulatory and fiscal matters.

We are advancing plans to invest in water infrastructure to provide options to extend existing operations, while continuing to monitor potential changes in Chile's regulatory and fiscal matters.

Operating Data.

Following is summary consolidated operating data for South America mining:

Three Months Ended March 31,

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

2023 2022 2023 2022

Copper (millions of recoverable pounds)

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

Beginning in December 2022 and continuing in first-quarter 2023, heightened tensions, protests and social unrest emerged in Peru following a change in the country's political leadership.

Cerro Verde operated at reduced rates from time to time during first-quarter 2023.

While demonstrations and road blockages subsided in recent weeks, the potential for civil unrest and disruption of commerce and supply chains continues.

Cerro Verde resumed normal operations in March 2023.

We continue to monitor the situation with a priority on safety and security.

Our consolidated copper sales volumes from South America of 302 million pounds in first-quarter 2023 were higher than first-quarter 2022 copper sales volumes of 264 million pounds, primarily reflecting higher mining rates.

Our consolidated copper sales volumes from South America totaled 304 million pounds in second-quarter 2023, 288 million pounds in second-quarter 2022, 606 million pounds for the first six months of 2023 and 552 million pounds for the first six months of 2022.

Higher copper sales volumes in the 2023 periods, compared with the 2022 periods, primarily reflect higher mill ore grades and increased production from leach ore placed on stockpiles.

Copper sales from South America mining are expected to approximate 1.2 billion pounds for the year 2023.

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Three Months Ended March 31,

Three Months Ended June 30,

Method Co-Product

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DD&A 0.44 0.39 0.35 0.32

Metals inventory adjustments — — 0.04 0.03

Noncash and other costs, net 0.08 a

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Copper sales (millions of recoverable pounds) 304 304 288 288

Includes $0.03 per pound of copper for feasibility and optimization studies.

Six Months Ended June 30,

Method Co-Product

Method By-Product

Method Co-Product

Revenues, excluding adjustments $ 3.85 $ 3.85 $ 4.00 $ 4.00

Site production and delivery, before net noncash and other costs shown below 2.49 2.25 2.45 2.26

By-product credits (0.45) — (0.38) —

Treatment charges 0.19 0.19 0.15 0.15

Royalty on metals 0.01 0.01 0.01 0.01

Unit net cash costs 2.24 2.45 2.23 2.42

DD&A 0.40 0.35 0.36 0.32

Metals inventory adjustments — — 0.02 0.02

Noncash and other costs, net 0.08 a

0.07 0.06 0.06

Total unit costs 2.72 2.87 2.67 2.82

Revenue adjustments, primarily for pricing on prior period open sales 0.11 0.11 0.06 0.06

Gross profit per pound $ 1.24 $ 1.09 $ 1.39 $ 1.24

Copper sales (millions of recoverable pounds) 606 606 552 552

Includes $0.04 per pound of copper in second-quarter 2023 and $0.03 per pound of copper for the first six months of 2023 for feasibility and optimization studies.

Our South America mines have varying cost structures because of differences in ore grades and characteristics, processing costs, by-product credits and other factors.

Average unit net cash costs (net of by-product credits) for South America mining of $2.20 per pound of copper in first-quarter 2023 were higher than first-quarter 2022 unit net cash costs of $2.16 per pound of copper, primarily reflecting higher energy and other input costs, partly offset by the impact of higher volumes and molybdenum by-product credits.

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.

Average unit net cash costs (net of by-product credits) for South America mining were $2.28 per pound of copper in second-quarter 2023, $2.29 per pound of copper in second-quarter 2022, $2.24 per pound of copper for the first six months of 2023 and $2.23 per pound of copper for the first six months of 2022.

The impact of higher volumes in the 2023 periods was offset by higher costs of maintenance, supplies and consumables, and increased treatment charges.

The first six months of 2023 also reflected the impact of higher molybdenum credits.

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

Higher treatment charges in the 2023 periods, compared to the 2022 periods, reflected higher smelting and refining rates.

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.

Increased DD&A rates per pound of copper in the 2023 periods, compared to the 2022 periods, primarily reflect a correction in the useful lives of certain fixed assets at Cerro Verde, which resulted in additional depreciation being recognized in second-quarter 2023.

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 $2.36 per pound of copper for the year 2023, based on current volume and cost estimates and assuming an average price of $18.00 per pound of molybdenum for the remainder of 2023.

Average unit net cash costs (net of by-product credits) for South America mining are expected to approximate $2.33 per pound of copper for the year 2023, based on current volume and cost estimates and assuming an average price of $20.00 per pound of molybdenum for the second half of 2023.

Indonesia Mining

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

Under the terms of agreements entered into in 2018, our economic interest in PT-FI approximated 81% through 2022, and beginning January 1, 2023, our economic interest in PT-FI is 48.76% (refer to Note 1 for further discussion).

Other than copper concentrate delivered to PT Smelting for further processing into refined products, most of PT-FI’s copper concentrate is sold under long-term contracts.

Regulatory Matters.

Over the past several years, the Indonesia government has enacted various laws and regulations to promote downstream processing of various minerals, including copper concentrates.

In 2018, PT-FI agreed to expand its domestic smelting and refining capacity to process all of its copper concentrates in Indonesia and is advancing the construction of the Indonesia smelter projects and expanding capacity at PT Smelting (refer to “Indonesia Smelter” below for further discussion of construction progress).

Export License .

On June 10, 2023, a ban on the export of copper concentrate went into effect in accordance with Indonesia regulations and export licenses for several exporters, including PT-FI, expired.

During the second quarter and in July 2023, the Indonesia government issued various regulations to address exports of unrefined metals, including regulations by the Ministry of Energy and Mineral Resources (MEMR) to allow continued exports of copper concentrates through May 2024 for companies engaged in ongoing smelter development projects with construction progress greater than 50%, and regulations by the Ministry of Trade on the permitted export of various products, including copper concentrates.

On July 24, 2023, PT-FI was granted an export license through May 2024 for 1.7 million metric tons of copper concentrate.

PT-FI will continue to work with the Indonesia government to obtain approvals to continue exports until the Manyar smelter is fully commissioned and has reached designed operating conditions.

Export Duties .

Under PT-FI’s special mining license (IUPK), export duties are determined based on regulations that were in effect in 2018, which provided that no duties are required after smelter construction progress reached 50%.

In March 2023, the Indonesia government verified that construction progress on the Manyar smelter exceeded 50% and PT-FI's export duties were eliminated effective March 29, 2023.

In July 2023, the Ministry of Finance issued a revised regulation on duties for various exported products, including copper concentrates.

PT-FI is continuing to discuss the applicability of the revised regulation with the Indonesia government and will contest, and seek recovery of, any assessments.

Refer to Note 8 for further discussion of the revised export regulation and other Indonesia regulatory matters.

Mining Rights .

PT-FI and the Indonesia government continue to engage in discussions regarding the extension of PT-FI's mining rights under its IUPK beyond 2041.

An extension beyond 2041 would enable continuity of large-scale operations for the benefit of all stakeholders and provide growth options through additional resource development opportunities in the highly attractive Grasberg minerals district.

Operating and Development Activities.

