2 0 2 1 A N N U A L R E P O R T
E l e c t r i f y i n g
t h e F u t u r e
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Freeport-McMoRan Inc. (FCX or Freeport) is a leading international mining company with headquarters in Phoenix, Arizona. FCX
operates large, long-lived, geographically diverse assets with significant proven and probable mineral reserves of copper, gold and
molybdenum. FCX’s portfolio of assets includes the Grasberg minerals district in Indonesia, one of the world’s largest copper and gold
deposits; and significant mining operations in North America and South America, including the large-scale Morenci minerals district in
Arizona and the Cerro Verde operation in Peru.
FCX has a strong commitment to safety performance, environmental management and the communities where it operates. As a
founding member of the International Council on Mining and Metals (ICMM), FCX is committed to implementing ICMM’s Mining
Principles which serve as a best practice framework on sustainable development for the global mining and metals industry.
By supplying responsibly produced copper, FCX is proud to be a positive contributor to the world well beyond its operational
boundaries. Additional information about FCX is available at fcx.com.
SUMMARY FINANCIAL HIGHLIGHTS
Years ended December 31,
(In millions, except per share amounts)
Revenues
Operating income
Net income (loss) attributable to common stockholders
Diluted net income (loss) per common share
Dividends declared per common share
Operating cash flows
Capital expenditures
At December 31:
Cash and cash equivalents
Total assets
Total debt, including current portion
Total stockholders’ equity
2021
2020
2019
$ 22,845
$ 14,198
$ 14,402
8,366
4,306
2.90
0.375
7,715
2,115
8,068
48,022
9,450
13,980
2,437
599
0.41
—
3,017
1,961
3,657
42,144
9,711
10,174
1,091
(239)
(0.17)
0.20
1,482
2,652
2,020
40,809
9,826
9,298
revenues
$ in billions
25
20
15
10
5
operating cash flows
$ in billions
CASH AND CASH EQUIVALENTS
$ in billions
8
6
4
2
10
8
6
4
2
2019
2020
2021
2019
2020
2021
2019
2020
2021
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The theme of this year’s
annual report, “Electrifying
the Future,” highlights our key
role in supplying responsibly
produced copper to support
the global economy and the
transition to clean energy.
Freeport is Foremost in Copper
and the prospects are bright
for our assets to become more
highly valued in the future.
1 2 0 2 1 A n n u a l R ep o r t
1 2 02 1 A nnu a l R ep or t
Table of contents
4
6
8
Copper’s Critical Role
Letter to Shareholders
Operational Overview
20 Sustainability
22 Climate Strategy
24
25
Board of Directors
and Leadership
Financial and
Operating Information
116 Performance Graph
117 Stockholder Information
M I N I N G O P E R A T I O N S
G E O G R A P H I C A L LY D I V E R S E P O R T F O L I O
HENDERSON, COLORADO
CLIMAX, COLORADO
CHINO, NEW MEXICO
TYRONE, NEW MEXICO
MORENCI, ARIZONA
BAGDAD, ARIZONA
SAFFORD/LONE STAR, ARIZONA
SIERRITA, ARIZONA
MIAMI, ARIZONA
EL ABRA, CHILE
CERRO VERDE, PERU
Reserves
at 12/31/21
2021 Sales
NORTH AMERICA
SOUTH AMERICA
INDONESIA
CONSOLIDATED TOTALS
Cu 43.0 billion lbs
0.5 million ozs
Au
Mo 2.69 billion lbs
Cu 31.9 billion lbs
Mo 0.69 billion lbs
Cu
Au
32.2 billion lbs
26.6 million ozs
Cu 107.2 billion lbs
Au 27.1 million ozs
Mo 3.39 billion lbs
1.4 billion lbs
Cu
0.1 million ozs
Au
Mo 82 million lbs*
Cu
1.1 billion lbs
Cu
Au
1.3 billion lbs
1.3 million ozs
Cu
Au
Mo
3.8 billion lbs
1.4 million ozs
82 million lbs
* Includes sales of molybdenum produced at FCX’s North America and South America copper mines.
Note: lbs=pounds; ozs=ounces.
2 Fre e p or t-McMoR an
GLOBAL INDUSTRY
LEADER
One of the world’s largest
publicly traded copper
producers; seasoned and value-
driven global team; ~25 year
reserve life with substantial
additional resources.
TRUSTED OPERATOR
Strong reputation and franchise
in four countries; synergistic
operation of all assets.
WORLD-CLASS
DEVELOPER
Industry-leading track record
for major project execution in
complex jurisdictions.
BLOCK CAVE LEADER
Industry-leading technical
capabilities; decades of block
caving experience.
RESPONSIBLE PRODUCER
Long-standing commitment to
all of our stakeholders including
our employees, communities,
host countries, customers
and suppliers.
GRASBERG MINERALS DISTRICT, INDONESIA
COPPER (CU)
GOLD (AU)
MOLYBDENUM (MO)
3 2 0 2 1 A n n u a l R ep o r t
C O P P E R ’ S C R I T I C A L R O L E
COPPER’S CRITICAL ROLE
IN OUR FUTURE
i n f r a s t r u c t u r e
Copper is the backbone of construction and urbanization. It is a critical metal for wire,
plumbing and hardware and possesses the best electrical and thermal heat conductivity
of any industrial metal.
t e c h n o l o gy
Copper demand is expected to benefit from technology advances in communications,
artificial intelligence applications, expanding connectivity through global infrastructure
and public health initiatives.
4 Fre epor t -McMoR an
4 Fre ep or t-McMoR a n
Copper has been integral in driving economic progress over time as it enables a higher standard
of living while contributing to infrastructure, the food chain, manufacturing and medical devices.
With the transition to clean energy accelerating on a global scale, we believe we are entering
a multi-year period of growth and a new era for broad-based copper demand. These demand
drivers position copper as a strategic metal for the future.
D E C A R B O N I Z A T I O N
Copper is vital to energy efficiency. Global decarbonization is expected to drive intensity of
copper use. For example, electric vehicles use up to four times more copper than internal
combustion engines. By 2030, copper could support reduction of global carbon emissions
by 16%.*
*Source: International Copper Association
D i f f i c u lt t o R e p l i c at e
Copper is an extremely versatile metal. Copper’s physical attributes include superior
electrical conductivity, corrosion resistance, structural capability, efficient heat transfer
and aesthetics.
5 2 0 2 1 A n n u a l R ep o r t
5 2 02 1 A nnu a l R ep or t
L E T T E R T O S H A R E H O L D E R S
D e a r F e l l o w S h a r e h o l d e r s
I am incredibly proud of our global team’s performance during
2021. Our strong results reflect the success by our team in
executing our long-term plan in an exceptional fashion. The theme
of this year’s annual report, “Electrifying the Future,” highlights
our key role in supplying responsibly produced copper to support
the global economy and the transition to clean energy.
During 2021, our global team delivered significant growth
in copper and gold volumes, effectively managed costs and
capital in a challenging environment and advanced our
sustainability objectives. Notably, we reached our targets of
Copper demand is growing at a
time when the industry’s pipeline
of new mine supply development is
shrinking. Absent a major downturn in
the global economy, this backdrop
is exceptionally favorable for
long-term fundamentals and for
our company.
achieving our annual run rate for copper and gold production
As a responsible producer of scale with a strategy focused on
in the Grasberg minerals district in Papua, Indonesia. This
copper, the prospects are bright for our assets to become more
major milestone, more than a decade in the making, is of great
highly valued in the future. We have a long-lived portfolio of
significance to our company, the global mining industry and the
mineral reserves — spanning over 25 years — and substantial
country of Indonesia. We are successfully managing the largest
options to expand our reserve base in the future from our large
and most modern underground mining complex in the history
inventory of mineral resources beyond reported reserves.
of the global mining industry.
We have multiple options for brownfield, low-risk growth across
Our Americas team did great work restoring production curtailed
our portfolio. We are highly optimistic about our opportunities in
in 2020 as a result of the pandemic, optimizing our new Lone
the U.S. to invest in mine expansions and unlock value through
Star mine in Arizona, advancing technologies and is now actively
engaged in enhancing our opportunities for future organic growth.
We generated strong financial results in 2021, achieved our net
exciting new opportunities from leach recovery technologies. We
also have an attractive expansion opportunity at our El Abra mine
in Chile. Following the success of our block cave development
in Indonesia, we commenced development of the Kucing Liar
debt targets, restored our investment grade credit ratings with two
underground deposit in the Grasberg minerals district, which
leading rating agencies and commenced a new performance-based
will provide long-term, low-cost copper and gold volumes. These
payout framework to provide increasing cash returns to shareholders.
opportunities provide significant value enhancing options for
Freeport was the top performing stock in our peer group for the
the future, particularly in the context of the scarcity of future
second consecutive year and the seventh best performing stock in
development opportunities industry wide.
the S&P 500 for the two-year period ended 2021.
Our safety performance in 2021, measured by incident rates of
Looking ahead, the fundamental outlook for the copper market
0.70, was similar to the average of the last three years. Regrettably,
is increasingly positive. Copper is essential to decarbonization
we had two fatalities in our operations during the year. Fatality
and is a strategic metal for the future. With the transition to
prevention is our top priority and we are implementing programs
clean energy accelerating on a global scale, we believe we are
to increase risk awareness and further embed fatal risk
entering a multi-year period of growth and a new era for broad-
management in all of our processes and daily tasks.
based copper demand.
We continue to expand resources dedicated to our sustainability
objectives. During 2021, we advanced our climate strategy and
6 Fre e por t-McMoR an
our work with the International Council of Mining and Metals
(ICMM). We lead the industry in achieving third-party validation of
our operations using the robust criteria and process established
by the Copper Mark. I am also proud of our strong partnerships
with communities where we operate. I encourage you to review
our annual sustainability and climate reports for details on our
program and initiatives in all of these important areas.
We welcomed six new high-quality, independent directors in
2021, enhancing the skills, experience and diversity of our Board.
This was an important initiative and I could not be more pleased
with the depth and breadth of our Board. I am personally grateful
to each of our directors for their service and contribution to the
future success of Freeport.
I want to close by recognizing and thanking our global team
for their performance and commitment to our future success. We
are optimistic about our business and our strategy and have the
capabilities and drive to continue to meet and exceed our own
expectations and those of our stakeholders.
As Foremost in Copper, Freeport is “Electrifying the Future, ‘’ and
we will continue to do so responsibly, reliably and relentlessly.
Respectfully yours,
2021 Highlights
+61%
total stockholder Return
(cid:27)(cid:28)(cid:11)(cid:7)(cid:8)(cid:9)(cid:18)(cid:6)(cid:9)(cid:25)(cid:8)(cid:26)(cid:5)(cid:8)(cid:12)(cid:14)(cid:17)(cid:11)(cid:29)(cid:25)(cid:8)(cid:25)(cid:30)(cid:8)(cid:9)(cid:5)(cid:7)(cid:8)(cid:8)(cid:9)(cid:5)(cid:14)(cid:9)(cid:6)(cid:28)(cid:7)(cid:5)
(cid:10)(cid:31)(cid:8)(cid:9)(cid:10)(cid:14)(cid:8)(cid:5)(cid:6)(cid:18)(cid:5)(cid:4) (cid:24)(cid:5)(cid:26)(cid:28)(cid:9)(cid:12)(cid:13)(cid:14)(cid:5)(cid:2)(cid:3)(cid:2)(cid:4)
$7.7
billion
(cid:2)(cid:3)(cid:2)(cid:4)(cid:5)(cid:6)(cid:7)(cid:8)(cid:9)(cid:10)(cid:11)(cid:12)(cid:13)(cid:14)(cid:5)(cid:15)(cid:10)(cid:16)(cid:17)(cid:5)(cid:18)(cid:19)(cid:6)(cid:20)(cid:16)(cid:21)(cid:5)
(cid:4)(cid:22)(cid:23)(cid:24)(cid:5)(cid:12)(cid:13)(cid:15)(cid:9)(cid:8)(cid:10)(cid:16)(cid:8)(cid:5)(cid:15)(cid:6)(cid:25)(cid:7)(cid:10)(cid:9)(cid:8)(cid:26)(cid:5)(cid:11)(cid:6)(cid:5)(cid:2)(cid:3)(cid:2)(cid:3)
$19
billion
R I C H A R D C . A D K E R S O N
C H A I R M A N O F T H E B O A R D A N D
C H I E F E X E C U T I V E O F F I C E R
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6
#(cid:26)(cid:26)(cid:12)(cid:11)(cid:12)(cid:6)(cid:13)(cid:16)(cid:5)(cid:11)(cid:6)(cid:5)$(cid:6)(cid:10)(cid:9)(cid:26)(cid:5)(cid:6)(cid:18)(cid:5)%(cid:12)(cid:9)(cid:8)(cid:15)(cid:11)(cid:6)(cid:9)(cid:16)(cid:5)(cid:5)
(cid:26)(cid:28)(cid:9)(cid:12)(cid:13)(cid:14)(cid:5)(cid:2)(cid:3)(cid:2)(cid:4)
March 21, 2022
7 2 0 2 1 A n n u a l R ep o r t
O P E R A T I O N A L O V E R V I E W
c o n s o l i d at e d r e s u lt s
FCX’s consolidated sales volumes of 3.8 billion pounds of copper and
1.4 million ounces of gold in 2021 were higher than 3.2 billion pounds of copper
and 0.9 million ounces of gold in 2020, primarily reflecting the ramp-up of
underground mining at the Grasberg minerals district.
Consolidated molybdenum sales totaled 82 million pounds in 2021 and 80 million
pounds in 2020.
During 2022, FCX expects to grow production and sales volumes while
continuing to execute its operating plans. FCX’s consolidated sales for 2022 are
expected to approximate 4.3 billion pounds of copper, 1.6 million ounces
of gold and 80 million pounds of molybdenum. This operating plan coupled
with a favorable market outlook positions FCX to generate strong cash flows,
which will support the advancement of organic growth initiatives and cash
returns to shareholders under its established financial policy.
FUTURE ORGANIC GROWTH OPPORTUNITIES
New Leach
Technologies
in the
Americas
• Focused on initiatives to advance sulfide
leaching technologies and to drive continuous
recovery improvement
• Leveraging both research and development and in-field
trials at existing leach stockpiles and future opportunities
to recover copper from below mill cut-off grade material
• Success would enable utilization of latent tank house
capacity with limited capital investment
8 Fre e por t-McMoR an
During 2021, FCX delivered growth in
volumes and solid cost and capital
management in a challenging environment.
FCX has a clear strategy of being foremost
in copper, with a strong balance sheet and
strong cash flows.
2021 Highlights
3.8
billion LBS
(cid:2)(cid:3)(cid:2)(cid:4)(cid:5)(cid:15)(cid:6)(cid:13)(cid:16)(cid:6)(cid:19)(cid:12)(cid:26)(cid:10)(cid:11)(cid:8)(cid:26)(cid:5)(cid:15)(cid:6)(cid:7)(cid:7)(cid:8)(cid:9)(cid:5)(cid:16)(cid:10)(cid:19)(cid:8)(cid:16)
19%
increase
&(cid:8)(cid:10)(cid:9)(cid:5)(cid:6)(cid:31)(cid:8)(cid:9)(cid:5)"(cid:8)(cid:10)(cid:9)(cid:5)(cid:15)(cid:17)(cid:10)(cid:13)(cid:14)(cid:8)(cid:5)(cid:12)(cid:13)(cid:5)
(cid:15)(cid:6)(cid:7)(cid:7)(cid:8)(cid:9)(cid:5)(cid:16)(cid:10)(cid:19)(cid:8)(cid:16)
1.36
MILLION OZS
(cid:2)(cid:3)(cid:2)(cid:4)(cid:5)(cid:15)(cid:6)(cid:13)(cid:16)(cid:6)(cid:19)(cid:12)(cid:26)(cid:10)(cid:11)(cid:8)(cid:26)(cid:5)(cid:14)(cid:6)(cid:19)(cid:26)(cid:5)(cid:16)(cid:10)(cid:19)(cid:8)(cid:16)
59%
Increase
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(cid:14)(cid:6)(cid:19)(cid:26)(cid:5)(cid:16)(cid:10)(cid:19)(cid:8)(cid:16)(cid:5)
9 2 0 2 1 A n n u a l R ep o r t
9 2 02 1 A nnu a l R ep or t
In-pit shovel rebuild at the
Morenci mine, Arizona
FCX is increasing exploration in
the Lone Star area to support
metallurgical testing and mine
development planning for a
potential long-term investment
in a concentrator.
LONE STAR COPPER MINE
IN ARIZONA
200
MILLION LBS
’(cid:13)(cid:12)(cid:11)(cid:12)(cid:10)(cid:19)(cid:5)(cid:26)(cid:8)(cid:16)(cid:12)(cid:14)(cid:13)(cid:5)(cid:15)(cid:10)(cid:7)(cid:10)(cid:15)(cid:12)(cid:11)"(cid:5)(cid:5)
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235
MILLION LBS
(cid:2)(cid:3)(cid:2)(cid:4)(cid:5)(cid:7)(cid:9)(cid:6)(cid:26)(cid:28)(cid:15)(cid:11)(cid:12)(cid:6)(cid:13)(cid:5)(cid:9)(cid:10)(cid:11)(cid:8)
300
MILLION LBS
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(cid:28)(cid:13)(cid:26)(cid:8)(cid:9)(cid:20)(cid:10)"(cid:5)
~50
BILLION LBS
*(cid:12)(cid:13)(cid:8)(cid:9)(cid:10)(cid:19)(cid:5)(cid:7)(cid:6)(cid:11)(cid:8)(cid:13)(cid:11)(cid:12)(cid:10)(cid:19)(cid:5)(cid:10)(cid:16)(cid:16)(cid:6)(cid:15)(cid:12)(cid:10)(cid:11)(cid:8)(cid:26)(cid:5)
(cid:20)(cid:12)(cid:11)(cid:17)(cid:5)(cid:26)(cid:8)(cid:8)(cid:7)(cid:8)(cid:9)(cid:5)(cid:16)(cid:28)(cid:19)(cid:18)(cid:12)(cid:26)(cid:8)(cid:5)(cid:6)(cid:9)(cid:8)(cid:16)
Exploration drilling at the
Lone Star mine, Arizona
10 Fre ep o r t-McMoR an
10 Fre ep or t-McMoR a n
O P E R A T I O N A L O V E R V I E W
n o r t h a m e r i c a m i n i n g
In North America, FCX operates seven open-pit copper mines — Morenci, Bagdad,
Safford (including Lone Star), Sierrita and Miami in Arizona, and Chino and
Tyrone in New Mexico; and two molybdenum mines — Henderson and Climax in
Colorado. Molybdenum concentrate, gold and silver are also produced by certain
of FCX’s North America copper mines.
FCX has substantial mineral reserves and future opportunities in the United
States (U.S.), primarily associated with existing mining operations. Current
operations at the Lone Star copper leach project exceeded initial design capacity
of 200 million pounds annually and produced approximately 235 million pounds
of copper in 2021. FCX continues to advance opportunities to increase Lone
Star operating rates and is advancing plans to increase volumes to achieve 300
million pounds of copper per year from oxide ores.
FCX is also evaluating an expansion of the Bagdad operation and is engaging
stakeholders. Feasibility studies to double Bagdad’s operating rates are expected
to commence in 2022.
North America’s consolidated copper sales totaled 1.4 billion pounds in both 2021
and 2020. FCX expects copper sales from its North America copper mines to
approximate 1.55 billion pounds in 2022.
Consolidated molybdenum sales, including sales of molybdenum produced
at FCX’s North America and South America copper mines, totaled 82 million
pounds in 2021 and 80 million pounds in 2020. FCX expects consolidated
molybdenum sales to approximate 80 million pounds in 2022.
FUTURE ORGANIC GROWTH OPPORTUNITIES
Bagdad
Expansion
in Arizona
• Double concentrator
capacity
• Commencing feasibility
study, stakeholder
engagement
• Increasing confidence in
potential 2026 start-up
11 2 0 2 1 A n n u a l R e p o r t
Lone Star
Expansions
in Arizona
• Near-term oxide
expansions
• Increasing exploration to
define resource
• Potential long-term
sulfide investment in
concentrator
O P E R A T I O N A L O V E R V I E W
s o u t h a m e r i c a m i n i n g
FCX operates two copper mines in South America — Cerro Verde in Peru
and El Abra in Chile. In addition to copper, the Cerro Verde mine produces
molybdenum concentrate and silver.
Milling rates at Cerro Verde’s concentrator facilities averaged 380,300 metric tons
of ore per day for the year 2021, compared with 331,600 metric tons of ore per day
for the year 2020 when COVID-19 restrictions resulted in reduced rates. Subject to
ongoing monitoring of COVID-19 protocols, Cerro Verde is targeting milling rates to
increase to approximately 400,000 metric tons of ore per day during 2022.
El Abra increased operating rates to pre-COVID-19 pandemic levels during
2021. Increased mining and stacking activities are expected to result in a
30 percent increase in El Abra copper production for the year 2022, compared
with the year 2021.
Consolidated copper sales from FCX’s South America mines of 1.1 billion pounds
in 2021 were higher than 1.0 billion pounds in 2020, primarily reflecting higher
mining and milling rates at Cerro Verde. FCX expects copper sales from its South
America mines to approximate 1.2 billion pounds in 2022.
FUTURE ORGANIC GROWTH OPPORTUNITIES
El Abra
Expansion
in Chile
• Large sulfide resource supports a major
expansion opportunity
• Preparations for submitting environmental impact
statement and stakeholder engagement
• Monitoring regulatory considerations
12 Fre e por t-McMoR an
FCX’s Cerro Verde mine in Peru
contains the largest mill
concentrating facility in the world.
1 3 2 0 2 1 A n n u a l R e p o r t
13 2 02 1 A nnu a l R ep or t
2021 HIGHLIGHTS
3.5%
of copper reserves
+,-(cid:5)(cid:15)(cid:6)(cid:13)(cid:16)(cid:6)(cid:19)(cid:12)(cid:26)(cid:10)(cid:11)(cid:8)(cid:26)(cid:5)(cid:15)(cid:6)(cid:7)(cid:7)(cid:8)(cid:9)(cid:5)
(cid:9)(cid:8)(cid:16)(cid:8)(cid:9)(cid:31)(cid:8)(cid:16)(cid:5)(cid:10)(cid:16)(cid:16)(cid:6)(cid:15)(cid:12)(cid:10)(cid:11)(cid:8)(cid:26)(cid:5)(cid:20)(cid:12)(cid:11)(cid:17)(cid:5)(cid:5)
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30%
increase
.((cid:7)(cid:8)(cid:15)(cid:11)(cid:8)(cid:26)(cid:5)(cid:12)(cid:13)(cid:15)(cid:9)(cid:8)(cid:10)(cid:16)(cid:8)(cid:5)(cid:12)(cid:13)(cid:5).(cid:19)(cid:5)#(cid:30)(cid:9)(cid:10)(cid:5)
(cid:7)(cid:9)(cid:6)(cid:26)(cid:28)(cid:15)(cid:11)(cid:12)(cid:6)(cid:13)(cid:5)(cid:12)(cid:13)(cid:5)(cid:2)(cid:3)(cid:2)(cid:2)
(cid:5)
380,o00
METRIC TONS
OF ORE PER DAY
(cid:2)(cid:3)(cid:2)(cid:4)(cid:5)(cid:25)(cid:12)(cid:19)(cid:19)(cid:5)(cid:9)(cid:10)(cid:11)(cid:8)(cid:5)(cid:10)(cid:11)(cid:5),(cid:8)(cid:9)(cid:9)(cid:6)(cid:5)/(cid:8)(cid:9)(cid:26)(cid:8)
400,000
METRIC TONS
OF ORE PER DAY
)(cid:10)(cid:9)(cid:14)(cid:8)(cid:11)(cid:8)(cid:26)(cid:5)(cid:25)(cid:12)(cid:19)(cid:19)(cid:5)(cid:9)(cid:10)(cid:11)(cid:8)(cid:5)(cid:10)(cid:11)(cid:5)(cid:5)
,(cid:8)(cid:9)(cid:9)(cid:6)(cid:5)/(cid:8)(cid:9)(cid:26)(cid:8)(cid:5)(cid:26)(cid:28)(cid:9)(cid:12)(cid:13)(cid:14)(cid:5)(cid:2)(cid:3)(cid:2)(cid:2)
KEY UNDERGROUND
DEVELOPMENT highlights
2004
&(cid:8)(cid:10)(cid:9)(cid:5)(cid:15)(cid:6)(cid:25)(cid:25)(cid:6)(cid:13)(cid:5)(cid:12)(cid:13)(cid:18)(cid:9)(cid:10)(cid:16)(cid:11)(cid:9)(cid:28)(cid:15)(cid:11)(cid:28)(cid:9)(cid:8)(cid:5)
(cid:26)(cid:8)(cid:31)(cid:8)(cid:19)(cid:6)(cid:7)(cid:25)(cid:8)(cid:13)(cid:11)(cid:5)(cid:15)(cid:6)(cid:25)(cid:25)(cid:8)(cid:13)(cid:15)(cid:8)(cid:26)(cid:5)(cid:18)(cid:6)(cid:9)(cid:5)
(cid:28)(cid:13)(cid:26)(cid:8)(cid:9)(cid:14)(cid:9)(cid:6)(cid:28)(cid:13)(cid:26)(cid:5)(cid:9)(cid:8)(cid:16)(cid:8)(cid:9)(cid:31)(cid:8)(cid:16)
2019
&(cid:8)(cid:10)(cid:9)(cid:5)(cid:7)(cid:9)(cid:6)(cid:26)(cid:28)(cid:15)(cid:11)(cid:12)(cid:6)(cid:13)(cid:5)(cid:7)(cid:17)(cid:10)(cid:16)(cid:8)(cid:5)
(cid:15)(cid:6)(cid:25)(cid:25)(cid:8)(cid:13)(cid:15)(cid:8)(cid:26)(cid:5)(cid:18)(cid:6)(cid:9)(cid:5)0(cid:9)(cid:10)(cid:16)(cid:30)(cid:8)(cid:9)(cid:14)(cid:5)
$(cid:19)(cid:6)(cid:15)1(cid:5),(cid:10)(cid:31)(cid:8)(cid:5)(cid:10)(cid:13)(cid:26)(cid:5)%(cid:8)(cid:8)(cid:7)(cid:5)*(cid:12)(cid:19)(cid:19)(cid:5)(cid:5)
2(cid:8)(cid:31)(cid:8)(cid:19)(cid:5)3(cid:6)(cid:13)(cid:8)
2021
&(cid:8)(cid:10)(cid:9)(cid:5)4)(cid:29)+’(cid:5)(cid:10)(cid:15)(cid:17)(cid:12)(cid:8)(cid:31)(cid:8)(cid:26)(cid:5)(cid:10)(cid:13)(cid:13)(cid:28)(cid:10)(cid:19)(cid:5)(cid:9)(cid:28)(cid:13)(cid:5)
(cid:9)(cid:10)(cid:11)(cid:8)(cid:5)(cid:18)(cid:6)(cid:9)(cid:5)(cid:28)(cid:13)(cid:26)(cid:8)(cid:9)(cid:14)(cid:9)(cid:6)(cid:28)(cid:13)(cid:26)(cid:5)(cid:15)(cid:6)(cid:7)(cid:7)(cid:8)(cid:9)(cid:5)
(cid:10)(cid:13)(cid:26)(cid:5)(cid:14)(cid:6)(cid:19)(cid:26)(cid:5)(cid:7)(cid:9)(cid:6)(cid:26)(cid:28)(cid:15)(cid:11)(cid:12)(cid:6)(cid:13)
over
350
miles
(cid:27)(cid:18)(cid:5)(cid:11)(cid:28)(cid:13)(cid:13)(cid:8)(cid:19)(cid:12)(cid:13)(cid:14)(cid:5)(cid:26)(cid:8)(cid:31)(cid:8)(cid:19)(cid:6)(cid:7)(cid:8)(cid:26)
FCX NOW HAS THE EXCITING FUTURE OF
managing the largest and most modern
underground operations in the history
of the global mining industry.
Underground rail car loading at
the Grasberg Block Cave mine
14 Fre epor t-McMoR an
14 Fre ep or t-McMoR a n
O P E R A T I O N A L O V E R V I E W
i n d o n e s i a m i n i n g
Through its subsidiary, PT Freeport Indonesia (PT-FI), FCX mines one of the
world’s largest copper and gold deposits in the Grasberg minerals district in
Papua, Indonesia. In addition to copper and gold, PT-FI produces silver. FCX
has a 48.76 percent ownership in PT-FI and manages its mining operations.
PT-FI’s results are consolidated in FCX’s financial statements.
PT-FI currently has three underground operating mines in the Grasberg
minerals district: Grasberg Block Cave, Deep Mill Level Zone and Big Gossan.
During 2021, PT-FI began development of the Kucing Liar underground ore
body. The ramp-up of underground production at the Grasberg minerals
district continues to advance on schedule.
Higher consolidated sales of 1.3 billion pounds of copper and
1.3 million ounces of gold in 2021, compared with 0.8 billion pounds of copper
and 0.8 million ounces of gold in 2020, primarily reflect the ramp-up of
underground mining at the Grasberg minerals district.
Consolidated sales volumes from PT-FI are expected to approximate 1.6 billion
pounds of copper and 1.6 million ounces of gold in 2022.
FUTURE ORGANIC GROWTH OPPORTUNITIES
Kucing Liar
Grasberg
Minerals
District in
Indonesia
• Commenced development of underground
copper and gold reserves
• Approximate 10-year development timeframe
• Benefits from substantial shared infrastructure
• Sustain large-scale, low-cost production
1 5 2 0 2 1 A n n u a l R ep o r t
M I N I N G R E S E R V E S A N D M I N E R A L I Z E D M A T E R I A L
m i n i n g r e s e r v e s a n d
m i n e r a l i z e d m at e r i a l
FCX has significant mineral reserves, mineral resources and future development
opportunities within its portfolio of mining assets. FCX’s estimated consolidated
recoverable proven and probable mineral reserves from its mines at December
31, 2021, included 107.2 billion pounds of copper, 27.1 million ounces of gold,
3.39 billion pounds of molybdenum and 345.7 million ounces of silver, which were
determined using metal price assumptions of $2.50 per pound for copper, $1,200
per ounce for gold, $10 per pound for molybdenum and $15 per ounce for silver.
In addition to the estimated consolidated recoverable proven and probable mineral
reserves, FCX’s estimated mineral resources (including measured, indicated and
inferred resources) at December 31, 2021, which were assessed using $3.00 per
pound for copper, totaled 191 billion pounds of incremental contained copper. FCX
continues to pursue opportunities to convert this material into mineral reserves,
future production volumes and cash flow.
ESTIMATED RECOVERABLE PROVEN AND PROBABLE RESERVES
COPPER RESERVES BY REGION
(cid:4)(cid:3)56(cid:2)(cid:5)(cid:30)(cid:12)(cid:19)(cid:19)(cid:12)(cid:6)(cid:13)(cid:5)(cid:19)(cid:30)(cid:16)(cid:5)(cid:10)(cid:16)(cid:5)(cid:6)(cid:18)(cid:5)(cid:2)(cid:3)(cid:2)(cid:4)
40%
North
America
30% 30%
South
America
indonesia
16 Fre epor t -McMoR an
FCX has long-lived reserves and
a significant resource position in
its existing portfolio.
LONG-LIVED ASSET BASE
107.2
BILLION LBS
.(cid:16)(cid:11)(cid:12)(cid:25)(cid:10)(cid:11)(cid:8)(cid:26)(cid:5)(cid:9)(cid:8)(cid:15)(cid:6)(cid:31)(cid:8)(cid:9)(cid:10)(cid:30)(cid:19)(cid:8)(cid:5)(cid:5)
(cid:7)(cid:9)(cid:6)(cid:31)(cid:8)(cid:13)(cid:5)(cid:10)(cid:13)(cid:26)(cid:5)(cid:7)(cid:9)(cid:6)(cid:30)(cid:10)(cid:30)(cid:19)(cid:8)(cid:5)(cid:15)(cid:6)(cid:7)(cid:7)(cid:8)(cid:9)(cid:5)
(cid:25)(cid:12)(cid:13)(cid:8)(cid:9)(cid:10)(cid:19)(cid:5)(cid:9)(cid:8)(cid:16)(cid:8)(cid:9)(cid:31)(cid:8)(cid:16)(cid:5)(cid:10)(cid:16)(cid:5)(cid:6)(cid:18)(cid:5)
%(cid:8)(cid:15)(cid:8)(cid:25)(cid:30)(cid:8)(cid:9)(cid:5)7(cid:4)(cid:21)(cid:5)(cid:2)(cid:3)(cid:2)(cid:4)
$2.50
PER LB
,(cid:6)(cid:7)(cid:7)(cid:8)(cid:9)(cid:5)(cid:7)(cid:9)(cid:12)(cid:15)(cid:8)(cid:5)(cid:28)(cid:16)(cid:8)(cid:26)(cid:5)(cid:11)(cid:6)(cid:5)(cid:26)(cid:8)(cid:11)(cid:8)(cid:9)(cid:25)(cid:12)(cid:13)(cid:8)(cid:5)
(cid:9)(cid:8)(cid:15)(cid:6)(cid:31)(cid:8)(cid:9)(cid:10)(cid:30)(cid:19)(cid:8)(cid:5)(cid:9)(cid:8)(cid:16)(cid:8)(cid:9)(cid:31)(cid:8)(cid:16)(cid:5)
25
YEARS
’(cid:25)(cid:7)(cid:19)(cid:12)(cid:8)(cid:26)(cid:5)(cid:9)(cid:8)(cid:16)(cid:8)(cid:9)(cid:31)(cid:8)(cid:5)(cid:19)(cid:12)(cid:18)(cid:8)(cid:5)(cid:18)(cid:6)(cid:9)(cid:5)(cid:15)(cid:6)(cid:7)(cid:7)(cid:8)(cid:9)
191
BILLION LBS
.(cid:16)(cid:11)(cid:12)(cid:25)(cid:10)(cid:11)(cid:8)(cid:26)(cid:5)(cid:12)(cid:13)(cid:15)(cid:9)(cid:8)(cid:25)(cid:8)(cid:13)(cid:11)(cid:10)(cid:19)(cid:5)(cid:15)(cid:6)(cid:7)(cid:7)(cid:8)(cid:9)(cid:5)
(cid:9)(cid:8)(cid:16)(cid:6)(cid:28)(cid:9)(cid:15)(cid:8)(cid:16)(cid:5)(cid:6)(cid:13)(cid:5)(cid:10)(cid:5)(cid:15)(cid:6)(cid:13)(cid:11)(cid:10)(cid:12)(cid:13)(cid:8)(cid:26)(cid:5)(cid:30)(cid:10)(cid:16)(cid:12)(cid:16)(cid:5)
(cid:10)(cid:16)(cid:5)(cid:6)(cid:18)(cid:5)%(cid:8)(cid:15)(cid:8)(cid:25)(cid:30)(cid:8)(cid:9)(cid:5)7(cid:4)(cid:21)(cid:5)(cid:2)(cid:3)(cid:2)(cid:4)
1 7 2 0 2 1 A n n u a l R ep o r t
1 7 2 02 1 A nnu a l R ep or t
Haul road at the Lone Star mine, Arizona
FCX’s new performance-based payout
framework is providing increasing
cash returns to shareholders.
SHAREHOLDER RETURNS
up to
50%
+(cid:9)(cid:8)(cid:8)(cid:5)(cid:15)(cid:10)(cid:16)(cid:17)(cid:5)(cid:18)(cid:19)(cid:6)(cid:20)(cid:5)(cid:11)(cid:6)(cid:5)(cid:30)(cid:8)(cid:5)(cid:9)(cid:8)(cid:11)(cid:28)(cid:9)(cid:13)(cid:8)(cid:26)(cid:5)(cid:11)(cid:6)(cid:5)
(cid:16)(cid:11)(cid:6)(cid:15)1(cid:17)(cid:6)(cid:19)(cid:26)(cid:8)(cid:9)(cid:16)(cid:5)(cid:28)(cid:13)(cid:26)(cid:8)(cid:9)(cid:5)(cid:7)(cid:8)(cid:9)(cid:18)(cid:6)(cid:9)(cid:25)(cid:10)(cid:13)(cid:15)(cid:8)(cid:29)
(cid:30)(cid:10)(cid:16)(cid:8)(cid:26)(cid:5)(cid:7)(cid:10)"(cid:6)(cid:28)(cid:11)(cid:5)(cid:18)(cid:9)(cid:10)(cid:25)(cid:8)(cid:20)(cid:6)(cid:9)1
$0.60
PER SHARE
IN dividendS
’(cid:13)(cid:15)(cid:19)(cid:28)(cid:26)(cid:8)(cid:16)(cid:5)8(cid:3)67(cid:3)(cid:5)(cid:7)(cid:8)(cid:9)(cid:5)(cid:16)(cid:17)(cid:10)(cid:9)(cid:8)(cid:5)(cid:10)(cid:13)(cid:13)(cid:28)(cid:10)(cid:19)(cid:5)
(cid:30)(cid:10)(cid:16)(cid:8)(cid:5)(cid:26)(cid:12)(cid:31)(cid:12)(cid:26)(cid:8)(cid:13)(cid:26)(cid:5)(cid:10)(cid:13)(cid:26)(cid:5)8(cid:3)67(cid:3)(cid:5)(cid:7)(cid:8)(cid:9)(cid:5)
(cid:16)(cid:17)(cid:10)(cid:9)(cid:8)(cid:5)(cid:31)(cid:10)(cid:9)(cid:12)(cid:10)(cid:30)(cid:19)(cid:8)(cid:5)(cid:26)(cid:12)(cid:31)(cid:12)(cid:26)(cid:8)(cid:13)(cid:26)(cid:5)(cid:18)(cid:6)(cid:9)(cid:5)(cid:2)(cid:3)(cid:2)(cid:2)
$3.0
BILLION
SHARE REPURCHASE PROGRAM
$(cid:6)(cid:10)(cid:9)(cid:26)(cid:5)(cid:10)(cid:7)(cid:7)(cid:9)(cid:6)(cid:31)(cid:8)(cid:26)(cid:5)(cid:12)(cid:13)(cid:5)(cid:5)
!(cid:6)(cid:31)(cid:8)(cid:25)(cid:30)(cid:8)(cid:9)(cid:5)(cid:2)(cid:3)(cid:2)(cid:4)
25
MILLION SHARES
9(cid:8)(cid:7)(cid:28)(cid:9)(cid:15)(cid:17)(cid:10)(cid:16)(cid:8)(cid:26)(cid:5)(cid:10)(cid:16)(cid:5)(cid:6)(cid:18)(cid:5)*(cid:10)(cid:9)(cid:15)(cid:17)(cid:5)7(cid:4)(cid:21)(cid:5)
(cid:2)(cid:3)(cid:2)(cid:2)(cid:21)(cid:5)(cid:12)(cid:13)(cid:5)(cid:6)(cid:7)(cid:8)(cid:13)(cid:5)(cid:25)(cid:10)(cid:9)1(cid:8)(cid:11)
Haul trucks delivering ore from
the Morenci mine, Arizona
18 Fre epor t-McMoR an
18 Fre ep or t-McMoR a n
F I N A N C I A L P E R F O R M A N C E
F I N A N C I A L P E R F O R M A N C e
FCX believes that its cash generating capability and financial
+(cid:12)(cid:13)(cid:10)(cid:13)(cid:15)(cid:12)(cid:13)(cid:14)(cid:5))(cid:9)(cid:10)(cid:13)(cid:16)(cid:10)(cid:15)(cid:11)(cid:12)(cid:6)(cid:13)(cid:16)
condition will allow it to meet its operating, investing and financing
needs over the next several years.
(cid:27)(cid:7)(cid:8)(cid:9)(cid:10)(cid:11)(cid:12)(cid:13)(cid:14)(cid:5),(cid:10)(cid:16)(cid:17)(cid:5)+(cid:19)(cid:6)(cid:20)(cid:16)(cid:5)(cid:10)(cid:13)(cid:26)(cid:5)2(cid:12):(cid:28)(cid:12)(cid:26)(cid:12)(cid:11)"
Net repayments of debt in 2021 totaled $260 million, primarily
associated with the $524 million redemption of FCX’s 3.55% Senior
Notes due 2022 and the repayment of $200 million under Cerro
Verde’s term loan, partly offset by borrowings of $432 million under
FCX generated consolidated operating cash flows of $7.7 billion in
2021. At December 31, 2021, FCX had consolidated total debt of
the PT-FI term loan.
$9.5 billion, consolidated cash and cash equivalents of $8.1 billion,
FCX’s next senior note maturity is in March 2023, with redemption
and no borrowings and $3.5 billion available under its revolving
rights, at par, beginning in December 2022.
credit facility.
+(cid:12)(cid:13)(cid:10)(cid:13)(cid:15)(cid:12)(cid:10)(cid:19)(cid:5)4(cid:6)(cid:19)(cid:12)(cid:15)"
Based on current sales volume and costs estimates, and assuming
average prices of $4.50 per pound of copper, $1,800 per ounce of
gold and $19.00 per pound of molybdenum, FCX’s consolidated
operating cash flows are expected to approximate $8.0 billion in
2022. The impact of copper price changes during 2022 on operating
cash flows would approximate $365 million for each $0.10 per pound
In February 2021, FCX’s Board of Directors (the Board) adopted
a financial policy for the allocation of cash flows aligned with
FCX’s strategic objectives of maintaining a strong balance sheet
and increasing cash returns to shareholders while advancing
opportunities for future growth.
change in the average price of copper.
In February 2021, the Board reinstated a cash dividend on FCX’s
’(cid:13)(cid:31)(cid:8)(cid:16)(cid:11)(cid:12)(cid:13)(cid:14)(cid:5)#(cid:15)(cid:11)(cid:12)(cid:31)(cid:12)(cid:11)(cid:12)(cid:8)(cid:16)
common stock (base dividend) at an annual rate of $0.30 per share,
and following achievement of FCX’s net debt target in the range
FCX’s capital expenditures totaled $2.1 billion in 2021, including
of $3.0 billion to $4.0 billion (excluding debt for additional smelting
$1.25 billion for major projects, primarily associated with
capacity in Indonesia), in November 2021 the Board approved
underground development activities in the Grasberg
the implementation of a performance-based payout framework,
minerals district.
Capital expenditures are expected to approximate $4.7 billion in
2022, including $2.0 billion for major mining projects ($1.4 billion
for underground development activities in the Grasberg minerals
district and $0.6 billion for discretionary growth projects) and
including (i) a new $3.0 billion share repurchase program and (ii) a
variable cash dividend on common stock for 2022 at an expected
annual rate of $0.30 per share. The combined annual rate of the base
dividend and the variable dividend is expected to total $0.60 per
share for 2022.
$1.4 billion for development of additional smelting capacity
The policy is being implemented to direct up to 50 percent of cash
in Indonesia.
Capital expenditures for the Indonesia smelter projects are
currently being funded through PT-FI’s $1.0 billion unsecured
bank credit facility. PT-FI is currently arranging incremental
financing for these projects, with the cost of debt shared by
its shareholders.
flows, after planned capital spending (excluding the Indonesia
smelter projects) and distributions to noncontrolling interests, to
shareholder returns, with the balance available for investments in
future value enhancing growth projects and further debt reductions.
The Board will review the structure and the amount of performance-
based payout at least annually.
19 2 0 2 1 A n n u a l R ep o r t
S U S T A I N A B I L I T Y
S U S TA I N A B I L I T Y
FCX is foremost in the global copper industry, a metal which plays an essential
role in the technologies necessary to support global decarbonization, to advance
reliable electrical grids, telecommunications and transportation, and to connect
and advance society.
FCX’s sustainability approach is underpinned by the recognition that its work
and the products it produces are key contributors to progress around the world.
FCX recognizes the importance of effective management, integration, and
governance of key environmental, social and governance (ESG) matters. Strong
ESG performance is imperative to the long-term success of FCX and its ability to
deliver value to stakeholders.
FCX’s highest priority is the health, safety and well-being of its workforce and
the communities where it operates. FCX seeks to work collaboratively with its
stakeholders to support shared value creation in its host communities and
countries and to recognize, respect and promote human rights everywhere it
conducts business. FCX is also dedicated to effective environmental protection
and stewardship, which are key to ensuring the long-term viability of its business,
including maintaining the necessary support from communities and governments.
One of the ways FCX is working to demonstrate its commitment to responsible
production is through the Copper Mark, a comprehensive assurance framework
developed specifically for the copper industry. To achieve the Copper Mark, each
site is required to be independently assessed against a comprehensive set of
32 ESG criteria. In 2020, FCX began the process of validating all of its copper
producing sites against the Copper Mark. To date, FCX has achieved the Copper
Mark at 9 global operations, two sites have signed letters of commitment and
FCX plans to commence the process at PT-FI in 2022. Read more about FCX’s
sustainability programs and progress in its 2021 Annual Report on Sustainability,
available at fcx.com/sustainability.
2 0 Fre e por t-McMoR an
FCX HAS ACHIEVED THE
COPPER MARK AT THE
FOLLOWING 9 SITES:
Atlantic Copper
smelter and
refinery in Spain
Bagdad mine in
Arizona, U.S.
El Paso refinery in
Texas, U.S.
Miami mine and
smelter in
Arizona, U.S.
Cerro Verde mine
in Peru
Morenci mine in
Arizona, U.S.
Chino mine in New
Mexico, U.S.
Tyrone mine in
Arizona, U.S.
El Abra mine
in Chile
COMMUNITY INVESTMENTS
$164
MILLION
(cid:2)(cid:3)(cid:2)(cid:4)(cid:5)(cid:11)(cid:6)(cid:11)(cid:10)(cid:19)(cid:5)(cid:12)(cid:13)(cid:31)(cid:8)(cid:16)(cid:11)(cid:25)(cid:8)(cid:13)(cid:11)
$2.1
BILLION
,(cid:28)(cid:25)(cid:28)(cid:19)(cid:10)(cid:11)(cid:12)(cid:31)(cid:8)(cid:5)(cid:12)(cid:13)(cid:31)(cid:8)(cid:16)(cid:11)(cid:25)(cid:8)(cid:13)(cid:11)(cid:5)(cid:5)
(cid:16)(cid:12)(cid:13)(cid:15)(cid:8)(cid:5)(cid:2)(cid:3)(cid:3)
2 1 2 0 2 1 A n n u a l R e p o r t
2 1 2 02 1 A nnu a l R ep or t
C L I M A T E S T R A T E G Y
C L I M A T E S T R A T E GY
As one of the world’s largest copper producers, FCX understands its critical role
in the low-carbon energy transition. FCX is dedicated to supplying the global
economy with responsibly produced copper while operating in a manner that
manages and mitigates its greenhouse gas (GHG) emissions and other climate-
related risks.
Building upon its 2020 progress, in 2021, FCX completed its first global climate
scenario analysis, significantly enhanced the climate expertise on its Board,
directly aligned climate performance with its annual executive compensation
program, and advanced its analysis of renewable energy opportunities in the
U.S. During the year, FCX also established a 30 percent GHG emissions intensity
reduction target for its Indonesia operations by 2030 (versus a 2018 baseline);
the Indonesia target is in addition to FCX’s 2030 intensity reduction target
established in 2020 for its Americas copper business. FCX is committed to
validating its 2030 interim targets with the Science Based Targets initiative.
FCX recognizes that climate change poses considerable near- and long-term
challenges for society and for FCX’s operational and financial performance.
Mining is energy-intensive and generates significant GHG emissions that
contribute to climate change. This is why FCX aspires to participate in — and
positively contribute to — a 2050 net zero economy. In support of this ambition,
FCX is working collaboratively with various industry consortiums and equipment
manufacturers to develop viable technological solutions necessary to achieve
its climate commitments. Read more about FCX’s climate strategy and progress
in its 2020 Climate Report, available at fcx.com/sustainability.
2 2 Fre e por t-McMoR an
FCX aspires to participate in — and
positively contribute to — a 2050
net zero economy.