Over a multi-year investment period, PT-FI has successfully commissioned three large-scale block cave mines in the Grasberg minerals district (Grasberg Block Cave, Deep Mill Level Zone and Big Gossan), providing cumulative annualized production volumes of approximately 1.6 billion pounds of copper and 1.6 million ounces of gold.

PT-FI is completing a project to install additional milling facilities, currently expected to be completed in early 2024.

Over a multi-year investment period, PT-FI has successfully commissioned three large-scale block cave mines in the Grasberg minerals district (Grasberg Block Cave, Deep Mill Level Zone and Big Gossan), providing annual production volumes of approximately 1.6 billion pounds of copper and 1.6 million ounces of gold.

PT-FI’s ongoing project to install additional milling facilities is currently expected to be completed in 2024.

The project will increase milling capacity to approximately 240,000 metric tons of ore per day to provide sustained large scale production volumes.

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 2024 and is expected to provide incremental metal production of approximately 60 million pounds of copper and 40 thousand ounces of gold per year.

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 second half of 2024 and to provide incremental metal production of approximately 60 million pounds of copper and 40 thousand ounces of gold per year.

Kucing Liar .

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

Mining Rights .

PT-FI and the Indonesia government continue to engage in discussions regarding the extension of PT-FI's mining rights under its special mining license (IUPK) beyond 2041.

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).

In connection with PT-FI’s 2018 agreement with the Indonesia government to secure the extension of its long-term mining rights, PT-FI agreed to expand its domestic smelting and refining capacity to process all of its copper concentrates in Indonesia.

PT-FI is actively engaged in the following projects for additional domestic smelting capacity:

• Construction of the Manyar smelter in Gresik, Indonesia with a capacity to process approximately 1.7 million metric tons of copper concentrate per year.

Smelter construction was approximately 60% complete at March 31, 2023, and is expected to be commissioned during 2024 at an estimated cost of $3.0 billion, including $2.8 billion for a construction contract (excluding capitalized interest, owner’s costs and commissioning) and $0.2 billion for investment in a desalinization plant.

Construction progress currently approximates 75%.

Construction of the smelter has an estimated cost of $3.0 billion, including $2.8 billion for a construction contract (excluding capitalized interest, owner’s costs and commissioning) and $0.2 billion for investment in a desalinization plant.

Construction is expected to be complete in mid-2024 followed by commissioning of the facilities and a ramp-up schedule through year-end 2024.

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

PT-FI is funding the cost of the expansion, estimated to approximate $250 million, with a loan that will convert to equity and increase PT-FI’s ownership in PT Smelting to a majority ownership interest upon project completion.

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

Construction is in progress with commissioning expected during 2024.

During first-quarter 2023, capital expenditures for the Indonesia smelter projects totaled $0.3 billion, and are expected to approximate $1.6 billion for the year 2023.

Capital expenditures for the Indonesia smelter projects are being funded with proceeds received from PT-FI's April 2022 senior notes offering and availability under its revolving credit facility.

Export License .

In March 2023, PT-FI received an extension of its export license through June 10, 2023.

PT-FI's IUPK provides that exports may continue through 2023, subject to force majeure considerations.

PT-FI is working with the Indonesia government to obtain approval to continue exports as required for PT-FI’s operations until the Indonesia smelter projects are fully commissioned and reach designed operating conditions.

In late 2022, PT-FI’s export duty rate declined from 5% to 2.5% as a result of smelter development progress.

In March 2023, the Indonesia government verified that construction progress on the Manyar smelter exceeded 50%, allowing PT-FI’s export duties to be eliminated effective March 29, 2023.

• The PMR is being constructed to process gold and silver from the Manyar smelter and PT Smelting.

Construction is in progress with commissioning expected during 2024 at an estimated cost of $525 million.

For the first six months of 2023, capital expenditures for the Indonesia smelter projects totaled $0.8 billion, and are expected to approximate $1.6 billion for the year 2023.

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

Operating Data.

Following is summary consolidated operating data for Indonesia mining:

Three Months Ended March 31,

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

2023 2022 2023 2022

Copper (millions of recoverable pounds)

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Total 207,100 197,000

186,100 191,800

Average ore grades:

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Gold 76.7 79.0 77.4 78.2

On February 11, 2023, PT-FI’s operations were temporarily disrupted because of significant rainfall and landslides, which restricted access to infrastructure near its milling operations.

After recovery activities and the clearing of debris, PT-FI resumed operations by the end of February 2023 and achieved a full recovery in March 2023.

PT-FI expects milling rates to average in excess of 200,000 metric tons of ore per day for the remainder of 2023.

Our consolidated sales of 198 million pounds of copper and 266 thousand ounces of gold in first-quarter 2023 were lower than first-quarter 2022 consolidated sales of 379 million pounds of copper and 406 thousand ounces of gold, primarily as a result of the timing of sales associated with the transition to a tolling arrangement with PT Smelting in 2023 and the impact of the temporary disruption of operations in February 2023 associated with the significant weather event.

PT-FI’s consolidated copper sales of 386 million pounds in second-quarter 2023 and 584 million pounds for the first six months of 2023 were lower than consolidated copper sales of 410 million pounds in second-quarter 2022 and 789 million pounds for the first six months of 2022, reflecting shipping delays associated with the renewal of PT-FI's export license.

PT-FI's consolidated copper sales for the first six months of 2023 also reflects the deferral of sales recognition related to the PT Smelting tolling arrangement.

PT-FI’s consolidated gold sales of 492 thousand ounces in second-quarter 2023 were higher than second-quarter 2022 consolidated gold sales of 474 thousand ounces, primarily reflecting the timing of sales.

PT-FI’s consolidated gold sales of 758 thousand ounces for the first six months of 2023 were lower than consolidated gold sales of 880

thousand ounces for the first six months of 2022, primarily reflects the deferral of sales recognition related to the PT Smelting tolling arrangement.

Consolidated sales volumes from PT-FI are expected to approximate 1.4 billion pounds of copper and 1.7 million ounces of gold for the year 2023, net of a deferral of approximately 90 million pounds of copper and 130 thousand ounces of gold from mine production under tolling arrangements to be processed and sold as refined metal in future periods.

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

Unit Net Cash (Credits) Costs.

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

Three Months Ended March 31,

Three Months Ended June 30,

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

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Treatment charges 0.39 0.23 118 0.24 0.15 72

Export duties 0.09 0.05 25 0.21 0.14 59

Export duties a

— — — 0.21 0.13 63

Royalty on metals 0.24 0.14 72 0.27 0.18 74

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DD&A 0.71 0.42 216 0.63 0.41 193

Noncash and other costs, net 0.16 a

Noncash and other costs, net 0.20 b,c

0.12 60 0.01 0.01 2

Total unit costs 0.82 2.03 1,035 0.62 1.79 837

Revenue adjustments, primarily for pricing on prior period open sales (0.14) (0.14) 1 (0.49) (0.49) (17)

PT Smelting intercompany profit — — — 0.06 0.04 19

Gross profit per pound/ounce $ 2.86 $ 1.65 $ 908 $ 2.81 $ 1.62 $ 992

Copper sales (millions of recoverable pounds) 386 386 410 410

Gold sales (thousands of recoverable ounces) 492 474

Six Months Ended June 30,

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

Copper Gold Copper Gold

Revenues, excluding adjustments $ 3.83 $ 3.83 $ 1,946 $ 4.04 $ 4.04 $ 1,861

Site production and delivery, before net noncash and other costs shown below 1.93 1.14 578 1.42 0.92 426

Gold and silver credits (2.68) — — (2.17) — —

Treatment charges 0.38 0.23 115 0.24 0.16 73

Export duties a

0.03 0.02 9 0.21 0.14 63

Royalty on metals 0.26 0.15 73 0.26 0.17 72

Unit net cash (credits) costs (0.08) 1.54 775 (0.04) 1.39 634

DD&A 0.72 0.43 217 0.64 0.42 194

Noncash and other costs, net 0.18 b,c

0.11 55 0.04 b

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Gold sales (thousands of recoverable ounces) 758 880

Includes charges totaling $0.07 per pound of copper for feasibility and optimization studies.

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

PT-FI's unit net cash credits (including gold and silver credits) of $0.08 per pound of copper in first-quarter 2023 were in line with unit net cash credits of $0.06 per pound in first-quarter 2022, reflecting higher gold and silver credits, mostly offset by lower volumes.

In March 2023, the Indonesia government verified that construction progress of the Manyar smelter exceeded 50% and export duties were eliminated effective March 29, 2023.

Refer to Note 8 for further discussion of the revised export duty regulation that was issued by the Indonesia government.

Includes a charge totaling $0.14 per pound of copper in second-quarter 2023 and $0.09 per pound of copper for the first six months of 2023 associated with a potential administrative fine.

The first six months of 2022 also includes a charge of $0.05 per pound of copper associated with an administrative fine.

Refer to Note 8 for further discussion.

Includes charges totaling $0.03 per pound of copper in second-quarter 2023 and $0.04 per pound of copper for the first six months 2023 for feasibility and optimization studies.

PT-FI's unit net cash credits (including gold and silver credits) of $0.09 per pound of copper in second-quarter 2023 and $0.08 per pound of copper for the first six months of 2023 were higher than unit net cash credits of $0.02 per pound of copper in second-quarter 2022 and $0.04 per pound of copper for the first six months of 2022, reflecting higher gold and silver credits and lower export duties, partly offset by higher operating rates, increased underground maintenance costs and treatment charges and the impact of lower copper sales volumes.

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.

The increase in treatment charges per pound of copper and ounce of gold in first-quarter 2023, compared to first-quarter 2022, reflects higher costs associated with the new tolling arrangement with PT Smelting compared to the previous concentrate sales agreement.

Tolling costs paid to PT Smelting are recorded as production costs in the consolidated statements of income but are reflected as treatment costs in our unit net cash (credits) costs presentation.

PT-FI’s export duties totaled $17 million in first-quarter 2023 and $79 million in first-quarter 2022, and PT-FI’s royalties totaled $58 million in first-quarter 2023 and $92 million in first-quarter 2022.

The decrease in export duties and royalties primarily reflects lower sales volumes.

In late 2022, PT-FI’s export duty rate declined from 5% to 2.5% and was eliminated effective March 29, 2023.

The increase in treatment charges per pound of copper and ounce of gold in the 2023 periods, compared with the 2022 periods, reflects higher costs associated with the new tolling arrangement with PT Smelting compared to the previous copper concentrate sales agreement.

Tolling costs paid to PT Smelting are recorded as production costs in the consolidated statements of income but are reflected as treatment costs above in our unit net cash (credits) costs presentation.

PT-FI’s royalties vary with the volume of metal sold and the prices of copper and gold.

PT-FI’s royalties totaled $92 million in second-quarter 2023, $108 million in second-quarter 2022, $150 million for the first six months of 2023 and $201 million for the first six months of 2022.

The decrease in PT-FI’s royalties for the 2023 periods, compared to the 2022 periods, primarily reflects lower sales volumes and copper prices.

Because certain assets are depreciated on a straight-line basis, PT-FI’s unit depreciation rate may vary with asset additions and the level of copper production and sales.

The increase in the DD&A rate per pound of copper in first-quarter 2023, compared with first-quarter 2022, primarily reflects lower volumes associated with decreased operating rates as discussed above and significant underground development assets being placed into service.

The increase in the DD&A rate per pound of copper in 2023 periods, compared with the 2022 periods, primarily reflects underground development assets being placed into service.

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.

PT Smelting intercompany profit (loss) represents the change in the deferral of 39.5% of PT-FI’s profit on sales to PT Smelting.

Beginning on January 1, 2023, PT-FI’s commercial arrangement with PT Smelting converted from a concentrate sales agreement to a tolling arrangement.

Under this arrangement, PT-FI pays PT Smelting a tolling fee to smelt and refine its concentrate and PT-FI retains title to all products for sales to third parties.

PT Smelting intercompany profit (loss) for the second quarter and first six months of 2022 represents the change in the deferral of 39.5% of PT-FI’s profit on sales to PT Smelting.

Beginning on January 1, 2023, PT-FI’s commercial arrangement with PT Smelting converted from a copper concentrate sales agreement to a tolling arrangement.

Under this arrangement, PT-FI pays PT Smelting a tolling fee to smelt and refine its copper concentrate and PT-FI retains title to all products for sales to third parties.

Accordingly, beginning in 2023, there are no further sales to PT Smelting.

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

Assuming an average gold price $2,000 per ounce for the remainder of 2023 and achievement of current volume and cost estimates, unit net cash credits (including gold and silver credits) for PT-FI are expected to approximate $0.15 per pound of copper for the year 2023.

PT-FI's average unit net cash credits for the year 2023 would change by approximately $0.11 per pound of copper for each $100 per ounce change in the average price of gold for the remainder of 2023.

PT-FI’s projected sales volumes and unit net cash costs for the year 2023 are dependent on a number of factors, including operational performance, timing of shipments and the extension of PT-FI's export license after June 10, 2023.

Assuming an average gold price $1,950 per ounce for the second half of 2023 and achievement of current volume and cost estimates, unit net cash credits (including gold and silver credits) for PT-FI are expected to approximate $0.06 per pound of copper for the year 2023.

PT-FI's average unit net cash credits for the year 2023 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 2023.

As discussed in Note 8, in July 2023, the Indonesia government issued a revised regulation on duties for various exported products, including copper concentrates.

Export duties that may be assessed under this revised regulation are not reflected in PT-FI's estimated unit net cash credits for the second half of 2023.

Based on current sales volume and metal price estimates, the assessment of a 7.5% export duty on PT-FI’s sales during the second half of 2023 is estimated to reduce PT-FI's unit net cash credits by $0.19 per pound of copper for the year 2023 (including $0.31 per pound of copper in third-quarter 2023).

PT-FI is continuing to discuss the applicability of the revised regulation with the Indonesia government and will contest, and seek recovery of, any assessments.

Molybdenum Mines

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Operating and Development Activities.

Production from the Molybdenum mines totaled 8 million pounds of molybdenum in first-quarter 2023 and was slightly higher than production of 7 million pounds of molybdenum in first-quarter 2022, primarily reflecting higher milling rates.

Production from the Molybdenum mines totaled 7 million pounds of molybdenum in second-quarter 2023, 15 million pounds for the first six months of 2023, 8 million pounds of molybdenum in second-quarter 2022 and 15 million pounds for the first six months of 2022.

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 and to “Markets” for a discussion of the decline in molybdenum prices.