CLIMATE
STRATEGY
PILLARS
PILLAR 1
Reduction
9(cid:8)(cid:26)(cid:28)(cid:15)(cid:8)(cid:5)0;0(cid:5)(cid:8)(cid:25)(cid:12)(cid:16)(cid:16)(cid:12)(cid:6)(cid:13)(cid:16)(cid:5)
(cid:12)(cid:13)(cid:15)(cid:19)(cid:28)(cid:26)(cid:12)(cid:13)(cid:14)(cid:5)(cid:6)(cid:28)(cid:9)(cid:5)#(cid:25)(cid:8)(cid:9)(cid:12)(cid:15)(cid:10)(cid:16)(cid:5)(cid:10)(cid:13)(cid:26)(cid:5)
4)(cid:29)+’(cid:5)(cid:2)(cid:3)7(cid:3)(cid:5)0;0(cid:5)(cid:12)(cid:13)(cid:11)(cid:8)(cid:13)(cid:16)(cid:12)(cid:11)"(cid:5)
(cid:9)(cid:8)(cid:26)(cid:28)(cid:15)(cid:11)(cid:12)(cid:6)(cid:13)(cid:5)(cid:11)(cid:10)(cid:9)(cid:14)(cid:8)(cid:11)(cid:16)
PILLAR 2
Resilience
.(cid:13)(cid:17)(cid:10)(cid:13)(cid:15)(cid:8)(cid:5)(cid:9)(cid:8)(cid:16)(cid:12)(cid:19)(cid:12)(cid:8)(cid:13)(cid:15)(cid:8)(cid:5)(cid:11)(cid:6)(cid:5)(cid:15)(cid:19)(cid:12)(cid:25)(cid:10)(cid:11)(cid:8)(cid:5)
(cid:15)(cid:17)(cid:10)(cid:13)(cid:14)(cid:8)(cid:5)(cid:9)(cid:12)(cid:16)1(cid:16)
PILLAR 3
Contribution
,(cid:6)(cid:13)(cid:11)(cid:9)(cid:12)(cid:30)(cid:28)(cid:11)(cid:8)(cid:5)(cid:9)(cid:8)(cid:16)(cid:7)(cid:6)(cid:13)(cid:16)(cid:12)(cid:30)(cid:19)"(cid:5)
(cid:7)(cid:9)(cid:6)(cid:26)(cid:28)(cid:15)(cid:8)(cid:26)(cid:5)(cid:15)(cid:6)(cid:7)(cid:7)(cid:8)(cid:9)(cid:5)(cid:11)(cid:6)(cid:5)(cid:11)(cid:17)(cid:8)(cid:5)(cid:14)(cid:19)(cid:6)(cid:30)(cid:10)(cid:19)(cid:5)
(cid:8)(cid:13)(cid:8)(cid:9)(cid:14)"(cid:5)(cid:11)(cid:9)(cid:10)(cid:13)(cid:16)(cid:12)(cid:11)(cid:12)(cid:6)(cid:13)
2 3 2 0 2 1 A n n u a l R e p o r t
2 3 2 02 1 A nnu a l R ep or t
Mangrove reclamation in Papua, Indonesia
BOARD OF DIRECTORS
Richard C. Adkerson
Chairman of the Board
and Chief Executive Officer
Freeport-McMoRan Inc.
Dustan E. McCoy (1, 2)
Lead Independent Director
Freeport-McMoRan Inc.
Retired Chairman and
Chief Executive Officer
Brunswick Corporation
David P. Abney (1, 2)
Retired Chairman and
Chief Executive Officer
United Parcel Service, Inc.
Marcela E. Donadio (3)
Retired Partner
and Americas Oil & Gas Sector Leader
Ernst & Young LLP
EXECUTIVE OFFICERS
Richard C. Adkerson
Chairman of the Board
and Chief Executive Officer
Kathleen L. Quirk
President
Maree Robertson*
Senior Vice President and
Chief Financial Officer
Douglas N. Currault II
Senior Vice President and
General Counsel
Stephen T. Higgins
Senior Vice President and
Chief Administrative Officer
* Ms. Robertson’s appointment was
effective March 1, 2022.
B O A R D O F D I R E C T O R S A N D L E A D E R S H I P
John J. Stephens (1)
Retired Senior Executive Vice President
and Chief Financial Officer
AT&T Inc.
Frances Fragos Townsend (2, 4)
Executive Vice President for
Corporate Affairs,
Corporate Secretary and
Chief Compliance Officer
Activision Blizzard, Inc.
EMERITUS MEMBER:
Dr. Henry A. Kissinger
Director Emeritus
BOARD COMMITTEES:
1) Audit Committee
2) Compensation Committee
3) Governance Committee
4) Corporate Responsibility Committee
#(cid:26)(cid:25)(cid:12)(cid:13)(cid:12)(cid:16)(cid:11)(cid:9)(cid:10)(cid:11)(cid:12)(cid:6)(cid:13)
Robert R. Boyce
Vice President and Treasurer
William E. Cobb
Vice President and
Chief Sustainability Officer
Pamela Q. Masson
Vice President and Chief Human
Resources Officer
Bertrand L. Odinet, II
Vice President, Chief Information
Officer and Chief Innovation Officer
C. Donald Whitmire, Jr. *
Vice President and
Controller — Financial Reporting
Internal Auditors
Deloitte & Touche LLP
* Mr. Whitmire will retire
June 30, 2022.
Robert W. “Bob” Dudley (3, 4)
Retired Group Chief Executive
BP, p.l.c.
Hugh Grant (2)
Retired Chairman of the Board,
President and Chief Executive Officer
Monsanto Company
Lydia H. Kennard (3, 4)
President and Chief Executive Officer
KDG Construction Consulting
and Quality Engineering Solutions
Ryan M. Lance (4)
Chairman and Chief Executive Officer
ConocoPhillips
Sara Grootwassink Lewis (1)
Retired Chief Executive Officer
Lewis Corporate Advisors
SENIOR LEADERSHIP
(cid:27)(cid:7)(cid:8)(cid:9)(cid:10)(cid:11)(cid:12)(cid:6)(cid:13)(cid:16)
Mark J. Johnson
Director and Executive Vice President
PT Freeport Indonesia
President and Chief Operating Officer
Freeport-McMoRan Indonesia
Joshua F. “Josh” Olmsted
President and Chief Operating Officer
Freeport-McMoRan Americas
Richard E. “Rick” Coleman
President
Freeport-McMoRan Growth Support
A. Cory Stevens
President
Freeport-McMoRan Mining Services
Michael J. Kendrick
President
Climax Molybdenum Co.
Javier Targhetta
President, Atlantic Copper S.L.U.
Senior Vice President, FCX
(Concentrates)
Clayton A. “Tony” Wenas
President Director
PT Freeport Indonesia
24 Fre e p or t -McMoR an
F I N A N C I A L A N D O P E R A T I N G I N F O R M A T I O N
Table of contents
26 Selected Operating Data
28
63
64
65
68
69
70
Management’s Discussion
and Analysis
Management’s Report
on Internal Control Over
Financial Reporting
Report of Independent
Registered Public
Accounting Firm
Report of Independent
Registered Public
Accounting Firm
Consolidated Statements
of Operations
Consolidated Statements of
Comprehensive Income (Loss)
Consolidated Statements
of Cash Flows
71 Consolidated Balance Sheets
72
Consolidated Statements
of Equity
73 Notes to Consolidated
Financial Statements
2 5 2 0 2 1 A n n u a l R ep o r t
S E L E C T E D O P E R A T I N G D A T A
Years Ended December 31,
2021
2020
2019
2018
2017
CONSOLIDATED MINING
Copper (millions of recoverable pounds)
Production
Sales, excluding purchases
Average realized price per pound
Gold (thousands of recoverable ounces)
Production
Sales, excluding purchases
Average realized price per ounce
Molybdenum (millions of recoverable pounds)
Production
Sales, excluding purchases
Average realized price per pound
NORTH AMERICA COPPER MINES
Operating Data, Net of Joint Venture Interestsa
Copper (millions of recoverable pounds)
Production
Sales, excluding purchases
Average realized price per pound
Molybdenum (millions of recoverable pounds)
Production
100% Operating Data
Leach operations
Leach ore placed in stockpiles (metric tons per day)
Average copper ore grade (percent)
Copper production (millions of recoverable pounds)
Mill operations
Ore milled (metric tons per day)
Average ore grade (percent):
Copper
Molybdenum
Copper recovery rate (percent)
Copper production (millions of recoverable pounds)
SOUTH AMERICA MINING
Copper (millions of recoverable pounds)
Production
Sales
Average realized price per pound
Molybdenum (millions of recoverable pounds)
Production
Leach operations
Leach ore placed in stockpiles (metric tons per day)
Average copper ore grade (percent)
Copper production (millions of recoverable pounds)
Mill operations
Ore milled (metric tons per day)
Average ore grade (percent):
Copper
Molybdenum
Copper recovery rate (percent)
Copper production (millions of recoverable pounds)
a. Amounts are net of Morenci’s joint venture partners’ undivided interest.
b. Cerro Verde mill operations were impacted by COVID-19 restrictions.
3,843
3,807
4.33
$
1,381
1,360
$ 1,796
85
82
$ 15.56
3,206
3,202
2.95
$
857
855
$ 1,832
76
80
$ 10.20
3,247
3,292
2.73
$
882
991
$ 1,415
90
90
$ 12.61
1,460
1,436
4.30
$
1,418
1,422
2.82
$
1,457
1,442
2.74
$
34
33
32
665,900
0.29
1,056
714,300
0.27
1,047
750,900
0.23
993
3,813
3,811
2.91
$
2,439
2,389
$ 1,254
95
94
$ 12.50
$
1,404
1,428
2.96
32
681,400
0.24
951
3,737
3,700
2.93
$
1,577
1,562
$ 1,268
$
$
92
95
9.33
1,518
1,484
2.85
33
679,000
0.28
1,016
269,500
279,700
326,100
301,000
299,500
0.38
0.03
81.2
649
1,047
1,055
4.34
$
21
163,900
0.32
256
0.35
0.02
84.1
647
979
976
3.05
19
$
160,300
0.35
241
0.34
0.02
87.0
748
1,183
1,183
2.71
$
29
205,900
0.37
268
0.35
0.02
87.8
719
$
1,249
1,253
2.87
28
195,200
0.33
287
0.39
0.03
86.4
788
$
1,235
1,235
2.97
27
142,800
0.37
255
380,300
331,600b
393,100
387,600
360,100
0.31
0.01
87.3
791
0.34
0.01
84.3
738
0.36
0.02
83.5
916
0.38
0.01
84.3
962
0.44
0.02
81.2
980
26 Fre epor t-McMoR an
S E L E C T E D O P E R A T I N G D A T A
Years Ended December 31,
2021
2020
2019
2018
2017
INDONESIA MINING
Operating Data, Net of Rio Tinto Joint Venture Interesta
Copper (millions of recoverable pounds)
Production
Sales
Average realized price per pound
Gold (thousands of recoverable ounces)
Production
Sales
Average realized price per ounce
100% Operating Data
Ore milled (metric tons per day)
Average ore grade:
Copper (percent)
Gold (grams per metric ton)
Recovery rates (percent):
Copper
Gold
Production:
Copper (millions of recoverable pounds)
Gold (thousands of recoverable ounces)
MOLYBDENUM MINES
Molybdenum production (millions of recoverable pounds)
Ore milled (metric tons per day)
Average molybdenum ore grade (percent)
1,336
1,316
4.34
$
1,370
1,349
$ 1,796
809
804
$ 3.08
848
842
$ 1,832
607
667
2.72
$
863
973
$ 1,416
1,160
1,130
2.89
$
2,416
2,366
$ 1,254
984
981
3.00
$
1,554
1,540
$ 1,268
151,600
87,700
110,100
178,100
140,400
1.30
1.04
89.8
77.0
1,336
1,370
1.32
1.10
91.9
78.1
809
848
0.84
0.93
88.4
75.0
607
863
0.98
1.58
91.8
84.7
1,227
2,697
30
21,800
0.19
24
20,700
0.17
29
30,100
0.14
35
27,900
0.18
1.01
1.15
91.6
85.0
996
1,554
32
22,500
0.20
a. Prior to December 21, 2018, PT Freeport Indonesia (PT-FI) had an unincorporated joint venture with Rio Tinto.
27 2 0 2 1 A n n u a l R ep o r t
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
In Management’s Discussion and Analysis of Financial Condition
opportunities for future growth. Following achievement of our net
and Results of Operations and Quantitative and Qualitative
debt target in the range of $3.0 billion to $4.0 billion (excluding
Disclosures About Market Risk (MD&A), “we,” “us” and “our” refer
debt for additional smelting capacity in Indonesia), we announced
to Freeport-McMoRan Inc. and its consolidated subsidiaries.
in November 2021 the implementation of a performance-based
The results of operations reported and summarized below are not
payout framework, including the commencement of a new
necessarily indicative of future operating results (refer to “Cautionary
$3.0 billion share repurchase program (through February 15, 2022,
Statement” below for further discussion). References to “Notes”
we acquired 18.2 million shares of our common stock for a total
are Notes included in our Notes to Consolidated Financial
cost of $710 million, $39.10 per share) and expected base and
Statements. Throughout MD&A, all references to earnings or losses
variable dividends on common stock totaling $0.60 per share for
per share are on a diluted basis.
2022. Our Board will review the structure and the amount of
This section of our Form 10-K discusses the results of operations
the performance-based payout framework at least annually. Refer
for the years 2021 and 2020 and comparisons between these
to Note 10 and “Capital Resources and Liquidity” for further
years. Discussion of the results of operations for the year 2019 and
discussion of our financial policy.
comparisons between the years 2020 and 2019 are not included in
As further discussed in “Operations,” highlights during
this Form 10-K and can be found in Items 7. and 7A. “Management’s
2021 include:
Discussion and Analysis of Financial Condition and Results of
• The successful ramp-up of underground mining at the Grasberg
Operations and Quantitative and Qualitative Disclosures About
minerals district, achieving quarterly copper and gold volumes in
Market Risk” contained in Part II of our Annual Report on Form 10-K
the fourth quarter approximating 100 percent of the projected
for the fiscal year ended December 31, 2020.
annualized levels.
OVERVIEW
• Operations at the Lone Star copper leach project at our Safford
mine exceeded initial design capacity of 200 million pounds of
We are a leading international mining company with headquarters
copper annually and produced approximately 235 million pounds
in Phoenix, Arizona. We operate large, long-lived, geographically
of copper.
diverse assets with significant proven and probable mineral
• Cerro Verde’s concentrator facilities milling rates averaged
reserves of copper, gold and molybdenum. We are one of the world’s
380,300 metric tons of ore per day, compared with 331,600 metric
largest publicly traded copper producers. Our portfolio of assets
tons of ore per day in 2020. Subject to ongoing monitoring
includes the Grasberg minerals district in Indonesia, one of the
of COVID-19 protocols, Cerro Verde is targeting milling rates to
world’s largest copper and gold deposits; and significant mining
increase to approximately 400,000 metric tons of ore per day
operations in North America and South America, including the
during 2022.
large-scale Morenci minerals district in Arizona and the Cerro Verde
• Advancement of several initiatives to recover additional
operation in Peru.
copper from our large existing leach stockpiles across our
Our results for 2021 reflect strong operating and financial
North America and South America operations, which incorporate
performance, and cash flow generation. We remained focused on
new applications, technologies and data analytics currently
cost and capital management and advanced our sustainability
being developed.
objectives. Despite continued challenges associated with the
Net income attributable to common stock totaled $4.3 billion
COVID-19 pandemic, we achieved a 19 percent increase in copper
in 2021 and $599 million in 2020. Our results in 2021, compared
sales volumes and a 59 percent increase in gold sales volumes
to 2020, primarily reflect increased copper and gold volumes and
in 2021, compared with 2020. During 2022, we expect to grow
higher copper and molybdenum prices, partly offset by higher
production and sales volumes while continuing to execute our
production and delivery costs and provision for income taxes.
operating plans, which we expect will provide strong cash flows
Refer to “Consolidated Results” for discussion of items
to support advancement of organic growth initiatives and continue
impacting our consolidated results for the two years ended
cash returns to shareholders under our established financial
December 31, 2021.
policy, based on a favorable operational and market outlook.
At December 31, 2021, we had consolidated debt of $9.5 billion
In February 2021, our Board of Directors (Board) adopted a
and consolidated cash and cash equivalents of $8.1 billion,
financial policy for the allocation of cash flows aligned with
resulting in net debt of $1.4 billion. This represents a reduction in
our strategic objectives of maintaining a strong balance sheet
net debt of $4.7 billion from December 31, 2020. Refer to “Net
and increasing cash returns to shareholders while advancing
Debt” for reconciliations of consolidated debt and consolidated
cash and cash equivalents to net debt.
28 Fre epor t-McMoR an
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
At December 31, 2021, we had no borrowings and $3.5 billion
further discussion. Because we cannot control the price of our
available under our revolving credit facility. In 2021, we redeemed
products, the key measures that management focuses on in
all $524 million of our 3.55% Senior Notes due 2022 at a
operating our business are sales volumes, unit net cash costs,
redemption price equal to 100 percent of the principal amount,
operating cash flows and capital expenditures.
plus accrued and unpaid interest. Our next senior note maturity is
in March 2023, with redemption rights, at par, beginning in
Sales Volumes. Following are our projected consolidated sales
volumes for 2022 and actual consolidated sales volumes for 2021:
December 2022. During 2021, we also prepaid $200 million of the
Cerro Verde Term Loan (the $325 million balance at December 31,
2021, matures in June 2022). Refer to Note 8 and “Capital Resources
and Liquidity” for further discussion.
We have significant mineral reserves, mineral resources and
future development opportunities within our portfolio of
mining assets. At December 31, 2021, our estimated consolidated
recoverable proven and probable mineral reserves totaled
107.2 billion pounds of copper, 27.1 million ounces of gold and
Copper (millions of recoverable pounds):
North America copper mines
South America mining
Indonesia mining
Total
Gold (thousands of recoverable ounces)
Molybdenum (millions of recoverable pounds)
2022
(Projected)
2021
(Actual)
1,550
1,180
1,570
4,300
1,580
80a
1,436
1,055
1,316
3,807
1,360
82
3.39 billion pounds of molybdenum. Refer to “Critical Accounting
a. Includes 50 million pounds from our North America and South America copper mines and 30 million
Estimates—Mineral Reserves” and Note 17 for further discussion.
During 2021, production from our mines totaled 3.8 billion pounds
of copper, 1.4 million ounces of gold and 85 million pounds of
molybdenum. Following is an allocation of our consolidated copper,
gold and molybdenum production in 2021 by geographic location:
pounds from our Molybdenum mines.
Consolidated sales for first-quarter 2022 are expected to
approximate 970 million pounds of copper, 380 thousand ounces
of gold and 20 million pounds of molybdenum. Projected sales
volumes are dependent on operational performance, weather-
North America
South America
Indonesia
Copper
Gold
Molybdenum
related conditions, timing of shipments and other factors. For
38%
27
35
100%
1%
—
99
100%
76%a
24
—
100%
other important factors that could cause results to differ materially
from projections, refer to “Cautionary Statement” below and
Item 1A. “Risk Factors” contained in Part I of our annual report on
Form 10-K for the year ended December 31, 2021.
a. Our North America copper mines produced 40 percent of consolidated molybdenum production,
Consolidated Unit Net Cash Costs. Assuming average prices
and our Henderson and Climax molybdenum mines produced 36 percent.
Copper production from the Morenci mine in North America,
Cerro Verde mine in Peru and the Grasberg minerals district in
Indonesia together totaled 74 percent of our consolidated
copper production in 2021.
OUTLOOK
We continue to view the long-term outlook for our business
positively, supported by expected rising demand associated with
limitations on supplies of copper, the global economic recovery
of $1,800 per ounce of gold and $19.00 per pound of molybdenum
and achievement of current sales volume and cost estimates,
consolidated unit net cash costs (net of by-product credits) for our
copper mines are expected to average $1.35 per pound of copper
in 2022. The impact of price changes on 2022 consolidated
unit net cash costs would approximate $0.03 per pound for each
$100 per ounce change in the average price of gold and $0.02
per pound for each $2 per pound change in the average price
of molybdenum. Quarterly unit net cash costs vary with
fluctuations in sales volumes and realized prices, primarily for
and infrastructure development and new demand associated with
gold and molybdenum.
clean energy. Our financial results vary as a result of fluctuations
in market prices primarily for copper, gold and, to a lesser extent,
molybdenum, as well as other factors. World market prices for
these commodities have fluctuated historically and are affected by
numerous factors beyond our control. Refer to “Markets” for
Consolidated Operating Cash Flows. Our consolidated
operating cash flows vary with sales volumes; prices realized from
copper, gold and molybdenum sales; production costs; income
taxes; other working capital changes; and other factors. Based on
current sales volume and cost estimates, and assuming average
prices of $4.50 per pound of copper, $1,800 per ounce of gold and
29 2 0 2 1 A n n u a l R ep o r t
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
$19.00 per pound of molybdenum, our consolidated operating
cash flows are estimated to approximate $8.0 billion (net of
LME Copper Prices
Through December 31, 2021
$1.3 billion of working capital and other uses, mostly for income
tax payments) for the year 2022. Estimated consolidated operating
cash flows in 2022 also reflect a projected income tax provision
of $3.2 billion (refer to “Consolidated Results—Income Taxes” for
further discussion of our projected income tax rate for the year
2022). The impact of price changes during 2022 on operating cash
flows would approximate $365 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 $110 million
for each $2 per pound change in the average price of molybdenum.
Consolidated Capital Expenditures. Capital expenditures for
the year 2022 are expected to approximate $4.7 billion, $3.3 billion
excluding the greenfield smelter and precious metals refinery
1,500
1,200
900
600
300
s
n
o
t
c
i
r
t
e
m
f
o
s
0
0
0
$5.00
$4.50
$4.00
$3.50
$3.00
$2.50
$2.00
$1.50
$1.00
$0.50
D
o
l
l
a
r
s
p
e
r
p
o
u
n
d
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
LME Copper Prices
Exchange Stocks
(PMR) (collectively, the Indonesia smelter projects discussed
This graph presents LME copper settlement prices and the
below), including $2.0 billion for major mining projects ($1.4 billion
combined reported stocks of copper at the LME, Commodity
for planned major projects primarily related to development
Exchange Inc., and the Shanghai Futures Exchange from January
activities associated with the Grasberg Block Cave and Deep Mill
2012 through December 2021. For the year 2021, LME copper
Level Zone (DMLZ) underground mines and $0.6 billion for
settlement prices ranged from a low of $3.52 per pound to a
discretionary growth projects).
record high of $4.86 per pound, averaged $4.23 per pound and
Capital expenditures for the Indonesia smelter projects are
closed at $4.40 per pound on December 31, 2021. Copper prices
expected to approximate $1.4 billion for the year 2022.
have been supported by strong demand during the pandemic
Development of additional smelting capacity in Indonesia will
recovery, rising investor sentiment associated with copper’s
result in the elimination of export duties, providing an offset to the
prominent role in the global transition to cleaner energy, ongoing
economic cost associated with the Indonesia smelter projects.
supply disruptions and falling inventories. The LME copper
MARKETS
settlement price was $4.36 per pound on January 31, 2022.
Long-term fundamentals for copper remain positive. We believe
World prices for copper, gold and molybdenum can fluctuate
future demand will be supported by copper’s role in the global
significantly. During the period from January 2012 through
transition to renewable power, electric vehicles and other
December 2021, the London Metal Exchange (LME) copper
carbon-reduction initiatives, and continued urbanization in
settlement price varied from a low of $1.96 per pound in 2016 to a
developing countries. The small number of approved, large-scale
record high of $4.86 per pound in 2021; the London Bullion Market
projects beyond those expected to commence operations in 2022
Association (London) PM gold price fluctuated from a low of
and 2023, the long lead times required to permit and build new
$1,049 per ounce in 2015 to a record high of $2,067 per ounce in
mines and declining ore grades at existing operations continue to
2020, and the Metals Week Molybdenum Dealer Oxide weekly
highlight the fundamental supply challenges for copper.
average price ranged from a low of $4.46 per pound in 2015 to a
high of $20.01 per pound in 2021. Copper, gold and molybdenum
prices are affected by numerous factors beyond our control
as described further in Item 1A. “Risk Factors” contained in
Part I of our annual report on Form 10-K for the year ended
December 31, 2021.
30 Fre epor t-McMoR an
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
London Gold Prices
Through December 31, 2021
D
o
l
l
a
r
s
p
e
r
o
u
n
c
e
$2,250
$2,050
$1,850
$1,650
$1,450
$1,250
$1,050
$850
$650
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
This graph presents London PM gold prices from January 2012
through December 2021. For the year 2021, London PM gold
prices ranged from a low of $1,684 per ounce to a high of $1,943
per ounce, averaged $1,799 per ounce and closed at $1,806 per
ounce on December 30, 2021 (there was no London PM gold price
quote on December 31, 2021). While the global economic recovery
has put downward pressure on gold prices, many analysts expect
gold prices to remain supported by the effects of elevated debt
levels associated with large pandemic-related stimulus efforts and
historically low United States (U.S.) interest rates. The London PM
gold price was $1,795 per ounce on January 31, 2022.
Metals Week Molybdenum Dealer Oxide Prices
Through December 31, 2021
D
o
l
l
a
r
s
p
e
r
p
o
u
n
d
$25
$20
$15
$10
$5
$0
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
CRITICAL ACCOUNTING ESTIMATES
MD&A is based on our consolidated financial statements, which
have been prepared in conformity with generally accepted
accounting principles (GAAP) in the U.S. The preparation of these
statements requires that we make estimates and assumptions
that affect the reported amounts of assets, liabilities, revenues
and expenses. We base these estimates on historical experience
and on assumptions that we consider reasonable under the
circumstances; however, reported results could differ from those
based on the current estimates under different assumptions or
conditions. The areas requiring the use of management’s estimates
are also discussed in Note 1 under the subheading “Use of
Estimates.” Management has reviewed the following discussion
of its development and selection of critical accounting estimates
with the Audit Committee of our Board.
Taxes. In preparing our consolidated financial statements, we
estimate the actual amount of income taxes currently payable
or receivable as well as deferred income tax assets and liabilities
attributable to temporary differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred income tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which these temporary differences
are expected to be recovered or settled. The effect on deferred
income tax assets and liabilities of a change in tax rates or laws
is recognized in income in the period in which such changes
are enacted.
Our operations are in multiple jurisdictions where uncertainties
arise in the application of complex tax regulations. Some of these
tax regimes are defined by contractual agreements with the local
government, while others are defined by general tax laws and
regulations. We and our subsidiaries are subject to reviews of our
income tax filings and other tax payments, and disputes can arise
with the taxing authorities over the interpretation of our contracts
or laws. During 2021, PT-FI recorded charges to provision for income
taxes totaling $186 million associated with historical contested tax
matters in Indonesia. Refer to Note 11 for further discussion.
This graph presents the Metals Week Molybdenum Dealer Oxide
As discussed in Note 11, we operate in the U.S. and multiple
weekly average price from January 2012 through December 2021.
international tax jurisdictions, and our income tax returns are
For the year 2021, the weekly average price for molybdenum
subject to examination by tax authorities in those jurisdictions who
ranged from a low of $10.09 per pound to a high of $20.01 per
may challenge any tax position on these returns. Uncertainty in a
pound, averaged $15.92 per pound and was $18.70 per pound on
tax position may arise because tax laws are subject to interpretation.
December 31, 2021. Molybdenum prices have risen in reaction to
We use significant judgment to (1) determine whether, based on
supply constraints and increased demand, as mines in both Chile
the technical merits, a tax position is more likely than not to be
and Peru reported lower production, and logistics challenges
sustained and (2) measure the amount of tax benefit that qualifies
continued globally. The Metals Week Molybdenum Dealer Oxide
for recognition.
weekly average price was $19.12 per pound on January 31, 2022.
31 2 0 2 1 A n n u a l R ep o r t
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
We have uncertain tax positions related to income tax assessments
Accounting for environmental obligations represents a critical
in Indonesia and Peru, including penalties and interest, which
accounting estimate because (i) changes to environmental laws
have not been recorded at December 31, 2021. Final taxes paid
and regulations and/or circumstances affecting our operations
may be dependent upon many factors, including negotiations with
could result in significant changes to our estimates, which could
taxing authorities. In certain jurisdictions, we pay a portion of
have a significant impact on our results of operations, (ii) we will
the disputed amount before formally appealing an assessment.
not incur most of these costs for a number of years, requiring
Such payment is recorded as a receivable if we believe the amount
us to make estimates over a long period, (iii) calculating the
is collectible. Refer to Note 12 for further discussion.
discounted cash flows for certain of our environmental obligations
A valuation allowance is provided for those deferred income tax
requires management to estimate the amounts and timing of
assets for which the weight of available evidence suggests that
projected cash flows and make long-term assumptions about
the related benefits will not be realized. In determining the amount
inflation rates and (iv) changes in estimates used in determining
of the valuation allowance, we consider estimated future taxable
our environmental obligations could have a significant impact
income or loss as well as feasible tax planning strategies in each
on our results of operations.
jurisdiction. If we determine that we will not realize all or a portion
We perform a comprehensive annual review of our
of our deferred income tax assets, we will increase our valuation
environmental obligations and also review changes in facts and
allowance. Conversely, if we determine that we will ultimately
circumstances associated with these obligations at least quarterly.
be able to realize all or a portion of the related benefits for which
Judgments and estimates are based upon currently available
a valuation allowance has been provided, all or a portion of the
facts, existing technology, presently enacted laws and regulations,
related valuation allowance will be reduced.
remediation experience, whether or not we are a potentially
Our valuation allowances totaled $4.1 billion at December 31,
responsible party (PRP), the ability of other PRPs to pay their
2021, which covered all of our U.S. foreign tax credits and U.S.
allocated portions and take into consideration reasonably
federal net operating losses (NOLs), substantially all of our U.S.
possible outcomes. Our cost estimates can change substantially
state NOLs, and a portion of our foreign NOLs. During 2021,
as additional information becomes available regarding the
valuation allowances decreased by $645 million. Refer to Note 11
nature or extent of site contamination, updated cost assumptions
for further discussion.
(including increases and decreases to cost estimates), changes
Environmental Obligations. Our current and historical operating
in the anticipated scope and timing of remediation activities, the
activities are subject to various national, state and local
settlement of environmental matters, required remediation
environmental laws and regulations that govern the protection of
methods and actions by or against governmental agencies or
the environment, and compliance with those laws requires
private parties.
significant expenditures. Environmental expenditures are charged
Asset Retirement Obligations. We record the fair value of our
to expense or capitalized, depending upon their future economic
estimated asset retirement obligations (AROs) associated with
benefits. The guidance provided by U.S. GAAP requires that
tangible long-lived assets in the period incurred. Fair value is
liabilities for contingencies be recorded when it is probable that
measured as the present value of cash flow estimates after
obligations have been incurred, and the cost can be reasonably
considering inflation and a market risk premium. Our cost estimates
estimated. At December 31, 2021, environmental obligations
are reflected on a third-party cost basis and comply with our
recorded in our consolidated balance sheet totaled $1.7 billion,
legal obligation to retire tangible long-lived assets in the period
which reflect obligations for environmental liabilities attributed to
incurred. These cost estimates may differ from financial assurance
the Comprehensive Environmental Response, Compensation, and
cost estimates for reclamation activities because of a variety of
Liability Act of 1980 (CERCLA) or analogous state programs and
factors, including obtaining updated cost estimates for
for estimated future costs associated with environmental matters.
reclamation activities, the timing of reclamation activities, changes
Refer to Item 1A. “Risk Factors” contained in Part I of our annual
in scope and the exclusion of certain costs not considered
report on Form 10-K for the year ended December 31, 2021, and
reclamation and closure costs. At December 31, 2021, AROs
Notes 1 and 12 for further discussion of environmental obligations,
recorded in our consolidated balance sheet totaled $2.7 billion,
including a summary of changes in our estimated environmental
including $0.3 billion associated with our remaining oil and gas
obligations for the three years ended December 31, 2021.
operations. In 2021, primarily because of safety constraints and
other concerns regarding our reclamation activities associated
32 Fre epor t-McMoR an
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
with an overburden stockpile at our Indonesia operations, we
costs incurred to develop and mine our mineral reserves. Our
recorded a $397 million adjustment to our Indonesia AROs. Refer
estimates of recoverable proven and probable mineral reserves are
to Item 1A. “Risk Factors” contained in Part I of our annual report
prepared by and are the responsibility of our employees. These
on Form 10-K for the year ended December 31, 2021, and to Notes 1
estimates are reviewed and verified regularly by independent
and 12 for further discussion of reclamation and closure costs,
experts in mining, geology and reserve determination.
including a summary of changes in our AROs for the three years
Our consolidated estimated recoverable proven and probable
ended December 31, 2021.
mineral reserves shown below were assessed using long-term
Generally, ARO activities are specified by regulations or in
price assumptions of $2.50 per pound for copper, $1,200 per ounce
permits issued by the relevant governing authority, and
of gold and $10 per pound of molybdenum. The following table
management’s judgment is required to estimate the extent and
summarizes changes in our estimated consolidated recoverable
timing of expenditures. Accounting for AROs represents a critical
proven and probable copper, gold and molybdenum mineral
accounting estimate because (i) we will not incur most of these
reserves during 2020 and 2021:
costs for a number of years, requiring us to make estimates over a
long period, (ii) reclamation and closure laws and regulations
could change in the future and/or circumstances affecting our
operations could change, either of which could result in significant
changes to our current plans, (iii) the methods used or required to
plug and abandon non-producing oil and gas wellbores, remove
platforms, tanks, production equipment and flow lines, and restore
the wellsite could change, (iv) calculating the fair value of our
AROs requires management to estimate projected cash flows,
make long-term assumptions about inflation rates, determine our
credit-adjusted, risk-free interest rates and determine market
risk premiums that are appropriate for our operations and
(v) given the magnitude of our estimated reclamation, mine
closure and wellsite abandonment and restoration costs, changes
in any or all of these estimates could have a significant impact on
our results of operations.
Mineral Reserves. Recoverable proven and probable mineral
reserves were determined from the application of relevant
modifying factors to geological data, in order to establish an
operational, economically viable mine plan and have been
prepared in accordance with the disclosure requirements of
subpart 1300 of Securities and Exchange Commission Regulation
S-K. The determination of mineral reserves involves numerous
uncertainties with respect to the ultimate geology of the ore
bodies, including quantities, grades and recoveries. Estimating
the quantity and grade of mineral reserves requires us to
determine the size, shape and depth of our ore bodies by analyzing
geological data, such as samplings of drill holes, tunnels and other
underground workings. In addition to the geology of our mines,
assumptions are required to determine the economic feasibility of
mining these reserves, including estimates of future commodity
prices and demand, the mining methods we use and the related
Consolidated reserves at
December 31, 2019
Net additions
Production
Consolidated reserves at
December 31, 2020
Net revisions
Production
Consolidated reserves at
December 31, 2021
Coppera
(billion
pounds)
Gold
(million
ounces)
Molybdenum
(billion
pounds)
116.0
0.4
(3.2)
113.2
(2.2)
(3.8)
107.2
29.6
0.2
(0.9)
28.9
(0.4)
(1.4)
27.1
3.58
0.21
(0.08)
3.71
(0.24)
(0.08)
3.39
a. Includes estimated recoverable metals contained in stockpiles. See below for additional discussion
of recoverable copper in stockpiles.
Refer to Note 17, and Items 1. and 2. “Business and Properties”
and Item 1A. “Risk Factors” contained in Part I of our annual report
on Form 10-K for the year ended December 31, 2021, for further
information regarding, and risks associated with, our estimated
recoverable proven and probable mineral reserves.
As discussed in Note 1, we depreciate our life-of-mine mining
and milling assets and values assigned to proven and probable
mineral reserves using the unit-of-production (UOP) method
based on our estimated recoverable proven and probable mineral
reserves. Because the economic assumptions used to estimate
mineral reserves may change from period to period and additional
geological data is generated during the course of operations,
estimates of mineral reserves may change, which could have a
significant impact on our results of operations, including changes
to prospective depreciation rates and impairments of long-lived
asset carrying values. Based on projected copper sales volumes,
if estimated copper reserves at our mines were 10 percent higher
at December 31, 2021, we estimate that our annual depreciation,
depletion and amortization (DD&A) expense for 2022 would
33 2 0 2 1 A n n u a l R e p o r t
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
decrease by approximately $50 million (approximately $30 million
Impairment of Long-Lived Assets. As discussed in Note 1, we
to net income attributable to common stock), and a 10 percent
assess the carrying values of our long-lived mining assets when
decrease in copper reserves would increase DD&A expense by
events or changes in circumstances indicate that the related
approximately $165 million (approximately $85 million to net income
carrying amounts of such assets may not be recoverable. In
attributable to common stock). We perform annual assessments
evaluating our long-lived mining assets for recoverability, we use
of our existing assets in connection with the review of mine
estimates of pre-tax undiscounted future cash flows of our mines.
operating and development plans. If it is determined that assigned
Estimates of future cash flows are derived from current
asset lives do not reflect the expected remaining period of benefit,
business plans, which are developed using near-term metal price
any change could affect prospective DD&A rates.
forecasts reflective of the current price environment and
As discussed below and in Note 1, we review and evaluate our
management’s projections for long-term average metal prices. In
long-lived assets for impairment when events or changes in
addition to near- and long-term metal price assumptions, other
circumstances indicate that the related carrying amount of such
key assumptions include estimates of commodity-based and other
assets may not be recoverable, and changes to our estimates
input costs; proven and probable mineral reserves estimates,
of recoverable proven and probable mineral reserves could have
including the timing and cost to develop and produce the mineral
an impact on our assessment of asset recoverability.
reserves; value beyond proven and probable mineral reserve
Recoverable Copper in Stockpiles. We record, as inventory,
estimates (refer to Note 1); and the use of appropriate discount
applicable costs for copper contained in mill and leach stockpiles
rates in the measurement of fair value. We believe our estimates
that are expected to be processed in the future based on proven
and models used to determine fair value are similar to what
processing technologies. Mill and leach stockpiles are evaluated
a market participant would use. As quoted market prices are
periodically to ensure that they are stated at the lower of
unavailable for our individual mining operations, fair value is
weighted-average cost or net realizable value (refer to Note 4 and
determined through the use of after-tax discounted estimated
“Consolidated Results” for further discussion of inventory
future cash flows.
adjustments recorded for the three years ended December 31,
During the two-year period ended December 31, 2021,
2021). Accounting for recoverable copper from mill and leach
no material impairments of our long-lived mining assets were
stockpiles represents a critical accounting estimate because
recorded.
(i) it is impracticable to determine copper contained in mill and
In addition to decreases in future metal price assumptions,
leach stockpiles by physical count, thus requiring management
other events that could result in future impairment of our long-lived
to employ reasonable estimation methods and (ii) recoveries
mining assets include, but are not limited to, decreases in
from leach stockpiles can vary significantly. Refer to Note 1 for
estimated recoverable proven and probable mineral reserves and
further discussion of our accounting policy for recoverable
any event that might otherwise have a material adverse effect on
copper in stockpiles.
mine site production levels or costs. Refer to Item 1A. “Risk Factors”
At December 31, 2021, estimated consolidated recoverable
contained in Part I of our annual report on Form 10-K for the year
copper was 1.8 billion pounds in leach stockpiles (with a carrying
ended December 31, 2021.
value of $2.1 billion) and 0.3 billion pounds in mill stockpiles
(with a carrying value of $0.4 billion).
34 Fre epor t -McMoR an
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
CONSOLIDATED RESULTS
Years Ended December 31,
SUMMARY FINANCIAL DATA (in millions, except per share amounts)
Revenuesa,b
Operating incomea
Net income attributable to common stockc
Diluted net income per share attributable to common stock
Diluted weighted-average common shares outstanding
Operating cash flowsf
Capital expenditures
At December 31:
Cash and cash equivalents
Total debt, including current portion
2021
2020
$ 22,845
$ 8,366
$ 4,306d
$ 2.90d
1,482
$ 7,715
$ 2,115
$ 8,068
$ 9,450
$ 14,198
$ 2,437
$ 599e
$ 0.41e
1,461
$ 3,017
$ 1,961
$ 3,657
$ 9,711
a. Refer to Note 16 for a summary of revenues and operating income by operating division.
b. Includes adjustments to embedded derivatives for provisionally priced concentrate and cathode sales (refer to Note 14).
c. We defer recognizing profits on intercompany sales until final sales to third parties occur. Refer to “Operations—Smelting & Refining” for a summary of net impacts from changes in these deferrals.
d. Includes net charges in 2021 totaling $331 million ($0.22 per share), primarily associated with net adjustments to AROs mostly at PT Freeport Indonesia (PT-FI), historical contested tax matters at PT-FI (including
historical tax audits and an administrative fine levied by the Indonesia government) and nonrecurring labor-related charges for labor agreements at Cerro Verde, partly offset by the release of a valuation allowance on
NOLs at PT-FI’s subsidiary, a gain on the sale of Freeport Cobalt, refunds of Arizona transaction privilege taxes related to purchased electricity and favorable adjustments to prior-years’ profit sharing at Cerro Verde.
e. Includes net charges in 2020 totaling $191 million ($0.13 per share), primarily associated with the COVID-19 pandemic and revised operating plans (including employee separation costs), a framework for the resolution
of all current and future potential talc-related litigation, net losses on early extinguishment of debt, metals inventory adjustments and historical contested tax audits at PT-FI. These charges were partly offset primarily
by a gain on the sale of our interests in the Kisanfu exploration project.
f. Working capital and other sources totaled $755 million in 2021 and $665 million in 2020.
Years Ended December 31,
SUMMARY OPERATING DATA
Copper (millions of recoverable pounds)
Production
Sales, excluding purchases
Average realized price per pound
Site production and delivery costs per pounda
Unit net cash costs per pounda
Gold (thousands of recoverable ounces)
Production
Sales, excluding purchases
Average realized price per ounce
Molybdenum (millions of recoverable pounds)
Production
Sales, excluding purchases
Average realized price per pound
2021
2020
3,843
3,807
$ 4.33
$ 1.93
$ 1.34
1,381
1,360
$ 1,796
85
82
$ 15.56
3,206
3,202
$ 2.95
$ 1.88
$ 1.48
857
855
$ 1,832
76
80
$ 10.20
a. Reflects per pound weighted-average production and delivery costs and unit net cash costs (net of by-product credits) for all copper mines, before net noncash and other costs. For reconciliations of the 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.”
35 2 0 2 1 A n n u a l R e p o r t
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
Revenues
prices, which results in an embedded derivative on provisionally
Consolidated revenues totaled $22.8 billion in 2021 and $14.2 billion
priced concentrate and cathode sales that is adjusted to fair value
in 2020. Our revenues primarily include the sale of copper
through earnings each period, using the period-end forward
concentrate, copper cathode, copper rod, gold in concentrate and
prices, until final pricing on the date of settlement. To the extent
molybdenum. Following is a summary of changes in our consolidated
final prices are higher or lower than what was recorded on a
revenues from 2020 to 2021 (in millions):
Consolidated revenues – 2020
Mining operations:
Higher sales volumes:
Copper
Gold
Molybdenum
Higher (lower) averaged realized prices:
Copper
Gold
Molybdenum
Adjustments for prior year provisionally priced copper sales
Lower revenues from sales of purchased copper
Higher Atlantic Copper revenues
Higher treatment charges
Higher royalties and export duties
Other, including intercompany eliminations
Consolidated revenues – 2021
$ 14,198
1,784
925
13
5,253
(48)
439
271
(64)
924
(83)
(291)
(476)
$ 22,845
provisional basis, an increase or decrease to revenues is recorded
each reporting period until the date of final pricing. Accordingly,
in times of rising copper prices, our revenues benefit from
adjustments to the final pricing of provisionally priced sales
pursuant to contracts entered into in prior periods; in times of
falling copper prices, the opposite occurs.
Prior Year Provisionally Priced Copper Sales. Net favorable
(unfavorable) adjustments to prior years’ provisionally priced copper
sales (i.e., provisionally priced copper sales at December 31, 2020
and 2019) recorded in consolidated revenues totaled $169 million
in 2021 and $(102) million in 2020. Refer to “Disclosures About
Market Risks—Commodity Price Risk” for further discussion of our
provisionally priced copper sales, and to Note 14 for a summary
of total adjustments to prior period and current period provisionally
priced copper sales.
Purchased Copper. Lower revenues associated with purchased
copper in 2021, compared to 2020, primarily reflects lower
Sales Volumes. Copper and gold sales volumes were higher
volumes, partly offset by higher copper prices. We purchased
in 2021, compared to 2020, primarily reflecting the ramp-up of
copper cathode primarily for processing by our Rod & Refining
underground mining at the Grasberg minerals district.
operations, totaling 173 million pounds in 2021 and 290 million
Refer to “Operations” for further discussion of sales volumes
pounds in 2020.
at our mining operations.
Atlantic Copper Revenues. Higher Atlantic Copper revenues
Realized Prices. Our consolidated revenues can vary significantly
in 2021, compared with 2020, primarily reflect higher copper prices.
as a result of fluctuations in the market prices of copper, gold and
Treatment Charges. Revenues from our concentrate sales are
molybdenum. In 2021, our average realized prices were 47 percent
recorded net of treatment charges (i.e., fees paid to smelters that
higher for copper, 2 percent lower for gold and 53 percent higher
are generally negotiated annually), which will vary with the sales
for molybdenum, compared with 2020.
volumes and the price of copper.
Average realized copper prices include net favorable adjustments
Royalties and Export Duties. Royalties are primarily for sales
to current year provisionally priced copper sales (i.e., provisionally
from PT-FI and vary with the volume of metal sold and the prices of
priced sales during the years 2021 and 2020) totaling $256 million
copper and gold. PT-FI will continue to pay export duties until
for 2021 and $361 million for 2020. Refer to Note 14 for a
development progress for additional smelting capacity in Indonesia
summary of total adjustments to prior period and current period
exceeds 50 percent. Refer to “Operations—Indonesia Mining” for
provisionally priced sales. As discussed below and in “Disclosures
further discussion of the current progress on additional smelting
About Market Risks—Commodity Price Risk,” substantially all of
capacity in Indonesia and to Note 13 for a summary of PT-FI’s
our copper concentrate and cathode sales contracts provide final
royalties and export duties.
copper pricing in a specified future month (generally one to four
months from the shipment date). We record revenues and invoice
customers at the time of shipment based on then-current LME
36 Fre e por t-McMoR an
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
Production and Delivery Costs
Consolidated production and delivery costs totaled $12.0 billion in
2021, compared with $10.0 billion in 2020. Higher consolidated
production and delivery costs in 2021 primarily reflect higher sales
volumes, the ramp-up of underground mining at the Grasberg
minerals district, higher milling rates at Cerro Verde associated
with the return to pre-COVID-19 operating rates and higher
hours of electricity at our North America and South America
copper mining operations (we generate all of our power at our
Indonesia mining operation); approximately 750 thousand
metric tons of coal for our coal power plant in Indonesia; and
approximately 1 million MMBtu (million British thermal units)
of natural gas at certain of our North America mines. Based
on current cost estimates, energy will approximate 25 percent
maintenance and input costs. The year 2021 includes net charges
of our copper mine site operating costs for 2022.
totaling $415 million primarily associated with an unfavorable ARO
adjustment (refer to Note 12) and other net charges at PT-FI and
nonrecurring labor-related charges at Cerro Verde for collective
labor agreements, partly offset by refunds of Arizona transaction
privilege taxes related to purchased electricity and favorable
adjustments to prior-years’ profit sharing at Cerro Verde. The year
2020 includes net charges totaling $252 million, primarily
associated with the COVID-19 pandemic and revised operating
plans (including employee separation costs). Refer to Note 16 for
details of production and delivery costs by operating segment.
Mining Unit Site Production and Delivery Costs. Site
production and delivery costs for our copper mining operations
primarily include labor, energy and commodity-based inputs,
such as sulfuric acid, reagents, liners, tires and explosives.
Consolidated unit site production and delivery costs (before net
noncash and other costs) for our copper mines averaged $1.93
per pound of copper in 2021 and $1.88 per pound in 2020. Higher
consolidated unit site production and delivery costs in 2021,
Depreciation, Depletion and Amortization
Depreciation will vary under the UOP method as a result of
changes in sales volumes and the related UOP rates at our mining
operations. Consolidated DD&A totaled $2.0 billion in 2021 and
$1.5 billion in 2020. Higher DD&A in 2021, compared with 2020,
primarily relates to significant assets placed in service associated
with the ramp-up of underground mining at the Grasberg
minerals district.
Metals Inventory Adjustments
Unfavorable net realizable value metals inventory adjustments
totaled $16 million in 2021 and $96 million in 2020. Metals
inventory adjustments in 2021 were primarily related to a leach
stockpile adjustment. Metals inventory adjustments in 2020 were
related to volatility in copper and molybdenum prices associated
with the COVID-19 pandemic. Refer to Note 4 for further details on
our inventory adjustments.
compared with 2020, primarily reflect higher mining and milling
Environmental Obligations and Shutdown Costs
costs associated with ramped-up operations and higher
maintenance and input costs, partly offset by higher sales
volumes. Consolidated site production and delivery costs per
pound for the year 2021 included nonrecurring labor-related
charges at Cerro Verde for collective labor agreements. 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.
Our copper mining operations require significant amounts of
energy, principally diesel, electricity, coal and natural gas, most of
which is obtained from third parties under long-term contracts.
Our take-or-pay contractual obligations for electricity totaled
approximately $0.3 billion at December 31, 2021. We do not have
take-or-pay contractual obligations for other energy commodities.
Energy represented approximately 21 percent of our copper mine
site operating costs in 2021, including purchases of approximately
220 million gallons of diesel fuel; approximately 8,000 gigawatt
Environmental obligation costs reflect net revisions to our long-
term environmental obligations, which vary from period to period
because of changes to environmental laws and regulations, the
settlement of environmental matters and/or circumstances
affecting our operations that could result in significant changes
in our estimates (refer to “Critical Accounting Estimates—
Environmental Obligations” for further discussion). Shutdown
costs include care-and-maintenance costs and any litigation,
remediation or related expenditures associated with closed
facilities or operations.
Net charges for environmental obligations and shutdown costs
totaled $91 million in 2021, including unfavorable adjustments to
environmental obligations totaling $41 million. Net charges for the
year 2020 totaled $159 million, including talc-related litigation
charges of $132 million, primarily associated with a framework for
the resolution of all current and future potential talc-related
litigation, partly offset by $19 million of net favorable adjustments
to environmental obligations. Refer to Note 12 for environmental
obligations and litigation matters.