Refer to “Outlook” for projected consolidated molybdenum sales volumes and to “Markets” for a discussion of molybdenum prices.

Unit Net Cash Costs Per Pound of Molybdenum.

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

Average unit net cash costs for the Molybdenum mines of $12.24 per pound of molybdenum in first-quarter 2023 were higher than average unit net cash costs of $10.89 per pound in first-quarter 2022, primarily reflecting increased contract labor and input costs, partly offset by higher volumes.

Average unit net cash costs for the Molybdenum mines of $15.99 per pound of molybdenum in second-quarter 2023 and $13.95 per pound for the first six months of 2023 were higher than average unit net cash costs of $10.62 per pound in second-quarter 2022 and $10.75 per pound for the first six months of 2022, primarily reflecting higher contract labor and input costs.

Based on current volume and cost estimates, average unit net cash costs for the Molybdenum mines are expected to approximate $14.13 per pound of molybdenum for the year 2023.

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Additionally, PT-FI has a 39.5% 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.

Through this form of downstream integration, we are assured placement of a significant portion of our concentrate production.

Through this form of downstream integration, we are assured placement of a significant portion of our copper concentrate production.

Treatment charges for smelting and refining copper concentrate consist of a base rate per pound of copper and per ounce of gold and are generally fixed.

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

During first-quarter 2023, Atlantic Copper’s concentrate purchases included 37% from our copper mining operations and 63% from third parties.

Beginning on January 1, 2023, PT-FI's commercial arrangement with PT Smelting converted from a concentrate sales agreement to a tolling arrangement.

Under this arrangement, PT-FI pays PT Smelting a tolling fee (which PT-FI records as production costs in the consolidated statements of income) to smelt and refine its concentrate and PT-FI retains title to all products for sale to third parties ( i.e.

During the first six months of 2023, Atlantic Copper’s copper concentrate purchases included 45% from our copper mining operations and 55% from third parties.

Beginning on January 1, 2023, PT-FI's commercial arrangement with PT Smelting converted from a copper concentrate sales agreement to a tolling arrangement.

Under this arrangement, PT-FI pays PT Smelting a tolling fee (which PT-FI records as production costs in the consolidated statements of income) to smelt and refine its copper concentrate and PT-FI retains title to all products for sale to third parties ( i.e.

, there are no further sales to PT Smelting).

While the new tolling agreement with PT Smelting does not significantly change PT-FI's economics, it impacted the timing of PT-FI's first-quarter 2023 sales and working capital requirements.

PT-FI's first-quarter 2023 production exceeded its sales primarily associated with the deferral of mine production under the tolling arrangement that will be processed and sold as refined metal in future periods.

We defer recognizing profits on sales from our mining operations to Atlantic Copper and, through December 31, 2022, on 39.5% 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 additions to operating income totaling $111 million ($48 million to net income attributable to common stock) in first-quarter 2023 and $46 million ($23 million to net income attributable to common stock) in first-quarter 2022.

Our net deferred profits on our inventories at Atlantic Copper to be recognized in future periods’ net income attributable to common stock totaled $51 million at March 31, 2023.

We defer recognizing profits on sales from our mining operations to Atlantic Copper (and on 39.5% of PT-FI’s sales to PT Smelting for the 2022 periods) 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 $(39) million ($(21) million to net income attributable to common stock) in second-quarter 2023, $(7) million (less than $1 million to net income attributable to common stock) in second-quarter 2022, $72 million ($27 million to net income attributable to common stock) for the first six months of 2023 and $40 million ($23 million to net income attributable to common stock) for the first six months of 2022.

Our net deferred profits on our inventories at Atlantic Copper to be recognized in future periods’ net income attributable to common stock totaled $63 million at June 30, 2023.

Quarterly variations in ore grades, the timing of intercompany shipments and changes in product prices will result in variability in our net deferred profits and quarterly earnings.

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

The banking industry has experienced disruption in recent months following the failure of certain banks, resulting in increased volatility in the global financial markets.

Although these events have not had a financial impact on our business, we continue to monitor the instability in the banking industry, including any impacts on our suppliers and customers.

We closely monitor market conditions and will adjust our operating plans to protect liquidity and preserve our asset values, if necessary.

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Based on current sales volume, cost and metal price estimates discussed in “Outlook,” our available cash and cash equivalents plus our projected consolidated operating cash flows of $6.4 billion for the year 2023 exceed our expected consolidated capital expenditures of $4.8 billion (which includes $1.6 billion for the Indonesia smelter projects that are being funded with the remaining proceeds from PT-FI’s senior notes and its available credit facility).

As discussed in “Outlook,” our projected financial results for the second half of 2023 do not include a 7.5% export duty at PT-FI that may be assessed under a revised regulation issued by the Indonesia government in July 2023.

Additionally, as further discussed in Note 8, PT-FI may be required to make an additional refundable smelter deposit of approximately $250 million and deposit 30% of its gross export proceeds into Indonesian banks for a period of 90 days before withdrawal.

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

At March 31, 2023, we had $6.9 billion of consolidated cash and cash equivalents (which includes $1.5 billion of PT-FI cash designated for Indonesia smelter projects).

At June 30, 2023, we had $6.7 billion of consolidated cash and cash equivalents (which includes $1.1 billion of PT-FI cash designated for Indonesia smelter projects).

FCX, PT-FI and Cerro Verde have $3.0 billion, $1.3 billion and $350 million, respectively, of availability under their revolving credit facilities.

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

The policy includes a base dividend and a performance-based payout framework, whereby up to 50% 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 net project debt for additional smelting capacity in Indonesia).

The policy includes a base dividend and a performance-based payout framework, whereby up to 50% of available cash flows generated after planned capital spending and distributions to noncontrolling interests would be allocated to shareholder returns and the balance to debt reduction and investments in value enhancing growth projects, subject to us maintaining our net debt at a level not to exceed the net debt target of $3.0 billion to $4.0 billion (excluding net project debt for additional smelting capacity in Indonesia).

Our Board of Directors (Board) will review the structure of the performance-based payout framework at least annually.

At March 31, 2023, our net debt, excluding net debt for the Indonesia smelter projects, totaled $1.3 billion.

At June 30, 2023, our net debt, excluding net debt for the Indonesia smelter projects, totaled $0.9 billion.

Refer to "Net Debt" for further discussion.

In March 2023, our Board declared cash dividends totaling $0.15 per share on our common stock (including a $0.075 per share quarterly base cash dividend and a $0.075 per share quarterly variable, performance-based cash dividend), which was paid on May 1, 2023, to shareholders of record as of April 14, 2023.

Based on current market conditions, the base and variable dividends on our common stock are anticipated to total $0.60 per share for 2023 (including the dividends paid on May 1, 2023), comprised of a $0.30 per share base dividend and $0.30 per share variable dividend.

On June 21, 2023, our Board declared cash dividends totaling $0.15 per share on our common stock (including a $0.075 per share quarterly base cash dividend and a $0.075 per share quarterly variable, performance-based cash dividend), which was paid on August 1, 2023, to common stockholders of record as of July 14, 2023.

Based on current market conditions, the base and variable dividends on our common stock are anticipated to total $0.60 per share for 2023 (including the dividends paid on August 1, 2023), comprised of a $0.30 per share base dividend and $0.30 per share variable dividend.

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

Following is a summary of the U.S.

and international components of consolidated cash and cash equivalents available to the parent company, excluding cash committed for the Indonesia smelter projects and net of noncontrolling interests’ share, taxes and other costs at March 31, 2023 (in billions):

Cash at domestic companies $ 3.3

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Net cash available $ 4.5

Estimated remaining net proceeds from PT-FI's April 2022 senior notes offering.

Estimated remaining net proceeds from PT-FI's senior notes offering.

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

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

At March 31, 2023, consolidated debt totaled $9.6 billion, with a weighted-average interest rate of 5.1%.

At June 30, 2023, consolidated debt totaled $9.5 billion, with a weighted-average interest rate of 5.2%.

Substantially all of our outstanding debt is fixed rate.

We had no borrowings outstanding and $8 million in letters of credit issued under our $3.0 billion revolving credit facility.

Additionally, at March 31, 2023, no amounts were drawn under PT-FI’s $1.3 billion revolving credit facility or Cerro Verde’s $350 million revolving credit facility.

Additionally, at June 30, 2023, 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 generated operating cash flows of $1.1 billion (net of $0.5 billion of working capital and other uses) in first-quarter 2023 and $1.7 billion (net of $0.8 billion of working capital and other uses) in first-quarter 2022.

Lower operating cash flows in first-quarter 2023, compared with first-quarter 2022, primarily reflected lower copper prices and the impact of lower sales volumes primarily associated with PT-FI’s transition to a tolling arrangement with PT Smelting.

We generated operating cash flows of $2.7 billion (net of $0.2 billion of working capital and other uses) for the first six months of 2023 and $3.3 billion (net of $0.7 billion of working capital and other uses) for the first six months of 2022.

Lower operating cash flows for the first six months of 2023, compared with first six months of 2022, primarily reflected lower copper prices, lower copper and gold sales volumes and higher production and delivery costs (refer to “Consolidated Results” for further discussion), partly offset by working capital changes.

Investing Activities

Capital Expenditures.

Capital expenditures, including capitalized interest, totaled $1.1 billion in first-quarter 2023, including approximately $0.4 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, including capitalized interest, totaled $0.7 billion in first-quarter 2022, including approximately $0.4 billion for major mining projects primarily associated with underground development activities in the Grasberg minerals district and $0.1 billion for the Indonesia smelter projects.

Capital expenditures, including capitalized interest, totaled $2.3 billion for the first six months of 2023, including approximately $0.8 billion for major mining projects primarily associated with underground development activities in the Grasberg minerals district and $0.8 billion for the Indonesia smelter projects.

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.

Proceeds from Sales of Assets.

Proceeds from sales of assets totaled $11 million for the first six months of 2023 and $96 million for the first six months of 2022.

In May 2022, we sold all of the shares we owned in Jervois Global Limited, which we received in connection with the 2021 sale of our remaining cobalt business, for proceeds of $60 million.

Loans to PT Smelting for Expansion.

PT-FI made loans to PT Smelting totaling $24 million in first-quarter 2023 and $9 million in first-quarter 2022 to fund PT Smelting’s expansion project.

PT-FI made loans to PT Smelting totaling $61 million for the first six months of 2023 and $34 million for the first six months of 2022 to fund PT Smelting’s expansion project.

Financing Activities

Debt Transactions.

Net repayments of debt totaled $1.0 billion in first-quarter 2023 reflecting the repayment of our 3.875% Senior Notes that matured in March 2023.

Net proceeds from debt totaled $170 million in first-quarter 2022.

Net repayments of debt totaled $1.1 billion for the first six months of 2023, including the repayment of our 3.875% Senior Notes that matured in March 2023 totaling $996 million and open-market purchases of our senior notes for a total cost of $125 million.

Refer to Note 5 for additional information.

Net proceeds from debt totaled $1.7 billion for the first six months of 2022, reflecting net proceeds from PT-FI’s $3.0 billion senior note offering, 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), and open-market purchases of our senior notes ($0.6 billion).

Cash Dividends on Common Stock.

We paid cash dividends on our common stock totaling $217 million in first-quarter 2023 and $220 million in first-quarter 2022.

We paid cash dividends on our common stock totaling $432 million for the first six months of 2023 and $438 million for the first six months of 2022.

2 unchanged sentences

Cash Dividends and Distributions Paid to Noncontrolling Interests.

Cash dividends and distributions paid to noncontrolling interests at our international operations totaled $204 million in first-quarter 2022 (none in first-quarter 2023).

At March 31, 2023, we had dividends payable to noncontrolling interests totaling $134 million recorded in accounts payable and accrued liabilities in our consolidated balance sheets that will be paid in second-quarter 2023.

Based on the estimates discussed in “Outlook,” we currently expect cash dividends and distributions paid to noncontrolling interests to exceed $2.0 billion for the year 2023.

Cash dividends and distributions paid to noncontrolling interests at our international operations totaled $291 million for the first six months of 2023 and $513 million for the first six months of 2022.

Based on the estimates discussed in “Outlook,” we currently expect cash dividends and distributions paid to noncontrolling interests totaling $1.1 billion for the year 2023.

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

Treasury Stock Purchases.

Since mid-2021, we have acquired 47.8 million shares of our common stock under the share repurchase program for a total cost of $1.8 billion ($38.35 average cost per share), including 12.3 million shares in first-quarter 2022 for a cost of $541 million.

No shares have been purchased since July 11, 2022.

As of May 4, 2023, we had $3.2 billion available for repurchases under the program.

Since mid-2021, we have acquired 47.8 million shares of our common stock under the share repurchase program for a total cost of $1.8 billion ($38.35 average cost per share), including 29.4 million shares in the first six months of 2022 for a total cost of $1.2 billion.

No shares have been purchased since July 11, 2022, and we have $3.2 billion available for repurchases under the program.

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

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Contributions from Noncontrolling Interests.

We received equity contributions totaling $50 million in first-quarter 2023 and $47 million in first-quarter 2022 from PT Mineral Industri Indonesia (formerly PT Indonesia Asahan Aluminium (Persero), (MIND ID)).

Contributions in first-quarter 2023 were primarily associated with receipt of the final capital contribution in accordance with the PT-FI shareholders agreement.

Contributions in first-quarter 2022 were associated with MIND ID’s share of capital spending on underground mine development projects in the Grasberg minerals district.

We received equity contributions totaling $50 million for the first six months of 2023 and $94 million for the first six months of 2022 from PT Mineral Industri Indonesia (formerly PT Indonesia Asahan Aluminium (Persero), (MIND ID)).

Contributions for the first six months of 2023 were primarily associated with receipt of the final capital contribution in accordance with the PT-FI shareholders agreement.

Contributions for the first six months of 2022 were associated with MIND ID’s share of capital spending on underground mine development projects in the Grasberg minerals district.

Beginning on January 1, 2023, capital spending at PT-FI is being shared in accordance with the shareholders’ ownership interests.

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CONTINGENCIES

Environmental Liabilities and AROs

Environmental Liabilities and Asset Retirement Obligations (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.

There have been no significant changes to our environmental liabilities and AROs since December 31, 2022.

As discussed in “Consolidated Results – Environmental Obligations and Shutdown Costs,” we recorded $116 million in revisions to our environmental obligations during the first six months of 2023 primarily associated with revised cost estimates.