37 2 0 2 1 A n n u a l R ep o r t
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
Net Gain on Sales of Assets
Net gain on sales of assets totaled $80 million in 2021 and
$473 million in 2020. Gains on sales of assets in 2021 were
primarily associated with the sale of our remaining Freeport
borrowings, and totaled $72 million in 2021 and $147 million in
2020. The decrease in capitalized interest in 2021, compared
with 2020, is primarily related to significant assets at PT-FI’s
underground mines being placed in service. Refer to “Operations”
Cobalt assets and the sale of carbon dioxide emissions credits
and “Capital Resources and Liquidity—Investing Activities” for
at Atlantic Copper. Gains on sales of assets in 2020 were
primarily associated with the sale of our interests in the Kisanfu
undeveloped exploration project. Refer to Note 2 for further
discussion of dispositions.
Interest Expense, Net
further discussion of current development projects.
Other (Expense) Income, Net
Other (expense) income, net, totaled $(105) million in 2021 and
$59 million in 2020. The year 2021 includes charges totaling
$208 million associated with historical contested tax matters at
Consolidated interest costs (before capitalization and excluding
PT-FI (refer to Note 11), partly offset by gains on currency
interest expense associated with international tax matters) totaled
exchange rate movements and other net credits. The year 2020
$634 million in 2021 and $649 million in 2020. Interest expense
associated with international tax matters totaled $40 million in
2021 and $96 million in 2020 (refer to Note 11).
Capitalized interest varies with the level of expenditures for
our development projects and average interest rates on our
includes a gain of $30 million for the sale of royalty interests.
Income Taxes
Following is a summary of the approximate amounts used in the
calculation of our consolidated income tax provision for the years
ended December 31 (in millions, except percentages):
U.S.b
South America
Indonesia
PT-FI historical contested tax disputesi
Gain on sale of Kisanfu
Eliminations and other
Consolidated
Income
(Loss)a
$ 1,883
2,072
3,986
(219)
—
(63)
$ 7,659
2021
Effective
Tax Rate
1%
40%
35%
N/A
N/A
N/A
30%
Tax (Provision)
Benefit
$
(10)c
(820)e
(1,377)g
(147)
—
55
$ (2,299)
Income
(Loss)a
$ (532)
466
1,342
(44)
486
79
$ 1,797
2020
Effective
Tax Rate
11%
51%
45%
N/A
N/A
N/A
53%j
Tax (Provision)
Benefit
$ 60d
(239)f
(608)h
2
(135)
(24)
$ (944)
a. Represents income (loss) before income taxes and equity in affiliated companies’ net earnings.
b. In addition to our North America mining operations, the U.S. jurisdiction reflects corporate-level expenses, which include interest expense associated with senior notes, general and administrative expenses, and
environmental obligations and shutdown costs.
c. Includes valuation allowance release on prior year unbenefited NOLs.
d. Includes tax benefits of $53 million associated with the reversal of a year-end 2019 tax charge related to the sale of our interest in the lower zone of the Timok exploration project and $6 million associated with
the removal of a valuation allowance on deferred tax assets.
e. Includes a tax benefit at Cerro Verde of $18 million primarily associated with completion of tax audits for the years 2014 and 2015.
f.
g. Includes net tax benefits associated with the release of valuation allowances recorded against PT Rio Tinto Indonesia NOLs totaling $189 million. The year 2021 also includes a tax benefit of $24 million, primarily
Includes tax charges at Cerro Verde of $15 million primarily associated with adjustments to profit sharing for prior years.
associated with the reversal of a tax reserve related to the treatment of prior-year contractor support costs; partly offset by a tax charge of $10 million associated with the audit of PT-FI’s 2019 tax returns.
h. Includes tax charges of $21 million associated with establishing a tax reserve related to the treatment of prior-year contractor support costs and $8 million associated with an unfavorable 2012 Indonesia
Supreme Court ruling.
i. Refer to Note 11 for further discussion of these historical contested tax disputes.
j. Our consolidated effective income tax rate is a function of the combined effective tax rates for the jurisdictions in which we operate, excluding the U.S. jurisdiction.
38 Fre epor t -McMoR an
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
Assuming achievement of current sales volume and cost estimates
produced copper. Refer to Item 1A. “Risk Factors” contained in
and average prices of $4.50 per pound for copper, $1,800 per
Part I of our annual report on Form 10-K for the year ended
ounce for gold and $19.00 per pound for molybdenum for 2022, we
December 31, 2021, for further discussion of ESG-related risks.
estimate our consolidated effective tax rate for the year 2022
2020 Climate Report. We published our updated climate report
would approximate 30 percent. Changes in projected sales volumes
in September 2021, which is available on our website. The climate
and average prices during 2022 would incur tax impacts at
report details the work underway across our global business to
estimated effective rates of 39 percent for Peru, 38 percent for
reduce greenhouse gas (GHG) emissions, improve energy
Indonesia and 0 percent for the U.S.
efficiency, advance the use of renewable energy and enhance our
Variations in the relative proportions of jurisdictional income
resilience to future climate-related risks. The updated climate
result in fluctuations to our consolidated effective income tax
report includes our GHG emissions reduction targets and aspirations
rate. Because of our U.S. tax position, we do not record a financial
and reflects our continued progress towards alignment with the
statement impact for income or losses generated in the U.S.
current recommendations of the Task Force on Climate-related
Refer to Note 11 for further discussion of income taxes.
Financial Disclosures. Refer to Item 1A. “Risk Factors” contained in
OPERATIONS
Responsible Production
The Copper Mark. We are committed to validating all of our
copper producing sites with the Copper Mark, a comprehensive
assurance framework designed to demonstrate the copper
industry’s responsible production practices. To achieve the
Copper Mark, each site is required to complete an external
assurance process to assess conformance with 32 environmental,
social and governance (ESG) requirements. We have a total of
seven sites that have been validated (Bagdad, Morenci, Miami,
El Paso, Cerro Verde, El Abra and Atlantic Copper) and we have
commenced the Copper Mark assessment process at four
additional sites in North America, including Chino, Tyrone, Safford
and Sierrita.
International Council of Mining and Metals (ICMM). We are a
founding and active member of the ICMM, an international
organization dedicated to safe, fair and sustainable mining. We are
committed to implementing ICMM’s Mining Principles, which serve
as a best practice framework on sustainable development for the
global mining and metals industry. Our Chairman of the Board and
Chief Executive Officer serves as the current Chair of ICMM.
2020 Annual Report on Sustainability. We published our 2020
Annual Report on Sustainability in April 2021, which is available on
our website. We have a long history of ESG programs and are
continuously striving to improve and embrace evolving stakeholder
expectations. This report marked our 20th year of reporting on
our sustainability progress and our first year reporting in alignment
with the Sustainability Accounting Standards Board Metals &
Mining industry framework. We are committed to building upon
our achievements in sustainability and seek to contribute
positively to society by supplying the world with responsibly
Part I of our annual report on Form 10-K for the year ended
December 31, 2021, for further discussion of climate-related risks.
Innovation Initiatives
During 2021, we continued to advance innovation initiatives
designed to enhance productivity, expand margins and reduce
the capital intensity of our business through the utilization of new
technology applications in combination with a more interactive
operating structure. These initiatives are expected to allow us to
recover additional copper from our large existing leach stockpiles.
There are several projects ongoing across our North America
and South America operations, which incorporate new applications,
technologies and data analytics. Initial results are encouraging
and support additional work on these emerging opportunities.
North America Copper Mines
We operate seven open-pit copper mines in North America—
Morenci, Bagdad, Safford (including Lone Star), Sierrita and
Miami in Arizona, and Chino and Tyrone in New Mexico. All of
the North America mining operations are wholly owned, except
for Morenci. We record our 72 percent undivided joint venture
interest in Morenci using the proportionate consolidation method.
The North America copper mines include open-pit mining,
sulfide-ore concentrating, leaching and solution extraction/
electrowinning (SX/EW) operations. A majority of the copper
produced at our North America copper mines is cast into copper
rod by our Rod & Refining segment. The remainder of our North
America copper production is sold as copper cathode or copper
concentrate, a portion of which is shipped to Atlantic Copper (our
wholly owned smelter). Molybdenum concentrate, gold and silver
are also produced by certain of our North America copper mines.
39 2 0 2 1 A n n u a l R e p o r t
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
Operating and Development Activities. We have substantial
Copper sales volumes from our North America copper mines
mineral reserves and future opportunities in the U.S., primarily
totaled 1.4 billion pounds in 2021 and 2020. North America copper
associated with existing mining operations. Current operations at
sales are estimated to approximate 1.55 billion pounds in 2022.
the Lone Star copper leach project at our Safford mine, which
Refer to “Outlook” for projected molybdenum sales volumes.
was completed in the second half of 2020, are exceeding the initial
Unit Net Cash Costs. Unit net cash costs per pound of copper is
design capacity of 200 million pounds annually and produced
a measure intended to provide investors with information about
approximately 235 million pounds of copper in 2021. We continue
the cash-generating capacity of our mining operations expressed
to advance opportunities to increase Lone Star operating rates
on a basis relating to the primary metal product for our respective
and are advancing plans to increase volumes to achieve 300 million
operations. We use this measure for the same purpose and for
pounds of copper per year from oxide ores. The oxide project
monitoring operating performance by our mining operations. This
advances the opportunity for development of the large-scale
information differs from measures of performance determined
sulfide resources at Lone Star. We are increasing exploration in
in accordance with U.S. GAAP and should not be considered in
the area to support metallurgical testing and mine development
isolation or as a substitute for measures of performance determined
planning for a potential long-term investment in a concentrator.
in accordance with U.S. GAAP. This measure is presented by
We are also evaluating an expansion to potentially double
other metals mining companies, although our measure may not be
concentrator capacity at our Bagdad operation in northwest
comparable to similarly titled measures reported by other companies.
Arizona, and are engaging stakeholders. Feasibility studies
Gross Profit per Pound of Copper and Molybdenum. The
to double Bagdad’s operating rates are expected to commence
following table summarizes unit net cash costs and gross profit
in 2022.
per pound of copper at our North America copper mines for the
Operating Data. Following is summary operating data for the
two years ended December 31, 2021. Refer to “Product Revenues
North America copper mines for the years ended December 31:
and Production Costs” for an explanation of the “by-product”
Operating Data, Net of Joint Venture Interests
Copper (millions of recoverable pounds)
Production
Sales, excluding purchases
Average realized price per pound
Molybdenum (millions of recoverable pounds)
Productiona
100% Operating Data
Leach operations
Leach ore placed in stockpiles (metric tons per day)
Average copper ore grade (percent)
Copper production (millions of recoverable pounds)
Mill operations
Ore milled (metric tons per day)
Average ore grade (percent):
Copper
Molybdenum
Copper recovery rate (percent)
Copper production (millions of recoverable pounds)
2021
2020
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.
1,460
1,436
4.30
$
1,418
1,422
2.82
$
34
33
665,900
0.29
1,056
714,300
0.27
1,047
269,500
279,700
0.38
0.03
81.2
649
0.35
0.02
84.1
647
a. Refer to “Consolidated Results” for our consolidated molybdenum sales volumes, which include
sales of molybdenum produced at the North America copper mines.
40 Fre epor t-McMoR an
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
Revenues, excluding adjustments
Site production and delivery, before net noncash
and other costs shown below
By-product credits
Treatment charges
Unit net cash costs
DD&A
Metals inventory adjustments
Noncash and other costs, net
Total unit costs
Revenue adjustments, primarily for pricing on prior period open sales
Gross profit per pound
Copper sales (millions of recoverable pounds)
Molybdenum sales (millions of recoverable pounds)a
By-Product
Method
$ 4.30
2.13
(0.33)
0.09
1.89
0.25
0.01
0.07b
2.22
—
$ 2.08
1,436
2021
Co-Product Method
Copper
$ 4.30
1.96
—
0.09
2.05
0.24
0.01
0.07
2.37
—
$ 1.93
1,436
Molybdenuma
$ 14.14
8.17
—
—
8.17
0.62
—
0.03
8.82
—
$ 5.32
34
By-Product
Method
$ 2.82
1.90
(0.19)
0.10
1.81
0.25
0.03
0.10c
2.19
(0.02)
$ 0.61
1,420
2020
Co-Product Method
Copper
$ 2.82
1.78
—
0.10
1.88
0.23
0.03
0.10
2.24
(0.02)
$ 0.56
1,420
Molybdenuma
$ 8.62
6.84
—
—
6.84
0.56
—
0.09
7.49
—
$ 1.13
33
a. Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing.
b. Includes credits totaling $0.02 per pound of copper associated with refunds of Arizona transaction privilege taxes related to purchased electricity.
c. Includes charges totaling $0.02 per pound of copper, primarily associated with our April 2020 revised operating plans (including employee separation costs) and the COVID-19 pandemic (including health and safety costs).
Our North America copper mines have varying cost structures
South America mining includes open-pit mining, sulfide-ore
because of differences in ore grades and characteristics,
concentrating, leaching and SX/EW operations. Production from
processing costs, by-product credits and other factors. During
our South America mines is sold as copper concentrate or
2021, average unit net cash costs (net of by-product credits) for
cathode under long-term contracts. Our South America mines
the North America copper mines ranged from $1.47 per pound to
also sell a portion of their copper concentrate production to
$2.86 per pound at the individual mines and averaged $1.89 per
Atlantic Copper. In addition to copper, the Cerro Verde mine
pound. Higher average unit net cash costs (net of by-product
produces molybdenum concentrate and silver.
credits) of $1.89 in 2021, compared with $1.81 per pound in 2020,
Operating and Development Activities. Milling rates at Cerro
primarily reflect higher mining and milling costs associated with
Verde’s concentrator facilities averaged 380,300 metric tons of ore
higher operating rates at Lone Star and higher maintenance
per day for the year 2021, compared with 331,600 metric tons of
and input costs, partly offset by higher by-product credits because
ore per day for the year 2020 when COVID-19 restrictions resulted
of higher molybdenum prices.
in reduced rates. Subject to ongoing monitoring of COVID-19
Average unit net cash costs (net of by-product credits) for
protocols, Cerro Verde is targeting milling rates to increase
our North America copper mines are expected to approximate
to approximately 400,000 metric tons of ore per day during 2022.
$2.00 per pound of copper in 2022, based on achievement of
El Abra increased operating rates to pre-COVID-19 pandemic
current sales volume and cost estimates and assuming an average
levels during 2021. Increased mining and stacking activities are
molybdenum price of $19.00 per pound. The impact of price
expected to result in a 30 percent increase in El Abra copper
changes during 2022 on North America’s average unit net cash
production for the year 2022, compared with the year 2021.
costs for the year 2022 would approximate $0.04 per pound for
We continue to evaluate a large-scale expansion at El Abra to
each $2 per pound change in the average price of molybdenum.
process additional sulfide material and to achieve higher copper
South America Mining
We operate two copper mines in South America—Cerro Verde
in Peru (in which we own a 53.56 percent interest) and
El Abra in Chile (in which we own a 51.0 percent interest), which
are consolidated in our financial statements.
recoveries. El Abra’s large sulfide resource could potentially
support a major mill project similar to the facilities constructed at
Cerro Verde in 2015. Technical and economic studies continue to
be evaluated to determine the optimal scope and timing for the
sulfide project, and we are engaging stakeholders and preparing
data required for submission of a robust permit application. We
are continuing to monitor potential changes in regulatory and
fiscal matters in Chile and will defer major investment decisions
pending clarity on these matters.
41 2 0 2 1 A n n u a l R e p o r t
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
Operating Data. Following is summary operating data for our
Gross Profit per Pound of Copper. The following table
South America mining operations for the years ended December 31.
summarizes unit net cash costs and gross profit per pound of
2021
2020
copper at our South America mining operations for the two years
Copper (millions of recoverable pounds)
Production
Sales
Average realized price per pound
Molybdenum (millions of recoverable pounds)
Productiona
1,047
1,055
4.34
$
$
21
979
976
3.05
19
Leach operations
Leach ore placed in stockpiles (metric tons per day)
Average copper ore grade (percent)
Copper production (millions of recoverable pounds)
163,900
0.32
256
160,300
0.35
241
Mill operations
Ore milled (metric tons per day)
Average ore grade (percent):
Copper
Molybdenum
Copper recovery rate (percent)
Copper production (millions of recoverable pounds)
380,300
331,600b
0.31
0.01
87.3
791
0.34
0.01
84.3
738
a. Refer to “Consolidated Results” for our consolidated molybdenum sales volumes, which include
sales of molybdenum produced at Cerro Verde.
b. Cerro Verde mill operations were impacted by COVID-19 restrictions.
Higher consolidated copper sales volumes from South America
of 1.1 billion pounds in 2021, compared with 1.0 billion pounds
in 2020, primarily reflect higher mining and milling rates at
Cerro Verde.
Copper sales from South America mines are expected to
approximate 1.2 billion pounds in 2022. Refer to “Outlook” for
projected molybdenum sales volumes.
Unit Net Cash Costs. Unit net cash costs per pound of copper
ended December 31, 2021. Unit net cash costs per pound of
copper are reflected under the by-product and co-product
methods as the South America mining operations also had sales
of molybdenum and silver. Refer to “Product Revenues and
Production Costs” for an explanation of the “by-product” and
“co-product” methods and a reconciliation of unit net cash costs
per pound to production and delivery costs applicable to sales
reported in our consolidated financial statements.
2021
2020
By-Product Co-Product By-Product Co-Product
Method
Method
Method
Method
$ 4.34
$ 4.34
$ 3.05
$ 3.05
2.23a
(0.32)
0.13
0.01
2.05
0.39
0.03b
2.47
2.06
—
0.13
0.01
2.20
0.37
0.03
2.60
1.86
(0.17)
0.15
0.01
1.85
0.43
0.13c
2.41
1.74
—
0.15
0.01
1.90
0.41
0.12
2.43
0.09
$ 1.96
0.09
$ 1.83
(0.07)
$ 0.57
(0.07)
$ 0.55
1,055
1,055
976
976
Revenues, excluding
adjustments
Site production and delivery,
before net noncash
and other costs shown below
By-product credits
Treatment charges
Royalty on metals
Unit net cash costs
DD&A
Noncash and other costs, net
Total unit costs
Revenue adjustments,
primarily for pricing on
prior period open sales
Gross profit per pound
Copper sales (millions of
recoverable pounds)
is a measure intended to provide investors with information about
the cash-generating capacity of our mining operations expressed
a. Includes charges totaling $0.09 per pound of copper associated with nonrecurring labor-related
charges at Cerro Verde for collective labor agreements reached with its hourly employees.
b. Includes credits totaling $0.03 per pound of copper associated with favorable adjustments to
on a basis relating to the primary metal product for our respective
operations. We use this measure for the same purpose and
for monitoring operating performance by our mining operations.
This information differs from measures of performance determined
in accordance with U.S. GAAP and should not be considered
in isolation or as a substitute for measures of performance
determined in accordance with U.S. GAAP. This measure is
presented by other metals mining companies, although our
measure may not be comparable to similarly titled measures
reported by other companies.
prior-years’ profit sharing at Cerro Verde.
c. Includes charges totaling $0.09 per pound of copper, primarily associated with idle facility (Cerro
Verde) and contract cancellation costs related to the COVID-19 pandemic, and employee
separation costs associated with our April 2020 revised operating plans.
Our South America mines have varying cost structures because of
differences in ore grades and characteristics, processing costs,
by-product credits and other factors. Higher average unit net cash
costs (net of by-product credits) of $2.05 per pound of copper
in 2021, compared with $1.85 per pound in 2020, primarily reflect
increased profit-sharing costs and nonrecurring labor-related
charges at Cerro Verde for collective labor agreements and higher
maintenance and input costs, partly offset by higher sales volumes
and 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.
42 Fre e por t-McMoR an
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
Because certain assets are depreciated on a straight-line
PT-FI expects milling rates to average approximately 180,000
basis, South America’s unit depreciation rate may vary with asset
metric tons of ore per day in 2022. The installation of additional
additions and the level of copper production and sales.
milling facilities are in progress and are currently expected to be
Revenue adjustments primarily result from changes in prices on
completed in 2023, which will increase milling capacity to
provisionally priced copper sales recognized in prior periods.
approximately 240,000 metric tons of ore per day.
Refer to “Consolidated Results—Revenues” for further discussion
PT-FI expects to generate average annual production of
of adjustments to prior period provisionally priced copper sales.
approximately 1.6 billion pounds of copper and 1.6 million ounces
Average unit net cash costs (net of by-product credits) for our
of gold for the next five years at an attractive unit net cash cost,
South America mines are expected to approximate $2.06 per
providing significant margins and cash flows.
pound of copper in 2022, based on current sales volume and cost
PT-FI’s estimated capital spending on the Grasberg Block Cave
estimates and assuming an average price of $19.00 per pound
and DMLZ underground projects for the year 2022 is expected
of molybdenum.
Indonesia Mining
PT-FI’s assets include one of the world’s largest copper and gold
deposits at the Grasberg minerals district in Papua, Indonesia.
PT-FI produces copper concentrate that contains significant
quantities of gold and silver. We have a 48.76 percent interest in
PT-FI and manage its mining operations. As further discussed
in Note 3, under the terms of the shareholders agreement, our
economic interest in PT-FI approximates 81 percent through
2022 and 48.76 percent thereafter. PT-FI’s results are consolidated
in our financial statements.
Substantially all of PT-FI’s copper concentrate is sold under
long-term contracts. During 2021, 41 percent of PT-FI’s copper
concentrate was sold to PT Smelting (PT-FI owned 25.0 percent of
PT Smelting prior to April 30, 2021, and 39.5 percent thereafter—
See Note 2).
Operating and Development Activities. PT-FI currently has
three underground operating mines in the Grasberg minerals
district: Grasberg Block Cave, DMLZ and Big Gossan. The
ramp-up of underground production at the Grasberg minerals
district continues to advance on schedule. For the year 2021,
highlights include:
to approximate $1.0 billion, net of scheduled contributions from
PT Indonesia Asahan Aluminium (Persero) (PT Inalum, also known
as MIND ID). PT-FI is also advancing construction of a dual-fuel
power plant and upgrades to the mill circuit to improve recoveries.
In accordance with applicable accounting guidance, the aggregate
costs (before scheduled contributions from PT Inalum), expected
to approximate $1.2 billion for the year 2022, will be reflected as an
investing activity in our cash flow statement, and contributions
from PT Inalum will be reflected as a financing activity.
Kucing Liar. In October 2021, PT-FI commenced long-term
mine development activities for its Kucing Liar deposit, which is
expected to produce over 6 billion pounds of copper and 5 million
ounces of gold between 2028 and the end of 2041. Similar to
PT-FI’s experience with large-scale, block-cave mines,
pre-production development activities will occur over an
approximate 10-year timeframe. At full operating rates, annual
production from Kucing Liar is expected to approximate
600 million pounds of copper and 500 thousand ounces of gold,
providing PT-FI with sustained long-term, large-scale and
low-cost production. Capital investments for Kucing Liar over the
next 10 years are expected to average approximately $400 million
per year. Kucing Liar will benefit from substantial shared
infrastructure and PT-FI’s experience and long-term success in
• Achieved quarterly copper and gold volumes in fourth-quarter
block-cave mining.
2021 approximating 100 percent of the projected annualized
levels discussed below.
• 139 new drawbells were constructed at the Grasberg Block Cave
and DMLZ underground mines, bringing cumulative open
drawbells to 510.
• Combined average production from the Grasberg Block Cave
and DMLZ underground mines approximated 128,600 metric
tons of ore per day (more than double the year 2020 rates)
and PT-FI’s total milling rates averaged 151,600 metric tons of
ore per day.
Indonesia Smelter Capacity. 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.
During 2020, PT-FI notified the Indonesia government
of schedule delays resulting from the COVID-19 pandemic and
continues to review with the government a revised schedule
for satisfying its commitment.
43 2 0 2 1 A n n u a l R ep o r t
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
On January 7, 2021, the Indonesia government levied an
Operating Data. Following is summary operating data for our
administrative fine of $149 million on PT-FI for failing to achieve
Indonesia mining operations for the years ended December 31.
physical development progress on the greenfield smelter as
of July 31, 2020. During 2021, PT-FI recorded charges totaling
$16 million for a potential settlement of the administrative fine.
On January 25, 2022, the Indonesia government submitted a
new estimate of the administrative fine totaling $57 million. On
February 15, 2022, PT-FI responded to the Indonesia government
with a revised calculation of $37 million. PT-FI expects to record
a charge in first-quarter 2022 for an amount in excess of the
previously recorded $16 million. Refer to Note 12 and Item 1A.
“Risk Factors” contained in Part I of our annual report on Form 10-K
for the year ended December 31, 2021, for further discussion.
PT-FI is actively engaging in the following projects for additional
domestic smelting capacity:
• Construction of a greenfield smelter with a capacity to process
approximately 1.7 million metric tons of concentrate per year.
In July 2021, PT-FI awarded a construction contract with an
estimated cost of $2.8 billion. During 2021, PT-FI progressed site
preparation activities and expects engineering procurement
and construction activities to advance during 2022 and 2023.
The smelter construction is expected to be completed as soon
as feasible in 2024, which is subject to potential pandemic-related
disruptions and other factors.
• Expansion of PT Smelting’s capacity by 30 percent to 1.3 million
metric tons of concentrate per year, which is expected to be
completed by the end of 2023. PT-FI completed agreements in
November 2021 with the majority owner of PT Smelting to
implement the expansion plans. PT-FI is funding the cost of the
expansion, estimated to approximate $250 million, with a loan
that will convert to equity and increase ownership in PT Smelting
to a majority ownership interest once the expansion is complete.
• Construction of a PMR to process gold and silver from the
greenfield smelter and PT Smelting at an estimated cost of
$250 million.
In July 2021, PT-FI entered into a $1.0 billion, five-year, unsecured
bank credit facility to advance these projects. As of December 31,
2021, $443 million ($432 million net of debt issuance costs) was
drawn under this facility. PT-FI is currently arranging incremental
financing for these projects, with the cost of debt shared 48.76
percent by us and 51.24 percent by PT Inalum. Refer to Note 8 for
further discussion.
Capital expenditures for the Indonesia smelter projects totaled
$0.2 billion for 2021, and are expected to approximate $1.4 billion
for 2022, $1.1 billion for 2023 and $0.4 billion for 2024, excluding
capitalized interest, owner’s costs and commissioning. Development
of additional smelting capacity in Indonesia will result in the
elimination of export duties, providing an offset to the economic
cost associated with the Indonesia smelter projects.
Operating Data
Copper (millions of recoverable pounds)
Production
Sales
Average realized price per pound
Gold (thousands of recoverable ounces)
Production
Sales
Average realized price per ounce
100% Operating Data
Ore milled (metric tons per day):
Grasberg Block Cave
DMLZ
Deep Ore Zonea
Big Gossan
Other
Total
Average ore grade:
Copper (percent)
Gold (grams per metric ton)
Recovery rates (percent):
Copper
Gold
Production (recoverable):
Copper (millions of pounds)
Gold (thousands of ounces)
a. Ore body depleted in 2021.
2021
2020
1,336
1,316
4.34
$
1,370
1,349
$ 1,796
70,600
58,000
8,700
7,500
6,800
151,600
1.30
1.04
89.8
77.0
1,336
1,370
809
804
$ 3.08
848
842
$ 1,832
30,800
28,600
20,900
7,000
400
87,700
1.32
1.10
91.9
78.1
809
848
Higher consolidated sales of 1.3 billion pounds of copper and
1.3 million ounces of gold in 2021, compared with 0.8 billion pounds
of copper and 0.8 million ounces of gold in 2020, primarily
reflect the ramp-up of underground mining at the Grasberg
minerals district.
Consolidated sales volumes from PT-FI are expected to
approximate 1.6 billion pounds of copper and 1.6 million ounces of
gold in 2022.
Unit Net Cash Costs. Unit net cash costs per pound of copper is
a measure intended to provide investors with information about
the cash-generating capacity of our mining operations expressed
on a basis relating to the primary metal product for our respective
operations. We use this measure for the same purpose and for
monitoring operating performance by our mining operations. This
information differs from measures of performance determined
in accordance with U.S. GAAP and should not be considered in
isolation or as a substitute for measures of performance
determined in accordance with U.S. GAAP. This measure is
presented by other metal mining companies, although our measure
may not be comparable to similarly titled measures reported by
other companies.
44 Fre epor t-McMoR an
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
Gross Profit per Pound of Copper and per Ounce of Gold.
explanation of “by-product” and “co-product” methods and a
The following table summarizes the unit net cash costs and
reconciliation of unit net cash costs per pound to production and
gross profit per pound of copper and per ounce of gold at our
delivery costs applicable to sales reported in our consolidated
Indonesia mining operations for the two years ended December 31,
financial statements.
2021. Refer to “Product Revenues and Production Costs” for an
Revenues, excluding adjustments
Site production and delivery, before net noncash
and other costs shown below
Gold and silver credits
Treatment charges
Export duties
Royalty on metals
Unit net cash costs
DD&A
Noncash and other costs, net
Total unit costs
Revenue adjustments, primarily for pricing on
prior period open sales
PT Smelting intercompany loss
Gross profit per pound/ounce
Copper sales (millions of recoverable pounds)
Gold sales (thousands of recoverable ounces)
2021
Co-Product Method
Gold
Copper
$ 4.34
$ 1,796
By-Product
Method
$ 4.34
1.49
(1.95)
0.24
0.17
0.24
0.19
0.80
0.27a
1.26
0.05
(0.07)
$ 3.06
1.03
—
0.17
0.11
0.17
1.48
0.55
0.18
2.21
0.05
(0.05)
$ 2.13
1,316
1,316
424
—
69
47
67
607
228
77
912
(3)
(19)
$ 862
1,349
By-Product
Method
$ 3.08
1.88
(2.03)
0.27
0.12
0.19
0.43
0.72
0.11b
1.26
(0.03)
(0.01)
$ 1.78
804
2020
Co-Product Method
Gold
Copper
$ 3.08
1.13
—
0.17
0.07
0.11
1.48
0.43
0.07
1.98
(0.03)
(0.01)
$ 1.06
804
$ 1,832
674
—
98
41
72
885
259
41
1,185
5
(5)
$ 647
842
a. Includes charges totaling $0.26 per pound of copper associated with an ARO adjustment.
b. Includes COVID-19 related costs (including one-time incremental employee benefits and health and safety costs) totaling $0.02 per pound of copper.
A significant portion of PT-FI’s costs are fixed and unit costs vary
Revenue adjustments primarily result from changes in prices on
depending on volumes and other factors. PT-FI’s unit net cash
provisionally priced copper sales recognized in prior periods.
costs (including gold and silver credits) of $0.19 per pound of
Refer to “Consolidated Results—Revenues” for further discussion
copper in 2021 were lower than unit net cash costs of $0.43 per
of adjustments to prior period provisionally priced copper sales.
pound in 2020, primarily reflecting higher copper and gold
PT Smelting intercompany loss represents the change in
sales volumes.
the deferral of PT-FI’s profit on sales to PT Smelting (25.0 percent
Treatment charges vary with the volume of metals sold and
prior to April 30, 2021, and 39.5 percent thereafter). Refer to
the price of copper, and royalties vary with the volume of metals
“Operations—Smelting & Refining” below for further discussion.
sold and the prices of copper and gold.
Assuming an average gold price of $1,800 per ounce for 2022
PT-FI’s export duties totaled $218 million in 2021 and $93 million
and achievement of current sales volume and cost estimates,
in 2020, and PT-FI’s royalties totaled $319 million in 2021 and
unit net cash costs (including gold and silver credits) for PT-FI
$153 million in 2020. PT-FI will continue to pay export duties until
are expected to approximate $0.18 per pound of copper in 2022. The
development progress for additional smelting capacity in Indonesia
impact of price changes during 2022 on PT-FI’s average unit net
exceeds 50 percent. Refer to Note 13 for further discussion of
cash costs would approximate $0.09 per pound of copper for each
PT-FI’s export duties and royalties.
$100 per ounce change in the average price of gold.
Because certain assets are depreciated on a straight-line
PT-FI’s projected sales volumes and unit net cash costs for
basis, PT-FI’s unit depreciation rate may vary with asset additions
the year 2022 are dependent on a number of factors, including
and the level of copper production and sales. DD&A per pound
operational performance, timing of shipments and the Indonesia
of copper under the by-product method was $0.80 in 2021,
government’s extension of PT-FI’s export permit. In March 2021,
compared with $0.72 in 2020, primarily reflecting significant
PT-FI received a one-year extension of its export license through
underground development assets placed in service.
45 2 0 2 1 A n n u a l R ep o r t
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
March 15, 2022. Refer to Note 12 and Item 1A. “Risk Factors”
costs for 2022, compared with 2021, primarily reflects higher
contained in Part I of our annual report on Form 10-K for the year
mining and input costs. Refer to “Product Revenues and
ended December 31, 2021, for a discussion of the administrative
Production Costs” for a reconciliation of unit net cash costs per
fine levied by the Indonesia government on PT-FI for failing to
pound to production and delivery costs applicable to sales
achieve physical development progress on the greenfield smelter
reported in our consolidated financial statements.
and ongoing discussions with the Indonesia government regarding
a deferred schedule for the completion of the greenfield smelter.
Smelting & Refining
Molybdenum Mines
We wholly own and operate the Miami smelter in Arizona, the El Paso
refinery in Texas and a smelter and refinery in Spain (Atlantic
We have two wholly owned molybdenum mines in Colorado—the
Copper). Additionally, PT-FI has a 39.5 percent ownership interest
Henderson underground mine and the Climax open-pit mine.
in PT Smelting and expects its ownership to increase to a majority
The Henderson and Climax mines produce high-purity, chemical-
interest upon completion of the project to expand PT Smelting’s
grade molybdenum concentrate, which is typically further
smelting capacity. See “Indonesia Smelter Capacity” above
processed into value-added molybdenum chemical products.
for additional information regarding the PT Smelting expansion
The majority of the molybdenum concentrate produced at the
and Note 13 for information regarding the tolling agreement
Henderson and Climax mines, as well as from our North America
effective in 2023. Treatment charges for smelting and refining
and South America copper mines, is processed at our own
copper concentrate consist of a base rate per pound of copper and
conversion facilities.
per ounce of gold and are generally fixed. Treatment charges
Operating and Development Activities. Production from the
represent a cost to our mining operations and income to Atlantic
Molybdenum mines totaled 30 million pounds of molybdenum
Copper and PT Smelting. Thus, higher treatment charges benefit
in 2021 and 24 million pounds in 2020. The increase in 2021,
our smelter operations and adversely affect our mining operations.
compared with 2020, primarily reflects higher ore grades. We
Our North America copper mines are less significantly affected by
plan to increase mining rates at the Climax mine in 2022
changes in treatment charges because these operations are largely
to provide options to increase volumes in response to market
integrated with our Miami smelter and El Paso refinery. Through
demand for molybdenum.
this form of downstream integration, we are assured placement of
Unit Net Cash Costs Per Pound of Molybdenum. Unit net cash
a significant portion of our concentrate production.
costs per pound of molybdenum is a measure intended to provide
Our Miami smelter processes concentrate produced by our
investors with information about the cash-generating capacity of
U.S. mines and also provides acid for copper leaching operations.
our mining operations expressed on a basis relating to the primary
During 2021, we incurred charges totaling $87 million associated
metal product for our respective operations. We use this measure
with a major maintenance turnaround at our Miami smelter, which
for the same purpose and for monitoring operating performance
were higher than original estimates as a result of extended
by our mining operations. This information differs from measures
downtime to address additional required maintenance work, the
of performance determined in accordance with U.S. GAAP
COVID-19 pandemic and weather events. The next major
and should not be considered in isolation or as a substitute for
maintenance turnaround is scheduled for the first half of 2024.
measures of performance determined in accordance with U.S.
Atlantic Copper smelts and refines copper concentrate and
GAAP. This measure is presented by other metals mining
markets refined copper and precious metals in slimes. Following is
companies, although our measure may not be comparable to
an allocation of Atlantic Copper’s concentrate purchases from
similarly titled measures reported by other companies.
unaffiliated third parties and our copper mining operations for the
Unit net cash costs for our Molybdenum mines of $8.87 per
two years ended December 31, 2021:
pound of molybdenum in 2021 were lower than $9.50 per pound in
2020, primarily reflecting higher volumes. Based on current sales
volume and cost estimates, average unit net cash costs for the
Molybdenum mines are expected to approximate $12.50 per pound
of molybdenum in 2022. The increase in expected unit net cash
Third parties
North America copper mines
Indonesia mining
South America mining
2021
66%
18
9
7
100%
2020
79%
10
4
7
100%
46 Fre epor t-McMoR an
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
Atlantic Copper’s major maintenance turnarounds typically occur
CAPITAL RESOURCES AND LIQUIDITY
approximately every eight years, with shorter-term maintenance
turnarounds in the interim. Atlantic Copper last completed a major
maintenance turnaround in 2013 and most recently completed a
16-day maintenance turnaround in 2019. The next major
maintenance turnaround is scheduled for the first half of 2022.
Atlantic Copper has take-or-pay contractual obligations for the
procurement of copper concentrate totaling $3.1 billion at
December 31, 2021, that provide for deliveries of specified volumes
at market-based prices.
PT-FI’s contract with PT Smelting provides for PT-FI to supply
100 percent of the copper concentrate requirements (subject to a
minimum or maximum treatment charge rate) necessary for
PT Smelting to produce 205,000 metric tons of copper annually
on a priority basis. PT-FI may also sell copper concentrate to
PT Smelting at market rates for quantities in excess of 205,000
metric tons of copper annually. PT-FI supplied 100 percent of
PT Smelting’s concentrate requirements in 2021 and 74 percent in
2020. PT Smelting processed 41 percent of PT-FI’s concentrate
production in 2021 and 50 percent of such production in 2020.
In December 2021, PT Smelting received a 12-month extension
of its anodes slimes export license, which currently expires
December 9, 2022, subject to review and approval by the Indonesia
government every 6 months.
PT Smelting’s maintenance turnarounds (which range from
two weeks to a month to complete) typically are expected to occur
approximately every two years, with shorter-term maintenance
turnarounds in the interim. PT Smelting completed a 30-day
maintenance turnaround during December 2020, and the next
major turnaround is scheduled for the second half of 2022. In
addition, PT Smelting has a planned 75-day shutdown scheduled
for the first half of 2023 associated with its expansion project.
We defer recognizing profits on sales from our mining
operations to Atlantic Copper and on PT-FI’s sales to PT Smelting
(on 25.0 percent prior to April 30, 2021, and 39.5 percent
thereafter) 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
$(188) million ($(106) million to net income attributable to
common stock) in 2021 and $(7) million ($1 million to net income
attributable to common stock) in 2020. Our net deferred profits
on our inventories at Atlantic Copper and PT Smelting to be
recognized in future periods’ net income attributable to common
stock totaled $175 million at December 31, 2021. Quarterly
variations in ore grades, the timing of intercompany shipments and
changes in product prices will result in variability in our net
deferred profits and quarterly earnings. No significant changes in
deferred profits are expected in the first quarter of 2022.
Our consolidated operating cash flows vary with sales volumes;
prices realized from copper, gold and molybdenum sales;
production costs; income taxes; other working capital changes;
and other factors. A large component of our production costs
are related to energy. See “Consolidated Results” and Item 1A.
“Risk Factors” contained in Part I of our annual report on Form 10-K
for the year ended December 31, 2021, for further discussion of
our energy requirements and related costs.
Our operating cash flows during 2021 primarily reflected strong
operating and financial performance and favorable copper prices.
During 2022, we expect to grow production and sales volumes
while continuing to execute our operating plans, which we expect
will provide strong cash flows to support advancement of organic
growth initiatives and continue cash returns to shareholders under
our established financial policy, based on a favorable operational
and market outlook.
We believe that we have a high-quality portfolio of long-lived
copper assets positioned to generate long-term value. During
fourth-quarter 2021, PT-FI successfully ramped-up production
from its underground mining operations and achieved quarterly
copper and gold volumes approximating 100 percent of the
projected annualized level, as well as commenced long-term
mine development activities for its Kucing Liar deposit at the
Grasberg minerals district. Production from the Lone Star copper
leach project at our Safford operation is exceeding initial design
capacity with production totaling approximately 235 million
pounds in 2021. We are also evaluating organic growth opportunities
for expansion of certain of our operations in North America
and South America, including at Bagdad, Lone Star and El Abra,
the timing of which will be dependent on, among other things,
market conditions.
Based on current sales volume, cost and metal price estimates
discussed in “Outlook”, our available cash and cash equivalents
plus our projected consolidated operating cash flows of
$8.0 billion for the year 2022 exceed our expected consolidated
capital expenditures of $4.7 billion (which includes $2.0 billion for
major projects and $1.4 billion for the Indonesia smelter projects)
and other expected cash requirements for the year, including
share repurchases, noncontrolling interest distributions, income
tax payments, common stock dividends (base and variable) and
debt repayments.
47 2 0 2 1 A n n u a l R e p o r t
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
We believe that our cash generating capability and financial
Cash
condition, which includes $8.1 billion of consolidated cash and
cash equivalents at December 31, 2021, together with $3.5 billion
available under our FCX revolving credit facility, will be adequate
Following is a summary of the U.S. and international components
of consolidated cash and cash equivalents available to the parent
company, net of noncontrolling interests’ share, taxes and other
to meet our operating, investing and financing needs over the next
costs at December 31, 2021 (in billions):
several years. Expenditures for the Indonesia smelter projects
are currently being funded by PT-FI’s new $1.0 billion unsecured
bank credit facility and additional debt financing is being evaluated.
Refer to “Outlook” for further discussion of projected operating
cash flows and capital expenditures for 2022 and to “Debt” below
and Note 8 for further discussion of PT-FI’s credit facility.
Financial Policy. In February 2021, our Board adopted a financial
policy for the allocation of cash flows aligned with our strategic
Cash at domestic companies
Cash at international operations
Total consolidated cash and cash equivalents
Noncontrolling interests’ share
Cash, net of noncontrolling interests’ share
Withholding taxes
Net cash available
$ 5.2
2.9
8.1
(0.9)
$ 7.2
(0.2)
$ 7.0
objectives of maintaining a strong balance sheet and increasing
Cash held at our international operations is generally used
cash returns to shareholders while advancing opportunities for
to support our foreign operations’ capital expenditures, operating
future growth.
expenses, debt repayments, working capital or other cash needs.
In February 2021, the Board reinstated a cash dividend on
Management believes that sufficient liquidity is available in the
our common stock (base dividend) at an annual rate of $0.30 per
U.S. from cash balances and availability from our revolving credit
share, and following achievement of our net debt target in the
facility. We have not elected to permanently reinvest earnings from
range of $3.0 billion to $4.0 billion (excluding debt for additional
our foreign subsidiaries, and we have recorded deferred tax
smelting capacity in Indonesia), in November 2021 the Board
liabilities for foreign earnings that are available to be repatriated to
approved the implementation of a performance-based payout
the U.S. From time to time, our foreign subsidiaries distribute
framework, including (i) a new $3.0 billion share repurchase
earnings to the U.S. through dividends that are subject to applicable
program and (ii) a variable cash dividend on common stock for
withholding taxes and noncontrolling interests’ share. See Item 1A.
2022 at an expected annual rate of $0.30 per share. The
“Risk Factors” contained in Part I of our annual report on Form 10-K
combined annual rate of the base dividend and the variable
for the year ended December 31, 2021, for further discussion of
dividend is expected to total $0.60 per share for 2022. Based on
our holding company structure.
current shares outstanding totaling 1.5 billion, the total common
stock dividends (base and variable) for 2022 are expected to
approximate $0.9 billion. Refer to “Financing Activities” below
for further discussion.
In December 2021, our Board declared dividends totaling
$0.15 per share on our common stock (including a $0.075 per
share quarterly base cash dividend and a $0.075 per share
quarterly variable cash dividend), which was paid on February 1,
2022, to shareholders of record as of January 14, 2022. Refer
to Item 1A. “Risk Factors” contained in Part I of our annual
report on Form 10-K for the year ended December 31, 2021, and
“Cautionary Statement” below for further discussion.
Debt
At December 31, 2021, consolidated debt totaled $9.5 billion, with
a related weighted-average interest rate of 4.6 percent. We had no
borrowings, $8 million in letters of credit issued and approximately
$3.5 billion available under our FCX revolving credit facility at
December 31, 2021.
On December 1, 2021, we redeemed all of our outstanding
$524 million aggregate principal amount of 3.55% Senior Notes
due 2022 at a redemption price equal to 100 percent of the
principal amount of the notes outstanding, plus accrued and
unpaid interest. Our next senior note maturity is March 2023,
with redemption rights at par beginning in December 2022.
In September 2021, Cerro Verde elected to prepay $200 million
on its term loan, reducing the outstanding balance to $325 million,
which matures in June 2022.
48 Fre epor t-McMoR an
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
In July 2021, PT-FI entered into a $1.0 billion, five-year, unsecured
contingent consideration associated with the 2016 sale of the
bank credit facility (consisting of a $667 million term loan and a
Tenke Fungurume Mining assets and the sale of royalty assets.
$333 million revolving credit facility) to fund projects associated
Refer to Note 2 for further discussion.
with its commitment to construct additional smelting capacity
Loans to PT Smelting for Expansion. PT-FI made loans to
in Indonesia. As of December 31, 2021, $443 million ($432 million
PT Smelting totaling $36 million in 2021 to fund PT Smelting’s
net of debt issuance costs) was drawn under the PT-FI term loan
expansion project. Refer to “Operations—Indonesia Mining”
and no amounts were drawn under the revolving credit facility.
for further discussion.
Refer to Note 8 for further discussion of the above items and
Acquisition of Minority Interest in PT Smelting. On April 30,
for information regarding our debt arrangements.
2021, PT-FI acquired 14.5 percent of the outstanding common
Operating Activities
stock of PT Smelting for $33 million, increasing its ownership
interest from 25.0 percent to 39.5 percent.
We generated consolidated operating cash flows of $7.7 billion
in 2021 (including $0.8 billion from working capital and other
Financing Activities
sources) and $3.0 billion in 2020 (including $0.7 billion from
Debt Transactions. Net repayments of debt in 2021 totaled
working capital and other sources).
$260 million, primarily associated with the $524 million redemption of
Higher operating cash flows for 2021, compared with 2020,
our 3.55% Senior Notes due 2022 and the repayment of $200 million
primarily reflect increased copper and gold volumes, higher
under Cerro Verde’s term loan, partly offset by borrowings of
copper and molybdenum prices and the timing of tax payments.
$432 million under the PT-FI term loan.
We have estimated 2021 final income tax payments primarily in
Net repayments of debt in 2020 totaled $193 million, primarily
Indonesia and Peru due in the first half of 2022 totaling
reflecting the repayment of $305 million under Cerro Verde’s
approximately $1.3 billion.
Investing Activities
Capital Expenditures. Capital expenditures, including capitalized
term loan. During 2020, we also completed the sale of $2.8 billion
of senior notes and used most of the net proceeds to purchase
and redeem senior notes maturing in 2021, 2022, 2023
and 2024. The remaining net proceeds were used for general
interest, totaled $2.1 billion for the year 2021, including $1.25 billion
corporate purposes.
for major projects, and $2.0 billion for the year 2020, including
$1.2 billion for major projects. Major projects were primarily
associated with underground development activities in the
Grasberg minerals district.
A large portion of the capital expenditures relate to projects
that are expected to add significant production and cash flow
in future periods, enabling us to continue to generate operating
cash flows exceeding capital expenditures in future years.
Refer to “Outlook” for further discussion of projected capital
expenditures for 2022.
Refer to Note 8 for further discussion of debt transactions.
Cash Dividends and Distributions Paid. We paid cash dividends
on our common stock totaling $331 million in 2021 and $73 million
in 2020. The declaration and payment of dividends (base or
variable) is at the discretion of the Board and will depend on our
financial results, cash requirements, business prospects, global
economic conditions and other factors deemed relevant by the
Board. Refer to Item 1A. “Risk Factors” contained in Part I of our
annual report on Form 10-K for the year ended December 31, 2021,
“Cautionary Statement” below and discussion of our financial
Proceeds from Sales of Assets. In September 2021, we
policy above.
completed the sale of our remaining Freeport Cobalt assets
to Jervois Global Limited (Jervois) for $208 million, including
net cash proceeds of $150 million and shares of Jervois, and
in December 2021, we collected $50 million in consideration
associated with the 2019 sale of the Timok exploration project.
Proceeds from sales of other assets totaled $47 million in 2021.
In 2020, we sold the Kisanfu undeveloped exploration project
for $550 million and collected proceeds of $45 million related to
Cash dividends and distributions paid to noncontrolling
interests at PT-FI and Cerro Verde totaled $583 million in 2021.
Based on the estimates discussed in “Outlook,” we currently
expect cash dividends and distributions paid to noncontrolling
interests to exceed $1.4 billion in 2022. There were no cash
dividends or distributions to noncontrolling interests paid in 2020.
Cash dividends and distributions to noncontrolling interests vary
based on the operating results and cash requirements of our
the 2019 sale of the Timok exploration project. Proceeds from sales
consolidated subsidiaries.
of other assets totaled $109 million in 2020 primarily related to
49 2 0 2 1 A n n u a l R ep o r t
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
Treasury Stock Purchases. In fourth-quarter 2021, we acquired
Refer to Items 1. and 2. “Business and Properties,” and Item 1A.