There have been no significant changes to our AROs since December 31, 2022.

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 liabilities and AROs.

1 unchanged sentence

Litigation and Other Contingencies

There have been no material changes to our contingencies associated with legal proceedings, environmental and other matters since December 31, 2022.

There have been no material changes to our contingencies associated with legal proceedings, environmental and other matters since December 31, 2022 other than the Indonesia regulatory matters discussed above in “Indonesia Mining-Regulatory Matters and as disclosed in Note 8.

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

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There were no significant updates to previously reported accounting standards included in Note 1 of our 2022 Form 10-K.

We believe net debt, which we define as consolidated debt less consolidated cash and cash equivalents, provides 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 $3.0 billion to $4.0 billion (excluding net project debt for additional smelting capacity in Indonesia).

We believe that net debt, which we define as consolidated debt less consolidated cash and cash equivalents, provides investors with information related to the performance-based payout framework in our financial policy, which requires us to maintain our net debt at a level not to exceed the net debt target of $3 billion to $4 billion (excluding net project debt for additional smelting capacity in Indonesia).

This information differs from consolidated debt determined in accordance with U.S.

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

As of March 31, 2023 As of December 31, 2022

As of June 30, 2023 As of December 31, 2022

Current portion of debt $ — a

2 unchanged sentences

consolidated cash and cash equivalents 6.7 8.1

FCX net debt 2.8 b

net debt for Indonesia smelter projects c

FCX net debt 2.8 2.5

net debt for Indonesia smelter projects b

FCX net debt, excluding Indonesia smelter projects $ 0.9 $ 1.3

Rounds to less than $0.1 billion

Does not foot because of rounding.

Includes consolidated debt of $3.0 billion and consolidated cash and cash equivalents of $1.5 billion as of March 31, 2023, and consolidated debt of $3.0 billion and consolidated cash and cash equivalents of $1.8 billion as of December 31, 2022.

Includes consolidated debt of $3.0 billion and consolidated cash and cash equivalents of $1.1 billion as of June 30, 2023, and consolidated debt of $3.0 billion and consolidated cash and cash equivalents of $1.8 billion as of December 31, 2022.

PRODUCT REVENUES AND PRODUCTION COSTS

13 unchanged sentences

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

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

(In Millions) By-Product Co-Product Method

7 unchanged sentences

DD&A 99 87 10 2 99

Metals inventory adjustments 1 1 — — 1

Noncash and other costs, net 51 c

2 unchanged sentences

on prior period open sales (11) (11) — — (11)

Gross profit $ 411 $ 366 $ 41 $ 4 $ 411

Gross profit (loss) $ 320 $ 280 $ 46 $ (6) $ 320

Copper sales (millions of recoverable pounds) 341 341

8 unchanged sentences

DD&A 0.29 0.26 1.15

Metals inventory adjustments — — —

Noncash and other costs, net 0.15 c

4 unchanged sentences

Reconciliation to Amounts Reported

Revenues Production and Delivery DD&A

Revenues Production and Delivery DD&A Metals Inventory Adjustments

Totals presented above $ 1,588 $ 1,060 $ 99 $ 1

11 unchanged sentences

Includes gold and silver product revenues and production costs.

Includes charges totaling $27 million ($0.08 per pound of copper) for feasibility and optimization studies and $16 million ($0.05 per pound of copper) related to asset impairments.

Includes charges totaling $26 million ($0.08 per pound of copper) for feasibility and optimization studies.

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

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

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

(In Millions) By-Product Co-Product Method

7 unchanged sentences

DD&A 103 95 7 1 103

Metals inventory adjustments 7 6 1 — 7

Noncash and other costs, net 36 c

14 unchanged sentences

DD&A 0.27 0.24 0.81

Metals inventory adjustments 0.02 0.02 0.16

Noncash and other costs, net 0.09 c

5 unchanged sentences

Reconciliation to Amounts Reported

Revenues Production and Delivery DD&A

Revenues Production and Delivery DD&A Metals Inventory Adjustments

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

13 unchanged sentences

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

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

Six Months Ended June 30, 2023

(In Millions) By-Product Co-Product Method

Method Copper Molybdenum a

Revenues, excluding adjustments $ 2,723 $ 2,723 $ 412 $ 86 $ 3,221

Site production and delivery, before net noncash

and other costs shown below 1,975 1,720 288 78 2,086

By-product credits (387) — — — —

Treatment charges 88 83 — 5 88

Net cash costs 1,676 1,803 288 83 2,174

DD&A 202 178 20 4 202

Metals inventory adjustments 1 1 — — 1

Noncash and other costs, net 126 c

Total costs 2,005 2,089 325 89 2,503

Other revenue adjustments, primarily for pricing

on prior period open sales 13 13 — — 13

Gross profit (loss) $ 731 $ 647 $ 87 $ (3) $ 731

Copper sales (millions of recoverable pounds) 676 676

Molybdenum sales (millions of recoverable pounds) a

Gross profit per pound of copper/molybdenum:

Revenues, excluding adjustments $ 4.03 $ 4.03 $ 25.52

Site production and delivery, before net noncash

and other costs shown below 2.92 2.55 17.81

By-product credits (0.57) — —

Treatment charges 0.13 0.12 —

Unit net cash costs 2.48 2.67 17.81

DD&A 0.30 0.26 1.24

Metals inventory adjustments — — —

Noncash and other costs, net 0.19 c

Total unit costs 2.97 3.09 20.11

Other revenue adjustments, primarily for pricing

on prior period open sales 0.02 0.02 —

Gross profit per pound $ 1.08 $ 0.96 $ 5.41

Reconciliation to Amounts Reported

Production Inventory

Revenues and Delivery DD&A Adjustments

Totals presented above $ 3,221 $ 2,086 $ 202 $ 1

Treatment charges (9) 79 — —

Noncash and other costs, net — 126 — —

Other revenue adjustments, primarily for pricing

on prior period open sales 13 — — —

Eliminations and other 35 37 — —

North America copper mines 3,260 2,328 202 1

Other mining d

11,068 7,435 712 —

Corporate, other & eliminations (3,202) (3,051) 32 1

As reported in our consolidated financial statements $ 11,126 $ 6,712 $ 946 $ 2

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

Includes gold and silver product revenues and production costs.

Includes charges totaling $53 million ($0.08 per pound of copper) for feasibility and optimization studies.

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

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

Six Months Ended June 30, 2022

(In Millions) By-Product Co-Product Method

Method Copper Molybdenum a

Revenues, excluding adjustments $ 3,440

$ 3,440 $ 282 $ 57 $ 3,779

Site production and delivery, before net noncash

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

By-product credits (269) — — — —

Treatment charges 77 75 — 2 77

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

DD&A 207 192 13 2 207

Metals inventory adjustments 7 6 1 — 7

Noncash and other costs, net 65 c

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

Other revenue adjustments, primarily for pricing

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

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

Copper sales (millions of recoverable pounds) 770 770

Molybdenum sales (millions of recoverable pounds) a

Gross profit per pound of copper/molybdenum:

Revenues, excluding adjustments $ 4.46

$ 4.46 $ 18.36

Site production and delivery, before net noncash

and other costs shown below 2.44 2.25 11.68

By-product credits (0.35) — —

Treatment charges 0.10 0.10 —

Unit net cash costs 2.19 2.35 11.68

DD&A 0.27 0.25 0.85

Metals inventory adjustments 0.01 0.01 0.08

Noncash and other costs, net 0.09 c

Total unit costs 2.56 2.68 12.84

Other revenue adjustments, primarily for pricing

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

Gross profit per pound $ 1.89 $ 1.77 $ 5.52

Reconciliation to Amounts Reported

Production Inventory

Revenues and Delivery DD&A Adjustments

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

Treatment charges (9) 68 — —

Noncash and other costs, net — 65 — —

Other revenue adjustments, primarily for pricing

on prior period open sales (7) — — —

Eliminations and other 43 49 — —

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

Other mining d

11,708 7,461 757 11

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

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

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

Includes gold and silver product revenues and production costs.

Includes charges totaling $29 million ($0.04 per pound of copper) for feasibility and optimization studies.

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

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

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

(In Millions) By-Product Co-Product Method

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

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

(In Millions) By-Product Co-Product Method

8 unchanged sentences

DD&A 101 91 10 101

Metals inventory adjustments 11 10 1 11

Noncash and other costs, net 18 17 1 18

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DD&A 0.35 0.32

Metals inventory adjustments 0.04 0.03

Noncash and other costs, net 0.06 0.06

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Gross profit per pound $ 0.56 $ 0.44

Reconciliation to Amounts Reported Metals

Production Inventory

Revenues and Delivery DD&A Adjustments

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

Treatment charges (44) — — —

Royalty on metals (3) — — —

Noncash and other costs, net — 18 — —

Other revenue adjustments, primarily for pricing

on prior period open sales (154) — — —

Eliminations and other (1) (3) 1 —

South America mining 1,016 742 102 11

Other mining b

6,171 3,989 389 7

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

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

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

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

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

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

Six Months Ended June 30, 2023

(In Millions) By-Product Co-Product Method

Method Copper Other a

Revenues, excluding adjustments $ 2,331 $ 2,331 $ 301 $ 2,632

Site production and delivery, before net noncash

and other costs shown below 1,508 1,363 179 1,542

By-product credits (270) — — —

Treatment charges 118 118 — 118

Royalty on metals 4 3 1 4

Net cash costs 1,360 1,484 180 1,664

DD&A 239 212 27 239

Noncash and other costs, net 50 b

Total costs 1,649 1,742 211 1,953

Other revenue adjustments, primarily for pricing

on prior period open sales 71 71 3 74

Gross profit $ 753 $ 660 $ 93 $ 753

Copper sales (millions of recoverable pounds) 606 606

Gross profit per pound of copper:

Revenues, excluding adjustments $ 3.85 $ 3.85

Site production and delivery, before net noncash

and other costs shown below 2.49 2.25

By-product credits (0.45) —

Treatment charges 0.19 0.19

Royalty on metals 0.01 0.01

Unit net cash costs 2.24 2.45

DD&A 0.40 0.35

Noncash and other costs, net 0.08 b

Total unit costs 2.72 2.87

Other revenue adjustments, primarily for pricing

on prior period open sales 0.11 0.11

Gross profit per pound $ 1.24 $ 1.09

Reconciliation to Amounts Reported

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South America mining 2,584 1,590 239

Other mining c

11,744 8,173 675

Corporate, other & eliminations (3,202) (3,051) 32

As reported in our consolidated financial statements $ 11,126 $ 6,712 $ 946

Includes silver sales of 2.1 million ounces ($23.20 per ounce average realized price).

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

Includes charges totaling $19 million ($0.03 per pound of copper) for feasibility studies.

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

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

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

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

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

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

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

Three Months Ended June 30, 2023

(In Millions) By-Product Co-Product Method

Method Copper Gold Silver a

Revenues, excluding adjustments $ 1,473 $ 1,473 $ 956 $ 45 $ 2,474

Site production and delivery, before net noncash

and other costs shown below 725 432 280 13 725

Gold and silver credits (1,002) — — — —

Treatment charges 151 90 58 3 151

Royalty on metals 92 55 36 1 92

Net cash (credits) costs (34) 577 374 17 968

DD&A 275 164 106 5 275

Noncash and other costs, net 77 b

Total costs 318 787 510 23 1,320

Other revenue adjustments, primarily for pricing

on prior period open sales (54) (54) 1 — (53)

Gross profit $ 1,101 $ 632 $ 447 $ 22 $ 1,101

Copper sales (millions of recoverable pounds) 386 386

Gold sales (thousands of recoverable ounces) 492

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

Revenues, excluding adjustments $ 3.82 $ 3.82 $ 1,942

Site production and delivery, before net noncash

and other costs shown below 1.88 1.12 569

Gold and silver credits (2.60) — —

Treatment charges 0.39 0.23 118

Royalty on metals 0.24 0.14 72

Unit net cash (credits) costs (0.09) 1.49 759

DD&A 0.71 0.42 216

Noncash and other costs, net 0.20 b

Total unit costs 0.82 2.03 1,035

Other revenue adjustments, primarily for pricing

on prior period open sales (0.14) (0.14) 1

Gross profit per pound/ounce $ 2.86 $ 1.65 $ 908

Reconciliation to Amounts Reported

Revenues and Delivery DD&A

Totals presented above $ 2,474 $ 725 $ 275

Treatment charges (92) 59

Royalty on metals (92) — —

Noncash and other costs, net — 77 —

Other revenue adjustments, primarily for pricing

on prior period open sales (53) — —

Eliminations and other — (3) —

Indonesia mining 2,237 858 275

Other mining c

5,109 4,244 253

Corporate, other & eliminations (1,609) (1,554) 19

As reported in our consolidated financial statements $ 5,737 $ 3,548 $ 547

Includes silver sales of 1.8 million ounces ($23.07 per ounce average realized price).

Includes a charge totaling $55 million ($0.14 per pound of copper) associated with a potential administrative fine and charges totaling $12 million ($0.03 per pound of copper) for feasibility and optimization studies.