12.7 million shares under our share repurchase program for a total
“Risk Factors” contained in Part I of our annual report on Form 10-K
cost of $488 million, $38.32 per share. Through February 15, 2022,
for the year ended December 31, 2021, Note 12 and “Critical
we have acquired 18.2 million shares under our share repurchase
Accounting Estimates—Environmental Obligations” above for
program for a total cost of $710 million, $39.10 per share, and
further information about environmental regulation, including
$2.3 billion remains available. The timing and amount of share
significant environmental matters.
repurchases is at the discretion of management and will depend
on a variety of factors. The share repurchase program may be
modified, increased, suspended or terminated at any time at the
Board’s discretion. Refer to Item 1A. “Risk Factors” contained
in Part I of our annual report on Form 10-K for the year ended
December 31, 2021, “Cautionary Statement” below and discussion
of our financial policy above.
Contributions from Noncontrolling Interests. PT-FI received
equity contributions from PT Inalum for their share of capital
spending on the underground mine development projects in
the Grasberg minerals district totaling $182 million in 2021 and
$156 million in 2020.
Stock-based awards. Following an increase in our stock price
during 2021, proceeds from exercised stock options totaled
$210 million and payments for related employee taxes totaled
$29 million. See Note 10 for a discussion of stock-based awards.
CONTINGENCIES
Environmental
The cost of complying with environmental laws is a fundamental
and substantial cost of our business. At December 31, 2021,
we had $1.7 billion recorded in our consolidated balance sheet for
environmental obligations attributed to CERCLA or analogous
state programs and for estimated future costs associated with
environmental obligations that are considered probable based on
specific facts and circumstances.
We incurred environmental capital expenditures and other
environmental costs (including our joint venture partners’ shares)
to comply with applicable environmental laws and regulations
that affect our operations totaling $0.3 billion in both 2021 and
2020. For 2022, we expect to incur approximately $0.5 billion
of aggregate environmental capital expenditures and other
environmental costs. The timing and amount of estimated payments
could change as a result of changes in regulatory requirements,
changes in scope and timing of reclamation and plug and
abandonment activities, the settlement of environmental matters and
the rate at which actual spending occurs on continuing matters.
Asset Retirement Obligations
We recognize AROs as liabilities when incurred, with the initial
measurement at fair value. These obligations, which are initially
estimated based on discounted cash flow estimates, are accreted
to full value over time through charges to cost of sales. Mine
reclamation costs for disturbances are recorded as an ARO and
as a related asset retirement cost (included in property, plant,
equipment and mine development costs) in the period of disturbance.
For non-operating properties without mineral reserves, changes to
the ARO are recorded in earnings. Our cost estimates are reflected
on a third-party cost basis and comply with our legal obligation
to retire tangible, long-lived assets. At December 31, 2021, we
had $2.7 billion recorded in our consolidated balance sheet for
AROs, including $0.3 billion related to our oil and gas properties.
Spending on AROs totaled $201 million in 2021 and $156 million
in 2020 (including $77 million in 2021 and $38 million in 2020 for
our oil and gas operations). At our former Grasberg open-pit
operations in Indonesia, we recorded an ARO adjustment of
$397 million in 2021, with $340 million charged to production and
delivery costs, as it relates to the depleted Grasberg open pit.
For 2022, we expect to incur approximately $0.2 billion in aggregate
ARO payments (including $0.1 billion for our oil and gas operations).
Refer to Note 12 and “Critical Accounting Estimates—Asset
Retirement Obligations” above for further discussion.
Litigation and Other Contingencies
Refer to Notes 2 and 12, and Item 1A. “Risk Factors” and Item 3.
“Legal Proceedings” contained in Part I of our annual report
on Form 10-K for the year ended December 31, 2021, for further
discussion of contingencies associated with legal proceedings
and other matters.
50 Fre e por t-McMoR an
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
DISCLOSURES ABOUT MARKET RISKS
Commodity Price Risk
Our consolidated revenues from our mining operations include
the sale of copper concentrate, copper cathode, copper rod,
gold, molybdenum and other metals by our North America and
South America mines, the sale of copper concentrate (which also
contains significant quantities of gold and silver) by our Indonesia
mining operations, the sale of molybdenum in various forms by
our molybdenum operations, and the sale of copper cathode,
copper anode and gold in anode and slimes by Atlantic Copper.
Our financial results will vary with fluctuations in the market
prices of the commodities we produce, primarily copper and gold,
and to a lesser extent molybdenum. For projected sensitivities
of our operating cash flow to changes in commodity prices,
refer to “Outlook.” World market prices for these commodities
have fluctuated historically and are affected by numerous
factors beyond our control. Refer to Item 1A. “Risk Factors”
contained in Part I of our annual report on Form 10-K for the year
ended December 31, 2021, for further discussion of financial
Following are the favorable (unfavorable) impacts of net
adjustments to the prior years’ provisionally priced copper
sales for the years ended December 31 (in millions, except per
share amounts):
Revenues
Net income attributable to common stock
Net income per share attributable to common stock
2021
$ 169
$ 65
$ 0.04
2020
$ (102)
$ (42)
$ (0.03)
At December 31, 2021, we had provisionally priced copper sales at
our copper mining operations totaling 397 million pounds of
copper (net of intercompany sales and noncontrolling interests)
recorded at an average price of $4.42 per pound, subject to final
pricing over the next several months. We estimate that each
$0.05 change in the price realized from the December 31, 2021,
provisional price recorded would have an approximate $12 million
effect on 2022 net income attributable to common stock.
The LME copper settlement price closed at $4.36 per pound on
January 31, 2022.
risks associated with fluctuations in the market prices of the
Foreign Currency Exchange Risk
The functional currency for most of our operations is the U.S.
dollar. Substantially all of our revenues and a significant portion of
our costs are denominated in U.S. dollars; however, some costs
and certain asset and liability accounts are denominated in local
currencies, including the Indonesia rupiah, Australian dollar,
Peruvian sol, Chilean peso and euro. We recognized foreign
currency translation gains on balances denominated in foreign
currencies totaling $66 million in 2021 and $34 million in 2020.
Generally, our operating results are positively affected when
the U.S. dollar strengthens in relation to those foreign currencies
and are adversely affected when the U.S. dollar weakens in
relation to those foreign currencies.
commodities we sell.
During 2021, our mined copper was sold 59 percent in
concentrate, 21 percent as cathode and 20 percent as rod from
North America operations. Substantially all of our copper
concentrate and cathode sales contracts provide final copper
pricing in a specified future month (generally one to four months
from the shipment date) based primarily on quoted LME monthly
average copper settlement prices. We receive market prices
based on prices in the specified future period, which results in
price fluctuations recorded through revenues until 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 our provisionally priced concentrate
and cathode sales that is adjusted to fair value through earnings
each period, using the period-end forward prices, until final
pricing on the date of settlement. To the extent final prices are
higher or lower than what was recorded on a provisional basis, an
increase or decrease to revenues is recorded each reporting
period until the date of final pricing. Accordingly, in times of rising
copper prices, our revenues benefit from adjustments to the final
pricing of provisionally priced sales pursuant to contracts entered
into in prior periods; in times of falling copper prices, the
opposite occurs.
51 2 0 2 1 A n n u a l R e p o r t
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
Following is a summary of estimated annual payments and
the impact of changes in foreign currency rates on our annual
operating costs:
Indonesia
Rupiah
Australian dollar
South America
Peruvian sol
Chilean peso
Atlantic Copper
Euro
Exchange Rate per $1
at December 31,
Estimated Annual Payments
10% Change in
Exchange Rate
(in millions of U.S. dollars)a
2021
2020
(in local currency)
(in millions of
U.S. dollars)b
Increase
Decrease
14,198
1.37
4.00
845
0.88
14,034
1.30
3.62
711
0.82
14.2 trillion
244 million
2.9 billion
193 billion
$ 1,000
$ 178
$ 735
$ 228
172 million
$ 195
$ (91)
$ (16)
$ (67)
$ (21)
$ (18)
$ 111
$ 20
$ 82
$ 25
$ 22
a. Reflects the estimated impact on annual operating costs assuming a 10 percent increase or decrease in the exchange rate reported at December 31, 2021.
b. Based on exchange rates at December 31, 2021.
Interest Rate Risk
London Interbank Offered Rate. The table below presents average
At December 31, 2021, we had total debt maturities based on
interest rates for our scheduled maturities of principal for our
principal amounts of $9.5 billion, of which approximately 9 percent
outstanding debt and the related fair values at December 31, 2021
was variable-rate debt with interest rates primarily based on the
(in millions, except percentages):
Fixed-rate debt
Average interest rate
Variable-rate debt
Average interest rate
2022
$ 4
—%
$ 368
1.8%
2023
$ 997
3.9%
$ —
—%
2024
$ 735
4.5%
$ —
—%
2025
$ 4
—%
$ 133
2.2%
2026
$ 4
—%
$ 310
2.2%
Thereafter
Fair Value
$ 6,971
5.0%
$ —
—%
$ 9,819
$
4.9%
811
2.0%
NEW ACCOUNTING STANDARDS
We did not adopt any new accounting standards in 2021.
NET DEBT
Net debt, which we define as consolidated debt less consolidated
cash and cash equivalents, is intended to provide investors with
information related to the performance-based payout framework
in our financial policy, which requires achievement of a net debt
Our net debt follows, which may not be comparable to similarly
titled measures reported by other companies (in millions):
December 31,
Current portion of debt
Long-term debt, less current portion
Consolidated debt
Less: consolidated cash and cash equivalents
Net debt
2021
$ 372
9,078
9,450a
8,068
$ 1,382
2020
34
$
9,677
9,711
3,657
$ 6,054
target in the range of $3 billion to $4 billion (excluding project debt
a. Includes $432 million, net of debt issuance costs, for the PT-FI term loan (refer to Note 8).
for additional smelting capacity in Indonesia). This information
differs from consolidated debt determined in accordance with U.S.
GAAP and should not be considered in isolation or as a substitute
for consolidated debt determined in accordance with U.S. GAAP.
52 Fre epor t-McMoR an
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
We show revenue adjustments for prior period open sales as
separate line items. Because these adjustments do not result from
current period sales, these amounts have been reflected
separately from revenues on current period sales. Noncash and
other costs, which are removed from site production and delivery
costs in the calculation of unit net cash costs, consist of items
such as stock-based compensation costs, long-lived asset
impairments, idle facility costs, restructuring and/or unusual
charges. As discussed above, gold, molybdenum and other metal
revenues at copper mines are reflected as credits against site
production and delivery costs in the by-product method. The
following schedules are presentations under both the by-product
and co-product methods together with reconciliations to amounts
reported in our consolidated financial statements.
PRODUCT REVENUES AND PRODUCTION COSTS
Mining Product Revenues and Unit Net Cash Costs
Unit net cash costs per pound of copper and molybdenum are
measures intended to provide investors with information about the
cash-generating capacity of our mining operations expressed
on a basis relating to the primary metal product for the respective
operations. We use this measure for the same purpose and for
monitoring operating performance by our mining operations. This
information differs from measures of performance determined
in accordance with U.S. GAAP and should not be considered in
isolation or as a substitute for measures of performance
determined in accordance with U.S. GAAP. These measures are
presented by other metals mining companies, although our
measures may not be comparable to similarly titled measures
reported by other companies.
We present gross profit per pound of copper in the following
tables using both a “by-product” method and a “co-product”
method. We use the by-product method in our presentation of
gross profit per pound of copper because (i) the majority of our
revenues are copper revenues, (ii) we mine ore, which contains
copper, gold, molybdenum and other metals, (iii) it is not possible
to specifically assign all of our costs to revenues from the copper,
gold, molybdenum and other metals we produce, (iv) it is the
method used to compare mining operations in certain industry
publications and (v) it is the method used by our management and
the Board to monitor operations and to compare mining
operations in certain industry publications. In the co-product
method presentations, shared costs are allocated to the different
products based on their relative revenue values, which will vary to
the extent our metals sales volumes and realized prices change.
53 2 0 2 1 A n n u a l R e p o r t
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
North America Copper Mines Product Revenues, Production Costs and Unit Net Cash Costs
Year Ended December 31, 2021
(In millions)
Revenues, excluding adjustments
Site production and delivery, before net noncash and other costs shown below
By-product credits
Treatment charges
Net cash costs
DD&A
Metals inventory adjustments
Noncash and other costs, net
Total costs
Other revenue adjustments, primarily for pricing on prior period open sales
Gross profit
Copper sales (millions of recoverable pounds)
Molybdenum sales (millions of recoverable pounds)a
Gross profit per pound of copper/molybdenum:
Revenues, excluding adjustments
Site production and delivery, before net noncash and other costs shown below
By-product credits
Treatment charges
Unit net cash costs
DD&A
Metals inventory adjustments
Noncash and other costs, net
Total unit costs
Other revenue adjustments, primarily for pricing on prior period open sales
Gross profit per pound
Reconciliation to Amounts Reported
(In millions)
Totals presented above
Treatment charges
Noncash and other costs, net
Other revenue adjustments, primarily for pricing on prior period open sales
Eliminations and other
North America copper mines
Other miningd
Corporate, other & eliminations
As reported in our consolidated financial statements
By-Product
Method
Co-Product Method
Copper
Molybdenuma
Otherb
Total
$ 120
75
—
5
80
7
—
2
89
—
$ 31
$ 6,775
3,173
—
135
3,308
368
13
105
3,794
7
$ 2,988
$ 6,174
$ 6,174
3,051
(479)
135
2,707
368
13
105c
3,193
7
$ 2,988
2,820
—
130
2,950
340
13
102
3,405
7
$ 2,776
1,436
1,436
$ 4.30
$ 4.30
2.13
(0.33)
0.09
1.89
0.25
0.01
0.07c
2.22
—
$ 2.08
1.96
—
0.09
2.05
0.24
0.01
0.07
2.37
—
$ 1.93
$ 481
278
—
—
278
21
—
1
300
—
$ 181
34
$ 14.14
8.17
—
—
8.17
0.62
—
0.03
8.82
—
$ 5.32
Revenues
Production
and Delivery
Metals
Inventory
Adjustments
DD&A
$ 6,775
(24)
—
7
67
6,825
22,229
(6,209)
$ 22,845
$ 3,173
111
105
—
72
3,461
14,395
(5,840)
$ 12,016
$ 368
—
—
—
1
369
1,562
67
$ 1,998
$ 13
—
—
—
—
13
1
2
$ 16
a. Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing.
b. Includes gold and silver product revenues and production costs.
c. Includes credits totaling $27 million ($0.02 per pound of copper) associated with refunds of Arizona transaction privilege taxes related to purchased electricity.
d. Represents the combined total for our other mining operations as presented in Note 16.
54 Fre epor t-McMoR an
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
North America Copper Mines Product Revenues, Production Costs and Unit Net Cash Costs (continued)
Year Ended December 31, 2020
(In millions)
Revenues, excluding adjustments
Site production and delivery, before net noncash and other costs shown below
By-product credits
Treatment charges
Net cash costs
DD&A
Metals inventory adjustments
Noncash and other costs, net
Total costs
Other revenue adjustments, primarily for pricing on prior period open sales
Gross profit
Copper sales (millions of recoverable pounds)
Molybdenum sales (millions of recoverable pounds)a
Gross profit per pound of copper/molybdenum:
Revenues, excluding adjustments
Site production and delivery, before net noncash and other costs shown below
By-product credits
Treatment charges
Unit net cash costs
DD&A
Metals inventory adjustments
Noncash and other costs, net
Total unit costs
Other revenue adjustments, primarily for pricing on prior period open sales
Gross profit per pound
Reconciliation to Amounts Reported
(In millions)
Totals presented above
Treatment charges
Noncash and other costs, net
Other revenue adjustments, primarily for pricing on prior period open sales
Eliminations and other
North America copper mines
Other mininge
Corporate, other & eliminations
As reported in our consolidated financial statements
By-Product
Method
Co-Product Method
Copper
Molybdenuma
Otherb
Total
$ 83
44
—
3
47
7
3
2
59
—
$ 24
$ 4,369
2,796
—
139
2,935
355
52
138
3,480
(22)
$ 867
$ 4,005c
$ 4,005
$ 281
2,700
(268)
139
2,571
355
52
138d
3,116
(22)
867
$
2,529
—
136
2,665
330
49
133
3,177
(22)
$ 806
1,420
1,420
$ 2.82c
$ 2.82
1.90
(0.19)
0.10
1.81
0.25
0.03
0.10d
2.19
(0.02)
$ 0.61
1.78
—
0.10
1.88
0.23
0.03
0.10
2.24
(0.02)
$ 0.56
223
—
—
223
18
—
3
244
—
37
33
$
$ 8.62
6.84
—
—
6.84
0.56
—
0.09
7.49
—
$ 1.13
Revenues
Production
and Delivery
Metals
Inventory
Adjustments
DD&A
$ 4,369
(15)
—
(22)
32
4,364
13,642
(3,808)
$ 14,198
$ 2,796
124
138
—
42
3,100
10,595
(3,664)
$ 10,031
$ 355
—
—
—
—
355
1,103
70
$ 1,528
$ 52
—
—
—
—
52
16
28
$ 96
a. Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing.
b. Includes gold and silver product revenues and production costs.
c. Includes reductions to revenues and average realized prices totaling $24 million ($0.02 per pound of copper) related to forward sales contracts covering 150 million pounds of copper sales for May and June 2020 at a
fixed price of $2.34 per pound.
d. Includes charges totaling $32 million ($0.02 per pound of copper) primarily associated with the April 2020 revised operating plans (including employee separation costs) and the COVID-19 pandemic (including health
and safety costs).
e. Represents the combined total for our other mining operations as presented in Note 16.
55 2 0 2 1 A n n u a l R e p o r t
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
South America Mining Product Revenues, Production Costs and Unit Net Cash Costs
Year Ended December 31, 2021
(In millions)
Revenues, excluding adjustments
Site production and delivery, before net noncash and other costs shown below
By-product credits
Treatment charges
Royalty on metals
Net cash costs
DD&A
Noncash and other costs, net
Total costs
Other revenue adjustments, primarily for pricing on prior period open sales
Gross profit
Copper sales (millions of recoverable pounds)
Gross profit per pound of copper:
Revenues, excluding adjustments
Site production and delivery, before net noncash and other costs shown below
By-product credits
Treatment charges
Royalty on metals
Unit net cash costs
DD&A
Noncash and other costs, net
Total unit costs
Other revenue adjustments, primarily for pricing on prior period open sales
Gross profit per pound
Reconciliation to Amounts Reported
(In millions)
Totals presented above
Treatment charges
Royalty on metals
Noncash and other costs, net
Other revenue adjustments, primarily for pricing on prior period open sales
Eliminations and other
South America mining
Other miningd
Corporate, other & eliminations
As reported in our consolidated financial statements
By-Product
Method
$ 4,585
2,349b
(338)
140
10
2,161
413
38c
2,612
99
$ 2,072
1,055
$ 4.34
2.23b
(0.32)
0.13
0.01
2.05
0.39
0.03c
2.47
0.09
$ 1.96
Revenues
$ 4,968
(140)
(10)
—
99
(1)
4,916
24,138
(6,209)
$ 22,845
Copper
$ 4,585
2,175
—
140
9
2,324
379
36
2,739
99
$ 1,945
1,055
$ 4.34
2.06
—
0.13
0.01
2.20
0.37
0.03
2.60
0.09
$ 1.83
Production
and Delivery
$ 2,394
—
—
38
—
(3)
2,429
15,427
(5,840)
$ 12,016
Co-Product Method
Othera
Total
$ 383
219
—
—
1
220
34
2
256
—
$ 127
$ 4,968
2,394
—
140
10
2,544
413
38
2,995
99
$ 2,072
DD&A
$ 413
—
—
—
—
—
413
1,518
67
$ 1,998
a. Includes silver sales of 3.7 million ounces ($24.73 per ounce average realized price). Also reflects sales of molybdenum produced by Cerro Verde to our molybdenum sales company at market-based pricing.
b. Includes nonrecurring charges totaling $92 million ($0.09 per pound of copper) associated with labor-related charges at Cerro Verde for collective labor agreements reached with its hourly employees.
c. Includes credits totaling $26 million ($0.03 per pound) associated with favorable adjustments to prior-years’ profit sharing at Cerro Verde.
d. Represents the combined total for our other mining operations as presented in Note 16.
56 Fre epor t-McMoR an
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
South America Mining Product Revenues, Production Costs and Unit Net Cash Costs (continued)
Year Ended December 31, 2020
(In millions)
Revenues, excluding adjustments
Site production and delivery, before net noncash and other costs shown below
By-product credits
Treatment charges
Royalty on metals
Net cash costs
DD&A
Metals inventory adjustments
Noncash and other costs, net
Total costs
Other revenue adjustments, primarily for pricing on prior period open sales
Gross profit
By-Product
Method
Copper
Co-Product Method
Othera
Total
$ 2,976
$ 2,976
$ 209
1,816
(166)
152
6
1,808
421
3
122b
2,354
(70)
552
$
1,701
—
152
6
1,859
391
3
115
2,368
(70)
538
$
158
—
—
—
158
30
—
7
195
—
14
$
$ 3,185
1,859
—
152
6
2,017
421
3
122
2,563
(70)
$ 552
Copper sales (millions of recoverable pounds)
976
976
Gross profit per pound of copper:
Revenues, excluding adjustments
Site production and delivery, before net noncash and other costs shown below
By-product credits
Treatment charges
Royalty on metals
Unit net cash costs
DD&A
Metals inventory adjustments
Noncash and other costs, net
Total unit costs
Other revenue adjustments, primarily for pricing on prior period open sales
Gross profit per pound
Reconciliation to Amounts Reported
(In millions)
Totals presented above
Treatment charges
Royalty on metals
Noncash and other costs, net
Other revenue adjustments, primarily for pricing on prior period open sales
Eliminations and other
South America mining
Other miningc
Corporate, other & eliminations
As reported in our consolidated financial statements
$ 3.05
1.86
(0.17)
0.15
0.01
1.85
0.43
—
0.13b
2.41
(0.07)
$ 0.57
Revenues
$ 3,185
(152)
(6)
—
(70)
(2)
2,955
15,051
(3,808)
$ 14,198
$ 3.05
1.74
—
0.15
0.01
1.90
0.41
—
0.12
2.43
(0.07)
$ 0.55
Production
and Delivery
$ 1,859
—
—
122
—
(3)
1,978
11,717
(3,664)
$ 10,031
Metals
Inventory
Adjustments
$
$
3
—
—
—
—
—
3
65
28
96
DD&A
$ 421
—
—
—
—
—
421
1,037
70
$ 1,528
a. Includes silver sales of 3.4 million ounces ($21.86 per ounce average realized price). Also reflects sales of molybdenum produced by Cerro Verde to our molybdenum sales company at market-based pricing.
b. Includes charges totaling $91 million ($0.09 per pound of copper) primarily associated with idle facility (Cerro Verde) and contract cancellation costs related to the COVID-19 pandemic, and employee separation costs
associated with the April 2020 revised operating plans.
c. Represents the combined total for our other mining operations as presented in Note 16.
57 2 0 2 1 A n n u a l R ep o r t
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
Indonesia Mining Product Revenues, Production Costs and Unit Net Cash Costs
Year Ended December 31, 2021
(In millions)
Revenues, excluding adjustments
Site production and delivery, before net noncash and other costs shown below
Gold and silver credits
Treatment charges
Export duties
Royalty on metals
Net cash costs
DD&A
Noncash and other costs, net
Total costs
Other revenue adjustments, primarily for pricing on prior period open sales
PT Smelting intercompany loss
Gross profit
Copper sales (millions of recoverable pounds)
Gold sales (thousands of recoverable ounces)
Gross profit per pound of copper/per ounce of gold:
Revenues, excluding adjustments
Site production and delivery, before net noncash and other costs shown below
Gold and silver credits
Treatment charges
Export duties
Royalty on metals
Unit net cash costs
DD&A
Noncash and other costs, net
Total unit costs
Other revenue adjustments, primarily for pricing on prior period open sales
PT Smelting intercompany loss
Gross profit per pound/ounce
Reconciliation to Amounts Reported
(In millions)
Totals presented above
Treatment charges
Export duties
Royalty on metals
Noncash and other costs, net
Other revenue adjustments, primarily for pricing on prior period open sales
PT Smelting intercompany loss
Indonesia mining
Other miningc
Corporate, other & eliminations
As reported in our consolidated financial statements
Total
$ 8,281
1,953
—
320
218
319
2,810
1,049
355
4,214
68
(86)
$ 4,049
By-Product
Method
Copper
Co-Product Method
Gold
Silvera
$ 143
33
—
6
4
6
49
18
6
73
—
(1)
$ 69
$ 5,715
$ 5,715
1,953
(2,562)
320
218
319
248
1,049
355b
1,652
72
(86)
$ 4,049
1,348
—
221
150
223
1,942
724
245
2,911
72
(60)
$ 2,816
1,316
1,316
$ 4.34
$ 4.34
1.49
(1.95)
0.24
0.17
0.24
0.19
0.80
0.27b
1.26
0.05
(0.07)
$ 3.06
1.03
—
0.17
0.11
0.17
1.48
0.55
0.18
2.21
0.05
(0.05)
$ 2.13
Revenues
Production
and Delivery
$ 8,281
(320)
(218)
(319)
31
68
—
7,523
21,531
(6,209)
$ 22,845
$ 1,953
—
—
—
386
—
86
2,425
15,431
(5,840)
$ 12,016
$ 2,423
572
—
93
64
90
819
307
104
1,230
(4)
(25)
$ 1,164
1,349
$ 1,796
424
—
69
47
67
607
228
77
912
(3)
(19)
$ 862
DD&A
$ 1,049
—
—
—
—
—
—
1,049
882
67
$ 1,998
a. Includes silver sales of 5.9 million ounces ($24.30 per ounce average realized price).
b. Includes charges totaling $340 million ($0.26 per pound of copper) associated with an ARO adjustment. Also, includes credits of $31 million ($0.02 per pound of copper) associated with adjustments to prior-year
treatment charges and charges of $16 million ($0.01 per pound of copper) associated with a potential settlement of an administrative fine levied by the Indonesia government.
c. Represents the combined total for our other mining operations as presented in Note 16.
58 Fre e por t-McMoR an
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
Indonesia Mining Product Revenues, Production Costs and Unit Net Cash Costs (continued)
Year Ended December 31, 2020
(In millions)
Revenues, excluding adjustments
Site production and delivery, before net noncash and other costs shown below
Gold and silver credits
Treatment charges
Export duties
Royalty on metals
Net cash costs
DD&A
Noncash and other costs, net
Total costs
Other revenue adjustments, primarily for pricing on prior period open sales
PT Smelting intercompany loss
Gross profit
Copper sales (millions of recoverable pounds)
Gold sales (thousands of recoverable ounces)
Gross profit per pound of copper/per ounce of gold:
Revenues, excluding adjustments
Site production and delivery, before net noncash and other costs shown below
Gold and silver credits
Treatment charges
Export duties
Royalty on metals
Unit net cash costs
DD&A
Noncash and other costs, net
Total unit costs
Other revenue adjustments, primarily for pricing on prior period open sales
PT Smelting intercompany loss
Gross profit per pound/ounce
Reconciliation to Amounts Reported
(In millions)
Totals presented above
Treatment charges
Export duties
Royalty on metals
Noncash and other costs, net
Other revenue adjustments, primarily for pricing on prior period open sales
PT Smelting intercompany loss
Indonesia mining
Other miningc
Corporate, other & eliminations
As reported in our consolidated financial statements
Total
$ 4,101
1,508
—
219
93
153
1,973
580
93
2,646
(16)
(11)
$ 1,428
By-Product
Method
Copper
Co-Product Method
Gold
Silvera
$ 81
30
—
4
2
3
39
11
2
52
—
—
$ 29
$ 2,475
$ 2,475
1,508
(1,630)
219
93
153
343
580
93b
1,016
(20)
(11)
$ 1,428
910
—
132
56
90
1,188
350
56
1,594
(20)
(7)
$ 854
804
804
$ 3.08
$ 3.08
1.88
(2.03)
0.27
0.12
0.19
0.43
0.72
0.11b
1.26
(0.03)
(0.01)
$ 1.78
1.13
—
0.17
0.07
0.11
1.48
0.43
0.07
1.98
(0.03)
(0.01)
$ 1.06
Revenues
Production
and Delivery
$ 4,101
(219)
(93)
(153)
(6)
(16)
—
3,614
14,392
(3,808)
$ 14,198
$ 1,508
—
—
—
87
—
11
1,606
12,089
(3,664)
$ 10,031
$ 1,545
568
—
83
35
60
746
219
35
1,000
4
(4)
$ 545
842
$ 1,832
674
—
98
41
72
885
259
41
1,185
5
(5)
$ 647
DD&A
$ 580
—
—
—
—
—
—
580
878
70
$ 1,528
a. Includes silver sales of 3.6 million ounces ($22.40 per ounce average realized price).
b. Includes COVID-19 related costs (including one-time incremental employee benefits and health and safety costs) of $14 million ($0.02 per pound of copper).
c. Represents the combined total for our other mining operations as presented in Note 16.
59 2 0 2 1 A n n u a l R e p o r t
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
Molybdenum Mines Product Revenues, Production Costs and Unit Net Cash Costs
Years Ended December 31,
(In millions)
Revenues, excluding adjustmentsa
Site production and delivery, before net noncash and other costs shown below
Treatment charges and other
Net cash costs
DD&A
Metals inventory adjustments
Noncash and other costs, net
Total costs
Gross profit (loss)
Molybdenum sales (millions of recoverable pounds)a
Gross profit (loss) per pound of molybdenum:
Revenues, excluding adjustmentsa
Site production and delivery, before net noncash and other costs shown below
Treatment charges and other
Unit net cash costs
DD&A
Metals inventory adjustments
Noncash and other costs, net
Total unit costs
Gross profit (loss) per pound
2021
2020
$
470
$
243
243
26
269
67
1
10
347
123
30
$
$ 15.52
8.02
0.85
8.87
2.22
0.03
0.33
11.45
$ 4.07
211
21
232
57
10
19b
318
(75)
24
$
$ 9.94
8.65
0.85
9.50
2.34
0.42
0.75b
13.01
$ (3.07)
Reconciliation to Amounts Reported
(In millions)
Year Ended December 31, 2021
Totals presented above
Treatment charges and other
Noncash and other costs, net
Molybdenum mines
Other mining c
Corporate, other & eliminations
As reported in our consolidated financial statements
Year Ended December 31, 2020
Totals presented above
Treatment charges and other
Noncash and other costs, net
Molybdenum mines
Other mining c
Corporate, other & eliminations
As reported in our consolidated financial statements
Revenues
Production
and Delivery
DD&A
Metals
Inventory
Adjustments
$
470
(26)
—
444
28,610
(6,209)
$ 22,845
$
243
(21)
—
222
17,784
(3,808)
$ 14,198
$
243
—
10
253
17,603
(5,840)
$ 12,016
$
211
—
19
230
13,465
(3,664)
$ 10,031
$
67
—
—
67
1,864
67
$ 1,998
$
57
—
—
57
1,401
70
$ 1,528
$ 1
—
—
1
13
2
$ 16
$ 10
—
—
10
58
28
$ 96
a. Reflects sales of the Molybdenum mines’ production to the molybdenum sales company at market-based pricing. On a consolidated basis, realizations are based on the actual contract terms for sales to third parties;
as a result, our consolidated average realized price per pound of molybdenum will differ from the amounts reported in this table.
b. Includes charges totaling $7 million ($0.29 per pound of molybdenum) primarily associated with contract cancellation costs related to the COVID-19 pandemic and employee separation costs associated with
April 2020 revised operating plans.
c. Represents the combined total for our other mining operations as presented in Note 16. Also includes amounts associated with the 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.
60 Fre e por t-McMoR an
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
CAUTIONARY STATEMENT
Our discussion and analysis contains forward-looking statements
in which we discuss our potential future performance. Forward-
looking statements are all statements other than statements of
historical facts, such as plans, projections, or expectations relating
to business outlook, strategy, goals or targets; ore grades and
milling rates; production and sales volumes; unit net cash costs;
capital expenditures; operating costs; operating plans; cash flows;
liquidity; PT-FI’s financing, construction and completion of additional
domestic smelting capacity in Indonesia in accordance with the
terms of its special mining license (IUPK); our commitments to
deliver responsibly produced copper, including plans to implement
and validate all of our operating sites under the Copper Mark and to
comply with other disclosure frameworks; execution of our energy
and climate strategies and the underlying assumptions and
estimated impacts on our business related thereto; achievement
of climate commitments and net zero aspirations; improvements in
operating procedures and technology innovations; exploration
efforts and results; development and production activities, rates and
costs; future organic growth opportunities; tax rates; export
quotas and duties; impact of copper, gold and molybdenum price
changes; the impact of deferred intercompany profits on earnings;
mineral reserve and mineral resource estimates; final resolution
of settlements associated with ongoing legal proceedings; and the
ongoing implementation of our financial policy and future returns
to shareholders, including dividend payments (base or variable) and
share repurchases. The words “anticipates,” “may,” “can,” “plans,”
“believes,” “estimates,” “expects,” “projects,” “targets,” “intends,”
“likely,” “will,” “should,” “could,” “to be,” ”potential,” “assumptions,”
“guidance,” “aspirations,” “future” and any similar expressions are
intended to identify those assertions as forward-looking statements.
The declaration and payment of dividends (base or variable) and
timing and amount of any share repurchases is at the discretion of
our Board and management, respectively, and is subject to a
number of factors, including maintaining our net debt target, capital
We caution readers that forward-looking statements are not
guarantees of future performance and actual results may differ
materially from those anticipated, expected, projected or assumed
in the forward-looking statements. Important factors that can
cause our actual results to differ materially from those anticipated
in the forward-looking statements include, but are not limited to,
supply of and demand for, and prices of the commodities we
produce, primarily copper; changes in our cash requirements,
financial position, financing or investment plans; changes in
general market, economic, tax, regulatory or industry conditions;
reductions in liquidity and access to capital; the ongoing
COVID-19 pandemic and any future public health crisis; political
and social risks; operational risks inherent in mining, with higher
inherent risks in underground mining; fluctuations in price and
availability of commodities purchased; constraints on supply,
logistics and transportation services; mine sequencing; changes
in mine plans or operational modifications, delays, deferrals or
cancellations; production rates; timing of shipments; results of
technical, economic or feasibility studies; potential inventory
adjustments; potential impairment of long-lived mining assets; the
potential effects of violence in Indonesia generally and in the
province of Papua; the Indonesia government’s extension of
PT-FI’s export license after March 15, 2022; satisfaction of
requirements in accordance with PT-FI’s IUPK to extend mining
rights from 2031 through 2041; the Indonesia government’s
approval of a deferred schedule for completion of additional
domestic smelting capacity in Indonesia; cybersecurity incidents;
labor relations, including labor-related work stoppages and
costs; compliance with applicable environmental, health
and safety laws and regulations; weather- and climate-related
risks; environmental risks and litigation results; our ability to comply
with our responsible production commitments under specific
frameworks and any changes to such frameworks; and other factors
described in more detail in Item 1A. “Risk Factors” contained in
Part I of our annual report on Form 10-K for the year ended
availability, our financial results, cash requirements, business
December 31, 2021.
prospects, global economic conditions, changes in laws, contractual
restrictions and other factors deemed relevant by our Board or
management, as applicable. Our share repurchase program may
be modified, increased, suspended or terminated at any time at
the Board’s discretion.
61 2 0 2 1 A n n u a l R ep o r t
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
Investors are cautioned that many of the assumptions upon which
Our annual report on Form 10-K for the year ended December 31,
our forward-looking statements are based are likely to change after
2021, also contains financial measures such as net debt and unit
the date the forward-looking statements are made, including for
net cash costs per pound of copper and molybdenum, which
example commodity prices, which we cannot control, and production
are not recognized under U.S. GAAP. Refer to “Operations—Unit
volumes and costs or technological solutions and innovation, some
Net Cash Costs” for further discussion of unit net cash costs
aspects of which we may not be able to control. Further, we may
associated with our operating divisions, and to “Product Revenues
make changes to our business plans that could affect our results. We
and Production Costs” for reconciliations of per pound costs by
caution investors that we undertake no obligation to update any
operating division to production and delivery costs applicable
forward-looking statements, which speak only as of the date made,
to sales reported in our consolidated financial statements. Refer to
notwithstanding any changes in our assumptions, changes in
“Net Debt” for reconciliations of consolidated debt and
business plans, actual experience or other changes.
consolidated cash and cash equivalents to net debt.
Our annual report on Form 10-K for the year ended December 31,
2021, also includes forward-looking statements regarding mineral
resources not included in proven and probable mineral reserves.
A mineral resource, which includes measured, indicated and
inferred mineral resources, is a concentration or occurrence of
material of economic interest in or on the Earth’s crust in such
form, grade or quality, and quantity that there are reasonable
prospects for economic extraction. Such a deposit cannot qualify
as recoverable proven and probable mineral reserves until legal and
economic feasibility are confirmed based upon a comprehensive
evaluation of development and operating costs, grades, recoveries
and other material factors. Accordingly, no assurance can be
given that the estimated mineral resources will become proven and
probable mineral reserves.
62 Fre e por t-McMoR an
M A N A G E M E N T ’ S R E P O R T O N I N T E R N A L C O N T R O L O V E R F I N A N C I A L R E P O R T I N G
Freeport-McMoRan Inc.’s (the Company’s) management is
Because of its inherent limitations, internal control over
responsible for establishing and maintaining adequate internal
financial reporting may not prevent or detect misstatements.
control over financial reporting. Internal control over financial
Projections of any evaluation of effectiveness to future periods are
reporting is defined in Rule 13a-15(f) or 15d-15(f) under the
subject to the risk that controls may become inadequate because
Securities Exchange Act of 1934 as a process designed by, or
of changes in conditions, or that the degree of compliance with
under the supervision of, the Company’s principal executive and
the policies or procedures may deteriorate.
principal financial officers and effected by the Company’s
Our management, including our principal executive officer and
Board of Directors, management and other personnel, to provide
principal financial officer, assessed the effectiveness of our
reasonable assurance regarding the reliability of financial
internal control over financial reporting as of the end of the fiscal
reporting and the preparation of financial statements for external
year covered by this annual report on Form 10-K. In making this
purposes in accordance with generally accepted accounting
assessment, our management used the criteria set forth in Internal
principles and includes those policies and procedures that:
• Pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of
the Company’s assets;
• Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013
framework) (the COSO criteria). Based on its assessment,
management concluded that, as of December 31, 2021, our
Company’s internal control over financial reporting is effective
based on the COSO criteria.
accordance with generally accepted accounting principles, and
Ernst & Young LLP, an independent registered public accounting
that receipts and expenditures of the Company are being made
firm, who audited the Company’s consolidated financial statements
only in accordance with authorizations of management and
included in this Form 10-K, has issued an attestation report on
directors of the Company; and
the Company’s internal control over financial reporting, which is
• Provide reasonable assurance regarding prevention or timely
included herein.
detection of unauthorized acquisition, use or disposition of the
Company’s assets that could have a material effect on the
financial statements.
Richard C. Adkerson
Kathleen L. Quirk
Chairman of the Board and
President and
Chief Executive Officer
Chief Financial Officer
63 2 0 2 1 A n n u a l R e p o r t
R E P O R T O F I N D E P E N D E N T R E G I S T E R E D P U B L I C A C C O U N T I N G F I R M
To the Board of Directors and
Stockholders of Freeport-McMoRan Inc.
Opinion on Internal Control over Financial Reporting
We have audited Freeport-McMoRan Inc.’s internal control over
financial reporting as of December 31, 2021, based on criteria
established in Internal Control—Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework) (the COSO criteria). In our opinion,
Freeport-McMoRan Inc. (the Company) maintained, in all material
respects, effective internal control over financial reporting as of
December 31, 2021, based on the COSO criteria.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of Freeport-McMoRan
Inc. as of December 31, 2021 and 2020, the related consolidated
statements of operations, comprehensive income (loss), equity and
cash flows for each of the three years in the period ended
December 31, 2021, and the related notes and our report dated
February 15, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining
effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial
reporting included in the accompanying Management’s Report
on Internal Control Over Financial Reporting. Our responsibility
is to express an opinion on the Company’s internal control
over financial reporting based on our audit. We are a public
accounting firm registered with the PCAOB and are required
to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules
and regulations of the Securities and Exchange Commission and
the PCAOB.
We conducted our audit in accordance with the standards of
the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all
material respects.
Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk,
and performing such other procedures as we considered necessary
in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
Definition and Limitations of Internal Control
Over Financial Reporting
A company’s internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets
of the company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management
and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could
have a material effect on the financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
ERNST & YOUNG LLP
Phoenix, Arizona
February 15, 2022
64 Fre epor t-McMoR an
R E P O R T O F I N D E P E N D E N T R E G I S T E R E D P U B L I C A C C O U N T I N G F I R M
To the Board of Directors and
Stockholders of Freeport-McMoRan Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets
of Freeport-McMoRan Inc. (the Company) as of December 31,
2021 and 2020, the related consolidated statements of operations,
comprehensive income (loss), equity and cash flows for each
of the three years in the period ended December 31, 2021, and the
Basis for Opinion
These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a
public accounting firm registered with the PCAOB and are required
to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and
related notes (collectively referred to as the “consolidated
the PCAOB.
financial statements”). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial
position of the Company at December 31, 2021 and 2020, and the
results of its operations and its cash flows for each of the three
years in the period ended December 31, 2021, in conformity with
U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of
the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company’s internal control over financial reporting
as of December 31, 2021, based on criteria established in Internal
Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013
framework) and our report dated February 15, 2022 expressed
an unqualified opinion thereon.
We conducted our audits in accordance with the standards of
the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error
or fraud. Our audits included performing procedures to assess the
risks of material misstatement of the financial statements, whether
due to error or fraud, and performing procedures that respond to
those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management,
as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis
for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising
from the current period audit of the consolidated financial statements
that were communicated or required to be communicated to
the audit committee and that: (1) relate to accounts or disclosures
that are material to the consolidated financial statements and
(2) involved our especially challenging, subjective, or complex
judgments. The communication of critical audit matters does
not alter in any way our opinion on the consolidated financial
statements, taken as a whole, and we are not, by communicating
the critical audit matters below, providing separate opinions
on the critical audit matters or on the accounts or disclosures to
which they relate.
65 2 0 2 1 A n n u a l R e p o r t
R E P O R T O F I N D E P E N D E N T R E G I S T E R E D P U B L I C A C C O U N T I N G F I R M
Uncertain tax positions
Description
of the Matter
As discussed in Note 11 to the consolidated financial
statements, the Company operates in the United
States and multiple international tax jurisdictions,
and its income tax returns are subject to examination
by tax authorities in those jurisdictions who may
challenge any tax position on these returns. Uncertainty
in a tax position may arise because tax laws are
subject to interpretation. The Company uses significant
judgment to (1) determine whether, based on the
technical merits, a tax position is more likely than not
to be sustained and (2) measure the amount of tax
benefit that qualifies for recognition.
Auditing management’s estimate of the amount of
tax benefit that qualifies for recognition involved
auditor judgment because management’s estimate is
complex, requires a high degree of judgment and is
based on interpretations of tax laws and legal rulings.
How We
Addressed
the Matter in
Our Audit
We obtained an understanding, evaluated the
design and tested the operating effectiveness
of controls over the Company’s accounting process
for uncertain tax positions. This included testing
controls over management’s review of the technical
merits of tax positions and disputed tax assessments,
including the process to measure the financial
statement impact of these tax matters.
Our audit procedures included, among others,
evaluating the Company’s accounting for these tax
positions by using our knowledge of and experience
with the application of respective tax laws by the
relevant tax authorities, or our understanding of the
contractual arrangements with the applicable
government, if the position is governed by a contract.
We analyzed the Company’s assumptions and data
used to determine the tax assessments and tested
the accuracy of the calculations. We involved our tax
professionals located in the respective jurisdictions
to assess the technical merits of the Company’s tax
positions and to evaluate the application of relevant
tax laws in the Company’s recognition determination.
We assessed the Company’s correspondence with
the relevant tax authorities and evaluated third-party
tax or legal opinions obtained by the Company.
We also evaluated the adequacy of the Company’s
disclosures included in Note 12 in relation to these
tax matters.
Environmental obligations
Description
of the Matter
As discussed in Note 12 to the consolidated financial
statements, the Company is subject to national,
state and local environmental laws and regulations
governing the protection of the environment,
including restoration and reclamation of
environmental contamination. Liabilities for
environmental contingencies are recorded when
it is probable that a liability has been incurred
and the amount can be reasonably estimated.
At December 31, 2021, the Company’s consolidated
environmental obligations totaled $1.7 billion.
Auditing management’s accounting for
environmental obligations was challenging, as
significant judgment is required by the Company
to evaluate whether an environmental loss
has been incurred and to estimate the future
costs to remediate the environmental matters.
The significant judgment was primarily due
to the inherent estimation uncertainty relating to
the amount of future costs. Such uncertainties
involve assumptions regarding the nature and
extent of contamination at each site, the nature and
66 Fre e por t-McMoR an
R E P O R T O F I N D E P E N D E N T R E G I S T E R E D P U B L I C A C C O U N T I N G F I R M
extent of required cleanup efforts under existing
environmental regulations, the duration and
effectiveness of the chosen remedial strategy, and
allocation of costs among other potentially
responsible parties. Actual costs incurred in future
periods could differ from amounts estimated.
How We
Addressed
the Matter in
Our Audit
We obtained an understanding, evaluated
the design and tested the operating effectiveness
of controls over the Company’s identification
and measurement of the environmental loss
contingencies. For example, we tested controls over
management’s review of the environmental loss
contingency calculations and management’s
assessment to evaluate key judgments and estimates
affecting the environmental loss contingencies.
To test the Company’s identification and
measurement of the environmental loss
contingencies, among other procedures, we
inspected correspondence with regulatory agencies,
obtained external legal counsel confirmation
letters, and inspected environmental studies.
Additionally, we assessed the appropriateness of
the Company’s models and tested the significant
assumptions discussed above along with the
underlying data used by the Company in its analyses.
We utilized our environmental professionals to
search for new or contrary evidence related
to the Company’s sites and to assist in evaluating
the reasonableness of estimated future costs
by comparing the estimated future costs to
environmental permits, third party observable data
such as vendor quotes, and to historical costs
incurred for similar activities.
ERNST & YOUNG LLP
We have served as the Company’s auditor since 2002.
Phoenix, Arizona
February 15, 2022
67 2 0 2 1 A n n u a l R e p o r t
C O N S O L I D A T E D S T A T E M E N T S O F O P E R A T I O N S
Years Ended December 31,
(In millions, except per share amounts)
Revenues
Cost of sales:
Production and delivery
Depreciation, depletion and amortization
Metals inventory adjustments
Total cost of sales
Selling, general and administrative expenses
Mining exploration and research expenses
Environmental obligations and shutdown costs
Net gain on sales of assets
Total costs and expenses
Operating income
Interest expense, net
Net loss on early extinguishment of debt
Other (expense) income, net
Income from continuing operations before income taxes and equity in affiliated companies’ net earnings
Provision for income taxes
Equity in affiliated companies’ net earnings
Net income (loss) from continuing operations
Net gain from discontinued operations
Net income (loss)
Net income attributable to noncontrolling interests
Net income (loss) attributable to common stockholders
Basic net income (loss) per share attributable to common stockholders:
Continuing operations
Discontinued operations
Diluted net income (loss) per share attributable to common stockholders:
Continuing operations
Discontinued operations
Weighted-average common shares outstanding:
Basic
Diluted
Dividends declared per share of common stock
The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements.
2021
2020
2019
$ 22,845
$ 14,198
$ 14,402
12,016
1,998
16
14,030
383
55
91
(80)
14,479
8,366
(602)
—
(105)
7,659
(2,299)
5
5,365
—
5,365
(1,059)
$ 4,306
$ 2.93
—
$ 2.93
$ 2.90
—
$ 2.90
1,466
1,482
$ 0.375
10,031
1,528
96
11,655
370
50
159
(473)
11,761
2,437
(598)
(101)
59
1,797
(944)
12
865
—
865
(266)
599
$
$ 0.41
—
$ 0.41
$ 0.41
—
$ 0.41
1,453
1,461
$
—
11,534
1,412
179
13,125
394
104
105
(417)
13,311
1,091
(620)
(27)
(138)
306
(510)
12
(192)
3
(189)
(50)
(239)
$
$ (0.17)
—
$ (0.17)
$ (0.17)
—
$ (0.17)
1,451
1,451
$ 0.20
68 Fre epor t-McMoR an
C O N S O L I D A T E D S T A T E M E N T S O F C O M P R E H E N S I V E I N C O M E ( L O S S )
Years Ended December 31,
(In millions)
Net income (loss)
Other comprehensive income (loss), net of taxes:
Defined benefit plans:
Actuarial gains (losses) arising during the period, net of taxes
Amortization or curtailment of unrecognized amounts included in net periodic benefit costs
Foreign exchange (losses) gains
Other comprehensive income (loss)
Total comprehensive income (loss)
Total comprehensive income attributable to noncontrolling interests
Total comprehensive income (loss) attributable to common stockholders
2021
2020
2019
$ 5,365
$ 865
$ (189)
179
18
(1)
196
5,561
(1,060)
$ 4,501
46
45
(1)
90
955
(263)
$ 692
(116)
47
1
(68)
(257)
(53)
$ (310)
The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements.
69 2 0 2 1 A n n u a l R e p o r t
C O N S O L I D A T E D S T A T E M E N T S O F C A S H F L O W S
2021
2020
2019
$ 5,365
$ 865
1,998
16
(80)
98
540
(273)
—
4
(109)
—
(171)
11
(421)
(18)
(472)
(618)
(101)
495
1,451
7,715
(342)
(162)
(1,296)
(222)
(6)
(87)
247
(36)
(33)
(27)
(1,964)
1,201
(1,461)
(331)
(583)
(488)
182
210
(29)
(41)
(1,340)
4,411
3,903
$ 8,314
1,528
96
(473)
99
181
(216)
130
65
(121)
101
181
32
(139)
23
132
42
(27)
115
403
3,017
(428)
(183)
(1,161)
(105)
(19)
(65)
704
—
—
(7)
(1,264)
3,531
(3,724)
(73)
—
—
156
51
(17)
(52)
(128)
1,625
2,278
$ 3,903
$ (189)
1,412
179
(417)
63
221
(244)
—
108
(75)
27
29
65
(187)
141
119
259
60
(60)
(29)
1,482
(877)
(256)
(1,369)
—
(19)
(131)
561
—
—
(12)
(2,103)
1,879
(3,197)
(291)
(82)
—
165
2
(8)
(24)
(1,556)
(2,177)
4,455
$ 2,278
Years Ended December 31,
(In millions)
Cash flow from operating activities:
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization
Metals inventory adjustments
Net gain on sales of assets
Stock-based compensation
Net charges for environmental and asset retirement obligations, including accretion
Payments for environmental and asset retirement obligations
Charge for talc-related litigation
Net charges for defined pension and postretirement plans
Pension plan contributions
Net loss on early extinguishment of debt
Deferred income taxes
Charges for Cerro Verde royalty dispute
Payments for Cerro Verde royalty dispute
Other, net
Changes in working capital and other:
Accounts receivable
Inventories
Other current assets
Accounts payable and accrued liabilities
Accrued income taxes and timing of other tax payments
Net cash provided by operating activities
Cash flow from investing activities:
Capital expenditures:
North America copper mines
South America
Indonesia mining
Indonesia smelter development
Molybdenum mines
Other
Proceeds from sales of assets
Loans to PT Smelting for expansion
Acquisition of minority interest in PT Smelting
Other, net
Net cash used in investing activities
Cash flow from financing activities:
Proceeds from debt
Repayments of debt
Cash dividends and distributions paid:
Common stock
Noncontrolling interests
Treasury stock purchases
Contributions from noncontrolling interests
Proceeds from exercised stock options
Payments for withholding of employee taxes related to stock-based awards
Debt financing costs and other, net
Net cash used in financing activities
Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of year
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of year
The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements.
70 Fre epor t-McMoR an
C O N S O L I D A T E D B A L A N C E S H E E T S
December 31,
(In millions, except par value)
ASSETS
Current assets:
Cash and cash equivalents
Trade accounts receivable
Income and other tax receivables
Inventories:
Materials and supplies, net
Mill and leach stockpiles
Product
Other current assets
Total current assets
Property, plant, equipment and mine development costs, net
Long-term mill and leach stockpiles
Other assets
Total assets
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued liabilities
Accrued income taxes
Current portion of debt
Current portion of environmental and asset retirement obligations
Dividends payable
Total current liabilities
Long-term debt, less current portion
Deferred income taxes
Environmental and asset retirement obligations, less current portion
Other liabilities
Total liabilities
Equity:
Stockholders’ equity:
Common stock, par value $0.10, 1,603 shares and 1,590 shares issued, respectively
Capital in excess of par value
Accumulated deficit
Accumulated other comprehensive loss
Common stock held in treasury—146 shares and 132 shares, respectively, at cost
Total stockholders’ equity
Noncontrolling interests
Total equity
Total liabilities and equity
The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements.
2021
2020
$ 8,068
1,168
574
1,669
1,170
1,658
523
14,830
30,345
1,387
1,460
$ 48,022
$ 3,495
1,541
372
264
220
5,892
9,078
4,234
4,116
1,683
25,003
160
25,875
(7,375)
(388)
(4,292)
13,980
9,039
23,019
$ 48,022
$ 3,657
892
520
1,594
1,014
1,285
341
9,303
29,818
1,463
1,560
$ 42,144
$ 2,708
324
34
351
—
3,417
9,677
4,408
3,705
2,269
23,476
159
26,037
(11,681)
(583)
(3,758)
10,174
8,494
18,668
$ 42,144
71 2 0 2 1 A n n u a l R e p o r t
C O N S O L I D A T E D S T A T E M E N T S O F E Q U I T Y
Stockholders’ Equity
(In millions)
Balance at January 1, 2019
Exercised and issued stock-based awards
Stock-based compensation, including the tender of shares
Dividends
Changes in noncontrolling interests
Contributions from noncontrolling interests
Adjustment for deferred taxes
Net loss attributable to common stockholders
Net income attributable to noncontrolling interests
Other comprehensive (loss) income
Balance at December 31, 2019
Exercised and issued stock-based awards
Stock-based compensation, including the tender of shares
Changes in noncontrolling interests
Contributions from noncontrolling interests
Net income attributable to common stockholders
Net income attributable to noncontrolling interests
Other comprehensive income (loss)
Balance at December 31, 2020
Exercised and issued stock-based awards
Stock-based compensation, including the tender of shares
Treasury stock purchases
Dividends
Contributions from noncontrolling interests
Net income attributable to common stockholders
Net income attributable to noncontrolling interests
Other comprehensive income
Common Stock
Number of At Par
Value
Shares
1,579
3
—
—
—
—
—
—
—
—
1,582
8
—
—
—
—
—
—
1,590
13
—
—
—
—
—
—
—
$ 158
—
—
—
—
—
—
—
—
—
158
1
—
—
—
—
—
—
159
1
—
—
—
—
—
—
—
Accumulated
Other
Common Stock
Held in Treasury
Capital in
Excess of Accumulated Comprehensive Number
Par Value
Deficit
Loss
of Shares At Cost
Total
Stockholders’ Noncontrolling
Equity
Interests
Total
Equity
$ 26,013 $ (12,041) $ (605)
—
—
—
—
—
—
—
—
(71)
1
50
(291)
(1)
80
(22)
—
—
—
—
—
—
—
—
—
(239)
—
—
25,830
57
74
—
76
—
—
—
26,037
225
75
—
(551)
89
—
—
—
(12,280)
—
—
—
—
599
—
—
(11,681)
—
—
—
—
—
4,306
—
—
(676)
—
—
—
—
—
—
93
(583)
—
—
—
—
—
—
—
195
130
—
1
—
—
—
—
—
—
—
131
—
1
—
—
—
—
—
132
—
1
13
—
—
—
—
—
$ (3,727)
—
(7)
—
—
—
—
—
—
—
(3,734)
—
(24)
—
—
—
—
—
(3,758)
—
(46)
(488)
—
—
—
—
—
$ 9,798
1
43
(291)
(1)
80
(22)
(239)
—
(71)
9,298
58
50
—
76
599
—
93
10,174
226
29
(488)
(551)
89
4,306
—
195
$ 8,094
—
1
(73)
(11)
86
—
—
50
3
8,150
—
—
1
80
—
266
(3)
8,494
—
(5)
—
(603)
93
—
1,059
1
$ 17,892
1
44
(364)
(12)
166
(22)
(239)
50
(68)
17,448
58
50
1
156
599
266
90
18,668
226
24
(488)
(1,154)
182
4,306
1,059
196
Balance at December 31, 2021
1,603
$ 160
$ 25,875 $ (7,375) $ (388)
146
$ (4,292)
$ 13,980
$ 9,039
$ 23,019
The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements.
72 Fre epor t -McMoR an
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
NOTE 1. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Basis of Presentation. The consolidated financial statements of
Freeport-McMoRan Inc. (FCX) include the accounts of those
subsidiaries where it directly or indirectly has more than 50 percent
of the voting rights and/or has control over the subsidiary. As of
December 31, 2021, the most significant entities that FCX
consolidates include its 48.76 percent-owned subsidiary PT Freeport
Indonesia (PT-FI), and the following wholly owned subsidiaries:
Freeport Minerals Corporation (FMC) and Atlantic Copper, S.L.U.
(Atlantic Copper). Refer to Note 3 for further discussion, including
FCX’s conclusion to consolidate PT-FI.
FMC’s unincorporated joint venture at Morenci is reflected
using the proportionate consolidation method (refer to Note 3 for
further discussion). Investments in unconsolidated companies
owned 20 percent or more are recorded using the equity method.
Investments in unconsolidated companies owned less than
20 percent, and for which FCX does not exercise significant
influence, are recorded at (i) fair value for those that have a readily
determinable fair value or (ii) cost, less any impairment, for those
that do not have a readily determinable fair value. All significant
intercompany transactions have been eliminated. Dollar amounts
in tables are stated in millions, except per share amounts.
Business Segments. FCX has organized its mining operations
into four primary divisions—North America copper mines,
South America mining, Indonesia mining and Molybdenum mines,
and operating segments that meet certain thresholds are reportable
segments. FCX’s reportable segments include the Morenci,
Cerro Verde and Grasberg (Indonesia mining) copper mines, the
Rod & Refining operations and Atlantic Copper Smelting & Refining.
Refer to Note 16 for further discussion.
Use of Estimates. The preparation of FCX’s financial statements
in conformity with accounting principles generally accepted in the
United States (U.S.) requires management to make estimates and
assumptions that affect the amounts reported in these financial
statements and accompanying notes. The more significant areas
requiring the use of management estimates include minerals
reserve estimation; asset lives for depreciation, depletion and
amortization; environmental obligations; asset retirement
obligations; estimates of recoverable copper in mill and leach
stockpiles; deferred taxes and valuation allowances; reserves for
contingencies and litigation; asset acquisitions and impairment,
including estimates used to derive future cash flows associated
with those assets; pension benefits; and valuation of derivative
instruments. Actual results could differ from those estimates.
Functional Currency. The functional currency for the majority of
FCX’s foreign operations is the U.S. dollar. For foreign subsidiaries
whose functional currency is the U.S. dollar, monetary assets
and liabilities denominated in the local currency are translated at
current exchange rates, and non-monetary assets and liabilities,
such as inventories, property, plant, equipment and mine
development costs, are translated at historical rates. Gains and
losses resulting from translation of such account balances are
included in other (expense) income, net, as are gains and losses
from foreign currency transactions. Foreign currency gains totaled
$66 million in 2021, $34 million in 2020 and $24 million in 2019.
Cash Equivalents. Highly liquid investments purchased with
maturities of three months or less are considered cash equivalents.
Restricted Cash and Restricted Cash Equivalents. FCX’s
restricted cash and restricted cash equivalents are primarily
related to PT-FI’s commitment for the development of a greenfield
smelter in Indonesia; and guarantees and commitments for certain
mine closure and reclamation obligations. Restricted cash and
restricted cash equivalents are classified as a current or long-term
asset based on the timing and nature of when or how the cash is
expected to be used or when the restrictions are expected to lapse.
Restricted cash and restricted cash equivalents are comprised of
bank deposits and money market funds.
Inventories. Inventories include materials and supplies, mill and
leach stockpiles, and product inventories. Inventories are stated at
the lower of weighted-average cost or net realizable value (NRV).
Mill and Leach Stockpiles. Mill and leach stockpiles are
work-in-process inventories for FCX’s mining operations. Mill and
leach stockpiles contain ore that has been extracted from an ore
body and is available for metal recovery. Mill stockpiles contain
sulfide ores, and recovery of metal is through milling, concentrating
and smelting and refining or, alternatively, by concentrate leaching.
Leach stockpiles contain oxide ores and certain secondary
sulfide ores and recovery of metal is through exposure to acidic
solutions that dissolve contained copper and deliver it in solution
to extraction processing facilities (i.e., solution extraction and
electrowinning (SX/EW)). The recorded cost of mill and leach
stockpiles includes mining and haulage costs incurred to deliver
ore to stockpiles, depreciation, depletion, amortization and site
overhead costs. Material is removed from the stockpiles at a
weighted-average cost per pound.
Because it is impracticable to determine copper contained in
mill and leach stockpiles by physical count, reasonable estimation
methods are employed. The quantity of material delivered to mill
and leach stockpiles is based on surveyed volumes of mined
material and daily production records. Sampling and assaying of
blasthole cuttings determine the estimated copper grade of the
material delivered to mill and leach stockpiles.
73 2 0 2 1 A n n u a l R ep o r t
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
Expected copper recoveries for mill stockpiles are determined
Property, Plant, Equipment and Mine Development Costs.
by metallurgical testing. The recoverable copper in mill stockpiles,
Property, plant, equipment and mine development costs are
once entered into the production process, can be produced into
carried at cost. Mineral exploration costs, as well as drilling and
copper concentrate almost immediately.
other costs incurred for the purpose of converting mineral
Expected copper recoveries for leach stockpiles are determined
resources to proven and probable mineral reserves or identifying
using small-scale laboratory tests, small- to large-scale column
new mineral resources at development or production stage
testing (which simulates the production process), historical trends
properties, are charged to expense as incurred. Development costs
and other factors, including mineralogy of the ore and rock type.
are capitalized beginning after proven and probable mineral
Total copper recovery in leach stockpiles can vary significantly from
reserves have been established. Development costs include costs
a low percentage to more than 90 percent depending on several
incurred resulting from mine pre-production activities undertaken
variables, including processing methodology, processing variables,
to gain access to proven and probable mineral reserves, including
mineralogy and particle size of the rock. For newly placed material
shafts, adits, drifts, ramps, permanent excavations, infrastructure
on active stockpiles, as much as 80 percent of the total copper
and removal of overburden. For underground mines certain costs
recovery may occur during the first year, and the remaining copper
related to panel development, such as undercutting and drawpoint
may be recovered over many years.
development, are also capitalized as mine development costs until
Process rates and copper recoveries for mill and leach stockpiles
production reaches sustained design capacity for the mine. After
are monitored regularly, and recovery estimates are adjusted
reaching design capacity, the mine transitions to the production
periodically as additional information becomes available and as
phase and panel development costs are allocated to inventory and
related technology changes. Recovery adjustments will typically
then included as a component of cost of goods sold. Additionally,
result in a future impact to the value of the material removed from
interest expense allocable to the cost of developing mining
the stockpiles at a revised weighted-average cost per pound of
properties and to constructing new facilities is capitalized until
recoverable copper.
assets are ready for their intended use.
Product. Product inventories include raw materials, work-in-
Expenditures for replacements and improvements are
process and finished goods. Corporate general and administrative
capitalized. Costs related to periodic scheduled maintenance (i.e.,
costs are not included in inventory costs.
turnarounds) are charged to expense as incurred. Depreciation
Raw materials are primarily unprocessed concentrate at Atlantic
for mining and milling life-of-mine assets, infrastructure and other
Copper’s smelting and refining operations.
common costs is determined using the unit-of-production (UOP)
Work-in-process inventories are primarily copper concentrate at
method based on total estimated recoverable proven and probable
various stages of conversion into anode and cathode at Atlantic
copper reserves (for primary copper mines) and proven and
Copper’s operations. Atlantic Copper’s in-process inventories are
probable molybdenum reserves (for primary molybdenum mines).
valued at the weighted-average cost of the material fed to the
Development costs and acquisition costs for proven and probable
smelting and refining process plus in-process conversion costs.
mineral reserves that relate to a specific ore body are depreciated
Finished goods for mining operations represent salable
using the UOP method based on estimated recoverable proven and
products (e.g., copper and molybdenum concentrate, copper
probable mineral reserves for the ore body benefited. Depreciation,
anode, copper cathode, copper rod, molybdenum oxide, and
depletion and amortization using the UOP method is recorded
high-purity molybdenum chemicals and other metallurgical
upon extraction of the recoverable copper or molybdenum from the
products). Finished goods are valued based on the weighted-
ore body or production of finished goods (as applicable), at which
average cost of source material plus applicable conversion costs
time it is allocated to inventory cost and then included as a
relating to associated process facilities. Costs of finished goods
component of cost of goods sold. Other assets are depreciated
and work-in-process (i.e., not raw materials) inventories include
on a straight-line basis over estimated useful lives for the related
labor and benefits, supplies, energy, depreciation, depletion,
assets of up to 50 years for buildings and 3 to 50 years for
amortization, site overhead costs and other necessary costs
machinery and equipment, and mobile equipment.
associated with the extraction and processing of ore, such as
Included in property, plant, equipment and mine development
mining, milling, smelting, leaching, SX/EW, refining, roasting and
costs is value beyond proven and probable mineral reserves
chemical processing.
(VBPP), primarily resulting from FCX’s acquisition of FMC in 2007.
The concept of VBPP may be interpreted differently by different
mining companies. FCX’s VBPP is attributable to (i) measured and
74 Fre e por t-McMoR an
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
indicated mineral resources that FCX believes could be brought
outside the current mining area for future production that are
into production with the establishment or modification of required
considered to be pre-production mine development, are capitalized
permits and should market conditions and technical assessments
and amortized using the UOP method based on estimated
warrant, (ii) inferred mineral resources and (iii) exploration potential.
recoverable proven and probable mineral reserves for the ore body
Carrying amounts assigned to VBPP are not charged to expense
benefited. However, where a second or subsequent pit or major
until the VBPP becomes associated with additional proven and
expansion is considered to be a continuation of existing mining
probable mineral reserves and the reserves are produced or the
activities, stripping costs are accounted for as a current production
VBPP is determined to be impaired. Additions to proven and
cost and a component of the associated inventory.
probable mineral reserves for properties with VBPP will carry with
Environmental Obligations. Environmental expenditures are
them the value assigned to VBPP at the date acquired, less any
charged to expense or capitalized, depending upon their future
impairment amounts. Refer to Note 5 for further discussion.
economic benefits. Accruals for such expenditures are recorded
Impairment of Long-Lived Mining Assets. FCX assesses the
when it is probable that obligations have been incurred and the
carrying values of its long-lived mining assets for impairment when
costs can be reasonably estimated. Environmental obligations
events or changes in circumstances indicate that the related
attributed to the Comprehensive Environmental Response,
carrying amounts of such assets may not be recoverable. In
Compensation, and Liability Act of 1980 (CERCLA) or analogous
evaluating long-lived mining assets for recoverability, estimates of
state programs are considered probable when a claim is asserted,
pre-tax undiscounted future cash flows of FCX’s individual mines
or is probable of assertion, and FCX, or any of its subsidiaries, have
are used. An impairment is considered to exist if total estimated
been associated with the site. Other environmental remediation
undiscounted future cash flows are less than the carrying amount
obligations are considered probable based on specific facts and
of the asset. Once it is determined that an impairment exists, an
circumstances. FCX’s estimates of these costs are based on an
impairment loss is measured as the amount by which the asset
evaluation of various factors, including currently available facts,
carrying value exceeds its fair value. The estimated undiscounted
existing technology, presently enacted laws and regulations,
cash flows used to assess recoverability of long-lived assets and
remediation experience, whether or not FCX is a potentially
to measure the fair value of FCX’s mining operations are derived
responsible party (PRP) and the ability of other PRPs to pay their
from current business plans, which are developed using near-term
allocated portions. With the exception of those obligations
price forecasts reflective of the current price environment and
assumed in the acquisition of FMC that were initially recorded at
management’s projections for long-term average metal prices. In
estimated fair values (refer to Note 12 for further discussion),
addition to near- and long-term metal price assumptions, other key
environmental obligations are recorded on an undiscounted basis.
assumptions include estimates of commodity-based and other
Where the available information is sufficient to estimate the
input costs; proven and probable mineral reserves estimates,
amount of the obligation, that estimate has been used. Where the
including the timing and cost to develop and produce the reserves;
information is only sufficient to establish a range of probable
VBPP estimates; and the use of appropriate discount rates in the
liability and no point within the range is more likely than any other,
measurement of fair value. FCX believes its estimates and models
the lower end of the range has been used. Possible recoveries of
used to determine fair value are similar to what a market
some of these costs from other parties are not recognized in the
participant would use. As quoted market prices are unavailable for
consolidated financial statements until they become probable.
FCX’s individual mining operations, fair value is determined
Legal costs associated with environmental remediation (such as
through the use of after-tax discounted estimated future cash flows
fees to third-party legal firms for work relating to determining the
(i.e., Level 3 measurement).
extent and type of remedial actions and the allocation of costs
Deferred Mining Costs. Stripping costs (i.e., the costs of
among PRPs) are included as part of the estimated obligation.
removing overburden and waste material to access mineral
Environmental obligations assumed in the acquisition of FMC,
deposits) incurred during the production phase of an open-pit mine
which were initially recorded at fair value and estimated on a
are considered variable production costs and are included
discounted basis, are accreted to full value over time through charges
as a component of inventory produced during the period in which
to interest expense. Adjustments arising from changes in amounts
stripping costs are incurred. Major development expenditures,
and timing of estimated costs and settlements may result in
including stripping costs to prepare unique and identifiable areas
increases and decreases in these obligations and are calculated in
the same manner as they were initially estimated. Unless these
adjustments qualify for capitalization, changes in environmental
obligations are charged to operating income when they occur.
75 2 0 2 1 A n n u a l R ep o r t
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
FCX performs a comprehensive review of its environmental
FCX’s product revenues are also recorded net of treatment
obligations annually and also reviews changes in facts and
charges, royalties and export duties. Moreover, because a portion
circumstances associated with these obligations at least quarterly.
of the metals contained in copper concentrate is unrecoverable as
Asset Retirement Obligations. FCX records the fair value of
a result of the smelting process, FCX’s revenues from concentrate
estimated asset retirement obligations (AROs) associated with
sales are also recorded net of allowances based on the quantity
tangible long-lived assets in the period incurred. AROs associated
and value of these unrecoverable metals. These allowances are a
with long-lived assets are those for which there is a legal obligation to
negotiated term of FCX’s contracts and vary by customer.
settle under existing or enacted law, statute, written or oral contract
Treatment and refining charges represent payments or price
or by legal construction. These obligations, which are initially
adjustments to smelters and refiners that are generally fixed. Refer
estimated based on discounted cash flow estimates, are accreted
to Note 16 for a summary of revenue by product type.
to full value over time through charges to cost of sales. In addition,
Gold sales are priced according to individual contract terms,
asset retirement costs (ARCs) are capitalized as part of the
generally the average London PM gold price for a specified month
related asset’s carrying value and are depreciated over the asset’s
near the month of shipment.
useful life.
The majority of FCX’s molybdenum sales are priced based on
For mining operations, reclamation costs for disturbances are
the average published Metals Week price, plus conversion
recognized as an ARO and as a related ARC in the period of the
premiums for products that undergo additional processing, such
disturbance and depreciated primarily on a UOP basis. FCX’s
as ferromolybdenum and molybdenum chemical products, for the
AROs for mining operations consist primarily of costs associated
month prior to the month of shipment.
with mine reclamation and closure activities. These activities,
Stock-Based Compensation. Compensation costs for share-
which are site specific, generally include costs for earthwork,
based payments to employees are measured at fair value and
revegetation, water treatment and demolition.
charged to expense over the requisite service period for awards that
For non-operating properties without reserves, changes to the
are expected to vest. The fair value of stock options is determined
ARO are recorded in earnings.
using the Black-Scholes-Merton option valuation model. The fair
At least annually, FCX reviews its ARO estimates for changes in
value for stock-settled restricted stock units (RSUs) is based on
the projected timing of certain reclamation and closure/restoration
FCX’s stock price on the date of grant. Shares of common stock are
costs, changes in cost estimates and additional AROs incurred
issued at the vesting date for stock-settled RSUs. The fair value of
during the period. Refer to Note 12 for further discussion.
performance share units (PSUs) is determined using FCX’s stock
Revenue Recognition. FCX recognizes revenue for its products
price and a Monte-Carlo simulation model. The fair value for
upon transfer of control in an amount that reflects the
liability-classified awards (i.e., cash-settled RSUs) is remeasured
consideration it expects to receive in exchange for those products.
each reporting period using FCX’s stock price. FCX has elected to
Transfer of control is in accordance with the terms of customer
recognize compensation costs for stock option awards that vest
contracts, which is generally upon shipment or delivery of the
over several years on a straight-line basis over the vesting period,
product. While payment terms vary by contract, terms generally
and for RSUs on the graded-vesting method over the vesting
include payment to be made within 30 days, but not longer than
period. Refer to Note 10 for further discussion.
60 days. Certain of FCX’s concentrate and cathode sales contracts
Earnings Per Share. FCX calculates its basic net income (loss)
also provide for provisional pricing, which is accounted for as
per share of common stock under the two-class method and
an embedded derivative (refer to Note 14 for further discussion).
calculates its diluted net income (loss) per share of common stock
For provisionally priced sales, 90 percent to 100 percent of the
using the more dilutive of the two-class method or the treasury-
provisional invoice amount is collected upon shipment or within
stock method. Basic net income (loss) per share of common stock
20 days, and final balances are settled in a contractually specified
was computed by dividing net income (loss) attributable to common
future month (generally one to four months from the shipment
stockholders (after deducting accumulated dividends and
date) based on quoted monthly average copper settlement prices
undistributed earnings to participating securities) by the weighted-
on the London Metal Exchange (LME) or the Commodity
average shares of common stock outstanding during the year.
Exchange Inc. (COMEX), and quoted monthly average London
Diluted net income (loss) per share of common stock was calculated
Bullion Market Association (London) PM gold prices.
by including the basic weighted-average shares of common stock
outstanding adjusted for the effects of all potential dilutive shares of
common stock, unless their effect would be anti-dilutive.
76 Fre e por t-McMoR an
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
Reconciliations of net income (loss) and weighted-average
basic and diluted net income (loss) per share for the years ended
shares of common stock outstanding for purposes of calculating
December 31 follow:
Net income (loss) from continuing operations
Net income from continuing operations attributable to noncontrolling interests
Accumulated dividends and undistributed earnings allocated to participating securities
Net income (loss) from continuing operations attributable to common stockholders
Net income from discontinued operations
Net income (loss) attributable to common stockholders
Basic weighted-average shares of common stock outstanding (millions)
Add shares issuable upon exercise or vesting of dilutive stock options and RSUs (millions)
Diluted weighted-average shares of common stock outstanding (millions)
Basic net income (loss) per share attributable to common stockholders:
Continuing operations
Discontinued operations
Diluted net income (loss) per share attributable to common stockholders:
Continuing operations
Discontinued operations
2021
$ 5,365
(1,059)
(7)
4,299
—
$ 4,299
1,466
16
1,482
$ 2.93
—
$ 2.93
$ 2.90
—
$ 2.90
2020
$ 865
(266)
(3)
596
—
$ 596
1,453
8
1,461
$ 0.41
—
$ 0.41
$ 0.41
—
$ 0.41
2019
$ (192)
(50)
(3)
(245)
3
$ (242)
1,451
—a
1,451
$ (0.17)
—
$ (0.17)
$ (0.17)
—
$ (0.17)
a. Excludes approximately 11 million shares of common stock in 2019 associated with outstanding stock options with exercise prices less than the average market price of FCX’s common stock and RSUs that
were anti-dilutive.
Outstanding stock options with exercise prices greater than the
consisting of cash consideration of $173 million and 7 percent of
average market price of FCX’s common stock during the year are
Jervois common stock (valued at $35 million at the time of
excluded from the computation of diluted net income (loss) per
closing). At closing, Freeport Cobalt’s assets included cash of
share of common stock. Stock options for 5 million shares of common
approximately $20 million and other net assets of $125 million. FCX
stock in 2021, 31 million shares in 2020 and 42 million shares in
recorded a gain of $60 million ($34 million to net income attributable
2019 were excluded.
to common stock) in 2021 associated with this transaction. In
Global Intangible Low-Taxed Income (GILTI). FCX has elected
addition, KCHL will have the right to receive contingent consideration
to treat taxes due on future U.S. inclusions in taxable income related
of up to $40 million based on the future performance of Freeport
to GILTI as a current period expense when incurred.
Cobalt. Any gain related to the contingent consideration will be
Reclassifications. For comparative purposes, certain prior year
recognized when received.
amounts have been reclassified to other, net on FCX’s consolidated
In fourth-quarter 2019, FCX completed the sale of its cobalt
statements of cash flows to conform with the current year
refinery in Kokkola, Finland, and related cobalt cathode precursor
presentation. Additionally, FCX has revised prior year amounts
business (consisting of approximately $271 million of assets and
related to activities associated with its reserve for unrecognized
$63 million of liabilities at the time of closing) to Umicore for total
tax benefits in conjunction with uncertain tax positions. See
cash consideration of approximately $200 million, including
Note 11 for further detail.
approximately $50 million of working capital. FCX recorded a gain of
Subsequent Events. FCX evaluated events after December 31,
$59 million in 2019 ($33 million to net loss attributable to common
2021, and through the date the financial statements were issued,
stock) associated with this transaction.
and determined any events or transactions occurring during
Following these transactions, FCX no longer has cobalt operations.
this period that would require recognition or disclosure are
PT Smelting. On April 30, 2021, PT-FI acquired 14.5 percent
appropriately addressed in these financial statements.
of the outstanding common stock of PT Smelting, a smelter and
NOTE 2. ACQUISITIONS AND DISPOSITIONS
refinery in Gresik, Indonesia, for $33 million, increasing its ownership
interest from 25.0 percent to 39.5 percent. The remaining outstanding
Cobalt Business. In September 2021, FCX’s 56-percent-owned
shares of PT Smelting continue to be owned by Mitsubishi Materials
subsidiary, Koboltti Chemicals Holdings Limited (KCHL),
Corporation. PT-FI has continued to account for its investment in
completed the sale of its remaining cobalt business based
PT Smelting using the equity method since it does not have control
in Kokkola, Finland (Freeport Cobalt) to Jervois Global Limited
over PT Smelting.
(Jervois) for $208 million (before post-closing adjustments),
77 2 0 2 1 A n n u a l R e p o r t
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
On November 30, 2021, PT-FI entered into a convertible loan
TF Holdings Limited—Discontinued Operations. In 2016, FCX
agreement to fund the expansion of PT Smelting’s current capacity
completed the sale of its 70 percent interest in TF Holdings
by 30 percent to 1.3 million metric tons of concentrate per year.
Limited (TFHL) to CMOC for $2.65 billion in cash (before closing
Upon completion of the expansion project, targeted for year-end
adjustments) and contingent consideration of up to $120 million
2023, PT-FI’s loan will convert into PT Smelting equity resulting in
in cash, consisting of $60 million if the average copper price
a majority ownership interest and consolidation of PT Smelting in
exceeded $3.50 per pound and $60 million if the average cobalt
FCX’s consolidated financial statements.
price exceeded $20 per pound, both during the 24-month period
Kisanfu Transaction. In December 2020, FCX completed the
ending December 31, 2019.
sale of its interests in the Kisanfu undeveloped project to a wholly
The contingent consideration was considered a derivative, and
owned subsidiary of China Molybdenum Co., Ltd. (CMOC) for
the fair value was adjusted through December 31, 2019. FCX
$550 million, with after-tax net cash proceeds totaling $415 million.
realized and collected in January 2020 contingent consideration of
The Kisanfu project, located in the Democratic Republic of Congo,
$60 million because the average cobalt price exceeded $20 per
is an undeveloped cobalt and copper resource. FCX did not have any
pound during the 24-month period ending December 31, 2019 (no
proven and probable mineral reserves associated with the Kisanfu
amount was realized associated with the copper price). Gains
project. FCX recorded a gain of $486 million in 2020 associated with
resulting from changes in the fair value of the contingent
this transaction.
consideration derivative totaling $3 million in 2019 were included in
Timok Transaction. In 2016, FCX sold an interest in the upper
net income from discontinued operations and primarily resulted
zone of the Timok exploration project in Serbia (the 2016 Transaction).
from fluctuations in cobalt prices. In accordance with accounting
In December 2019, FCX completed the sale of its interest in
guidance, FCX reported the results from TFHL as discontinued
the lower zone of the Timok exploration project to an affiliate of the
operations in the consolidated statements of operations because
purchaser in the 2016 Transaction, for cash consideration of
the disposal represented a strategic shift that had a major effect
$240 million at closing plus the right to future contingent payments
on operations.
of up to $150 million. These future contingent payments will be
based on the future sale of products (as defined in the agreement)
from the Timok lower zone. For a period of 12 months after the
third anniversary of the initial sale of products from the Timok
NOTE 3. OWNERSHIP IN SUBSIDIARIES
AND JOINT VENTURE
Ownership in Subsidiaries. FMC produces copper and molybdenum
lower zone, the purchaser can settle, or FCX can demand payment
from mines in North America and South America. At December 31,
of, such deferred payment obligation, in each case, for a total of
2021, FMC’s operating mines in North America were Morenci,
$60 million. As these deferred payments are contingent upon future
Bagdad, Safford (including Lone Star), Sierrita and Miami located in
production (the Timok lower zone project is still pre-operational) and
Arizona; Tyrone and Chino located in New Mexico; and Henderson
would result in gain recognition, no amounts were recorded upon
and Climax located in Colorado. FMC has a 72 percent interest
the closing of the transaction. Subsequent recognition will be
in Morenci (refer to “Joint Venture—Sumitomo and SMM Morenci,
based on the gain contingency model, in which the consideration
Inc.”) and owns 100 percent of the other North America mines.
would be recorded in the period in which all contingencies are
At December 31, 2021, operating mines in South America were
resolved and the gain is realized. This is expected to be when FCX
Cerro Verde (53.56 percent owned) located in Peru and El Abra
(i) is provided periodic product sales information by the purchaser
(51 percent owned) located in Chile. At December 31, 2021, FMC’s
or (ii) gives notice to the purchaser or receives notice from the
net assets totaled $18.4 billion and its accumulated deficit totaled
purchaser regarding the settlement of the deferred payments for
$12.6 billion. FCX had $111 million in loans to FMC outstanding at
$60 million.
December 31, 2021.
In addition, in lieu of payment upon achievement of defined
FCX owns 48.76 percent of PT-FI (refer to “PT-FI Divestment”).
development milestones provided for in the 2016 Transaction, the
At December 31, 2021, PT-FI’s net assets totaled $12.7 billion and its
purchaser agreed to pay $107 million in three installment payments
retained earnings totaled $8.4 billion. FCX had no loans to PT-FI
of $45 million (collected in 2020), $50 million (collected in 2021),
outstanding at December 31, 2021.
and $12 million by March 31, 2022. As a result of this transaction, FCX
FCX owns 100 percent of the outstanding Atlantic Copper
recorded a gain of $343 million in 2019, consisting of the cash
(FCX’s wholly owned smelting and refining unit in Spain) common
consideration ($240 million) and the aggregate discounted amount
stock. At December 31, 2021, Atlantic Copper’s net assets totaled
of the three installment payments ($103 million).
$167 million and its accumulated deficit totaled $379 million.
FCX had $274 million in loans to Atlantic Copper outstanding at
December 31, 2021.
78 Fre epor t -McMoR an
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
PT-FI Divestment. On December 21, 2018, FCX completed the
agreement, as previously discussed. The economics replacement
transaction with the Indonesia government regarding PT-FI’s
agreement entitles FCX to approximately 81 percent of PT-FI
long-term mining rights and share ownership (the 2018
dividends paid during the Initial Period, with the remaining 19 percent
transaction). Pursuant to the divestment agreement and related
paid to the noncontrolling interests. PT-FI paid dividends totaling
documents, PT Indonesia Asahan Aluminium (Persero) (PT Inalum,
$1.3 billion during 2021, of which $1.0 billion was paid to FCX.
also known as MIND ID), an Indonesia state-owned enterprise,
No other dividends have been paid by PT-FI during the Initial Period.
acquired all of Rio Tinto plc’s (Rio Tinto) interests associated with
PT-FI’s net income for 2021 totaled $2.4 billion, of which $2.0 billion
its joint venture with PT-FI (the former Rio Tinto Joint Venture) and
was attributed to FCX, and $765 million for 2020, of which $621 million
100 percent of FCX’s interests in PT Indonesia Papua Metal Dan
was attributed to FCX. PT-FI’s net loss for 2019 totaled $203 million,
Mineral (PTI—formerly known as PT Indocopper Investama).
of which $165 million was attributed to FCX. PT-FI’s cumulative net
In connection with the 2018 transaction, PT-FI acquired all of the
income from December 21, 2018, through December 31, 2021, totaled
common stock of PT Rio Tinto Indonesia that held the former Rio
$2.9 billion, of which $2.3 billion was attributed to FCX.
Tinto Joint Venture interest. After the transaction, PT Inalum’s
The above-described attribution of PT-FI’s net income or loss
(26.24 percent) and PTI’s (25.00 percent) collective share
applies only through the Initial Period. Beginning January 1, 2023,
ownership of PT-FI totals 51.24 percent and FCX’s share ownership
the attribution of PT-FI’s net income or loss will be based on equity
totals 48.76 percent. The arrangements provide for FCX and the
ownership percentages (48.76 percent for FCX, 26.24 percent for
other pre-transaction PT-FI shareholders (i.e., PT Inalum and PTI)
PT Inalum and 25.00 percent for PTI).
to retain the economics of the revenue and cost sharing
For all of its other partially owned consolidated subsidiaries,
arrangements under the former Rio Tinto Joint Venture. As a result,
FCX attributes net income or loss based on equity ownership
FCX’s economic interest in PT-FI is expected to approximate
percentages.
81 percent through 2022 and 48.76 percent thereafter (see further
Joint Venture. Sumitomo and SMM Morenci, Inc. FMC owns
discussion below).
a 72 percent undivided interest in Morenci via an unincorporated
FCX, PT-FI, PTI and PT Inalum entered into a shareholders
joint venture. The remaining 28 percent is owned by Sumitomo
agreement (the PT-FI Shareholders Agreement), which includes
(15 percent) and SMM Morenci, Inc. (13 percent). Each partner
provisions related to the governance and management of PT-FI.
takes in kind its share of Morenci’s production. FMC purchased
FCX considered the terms of the PT-FI Shareholders Agreement and
82 million pounds of Morenci’s copper cathode from Sumitomo
related governance structure, including whether PT Inalum has
and SMM Morenci, Inc. at market prices for $349 million during
substantive participating rights, and concluded that it has retained
2021. FMC had receivables from Sumitomo and SMM Morenci, Inc.
control and would continue to consolidate PT-FI in its financial
totaling $20 million at December 31, 2021, and $15 million at
statements following the 2018 transaction. Among other terms,
December 31, 2020.
the governance arrangements under the PT-FI Shareholders
Agreement transfers control over the management of PT-FI’s
mining operations to an operating committee, which is controlled
NOTE 4. INVENTORIES, INCLUDING
LONG-TERM MILL AND LEACH STOCKPILES
by FCX. Additionally, as discussed above, the existing PT-FI
The components of inventories follow:
shareholders will retain the economics of the revenue and cost
December 31,
2021
2020
sharing arrangements under the former Rio Tinto Joint Venture,
so that FCX’s economic interest in the project through 2041 will
not be significantly affected by the transaction. FCX believes its
conclusion to continue to consolidate PT-FI in its financial
Current inventories:
Total materials and supplies, neta
Mill stockpiles
Leach stockpiles
statements is in accordance with the U.S. Securities and Exchange
Total current mill and leach stockpiles
Commission (SEC) Regulation S-X, Rule 3A-02 (a), which provides
for situations in which consolidation of an entity, notwithstanding
the lack of majority ownership, is necessary to present fairly the
financial position and results of operations of the registrant,
because of the existence of a parent-subsidiary relationship by
means other than record ownership of voting stock.
Raw materials (primarily concentrate)
Work-in-process
Finished goods
Total product
Long-term inventories:
Mill stockpiles
Leach stockpiles
Attribution of PT-FI Net Income or Loss. FCX has concluded that
Total long-term mill and leach stockpilesb
$ 1,669
$ 193
977
$ 1,170
$ 536
195
927
$ 1,658
$ 226
1,161
$ 1,387
$ 1,594
$ 205
809
$ 1,014
$ 366
174
745
$ 1,285
$ 223
1,240
$ 1,463
the attribution of PT-FI’s net income or loss from December 21, 2018
a. Materials and supplies inventory was net of obsolescence reserves totaling $36 million at
(the date of the divestment transaction), through December 31, 2022
December 31, 2021, and $32 million at December 31, 2020.
(the Initial Period), should be based on the economics replacement
b. Estimated metals in stockpiles not expected to be recovered within the next 12 months.
79 2 0 2 1 A n n u a l R ep o r t
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
FCX recorded NRV inventory adjustments to decrease metals
NOTE 6. OTHER ASSETS
inventory carrying values totaling $16 million in 2021, primarily
associated with stockpiles no longer expected to be leached;
$96 million in 2020, associated with lower market prices for copper
($58 million) and molybdenum ($38 million); and $179 million in
2019, associated with lower market prices for molybdenum
($84 million), cobalt ($58 million) and copper ($37 million). Refer to
Note 16 for metals inventory adjustments by business segment.
FCX’s Morenci mine has experienced improved recoveries at
certain of its leach stockpiles and following an analysis of column
testing results, Morenci concluded it had sufficient evidence to
increase its estimated recoveries for certain of its leach stockpiles
effective July 1, 2021. As a result of the revised recoveries, Morenci
increased its estimated recoverable copper in leach stockpiles,
net to its joint venture interest, by 191 million pounds. The effect of
this change in estimate reduced site production and delivery costs
and increased net income by $112 million ($0.08 per share) in 2021.
NOTE 5. PROPERTY, PLANT, EQUIPMENT
AND MINE DEVELOPMENT COSTS, NET
The components of net property, plant, equipment and mine
development costs follow:
December 31,
Proven and probable mineral reserves
VBPP
Mine development and other
Buildings and infrastructure
Machinery and equipment
Mobile equipment
Construction in progress
Oil and gas properties
Total
Accumulated depreciation, depletion and amortizationa
Property, plant, equipment and mine
2021
2020
$ 7,142
376
11,309
9,412
14,399
4,605
2,477
27,298
77,018
(46,673)
$ 7,142
376
10,686
9,214
14,235
4,495
1,454
27,281
74,883
(45,065)
development costs, net
$ 30,345
$ 29,818
a. Includes accumulated amortization for oil and gas properties of $27.3 billion at December 31, 2021
and 2020.
FCX recorded $1.6 billion for VBPP in connection with the FMC
acquisition in 2007 (excluding $634 million associated with mining
operations that were subsequently sold) and transferred $811 million
to proven and probable mineral reserves through 2021 (none in
2021 and less than $0.1 million in 2020). Cumulative impairments of
and adjustments to VBPP total $497 million, which were primarily
recorded in 2008.
Capitalized interest, which primarily related to FCX’s mining
operations’ capital projects, totaled $72 million in 2021, $147 million
in 2020 and $149 million in 2019.
During the three-year period ended December 31, 2021,
no material impairments of FCX’s long-lived mining assets
were recorded.
The components of other assets follow:
December 31,
2021
2020
Intangible assetsa
Legally restricted fundsb
Disputed tax assessments:c
Cerro Verde
PT-FI
Long-term receivable for taxesd
Investments:
Assurance bonde
Fixed income, equity securities and other
PT Smeltingf
Contingent consideration associated with sales of assetsg
Loans to PT Smeltingh
Long-term employee receivables
Other
Total other assets
$ 412
209
237
57
84
132
74
26
70
36
20
103
$ 1,460
$ 401
213
190
143
106
148
70
77
96
—
19
97
$ 1,560
a. Indefinite-lived intangible assets totaled $215 million at December 31, 2021 and 2020. Accumulated
amortization of definite-lived intangible assets totaled $35 million at December 31, 2021, and
$32 million at December 31, 2020.
b. Includes $208 million at December 31, 2021, and $212 million at December 31, 2020, held in trusts for
AROs related to properties in New Mexico (refer to Note 12 for further discussion).
c. Refer to Note 12 for further discussion.
d. Includes tax overpayments and refunds not expected to be realized within the next 12 months.
e. Relates to PT-FI’s commitment for the development of a greenfield smelter in Indonesia (refer to
Note 13 for further discussion).
f. PT-FI’s ownership in PT Smelting is recorded using the equity method. Amounts were reduced by
unrecognized profits on sales from PT-FI to PT Smelting totaling $126 million at December 31, 2021,
and $39 million at December 31, 2020. Trade accounts receivable from PT Smelting totaled $411 million
at December 31, 2021, and $265 million at December 31, 2020.
g. Refer to Note 15 for further discussion.
h. Refer to Note 2 for further discussion.
NOTE 7. ACCOUNTS PAYABLE AND
ACCRUED LIABILITIES
The components of accounts payable and accrued liabilities follow:
December 31,
2021
2020
Accounts payable
Salaries, wages and other compensation
PT-FI contingenciesa
Accrued interestb
Deferred revenue
Pension, postretirement, postemployment and
other employee benefitsc
Accrued taxes, other than income taxes
Leasesd
Litigation accruals
Other
Total accounts payable and accrued liabilities
$ 2,035
334
259
203
191
190
64
38
28
153
$ 3,495
$ 1,473
312
196
243
65
91
76
38
86
128
$ 2,708
a. Refer to Note 12 for further discussion.
b. Third-party interest paid, net of capitalized interest, was $640 million in 2021, $472 million in 2020
and $591 million in 2019.
c. Refer to Note 9 for long-term portion.
d. Refer to Note 13 for further discussion.
80 Fre epor t-McMoR an
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
NOTE 8. DEBT
FCX’s debt at December 31, 2021, included additions of $9 million
($10 million at December 31, 2020) for unamortized fair value
adjustments, and is net of reductions of $86 million ($85 million at
December 31, 2020) for unamortized net discounts and unamortized
debt issuance costs. The components of debt follow:
December 31,
Revolving credit facility
Senior notes and debentures:
Issued by FCX:
3.55% Senior Notes due 2022
3.875% Senior Notes due 2023
4.55% Senior Notes due 2024
5.00% Senior Notes due 2027
4.125% Senior Notes due 2028
4.375% Senior Notes due 2028
5.25% Senior Notes due 2029
4.25% Senior Notes due 2030
4.625% Senior Notes due 2030
5.40% Senior Notes due 2034
5.450% Senior Notes due 2043
Issued by FMC:
7⅛% Debentures due 2027
9½% Senior Notes due 2031
6⅛% Senior Notes due 2034
PT-FI Term Loan
Cerro Verde Term Loan
Other
Total debt
Less current portion of debt
Long-term debt
2021
2020
$ —
$ —
—
995
728
594
693
643
593
593
841
742
1,846
115
123
117
432
325
70
9,450
(372)
$ 9,078
523
994
728
593
691
642
593
592
840
742
1,845
115
124
117
—
523
49
9,711
(34)
$ 9,677
Revolving Credit Facility. At December 31, 2021, FCX had no
borrowings outstanding and $8 million in letters of credit issued
In December 2021, Freeport-McMoRan Oil & Gas LLC, a
100-percent-owned subsidiary of FCX Oil & Gas LLC (FM O&G)
and indirect subsidiary of FCX, was released as co-borrower from
FCX’s revolving credit facility and released as guarantor from all
of the indentures relating to FCX’s outstanding senior notes.
Interest on loans made under the revolving credit facility is,
at the option of FCX, determined based on the adjusted London
Interbank Offered rate (LIBOR) or the alternate base rate (each
as defined in the revolving credit facility) plus a spread to be
determined by reference to FCX’s credit ratings.
Certain of FCX’s debt agreements, including its revolving credit
facility, reference LIBOR which is being phased out and replaced
with alternative reference rates. FCX does not expect the transition
from LIBOR and other interbank offered rates to have a material
impact on its consolidated financial results.
Senior Notes. In December 2021, FCX redeemed all of its
outstanding $524 million aggregate principal amount of 3.55%
Senior Notes due 2022, at a redemption price equal to 100 percent
of the principal amount of the notes outstanding, plus accrued
and unpaid interest.
In July 2020, FCX completed the sale of $650 million of 4.375%
Senior Notes due 2028 and $850 million of 4.625% Senior Notes due
2030 for proceeds, net of underwriting fees, totaling $1.485 billion.
Interest on these senior notes is payable semiannually on February 1
and August 1 of each year. FCX used $1.4 billion of the net proceeds
from this offering to purchase a portion of its outstanding 3.55%
Senior Notes due 2022, 3.875% Senior Notes due 2023 and 4.55%
Senior Notes due 2024, and the payment of accrued and unpaid
interest, premiums, fees and expenses in connection with these
transactions. The remaining net proceeds from this offering were
under its revolving credit facility, resulting in availability of
used for general corporate purposes.
approximately $3.5 billion, of which approximately $1.5 billion could
In March 2020, FCX completed the sale of $700 million of 4.125%
be used for additional letters of credit. Availability under FCX’s
revolving credit facility consists of $3.28 billion maturing April 2024
and $220 million maturing April 2023. For PT-FI, $500 million of
FCX’s revolving credit facility is available.
FCX’s revolving credit facility contains customary affirmative
covenants and representations, and also contains a number of
negative covenants that, among other things, restrict, subject to
certain exceptions, the ability of FCX’s subsidiaries that are not
borrowers or guarantors to incur additional indebtedness
(including guarantee obligations) and FCX’s or its subsidiaries’
abilities to: create liens on assets; enter into sale and leaseback
Senior Notes due 2028 and $600 million of 4.25% Senior Notes due
2030 for proceeds, net of underwriting fees, totaling $1.285 billion.
Interest on these senior notes is payable semiannually on March 1
and September 1 of each year. FCX used a portion of the net
proceeds from this offering to purchase a portion of its 4.00%
Senior Notes due 2021 and its 3.55% Senior Notes due 2022 and
the payment of accrued and unpaid interest, premiums, fees
and expenses in connection with these transactions. In April 2020,
FCX used the remaining net proceeds to fund the make-whole
redemption of all of its remaining 4.00% Senior Notes due 2021 and
the payment of accrued and unpaid interest, premiums, fees and
transactions; engage in mergers, liquidations and dissolutions;
expenses in connection with the transaction.
and sell assets. FCX’s revolving credit facility also contains
financial ratios governing maximum total leverage and minimum
interest expense coverage. At December 31, 2021, FCX was in
compliance with its revolving credit facility covenants.
81 2 0 2 1 A n n u a l R e p o r t
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Listed below are the FCX senior notes, redeemed in full or
PT-FI Credit Facility. In July 2021, PT-FI entered into a
purchased during the three-year period ended December 31, 2021.
$1.0 billion, five-year, unsecured credit facility (consisting of a
Year Ended December 31, 2021
FCX 3.55% Senior Notes due 2022
Year Ended December 31, 2020
FCX 4.00% Senior Notes due 2021
FCX 3.55% Senior Notes due 2022
FCX 3.875% Senior Notes due 2023
FCX 4.55% Senior Notes due 2024
Total
Year Ended December 31, 2019
FCX 3.100% Senior Notes due 2020
FCX 6.875% Senior Notes due 2023
FCX 4.00% Senior Notes due 2021
FCX 3.55% Senior Notes due 2022
Total
Book
Net
Principal
Amount Adjustments Value
Redemption/
Tender
Value
Loss
$ 524
$ —
$ 524
$ 524 $ —
$ 195
1,356
927
120
$ 2,598
$ 1,000
728
405
12
$ 2,145
$ (1) $ 194
1,350
923
119
$ (12) $ 2,586
(6)
(4)
(1)
$ 205 $ 11
41
1,391
41
964
7
126
$ 2,686 $ 100
$ (2) $ 998
762
34
403
(2)
12
—
$ 2,175
$ 30
$ 1,003 $ 5
6
768
15
418
—
12
$ 2,201 $ 26
The senior notes listed below are redeemable in whole or in part,
at the option of FCX, at a make-whole redemption price prior to the
dates stated below, at specified redemption prices beginning on
the dates stated below, and at 100 percent of principal two years
before maturity.
Debt Instrument
5.00% Senior Notes due 2027
4.125% Senior Notes due 2028
4.375% Senior Notes due 2028
5.25% Senior Notes due 2029
4.25% Senior Notes due 2030
4.625% Senior Notes due 2030
Date
September 1, 2022
March 1, 2023
August 1, 2023
September 1, 2024
March 1, 2025
August 1, 2025
The senior notes listed below are redeemable in whole or in part,
at the option of FCX, at a make-whole redemption price prior to the
dates stated below, and beginning on the dates stated below at
100 percent of principal.
Debt Instrument
3.875% Senior Notes due 2023
4.55% Senior Notes due 2024
5.40% Senior Notes due 2034
5.450% Senior Notes due 2043
Date
December 31, 2021.
December 15, 2022
August 14, 2024
May 14, 2034
September 15, 2042
FCX’s senior notes contain limitations on liens and rank equally
with FCX’s other existing and future unsecured and unsubordinated
indebtedness.
$667 million term loan and a $333 million revolving credit facility)
to fund project costs in connection with the PT Smelting
expansion and construction of a precious metals refinery (PMR),
and for PT-FI’s general corporate purposes. The term loan allows
for borrowings up to $667 million within the first three years,
and then amortizes in four installments, with 15 percent of the
outstanding balance due in January 2025, 15 percent due in July 2025,
35 percent due in January 2026 and the remaining 35 percent
due in July 2026. The $333 million revolving credit facility is available
for drawings until June 2026. Amounts drawn under the credit
facility bear interest at LIBOR plus a margin of 1.875% or 2.125%, as
defined by the agreement.
PT-FI’s credit facility contains customary affirmative covenants
and representations and also contains standard covenants that,
among other things, restrict, subject to certain exceptions, the
ability of PT-FI to incur additional indebtedness; create liens on
assets; enter into sale and leaseback transactions; sell assets;
and modify or amend the shareholders agreement or related
governance structure. The credit facility also contains financial
ratios governing maximum total leverage and minimum
interest expense coverage and certain environmental and social
compliance requirements. At December 31, 2021, PT-FI was in
compliance with its credit facility covenants.
As of December 31, 2021, $443 million ($432 million net of debt
issuance costs) was drawn under the PT-FI Term Loan and no
amounts were drawn under the revolving credit facility.
Cerro Verde Term Loan. Repayments of the Cerro Verde
Term Loan totaled $200 million in 2021, $305 million in 2020 and
$200 million in 2019, with the remaining balance of $325 million
due on the maturity date of June 19, 2022. Interest under the Term
Loan is based on LIBOR plus a spread based on Cerro Verde’s
total net debt to EBITDA ratio as defined in the agreement. The
interest rate on Cerro Verde’s Term Loan was 2.00 percent at
Cerro Verde Shareholder Loans. In December 2014, Cerro Verde
entered into loan agreements with three of its shareholders for
borrowings up to $800 million due June 2024. No amounts were
outstanding at December 31, 2021 and 2020, and availability under
these agreements totals $200 million at December 31, 2021.
Maturities. Maturities of debt instruments based on the principal
amounts and terms outstanding at December 31, 2021, total
$372 million in 2022, $997 million in 2023, $735 million in 2024,
$137 million in 2025, $314 million in 2026 and $7.0 billion thereafter.
82 Fre epor t-McMoR an
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
NOTE 9. OTHER LIABILITIES, INCLUDING
EMPLOYEE BENEFITS
The components of other liabilities follow:
December 31,
2021
2020
Pension, postretirement, postemployment and
other employment benefitsa
Leasesb
Provision for tax positions
Litigation accruals
Indemnification of PT Inalumb
Cerro Verde royalty disputec
Other
Total other liabilities
a. Refer to Note 7 for current portion.
b. Refer to Note 13 for further discussion.
c. Refer to Note 12 for further discussion.
$ 845
281
232
131
78
—
116
$ 1,683
$ 1,213
190
261
110
42
376
77
$ 2,269
Pension Plans. Following is a discussion of FCX’s pension plans.
FMC Plans. FMC has U.S. trusteed, non-contributory pension
plans covering some U.S. employees and some employees of its
international subsidiaries hired before 2007. The applicable FMC
plan design determines the manner in which benefits are calculated
for any particular group of employees. Benefits are calculated
based on final average monthly compensation and years of service
or based on a fixed amount for each year of service. Non-bargained
FMC employees hired after December 31, 2006, are not eligible to
participate in the FMC U.S. pension plan. See below for discussion
of a 2020 plan amendment.
FCX’s funding policy for these plans provides that contributions
to pension trusts shall be at least equal to the minimum funding
requirements of the Employee Retirement Income Security Act of
1974, as amended, for U.S. plans; or, in the case of international
plans, the minimum legal requirements that may be applicable in
the various countries. Additional contributions also may be made
from time to time.
FCX’s primary investment objectives for the FMC plan assets
held in a master trust (Master Trust) are to maintain funds
sufficient to pay all benefit and expense obligations when due,
minimize the volatility of the plan’s funded status to the extent
practical, and to maintain prudent levels of risk consistent with the
plan’s investment policy. Historically, FMC plan assets have been
invested in a balanced portfolio of return-seeking assets and
risk-mitigating assets, with the allocation between these
portfolios dependent on the funded status of the plan. During
2021, FCX reallocated essentially all of the portfolio to risk-
mitigating assets with the objective of minimizing funded-status
volatility. The risk-mitigating assets are allocated among multiple
fixed income managers. The current target allocation of the
portfolio is long-duration credit (50 percent); long-duration U.S.
government/credit (20 percent); core fixed income (16 percent);
long-term U.S. Treasury Separate Trading of Registered Interest and
Principal Securities (STRIPS) (13 percent); and cash equivalents
(1 percent).
The expected rate of return on plan assets is evaluated at least
annually, taking into consideration asset allocation, historical and
expected future performance on the types of assets held in the
Master Trust, and the current economic environment. Based on
these factors, FCX expects the pension assets will earn an average
of 3.00 percent per annum beginning January 1, 2022, which was
based on the target asset allocation and long-term capital market
return expectations.
For estimation purposes, FCX assumes the long-term asset mix
for these plans generally will be consistent with the current mix.
Changes in the asset mix could impact the amount of recorded
pension costs, the funded status of the plans and the need for
future cash contributions. A lower-than-expected return on assets
also would decrease plan assets and increase the amount
of recorded pension costs in future years. When calculating the
expected return on plan assets, FCX uses the market value
of assets.
Among the assumptions used to estimate the pension benefit
obligation is a discount rate used to calculate the present value of
expected future benefit payments for service to date. The discount
rate assumption for FCX’s U.S. plans is designed to reflect yields
on high-quality, fixed-income investments for a given duration. The
determination of the discount rate for these plans is based on
expected future benefit payments together with the Mercer Yield
Curve—Above Mean. The Mercer Yield Curve—Above Mean is
constructed from the bonds in the Mercer Pension Discount Curve
that have a yield higher than the regression mean yield curve.
The Mercer Yield Curve—Above Mean consists of spot (i.e., zero
coupon) interest rates at one-half-year increments for each of the
next 30 years and is developed based on pricing and yield
information for high-quality corporate bonds. Changes in the
discount rate are reflected in FCX’s benefit obligation and,
therefore, in future pension costs.
SERP Plan. FCX has an unfunded Supplemental Executive
Retirement Plan (SERP) for its chief executive officer. The SERP
provides for retirement benefits payable in the form of a joint
and survivor annuity, life annuity or an equivalent lump sum. The
participant has elected to receive an equivalent lump sum
payment. The payment will equal a percentage of the participant’s
83 2 0 2 1 A n n u a l R ep o r t
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
highest average compensation for any consecutive three-year
Information on the qualified and non-qualified FCX (FMC and
period during the five years immediately preceding the completion
SERP plans) and PT-FI plans as of December 31 follows:
of 25 years of credited service. The SERP benefit will be reduced
by the value of all benefits from current and former retirement
plans (qualified and nonqualified) sponsored by FCX, by FM Services
Company, FCX’s wholly owned subsidiary, or by any predecessor
employer (including FCX’s former parent company), except for
benefits produced by accounts funded exclusively by deductions
from the participant’s pay.
Change in benefit obligation:
Benefit obligation at beginning
of year
Service cost
Interest cost
PT-FI Plan. PT-FI has a defined benefit pension plan
denominated in Indonesia rupiah covering substantially all of its
Indonesia national employees. PT-FI funds the plan and invests the
assets in accordance with Indonesia pension guidelines. The
pension obligation was valued at an exchange rate of 14,198 rupiah
Actuarial (gains) losses
Plan amendments
Foreign exchange (gains) losses
Curtailment
Benefits and administrative
expenses paid
to one U.S. dollar on December 31, 2021, and 14,034 rupiah to one
Benefit obligation at end of year
U.S. dollar on December 31, 2020. Indonesia labor laws require that
companies provide a minimum severance to employees upon
employment termination based on the reason for termination and
the employee’s years of service. PT-FI’s pension benefit obligation
includes benefits determined in accordance with this law.
PT-FI’s expected rate of return on plan assets is evaluated at least
annually, taking into consideration its long-range estimated return
for the plan based on the asset mix. Based on these factors, PT-FI
expects its pension assets will earn an average of 7.00 percent per
annum beginning January 1, 2022. The discount rate assumption
for PT-FI’s plan is based on the Indonesia Government Security
Yield Curve. Changes in the discount rate are reflected in PT-FI’s
benefit obligation and, therefore, in future pension costs.
Plan Information. FCX uses a measurement date of December 31
for its plans. Information for qualified and non-qualified plans
where the projected benefit obligations and the accumulated
benefit obligations exceed the fair value of plan assets follows:
December 31,
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
2021
2020
$ 2,476
2,476
1,988
$ 2,666
2,664
1,884
FCX
PT-FI
2021
2020
2021
2020
$ 2,722
12
66
(117)
—
(1)
—
$ 2,576
37
77
308
—
1
(154)
$ 238
13
14
(3)
(2)
(3)
—
$ 217
11
14
12
—
(2)
—
(129)
2,553
(123)
2,722
(20)
237
(14)
238
1,946
150
105
(1)
1,677
272
119
1
251
8
4
(3)
254
13
2
(4)
Change in plan assets:
Fair value of plan assets at
beginning of year
Actual return on plan assets
Employer contributionsa
Foreign exchange (losses) gains
Benefits and administrative
expenses paid
(129)
(123)
(20)
(14)
Fair value of plan assets at end
of year
Funded status
2,071
1,946
240
$ (482)
$ (776)
$ 3
Accumulated benefit obligation
$ 2,551
$ 2,719
$ 194
251
$ 13
$ 194
Weighted-average assumptions used
to determine benefit obligations:
Discount rate
Rate of compensation increase
Balance sheet classification of
funded status:
Other assets
Accounts payable and accrued
liabilities
Other liabilities
Total
2.85%
—%
2.50%
—%
6.50%
4.00%
6.25%
4.00%
$
6
$
7
$ 3
$ 13
(4)
(484)
$ (482)
(4)
(779)
$ (776)
—
—
$ 3
—
—
$ 13
a. Employer contributions for 2022 are currently expected to approximate $112 million for the FCX plans
and $1 million for the PT-FI plan (based on a December 31, 2021, exchange rate of 14,198 Indonesia
rupiah to one U.S. dollar), and are subject to change.
In August 2020, the FMC Retirement Plan, the largest FMC plan,
was amended such that, effective September 1, 2020, participants
no longer accrue any additional benefits. As a result, FCX
remeasured its pension assets and benefit obligation as of July 31,
2020. The discount rate and expected long-term rate of return
on the plan assets used for the July 31, 2020, remeasurement were
2.40 percent and 6.25 percent, respectively. The remeasurement
84 Fre e por t-McMoR an
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
and curtailment resulted in the projected benefit obligation
Included in accumulated other comprehensive loss are the
increasing by $184 million and plan assets increasing by $103 million.
following amounts that have not been recognized in net periodic
In addition, FCX recognized a curtailment loss of $4 million in 2020.
pension cost as of December 31:
During 2021, the actuarial gain of $117 million for the FCX pension
plans primarily resulted from the increase in the discount rate from
2.50 percent to 2.85 percent. During 2020, the actuarial loss of
$308 million for the FCX pension plans primarily resulted from the
decrease in the discount rate from 3.40 percent to 2.50 percent,
offset by the FMC Retirement Plan amendment to discontinue
additional benefits.
The weighted-average assumptions used to determine net
periodic benefit cost and the components of net periodic benefit cost
for FCX’s pension plans for the years ended December 31 follow:
Weighted-average assumptions:a
Discount rate
Expected return on plan assets
Rate of compensation increase
Service cost
Interest cost
Expected return on plan assets
Amortization of net actuarial losses
Curtailment loss
Net periodic benefit cost
2021
2020
2019
2.50%
5.25%
—%
2.98%
6.25%
3.25%
4.40%
6.50%
3.25%
$ 12
66
(98)
25
—
5
$
$ 37
77
(105)
45
4
$ 58
$ 42
95
(90)
48
—
$ 95
a. The assumptions shown relate only to the FMC Retirement Plan.
The weighted-average assumptions used to determine net periodic
benefit cost and the components of net periodic benefit cost
for PT-FI’s pension plan for the years ended December 31 follow:
Weighted-average assumptions:
Discount rate
Expected return on plan assets
Rate of compensation increase
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Amortization of net actuarial gains
Net periodic benefit cost
2021
2020
2019
6.25%
7.75%
4.00%
7.25%
7.75%
4.00%
8.25%
8.25%
4.00%
$ 13
14
(19)
1
(1)
$ 8
$ 11
14
(19)
2
(3)
$ 5
$ 12
17
(17)
1
(1)
$ 12
The service cost component of net periodic benefit cost is included
in operating income, and the other components are included
in other (expense) income, net in the consolidated statements
of operations.
Net actuarial losses
Prior service costs
2021
After Taxes and
Before Noncontrolling
Taxes
Interests
2020
After Taxes and
Before Noncontrolling
Taxes
Interests
$ 488
2
$ 490
$ 369
—
$ 369
$ 673
6
$ 679
$ 558
1
$ 559
Plan assets are classified within a fair value hierarchy that
prioritizes the inputs to valuation techniques used to measure fair
value. The hierarchy gives the highest priority to unadjusted
quoted prices in active markets for identical assets or liabilities
(Level 1), then to prices derived using significant observable inputs
(Level 2) and the lowest priority to prices derived using significant
unobservable inputs (Level 3).
A summary of the fair value for pension plan assets, including
those measured at net asset value (NAV) as a practical expedient,
associated with the FCX plans follows:
Fair Value at December 31, 2021
Total
NAV
Level 1 Level 2 Level 3
Commingled/collective funds:
Fixed income securities
Real estate property
Short-term investments
Fixed income:
Corporate bonds
Government bonds
Private equity investments
Other investments
Total investments
Cash and receivables
Payables
Total pension plan net assets
$ 522
72
38
911
437
11
74
2,065
18
(12)
$ 2,071
$ 522
72
38
—
—
11
—
$ 643
$ —
—
—
—
—
—
1
$ 1
$ —
—
—
911
437
—
73
$ 1,421
$ —
—
—
—
—
—
—
$ —
Fair Value at December 31, 2020
Total
NAV
Level 1 Level 2 Level 3
$ 527
404
76
59
51
51
25
Commingled/collective funds:
Global equity
Fixed income securities
International small-cap equity
Real estate property
U.S. real estate securities
Short-term investments
U.S. small-cap equity
Fixed income:
381
Corporate bonds
Government bonds
181
Global large-cap equity securities 109
10
Private equity investments
55
Other investments
1,929
Total investments
$ 527
404
76
59
51
51
25
—
—
—
10
—
$ 1,203
$ —
—
—
—
—
—
—
—
—
109
—
1
$ 110
$ —
—
—
—
—
—
—
381
181
—
—
54
$ 616
$ —
—
—
—
—
—
—
—
—
—
—
—
$ —
Cash and receivables
Payables
Total pension plan net assets
100
(83)
$ 1,946
85 2 0 2 1 A n n u a l R ep o r t
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
Following is a description of the pension plan asset categories and
the valuation techniques used to measure fair value. There have
been no changes to the techniques used to measure fair value.
Commingled/collective funds are managed by several fund
managers and are valued at the NAV per unit of the fund. For most
of these funds, the majority of the underlying assets are actively
traded securities. These funds (except the real estate property
fund) primarily require up to a two-business-day notice for
redemptions. The real estate property fund is valued at NAV using
information from independent appraisal firms, who have
Fair Value at December 31, 2020
Level 1 Level 2
Level 3
Total
Government bonds
Common stocks
Mutual funds
Total investments
Cash and receivablesa
Payables
Total pension plan net assets
$ 117
77
18
212
41
(2)
$ 251
a. Cash consists primarily of short-term time deposits.
$ 117
77
18
$ 212
$ —
—
—
$ —
$ —
—
—
$ —
knowledge and expertise about the current market values of real
Following is a description of the valuation techniques used for
property in the same vicinity as the investments. Redemptions
pension plan assets measured at fair value associated with the
of the real estate property fund are allowed once per quarter (with
PT-FI plan. There have been no changes to the techniques used
a 30-calendar-day notice), subject to available cash.
to measure fair value.
Fixed income investments include government and corporate
Government bonds, common stocks and mutual funds are
bonds held directly by the Master Trust. Fixed income securities are
valued at the closing price reported on the active market on which
valued using a bid-evaluation price or a mid-evaluation price and,
the individual securities are traded and, as such, are classified
as such, are classified within Level 2 of the fair value hierarchy.
within Level 1 of the fair value hierarchy.
A bid-evaluation price is an estimated price at which a dealer
The techniques described above may produce a fair value
would pay for a security. A mid-evaluation price is the average of
calculation that may not be indicative of NRV or reflective of future
the estimated price at which a dealer would sell a security and the
fair values. Furthermore, while FCX believes its valuation
estimated price at which a dealer would pay for a security. These
techniques are appropriate and consistent with those used by
evaluations are based on quoted prices, if available, or models that
other market participants, the use of different techniques or
use observable inputs.
assumptions to determine the fair value of certain financial
Common stocks included in global large-cap equity securities
instruments could result in a different fair value measurement at
and preferred stocks included in other investments are valued at
the reporting date.
the closing price reported on the active market on which the
The expected benefit payments for FCX’s and PT-FI’s pension
individual securities are traded and, as such, are classified within
plans follow:
Level 1 of the fair value hierarchy.
Private equity investments are valued at NAV using information
from general partners and have inherent restrictions on
redemptions that may affect the ability to sell the investments at
their NAV in the near term.
A summary of the fair value hierarchy for pension plan assets
associated with the PT-FI plan follows:
2022
2023
2024
2025
2026
2027 through 2031
FCX
$ 127
178
130
131
132
653
PT-FIa
$ 17
27
30
27
30
146
Fair Value at December 31, 2021
Level 1 Level 2
Level 3
Total
a. Based on a December 31, 2021, exchange rate of 14,198 Indonesia rupiah to one U.S. dollar.
Government bonds
Common stocks
Mutual funds
Total investments
Cash and receivablesa
Payables
Total pension plan net assets
$ 114
80
18
212
29
(1)
$ 240
$ 114
80
18
$ 212
$ —
—
—
$ —
$ —
—
—
$ —
86 Fre epor t-McMoR an
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
Postretirement and Other Benefits. FCX also provides postretirement
medical and life insurance benefits for certain U.S. employees
NOTE 10. STOCKHOLDERS’ EQUITY
AND STOCK-BASED COMPENSATION
and, in some cases, employees of certain international subsidiaries.
These postretirement benefits vary among plans, and many plans
FCX’s authorized shares of capital stock total 3.05 billion shares,
consisting of 3.0 billion shares of common stock and 50 million
require contributions from retirees. The expected cost of providing
shares of preferred stock.
such postretirement benefits is accrued during the years
employees render service.
The benefit obligation (funded status) for the postretirement
medical and life insurance benefit plans consisted of a current
portion of $7 million (included in accounts payable and accrued
liabilities) and a long-term portion of $57 million (included in other
liabilities) at December 31, 2021, and a current portion of $7 million
and a long-term portion of $69 million at December 31, 2020.
FCX has a number of postemployment plans covering
severance, long-term disability income, continuation of health and
life insurance coverage for disabled employees or other welfare
benefits. The accumulated postemployment benefit obligation
consisted of a current portion of $6 million (included in accounts
payable and accrued liabilities) and a long-term portion of
$35 million (included in other liabilities) at December 31, 2021,
and a current portion of $6 million and a long-term portion of
$42 million at December 31, 2020.
FCX also sponsors a retirement savings plan for most of its
U.S. employees. The plan allows employees to contribute a
portion of their income in accordance with specified guidelines.
The savings plan is a qualified 401(k) plan for all U.S. salaried
and non-bargained hourly employees. Participants exercise
control and direct the investment of their contributions and
account balances among various investment options under the
plan. FCX contributes to the plan and matches a percentage of
employee contributions up to certain limits. For employees whose
eligible compensation exceeds certain levels, FCX provides
a nonqualified unfunded defined contribution plan, which had a
liability balance of $51 million at December 31, 2021, and
$49 million at December 31, 2020, all of which was included in
other liabilities.
The costs charged to operations for the employee savings
plan totaled $95 million in 2021, $40 million in 2020 and $85 million
in 2019. The costs were lower in 2020, compared with 2021 and
2019, because of a temporary suspension of FCX contributions
implemented as part of FCX’s April 2020 revised operating plans.
FCX contributions resumed on January 1, 2021. FCX has other
employee benefit plans, certain of which are related to FCX’s
financial results, which are recognized in operating costs.
Financial Policy. In February 2021, FCX’s Board of Directors
(Board) adopted a financial policy for the allocation of cash flows
aligned with FCX’s strategic objectives of maintaining a strong
balance sheet and increasing cash returns to shareholders while
advancing opportunities for future growth. The policy includes a
base dividend and a performance-based payout framework,
whereby up to 50 percent of available cash flows generated after
planned capital spending and distributions to noncontrolling
interests would be allocated to shareholder returns and the
balance to debt reduction and investments in value enhancing
growth projects, subject to FCX maintaining its net debt at
a level not to exceed the net debt target of $3 billion to $4 billion
(excluding project debt for additional smelting capacity
in Indonesia).
In February 2021, the Board reinstated a cash dividend on FCX’s
common stock (base dividend), and on November 1, 2021, the
Board approved (i) a new share repurchase program authorizing
repurchases of up to $3.0 billion of FCX common stock and
(ii) a variable cash dividend on FCX’s common stock for 2022.
In fourth-quarter 2021, FCX acquired 12.7 million shares under
the share repurchase program for a total cost of $488 million ($38.32
per share). Through February 15, 2022, FCX acquired 18.2 million
shares of its common stock for a total cost of $710 million ($39.10
per share) and $2.3 billion remains available for repurchases.
On December 22, 2021, FCX declared dividends totaling $0.15
per share on its common stock, which was paid on February 1,
2022, to common stockholders of record as of January 14, 2022.
This payment includes a $0.075 per share quarterly base cash
dividend and a $0.075 per share quarterly variable cash dividend.
The declaration and payment of dividends (base or variable)
and timing and amount of any share repurchases is at the discretion
of FCX’s Board and management, respectively, and is subject to
a number of factors, including maintaining FCX’s net debt target,
capital availability, FCX’s financial results, cash requirements,
business prospects, global economic conditions, changes in laws,
contractual restrictions and other factors deemed relevant by
FCX’s Board or management, as applicable. FCX’s share repurchase
program may be modified, increased, suspended or terminated at
any time at the Board’s discretion.
87 2 0 2 1 A n n u a l R ep o r t
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
Accumulated Other Comprehensive Loss. A summary of
retirement-eligible employees. The award agreements also provide
changes in the balances of each component of accumulated other
for accelerated vesting upon certain qualifying terminations of
comprehensive loss, net of tax, follows:
employment within one year following a change of control.
Balance at January 1, 2019
Amounts arising during the perioda,b
Amounts reclassifiedc
Balance at December 31, 2019
Amounts arising during the perioda,b
Amounts reclassifiedc
Balance at December 31, 2020
Amounts arising during the perioda,b
Amounts reclassifiedc
Balance at December 31, 2021
Defined
Benefit Plans
Translation
Adjustment
$ (615)
(118)
47
(686)
47
46
(593)
176
19
$ (398)
$ 10
—
—
10
—
—
10
—
—
$ 10
Total
$ (605)
(118)
47
(676)
47
46
(583)
176
19
$ (388)
a. Includes net actuarial (losses) gains, net of noncontrolling interest, totaling $(111) million for 2019,
$40 million for 2020 and $174 million for 2021.
b. Includes tax (benefit) provision totaling $(8) million for 2019, $7 million for 2020 and $2 million for 2021.
c. Includes amortization primarily related to actuarial losses, net of taxes of less than $1 million for
2019, 2020 and 2021.
Stock Award Plans. FCX currently has awards outstanding under
various stock-based compensation plans. The stockholder-
approved 2016 Stock Incentive Plan (the 2016 Plan) provides for
the issuance of stock options, stock appreciation rights, restricted
stock, RSUs, PSUs and other stock-based awards for up to 72 million
common shares. As of December 31, 2021, 30.7 million shares
were available for grant under the 2016 Plan, and no shares were
available under other plans.
Stock-Based Compensation Cost. Compensation cost charged
against earnings for stock-based awards for the years ended
December 31 follows:
Selling, general and administrative expenses
Production and delivery
Total stock-based compensation
Tax benefit and noncontrolling interests’ sharea
Impact on net income (loss)
2021
$ 64
34
98
(5)
$ 93
2020
$ 70
29
99
(5)
$ 94
2019
$ 48
15
63
(4)
$ 59
a. Charges in the U.S. are not expected to generate a future tax benefit.
Stock Options. Stock options granted under the plans generally
expire 10 years after the date of grant. Stock options vest in
one-third annual increments beginning one year from the date of
grant. The award agreements provide that participants will receive
the following year’s vesting upon retirement. Therefore, on
the date of grant, FCX accelerates one year of amortization for
A summary of stock options outstanding as of December 31,
2021, and activity during the year ended December 31, 2021, follows:
Weighted-
Average
Exercise Price
Per Share
Weighted-
Average
Remaining Aggregate
Intrinsic
Contractual
Value
Term (years)
$ 25.58
28.14
19.48
51.15
23.78
4.3
$ 411
Number of
Options
37,100,098
598,000
(11,527,957)
(4,347,579)
21,822,562
17,119,081
26.62
3.4
$ 278
Balance at January 1
Granted
Exercised
Expired/Forfeited
Balance at December 31
Vested and exercisable at
December 31
The fair value of each stock option is estimated on the date of grant
using the Black-Scholes-Merton option valuation model. Expected
volatility is based on implied volatilities from traded options on
FCX’s common stock and historical volatility of FCX’s common
stock. FCX uses historical data to estimate future option exercises,
forfeitures and expected life. When appropriate, separate groups of
employees who have similar historical exercise behavior are
considered separately for valuation purposes. The expected
dividend rate is calculated using the expected annual dividend at
the date of grant. The risk-free interest rate is based on Federal
Reserve rates in effect for bonds with maturity dates equal to the
expected term of the option.
Information related to stock options during the years ended
December 31 follows:
2021
2020
2019
Weighted-average assumptions used
to value stock option awards:
Expected volatility
Expected life of options (in years)
Expected dividend rate
Risk-free interest rate
Weighted-average grant-date fair value
(per option)
Intrinsic value of options exercised
Fair value of options vested
58.1%
5.90
2.5%
0.6%
$ 11.92
$ 194
16
$
47.7%
5.83
1.7%
1.5%
$ 4.72
$ 82
$ 28
47.8%
6.10
1.8%
2.5%
$ 4.87
3
$
$ 26
As of December 31, 2021, FCX had $5 million of total unrecognized
compensation cost related to unvested stock options expected
to be recognized over a weighted-average period of approximately
1.0 years.
88 Fre epor t-McMoR an
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
Stock-Settled PSUs and RSUs. Beginning in 2014, FCX’s
The total fair value of stock-settled RSUs and PSUs granted was
executive officers received annual grants of PSUs that vest after
$62 million during 2021, $47 million during 2020 and $24 million
three years. The total grant date target shares related to the
during 2019. The total intrinsic value of stock-settled RSUs and
PSU grants were 0.7 million for 2019, 0.8 million for 2020 and
PSUs vested was $56 million during 2021, $18 million during 2020
0.3 million for 2021, of which the executive officers will earn
and $26 million during 2019. As of December 31, 2021, FCX had
(i) between 0 percent and 200 percent of the target shares based
$17 million of total unrecognized compensation cost related
on achievement of financial metrics and (ii) +/- up to 25 percent
to unvested stock-settled RSUs expected to be recognized over
of the target shares based on FCX’s total shareholder return
approximately 1.2 years.
compared to the total shareholder return of a peer group. All of FCX’s
Cash-Settled RSUs. Cash-settled RSUs are similar to stock-
executive officers who hold PSUs are retirement eligible, and their
settled RSUs, but are settled in cash rather than in shares
PSU awards are therefore non-forfeitable. As such, FCX charges
of common stock. These cash-settled RSUs generally vest over
the estimated fair value of the PSU awards to expense at the time
three years of service. Some award agreements allow for
the financial and operational, if applicable, metrics are established.
participants to receive the following year’s vesting upon retirement.
FCX grants RSUs that vest over a period of three years or at the
Therefore, on the date of grant of these cash-settled RSU awards,
end of three years to certain employees. Some award agreements
FCX accelerates one year of amortization for retirement-eligible
allow for participants to receive the following year’s vesting upon
employees. The cash-settled RSUs are classified as liability
retirement. Therefore, on the date of grant of these RSU awards,
awards, and the fair value of these awards is remeasured each
FCX accelerates one year of amortization for retirement-eligible
reporting period until the vesting dates. The award agreements for
employees. FCX also grants RSUs to its directors, which vest on
cash-settled RSUs provide for accelerated vesting upon certain
the first anniversary of the date of grant. The fair value of the RSUs
qualifying terminations of employment within one year following a
is amortized over the vesting period or the period until the director
change of control.
becomes retirement eligible, whichever is shorter. Upon a
Dividends attributable to cash-settled RSUs accrue and are
director’s retirement, all of their unvested RSUs immediately vest.
paid if the award vests. A summary of outstanding cash-settled
For retirement-eligible directors, the fair value of RSUs is
RSUs as of December 31, 2021, and activity during the year ended
recognized in earnings on the date of grant.
December 31, 2021, follows:
The award agreements provide for accelerated vesting of all
RSUs held by directors if there is a change of control (as defined
in the award agreements) and for accelerated vesting of all RSUs
held by employees if they experience a qualifying termination
within one year following a change of control.
Dividends attributable to RSUs and PSUs accrue and are paid
if the award vests. A summary of outstanding stock-settled RSUs
Balance at January 1
Granted
Vested
Forfeited
and PSUs as of December 31, 2021, and activity during the year
Balance at December 31
ended December 31, 2021, follows:
Weighted-
Average
Grant-Date Aggregate
Intrinsic
Fair Value
Value
Per Award
$ 12.92
28.00
13.94
15.37
16.56
$ 44
Number of
Awards
1,521,097
308,600
(753,574)
(22,199)
1,053,924
Balance at January 1
Granted
Vested
Forfeited
Balance at December 31
Number of
Awards
7,523,022
2,121,755
(1,814,976)
(28,916)
7,800,885
$ 16.79
29.15
15.72
20.29
20.38
Weighted-
Average
Grant-Date Aggregate
Intrinsic
Fair Value
Value
Per Award
The total grant-date fair value of cash-settled RSUs was $9 million
during 2021, $11 million during 2020 and $10 million during 2019.
The intrinsic value of cash-settled RSUs vested was $24 million
during 2021, $11 million during 2020 and $8 million during 2019.
The accrued liability associated with cash-settled RSUs consisted
of a current portion of $26 million (included in accounts payable
and accrued liabilities) and a long-term portion of $6 million
$ 326
(included in other liabilities) at December 31, 2021, and a current
portion of $22 million and a long-term portion of $6 million at
December 31, 2020.
89 2 0 2 1 A n n u a l R ep o r t
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
Other Information. The following table includes amounts related
other differences between the book and tax carrying amounts of its
to exercises of stock options and vesting of RSUs and PSUs during
investments in material foreign subsidiaries as FCX considers its
the years ended December 31:
ownership positions to be permanent in duration, and quantification
2021
2020
2019
of the related deferred tax liability is not practicable.
FCX’s provision for income taxes for the years ended December 31
consists of the following:
FCX shares tendered to pay the
exercise price and/or the minimum
required withholding taxesa
Cash received from stock option
exercises
Actual tax benefit realized for tax
deductions
Amounts FCX paid for employee taxes
1,358,101
1,193,183
670,508
$
$
$
210
9
29
$
$
$
51
2
17
$
$
$
2
1
8
a. Under terms of the related plans, upon exercise of stock options, vesting of stock-settled RSUs and
payout of PSUs, employees may tender FCX shares to pay the exercise price and/or the minimum
required withholding taxes.
NOTE 11. INCOME TAXES
Current income taxes:
Federal
State
Foreign
Total current
Deferred income taxes:
Federal
State
Foreign
Total deferred
2021
2020
2019
$
—
(11)
(2,460)
(2,471)
(184)
(4)
(23)
(211)
193e
190
$ 53a
(1)
(816)d
(764)
3
5
(306)
(298)
37
81
$ (23)b,c
3
(462)
(482)
48
8
(101)
(45)
12
5
Geographic sources of income (losses) before income taxes and
equity in affiliated companies’ net earnings for the years ended
Adjustments
Operating loss carryforwards
December 31 consist of the following:
Provision for income taxes
$ (2,299)
$ (944)
$ (510)
U.S.
Foreign
Total
2021
2020
2019
$ 1,861
5,798
$ 7,659
$
(40)
1,837
$ 1,797
$ (287)
593
$ 306
Income taxes are provided on the earnings of FCX’s material
foreign subsidiaries under the assumption that these earnings will
a. Includes a credit of $53 million associated with the reversal of the charge discussed in
footnote c below.
b. As a result of the 2017 Tax Cuts and Jobs Act (the Act) guidance released in 2019, FCX recorded a
$29 million credit.
c. Includes a charge of $53 million associated with the sale of FCX’s interest in the lower zone of the
Timok exploration project.
d. Includes a charge of $135 million associated with the gain on sale of Kisanfu.
e. Primarily reflects the release of valuation allowances on NOLs at PT Rio Tinto (see below).
be distributed. FCX has not provided deferred income taxes for
A reconciliation of the U.S. federal statutory tax rate to FCX’s
U.S. federal statutory tax rate
Valuation allowancea
PT Rio Tinto valuation allowancea
PT-FI historical tax disputesb
Percentage depletion
Effect of foreign rates different than the U.S. federal statutory rate
Withholding and other impacts on foreign earnings
Adjustment to deferred taxes
Non-deductible permanent differences
Uncertain tax positions
U.S. tax reform
Foreign tax credit limitation
State income taxes
Cerro Verde historical tax disputese
Timok exploration project sale
Sale of Kisanfu
Other items, net
Provision for income taxes
effective income tax rate for the years ended December 31 follows:
2021
2020
2019
Amount
Percent
Amount
Percent
Amount
Percent
$ (1,608)
221
189
(193)
221
(328)
(678)
—
—
13
—
(11)
(14)
—
—
—
(111)
$(2,299)
(21)%
3
2
(3)
3
(4)
(9)
—
—
—
—
—
—
—
—
—
(1)
(30)%
$ (377)
(210)
—
(8)
104
(109)
(193)
—
—
(15)
—
28
(2)
(39)
53
(135)
(41)
$ (944)
(21)%
(12)
—
—
6
(6)
(11)
—
—
(1)
—
2
—
(2)
3
(8)
(3)
(53)%
$ (64)
(149)
—
(145)
118
(64)
(55)
(49)c
(47)
(47)
29d
(16)
16
2
(15)
—
(24)
$ (510)
(21)%
(49)
—
(47)
39
(21)
(18)
(16)
(15)
(15)
9
(5)
6
1
(5)
—
(9)
(166)%
a. Refer to “Valuation Allowance” below.
b. Refer to “Income Tax Matters” below.
c. Represents net charges primarily to adjust deferred taxes on historical balance sheet items in accordance with tax accounting principles.
d. As a result of the Act guidance released in 2019, FCX recorded a $29 million credit.
e. Refer to Note 12 for further discussion.
90 Fre epor t-McMoR an
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
FCX paid federal, state and foreign income taxes totaling $1.3 billion
The valuation allowance related to FCX’s U.S. federal, state and
in 2021, $397 million in 2020 and $610 million in 2019. FCX
foreign NOLs totaled $2.0 billion and other deferred tax assets
received refunds of federal, state and foreign income taxes of
totaled $561 million at December 31, 2021. NOLs and deferred tax
$109 million in 2021, $265 million in 2020 and $306 million in 2019.
assets represent future deductions for which a benefit will only
The components of deferred taxes follow:
be realized to the extent these deductions offset future income.
December 31,
2021
2020
Deferred tax assets:
Foreign tax credits
Accrued expenses
Net operating losses (NOLs)
Employee benefit plans
Other
Deferred tax assets
Valuation allowances
Net deferred tax assets
Deferred tax liabilities:
Property, plant, equipment and
mine development costs
Undistributed earnings
Other
Total deferred tax liabilities
Net deferred tax liabilities
$ 1,536
1,193
2,220
105
252
5,306
(4,087)
1,219
(4,492)
(807)
(152)
(5,451)
$ (4,232)
$ 1,641
1,194
2,443
177
227
5,682
(4,732)
950
(4,489)
(694)
(175)
(5,358)
$ (4,408)
Tax Attributes. At December 31, 2021, FCX had (i) U.S. foreign
tax credits of $1.5 billion that will expire between 2022 and 2027,
(ii) U.S. federal net operating losses (NOLs) of $6.1 billion that
primarily expire between 2036 and 2037, of which $0.2 billion can be
carried forward indefinitely, (iii) U.S. state NOLs of $10.9 billion
that primarily expire between 2022 and 2041, (iv) Spanish NOLs of
$0.5 billion that can be carried forward indefinitely and (v) Indonesia
NOLs of $0.9 billion that expire between 2022 and 2026.
Valuation Allowances. On the basis of available information at
December 31, 2021, including positive and negative evidence, FCX
has provided valuation allowances for certain of its deferred tax
assets where it believes it is more-likely-than-not that some portion
or all of such assets will not be realized. Valuation allowances totaled
$4.1 billion at December 31, 2021, and covered all of FCX’s U.S.
foreign tax credits and U.S. federal NOLs, substantially all of its U.S.
state NOLs, and a portion of its foreign NOLs. Valuation
allowances totaled $4.7 billion at December 31, 2020, and covered
all of FCX’s U.S. foreign tax credits, U.S. federal NOLs, foreign net
operating losses and substantially all of its U.S. state NOLs.
The valuation allowance related to FCX’s U.S. foreign tax credits
totaled $1.5 billion at December 31, 2021. FCX has operations
in tax jurisdictions where statutory income taxes and withholding
taxes are in excess of the U.S. federal income tax rate. Valuation
allowances are recognized on foreign tax credits for which no benefit
is expected to be realized.
FCX develops an estimate of which future tax deductions will be
realized and recognizes a valuation allowance to the extent these
deductions are not expected to be realized in future periods.
Valuation allowances will continue to be carried on U.S. foreign
tax credits, U.S. federal, state and foreign NOLs and U.S. federal,
state and foreign deferred tax assets, until such time that (i) FCX
generates taxable income against which any of the assets,
credits or NOLs can be used, (ii) forecasts of future income provide
sufficient positive evidence to support reversal of the valuation
allowances or (iii) FCX identifies a prudent and feasible means of
securing the benefit of the assets, credits or net operating losses
that can be implemented.
The $645 million net decrease in the valuation allowances
during 2021 is primarily related to a $219 million decrease associated
with U.S. federal NOLs utilized during 2021, a $105 million decrease
related to expirations of U.S. foreign tax credits and a $228 million
decrease associated with PT Rio Tinto NOLs resulting from positive
evidence supporting future taxable income against which net
operating losses can be used. Changes in assumptions about
future taxable income against which PT Rio Tinto NOLs can be
utilized resulted from delays in timing of the anticipated merger of
PT Rio Tinto into PT-FI.
Other Events. In connection with the negative impacts of the
COVID-19 pandemic on the global economy, governments
throughout the world announced measures that are intended to
provide tax and other financial relief. Such measures include the
American Rescue Plan Act of 2021, enacted on March 11, 2021, and
the Coronavirus Aid, Relief, and Economic Security Act (CARES
Act), enacted on March 27, 2020. None of these measures resulted
in material impacts to FCX’s provision for income taxes for the
years ended December 31, 2021 and 2020. However, certain
provisions of the CARES Act provided FCX with the opportunity to
accelerate collections of tax refunds, primarily those associated
with the U.S. alternative minimum tax (AMT). FCX collected
U.S. AMT refunds of $24 million in 2021 and $244 million in 2020.
FCX continues to evaluate income tax accounting considerations
of COVID-19 measures as they develop, including any impact
on its measurement of existing deferred tax assets and deferred
tax liabilities. FCX will recognize any impact from COVID-19 related
changes to tax laws in the period in which the new legislation
is enacted.
91 2 0 2 1 A n n u a l R ep o r t
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
Indonesia Tax Matters. In 2018, PT-FI received unfavorable
which Cerro Verde has contested on the basis that its 1998
Indonesia Tax Court decisions with respect to its appeal of
stability agreement exempts from royalties all minerals extracted
capitalized mine development costs on its 2012 and 2014 corporate
from its mining concessions, irrespective of the method used for
income tax returns. PT-FI appealed those decisions to the
processing those minerals. Refer to Note 12 for further discussion
Indonesia Supreme Court. In 2019, the Indonesia Supreme Court
of the Cerro Verde royalty dispute.
communicated an unfavorable ruling regarding the treatment
In December 2016, the Peru parliament passed tax legislation
of mine development costs on PT-FI’s 2014 tax return. During the
that, in part, modified the applicable tax rates established in its
fourth quarter of 2019, PT-FI met with the Indonesia Tax Office
December 2014 tax legislation, which progressively decreased the
and developed a framework for resolution of the disputed matters.
corporate income tax rate to 26 percent in 2019 and thereafter, and
On December 30, 2019, PT-FI made a payment of $250 million
also increased the dividend tax rate on distributions to 9.3 percent in
based on its understanding of the framework for resolution of
2019 and thereafter. Under the tax legislation, which was effective
disputes arising from the audits of the tax years 2012 through 2016,
January 1, 2017, the corporate income tax rate was 29.5 percent, and
as well as tax years 2017 and 2018. Additional administrative
the dividend tax rate on distributions of earnings was 5 percent.
steps would need to be completed by both PT-FI and the Indonesia
Cerro Verde’s current mining stability agreement subjects it to a
Tax Office in order to implement the resolution.
stable income tax rate of 32 percent through the expiration of the
During October 2021, PT-FI participated in discussions with
agreement on December 31, 2028. The tax rate on dividend
the Indonesia tax office regarding progress on the framework for
distributions is not stabilized by the agreement.
resolution of disputes arising from the audits of tax years 2012
Chile Tax Matters. In September 2014, the Chile legislature
through 2016. As a result of these discussions and the revised
approved a tax reform package that implemented a dual tax
positions taken by both the Indonesia tax office and PT-FI, FCX
system, which was amended in January 2016. Under previous rules,
believes it can no longer conclude a resolution of all of the disputed
FCX’s share of income from Chile operations was subject to an
tax items at a more-likely-than-not threshold. PT-FI will continue
effective 35 percent tax rate allocated between income taxes and
to engage with the Indonesia tax office in pursuit of certain aspects
dividend withholding taxes. Under the amended tax reform
of the original framework for resolution.
package, FCX’s Chile operation is subject to the “Partially-Integrated
During 2019, in conjunction with the framework for resolution,
System,” resulting in FCX’s share of income from El Abra being
PT-FI recorded net charges totaling $304 million, including
subject to progressively increasing effective tax rates of 35 percent
$123 million for non-deductible penalties recorded to other (expense)
through 2019 and 44.5 percent in 2020 and thereafter. In
income, net, $78 million for non-deductible interest recorded to
November 2017, the progression of increasing tax rates was
interest expense, net and $103 million to provision for income tax
delayed by the Chile legislature so that the 35 percent rate continued
expense, primarily for the impact of a reduction in the statutory
through 2021, increasing to 44.5 percent in 2022 and thereafter.
rate on PT-FI’s deferred tax assets.
In January 2020, the Chile legislature approved a tax reform
During 2020, in connection with progress of the framework for
package that would further delay the 44.5 percent rate until 2027
resolution, PT-FI recorded additional net charges of $46 million,
and thereafter.
including $9 million for non-deductible penalties recorded to other
In 2010, the Chile legislature approved an increase in mining
(expense) income, net and $35 million for non-deductible interest
royalty taxes to help fund earthquake reconstruction activities,
recorded to interest expense, net, and $2 million to provision for
education and health programs. Beginning in 2018, and through
income tax expense.
2023 mining royalty rates at FCX’s El Abra mine are based
During 2021, mostly in connection with the October 2021
on a sliding scale of 5 to 14 percent (depending on a defined
meeting with the Indonesia tax office and the progress of the
operational margin).
framework for resolution, PT-FI recorded total additional net
Uncertain Tax Positions. FCX accounts for uncertain income tax
charges of $384 million, including $155 million for non-deductible
positions using a threshold and measurement criteria for the
penalties recorded to other (expense) income, net, $43 million
financial statement recognition and measurement of a tax position
for non-deductible interest recorded to interest expense, net, and
taken or expected to be taken in a tax return. FCX’s policy
$186 million to provision for income tax expense.
associated with uncertain tax positions is to record accrued interest
Peru Tax Matters. SUNAT (National Superintendency of
in interest expense and accrued penalties in other (expense)
Customs and Administration), the Peru national tax authority, has
income, net rather than in the provision for income taxes.
assessed mining royalties on ore processed by the Cerro Verde
concentrator for the period December 2006 to December 2013,
92 Fre epor t -McMoR an
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
A summary of the activities associated with FCX’s reserve for
NOTE 12. CONTINGENCIES
unrecognized tax benefits for the years ended December 31
follows. The balance at year-end December 31, 2019, was revised
by $115 million and the balance at year-end December 31, 2020,
was revised by $179 million to adjust for amounts paid on accruals
not yet settled.
Balance at beginning of year
Additions:
Prior year tax positions
Current year tax positions
Decreases:
Prior year tax positions
Settlements with taxing authorities
Balance at end of year
2021
$ 474
330
71
(30)
(37)
$ 808
2020
$ 491
56
60
(82)
(51)
$ 474
2019
$ 494
86
11
(75)
(25)
$ 491
The total amount of accrued interest and penalties associated with
unrecognized tax benefits was $620 million at December 31, 2021,
primarily relating to unrecognized tax benefits associated with
cost recovery methods and royalties and other related mining
taxes, $307 million at December 31, 2020, and $339 million at
December 31, 2019.
The reserve for unrecognized tax benefits of $808 million at
December 31, 2021, included $694 million ($465 million net of
income tax benefits and valuation allowances) that, if recognized,
would reduce FCX’s provision for income taxes. Changes in the
reserve for unrecognized tax benefits associated with current and
prior-year tax positions were primarily related to uncertainties
associated with FCX’s tax treatment of cost recovery methods.
There continues to be uncertainty related to the timing of
settlements with taxing authorities, but if additional settlements
are agreed upon during the year 2022, FCX could experience a
change in its reserve for unrecognized tax benefits.
FCX or its subsidiaries file income tax returns in the U.S. federal
jurisdiction and various state and foreign jurisdictions. The
tax years for FCX’s major tax jurisdictions that remain subject to
examination are as follows:
Environmental. FCX subsidiaries are subject to various national,
state and local environmental laws and regulations that govern
emissions of air pollutants; discharges of water pollutants;
generation, handling, storage and disposal of hazardous
substances, hazardous wastes and other toxic materials; and
remediation, restoration and reclamation of environmental
contamination. FCX subsidiaries that operate in the U.S. also are
subject to potential liabilities arising under CERCLA and similar
state laws that impose responsibility on current and previous
owners and operators of a facility for the remediation of hazardous
substances released from the facility into the environment,
including damages to natural resources, in some cases irrespective
of when the damage to the environment occurred or who caused it.
Remediation liability also extends to persons who arranged for
the disposal of hazardous substances or transported the hazardous
substances to a disposal site selected by the transporter. These
liabilities are often shared on a joint and several basis, meaning
that each responsible party is fully responsible for the remediation
if some or all of the other historical owners or operators no longer
exist, do not have the financial ability to respond or cannot be
found. As a result, because of FCX’s acquisition of FMC in 2007,
many of the subsidiary companies FCX now owns are responsible
for a wide variety of environmental remediation projects
throughout the U.S., and FCX expects to spend substantial sums
annually for many years to address those remediation issues.
Certain FCX subsidiaries have been advised by the U.S.
Environmental Protection Agency (EPA), the Department of the
Interior, the Department of Agriculture and various state agencies
that, under CERCLA or similar state laws and regulations, they
may be liable for costs of responding to environmental conditions
at a number of sites that have been or are being investigated to
determine whether releases of hazardous substances have
occurred and, if so, to develop and implement remedial actions to
address environmental concerns. FCX is also subject to claims
where the release of hazardous substances is alleged to have
Jurisdiction
U.S. Federal
Indonesia
Peru
Chile
Years Subject to Examination
Additional Open Years
damaged natural resources (NRD) and to litigation by individuals
2017-2018
2011-2018
2016
2020
2014-2016, 2019-2021
2020-2021
2017-2021
2018-2019, 2021
allegedly exposed to hazardous substances. As of December 31,
2021, FCX had more than 100 active remediation projects, including
NRD claims, in 24 U.S. states. The aggregate environmental
obligation for approximately 60 percent of the active remediation
projects totaled less than $20 million at December 31, 2021.
93 2 0 2 1 A n n u a l R ep o r t
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
A summary of changes in estimated environmental obligations
2010 settlement agreement, Miami agreed to take full responsibility
for the years ended December 31 follows:
for future groundwater remediation at the Pinal Creek site, with
Balance at beginning of year
Accretion expensea
Additionsb
Reductionsb
Spending
Balance at end of year
Less current portion
Long-term portion
2021
2020
2019
$ 1,584
104
60
(20)
(64)
1,664
(64)
$ 1,600
$ 1,561
102
38
(58)
(59)
1,584
(83)
$ 1,501
$ 1,511
102
23
(1)
(74)
1,561
(106)
$ 1,455
a. Represents accretion of the fair value of environmental obligations assumed in the 2007 acquisition
of FMC, which were determined on a discounted cash flow basis.
b. Adjustments to environmental obligations that do not provide future economic benefits are charged
to operating income. Adjustments primarily reflect revisions for changes in the anticipated scope
and timing of projects and other noncash adjustments.
limited exceptions. Remediation work consisting of groundwater
extraction and treatment plus source control capping is expected
to continue for many years.
Newtown Creek. From the 1930s until 1964, Phelps Dodge
Refining Corporation (PDRC), an indirect wholly owned subsidiary
of FCX, operated a copper smelter, and from the 1930s until
1984 operated a copper refinery, on the banks of Newtown Creek
(the creek), which is a 3.5-mile-long waterway that forms part
of the boundary between Brooklyn and Queens in New York City.
Heavy industrialization along the banks of the creek and
discharges from the City of New York’s sewer system over more
than a century resulted in significant environmental contamination
of the waterway. In 2010, EPA notified PDRC, four other
Estimated future environmental cash payments (on an undiscounted
companies and the City of New York that EPA considers them
and de-escalated basis) total $89 million in 2022, $80 million in
PRPs under CERCLA. The notified parties began working with
2023, $105 million in 2024, $98 million in 2025, $100 million in 2026
EPA to identify other PRPs. In 2010, EPA designated the creek
and $3.2 billion thereafter. The amount and timing of these
as a Superfund site, and in 2011, PDRC and four other companies
estimated payments will change as a result of changes in regulatory
(the Newtown Creek Group, NCG) and the City of New York
requirements, changes in scope and timing of remediation
entered an Administrative Order on Consent (AOC) to perform a
activities, the settlement of environmental matters and as actual
remedial investigation/feasibility study (RI/FS) to assess the nature
spending occurs.
and extent of environmental contamination in the creek and
At December 31, 2021, FCX’s environmental obligations totaled
identify remedial options. The NCG’s RI/FS work and efforts to
$1.7 billion, including $1.5 billion recorded on a discounted basis
identify other PRPs are ongoing. The NCG submitted a final
for those obligations assumed in the FMC acquisition at fair value.
draft RI report in October 2021, which is currently under review by
On an undiscounted and de-escalated basis, these obligations
EPA. The NCG expects to submit a draft FS report to EPA in late
totaled $3.7 billion. FCX estimates it is reasonably possible that
2025 and currently expects EPA to select a creek-wide remedy in
these obligations could range between $3.3 billion and $4.2 billion
2026, with the actual remediation construction starting several
on an undiscounted and de-escalated basis.
years later. In July 2019, the NCG entered into an AOC with EPA
At December 31, 2021, the most significant environmental
to conduct a Focused Feasibility Study (FFS) of the first two miles of
obligations were associated with the Pinal Creek site in Arizona;
the creek to support an evaluation of an early interim remedy
the Newtown Creek site in New York City; historical smelter sites
for that section of the creek. In July 2021, EPA terminated the FFS,
principally located in Arizona, Indiana, Kansas, Missouri, New
which effectively means remediation of the lower creek will be
Jersey, Oklahoma and Pennsylvania; and uranium mining sites in
performed at the same time as the site-wide remedy. FCX’s
the western U.S. The recorded environmental obligations for these
environmental liability balance for the creek was $318 million at
sites totaled $1.4 billion at December 31, 2021. FCX may also be
December 31, 2021. The final costs of fulfilling this remedial
subject to litigation brought by private parties, regulators and local
obligation and the allocation of costs among PRPs are uncertain
governmental authorities related to these historical sites.
A discussion of these sites follows.
and subject to change based on the results of the RI/FS, the
remedy ultimately selected by EPA and related allocation
Pinal Creek. The Pinal Creek site was listed under the Arizona
determinations. Changes to the overall cost of this remedial
Department of Environmental Quality’s (ADEQ) Water Quality
obligation and the portion ultimately allocated to PDRC could be
Assurance Revolving Fund program in 1989 for contamination in
material to FCX.
the shallow alluvial aquifers within the Pinal Creek drainage near
Historical Smelter Sites. FCX subsidiaries and their predecessors
Miami, Arizona. Since that time, environmental remediation has
at various times owned or operated copper, zinc and lead smelters
been performed by members of the Pinal Creek Group, consisting
or refineries in states including Arizona, Indiana, Kansas, Missouri,
of Freeport-McMoRan Miami Inc. (Miami), an indirect wholly
New Jersey, Oklahoma and Pennsylvania. For some of these
owned subsidiary of FCX, and two other companies. Pursuant to a
94 Fre epor t -McMoR an
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
former processing sites, certain FCX subsidiaries have been
other damages. In January 2020, the parties completed briefing on
advised by EPA or state agencies that they may be liable for costs
the plaintiffs’ motion for class certification. The judge indicated
of investigating and, if appropriate, remediating environmental
in late 2021 that the plaintiffs may submit rebuttal expert reports,
conditions associated with these former processing facilities. At
which will likely result in additional discovery and refiling of a new
other sites, certain FCX subsidiaries have entered into state
briefing on class certification. This will likely delay the court’s
voluntary remediation programs to investigate and, if appropriate,
decision on class certification. FCX continues to vigorously defend
remediate on-site and off-site conditions associated with the
this matter.
facilities. The historical processing sites are in various stages of
Uranium Mining Sites. During a period between 1940 and the
assessment and remediation. At some of these sites, disputes
early 1980s, certain FCX subsidiaries and their predecessors were
with local residents and elected officials regarding alleged health
involved in uranium exploration and mining in the western U.S.,
effects or the effectiveness of remediation efforts have resulted
primarily on federal and tribal lands in the Four Corners region of
in litigation of various types, and similar litigation at other sites
the southwest. Similar exploration and mining activities by other
is possible.
companies have also caused environmental impacts warranting
From 1920 until 1986, United States Metals Refining Company
remediation. In 2017, the Department of Justice, EPA, Navajo
(USMR), an indirect wholly owned subsidiary of FCX, owned and
Nation, and two FCX subsidiaries reached an agreement regarding
operated a copper smelter and refinery in the Borough of Carteret,
the financial contribution of the U.S. Government and the FCX
New Jersey. Since the early 1980s, the site has been the subject
subsidiaries and the scope of the environmental investigation and
of environmental investigation and remediation, under the direction
remediation work for 94 former uranium mining sites on tribal
and supervision of the New Jersey Department of Environmental
lands. Under the terms of the Consent Decree executed in May 2017,
Protection (NJDEP). On-site contamination is in the later stages of
and approved by the U.S. District Court for the District of Arizona,
remediation. In 2012, after receiving a request from NJDEP, USMR
the U.S. contributed $335 million into a trust fund to cover the
also began investigating and remediating off-site properties,
government’s initial share of the costs, and FCX’s subsidiaries are
which is ongoing. As a result of off-site soil sampling in public and
proceeding with the environmental investigation and remediation
private areas near the former Carteret smelter, FCX established
work at the 94 sites. The program is expected to take more than
an environmental obligation for known and potential off-site
20 years to complete. In 2020, FCX reduced its associated obligation
environmental remediation. Assessments of sediments in the
and recorded a $47 million credit to operating income to reflect
adjacent Arthur Kill and sampling and analysis within the offsite area
the discounting effect of the recent and expected pace of project
as we obtain access to residential properties are ongoing and
work under post-COVID-19 pandemic conditions. By letter dated
could result in additional adjustments to the related environmental
September 29, 2021, EPA also informed an FCX subsidiary that it
remediation obligation in future periods. The extent of contamination
does not expect to have funds sufficient to remediate sites covered
and potential remedial actions are uncertain and may take several
by a bankruptcy settlement with Tronox and EPA considers a
years to evaluate.
subsidiary of FCX to be potentially liable for 23 of these sites. FCX is
On January 30, 2017, a putative class action titled Juan Duarte,
also conducting site surveys of historical uranium mining claims
Betsy Duarte and N.D., Infant, by Parents and Natural Guardians
associated with FCX subsidiaries on non-tribal federal lands in the
Juan Duarte and Betsy Duarte, Leroy Nobles and Betty Nobles, on
Four Corners region. Under a memorandum of understanding with
behalf of themselves and all others similarly situated v. United
the U.S. Bureau of Land Management (BLM), site surveys are being
States Metals Refining Company, Freeport-McMoRan Copper &
performed on approximately 15,000 mining claims, ranging from
Gold Inc. and Amax Realty Development, Inc., Docket No. 734-17,
undisturbed claims to claims with mining features. Based on these
was filed in the Superior Court of New Jersey against USMR, FCX,
surveys, BLM has issued no further action determinations for
and Amax Realty Development, Inc. The defendants removed this
certain undisturbed claims. A similar agreement is in place with the
litigation to the U.S. District Court for the District of New Jersey,
U.S. Forest Service for mine features on U.S. Forest Service land.
where it remains pending, and FMC was added as a defendant.
Either BLM or the U.S. Forest Service may request additional
The suit alleges that USMR generated and disposed of smelter
assessment or remediation activities for other claims with mining
waste at the site and allegedly released contaminants on-site and
features. FCX will update this obligation when it has a sufficient
off-site through discharges to surface water and air emissions over
number of remedy decisions from the BLM or the U.S. Forest
a period of decades and seeks unspecified compensatory and
Service to support a reasonably certain range of outcomes. FCX
punitive damages for economic losses, including diminished
expects it will take several years to complete this work.
property values, additional soil investigation and remediation and
95 2 0 2 1 A n n u a l R e p o r t
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
AROs. FCX’s ARO estimates are reflected on a third-party cost
of which $0.9 billion was in the form of guarantees issued by
basis and are based on FCX’s legal obligation to retire tangible,
FCX and FMC. At December 31, 2021, FCX had trust assets totaling
long-lived assets. A summary of changes in FCX’s AROs for the
$208 million (included in other assets), which are legally restricted
years ended December 31 follows:
2021
2020
Balance at beginning of year
Liabilities incurred
Settlements and revisions to cash flow
estimates, net
Accretion expense
Dispositions
Spending
Balance at end of year
Less current portion
Long-term portion
$ 2,472
2
331a
112
—
(201)
2,716
(200)
$ 2,516
$ 2,505
7
(13)
131
(2)
(156)
2,472
(268)
$ 2,204
2019
$ 2,547
20
(5)
118
(5)
(170)
2,505
(330)
$ 2,175
a. Includes an adjustment at PT-FI totaling $397 million, see further discussion below.
to be used to satisfy its financial assurance obligations for its
mining properties in New Mexico. In addition, FCX subsidiaries
have financial assurance obligations for its oil and gas properties
associated with plugging and abandoning wells and facilities
totaling $424 million. Where oil and gas guarantees associated with
the Bureau of Ocean Energy Management do not include a
stated cap, the amounts reflect management’s estimates of the
potential exposure.
New Mexico Environmental and Reclamation Programs. FCX’s
New Mexico operations are regulated under the New Mexico Water
Quality Act and regulations adopted by the Water Quality Control
Commission. In connection with discharge permits, the New Mexico
Environment Department (NMED) has required each of these
ARO costs may increase or decrease significantly in the future as a
operations to submit closure plans for NMED’s approval. The closure
result of changes in regulations, changes in engineering designs
plans must include measures to assure meeting applicable
and technology, permit modifications or updates, changes in mine
groundwater quality standards following the closure of discharging
plans, settlements, inflation or other factors and as reclamation
facilities and to abate groundwater or surface water contamination
(concurrent with mining operations or post mining) spending
to meet applicable standards. FCX’s New Mexico operations also
occurs. ARO activities and expenditures for mining operations
are subject to regulation under the 1993 New Mexico Mining Act
generally are made over an extended period of time commencing
(the Mining Act) and the related rules that are administered by the
near the end of the mine life; however, certain reclamation
Mining and Minerals Division of the New Mexico Energy, Minerals
activities may be accelerated if legally required or if determined
and Natural Resources Department. Under the Mining Act, mines
to be economically beneficial. The methods used or required
are required to obtain approval of reclamation plans. In 2020,
to plug and abandon non-producing oil and gas wellbores; remove
the agencies approved updates to the closure plan and financial
platforms, tanks, production equipment and flow lines; and restore
assurance instruments and completed a permit renewal for Chino.
wellsites could change over time.
In 2021, the agencies approved updates to the closure plan and
Financial Assurance. New Mexico, Arizona, Colorado and other
financial assurance instruments, and completed a permit renewal
states, as well as federal regulations governing mine operations
for Tyrone. At December 31, 2021, FCX had accrued reclamation
on federal land, require financial assurance to be provided for the
and closure costs of $510 million for its New Mexico operations.
estimated costs of mine reclamation and closure, including
Additional accruals may be required based on the state’s periodic
groundwater quality protection programs. FCX has satisfied
review of FCX’s updated closure plans and any resulting permit
financial assurance requirements by using a variety of mechanisms,
conditions, and the amount of those accruals could be material.
primarily involving parent company performance guarantees and
Arizona Environmental and Reclamation Programs. FCX’s
financial capability demonstrations, but also including trust funds,
Arizona operations are subject to regulatory oversight by the ADEQ.
surety bonds, letters of credit and other collateral. The applicable
ADEQ has adopted regulations for its aquifer protection permit
regulations specify financial strength tests that are designed
(APP) program that require permits for, among other things, certain
to confirm a company’s or guarantor’s financial capability to fund
facilities, activities and structures used for mining, leaching,
estimated reclamation and closure costs. The amount of financial
concentrating and smelting, and require compliance with aquifer
assurance FCX subsidiaries are required to provide will vary
water quality standards during operations and closure. An
with changes in laws, regulations, reclamation and closure
application for an APP requires a proposed closure strategy
requirements, and cost estimates. At December 31, 2021, FCX’s
that will meet applicable groundwater protection requirements
financial assurance obligations associated with these U.S. mine
following cessation of operations and an estimate of the
closure and reclamation/restoration costs totaled $1.5 billion,
96 Fre epor t-McMoR an
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
implementation cost, with a more detailed closure plan required
Chile Reclamation and Closure Programs. El Abra is subject
at the time operations cease. A permit applicant must demonstrate
to regulation under the Mine Closure Law administered by the
its financial ability to meet the closure costs approved by ADEQ.
Chile Mining and Geology Agency. In compliance with the
Closure costs for facilities covered by APPs are required to be
requirement for five-year updates, in November 2018, El Abra
updated every six years and financial assurance mechanisms are
submitted an updated plan with closure cost estimates based on
required to be updated every two years. Morenci’s APP requires
the existing approved closure plan. Approval of the updated
updated stockpile reclamation plans in 2022, which are expected
closure plan and cost estimates was received in August 2020,
to result in increased closure costs. Bagdad’s APP also requires
and did not result in a material increase to closure costs. At
an updated cost estimate for its closure plan in 2022, which is
December 31, 2021, FCX had accrued reclamation and closure
expected to result in increased closure costs. FCX will continue
costs of $82 million for its El Abra operation.
updating its closure strategy and closure cost estimates at other
Peru Reclamation and Closure Programs. Cerro Verde is subject
Arizona sites and intends to submit an updated tailings dam
to regulation under the Mine Closure Law administered by the Peru
system closure cost for Bagdad according to a schedule to be
Ministry of Energy and Mines. Under the closure regulations, mines
determined by ADEQ.
must submit a closure plan that includes the reclamation methods,
Portions of Arizona mining facilities that operated after January 1,
closure cost estimates, methods of control and verification, closure
1986, also are subject to the Arizona Mined Land Reclamation Act
and post-closure plans, and financial assurance. In compliance
(AMLRA). AMLRA requires reclamation to achieve stability and
with the requirement for five-year updates, in 2017 Cerro Verde
safety consistent with post-mining land use objectives specified in
submitted its closure plan and cost estimate updated for the mine
a reclamation plan. Reclamation plans must be approved by the
expansion, which was approved in February 2018. At December 31,
State Mine Inspector and must include an estimate of the cost to
2021, FCX had accrued reclamation and closure costs of $141 million
perform the reclamation measures specified in the plan along
for its Cerro Verde operation.
with financial assurance. FCX will continue to evaluate options for
Indonesia Reclamation and Closure Programs. The ultimate
future reclamation and closure activities at its operating and
amount of reclamation and closure costs to be incurred at PT-FI’s
non-operating sites, which are likely to result in adjustments to
operations will be determined based on applicable laws and
FCX’s AROs, and those adjustments could be material. At
regulations and PT-FI’s assessment of appropriate remedial activities
December 31, 2021, FCX had accrued reclamation and closure
under the circumstances, after consultation with governmental
costs of $363 million for its Arizona operations.
authorities, affected local residents and other affected parties and
Colorado Reclamation Programs. FCX’s Colorado operations
cannot currently be projected with precision. Some reclamation
are regulated by the Colorado Mined Land Reclamation Act
costs will be incurred during mining activities, while the remaining
(Reclamation Act) and regulations promulgated thereunder. Under
reclamation costs will be incurred at the end of mining activities,
the Reclamation Act, mines are required to obtain approval of plans
which are currently estimated to continue through 2041. The
for reclamation of lands affected by mining operations to be
construction time frame for reclamation of the West Wanagon
performed during mining or upon cessation of mining operations.
overburden stockpile has been extended from 2025 to 2029
In March 2020, the Division of Reclamation, Mining, and Safety
because safety constraints for working in steep and difficult terrain
(DRMS) approved Henderson’s proposed update to its closure plan
have reduced labor and equipment operating efficiencies. The time
and closure cost estimate. As of December 31, 2021, FCX had
frame extension resulted in longer and escalating fixed costs,
accrued reclamation and closure costs of $153 million for its
combined with additional anticipated volumes of stockpile material
Colorado operations.
to be moved. As a result of the change in estimated costs, an
In 2019, Colorado enacted legislation that requires proof of an
ARO adjustment of $397 million was recorded in 2021, with
end date for water treatment as a condition of permit authorizations
$340 million charged to production and delivery costs, as it relates
for new mining operations and expansions beyond current permit
to the depleted Grasberg open pit. At December 31, 2021, FCX
authorizations. While this requirement does not apply to existing
had accrued reclamation and closure costs of $1.1 billion for its
operations, it may lead to changes in long-term water management
PT-FI operations.
requirements at Climax and Henderson operations and AROs.
In accordance with its permit from DRMS, Climax will submit an
updated reclamation plan and cost estimate in 2024.
97 2 0 2 1 A n n u a l R e p o r t
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
Indonesia government regulations issued in 2010 require
coastal wetlands and caused significant land loss along the
a company to provide a mine closure guarantee in the form of a
Louisiana coast. The state of Louisiana, through the Attorney
time deposit placed in a state-owned bank in Indonesia. In
General and separately through the Louisiana Department of
December 2018, PT-FI, in conjunction with the issuance of its
Natural Resources, intervened in the litigation in support of the
special mining license (IUPK), submitted a revised mine closure
parishes’ claims. Specifically, the cases alleged the defendants
plan to Indonesia’s Department of Energy and Mineral Resources
failed to obtain and/or comply with required coastal use permits in
to reflect the extension of operations to 2041. At December 31,
violation of the Louisiana State and Local Coastal Resources
2021, PT-FI had restricted time deposits totaling $113 million for
Management Act of 1978, and sought unspecified damages for the
mine closure and reclamation guarantees.
alleged statutory violations, and restoration of the properties at
Oil and Gas Properties. Substantially all of FM O&G’s oil and
issue to their original condition. Certain FCX affiliates were named
gas leases require that, upon termination of economic production,
as defendants in two of the five cases that had been set for trial,
the working interest owners plug and abandon non-producing
both originally filed on November 8, 2013: Parish of Plaquemines v.
wellbores, remove equipment and facilities from leased acreage,
ConocoPhillips Company et al., 25th Judicial District Court,
and restore land in accordance with applicable local, state and
Plaquemines Parish, Louisiana; No. 60-982, Div. B and Parish of
federal laws. Following several sales transactions, FM O&G’s
Plaquemines v. Hilcorp Energy Company et al., 25th Judicial
remaining operating areas primarily include offshore California and
District Court, Plaquemines Parish, Louisiana; No. 60-999, Div. B.
the Gulf of Mexico (GOM). As of December 31, 2021, FM O&G
In 2019, affiliates of FCX reached an agreement in principle to settle
AROs cover 135 wells and approximately 100 platforms and other
all 13 cases. The maximum out-of-pocket settlement payment will
structures and it had accrued reclamation and closure costs of
be $23.5 million with the initial payment of $15 million to be paid
$337 million.
upon execution of the settlement agreement. The initial payment
Litigation. In addition to the material pending legal proceedings
will be held in trust and later deposited into a newly formed
discussed below and above under “Environmental,” we are
Coastal Zone Recovery Fund (the Fund) if the state of Louisiana
involved periodically in ordinary routine litigation incidental to our
passes enabling legislation to establish the Fund. The settlement
business and not required to be disclosed, some of which may
agreement will also require the FCX affiliates to pay into the Fund
result in adverse judgments, settlements, fines, penalties,
twenty annual installments of $4.25 million beginning in 2023
injunctions or other relief. SEC regulations require us to disclose
provided the state of Louisiana passes the enabling legislation.
environmental proceedings involving a governmental authority if
The first two of those annual installments are conditioned only on
we reasonably believe that such proceedings may result in
the enactment of the enabling legislation within three years of
monetary sanctions above a stated threshold. Pursuant to the SEC
execution of the settlement agreement, but all subsequent
regulations, we use a threshold of $1 million for purposes of
installments are also conditioned on the FCX affiliates receiving
determining whether disclosure of any such environmental
simultaneous reimbursement on a dollar-for-dollar basis from the
proceedings is required. Management does not believe, based on
proceeds of environmental credit sales generated by the Fund,
currently available information, that the outcome of any current
resulting in the $23.5 million maximum total payment obligation.
pending legal proceeding will have a material adverse effect on
The settlement agreement must be executed by all parties,
FCX’s financial condition, although individual or cumulative
including authorized representatives of the six south Louisiana
outcomes could be material to FCX’s operating results for a
parishes originally plaintiffs in the suit and certain other
particular period, depending on the nature and magnitude of the
non-plaintiff Louisiana parishes and the state of Louisiana. The
outcome and the operating results for the period.
agreement in principle does not include any admission of liability
Louisiana Parishes Coastal Erosion Cases. Certain FCX
by FCX or its affiliates. FCX recorded a charge in 2019 for the initial
affiliates were named as defendants, along with numerous
payment of $15 million, which will be paid upon execution of the
co-defendants, in 13 cases out of a total of 42 cases filed in
settlement agreement. The settlement agreement has been
Louisiana state courts by six south Louisiana parishes (Cameron,
executed by the FCX affiliates, several of the Louisiana parishes,
Jefferson, Plaquemines, St. Bernard, St. John the Baptist
and the state of Louisiana. FCX is continuing its efforts to obtain
and Vermilion), alleging that certain oil and gas exploration and
signatures from or on behalf of the remaining parishes to finalize
production operations and sulfur mining and production
the settlement. Upon execution of the settlement agreement by all
operations in coastal Louisiana contaminated and damaged
parties, the FCX affiliates will be fully released and dismissed from
all 13 pending cases.
98 Fre e por t-McMoR an
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
Asbestos and Talc Claims. Since approximately 1990, various
sole right to access, the proceeds of the legacy insurance coverage
FCX affiliates have been named as defendants in a large number of
of Cyprus Mines and CAMC for talc liabilities. In March 2019,
lawsuits alleging personal injury from exposure to asbestos or
Cyprus Mines and CAMC challenged this position and obtained
talc allegedly contained in industrial products such as electrical
emergency relief from the bankruptcy court to gain access to the
wire and cable, raw materials such as paint and joint compounds,
insurance until the question of ownership and contractual access
talc-based lubricants used in rubber manufacturing or from
could be decided in an adversary proceeding before the bankruptcy
asbestos contained in buildings and facilities located at properties
court, which is currently on hold.
owned or operated by affiliates of FCX. Many of these suits involve
On December 22, 2020, Imerys filed an amended bankruptcy
a large number of codefendants. Based on litigation results to
plan disclosing a global settlement with Cyprus Mines and CAMC,
date and facts currently known, FCX believes there is a reasonable
which provides a framework for a full and comprehensive
possibility that losses may have been incurred related to these
resolution of all current and future potential liabilities arising out of
matters; however, FCX also believes that the amounts of any such
the Cyprus Mines talc business, including claims against FCX, its
losses, individually or in the aggregate, are not material to its
affiliates, Cyprus Mines, and CAMC.
consolidated financial statements. There can be no assurance that
In 2021, Imerys obtained an injunction temporarily staying
future developments will not alter this conclusion.
approximately 950 talc-related lawsuits against CAMC and Cyprus
There has been a significant increase in the number of cases
Mines, which has been extended through June 2022. The interim
alleging the presence of asbestos contamination in talc-based
stay is a component of the global settlement but there can be
cosmetic and personal care products and in cases alleging
no assurance that the bankruptcy court will continue to impose the
exposure to talc products that are not alleged to be contaminated
interim stay.
with asbestos. The primary targets have been the producers of
On January 23, 2021, Imerys filed the form of a settlement and
those products, but defendants in many of these cases also include
release agreement to be entered into by CAMC, Cyprus Mines,
talc miners. Cyprus Amax Minerals Company (CAMC), an indirect
FCX, Imerys and the other debtors, tort claimants’ committee and
wholly owned subsidiary of FCX, and Cyprus Mines Corporation
future claims representative in the Imerys bankruptcy. In
(Cyprus Mines), a wholly owned subsidiary of CAMC, are among
accordance with the global settlement, among other things, (1) CAMC
those targets. Cyprus Mines was engaged in talc mining and
will pay a total of $130 million in cash to a settlement trust
processing from 1964 until 1992 when it exited its talc business by
in seven annual installments, which will be guaranteed by FCX;
conveying it to a third party in two related transactions. Those
(2) CAMC and Cyprus Mines and their affiliates will contribute to
transactions involved (1) a transfer by Cyprus Mines of the assets
the settlement trust all rights that they have to the proceeds of
of its talc business to a newly formed subsidiary that assumed all
certain legacy insurance policies as well as indemnity rights they
pre-sale and post-sale talc liabilities, subject to limited
have against Johnson & Johnson, and (3) Cyprus Mines will file for
reservations, and (2) a sale of the stock of that subsidiary to the
Chapter 11 bankruptcy protection with CAMC paying expenses
third party. In 2011, the third party sold that subsidiary to Imerys
of Cyprus Mines’ bankruptcy process, subject to certain limitations.
Talc America (Imerys), an affiliate of Imerys S.A. In accordance
On February 11, 2021, Cyprus Mines filed for Chapter 11 bankruptcy
with the terms of the 1992 transactions and subsequent
protection. In connection with executing the settlement and release
agreements, Imerys undertook the defense and indemnification
agreement, FCX concluded that it has a probable loss and, in
of Cyprus Mines and CAMC in talc lawsuits.
2020, recorded a $130 million charge to environmental obligations
Cyprus Mines has contractual indemnification rights, subject
and shutdown costs.
to limited reservations, against Imerys, which has historically
In October 2021, Johnson & Johnson announced it established
acknowledged those indemnification obligations and took
a new subsidiary to hold and manage its cosmetic talc liabilities,
responsibility for all cases tendered to it. However, in February 2019,
which entity subsequently filed for Chapter 11 bankruptcy
Imerys filed for Chapter 11 bankruptcy protection, which triggered
protection. This filing could further slow and complicate FCX’s
an immediate automatic stay under the federal bankruptcy code
efforts to implement a resolution.
prohibiting any party from continuing or initiating litigation or
FCX’s global settlement is subject to, among other things,
asserting new claims against Imerys. As a result, Imerys stopped
votes by claimants in both the Imerys and Cyprus Mines bankruptcy
defending the talc lawsuits against Cyprus Mines and CAMC. In
cases as well as bankruptcy court approvals in both cases, and
addition, Imerys took the position that it alone owns, and has the
there can be no assurance that the global settlement will be
successfully implemented. FCX has a $130 million liability balance
at December 31, 2021, associated with the proposed settlement.
99 2 0 2 1 A n n u a l R ep o r t
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
Tax and Other Matters. FCX’s operations are in multiple
jurisdictions where uncertainties arise in the application of complex
tax regulations. Some of these tax regimes are defined by
contractual agreements with the local government, while others
are defined by general tax laws and regulations. FCX and its
subsidiaries are subject to reviews of its income tax filings and
other tax payments, and disputes can arise with the taxing
authorities over the interpretation of its contracts or laws. The final
taxes paid may be dependent upon many factors, including
negotiations with taxing authorities. In certain jurisdictions, FCX
pays a portion of the disputed amount before formally appealing an
assessment. Such payment is recorded as a receivable if FCX
believes the amount is collectible.
Cerro Verde Royalty Dispute. SUNAT assessed mining royalties
on ore processed by the Cerro Verde concentrator for the period
from December 2006 to December 2013. No royalty assessments
can be issued for the years after 2013, as Cerro Verde began
paying royalties on all of its production in January 2014 under its
new 15-year stability agreement. Cerro Verde contested each of
these assessments because it believes that its 1998 stability
agreement exempts from royalties all minerals extracted from its
mining concession, irrespective of the method used for processing
such minerals.
Since 2014, Cerro Verde has been paying under protest the
disputed assessments mostly under installment payment programs
provided under Peruvian law. During 2021, Cerro Verde made
payments totaling $421 million, which was the balance of its royalty
dispute liabilities.
On February 28, 2020, FCX filed on its own behalf and on behalf
of Cerro Verde international arbitration proceedings against the
Government of Peru under the United States-Peru Trade
Promotion Agreement. The hearing on the merits is scheduled to
take place in May 2023. In April 2020, SMM Cerro Verde
Netherlands B.V., another shareholder of Cerro Verde, filed another
international arbitration proceeding against the Government of
Peru under the Netherlands-Peru Bilateral Investment Treaty. The
Tax Year
2003 to 2008
2009
2010
2011 and 2012
2013
2014 to 2016
Tax
Assessment
Penalties and
Interest
$ 48
56
54
41
48
5
$ 252
$ 130
52
122
72
65
28
$ 469
Total
$ 178
108
176
113
113
33
$ 721
As of December 31, 2021, Cerro Verde had paid $642 million
on these disputed tax assessments. A reserve has been applied
against these payments totaling $405 million, resulting in a
net receivable of $237 million (included in other assets), which
Cerro Verde believes is collectible.
Cerro Verde’s income tax assessments, penalties and interest
included in the table above totaled $0.6 billion at December 31, 2021,
of which $0.3 billion has not been recorded.
Indonesia Tax Matters. PT-FI has received assessments from
the Indonesia tax authorities for additional taxes and interest
related to various audit exceptions for income and other taxes.
PT-FI has filed objections to the assessments because it believes
it has properly determined and paid its taxes. Excluding surface
water tax assessments discussed below and the Indonesia
government’s previous imposition of a 7.5 percent export duty
that PT-FI paid under protest during the period April 2017
to December 21, 2018 (refer to Note 13), a summary of these
assessments, including potential penalties follows:
Tax Year
2005
2007
2008 and 2011
2012 and 2013
2014 and 2015
2016
2017 and 2019
Tax
Assessment
Penalties and
Interest
$ 62
48
28
41
121
257
48
$ 605
$ 30
23
36
43
—
483
47
$ 662
Total
$
92
71
64
84
121
740
95
$ 1,267
hearing on the merits is scheduled to take place in February 2023.
As of December 31, 2021, PT-FI had paid $278 million on these
Other Peru Tax Matters. Cerro Verde has also received
assessments from SUNAT for additional taxes, penalties and
interest related to various audit exceptions for income and
other taxes. Cerro Verde has filed or will file objections to the
assessments because it believes it has properly determined
disputed tax assessments. A reserve has been applied against these
payments totaling $221 million, resulting in a net receivable of
$57 million (included in other assets).
PT-FI’s income tax assessments, penalties and interest included
in the table above totaled $1.1 billion at December 31, 2021, of which
and paid its taxes. A summary of these assessments follows:
$0.5 billion has not been recorded.
Surface Water Taxes. PT-FI received assessments from the
local regional tax authority in Papua, Indonesia, for additional taxes
and penalties related to surface water taxes for the period from
January 2011 through December 2018. As a result, PT-FI offered to
pay one trillion rupiah to settle these historical surface water tax
100 Fre epor t-McMoR an
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
disputes and charged $69 million to production and delivery costs
of the ongoing COVID-19 pandemic. Refer to Note 13 for discussion
in December 2018. In May 2019, PT-FI agreed to a final settlement
of PT-FI’s commitment for the development of additional smelting
of 1.394 trillion rupiah (approximately $99 million) and recorded
capacity in Indonesia under the terms of its IUPK.
an incremental charge of $28 million. PT-FI paid 708.5 billion rupiah
On January 7, 2021, the Indonesia government levied an
($50 million) in October 2019, and paid the balance of 685.5 billion
administrative fine of $149 million for the period from March 30,
rupiah ($48 million) during 2021.
2020, through September 30, 2020, on PT-FI for failing to achieve
Export Duty Matter. In April 2017, PT-FI entered into a
physical development progress on the greenfield smelter as of
memorandum of understanding with the Indonesia government
July 31, 2020. On January 13, 2021, PT-FI responded to the
(the 2017 MOU) confirming that the former contract of work
Indonesia government objecting to the fine because of events
(COW) would continue to be valid and honored until replaced by
outside of its control causing a delay of the greenfield smelter’s
a mutually agreed IUPK and investment stability agreement and
development progress. PT-FI believes that its communications
agreed to continue to pay export duties of 5 percent on copper
during 2020 with the Indonesia government were not properly
concentrate export sales until completion of the divestment and
considered before the administrative fine was levied.
new IUPK. Subsequently, the Customs Office of the Minister of
In June 2021, the Indonesia government issued a ministerial
Finance refused to recognize the 5 percent export duty agreed to
decree for the calculation of an administrative fine for lack of
under the 2017 MOU and imposed a 7.5 percent export duty under
smelter development in light of the COVID-19 pandemic. During
the Ministry of Finance regulations. PT-FI paid $155 million for
2021, PT-FI recorded charges totaling $16 million for a potential
these duties under protest and appealed the disputed amounts to
settlement of the administrative fine. On January 25, 2022,
the Indonesia Tax Court. The Indonesia Tax Court subsequently
the Indonesia government submitted a new estimate of the
ruled in favor of PT-FI related to the cases involving $29 million of
administrative fine totaling $57 million. On February 15, 2022, PT-FI
the disputed amounts, which were refunded by the Indonesia
responded to the Indonesia government with a revised calculation
Customs Office to PT-FI. The Indonesia Customs Office appealed
of $37 million. PT-FI expects to record a charge in the first quarter
the Indonesia Tax Court decisions on these cases to the Indonesia
of 2022 for an amount in excess of the previously recorded
Supreme Court. On October 29, 2019, the Indonesia Supreme Court
$16 million.
posted on its website rulings unfavorable to PT-FI for certain of
Letters of Credit, Bank Guarantees and Surety Bonds. Letters of
the appealed cases involving approximately half of the $29 million
credit and bank guarantees totaled $239 million at December 31,
that had been refunded to PT-FI. As a result of the October 2019
2021, primarily associated with environmental obligations, AROs
ruling, FCX recorded a charge of $155 million in 2019 to fully reserve
and for copper concentrate shipments from PT-FI to Atlantic
for this matter.
Copper as required by Indonesia regulations. In addition, FCX had
Withholding Tax Assessments. In January 2019, the Indonesia
surety bonds totaling $492 million at December 31, 2021, primarily
Supreme Court posted on its website an unfavorable decision
associated with environmental obligations and AROs.
related to a PT-FI 2005 withholding tax matter. PT-FI had also
Insurance. FCX purchases a variety of insurance products to
received an unfavorable Indonesia Supreme Court decision in
mitigate potential losses, which typically have specified deductible
November 2017. PT-FI currently has other pending cases at the
amounts or self-insured retentions and policy limits. FCX generally
Indonesia Supreme Court related to withholding taxes for employees
is self-insured for U.S. workers’ compensation, but purchases
and other service providers for the year 2005 and the year
excess insurance up to statutory limits. An actuarial analysis is
2007, which total $47 million (based on the exchange rate as of
performed twice a year on the various casualty insurance programs
December 31, 2021, and included in accounts payable and accrued
covering FCX’s U.S.-based mining operations, including workers’
liabilities in the consolidated balance sheet at December 31, 2021),
compensation, to estimate expected losses. At December 31, 2021,
including penalties and interest.
FCX’s liability for expected losses under these insurance
Smelter Development Progress. As a result of COVID-19
programs totaled $62 million, which consisted of a current portion
mitigation measures, there have been disruptions to work and
of $11 million (included in accounts payable and accrued liabilities)
travel schedules of international contractors and restrictions on
and a long-term portion of $51 million (included in other liabilities).
access to the proposed physical site of the greenfield smelter in
In addition, FCX has receivables of $26 million (a current portion
Gresik, Indonesia. PT-FI continues to discuss with the Indonesia
of $7 million included in other accounts receivable and a long-term
government a deferred schedule for the greenfield smelter in light
portion of $19 million included in other assets) for expected claims
associated with these losses to be filed with insurance carriers.
101 2 0 2 1 A n n u a l R e p o r t
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
FCX’s oil and gas operations are subject to all of the risks
The future minimum payments for leases presented in the
normally incidental to the production of oil and gas, including well
consolidated balance sheet at December 31, 2021, follow:
blowouts, cratering, explosions, oil spills, releases of gas or well
fluids, fires, pollution and releases of toxic gas, each of which could
result in damage to or destruction of oil and gas wells, production
facilities or other property, or injury to persons. While FCX is not
fully insured against all risks related to its oil and gas operations,
its insurance policies provide limited coverage for losses or
liabilities relating to pollution, with broader coverage for sudden
and accidental occurrences. FCX is self-insured for named
windstorms in the GOM.
NOTE 13. COMMITMENTS AND GUARANTEES
2022
2023
2024
2025
2026
Thereafter
Total payments
Less amount representing interest
Present value of net minimum lease payments
Less current portion
Long-term portion
$ 46
35
73
27
24
194
399
(80)
319
(38)
$ 281
Leases. Effective January 1, 2019, FCX adopted the new Accounting
Contractual Obligations. At December 31, 2021, based on
Standards Update (ASU) for lease accounting, and nearly all
applicable prices on that date, FCX has unconditional purchase
of FCX’s leases were considered operating leases under the new
obligations (including take-or-pay contracts with terms less than
ASU. FCX leases various types of properties, including land,
one year) of $4.3 billion, primarily comprising the procurement
offices and equipment under non-cancelable leases.
of copper concentrate ($3.1 billion), transportation services
The components of FCX’s leases presented in the consolidated
($0.4 billion) and electricity ($0.3 billion). Some of FCX’s unconditional
balance sheet for the years ended December 31 follow:
purchase obligations are settled based on the prevailing market
2021
2020
rate for the service or commodity purchased. In some cases, the
Lease right-of-use assets (included in property, plant,
equipment and mine development costs, net)
Short-term lease liabilities (included in accounts
payable and accrued liabilities)
Long-term lease liabilities (included in other liabilities)
Total lease liabilities
$ 277
$ 207
$ 38
281a
$ 319
$ 38
190
$ 228
a. Includes a land lease by PT-FI for the greenfield smelter totaling $126 million. This is FCX’s only
significant finance lease.
Operating lease costs, primarily included in production and
delivery expense in the consolidated statement of operations, for
the three years ended December 31 follow:
Operating leases
Variable and short-term leases
Total operating lease costs
2021
2020
2019
$ 42
62
$ 104
$ 42
$ 74
$ 116
$ 55
79
$ 134
amount of the actual obligation may change over time because
of market conditions. Obligations for copper concentrate
provide for deliveries of specified volumes to Atlantic Copper at
market-based prices. Transportation obligations are primarily
for South America contracted ocean freight. Electricity obligations
are primarily for long-term power purchase agreements in
North America and contractual minimum demand at the South
America mines.
FCX’s unconditional purchase obligations by year total $1.6 billion
in 2022, $1.5 billion in 2023, $0.5 billion in 2024, $0.2 billion in
2025, $0.2 billion in 2026 and $0.3 billion thereafter. During the
three-year period ended December 31, 2021, FCX fulfilled its
minimum contractual purchase obligations.
IUPK—Indonesia. On December 21, 2018, FCX completed the
transaction with the Indonesia government regarding PT-FI’s
long-term mining rights and share ownership. Concurrent with the
FCX payments included in operating cash flows for its lease
closing of the transaction, the Indonesia government granted
liabilities totaled $54 million in 2021, $36 million in 2020 and
PT-FI an IUPK to replace its former COW, enabling PT-FI to
$38 million in 2019. FCX payments included in financing cash flows
conduct operations in the Grasberg minerals district through 2041.
for its lease liabilities totaled $25 million in 2021 and $4 million in
Under the terms of the IUPK, PT-FI has been granted an extension
both 2020 and 2019. As of December 31, 2021, the weighted-
of mining rights through 2031, with rights to extend mining rights
average discount rate used to determine the lease liabilities was
through 2041, subject to PT-FI completing the development of
4.2 percent (5.4 percent as of December 31, 2020) and the
weighted-average remaining lease term was 12.4 years (7.7 years
as of December 31, 2020).
102 Fre e por t-McMoR an
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
additional smelting capacity in Indonesia by the end of 2023
expects engineering procurement and construction activities to
(an extension of which has been requested due to COVID-19
advance during 2022 and 2023. Construction of the greenfield
mitigation measures subject to the approval of the Indonesia
smelter is expected to be completed as soon as feasible in 2024,
government, refer to Note 12), and fulfilling its defined fiscal
which is subject to no additional COVID-19-related disruptions and
obligations to the Indonesia government. The IUPK, and related
other factors.
documentation, contains legal and fiscal terms and is legally
PT-FI Tolling Agreement. PT-FI entered into a tolling agreement
enforceable through 2041, assuming the additional extension is
with PT Smelting that will be effective January 1, 2023, and will
received. In addition, FCX, as a foreign investor, has rights
replace the current concentrate sales agreements between PT-FI
to resolve investment disputes with the Indonesia government
and PT Smelting. Under the tolling agreement, PT-FI will pay
through international arbitration.
PT Smelting to smelt and refine its concentrate and will retain title
The key fiscal terms set forth in the IUPK include a 25 percent
to all products for sale to third parties.
corporate income tax rate, a 10 percent profits tax on net income,
Indemnification. The PT-FI divestment agreement, discussed in
and royalty rates of 4 percent for copper, 3.75 percent for gold and
Note 3, provides that FCX will indemnify PT Inalum and PTI from
3.25 percent for silver. PT-FI’s royalties totaled $319 million in
any losses (reduced by receipts) arising from any tax disputes of
2021, $160 million in 2020 and $106 million in 2019.
PT-FI disclosed to PT Inalum in a Jakarta, Indonesia tax court letter
Dividend distributions from PT-FI to FCX totaled $1.0 billion in
limited to PTI’s respective percentage share at the time the loss is
2021 and are subject to a 10 percent withholding tax. There were
finally incurred. Any net obligations arising from any tax settlement
no dividend distributions from PT-FI to FCX in 2020 or 2019.
would be paid on December 21, 2025. FCX had accrued $78 million
The IUPK requires PT-FI to pay export duties of 5 percent,
as of December 31, 2021, and $42 million as of December 31, 2020,
declining to 2.5 percent when smelter development progress
(included in other liabilities in the consolidated balance sheets)
exceeds 30 percent and eliminated when development progress for
related to this indemnification.
additional smelting capacity in Indonesia exceeds 50 percent.
Community Development Programs. FCX has adopted policies
PT-FI had previously agreed to and has been paying export duties
that govern its working relationships with the communities where
since July 2014 (refer to Note 12 for further discussion of disputed
it operates. These policies are designed to guide its practices and
export duties). PT-FI’s export duties charged against revenues
programs in a manner that respects and promotes basic human
totaled $218 million in 2021, $92 million in 2020 and $66 million in
rights and the culture of the local people impacted by FCX’s
2019 (excluding $155 million associated with the historical export
operations. FCX continues to make significant expenditures on
duty matter discussed in Note 12).
community development, education, training and cultural programs.
The IUPK also requires PT-FI to pay surface water taxes of
In 1996, PT-FI established the Freeport Partnership Fund for
$15 million annually, which began in 2019 and are recognized in
Community Development (Partnership Fund) through which PT-FI
production and delivery costs.
has made available funding and technical assistance to support
In connection with a memorandum of understanding previously
community development initiatives in the areas of health,
entered into with the Indonesia government in July 2014, PT-FI
education, economic development and local infrastructure of the
provided an assurance bond to support its commitment to construct
area. Throughout 2019, PT-FI consulted with key stakeholders to
a greenfield smelter in Indonesia ($132 million based on exchange
restructure the management of the Partnership Fund in
rate as of December 31, 2021).
compliance with PT-FI’s IUPK. Throughout the restructuring
In March 2021, PT-FI received a one-year extension of its export
process, PT-FI continued its contributions to ensure no disruptions
license through March 15, 2022. In December 2021, PT Smelting
in implementation of approved projects. Beginning in February
received a twelve-month extension of its anodes slimes export
2020, the Partnership Fund is managed by a legally-recognized
license, which expires December 9, 2022, subject to review and
Indonesia foundation (Yayasan Pemberdayaan Masyarakat
approval by the Indonesia government every six months.
Amungme dan Kamoro, or YPMAK). PT-FI charged $75 million in
Chiyoda Contract. In July 2021, PT-FI awarded a construction
2021, $36 million in 2020 and $28 million in 2019 to cost of sales
contract to Chiyoda for the construction of a greenfield smelter in
for this commitment.
Gresik, Indonesia with an estimated contract cost of $2.8 billion.
During 2021, PT-FI progressed site preparation activities and
103 2 0 2 1 A n n u a l R ep o r t
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
Guarantees. FCX provides certain financial guarantees (including
In April 2020, FCX entered into forward sales contracts for
indirect guarantees of the indebtedness of others) and indemnities.
150 million pounds of copper for settlement in May and June of
Prior to its acquisition by FCX, FMC and its subsidiaries have, as
2020. The forward sales provided for fixed pricing of $2.34 per
part of merger, acquisition, divestiture and other transactions,
pound of copper on approximately 60 percent of North America’s
from time to time, indemnified certain sellers, buyers or other parties
sales volumes for May and June 2020. These contracts
related to the transaction from and against certain liabilities
resulted in hedging losses totaling $24 million for the year
associated with conditions in existence (or claims associated with
ended December 31, 2020. There were no remaining forward
actions taken) prior to the closing date of the transaction. As part
sales contracts after June 30, 2020.
of these transactions, FMC indemnified the counterparty from and
A discussion of FCX’s other derivative contracts and
against certain excluded or retained liabilities existing at the time
programs follows.
of sale that would otherwise have been transferred to the party at
closing. These indemnity provisions generally now require FCX to
indemnify the party against certain liabilities that may arise in the
future from the pre-closing activities of FMC for assets sold or
purchased. The indemnity classifications include environmental,
tax and certain operating liabilities, claims or litigation existing at
closing and various excluded liabilities or obligations. Most of these
indemnity obligations arise from transactions that closed many
years ago, and given the nature of these indemnity obligations, it is
not possible to estimate the maximum potential exposure. Except
as described in the following sentence, FCX does not consider any
of such obligations as having a probable likelihood of payment
that is reasonably estimable, and accordingly, has not recorded any
obligations associated with these indemnities. With respect to
FCX’s environmental indemnity obligations, any expected costs
from these guarantees are accrued when potential environmental
obligations are considered by management to be probable and
the costs can be reasonably estimated.
NOTE 14. FINANCIAL INSTRUMENTS
Derivatives Designated as Hedging Instruments—
Fair Value Hedges
Copper Futures and Swap Contracts. Some of FCX’s U.S. copper
rod and cathode customers request a fixed market price instead
of the COMEX average copper price in the month of shipment.
FCX hedges this price exposure in a manner that allows it to
receive the COMEX average price in the month of shipment while
the customers pay the fixed price they requested. FCX accomplishes
this by entering into copper futures or swap contracts. Hedging
gains or losses from these copper futures and swap contracts are
recorded in revenues. FCX did not have any significant gains or
losses resulting from hedge ineffectiveness during the year ended
December 31, 2021. At December 31, 2021, FCX held copper
futures and swap contracts that qualified for hedge accounting for
78 million pounds at an average contract price of $4.30 per pound,
with maturities through October 2023.
A summary of gains (losses) recognized in revenues for
derivative financial instruments related to commodity contracts
that are designated and qualify as fair value hedge transactions,
FCX does not purchase, hold or sell derivative financial instruments
including the unrealized gains (losses) on the related hedged item
unless there is an existing asset or obligation, or it anticipates a
follows (in millions):
future activity that is likely to occur and will result in exposure to
market risks, which FCX intends to offset or mitigate. FCX does not
enter into any derivative financial instruments for speculative
purposes, but has entered into derivative financial instruments in
limited instances to achieve specific objectives. These objectives
principally relate to managing risks associated with commodity
price changes, foreign currency exchange rates and interest rates.
Commodity Contracts. From time to time, FCX has entered into
derivative contracts to hedge the market risk associated with
fluctuations in the prices of commodities it purchases and sells.
Derivative financial instruments used by FCX to manage its risks
do not contain credit risk-related contingent provisions.
2021
2020
2019
Copper futures and swap contracts:
Unrealized (losses) gains:
Derivative financial instruments
Hedged item—firm sales commitments
$ (4)
4
$ 9
(9)
$ 15
(15)
Realized gains (losses):
Matured derivative financial instruments
65
22
(8)
104 Fre e por t-McMoR an
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
Derivatives Not Designated as Hedging Instruments
hedge against changes in copper prices, with the mark-to-market
Embedded Derivatives. Certain FCX concentrate, copper cathode
and gold sales contracts provide for provisional pricing primarily
based on the LME copper price or the COMEX copper price and the
London gold price at the time of shipment as specified in the
hedging gains or losses recorded in production and delivery
costs. At December 31, 2021, Atlantic Copper held net copper
forward sales contracts for 2 million pounds at an average contract
price of $4.53 per pound, with maturities through March 2022.
contract. FCX receives market prices based on prices in the specified
Summary of Gains (Losses). A summary of the realized and
future month, which results in price fluctuations recorded in
unrealized gains (losses) recognized in operating income for
revenues until the date of settlement. FCX records revenues and
commodity contracts that do not qualify as hedge transactions,
invoices customers at the time of shipment based on then-current
including embedded derivatives, follows (in millions):
LME or COMEX copper prices and the London gold prices as
specified in the contracts, which results in an embedded derivative
(i.e., a pricing mechanism that is finalized after the time of delivery)
that is required to be bifurcated from the host contract. The host
contract is the sale of the metals contained in the concentrate
or cathode at the then-current LME or COMEX copper price and
the London gold price. FCX applies the normal purchases and
normal sales scope exception in accordance with derivatives and
hedge accounting guidance to the host contract in its concentrate
or cathode sales agreements since these contracts do not allow
for net settlement and always result in physical delivery. The
embedded derivative does not qualify for hedge accounting and
is adjusted to fair value through earnings each period, using
the period-end LME or COMEX copper forward prices and the
adjusted London gold price, until the date of final pricing.
Similarly, FCX purchases copper under contracts that provide for
provisional pricing. Mark-to-market price fluctuations from these
embedded derivatives are recorded through the settlement date and
are reflected in revenues for sales contracts and in inventory for
purchase contracts.
A summary of FCX’s embedded derivatives at December 31,
2021, follows:
Average Price
Per Unit
Open
Positions Contract Market
Maturities
Through
Embedded derivatives in provisional
sales contracts:
Copper (millions of pounds)
Gold (thousands of ounces)
Embedded derivatives in provisional
purchase contracts:
682
223
$ 4.37
1,797
$ 4.42
July 2022
1,822 March 2022
Embedded derivatives in provisional
sales contractsa:
Copper
Gold and other
Copper forward contractsb
2021
2020
2019
$ 425
(2)
(15)
$ 259
45
3
$ 34
20
(7)
a. Amounts recorded in revenues.
b. Amounts recorded in cost of sales as production and delivery costs.
Unsettled Derivative Financial Instruments
A summary of the fair values of unsettled commodity derivative
financial instruments follows:
December 31,
2021
2020
Commodity Derivative Assets:
Derivatives designated as hedging instruments:
Copper futures and swap contracts
$ 12
$ 15
Derivatives not designated as hedging instruments:
Embedded derivatives in provisional sales/
purchase contracts
Copper forward contracts
Total derivative assets
Commodity Derivative Liabilities:
Derivatives not designated as hedging instruments:
Embedded derivatives in provisional sales/
purchase contracts
Copper forward contracts
Total derivative liabilities
64
1
$ 77
$ 27
1
$ 28
169
—
$ 184
$ 21
—
$ 21
FCX’s commodity contracts have netting arrangements with
counterparties with which the right of offset exists, and it is FCX’s
policy to generally offset balances by contract on its balance
sheet. FCX’s embedded derivatives on provisional sales/purchase
Copper (millions of pounds)
132
4.38
4.42
April 2022
contracts are netted with the corresponding outstanding
Copper Forward Contracts. Atlantic Copper enters into copper
forward contracts designed to hedge its copper price risk
whenever its physical purchases and sales pricing periods do not
match. These economic hedge transactions are intended to
receivable/payable balances.
105 2 0 2 1 A n n u a l R ep o r t
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
A summary of these unsettled commodity contracts that are
December 31, 2021, and $0.3 billion at December 31, 2020),
offset in the balance sheet follows (in millions):
restricted cash, restricted cash equivalents, accounts receivable,
Assets
2021
2020
Liabilities
2020
2021
accounts payable and accrued liabilities, and dividends payable
approximates fair value because of their short-term nature and
generally negligible credit losses (refer to Note 15 for the fair values
$ 64
13
77
$ 169
15
184
$ 27
1
28
$ 21
—
21
of investment securities, legally restricted funds and debt).
In addition, as of December 31, 2021, FCX has contingent
consideration assets related to the sales of certain oil and gas
properties (refer to Note 15 for the related fair values).
Trade Accounts Receivable Agreements. In first-quarter
2021, PT-FI entered into agreements to sell certain trade accounts
receivables to unrelated third-party financial institutions. The
3
1
4
1
—
1
3
1
4
1
—
1
agreements were entered into in the normal course of business to fund
the working capital for the additional quantity of copper to be supplied
by PT-FI to PT Smelting. The balances sold under the agreements were
December 31,
Gross amounts recognized:
Commodity contracts:
Embedded derivatives in provisional
sales/purchase contracts
Copper derivatives
Less gross amounts of offset:
Commodity contracts:
Embedded derivatives in provisional
sales/purchase contracts
Copper derivatives
Net amounts presented in balance sheet:
Commodity contracts:
Embedded derivatives in provisional
sales/purchase contracts
Copper derivatives
Balance sheet classification:
Trade accounts receivable
Other current assets
Accounts payable and accrued liabilities
61
12
$ 73
$ 51
12
10
$ 73
168
15
$ 183
$ 168
15
—
$ 183
24
—
$ 24
$ 14
—
10
$ 24
20
—
$ 20
$ —
—
20
$ 20
Credit Risk. FCX is exposed to credit loss when financial
institutions with which it has entered into derivative transactions
(commodity, foreign exchange and interest rate swaps) are unable
to pay. To minimize the risk of such losses, FCX uses counterparties
that meet certain credit requirements and periodically reviews the
creditworthiness of these counterparties. As of December 31, 2021,
the maximum amount of credit exposure associated with derivative
transactions was $77 million.
Other Financial Instruments. Other financial instruments
excluded from trade accounts receivable on the consolidated balance
sheet at December 31, 2021. Receivables are considered sold when
(i) they are transferred beyond the reach of PT-FI and its creditors,
(ii) the purchaser has the right to pledge or exchange the receivables,
and (iii) PT-FI has no continuing involvement in the transferred
receivables. In addition, PT-FI provides no other forms of continued
financial support to the purchaser of the receivables once the receivables
are sold.
Gross amounts sold under these arrangements totaled $431 million
in 2021. Discounts on the sold receivables totaled $2 million in 2021.
Cash, Cash Equivalents, Restricted Cash and Restricted Cash
Equivalents. The following table provides a reconciliation of total cash,
cash equivalents, restricted cash and restricted cash equivalents
presented in the consolidated statements of cash flows (in millions):
December 31,
2021
2020
Balance sheet components:
Cash and cash equivalents
Restricted cash and restricted cash equivalents
included in:
Other current assets
Other assets
$ 8,068
$ 3,657
114
132
97
149
include cash and cash equivalents, restricted cash, restricted cash
Total cash, cash equivalents, restricted cash
equivalents, accounts receivable, investment securities, legally
restricted funds, accounts payable and accrued liabilities,
dividends payable and debt. The carrying value for cash and cash
equivalents (which included time deposits of $0.2 billion at
and restricted cash equivalents presented in the
consolidated statements of cash flows
$ 8,314
$ 3,903
106 Fre e por t-McMoR an
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
NOTE 15. FAIR VALUE MEASUREMENT
Fair value accounting guidance includes a hierarchy that prioritizes the
inputs to valuation techniques used to measure fair value. The hierarchy
the sale of the Deepwater GOM oil and gas properties (which was
recorded under the loss recovery approach) and debt. A summary of the
carrying amount and fair value of FCX’s financial instruments
gives the highest priority to unadjusted quoted prices in active markets
(including those measured at NAV as a practical expedient), other
for identical assets or liabilities (Level 1) and the lowest priority to
than cash and cash equivalents, restricted cash, restricted cash
unobservable inputs (Level 3). FCX did not have any significant transfers
equivalents, accounts receivable, accounts payable and accrued
in or out of Level 3 for 2021.
FCX’s financial instruments are recorded on the consolidated balance
sheets at fair value except for contingent consideration associated with
liabilities, and dividends payable (refer to Note 14) follows:
At December 31, 2021
Total
NAV
Fair Value
Level 1
Level 2
Level 3
$
50
29
79
64
53
45
20
18
8
1
209
64
12
1
77
81
27
1
28
10,630
$ —
29
29
64
—
—
—
—
—
—
64
—
—
—
—
—
—
—
—
—
$
$ 50
—
50
—
—
—
—
53
45
20
18
—
1
137
64
3
—
67
—
27
—
27
10,630
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
81
—
—
—
—
—
—
—
—
—
8
—
8
—
9
1
10
—
—
1
1
—
Assets
Investment securities:a,b
Equity securities
U.S. core fixed income fund
Total
Legally restricted funds:a
U.S. core fixed income fund
Government bonds and notes
Corporate bonds
Government mortgage-backed securities
Asset-backed securities
Money market funds
Municipal bonds
Total
Derivatives:
Embedded derivatives in provisional sales/purchase
contracts in a gross asset positionc
Copper futures and swap contractsc
Copper forward contractsc
Total
Contingent consideration for the sale of the
Deepwater GOM oil and gas propertiesa
Liabilities
Derivatives:c
Embedded derivatives in provisional sales/purchase
contracts in a gross liability position
Copper forward contracts
Total
Long-term debt, including current portiond
Carrying
Amount
$ 50
29
79
64
53
45
20
18
8
1
209
64
12
1
77
90
27
1
28
9,450
107 2 0 2 1 A n n u a l R ep o r t
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
At December 31, 2020
Carrying
Amount
Total
NAV
Fair Value
Level 1
Level 2
Level 3
Assets
Investment securities:a,b
U.S. core fixed income fund
Equity securities
Total
Legally restricted funds:a
U.S. core fixed income fund
Government bonds and notes
Corporate bonds
Government mortgage-backed securities
Asset-backed securities
Money market funds
Collateralized mortgage-backed securities
Municipal bonds
Total
Derivatives:
Embedded derivatives in provisional sales/purchase
contracts in a gross asset positionc
Copper futures and swap contractsc
Total
Contingent consideration for the sale of the
Deepwater GOM oil and gas propertiesa
Liabilities
Derivatives:c
Embedded derivatives in provisional sales/purchase
contracts in a gross liability position
Long-term debt, including current portiond
$
$
29
7
36
$
$ —
7
7
29
7
36
65
49
43
30
16
5
4
1
213
169
15
184
$ 29
—
29
65
—
—
—
—
—
—
—
65
—
—
—
88
—
21
10,994
—
—
65
49
43
30
16
5
4
1
213
169
15
184
108
21
9,711
—
—
—
—
49
43
30
16
—
4
1
143
169
2
171
—
21
10,994
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
88
—
—
—
—
—
—
—
5
—
—
5
—
13
13
—
—
—
a. Current portion included in other current assets and long-term portion included in other assets.
b. Excludes time deposits (which approximated fair value) included in (i) other current assets of $114 million at December 31, 2021, and $97 million at December 31, 2020, and (ii) other assets of $132 million at
December 31, 2021, and $148 million at December 31, 2020, primarily associated with an assurance bond to support PT-FI’s commitment for the development of a greenfield smelter in Indonesia (refer to Note 13 for
further discussion) and PT-FI’s closure and reclamation guarantees (refer to Note 12 for further discussion).
c. Refer to Note 14 for further discussion and balance sheet classifications.
d. Recorded at cost except for debt assumed in acquisitions, which are recorded at fair value at the respective acquisition dates.
108 Fre e por t-McMoR an
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
Valuation Techniques. Equity securities are valued at the closing
handling agreement for an offshore platform, with the related
price reported on the active market on which the individual
payments commencing in third-quarter 2018. The contingent
securities are traded and, as such, are classified within Level 1 of
consideration included in (i) other current assets totaled $20 million
the fair value hierarchy.
at December 31, 2021, and $12 million at December 31, 2020,
The U.S. core fixed income fund is valued at NAV. The fund
and (ii) other assets totaled $70 million at December 31, 2021, and
strategy seeks total return consisting of income and capital
$96 million at December 31, 2020. The fair value of this contingent
appreciation primarily by investing in a broad range of investment-
consideration was calculated based on a discounted cash flow
grade debt securities, including U.S. government obligations,
model using inputs that include third-party estimates for reserves,
corporate bonds, mortgage-backed securities, asset-backed
production rates and production timing, and discount rates.
securities and money market instruments. There are no restrictions
Because significant inputs are not observable in the market, the
on redemptions (which are usually within one business day of notice).
contingent consideration is classified within Level 3 of the fair
Fixed income securities (government securities, corporate
value hierarchy.
bonds, asset-backed securities, collateralized mortgage-backed
Long-term debt, including current portion, is primarily valued
securities and municipal bonds) are valued using a bid-evaluation
using available market quotes and, as such, is classified within
price or a mid-evaluation price. These evaluations are based on
Level 2 of the fair value hierarchy.
quoted prices, if available, or models that use observable inputs
The techniques described above may produce a fair value
and, as such, are classified within Level 2 of the fair value hierarchy.
that may not be indicative of NRV or reflective of future fair values.
Money market funds are classified within Level 1 of the fair value
Furthermore, while FCX believes its valuation techniques are
hierarchy because they are valued using quoted market prices in
appropriate and consistent with other market participants, the use
active markets.
of different techniques or assumptions to determine fair value of
FCX’s embedded derivatives on provisional copper concentrate,
certain financial instruments could result in a different fair value
copper cathode and gold purchases and sales are valued using
measurement at the reporting date. There have been no changes in
only quoted monthly LME or COMEX copper forward prices and the
the techniques used at December 31, 2021, as compared to those
adjusted London gold prices at each reporting date based on the
techniques used at December 31, 2020.
month of maturity (refer to Note 14 for further discussion); however,
A summary of the changes in the fair value of FCX’s Level 3
FCX’s contracts themselves are not traded on an exchange. As
instrument, contingent consideration for the sale of the
a result, these derivatives are classified within Level 2 of the fair
Deepwater GOM oil and gas properties, for the years ended
value hierarchy.
December 31 follows:
Balance at beginning of year
Net unrealized gains (losses) related
to assets still held at the end of the year
Settlements
Balance at end of year
2021
$ 88
12
(19)
$ 81
2020
$ 108
(6)
(14)
$ 88
2019
$ 127
2
(21)
$ 108
FCX’s derivative financial instruments for copper futures and
swap contracts and copper forward contracts that are traded on
the respective exchanges are classified within Level 1 of the fair
value hierarchy because they are valued using quoted monthly
COMEX or LME prices at each reporting date based on the month
of maturity (refer to Note 14 for further discussion). Certain of
these contracts are traded on the over-the-counter market and are
classified within Level 2 of the fair value hierarchy based on
COMEX and LME forward prices.
In December 2016, FCX’s sale of its Deepwater GOM oil and gas
properties included up to $150 million in contingent consideration
that was recorded at the total amount under the loss recovery
approach. The contingent consideration is being received over
time as future cash flows are realized from a third-party production
109 2 0 2 1 A n n u a l R e p o r t
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
NOTE 16. BUSINESS SEGMENT INFORMATION
Product Revenues. FCX’s revenues attributable to the products it
sold for the years ended December 31 follow:
2021
2020
2019
Copper:
Concentrate
Cathode
Rod and other refined copper products
Purchased coppera
Gold
Molybdenum
Otherb
Adjustments to revenues:
Treatment charges
Royalty expensec
Export dutiesd
Revenues from contracts with customers
Embedded derivativese
Total consolidated revenues
$ 8,705
5,900
3,369
757
2,580
1,283
821
(445)
(330)
(218)
22,422
423
$ 22,845
$ 4,294
4,204
2,052
821
1,702
848
592
(362)
(165)
(92)
13,894
304
$ 14,198
$ 4,566
3,656
2,110
1,060
1,620
1,169
905
(404)
(113)
(221)
14,348
54
$ 14,402
a. FCX purchases copper cathode primarily for processing by its Rod & Refining operations.
b. Primarily includes revenues associated with silver and cobalt.
c. Reflects royalties on sales from PT-FI and Cerro Verde that will vary with the volume of metal sold
and prices.
d. Reflects PT-FI export duties. The year 2019 includes charges totaling $155 million primarily
associated with an unfavorable Indonesia Supreme Court ruling related to certain disputed export
duties (refer to Note 12).
e. Refer to Note 14 for discussion of embedded derivatives related to FCX’s provisionally priced
concentrate and cathode sales contracts.
Years Ended December 31,
2021
2020
2019
Revenues:a
U.S.
Switzerland
Indonesia
Japan
Spain
China
United Kingdom
Germany
Chile
Korea
Egypt
Philippines
India
Other
Total
$ 7,168
3,682
3,132
2,372
1,495
1,044
659
469
343
270
268
264
207
1,472
$ 22,845
$ 5,248
2,032
1,760
1,205
785
692
491
248
221
89
153
34
152
1,088
$ 14,198
$ 5,107
2,223
1,894
1,181
884
531
233
311
242
140
123
73
107
1,353
$ 14,402
a. Revenues are attributed to countries based on the location of the customer.
Major Customers and Affiliated Companies. Copper concentrate
sales to PT Smelting totaled 14 percent of FCX’s consolidated
revenues in 2021, 12 percent in 2020 and 13 percent in 2019, and
they are the only customer that accounted for 10 percent or more
of FCX’s consolidated revenues during the three years ended
December 31, 2021.
Consolidated revenues include sales to the noncontrolling
interest owners of FCX’s South America mining operations totaling
Geographic Area. Information concerning financial data by
$1.4 billion in 2021, $0.9 billion in 2020 and $1.0 billion in 2019, and
geographic area follows:
December 31,
Long-lived assets:a
Indonesia
U.S.
Peru
Chile
Other
Total
a. Excludes deferred tax assets and intangible assets.
2021
2020
$ 16,288
8,292
6,827
1,110
261
$ 32,778
$ 15,567
8,420
6,989
1,172
290
$ 32,438
PT-FI’s sales to PT Smelting totaling $3.1 billion in 2021, $1.8 billion
in 2020 and $1.9 billion in 2019.
Labor Matters. As of December 31, 2021, approximately 31 percent
of FCX’s global labor force was covered by collective bargaining
agreements, and approximately 14 percent was covered by agreements
that will or were scheduled to expire during 2022. In February 2022,
PT-FI completed negotiations with its unions on a new two-year
collective bargaining agreement that is effective through March 2024.
Business Segments. FCX has organized its mining operations
into four primary divisions—North America copper mines, South
America mining, Indonesia mining and Molybdenum mines, and
operating segments that meet certain thresholds are reportable
segments. Separately disclosed in the following tables are FCX’s
reportable segments, which include the Morenci, Cerro Verde and
Grasberg (Indonesia Mining) copper mines, the Rod & Refining
operations and Atlantic Copper Smelting & Refining.
Intersegment sales between FCX’s business segments are
based on terms similar to arm’s length transactions with third
parties at the time of the sale. Intersegment sales may not
be reflective of the actual prices ultimately realized because of a
variety of factors, including additional processing, timing of
sales to unaffiliated customers and transportation premiums.
110 Fre epor t-McMoR an
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
FCX defers recognizing profits on sales from its mines to other
The Cerro Verde open-pit copper mine, located near Arequipa,
segments, including Atlantic Copper Smelting & Refining and on
Peru, produces copper cathode and copper concentrate. In
PT-FI’s sales to PT Smelting (on 25.0 percent prior to April 30, 2021,
addition to copper, the Cerro Verde mine also produces molybdenum
and 39.5 percent thereafter) until final sales to third parties occur.
concentrate and silver. During 2021, the Cerro Verde mine
Quarterly variations in ore grades, the timing of intercompany
produced 85 percent of FCX’s South America copper and 23 percent
shipments and changes in product prices result in variability in FCX’s
of FCX’s consolidated copper production.
net deferred profits and quarterly earnings.
Indonesia Mining. Indonesia mining includes PT-FI’s
FCX allocates certain operating costs, expenses and capital
Grasberg minerals district that produces copper concentrate that
expenditures to its operating divisions and individual segments.
contains significant quantities of gold and silver. During 2021,
However, not all costs and expenses applicable to an operation are
PT-FI’s Grasberg minerals district produced 35 percent of FCX’s
allocated. U.S. federal and state income taxes are recorded and
consolidated copper production and 99 percent of FCX’s
managed at the corporate level (included in Corporate, Other
consolidated gold production.
& Eliminations), whereas foreign income taxes are recorded and
Molybdenum Mines. Molybdenum mines include the wholly
managed at the applicable country level. In addition, most
owned Henderson underground mine and Climax open-pit mine,
mining exploration and research activities are managed on a
both in Colorado. The Henderson and Climax mines produce
consolidated basis, and those costs, along with some selling,
high-purity, chemical-grade molybdenum concentrate, which is
general and administrative costs, are not allocated to the
typically further processed into value-added molybdenum
operating divisions or individual segments. Accordingly, the
chemical products.
following Financial Information by Business Segment reflects
Rod & Refining. The Rod & Refining segment consists of copper
management determinations that may not be indicative of what
conversion facilities located in North America, and includes a
the actual financial performance of each operating division or
refinery and two rod mills, which are combined in accordance with
segment would be if it was an independent entity.
segment reporting aggregation guidance. These operations
North America Copper Mines. FCX operates seven open-pit
process copper produced at FCX’s North America copper mines
copper mines in North America—Morenci, Safford (including
and purchased copper into copper cathode and rod. At times these
Lone Star), Bagdad, Sierrita and Miami in Arizona, and Chino and
operations refine copper and produce copper rod for customers on
Tyrone in New Mexico. The North America copper mines include
a toll basis. Toll arrangements require the tolling customer to
open-pit mining, sulfide-ore concentrating, leaching and SX/EW
deliver appropriate copper-bearing material to FCX’s facilities for
operations. A majority of the copper produced at the North
processing into a product that is returned to the customer, who
America copper mines is cast into copper rod by FCX’s Rod &
pays FCX for processing its material into the specified products.
Refining segment. In addition to copper, certain of FCX’s North
Atlantic Copper Smelting & Refining. Atlantic Copper smelts
America copper mines also produce molybdenum concentrate,
and refines copper concentrate and markets refined copper and
gold and silver.
precious metals in slimes. During 2021, Atlantic Copper purchased
The Morenci open-pit mine, located in southeastern Arizona,
18 percent of its concentrate requirements from FCX’s North
produces copper cathode and copper concentrate. In addition to
America copper mines, 7 percent from FCX’s South America mining
copper, the Morenci mine also produces molybdenum concentrate.
operations and 9 percent from FCX’s Indonesia mining operations,
During 2021, the Morenci mine produced 43 percent of FCX’s
with the remainder purchased from unaffiliated third parties.
North America copper and 16 percent of FCX’s consolidated
Corporate, Other & Eliminations. Corporate, Other &
copper production.
Eliminations consists of FCX’s other mining, oil and gas operations
South America Mining. South America mining includes two
and other corporate and elimination items, which include the Miami
operating copper mines—Cerro Verde in Peru and El Abra in Chile.
smelter, Freeport Cobalt (until the sale of it in September 2021),
These operations include open-pit mining, sulfide ore concentrating,
molybdenum conversion facilities in the U.S. and Europe, the
leaching and SX/EW operations.
greenfield smelter and PMR in Indonesia, certain non-operating
copper mines in North America (Ajo, Bisbee and Tohono in
Arizona) and other mining support entities.
111 2 0 2 1 A n n u a l R e p o r t
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
FINANCIAL INFORMATION BY BUSINESS SEGMENT
Year Ended December 31, 2021
Revenues:
Unaffiliated customers
Intersegment
Production and delivery
Depreciation, depletion and amortization
Metals inventory adjustments
Selling, general and administrative expenses
Mining exploration and research expenses
Environmental obligations and shutdown costs
Net gain on sales of assets
Operating income (loss)
Interest expense, net
Provision for (benefit from) income taxes
Total assets at December 31, 2021
Capital expenditures
North America Copper Mines
South America Mining
Morenci
Other
Total
Cerro
Verde
Other
Total
Indonesia Molybdenum
Mining
Mines
Rod &
Refining
Atlantic
Copper
Smelting
& Refining
Corporate,
Other &
Eliminations
FCX
Total
$ 82
2,728
1,226
152
13
2
—
—
—
1,417
—
—
2,708
135
$ 180
3,835
2,235
217
—
2
1
(1)
—
1,561
1
—
5,208
207
$ 262
6,563
3,461
369
13
4
1
(1)
—
2,978
1
—
7,916
342
$ 3,736
460
2,000b
366
—
8
—
—
—
1,822
28
730
8,694
132
$ 720
—
429
47
—
—
—
—
—
244
—
90
1,921
30
$ 4,456
460
2,429
413
—
8
—
—
—
2,066
28
820
10,615
162
$ 7,241
282
2,425c
1,049
—
111
—
—
—
3,938
48
1,524f
18,971
1,296
$ —
444
253
67
1
—
—
—
—
123
—
—
1,713
6
$ 6,356 $ 2,961
—
29
2,907
6,381
28
5
—
—
24
—
—
—
—
—
(19)
—
21
(1)
$ 1,569a
(7,778)
(5,840)d
67
2
236
54
92
(61)e
(759)
—
—
228
2
6
—
1,318
34
519
(45)
7,261
273g
$ 22,845
—
12,016
1,998
16
383
55
91
(80)
8,366
602
2,299
48,022
2,115
a. Includes revenues from FCX’s molybdenum sales company, which includes sales of molybdenum produced by the Molybdenum mines and by certain of the North America and South America copper mines.
b. Includes nonrecurring charges totaling $92 million associated with labor-related charges at Cerro Verde for agreements reached with its hourly employees.
c. Includes charges totaling $340 million associated with unfavorable ARO change. Refer to Note 12 for further discussion.
d. Includes charges associated with the major maintenance turnaround at the Miami Smelter totaling $87 million.
e. Includes a $60 million gain on the sale of FCX’s remaining cobalt business located in Kokkola, Finland. Refer to Note 2 for further discussion.
f.
g. Includes capital expenditures for the Indonesia smelter projects of $222 million.
Includes net tax benefits of $189 million associated with the release of a portion of the valuation allowance recorded against PT Rio Tinto NOLs. Refer to Note 11 for further discussion.
112 Fre epor t-McMoR an
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
FINANCIAL INFORMATION BY BUSINESS SEGMENT (continued)
Year Ended December 31, 2020
Revenues:
Unaffiliated customers
Intersegment
Production and delivery
Depreciation, depletion and amortization
Metals inventory adjustments
Selling, general and administrative expenses
Mining exploration and research expenses
Environmental obligations and shutdown costs
Net gain on sales of assets
Operating income (loss)
Interest expense, net
Provision for income taxes
Total assets at December 31, 2020
Capital expenditures
North America Copper Mines
South America Mining
Morenci
Other
Total
Cerro
Verde
Other
Total
Indonesia Molybdenum
Mining
Mines
Rod &
Refining
Atlantic
Copper
Smelting
& Refining
Corporate,
Other &
Eliminations
FCX
Total
$
29
2,015
1,269
166
4
2
—
—
—
603
2
—
2,574
102
$
48
2,272
1,831
189
48
2
2
(1)
—
249
—
—
5,163
326
$
77
4,287
3,100
355
52
4
2
(1)
—
852
2
—
7,737
428
$ 2,282
242
1,599
367
—
6
—
—
—
552d
139
238
8,474
141
$ 431
—
379
54
3
—
—
—
—
(5)
—
1
1,678
42
$ 2,713
242
1,978
421
3
6
—
—
—
547
139
239
10,152
183
$ 3,534
80
1,606
580
—
108
—
—
—
1,320
$ —
222
230
57
10
—
—
—
—
(75)
39e
606
16,918
1,161
—
—
1,760
19
$ 4,781
33
4,819
16
3
—
—
1
—
(25)d
—
—
211
6
$ 2,020
17
1,962
29
—
21
—
—
—
25
6
2
877
29
$ 1,073a
(4,881)
(3,664)
70
28
231
48
159b
(473)c
(207)d
412
97f
4,489
135g
$ 14,198
—
10,031
1,528
96
370
50
159
(473)
2,437d
598
944
42,144
1,961
a. Includes revenues from FCX’s molybdenum sales company, which includes sales of molybdenum produced by the Molybdenum mines and by certain of the North America and South America copper mines.
b. Includes charges totaling $130 million associated with a framework for the resolution of all current and future potential talc-related litigation. Refer to Note 12 for further discussion.
c. Includes a $486 million gain associated with the sale of FCX’s interests in the Kisanfu undeveloped project. Refer to Note 2 for further discussion.
d. Includes charges totaling $258 million associated with (i) idle facility costs (Cerro Verde), contract cancellation and other charges directly related to the COVID-19 pandemic and (ii) the April 2020 revised operating
plans (including employee separation costs). These charges were primarily recorded in the Cerro Verde segment ($89 million), Corporate, Other & Eliminations ($57 million) and the Rod & Refining segment
($30 million).
e. Includes charges totaling $35 million associated with PT-FI’s historical contested tax audits. Refer to Note 12 for further discussion.
f.
Includes tax charges totaling $135 million associated with the sale of the Kisanfu undeveloped project, partly offset by tax credits of $53 million associated with the reversal of a year-end 2019 tax charge related to
the sale of FCX’s interest in the lower zone of the Timok exploration project.
g. Includes capital expenditures for the Indonesia smelter projects of $105 million.
Year Ended December 31, 2019
Revenues:
Unaffiliated customers
Intersegment
Production and delivery
Depreciation, depletion and amortization
Metals inventory adjustments
Selling, general and administrative expenses
Mining exploration and research expenses
Environmental obligations and shutdown costs
Net gain on sales of assets
Operating income (loss)
Interest expense, net
Provision for (benefit from) income taxes
Total assets at December 31, 2019
Capital expenditures
North America Copper Mines
South America Mining
Morenci
Other
Total
Cerro
Verde
Other
Total
Indonesia Molybdenum
Mining
Mines
Rod &
Refining
Atlantic
Copper
Smelting
& Refining
Corporate,
Other &
Eliminations
FCX
Total
$ 143
1,864
1,376
171
1
2
—
1
—
456
3
—
2,880
231
$ 224
2,155
1,943
178
29
2
2
—
—
225
1
—
5,109
646
$ 367
4,019
3,319
349
30
4
2
1
—
681
4
—
7,989
877
$ 2,576
313
1,852
406
2
8
—
—
—
621
114
250
8,612
232
$ 499
—
474
68
—
—
—
—
—
(43)
—
(11)
1,676
24
$ 3,075
313
2,326
474
2
8
—
—
—
578
114
239
10,288
256
$ 2,713a $ —
344
299
62
50
—
—
—
—
(67)
58
2,055c
406
5
125
—
—
—
180
82c
167c
16,345
1,369
—
—
1,798
19
$ 4,457
26
4,475
9
—
—
—
—
—
(1)
—
—
193
5
$ 2,063
5
1,971
28
—
20
—
—
—
49
22
5
761
34
$ 1,727b
(4,765)
(2,911)
84
92
237
102
104
(417)d
(329)
398
99e
3,435
92
$ 14,402
—
11,534
1,412
179
394
104
105
(417)
1,091
620
510
40,809
2,652
a. Includes charges totaling $155 million associated with an unfavorable Indonesia Supreme Court ruling related to PT-FI export duties. Refer to Note 12 for further discussion.
b. Includes revenues from FCX’s molybdenum sales company, which includes sales of molybdenum produced by the Molybdenum mines and by certain of the North America and South America copper mines.
c. Includes net charges totaling $28 million in production and delivery costs for an adjustment to the settlement of the historical surface water tax matters with the local regional tax authority in Papua, Indonesia, and
$78 million in interest expense and $103 million of tax charges in provision for income taxes associated with PT-FI’s historical contested tax disputes. Refer to Note 12 for further discussion.
d. Includes net gains totaling $343 million associated with the sale of FCX’s interest in the lower zone of the Timok exploration project and $59 million for the sale of a portion of Freeport Cobalt. Refer to Note 2 for
further discussion.
e. Includes tax charges totaling $53 million associated with the sale of FCX’s interest in the lower zone of the Timok exploration project and $49 million primarily to adjust deferred taxes on historical balance sheet items
in accordance with tax accounting principles.
113 2 0 2 1 A n n u a l R e p o r t
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
NOTE 17. SUPPLEMENTARY MINERAL RESERVE
INFORMATION (UNAUDITED)
Recoverable proven and probable mineral reserves as of
December 31, 2021, have been prepared using industry accepted
practice and conform to the disclosure requirements under
Subpart 1300 of SEC Regulation S-K. FCX’s proven and probable
mineral reserves may not be comparable to similar information
regarding mineral reserves disclosed in accordance with the
guidance in other countries. Proven and probable mineral reserves
were determined by the use of mapping, drilling, sampling,
assaying and evaluation methods generally applied in the mining
industry. Mineral reserves, as used in the reserve data presented
here, mean an estimate of tonnage and grade of measured and
indicated mineral resources that, in the opinion of the qualified
person, can be the basis of an economically viable project. Proven
mineral reserves are the economically mineable part of a measured
mineral resource. To classify an estimate as a proven mineral
reserve, the qualified person must possess a high degree of
confidence of tonnage, grade and quality. Probable mineral reserves
are the economically mineable part of an indicated or, in some
Estimated recoverable proven and probable mineral reserves at
December 31, 2021, were determined using metals price
assumptions of $2.50 per pound for copper, $1,200 per ounce for
gold and $10 per pound for molybdenum. For the three-year period
ended December 31, 2021, LME copper settlement prices averaged
$3.25 per pound, London PM gold prices averaged $1,654 per
ounce and the weekly average price for molybdenum quoted by
Metals Week averaged $11.97 per pound.
The recoverable proven and probable mineral reserves presented
in the table below represent the estimated metal quantities from
which FCX expects to be paid after application of estimated
metallurgical recoveries and smelter recoveries, where applicable.
Estimated Recoverable Proven and Probable
Mineral Reserves at December 31, 2021
Gold
(million ounces)
Coppera
(billion pounds)
Molybdenum
(billion pounds)
North America
South America
Indonesiab
Consolidated basisc,d
Net equity interestb,e
43.0
31.9
32.2
107.2
76.2
0.5
—
26.6
27.1
14.2
2.69
0.69
—
3.39
3.06
cases, a measured mineral resource. The qualified person’s level
a. Estimated consolidated recoverable copper reserves included 1.8 billion pounds in leach stockpiles
of confidence will be lower in determining a probable mineral
reserve than it would be in determining a proven mineral reserve.
To classify an estimate as a probable mineral reserve, the qualified
person’s confidence must still be sufficient to demonstrate that
extraction is economically viable considering reasonable investment
and market assumptions.
FCX’s mineral reserve estimates are based on the latest available
geological and geotechnical studies. FCX conducts ongoing
studies of its ore bodies to optimize economic values and to manage
risk. FCX revises its mine plans and estimates of proven and
probable mineral reserves as required in accordance with the
latest available studies.
and 0.3 billion pounds in mill stockpiles.
b. Estimated recoverable proven and probable mineral reserves from Indonesia reflect estimates of
minerals that can be recovered through 2041. As a result, PT-FI’s current long-term mine plan and
planned operations are based on the assumption that PT-FI will abide by the terms and conditions
of the IUPK and will be granted the 10-year extension from 2031 through 2041 (refer to Note 13 for
discussion of PT-FI’s IUPK). As a result, PT-FI will not mine all of these mineral reserves during the
initial term of the IUPK. Prior to the end of 2031, PT-FI expects to mine 48 percent of aggregate
proven and probable recoverable mineral reserves at December 31, 2021, representing 53 percent
of FCX’s net equity share of recoverable copper reserves and 55 percent of FCX’s net equity share
of recoverable gold reserves.
c. Consolidated mineral reserves represent estimated metal quantities after reduction for joint venture
partner interests at the Morenci mine in North America (refer to Note 3 for further discussion).
Excluded from the table above were FCX’s estimated recoverable proven and probable mineral
reserves of 346 million ounces of silver, which were determined using $15 per ounce.
d. May not foot because of rounding.
e. Net equity interest mineral reserves represent estimated consolidated metal quantities further
reduced for noncontrolling interest ownership (refer to Note 3 for further discussion of FCX’s
ownership in subsidiaries). FCX’s net equity interest for estimated metal quantities in Indonesia
reflects approximately 81 percent for 2022 and 48.76 percent from 2023 through 2041. Excluded
from the table above were FCX’s estimated recoverable proven and probable mineral reserves of
230 million ounces of silver.
114 Fre epor t -McMoR an
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
Estimated Recoverable Proven and Probable Mineral Reserves
at December 31, 2021
Average Ore Grade
Per Metric Tona
Orea
(million
metric tons)
Copper
(%)
Gold
(grams)
Molybdenum
(%)
Recoverable Proven and
Probable Reservesb
Gold
(million
ounces)
Molybdenum
(billion
pounds)
Copper
(billion
pounds)
3,918
2,430
2,534
685
308
151
54
19
—
0.23
0.23
0.32
0.45
0.44
—
—
0.28
—
—
—c
—c
—
0.03
—
—
—
—
—c
0.02
0.02
—
—
0.15
0.16
—
—
3,999
732
0.36
0.42
—
—
0.01
—
1.06
0.85
2.26
0.71
0.73
0.97
1.03
0.91
—
—
—
—
857
412
51
351
16,501
13.1
10.3
15.5
5.2
2.5
—
—
0.2
—c
27.9
4.1
16.7
6.6
2.3
6.6
110.8
107.2
76.2
—
0.1
0.2
—
0.3
—
—
—
—
—
—
12.6
7.6
1.1
5.3
27.1
27.1
14.2
0.15
1.02
0.92
—
—
0.46
0.17
—
—
0.69
—
—
—
—
—
3.43
3.39
3.06
North America
Production stage:
Morenci
Sierrita
Bagdad
Safford, including Lone Star
Chino, including Cobre
Climax
Henderson
Tyrone
Miami
South America
Production stage:
Cerro Verde
El Abra
Indonesiad
Production stage:
Grasberg Block Cave
Deep Mill Level Zone
Big Gossan
Development stage:
Kucing Liar
Total 100% basise
Consolidated basisf
FCX’s net equity interestg
a. Excludes material contained in stockpiles.
b. Includes estimated recoverable metals contained in stockpiles.
c. Amounts not shown because of rounding.
d. Estimated recoverable proven and probable mineral reserves from Indonesia reflect estimates of minerals that can be recovered through 2041. Refer to Note 13 for discussion of PT-FI’s IUPK.
e. Totals may not foot because of rounding.
f. Consolidated mineral reserves represent estimated metal quantities after reduction for Morenci’s joint venture partner interests (refer to Note 3 for further discussion).
g. Net equity interest mineral reserves represent estimated consolidated metal quantities further reduced for noncontrolling interest ownership (refer to Note 3 for further discussion of FCX’s ownership in subsidiaries).
FCX’s net equity interest for estimated metal quantities in Indonesia reflects approximately 81 percent for 2022 and 48.76 percent from 2023 through 2041.
115 2 0 2 1 A n n u a l R ep o r t
P E R F O R M A N C E G R A P H
The following graph compares the change in the cumulative total
S&P Total Market Index that are classified in the metals and
stockholder return on our common stock with the cumulative total
mining sub-industry. This comparison assumes $100 invested on
return of the S&P 500 Stock Index and the S&P Metals and
December 31, 2016, in (a) Freeport-McMoRan Inc. common stock,
Mining Select Industry Index from 2017 through 2021. The S&P
(b) the S&P 500 Stock Index and (c) the S&P Metals and Mining
Metals and Mining Select Industry Index comprises stocks in the
Select Industry Index (with the reinvestment of all dividends).
Comparison of 5-Year Cumulative Total Return
Among Freeport-McMoRan Inc., the S&P 500 Stock Index and the S&P Metals and Mining Select Industry Index
$350
$300
$250
$200
$150
$100
$50
$0
12/31/16
12/31/17
12/31/18
12/31/19
12/31/20
12/31/21
Freeport-McMoRan Inc.
S&P 500 Stock Index
December 31,
2016
2017
2018
2019
2020
2021
$ 100.00
$ 143.75
$ 78.92
$ 102.22
$ 203.50
$ 328.41
100.00
12 1.83
116.49
153.17
181.35
233.41
S&P Metals and Mining Select Industry Index
100.00
120.63
89.20
102.43
119.27
161 .58
116 Fre epor t-McMoR an
S T O C K H O L D E R I N F O R M A T I O N
INVESTOR INQUIRIES
COMMON STOCK DIVIDENDS
The Investor Relations Department is pleased to receive
any inquiries about the company. Our Principles of Business
Conduct and our Annual Report on Form 10-K filed with the U.S.
Securities and Exchange Commission (SEC), which includes
certifications of our Chief Executive Officer and Chief Financial
Officer, are available on our website. Additionally, copies will be
furnished, without charge, to any stockholder of the company
entitled to vote at the annual meeting, upon written request. The
Investor Relations Department can be contacted as follows:
Freeport-McMoRan Inc.
Investor Relations Department
333 North Central Avenue
Phoenix, AZ 85004
Telephone 602.366.8400
fcx.com
TRANSFER AGENT
Questions about lost certificates, lost or missing dividend checks,
or notifications of change of address should be directed to our
transfer agent, registrar and dividend disbursement agent:
Computershare
462 South 4th Street, Suite 1600
Louisville, KY 40202
Telephone 800.953.2493
https://www-us.computershare.com/investor/contact
NOTICE OF ANNUAL MEETING
The annual meeting of stockholders will be held June 9, 2022. Notice
of the annual meeting will be sent to stockholders of record as of the
close of business on April 12, 2022. In accordance with SEC rules,
we will report the voting results of our annual meeting on a Form
8-K, which will be available on our website (fcx.com).
FCX COMMON STOCK
FCX’s common stock trades on the New York Stock Exchange
(NYSE) under the symbol “FCX.” As of March 15, 2022, the
number of holders of record of FCX’s common stock was 10,637.
NYSE composite tape common share price ranges during 2021
and 2020 were:
20220211
2021
2020
High
High
Low
Low
High
First Quarter
$ 39.10
$ 39.10
$ 24.71
$ 24.71
$ 13.64
Second Quarter
46.10 33.03
46.10 33.03
11.68
Third Quarter
Fourth Quarter
39.20
39.20
4242 77.77
42.77
30.02
30.02
3030.9393
30.93
17.50
26.83
Low
$ 4.82
6.14
11.24
15.22
On February 2, 2021, the Board of Directors (Board) adopted
a financial policy for the allocation of cash flows aligned with
FCX’s strategic objectives of maintaining a strong balance sheet
and increasing cash returns to shareholders while advancing
opportunities for future growth. The combined base dividend,
variable dividend and share repurchases are designed to achieve
the objectives of this performance-based payout framework.
As a first step under the new financial policy, the Board reinstated a
cash dividend on its common stock at an annual rate of $0.30 per share.
FCX’s previous cash dividend on its common stock was $0.20 per share
prior to suspending these payments in April 2020 in connection with its
comprehensive response to the global pandemic.
20220211
2021
Amount per Share
Amount per Share
Record Date
Record Date
Payment Date
Payment Date
SSecond Quarter
Second Quarter
$0.075
$0.075
April 15, 2021
April 15, 2021
May 3, 2021
May 3, 2021
TThird Quarter
Third Quarter
FouFourthrth QuQuartarterer
Fourth Quarter
$0.075
$0.075
$0.$0.075075
$0.075
July 15, 2021
July 15, 2021
Aug. 2, 2021
Aug. 2, 2021
OctOct. 1. 15,5, 20220211
Oct. 15, 2021
NovNov. 1. 1, 2, 2021021
Nov. 1, 2021
2020
Amount per Share
Record Date
Payment Date
First Quarter
$ 0.05
Jan. 15, 2020
Feb. 3, 2020
In November 2021, following the achievement of FCX’s net debt
target, the Board began to implement the new performance based-
payout framework. A variable cash dividend on common stock for
2022 was approved at an expected annual rate of $0.30 per share.
The combined annual rate of the base dividend and the variable
dividend is expected to total $0.60 per share. The Board intends to
declare quarterly dividends for 2022 of $0.15 per share (including
the $0.075 variable component). The initial quarterly dividend was
paid on February 1, 2022. Additionally, a new $3.0 billion share
repurchase program was authorized. Through March 31, 2022, FCX
acquired 25.0 million shares of FCX’s common stock for a total cost
of $1,028.9 million ($41.12 per share) under this program.
FM_FCX
Freeport-McMoRan
FreeportFCX
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