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

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

Three Months Ended March 31, 2023

Three Months Ended June 30, 2022

(In Millions) By-Product Co-Product Method

Method Copper Gold Other a

Method Copper Gold Silver a

Revenues, excluding adjustments $ 1,582 $ 1,582 $ 865 $ 32 $ 2,479

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DD&A 0.63 0.41 193

Noncash and other costs, net 0.01 0.01 2

Total unit costs 0.62 1.79 837

Other revenue adjustments, primarily for pricing

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

PT Smelting intercompany profit 0.06 0.04 19

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

Reconciliation to Amounts Reported

Revenues and Delivery DD&A

Totals presented above $ 2,479 $ 587 $ 262

Treatment charges (98) — —

Export duties (85) — —

Royalty on metals (108) — —

Noncash and other costs, net — 3 —

Other revenue adjustments, primarily for pricing

on prior period open sales (210) — —

PT Smelting intercompany profit — (26) —

Indonesia mining 1,978 564 262

Other mining b

5,209 4,167 229

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

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

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

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

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

Six Months Ended June 30, 2023

(In Millions) By-Product Co-Product Method

Method Copper Gold Silver a

Revenues, excluding adjustments $ 2,238 $ 2,238 $ 1,474 $ 73 $ 3,785

Site production and delivery, before net noncash

and other costs shown below 1,124 665 438 21 1,124

Gold and silver credits (1,564) — — — —

Treatment charges 224 133 87 4 224

Export duties 18 10 7 1 18

Royalty on metals 150 92 55 3 150

Net cash (credits) costs (48) 900 587 29 1,516

DD&A 423 250 165 8 423

Noncash and other costs, net 107 b

Total costs 482 1,213 794 39 2,046

Other revenue adjustments, primarily for pricing

on prior period open sales 114 114 18 (1) 131

PT Smelting intercompany profit 112 66 44 2 112

Gross profit $ 1,982 $ 1,205 $ 742 $ 35 $ 1,982

Copper sales (millions of recoverable pounds) 584 584

Gold sales (thousands of recoverable ounces) 758

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

Revenues, excluding adjustments $ 3.83 $ 3.83 $ 1,946

Site production and delivery, before net noncash

and other costs shown below 1.93 1.14 578

Gold and silver credits (2.68) — —

Treatment charges 0.38 0.23 115

Export duties 0.03 0.02 9

Royalty on metals 0.26 0.15 73

Unit net cash (credits) costs (0.08) 1.54 775

DD&A 0.72 0.43 217

Noncash and other costs, net 0.18 b

Total unit costs 0.82 2.08 1,047

6 unchanged sentences

Totals presented above $ 3,785 $ 1,124 $ 423

Treatment charges (52) 22 c

Treatment charges (143) 81 —

Export duties (18) — —

6 unchanged sentences

Indonesia mining 3,605 1,193 423

Other mining d

Other mining c

10,723 8,570 491

2 unchanged sentences

Includes silver sales of 2.7 million ounces ($23.28 per ounce average realized price).

Includes charges totaling $13 million ($0.07 per pound of copper) for feasibility and optimization studies.

Represents tolling costs paid to PT Smelting.

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

Includes a charge of $55 million ($0.09 per pound of copper) associated with a potential administrative fine and charges totaling $25 million ($0.04 per pound of copper) for feasibility and optimization studies.

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

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

Three Months Ended March 31, 2022

Six Months Ended June 30, 2022

(In Millions) By-Product Co-Product Method

20 unchanged sentences

Site production and delivery, before net noncash

and other costs shown below 1.41 0.96 395

and other credits shown below 1.42 0.92 426

Gold and silver credits (2.17) — —

26 unchanged sentences

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

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

Includes charges of $41 million ($0.05 per pound of copper) associated with a settlement of an administrative fine levied by the Indonesia government (refer to Note 8) and $18 million ($0.02 per pound of copper) to reserve for exposure associated with export duties in prior periods, partly offset by a credit of $30 million ($0.04 per pound of copper) associated with adjustments to prior year treatment and refining charges.

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

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

Three Months Ended June 30,

(In Millions) 2023 2022

Revenues, excluding adjustments a

Site production and delivery, before net noncash

and other costs shown below 101 78

Treatment charges and other 6 7

Net cash costs 107 85

Noncash and other costs, net 4

Total costs 125 105

Gross profit $ 31 $ 46

Molybdenum sales (millions of recoverable pounds) a

Gross profit per pound of molybdenum:

Revenues, excluding adjustments a

$ 23.28 $ 18.87

Site production and delivery, before net noncash

and other costs shown below 15.13 9.77

Treatment charges and other 0.86 0.85

Unit net cash costs 15.99 10.62

DD&A 2.01 2.27

Noncash and other costs, net 0.59

Total unit costs 18.59 13.19

Gross profit per pound $ 4.69 $ 5.68

Reconciliation to Amounts Reported

Three Months Ended June 30, 2023 Revenues and Delivery DD&A

Totals presented above $ 156 $ 101 $ 14

Treatment charges and other (6) — —

Noncash and other costs, net — 4 —

Molybdenum mines 150 105 14

Other mining b

7,196 4,997 514

Corporate, other & eliminations (1,609) (1,554) 19

As reported in our consolidated financial statements $ 5,737 $ 3,548 $ 547

Three Months Ended June 30, 2022

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

Reflects sales of the Molybdenum mines’ production to our molybdenum sales company at market-based pricing.

On a consolidated basis, realizations are based on the actual contract terms for sales to third parties;

as a result, our consolidated average realized price per pound of molybdenum will differ from the amounts reported in this table.

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

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

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

Three Months Ended March 31,

Six Months Ended June 30,

(In Millions) 2023 2022

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Reconciliation to Amounts Reported

Three Months Ended March 31, 2023 Revenues and Delivery DD&A

Six months ended June 30, 2023 Revenues and Delivery DD&A

Totals presented above $ 386 $ 192 $ 34

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As reported in our consolidated financial statements $ 11,126 $ 6,712 $ 946

Three Months Ended March 31, 2022

Six months ended June 30, 2022

Totals presented above $ 285 $ 150 $ 34

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PT-FI’s financing, construction and completion of additional domestic smelting capacity in Indonesia in accordance with the terms of its IUPK;

extension of PT-FI’s IUPK beyond 2041 and export permit beyond June 10, 2023;

extension of PT-FI’s IUPK beyond 2041 and export licenses;

payment of export duties;

export volumes;

our commitment to deliver responsibly produced copper and molybdenum, including plans to implement, validate and maintain validation of our operating sites under specific frameworks;

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achievement of 2030 climate targets and 2050 net zero aspiration;

improvements in operating procedures and technology innovations;

improvements in operating procedures and technology innovations and applications;

exploration efforts and results;

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future organic growth opportunities;

export quotas;

the impact of copper, gold and molybdenum price changes;

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mineral reserve and mineral resource estimates;

final resolution of settlements associated with ongoing legal proceedings;

final resolution of settlements associated with ongoing legal and environmental proceedings;

debt repurchases;

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The words “anticipates,” “may,” “can,” “plans,” “believes,” “estimates,” “expects,” “projects,” “targets,” “intends,” “likely,” “will,” “should,” “could,” “to be,” “potential,” “assumptions,” “guidance,” “aspirations,” “future,” “commitments,” “pursues,” “initiatives,” “objectives,” “opportunities,” “strategy” 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 are at the discretion of the Board and management, respectively, and are subject to a number of factors, including maintaining our net debt target, capital availability, our financial results, cash requirements, global economic conditions, changes in laws, contractual restrictions and other factors deemed relevant by the Board or management, as applicable.

The declaration and payment of dividends (base or variable), and timing and amount of any share repurchases are at the discretion of the Board and management, respectively, and are subject to a number of factors, including not exceeding our net debt target, capital availability, our financial results, cash requirements, 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.

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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;

PT-FI’s ability to continue to export and sell copper concentrates and anode slimes;

changes in export duties;

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

production rates;

timing of shipments;

price and availability of consumables and components we purchase as well as constraints on supply and logistics, and transportation services;

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changes in mine plans or operational modifications, delays, deferrals or cancellations;

production rates;

timing of shipments;

results of technical, economic or feasibility studies;

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potential impairment of long-lived mining assets;

PT-FI's ability to export and sell copper concentrate and anode slimes;

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;

discussions relating to the extension of PT-FI’s IUPK beyond 2041;

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of our 2022 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.

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 innovations, 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 per pound of copper and molybdenum, which are not recognized under U.S.

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

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

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis