Freeport-McMoRan
Annual Report 2022

Plain-text annual report

2022 ANNUAL REPORT THE POWER OF C O P P E R SUMMARY FINANCIAL HIGHLIGHTS Years ended December 31, (In millions, except per share amounts) Revenues Operating income Net income attributable to common stockholders Diluted net income per common share Dividends declared per common share Operating cash flows Capital expenditures Treasury stock purchases At December 31: Cash and cash equivalents Total assets Total debt, including current portion Total stockholders’ equity 2022 2021 2020 $22,780 $22,845 7,037 3,468 2.39 0.60 5,139 3,469 1,347 8,146 51,093 10,620 15,555 8,366 4,306 2.90 0.375 7,7 15 2 ,1 1 5 488 8,068 48,022 9,450 13,980 $14,198 2,437 599 0.41 — 3,017 1,961 — 3,657 42,144 9,711 10,174 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. FCX also has achieved the Copper Mark, a comprehensive assurance framework designed to demonstrate the copper industry’s responsible production practices, at all 12 of its copper producing sites globally. 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. “THE POWER OF COPPER” HIGHLIGHTS THE CRITICAL ROLE OF COPPER IN THE GLOBAL TRANSITION TO CLEANER ENERGY AND ELECTRIFICATION. FREEPORT’S STRATEGY IS CENTERED ON BEING FOREMOST IN COPPER, SUPPORTED BY A HIGH-QUALITY PORTFOLIO OF ASSETS WITH CHARACTERISTICS DIFFICULT TO REPLICATE. TABLE OF CONTENTS 4 6 8 20 The Power of Copper Letter to Shareholders Operational Overview Sustainability 22 Climate Strategy 24 25 114 115 Board of Directors and Leadership Financial and Operating Information Performance Graph Stockholder Information 2022 Annual Report 1 M I N I N G O P E R A T I O N S GEOGRAPHICALLY DIVERSE PORTFOLIO 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 COPPER (CU)) GOLD (AU) MOLYBDENUM (MO) 2 Freeport-McMoRan | The Power of Copper Freeport’s portfolio includes several mines that were among the largest copper producers in the world during 2022.* (thousand metric tons) 0 200 400 600 800 1,000 1,200 Grasberg Cerro Verde Morenci * Source: Wood Mackenzie GRASBERG MINERALS DISTRICT, INDONESIA NORTH AMERICA SOUTH AMERICA INDONESIA CONSOLIDATED TOTALS Reserves at 12/31/22 Cu 48.6 billion lbs Cu 31.7 billion lbs Cu 30.8 billion lbs Cu 111.0 billion lbs Au 0.6 million ozs Au 26.3 million ozs Au 26.9 million ozs Mo 2.8 billion lbs Mo 0.7 billion lbs Mo 3.5 billion lbs 2022 Sales Cu 1.5 billion lbs Cu 1.2 billion lbs Cu 1.6 billion lbs Cu 4.2 billion lbs Mo 75 million lbs* Mo 75 million lbs Au 1.8 million ozs Au 1.8 million ozs * Includes sales of molybdenum produced at FCX’s North America and South America copper mines. Note: lbs=pounds; ozs=ounces. 2022 Annual Report 3 THE POWER OF COPPER The increased intensity of copper use required by clean energy applications and the acceleration of electrification has enhanced copper’s importance in the economy, pointing to broad-based secular growth in long-term copper demand. Copper is: · an efficient conductor of electricity · integral to economic progress · difficult to replicate · vital to clean energy technologies · a positive contributor to society · essential for our future 4 Freeport-McMoRan | The Power of Copper Freeport’s long-lived, large-scale and geographically diverse assets provide a solid foundation for the future production of metals required to support the global economy and the energy transition. FREEPORT is: · a leading global copper producer · a responsible operator · a world-class developer · a respected partner · a reliable supplier · focused on shareholder value 2022 Annual Report 5 L E T T E R T O S H A R E H O L D E R S Dear Fellow Shareholders I am proud of our global team’s performance, focus and effective years ago and our team has done an outstanding job. During 2022, execution during 2022 to drive results and long-term value. we celebrated our 55th anniversary of operations in Indonesia. The theme of our 2022 annual report, “The Power of Copper,” The success of this project and our strong partnership with highlights the critical role of copper in the global transition to the Government of Indonesia establish a strong foundation cleaner energy and electrification. Freeport’s strategy is centered for the future. on being Foremost in Copper, supported by a high-quality portfolio of assets with characteristics difficult to replicate. In 2022, we generated solid financial results, maintained balance sheet strength and continued to implement our performance- The increased intensity of copper use required by clean energy based shareholder payout policy, which was introduced in applications and the acceleration of electrification has enhanced 2021. Through the combination of cash dividends and share copper’s importance in the economy, pointing to broad-based repurchases, we nearly tripled our year-over-year cash returns to secular growth in long-term copper demand. At the same time, it shareholders in 2022. We believe the priorities of balance sheet will be challenging for the industry to meet this period of growing strength and allocating excess cash flow to shareholder returns demand, leading to projected large market deficits. Higher long- term copper prices will be required to incentivize new supplies. and organic growth will enhance long-term value. During 2022, we added to our large reserve and resource position. In 2022, we strengthened our industry leadership position in We are well-positioned to support attractive investments in our copper. We achieved another year of growth in copper and low-risk brownfield projects in the Americas. We continue to gold sales volumes, driven largely by underground production plan our next phase of growth and have multiple organic growth from the Grasberg minerals district in Papua, Indonesia. In the projects to develop over time, including future expansions at Americas, our teams at Cerro Verde in Peru and El Abra in Chile Bagdad and Lone Star in Arizona and El Abra in Chile. We operate proved resilient in restoring production that was impacted by the all the mines in which we own an interest, which allows us to direct pandemic and our teams in the United States (U.S.) maintained capital across the portfolio to the highest value opportunities, production at 2021 levels despite ongoing labor shortages. We and leverage shared experiences, new technologies, operating also made advances on innovative new leach initiatives and are synergies and best practices. Our proven technical expertise is a optimistic about the opportunity to enhance value by improving core strength, and our management team has a track record of copper recoveries through this emerging low cost, low carbon operating sustainably and responsibly. technology in the years ahead. Our portfolio also benefits from exposure to molybdenum. We are achievements, we are proud of our work with third parties a leader in the molybdenum industry and are the world’s largest to validate all our mining operations under the Copper and producer with by-product and primary production in the Americas. Molybdenum Mark standards, the measurable progress we are The significant price increase in recent months, if sustained, will making on our climate initiatives, and the expanded disclosures we add additional leverage to our future results. have developed to enhance transparency and accountability in our In addition to driving value through operating and financial The Grasberg transition to full underground mining is a significant success story for Freeport, the global mining industry and the country of Indonesia. We started planning for this transition over 20 environmental, social and governance programs. While there were numerous achievements in 2022, we are saddened by the fatal injury of a contractor at our Morenci mine. We continue to show a We believe the priorities of balance sheet strength and allocating excess cash flow to shareholder returns and organic growth will enhance long-term value. 6 Freeport-McMoRan | The Power of Copper favorable trend in reducing serious injuries but are disappointed with our 2022 safety incident rate, which exceeded our target. We are committed to turning this around. As we enter 2023, our global team is energized for success with the priority of safe and responsible production and is highly motivated to build value in our business. We have a clear focus on executing our operating plans efficiently, maintaining the momentum at Grasberg, driving our innovation initiatives, and advancing our internal options for future growth. In Indonesia, priorities include completing construction of new smelter capacity in a safe, timely and cost-efficient manner, and securing an extension of our operating rights beyond 2041. In our Americas business, we are focused on improving our safety performance, enhancing productivity in a challenging U.S. labor market and building value with our new leach initiatives. We appreciate the positive spirit, commitment and dedication of our entire organization. Our team’s steady and consistent execution shined through during a volatile macroeconomic environment in 2022. We also value the counsel and support of our Board of Directors as we look forward to executing our long- term business objectives and strategy. As a leading responsible copper producer of scale, we believe we are strongly positioned to benefit from our long-lived, geographically diverse portfolio and the “The Power of Copper.” Thank you for your investment in Freeport. Respectfully yours, RICHARD C. ADKERSON Chairman of the Board and Chief Executive Officer March 24, 2023 2022 Annual Report 7 O P E R A T I O N A L O V E R V I E W CONSOLIDATED RESULTS FCX’s consolidated sales volumes of 4.2 billion pounds of copper and 1.8 million ounces of gold in 2022 were higher than 3.8 billion pounds of copper and 1.4 million ounces of gold in 2021, primarily reflecting increased operating rates at the Grasberg minerals district and Cerro Verde. Consolidated molybdenum sales totaled 75 million pounds in 2022 and 82 million pounds in 2021. Despite near-term uncertainties in the global economy and potential volatility in the copper market, we believe the outlook for copper fundamentals in the medium and long term is favorable, with third-party studies indicating that demand for copper may double in 15 years as a result of global decarbonization trends. We believe substantial new mine supply development will be required to meet the goals of the global energy transition, and higher copper prices will be required to support new mine supply development. WORLD’S LARGEST MOLYBDENUM PRODUCER Freeport is a leader in the molybdenum industry. In 2022, Freeport produced 85 million pounds, with about 60% as a by-product from copper mines in North America and South America and the balance from two primary molybdenum mines that Freeport operates in Colorado (Climax shown at left). Our molybdenum team also operates downstream processing facilities to produce products used in a broad range of metallurgical, specialty steel and chemical applications. 8 Freeport-McMoRan | The Power of Copper DURING 2022, FREEPORT ACHIEVED ANOTHER YEAR OF GROWTH IN PRODUCTION VOLUMES AND ENHANCED OUR POSITION AS A LEADING PRODUCER OF COPPER. OUR GLOBAL TEAM FOCUSED ON EFFECTIVE EXECUTION AND DROVE RESULTS IN A VOLATILE MACROECONOMIC ENVIRONMENT. The Morenci mine in Arizona is one of the world’s top copper producing mines 2022 HIGHLIGHTS 4.2 BILLION LBS 2022 consolidated copper sales 11% INCREASE Year over year change in copper sales 1.8 MILLION OZS 2022 consolidated gold sales 34% INCREASE Year over year change in gold sales 2022 Annual Report 9 O P E R A T I O N A L O V E R V I E W NORTH AMERICA MINING 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. Lone Star is increasing its operating rates to achieve targeted production of 300 million pounds of copper per year from oxide ores in 2023 (compared with the initial design capacity of 200 million pounds of copper per year). The oxide project at Lone Star advances the opportunity for development of the underlying, large-scale sulfide resources. FCX is conducting follow-on exploration in the area to support metallurgical testing and mine development planning for a potential significant long-term investment to build additional scale on an economically attractive basis. The timing of future development will be dependent on market conditions, labor and supply chain considerations and other economic factors. North America’s consolidated copper sales totaled 1.47 billion pounds in 2022 and 1.44 billion pounds in 2021. Consolidated molybdenum sales, including sales of molybdenum produced at FCX’s North America and South America copper mines, totaled 75 million pounds in 2022 and 82 million pounds in 2021. FUTURE GROWTH OPPORTUNITY Freeport is planning an expansion to double the concentrator capacity of the Bagdad operation in northwest Arizona. Freeport is engaging stakeholders and is conducting a feasibility study, which is expected to be completed in 2023. 10 Freeport-McMoRan | The Power of Copper LEACH INNOVATION INITIATIVES PROVIDE POTENTIAL OPPORTUNITIES FOR FREEPORT TO PRODUCE INCREMENTAL COPPER BY INCREASING RECOVERIES FROM ITS LARGE EXISTING LEACH STOCKPILES AND LOWER-GRADE MATERIAL CURRENTLY CLASSIFIED AS WASTE. At Lone Star we are increasing the stacking rate on the leach pad to achieve targeted annual production of approximately 300 million pounds ADVANCING NEW LEACH TECHNOLOGIES 38 BILLION LBS Contained copper in leach stockpiles unrecoverable by traditional leach methods and not included in our mineral reserves and mineral resources 200 MILLION LBS Identified opportunities to achieve annual run rate by year-end 2023 LOWER CARBON AND WATER-INTENSITY FOOTPRINT LEACH TO THE LAST DROP 2022 Annual Report 11 O P E R A T I O N A L O V E R V I E W SOUTH AMERICA MINING 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. Increased operating rates at Cerro Verde and higher mining and stacking activities at El Abra resulted in a 12% increase in copper production from South America mining for the year 2022, compared with the year 2021 (which was impacted by COVID-19 protocols). El Abra’s large sulfide resource supports a potential major mill project similar to the large-scale concentrator constructed at Cerro Verde in 2015. Technical and economic studies continue to be evaluated to determine optimal scope and timing of the sulfide project. Consolidated copper sales from FCX’s South America mines of 1.2 billion pounds in 2022 were higher than 1.1 billion pounds reported in 2021, primarily reflecting increased mining and milling rates at Cerro Verde. FUTURE GROWTH OPPORTUNITY El Abra’s large sulfide resource in Chile supports a major mill expansion project similar to the large-scale concentrator constructed at Cerro Verde in 2015. Freeport is advancing plans to invest in water infrastructure to provide options to extend existing operations, while continuing to monitor potential changes in Chile’s regulatory and fiscal matters. 12 Freeport-McMoRan | The Power of Copper DURING 2022, CERRO VERDE EXCEEDED ITS TARGETED MILL THROUGHPUT RATE OF 400,000 METRIC TONS OF ORE PER DAY, RESULTING IN INCREASED PRODUCTION OF COPPER AND MOLYBDENUM COMPARED TO 2021. 2022 HIGHLIGHTS 1.2 BILLION LBS 10% INCREASE 2022 consolidated copper sales Year-over-year change in copper sales A conveyor at Cerro Verde delivers ore to the concentrator 31.7 BILLION LBS Estimated recoverable proven and probable copper mineral reserves as of December 31, 2022 28% FCX COPPER RESERVES IN SOUTH AMERICA 2022 Annual Report 13 O P E R A T I O N A L O V E R V I E W INDONESIA MINING Through its subsidiary, PT Freeport Indonesia (PT-FI), FCX operates one of the world’s largest copper and gold mines at the Grasberg minerals district in Central Papua, Indonesia. PT-FI produces copper concentrate that contains significant quantities of gold and silver. FCX has a 48.76% ownership interest in PT-FI and manages its mining operations. PT-FI’s results are consolidated in FCX’s financial statements. Under the terms of the divestment agreement and related documents entered into in 2018, FCX’s economic interest in PT-FI approximated 81% through 2022, and beginning January 1, 2023, FCX’s economic interest in PT-FI is 48.76%. This arrangement was developed to replicate the economics of PT-FI’s former joint venture partner interests, which were acquired by the Indonesia government in 2018. PT-FI currently has three underground operating mines in the Grasberg minerals district: Grasberg Block Cave, Deep Mill Level Zone and Big Gossan. Long-term mine development activities are ongoing for PT-FI’s Kucing Liar deposit in the Grasberg minerals district, which is expected to produce over 6 billion pounds of copper and 6 million ounces of gold between 2028 and the end of 2041. Pre-production development activities commenced in 2022 and are expected to continue over an approximate 10-year timeframe. Higher consolidated sales of 1.6 billion pounds of copper and 1.8 million ounces of gold in 2022, compared with 1.3 billion pounds of copper and 1.3 million ounces of gold in 2021, primarily reflect increased operating rates at the Grasberg minerals district, partly offset by lower copper ore grades. FUTURE GROWTH OPPORTUNITY Development at the Kucing Liar copper and gold deposit is advancing. The learnings from our Grasberg underground development are providing efficiencies. Similar to the Grasberg development, this is a long-term project, which will benefit from substantial shared infrastructure and PT-FI’s experience and long-term success in block-cave mining, with initial production expected near the end of the decade. UNIT NET CASH COST $/lb of Cu 2019 $1.28 2020 $0.43 2021 $0.19 2022 $0.09 14 Freeport-McMoRan | The Power of Copper PT FREEPORT INDONESIA HAS SUCCESSFULLY AND MATERIALLY GROWN PRODUCTION LEVELS AND IS SUSTAINING LARGE-SCALE, LOW-COST PRODUCTION AT THE WORLD’S LARGEST UNDERGROUND MINING COMPLEX. PT Freeport Indonesia developed over 350 miles of tunneling to support underground production UNDERGROUND ORE TO MILL thousands of metric tons per day COPPER PRODUCTION billions of pounds GOLD PRODUCTION millions of ounces 187 145 1.6 1.3 1.8 1.4 87 50 0.8 0.6 0.9 0.8 2019 2020 2021 2022 2019 2020 2021 2022 2019 2020 2021 2022 2022 Annual Report 15 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 MINING RESERVES AND MINERALIZED MATERIAL 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, 2022, included 111.0 billion pounds of copper, 26.9 million ounces of gold, 3.53 billion pounds of molybdenum and 340 million ounces of silver, which were determined using metal price assumptions of $3.00 per pound for copper, $1,500 per ounce for gold, $12 per pound for molybdenum and $20 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, 2022, which were assessed using $3.50 per pound for copper, totaled 235 billion pounds of incremental contained copper. FCX continues to pursue opportunities to convert these resources into mineral reserves, future production volumes and cash flow. ESTIMATED CONSOLIDATED RECOVERABLE PROVEN AND PROBABLE RESERVES CONSOLIDATED COPPER RESERVES BY REGION 111.0 billion lbs as of December 31, 2022 44% NORTH AMERICA 28% INDONESIA 28% SOUTH AMERICA 16 Freeport-McMoRan | The Power of Copper FREEPORT’S MINING EXPLORATION ACTIVITIES ARE PRIMARILY ASSOCIATED WITH ITS EXISTING MINES, FOCUSING ON OPPORTUNITIES TO EXPAND RESERVES AND RESOURCES TO SUPPORT DEVELOPMENT OF ADDITIONAL FUTURE PRODUCTION CAPACITY. LONG-LIVED ASSET BASE 111 BILLION LBS Estimated consolidated recoverable proven and probable copper mineral reserves as of December 31, 2022 $3.00 PER LB Copper price used to determine recoverable reserves 25+ YEARS Implied reserve life for copper Drilling at the Lone Star mine in Arizona 235 BILLION LBS Estimated incremental copper resources on a contained basis as of December 31, 2022 2022 Annual Report 17 F I N A N C I A L P E R F O R M A N C E FINANCIAL PERFORMANCE FCX believes the actions it has taken in recent years to build a supporting mill and power capital costs, and $1.0 billion for solid balance sheet, successfully expand low-cost operations discretionary growth projects. and maintain flexible organic growth options while maintaining sufficient liquidity, will allow it to continue to execute its business plans in a prudent manner during periods of economic uncertainty while preserving substantial future asset values. FCX expects to maintain a solid balance sheet and strong liquidity position as it focuses on building long-term value in its business, executing its operating plans safely, responsibly and efficiently, and prudently managing costs and capital expenditures. Operating Cash Flows and Liquidity Capital expenditures for the Indonesia smelter projects are being funded with proceeds from PT-FI’s senior notes and its available revolving credit facility. Financing Transactions Net borrowings of debt totaled $1.2 billion in 2022, primarily associated with PT-FI’s $3.0 billion senior notes offering, partly offset by FCX’s purchase of its senior notes in open market transactions ($1.0 billion), and the repayment of borrowings under PT-FI’s term loan ($0.6 billion) and Cerro Verde’s term FCX generated consolidated operating cash flows of $5.1 billion in 2022. At December 31, 2022, FCX had consolidated total debt loan ($0.3 billion). of $10.6 billion, consolidated cash and cash equivalents of $8.1 billion, and no borrowings and $3.0 billion available under its revolving credit facility. In addition, PT-FI and Cerro Verde have $1.3 billion and $350 million, respectively, of availability under their respective revolving credit facilities. Financial Policy FCX’s financial policy is aligned with its strategic objectives of maintaining a solid balance sheet and increasing cash returns to shareholders while advancing opportunities for future growth. The policy includes a base dividend and a performance-based Based on current sales volume and cost estimates, and assuming payout framework, whereby up to 50% of available cash flows average prices of $4.00 per pound of copper, $1,900 per ounce generated after planned capital spending and distributions of gold and $20.00 per pound of molybdenum, consolidated to noncontrolling interests would be allocated to shareholder operating cash flows are estimated to approximate $7.2 billion returns and the balance to debt reduction and investments in in 2023. The impact of copper price changes during 2023 on value enhancing growth projects, subject to FCX maintaining its operating cash flows would approximate $440 million for each net debt at a level not to exceed the net debt target of $3.0 billion $0.10 per pound change in the average price of copper. to $4.0 billion (excluding project net debt for additional smelting Investing Activities capacity in Indonesia). FCX’s Board of Directors (Board) will review the structure of the performance-based payout framework FCX’s capital expenditures totaled $3.5 billion in 2022, including at least annually. $1.7 billion for major mining projects primarily associated with the underground development activities in the Grasberg minerals district and $0.8 billion for the Indonesia smelter projects. Based on current market conditions, the base and variable dividends on FCX’s common stock are anticipated to total $0.60 per share for 2023 (including the dividends paid on Capital expenditures are expected to approximate $5.2 billion February 1, 2023), comprised of a $0.30 per share base dividend in 2023, including $2.3 billion for major mining projects and and $0.30 per share variable dividend. The declaration and $1.8 billion for Indonesia smelter projects. Projected capital payment of dividends (base or variable) is at the discretion expenditures for major mining projects include $1.3 billion of the Board and will depend on FCX’s financial results, cash for planned projects, primarily associated with underground requirements, global economic conditions and other factors development activities in the Grasberg minerals district and deemed relevant by the Board. 18 Freeport-McMoRan | The Power of Copper THROUGH THE COMBINATION OF CASH DIVIDENDS AND SHARE REPURCHASES, WE NEARLY TRIPLED OUR YEAR-OVER-YEAR CASH RETURNS TO SHAREHOLDERS IN 2022. SHAREHOLDER RETURNS $1.3 BILLION Net debt at year-end 2022, excluding net debt associated with the Indonesia smelter projects ~50% FREE CASH FLOW To be returned to shareholders under performance-based payout framework Copper cathode produced at Safford in Arizona $0.60 PER SHARE IN COMMON STOCK DIVIDENDS FCX paid $0.30 per share in base dividends and $0.30 per share in variable dividends in 2022 $2.2 BILLION Cash returned to shareholders during 2022, including dividends and share repurchases 2022 Annual Report 19 S U S T A I N A B I L I T Y SUSTAINABILITY FCX supplies over 9% of the world’s mined copper. As global decarbonization accelerates, demand for copper is expected to increase. FCX is committed to meeting growing demand through its sustainability strategy — Accelerate the Future, Responsibly. This strategy recognizes the vital role FCX plays in global progress and its dedication to continuously advance the responsible production of its products. FCX’s sustainability strategy is supported by its environmental, social and governance (ESG) commitments which, in alignment with its business objectives, seek to enhance responsible production practices at its sites around the world. Fundamental to this work is the health, safety and well-being of its workforce and host communities where it operates. FCX seeks to work collaboratively with its stakeholders to support shared value creation and to recognize, respect and promote human rights everywhere it conducts business. FCX is dedicated to effective environmental management 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 demonstrates its responsible production performance 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 complete an independent external assurance process to assess conformance with 32 ESG criteria. Awarded sites must be revalidated every three years. FCX has achieved the Copper Mark at all 12 of its copper producing sites globally. In addition, following the extension of the Copper Mark framework to molybdenum producers in 2022, FCX’s two primary molybdenum mines and its four copper mines that produce by-product molybdenum were awarded the Molybdenum Mark. To learn more, please see FCX’s 2022 Annual Report on Sustainability, available at fcx.com/sustainability. COMMUNITY INVESTMENTS FOCUS ON RESILIENCE FCX’s strategic community investments seek to advance education and skill-building, economic opportunity, and community-level capacity building. DreamBuilder is a free online entrepreneurship training program developed for women who want to start or grow their own small business. DreamBuilder is a partnership between the Freeport-McMoRan Foundation and the Thunderbird School of Global Management. 20 Freeport-McMoRan | The Power of Copper FCX HAS ACHIEVED THE COPPER MARK AT ALL 12 COPPER OPERATIONS: Atlantic Copper smelter and refinery in Spain Bagdad mine in Arizona, U.S. Cerro Verde mine in Peru Chino mine in New Mexico, U.S. El Abra mine in Chile El Paso refinery and rod mill in Texas, U.S. Miami mine, smelter and rod mill in Arizona, U.S. Morenci mine in Arizona, U.S. PT Freeport Indonesia Safford mine in Arizona, U.S. Sierrita mine in Arizona, U.S. Tyrone mine in New Mexico, U.S. FCX HAS ACHIEVED THE MOLYBDENUM MARK AT THE FOLLOWING OPERATIONS: Bagdad mine in Arizona, U.S.* Cerro Verde mine in Peru* Climax mine in Colorado, U.S. Henderson mine in Colorado, U.S. Morenci mine in Arizona, U.S.* Sierrita mine in Arizona, U.S.* * Indicates sites that produce molybdenum as a by-product. COMMUNITY INVESTMENTS $177 MILLION 2022 total investment $2.3 BILLION Cumulative investment since 2009 2022 Annual Report 21 C L I M A T E S T R A T E G Y CLIMATE STRATEGY The copper that FCX produces is essential to new and existing technologies that will support global efforts to decarbonize. FCX is dedicated to supplying responsibly produced copper to support the energy transition, which includes managing and mitigating its greenhouse gas (GHG) emissions and other climate-related risks and impacts. FCX is advancing important initiatives to reduce its GHG emissions, improve energy efficiency, evaluate and integrate the use of lower carbon and renewable energy and enhance its resilience to future climate-related risks. Building upon its 2021 momentum, in 2022 FCX progressed evaluation options to replace PT-FI’s coal-fired power plant, advanced studies on sea level rise and other potential physical risks, continued to collaborate with suppliers to support innovation in equipment and technology and completed a multi-year Scope 3 GHG emissions inventory review. FCX has committed to 2030 GHG emissions reduction targets that collectively cover nearly 100% of its Scope 1 and 2 GHG emissions. 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. FCX is continuing to advance its climate strategy by collaborating and innovating in order to take practical, responsible steps toward an eventual net zero mining future. Learn more about FCX’s climate strategy and progress in its most recent Climate Report, available at fcx.com/sustainability. ADVANCING ELECTRIFICATION OF EQUIPMENT New technological solutions and innovations — many of which will be driven by industry and value chain collaboration — will continue to be required in order for FCX to advance its climate strategy objectives. FCX partners with its equipment manufacturers to advance viable solutions and is actively trialing diesel-electric, ultra-class haul trucks at its Cerro Verde operations in Peru. These trucks have a larger capacity, enable fewer trips per ton of material moved, and use an electric drive which provides the potential to convert to fully electric power in the future. 22 Freeport-McMoRan | The Power of Copper AS ONE OF THE WORLD’S LARGEST COPPER PRODUCERS, FCX UNDERSTANDS ITS CRITICAL ROLE IN THE LOW-CARBON ENERGY TRANSITION. Mangrove forests are revegetated in Central Papua, Indonesia CLIMATE STRATEGY PILLARS REDUCTION FCX strives to reduce, manage and mitigate its GHG emissions where possible. FCX currently has four 2030 GHG emissions reduction targets which, collectively, cover nearly 100% of its global (Scope 1 and 2) emissions. RESILIENCE FCX strives to enhance its resilience to climate change risks (both physical and transitional) for its current and future operations, its host communities and its stakeholders. CONTRIBUTION FCX strives to be a positive contributor beyond its operational boundaries by responsibly producing and supplying the copper that will support the technologies needed to enable the energy transition. 2022 Annual Report 23 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 BOARD OF DIRECTORS Richard C. Adkerson Chairman of the Board and Chief Executive Officer Freeport-McMoRan Inc. Dustan E. McCoy (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 (1, 3) Retired Partner and Americas Oil & Gas Sector Leader Ernst & Young LLP 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 Kathleen L. Quirk President Freeport-McMoRan Inc. John J. Stephens (1) Retired Senior Executive Vice President and Chief Financial Officer AT&T Inc. Frances Fragos Townsend (4) Senior Counsel and Former Executive Vice President for Corporate Affairs 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 EXECUTIVE OFFICERS SENIOR LEADERSHIP Richard C. Adkerson Chairman of the Board and Chief Executive Officer Kathleen L. Quirk President Maree E. 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 Operations Administration 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 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 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 Ellie L. Mikes Vice President and Chief Accounting Officer Bertrand L. Odinet, II Vice President, Chief Information Officer and Chief Innovation Officer Internal Auditors Deloitte & Touche LLP 24 Freeport-McMoRan | The Power of Copper 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 28 63 64 65 68 69 70 71 72 73 Selected Operating Data 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 Income Consolidated Statements of Comprehensive Income Consolidated Statements of Cash Flows Consolidated Balance Sheets Consolidated Statements of Equity Notes to Consolidated Financial Statements 2022 Annual Report 25 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, 2022 2021 2020 2019 2018 4,210 4,213 3.90 $ 1,811 1,823 $ 1,787 85 75 $ 18.71 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 1,467 1,469 4.08 $ 1,460 1,436 4.30 $ 1,418 1,422 2.82 $ 1,457 1,442 2.74 $ 29 34 33 32 676,400 0.29 1,019 665,900 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 0.24 951 294,200 269,500 279,700 326,100 301,000 0.37 0.02 81.8 695 0.38 0.03 81.2 649 1,176 1,162 3.80 $ 1,047 1,055 4.34 $ $ 23 21 0.35 0.02 84.1 647 979 976 3.05 19 163,000 0.35 302 163,900 0.32 256 160,300 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 0.33 287 409,200 380,300 331,600 393,100 387,600 0.32 0.01 85.3 874 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 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 (%) Copper production (millions of recoverable pounds) Mill operations Ore milled (metric tons per day) Average ore grade (%): Copper Molybdenum Copper recovery rate (%) 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 (%) Copper production (millions of recoverable pounds) Mill operations Ore milled (metric tons per day) Average ore grade (%): Copper Molybdenum Copper recovery rate (%) Copper production (millions of recoverable pounds) a. Amounts are net of Morenci’s joint venture partners’ undivided interest. 26 Freeport-McMoRan | The Power of Copper 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, 2022 2021 2020 2019 2018 INDONESIA MINING Operating Dataa 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 (%) Gold (grams per metric ton) Recovery rates (%): Copper Gold Production: Copper (millions of recoverable pounds) Gold (thousands of recoverable ounces) MOLYBDENUM MINES Ore milled (metric tons per day) Average molybdenum ore grade (%) Molybdenum production (millions of recoverable pounds) 1,567 1,582 3.80 $ 1,798 1,811 $ 1,787 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 $ 1,254 192,600 151,600 87,700 110,100 178,100 1.19 1.05 90.0 77.7 1,567 1,798 26,100 0.18 33 1.30 1.04 89.8 77.0 1,336 1,370 21,800 0.19 30 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 20,700 0.17 24 30,100 0.14 29 27,900 0.18 35 a. Prior to December 21, 2018, PT Freeport Indonesia (PT-FI) had an unincorporated joint venture with Rio Tinto; 2018 operating data is net of Rio Tinto’s joint venture interest. 2022 Annual Report 27 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 “Consolidated Results” for discussion of items impacting our and Results of Operations and Quantitative and Qualitative consolidated results for the two years ended December 31, 2022. Disclosures About Market Risk (MD&A), “we,” “us” and “our” refer At December 31, 2022, we had consolidated debt of $10.6 billion to Freeport-McMoRan Inc. and its consolidated subsidiaries. and consolidated cash and cash equivalents of $8.1 billion, The results of operations reported and summarized below are not resulting in net debt of $2.5 billion ($1.3 billion excluding net debt necessarily indicative of future operating results (refer to “Cautionary for the greenfield smelter and precious metals refinery (PMR) Statement” below for further discussion). References to “Notes” in Indonesia—collectively, the Indonesia smelter projects). Refer are Notes included in our Notes to Consolidated Financial Statements. to “Net Debt” for reconciliations of consolidated debt and Throughout MD&A, all references to earnings or losses per share consolidated cash and cash equivalents to net debt. are on a diluted basis. During 2022, we purchased approximately $1.1 billion aggregate This section of our Form 10-K discusses the results of operations principal amount of our senior notes in open-market transactions for the years 2022 and 2021 and comparisons between these for a total cost of $1.0 billion, resulting in annual cash interest years. Discussion of the results of operations for the year 2020 and savings of approximately $50 million. In October 2022, we entered comparisons between the years 2021 and 2020 are not included in into a $3.0 billion revolving credit facility that matures in this Form 10-K and can be found in Items 7. and 7A. “Management’s October 2027 and replaced our prior revolving credit facility. At Discussion and Analysis of Financial Condition and Results of December 31, 2022, we had no borrowings and $3.0 billion available Operations and Quantitative and Qualitative Disclosures About under our revolving credit facility, and PT Freeport Indonesia Market Risk” contained in Part II of our Annual Report on Form 10-K (PT-FI) and Cerro Verde had $1.3 billion and $350 million, respectively, for the fiscal year ended December 31, 2021. of availability under their revolving credit facilities. Refer to Note 8 OVERVIEW and “Capital Resources and Liquidity” for further discussion. During 2022, we acquired 35.1 million shares of our common We are a leading international mining company with headquarters stock under our share repurchase program for a total cost of in Phoenix, Arizona. We operate large, long-lived, geographically $1.3 billion ($38.36 average cost per share) and declared cash diverse assets with significant proven and probable mineral dividends totaling $0.60 per share on our common stock (which reserves of copper, gold and molybdenum. We are one of the world’s included both base and variable, performance-based cash largest publicly traded copper producers. Our portfolio of assets dividends). Approximately $3.2 billion remains available under our includes the Grasberg minerals district in Indonesia, one of the $5.0 billion share repurchase program. Refer to Note 10 and world’s largest copper and gold deposits; and significant mining “Capital Resources and Liquidity” for further discussion. operations in North America and South America, including the We have significant mineral reserves, mineral resources and large-scale Morenci minerals district in Arizona and the Cerro Verde future development opportunities within our portfolio of operation in Peru. mining assets. At December 31, 2022, our estimated consolidated Our results for 2022 reflect solid execution of our operating plan, recoverable proven and probable mineral reserves totaled which resulted in strong operating performance and cash flow 111.0 billion pounds of copper, 26.9 million ounces of gold and generation allowing for increased cash returns to shareholders. 3.53 billion pounds of molybdenum. Refer to Note 17 and “Critical Our execution led to growth in consolidated copper and gold Accounting Estimates—Mineral Reserves” for further discussion. production and sales volumes when compared to the prior year. During 2022, production from our mines totaled 4.2 billion pounds Despite lower average realized copper prices, increased production of copper, 1.8 million ounces of gold and 85 million pounds of and delivery costs, and economic uncertainty, we continued to molybdenum. Following is the allocation of our consolidated copper, generate positive operating income and operating cash flows. gold and molybdenum production in 2022 by geographic location: We believe the actions we have taken in recent years to build a solid balance sheet, successfully expand low-cost operations, and maintain flexible organic growth options while maintaining liquidity allow us to continue to execute our business plans in a prudent manner and preserve substantial future asset values. Net income attributable to common stock totaled $3.5 billion in 2022 and $4.3 billion in 2021. Our results in 2022, compared to 2021, primarily reflect lower average realized copper prices and increased costs for energy, sulfuric acid, and maintenance and supplies, partly offset by higher copper and gold sales volumes. Refer to North America South America Indonesia Copper Gold Molybdenum 35% 28 37 100% 1% — 99 100% 73%a 27 — 100% a. Our North America copper mines produced 34% of consolidated molybdenum production, and our Henderson and Climax molybdenum mines produced 39%. Copper production from the Morenci mine in North America, Cerro Verde mine in Peru and the Grasberg minerals district in Indonesia together totaled 75% of our consolidated copper production in 2022. 28 Freeport-McMoRan | The Power of Copper 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 OUTLOOK 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. Beginning in 2020, with the onset of the COVID-19 pandemic, and continuing in 2022 because of a series of macro-economic factors, there has been significant volatility in the financial and commodities markets, including the copper market. Market sentiment improved beginning in late 2022 and we believe the outlook for copper fundamentals in the medium and long term is favorable. Refer to “Markets” and Item 1A. “Risk Factors” contained in Part I of our annual report on Form 10-K for the year ended December 31, 2022, for further discussion. Because we cannot control the price of our products, the key measures that management focuses on in operating our business are sales volumes, unit net cash costs, operating cash flows and capital expenditures. In addition to the measures noted below and as further discussed in Note 3, beginning January 1, 2023, our economic interest in PT-FI changes from approximately 81% to 48.76%, and accordingly, net income attributable to noncontrolling interests is expected to increase in 2023. Sales Volumes. Following are our projected consolidated sales volumes for 2023 and actual consolidated sales volumes for 2022: 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) 2023 (Projected) 2022 (Actual) 1,460 1,200 1,500 4,160 1,700 80a 1,469 1,162 1,582 4,213 1,823 75 a. Includes 50 million pounds from our North America and South America copper mines and 30 million pounds from our Molybdenum mines. Projected sales volumes are dependent on operational performance, weather-related conditions, timing of shipments, PT-FI’s continued ability to export copper concentrate, including the extension of PT-FI’s export license after March 19, 2023, PT Smelting and PT-FI’s continued ability to export anode slimes and other factors. Since February 11, 2023, PT-FI’s operations have been temporarily disrupted because of significant rainfall and landslides, which restricted access to infrastructure near its milling operations. Recovery activities are in progress to clear debris from the affected areas and PT-FI is in the process of gradually resuming operations. Operations are expected to be fully restored by the end of February 2023. As a result of this disruption, we expect our first-quarter 2023 sales volumes to be lower than previously expected. If PT-FI is not able to resume operations as currently expected or on our anticipated timeline, our results of operations may be further impacted. For further discussion of the February 2023 weather event at PT-FI’s operations and 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, 2022. Consolidated Unit Net Cash Costs. Our operations have been impacted by inflationary cost pressures, including increased costs for energy, sulfuric acid, and maintenance and supplies. Historically, copper prices have been correlated to various input costs, including energy and other commodity-related consumables. During 2022, prices for a number of commodity-related consumables increased at a time when copper prices declined. While prices for a number of commodity-related consumables have retreated from the highs of 2022, most cost elements remain high relative to long-term correlations. In addition, labor constraints, particularly in the United States (U.S.), continue to limit production levels. We plan to continue to carefully manage costs and drive efficiencies to mitigate cost increases. Assuming average prices of $1,900 per ounce of gold and $20.00 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 $1.60 per pound of copper in 2023. The impact of price changes on 2023 consolidated unit net cash costs would approximate $0.04 per pound of copper for each $100 per ounce change in the average price of gold and $0.02 per pound of copper for each $2 per pound change in the average price of molybdenum. Quarterly unit net cash costs vary with fluctuations in sales volumes and realized prices, primarily for gold and molybdenum. 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 $4.00 per pound of copper, $1,900 per ounce of gold and $20.00 per pound of molybdenum, our consolidated operating cash flows are estimated to approximate $7.2 billion (including $0.1 billion of working capital and other sources) for the year 2023. Estimated consolidated operating cash flows in 2023 also reflect a projected income tax provision of $2.5 billion (refer to “Consolidated Results—Income Taxes” for further discussion of our projected income tax rate, including potential impacts of the provisions of the U.S. Inflation Reduction Act of 2022 (the Act), for the year 2023). The impact of price changes during 2023 on operating cash flows would approximate $440 million for each $0.10 per pound change in the average price of copper, $170 million for each $100 per ounce change in the average price of gold and $120 million for each $2 per pound change in the average price of molybdenum. 2022 Annual Report 29 Consolidated Capital Expenditures. Capital expenditures for MARKETS the year 2023 are expected to approximate $5.2 billion (including $2.3 billion for major mining projects and $1.8 billion for the Indonesia smelter projects). Projected capital expenditures for major mining projects include $1.3 billion for planned projects primarily associated with underground mine development in the Grasberg minerals district and supporting mill and power capital costs and $1.0 billion for discretionary growth projects (primarily for development of Kucing Liar, a mill recovery project with the installation of a new copper cleaner circuit at PT-FI, an electronic material recycle project at Atlantic Copper and an expansion project at Lone Star). We closely monitor market conditions and will continue to adjust our operating plans, including capital expenditures, to protect our liquidity and preserve our asset values, as necessary. Capital expenditures for the Indonesia smelter projects are being funded with proceeds from PT-FI’s senior notes and its available revolving credit facility. Construction of the additional domestic smelter capacity will result in the elimination of export duties, providing an offset to the economic cost associated with the Indonesia smelter projects. Noncontrolling Interests. Net income attributable to noncontrolling interests is primarily associated with PT-FI, Cerro Verde and El Abra and totaled $1.0 billion for the year 2022 (which represented 15% of our consolidated income before income taxes). As further described in Note 3, in December 2018, we completed the transaction with the Indonesia government World prices for copper, gold and molybdenum can fluctuate significantly. During the period from January 2013 through December 2022, the London Metal Exchange (LME) copper settlement price varied from a low of $1.96 per pound in 2016 to a record high of $4.87 per pound in 2022; the London Bullion Market Association (London) PM gold price fluctuated from a low of $1,049 per ounce in 2015 to a record high of $2,067 per ounce in 2020, and the Platts Metals Daily Molybdenum Dealer Oxide weekly average price ranged from a low of $4.46 per pound in 2015 to a high of $31.37 per pound in 2022. 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, 2022. LME Copper Prices Through December 31, 2022 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 regarding PT-FI’s long-term mining rights and share ownership 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 (the 2018 Transaction). The arrangements related to the 2018 Transaction provided for us and the other pre-transaction PT-FI shareholders to initially retain the economics of the revenue and LME Copper Prices Exchange Stocks cost sharing arrangements under the former unincorporated joint This graph presents LME copper settlement prices and the combined venture with Rio Tinto plc (Rio Tinto). As a result, our economic reported stocks of copper at the LME, Commodity Exchange Inc., interest in PT-FI approximated 81% through 2022, and beginning and the Shanghai Futures Exchange from January 2013 through January 1, 2023, is 48.76% (refer to Note 3 for further discussion of December 2022. For the year 2022, the LME copper settlement attribution of PT-FI net income). Therefore, beginning in 2023, net prices ranged from a high of $4.87 per pound in March (record income attributable to noncontrolling interests will reflect the high) to a low for the year of $3.18 per pound in July, closed at $3.80 noncontrolling parties’ 51.24% share of PT-FI net income. Based on per pound on December 30, 2022, and averaged $3.99 per pound current sales volume and cost estimates and assuming average for the year. Current physical market conditions are strong as prices of $4.00 per pound of copper, $1,900 per ounce of gold and evidenced by low levels of global exchange stocks, and our global $20.00 per pound of molybdenum and taking into account the customer base reports continued healthy demand for copper. change in our economic interest in PT-FI, net income attributable to Improved market sentiment beginning in late 2022 was associated noncontrolling interests is estimated to approximate $2.3 billion with prospects for improved demand from China, rising demand for the year 2023 (which would represent 29% of our consolidated from global decarbonization initiatives, supply constraints, income before income taxes). The actual amount will depend U.S. dollar exchange rates and low inventories. Despite near-term on many factors, including relative performance of each business uncertainties in the global economy and potential volatility in the segment, commodity prices, costs and other factors. 30 Freeport-McMoRan | The Power of Copper MANAGEMENT’S DISCUSSION AND ANALYSIS copper market, we believe the outlook for copper fundamentals in the medium and long term is favorable, with third-party studies indicating that demand for copper may double in 15 years as a result of global decarbonization trends. We believe substantial new mine supply development will be required to meet the goals of the global energy transition, and higher copper prices will be required to support new mine supply development. The LME copper settlement price was $4.12 per pound on January 31, 2023. We believe long-term fundamentals for copper are favorable and that future demand will be supported by copper’s role in the global transition to renewable power, electric vehicles and other carbon-reduction initiatives, and continued urbanization in developing countries. The small number of approved, large-scale projects beyond those that have been announced, the long lead times required to permit and build new mines and declining ore grades at existing operations continue to highlight the fundamental supply challenges for copper. London Gold Prices Through December 31, 2022 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 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 This graph presents London PM gold prices from January 2013 through December 2022. For the year 2022, London PM gold prices ranged from a low of $1,629 per ounce in November to a high of $2,039 per ounce in March, averaged $1,800 per ounce and closed at $1,814 per ounce on December 29, 2022. Gold prices were positively impacted at the end of 2022 by market views that the strength of the U.S. dollar will not be sustained. The London PM gold price was $1,924 per ounce on January 31, 2023. Platts Metals Daily Molybdenum Dealer Oxide Prices Through December 31, 2022 D o l l a r s p e r p o u n d $35 $30 $25 $20 $15 $10 $5 $0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 This graph presents the Platts Metals Daily Molybdenum Dealer Oxide weekly average price from January 2013 through December 2022. For the year 2022, the weekly average price for molybdenum ranged from a low of $14.10 per pound in August to a high of $31.37 per pound in December, averaged $18.82 per pound and was $31.37 per pound on December 30, 2022. Higher molybdenum prices at the end of 2022 reflect tight supply and steady demand. The Platts Metals Daily Molybdenum Dealer Oxide weekly average price was $36.75 per pound on January 31, 2023. 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 of Directors (the Board). Taxes. Refer to Note 11 and Item 1A. “Risk Factors” contained in Part I of our annual report on Form 10-K for the year ended December 31, 2022, for further discussion of our consolidated income taxes. 2022 Annual Report 31 MANAGEMENT’S DISCUSSION AND ANALYSIS In preparing our consolidated financial statements, we estimate A valuation allowance is provided for those deferred income tax the actual amount of income taxes currently payable or receivable assets for which the weight of available evidence suggests that as well as deferred income tax assets and liabilities attributable the related benefits will not be realized. In determining the amount to temporary differences between the financial statement carrying of the valuation allowance, we consider estimated future taxable amounts of existing assets and liabilities and their respective tax income or loss as well as feasible tax planning strategies in each bases. Deferred income tax assets and liabilities are measured jurisdiction. If we determine that we will not realize all or a portion using enacted tax rates expected to apply to taxable income in the of our deferred income tax assets, we will increase our valuation years in which these temporary differences are expected to be allowance. Conversely, if we determine that we will ultimately recovered or settled. The effect on deferred income tax assets and be able to realize all or a portion of the related benefits for which liabilities of a change in tax rates or laws is recognized in income a valuation allowance has been provided, all or a portion of in the period in which such changes are enacted. the related valuation allowance will be reduced. Our valuation Our operations are in multiple jurisdictions where uncertainties allowances totaled $4.0 billion at December 31, 2022, which covered arise in the application of complex tax regulations. Some of these all of our U.S. foreign tax credits and U.S. federal NOLs, tax regimes are defined by contractual agreements with the local substantially all of our U.S. state NOLs, as well as a portion of our government, while others are defined by general tax laws and U.S. federal, state and foreign deferred tax assets and foreign NOLs. regulations. We and our subsidiaries are subject to reviews of our During 2022, valuation allowances decreased by $102 million. income tax filings and other tax payments, and disputes can arise Environmental Obligations. Refer to Notes 1 and 12, and Item 1A. with the taxing authorities over the interpretation of our contracts “Risk Factors” contained in Part I of our annual report on Form 10-K or laws. Refer to Note 11 for net charges recorded for historical for the year ended December 31, 2022, for further discussion of contested tax matters in Indonesia. environmental obligations, including a summary of changes in our In August 2022, the Act was signed into law, which had no estimated environmental obligations for the three years ended impact on our 2022 financial results. The provisions of the Act are December 31, 2022. applicable to us beginning January 1, 2023. Additional guidance Our current and historical operating activities are subject to related to how the Corporate Alternative Minimum Tax (CAMT) various national, state and local environmental laws and provisions of the Act will be applied or otherwise administered is regulations that govern the protection of the environment, and yet to be released by the U.S. Department of the Treasury, and compliance with those laws requires significant expenditures. may differ from our interpretations. We will continue to analyze the Environmental expenditures are charged to expense or capitalized, impacts as additional guidance is available. We expect the CAMT depending upon their future economic benefits. The guidance provisions will impact our U.S. tax position, and may further limit provided by U.S. GAAP requires that liabilities for contingencies our ability to benefit from our U.S. net operating losses (NOLs). be recorded when it is probable that obligations have been Refer to “Consolidated Results” for further discussion of the Act. incurred, and the cost can be reasonably estimated. At We operate in the U.S. and multiple international tax jurisdictions, December 31, 2022, environmental obligations recorded in our and our income tax returns are subject to examination by tax consolidated balance sheet totaled $1.7 billion, which reflect authorities in those jurisdictions who may challenge any tax position obligations for environmental liabilities attributed to the on these returns. Uncertainty in a tax position may arise because Comprehensive Environmental Response, Compensation, and tax laws are subject to interpretation. We use significant judgment Liability Act of 1980 (CERCLA) or analogous state programs and for to (1) determine whether, based on the technical merits, a tax estimated future costs associated with environmental matters. position is more likely than not to be sustained and (2) measure Accounting for environmental obligations represents a critical the amount of tax benefit that qualifies for recognition. accounting estimate because (i) changes to environmental laws We have uncertain tax positions related to income tax assessments and regulations and/or circumstances affecting our operations in Indonesia and Peru, including penalties and interest, which could result in significant changes to our estimates, which could have not been recorded at December 31, 2022. Final taxes paid have a significant impact on our results of operations, (ii) we will not may be dependent upon many factors, including negotiations with incur most of these costs for a number of years, requiring us to taxing authorities. In certain jurisdictions, we pay a portion of make estimates over a long period, (iii) calculating the discounted the disputed amount before formally appealing an assessment. cash flows for certain of our environmental obligations requires Such payment is recorded as a receivable if we believe the amount management to estimate the amounts and timing of projected is collectible. Refer to Note 12 for further discussion. 32 Freeport-McMoRan | The Power of Copper MANAGEMENT’S DISCUSSION AND ANALYSIScash flows and make long-term assumptions about inflation rates the future and/or circumstances affecting our operations could and (iv) changes in estimates used in determining our change, either of which could result in significant changes to our environmental obligations could have a significant impact on our current plans, (iii) our implementation of the Global Industry results of operations. Standard on Tailings Management, which could result in changes to We perform a comprehensive annual review of our environmental our plans and the scope of work required, (iv) the methods used or obligations and also review changes in facts and circumstances required to plug and abandon non-producing oil and gas associated with these obligations at least quarterly. Judgments and wellbores, remove platforms, tanks, production equipment and flow estimates are based upon currently available facts, existing lines, and restore the wellsite could change, (v) calculating the technology, presently enacted laws and regulations, remediation fair value of our AROs requires management to estimate projected experience, whether or not we are a potentially responsible party cash flows, make long-term assumptions about inflation rates, (PRP), the ability of other PRPs to pay their allocated portions determine our credit-adjusted, risk-free interest rates and determine and take into consideration reasonably possible outcomes. Our market risk premiums that are appropriate for our operations and cost estimates can change substantially as additional information (vi) given the magnitude of our estimated reclamation, mine becomes available regarding the nature or extent of site closure and wellsite abandonment and restoration costs, changes contamination, updated cost assumptions (including increases in any or all of these estimates could have a significant impact on and decreases to cost estimates), changes in the anticipated our results of operations. scope and timing of remediation activities, the settlement of Mineral Reserves. Refer to Note 17, and Items 1. and 2. “Business environmental matters, required remediation methods and actions and Properties” and Item 1A. “Risk Factors” contained in Part I by or against governmental agencies or private parties. of our annual report on Form 10-K for the year ended December 31, Asset Retirement Obligations. Refer to Notes 1 and 12, and 2022, for further information regarding, and risks associated with, Item 1A. “Risk Factors” contained in Part I of our annual report on our estimated recoverable proven and probable mineral reserves. Form 10-K for the year ended December 31, 2022, for further Recoverable proven and probable mineral reserves were discussion of reclamation and closure costs, including a summary determined from the application of relevant modifying factors to of changes in our asset retirement obligations (AROs) for the three geological data, in order to establish an operational, economically years ended December 31, 2022. viable mine plan and have been prepared in accordance with the We record the fair value of our estimated AROs associated disclosure requirements of Subpart 1300 of Securities and Exchange with tangible long-lived assets in the period incurred. Fair value Commission Regulation S-K. The determination of mineral is measured as the present value of cash flow estimates after reserves involves numerous uncertainties with respect to the considering inflation and a market risk premium. Our cost estimates ultimate geology of the ore bodies, including quantities, grades and are reflected on a third-party cost basis and comply with our recoveries. Estimating the quantity and grade of mineral reserves legal obligation to retire tangible long-lived assets in the period requires us to determine the size, shape and depth of our ore incurred. These cost estimates may differ from financial assurance bodies by analyzing geological data, such as samplings of drill cost estimates for reclamation activities because of a variety of holes, tunnels and other underground workings. In addition to the factors, including obtaining updated cost estimates for reclamation geology of our mines, assumptions are required to determine the activities, the timing of reclamation activities, changes in scope economic feasibility of mining these reserves, including estimates and the exclusion of certain costs not considered reclamation and of future commodity prices and demand, the mining methods we closure costs. At December 31, 2022, AROs recorded in our use and the related costs incurred to develop and mine our mineral consolidated balance sheet totaled $3.0 billion. reserves. Our estimates of recoverable proven and probable Generally, ARO activities are specified by regulations or in mineral reserves are prepared by and are the responsibility of our permits issued by the relevant governing authority, and management’s employees. These estimates are reviewed and verified regularly by judgment is required to estimate the extent and timing of independent experts in mining, geology and reserve determination. expenditures. Accounting for AROs represents a critical accounting Our consolidated estimated recoverable proven and probable estimate because (i) we will not incur most of these costs for a mineral reserves shown below were assessed using long-term number of years, requiring us to make estimates over a long period, price assumptions of $3.00 per pound of copper, $1,500 per ounce (ii) reclamation and closure laws and regulations could change in of gold and $12 per pound of molybdenum at December 31, 2022, compared with long-term price assumptions of $2.50 per pound of copper, $1,200 per ounce of gold and $10 per pound of 2022 Annual Report 33 MANAGEMENT’S DISCUSSION AND ANALYSIS molybdenum at December 31, 2021. The following table summarizes We record, as inventory, applicable costs for copper contained changes in our estimated consolidated recoverable proven in mill and leach stockpiles that are expected to be processed in and probable copper, gold and molybdenum mineral reserves the future based on proven processing technologies. Mill and during 2022: Consolidated reserves at December 31, 2021 Net revisions Production Consolidated reserves at December 31, 2022 Coppera (billion pounds) 107.2 8.1b (4.2) Gold (million ounces) Molybdenum (billion pounds) 27.1 1.6 (1.8) 3.39 0.23 (0.08) 3.53 111.0 26.9 Note: Totals may not foot because of rounding. a. Includes estimated recoverable metals contained in stockpiles. See below for additional discussion of recoverable copper in stockpiles. b. Primarily reflects the impact of a higher long-term price assumption for copper at December 31, 2022, compared with December 31, 2021. 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% higher at December 31, 2022, we estimate that our annual depreciation, depletion and amortization (DD&A) expense for 2023 would decrease by approximately $106 million (approximately $39 million to net income attributable to common stock), and a 10% decrease in copper reserves would increase DD&A expense by approximately $130 million (approximately $47 million to net income attributable to common stock). We perform annual assessments of our existing assets in connection with the review of mine operating and development plans. If it is determined that assigned asset lives do not reflect the expected remaining period of benefit, any change could affect prospective DD&A rates. As discussed below and in Note 1, we review and evaluate our long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amount of such assets may not be recoverable, and changes to our estimates of recoverable proven and probable mineral reserves could have an impact on our assessment of asset recoverability. Recoverable Copper in Stockpiles. Refer to Note 1 for further discussion of our accounting policy for recoverable copper in stockpiles and to Note 4 and “Consolidated Results” for discussion of adjustments to stockpile inventory volumes. 34 Freeport-McMoRan | The Power of Copper leach stockpiles are evaluated periodically to ensure that they are stated at the lower of weighted-average cost or net realizable value (NRV). Accounting for recoverable copper from mill and leach stockpiles represents a critical accounting estimate because (i) it is impracticable to determine copper contained in mill and leach stockpiles by physical count, thus requiring management to employ reasonable estimation methods and (ii) recoveries from leach stockpiles can vary significantly. At December 31, 2022, estimated consolidated recoverable copper was 1.8 billion pounds in leach stockpiles (with a carrying value of $2.2 billion) and 0.3 billion pounds in mill stockpiles (with a carrying value of $0.4 billion). Impairment of Long-Lived Assets. As discussed in Note 1, we assess the carrying values of our long-lived mining assets when events or changes in circumstances indicate that the related carrying amounts of such assets may not be recoverable. In evaluating our long-lived mining assets for recoverability, we use estimates of pre-tax undiscounted future cash flows of our mines. Estimates of future cash flows are derived from current business plans, which are developed using near-term metal price forecasts reflective of the current price environment and management’s projections for long-term average metal prices. In addition to near- and long-term metal price assumptions, other key assumptions include estimates of commodity-based and other input costs; proven and probable mineral reserves estimates, including the timing and cost to develop and produce the mineral reserves; value beyond proven and probable mineral reserve estimates; and the use of appropriate discount rates in the measurement of fair value. We believe our estimates and models used to determine fair value are similar to what a market participant would use. As quoted market prices are unavailable for our individual mining operations, fair value is determined through the use of after-tax discounted estimated future cash flows. During the two-year period ended December 31, 2022, no material impairments of our long-lived mining assets were recorded. In addition to decreases in future metal price assumptions, other events that could result in future impairment of our long-lived mining assets include, but are not limited to, decreases in estimated recoverable proven and probable mineral reserves and any event that might otherwise have a material adverse effect on mine site production levels or costs. Refer to Item 1A. “Risk Factors” contained in Part I of our annual report on Form 10-K for the year ended December 31, 2022. MANAGEMENT’S DISCUSSION AND ANALYSIS 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 2022 2021 $ 22,780 $ 7,037 $ 3,468d $ 2.39 1,451 $ 5,139 $ 3,469 $ 8,146 $ 10,620 $ 22,845 $ 8,366 $ 4,306e $ 2.90 1,482 $ 7,715 $ 2,115 $ 8,068 $ 9,450 a. Refer to Note 16 for a summary of revenues and operating income by operating division. b. Includes favorable adjustments to prior period provisionally priced concentrate and cathode copper sales totaling $60 million ($25 million to net income attributable to common stock or $0.02 per share) in 2022 and $169 million ($65 million to net income attributable to common stock or $0.04 per share) in 2021 (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 totaling $74 million ($0.05 per share) primarily associated with an ARO adjustment at PT-FI, a proposed settlement related to legacy environmental litigation and metals inventory adjustments, partly offset by net favorable adjustments to historical tax matters and net gains on early extinguishment of debt. e. Includes net charges totaling $331 million ($0.22 per share), primarily associated with net adjustments to AROs mostly at 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 costs 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. f. Working capital and other (uses) sources totaled $(1.5) billion in 2022 and $755 million in 2021. 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 2022 2021 4,210 4,213 $ 3.90 $ 2.19 $ 1.50 1,811 1,823 $ 1,787 85 75 $ 18.71 3,843 3,807 $ 4.33 $ 1.93 $ 1.34 1,381 1,360 $ 1,796 85 82 $ 15.56 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.” 2022 Annual Report 35 MANAGEMENT’S DISCUSSION AND ANALYSIS Revenues the final pricing of provisionally priced sales pursuant to contracts Consolidated revenues totaled $22.8 billion in both 2022 and 2021. entered into in prior periods; in times of falling copper prices, the Our revenues primarily include the sale of copper concentrate, opposite occurs. copper cathode, copper rod, gold in concentrate and molybdenum. Following is a summary of changes in our consolidated revenues from 2021 to 2022 (in millions): Consolidated revenues – 2021 Mining operations: Higher (lower) sales volumes: Copper Gold Molybdenum (Lower) higher averaged realized prices: Copper Gold Molybdenum Adjustments for prior year provisionally priced copper sales Lower revenues from sales of purchased copper Lower Atlantic Copper revenues Higher treatment charges Higher royalties and export duties Other, including intercompany eliminations Consolidated revenues – 2022 $ 22,845 1,759 832 (115) (1,812) (16) 234 (109) (276) (518) (58) (143) 157 $ 22,780 Consolidated revenues include net (unfavorable) favorable adjustments to current year provisionally priced copper sales (i.e., provisionally priced sales during the years 2022 and 2021) totaling $(539) million for 2022 and $256 million for 2021. Refer to Note 14 for a summary of total adjustments to prior period and current period provisionally priced sales. Prior Year Provisionally Priced Copper Sales. Net favorable adjustments to prior years’ provisionally priced copper sales (i.e., provisionally priced copper sales at December 31, 2021 and 2020) recorded in consolidated revenues totaled $60 million in 2022 and $169 million in 2021. 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 2022 compared to 2021, primarily reflects lower volumes and prices. We purchased copper cathode primarily for processing by our Rod & Refining operations, totaling 124 million pounds in Sales Volumes. Copper and gold sales volumes were higher in 2022 and 173 million pounds in 2021. 2022, compared to 2021, primarily reflecting increased operating Atlantic Copper Revenues. Lower Atlantic Copper revenues in rates at the Grasberg minerals district and Cerro Verde. Refer 2022, compared with 2021, primarily reflect reduced operations to “Operations” for further discussion of sales volumes at our as a result of a scheduled major maintenance turnaround resulting mining operations. in a 78-day shutdown and lower copper prices. Realized Prices. Our consolidated revenues can vary significantly Treatment Charges. Revenues from our concentrate sales are as a result of fluctuations in the market prices of copper, gold recorded net of treatment charges (i.e., fees paid to smelters and molybdenum. In 2022, our average realized prices, compared that are generally negotiated annually), which will vary with the with 2021, were 10% lower for copper, 1% lower for gold and sales volumes and the price of copper. The increase in the 20% higher for molybdenum. treatment charges during 2022 primarily reflects higher copper As discussed in “Disclosures About Market Risks—Commodity sales volumes. Price Risk,” substantially all of our copper concentrate and Royalties and Export Duties. Royalties are primarily on PT-FI cathode sales contracts provide final copper pricing in a specified sales and vary with the volume of metal sold and the prices of future month (generally one to four months from the shipment copper and gold. In late 2022, PT-FI’s export duty rate declined from date). We record revenues and invoice customers at the time of 5% to 2.5% as a result of smelter development progress. Higher shipment based on then-current LME prices, which results in royalties and export duties during 2022, compared to 2021, are an embedded derivative on provisionally priced concentrate and primarily associated with increased copper and gold sales volumes, cathode sales that is adjusted to fair value through earnings each partly offset by the decline in metal prices. Refer to “Operations— period, using the period-end forward prices, until final pricing Indonesia Mining” for further discussion of the current progress on on the date of settlement. To the extent final prices are higher or additional smelting capacity in Indonesia and to Note 13 for a lower than what was recorded on a provisional basis, an summary of PT-FI’s royalties and export duties. 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 36 Freeport-McMoRan | The Power of Copper MANAGEMENT’S DISCUSSION AND ANALYSIS Production and Delivery Costs Consolidated production and delivery costs totaled $13.0 billion in 2022, compared with $12.0 billion in 2021. Higher consolidated production and delivery costs in 2022 are primarily associated with significant inflationary cost pressures, principally associated with materials and supplies including sulfuric acid and explosives (41% of our site operating costs), labor (27% of our site operating costs) and energy prices (21% of our site operating costs). During 2022, prices for a number of commodity-related consumables operating costs in 2022, including purchases of approximately 230 million gallons of diesel fuel; approximately 8,400 gigawatt 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 820 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 24% of our copper mine site operating increased at a time when copper prices declined. While prices for costs for 2023. a number of commodity-related consumables have retreated from the highs of 2022, most cost elements remain high relative to long-term correlations. Consolidated production and delivery costs also includes net charges totaling $157 million in 2022, primarily associated with ARO adjustments and an administrative fine at PT-FI; and $415 million in 2021, primarily associated with ARO adjustments and other net charges at PT-FI and nonrecurring labor-related costs 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. 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 $2.19 per pound of copper in 2022 and $1.93 per pound in 2021. Higher consolidated unit site production and delivery costs in 2022, compared with 2021, primarily reflect higher energy prices and increased costs for consumables such as sulfuric acid, explosives, key equipment parts and other supplies and services. Refer to “Operations—Unit Net Cash Costs” for further discussion of unit net cash costs 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 both 2022 and 2021. Metals Inventory Adjustments Unfavorable metals inventory adjustments totaled $29 million in 2022 and $16 million in 2021. Adjustments in 2022 reflect NRV inventory adjustments related to lower market prices for copper and higher costs at Morenci and Bagdad. Adjustments in 2022 also include $10 million for stockpile write-offs at Cerro Verde. Adjustments in 2021 were primarily related to a leach stockpile adjustment at Morenci. Environmental Obligations and Shutdown Costs 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 associated with our operating divisions, and to “Product Revenues or operations. 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, 2022. We do not have take-or-pay contractual obligations for other energy commodities. Energy represented approximately 21% of our copper mine site Net charges for environmental obligations and shutdown costs totaled $121 million in 2022, including $44 million for a proposed settlement related to historical environmental litigation and $22 million in net unfavorable adjustments to environmental obligations. Net charges for the year 2021 totaled $91 million, including net unfavorable adjustments to environmental obligations totaling $41 million. Refer to Note 12 for further discussion of environmental obligations and litigation matters. 2022 Annual Report 37 MANAGEMENT’S DISCUSSION AND ANALYSIS Net Gain on Sales of Assets Net gain on sales of assets totaled $2 million in 2022 and $80 million in 2021. Gains on sales of assets in 2021 were primarily associated with the sale of our remaining Freeport Cobalt assets and the sale of carbon dioxide emissions credits at Atlantic Copper. Refer to Note 2 for further discussion of dispositions. Capitalized interest varies with the level of expenditures for our development projects and average interest rates on our borrowings and totaled $150 million in 2022 and $72 million in 2021. The increase in capitalized interest in 2022, compared with 2021, is primarily associated with development activities related to Indonesia smelter projects. Refer to “Operations” and “Capital Resources and Liquidity—Investing Activities” for further Net Gain on Early Extinguishment of Debt discussion of current development projects. Net gain on early extinguishment of debt totaled $31 million in 2022, consisting primarily of $44 million associated with senior note purchases, partly offset by a charge of $10 million associated with the repayment of the PT-FI term loan. Refer to Note 8 for further discussion. Interest Expense, Net Other Income (Expense), Net Other income (expense), net, totaled $207 million in 2022 and $(105) million in 2021. The year 2022 primarily includes interest income totaling $136 million and credits totaling $76 million associated with favorable adjustments to penalties on historical contested tax matters. The year 2021 primarily includes charges Consolidated interest costs (before capitalization) totaled totaling $208 million associated with historical contested tax $710 million in 2022 and $674 million in 2021. Higher interest costs matters at PT-FI, partly offset by gains on currency exchange rate (before capitalization) in 2022, compared with 2021, primarily movements and other net credits. Refer to Note 11 for discussion reflects additional interest costs associated with PT-FI senior notes of historical tax matters. sold in April 2022, partly offset by lower interest costs associated with the repayment and purchase of certain FCX senior notes. Income Taxes Refer to Note 8 for further discussion. U.S.b South America Indonesia PT-FI historical contested tax disputes Eliminations and other Continuing Operations 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): Income (Loss)a $ 811 1,236 4,629 72 (33) $ 6,715 2022 Effective Tax Rate —% 37% 39% N/A N/A 34% Income Tax (Provision) Benefit $ 4c (453)d (1,797) (23) 2 $ (2,267) 2021 Effective Tax Rate 1% 40% 35% N/A N/A 30% Income Tax (Provision) Benefit $ (10)c (820)e (1,377)f (147) 55 $ (2,299) Income (Loss)a $ 1,883 2,072 3,986 (219) (63) $7,659 a. Represents income before income taxes and equity in affiliated companies’ net earnings. b. In addition to our North America mining operations, the U.S. jurisdiction reflects corporate-level expenses, which include interest expense associated with senior notes, general and administrative expenses, and environmental obligations and shutdown costs. c. Includes valuation allowance release on prior year unbenefited NOLs. d. Includes a tax benefit of $31 million ($16 million net of noncontrolling interest), primarily associated with completion of Cerro Verde’s 2016 tax audit. e. Includes a tax benefit of $18 million ($9 million net of noncontrolling interest), primarily associated with completion of tax audits at Cerro Verde for the years 2014 and 2015. f. Includes net tax benefits associated with the release of valuation allowances recorded against PT Rio Tinto Indonesia NOLs totaling $189 million ($151 million net of noncontrolling interest). 38 Freeport-McMoRan | The Power of Copper MANAGEMENT’S DISCUSSION AND ANALYSIS 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 August 2022, the Act was signed into law, which includes, among four copper mines that produce byproduct molybdenum (Bagdad, other provisions, a new CAMT of 15% on the adjusted financial Cerro Verde, Morenci and Sierrita) have also been awarded the statement income (AFSI) of corporations with average AFSI Molybdenum Mark. exceeding $1.0 billion over a three-year period, and a new excise ICMM. We are a founding member of the International Council tax of 1% on the fair market value of net corporate stock repurchases. on Mining & Metals (ICMM), an organization dedicated to a safe, The Act had no impact on our consolidated financial statements fair and sustainable mining and metals industry, aiming for the year ended December 31, 2022. The provisions of the Act are continuously to strengthen ESG performance across the global applicable to us beginning January 1, 2023. Additional guidance mining and metals industry. As a member company, we are related to how the CAMT provisions of the Act will be applied or required to implement the 10 Mining Principles that define good otherwise administered is yet to be released by the U.S. Department ESG practices, and associated position statements, while also of the Treasury, and may differ from our interpretations. We will meeting 39 performance expectations and producing an externally continue to analyze the impacts as additional guidance is available. verified sustainability report in accordance with the Global We expect the CAMT provisions will impact our U.S. tax position, Reporting Initiative Sustainability Reporting Standards subject and may further limit our ability to benefit from our U.S. NOLs. to the ICMM Assurance & Validation Procedure. Assuming achievement of current sales volume and cost 2021 Annual Report on Sustainability. In April 2022, we published estimates and average prices of $4.00 per pound for copper, our 2021 Annual Report on Sustainability, which is available on our $1,900 per ounce for gold and $20.00 per pound for molybdenum website at fcx.com/sustainability. We have a long history of ESG for 2023, we estimate our consolidated effective tax rate for the programs, and we are focused on leading as a responsible copper year 2023 would approximate 33%. Changes in projected sales producer. Refer to Item 1A. “Risk Factors” contained in Part I of our volumes and average prices during 2023 would incur tax impacts annual report on Form 10-K for the year ended December 31, 2022, at estimated effective rates of 39% for Peru, 38% for Indonesia for discussion of ESG-related risks. and 0% for the U.S., which excludes any potential impact from the 2021 Climate Report. In September 2022, we published our Act. Our projected estimated effective tax rate of 0% for the U.S. updated Climate Report which details our ongoing initiatives for the year 2023 may be adjusted as additional guidance is to reduce our greenhouse gas (GHG) emissions, improve energy released by the U.S. Department of the Treasury on key provisions efficiency, evaluate and integrate the use of lower carbon and of the Act, including guidance on the CAMT. renewable energy sources and enhance our resilience to future Refer to Note 11 and Item 1A. “Risk Factors” contained in Part I climate-related risks. We continue to advance GHG emissions of our annual report on Form 10-K for the year ended December 31, reduction initiatives across our global operations and established 2022, for further discussion of income taxes. our 2030 GHG reduction targets that collectively cover nearly OPERATIONS Responsible Production 100% of our Scope 1 and 2 GHG emissions. Refer to Item 1A. “Risk Factors” contained in Part I of our annual report on Form 10-K for the year ended December 31, 2022, for further discussion of The Copper Mark. We are committed to maintaining the validation climate-related risks. of 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. In February 2023, PT-FI was awarded the Copper Mark and we have now achieved the Copper Mark at all 12 of our eligible copper producing sites globally. In fourth-quarter 2022, the Copper Mark announced an extension of its framework to include molybdenum producers, among other metal producers. In February 2023, our Climax and Henderson molybdenum mines were awarded the Molybdenum Mark, making FCX the first molybdenum miner to achieve this distinction. Our Leaching Innovation Initiatives We are advancing efforts to improve copper recovery from our leach processes, including initiatives across our North America and South America operations to incorporate new applications, technologies and data analytics. We believe these leach innovation initiatives provide potential opportunities to produce incremental copper from our large existing leach stockpiles and lower-grade material currently classified as waste. Initial results support the potential for incremental low-cost additions to our production and reserve profile and we have identified opportunities to achieve an annual run rate of 200 million pounds of copper per year through these initiatives by the end of 2023. 2022 Annual Report 39 Feasibility and Optimization Studies We are planning an expansion to double the concentrator We are engaged in various studies associated with potential future capacity of the Bagdad operation in northwest Arizona. We are expansion projects primarily at our mining operations. The costs for these studies are charged to production and delivery costs as incurred and totaled $141 million for 2022 and $59 million for 2021. engaging stakeholders and conducting a feasibility study, which is expected to be completed in 2023. We are advancing plans for expanded tailings infrastructure projects to support We estimate the costs of these studies will approximate $200 million Bagdad’s long-range plans. The timing of future development will for the year 2023 (including approximately $70 million in first- be dependent on market conditions, labor and supply chain quarter 2023). 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% undivided joint venture interest in Morenci using the proportionate consolidation method. The North America copper mines include open-pit mining, sulfide-ore concentrating, leaching and solution extraction/ electrowinning (SX/EW) operations. A majority of the copper produced at our North America copper mines is cast into copper rod by our Rod & Refining segment. The remainder of our North America copper production is sold as copper cathode or copper concentrate, a portion of which is shipped to Atlantic Copper (our wholly owned smelter). Molybdenum concentrate, gold and silver are also produced by certain of our North America copper mines. Operating and Development Activities. We have substantial reserves and future opportunities in the U.S., primarily associated with existing mining operations. Following our response to the COVID-19 pandemic in early 2020, we began ramping up mining rates at the North America mines considerations and other economic factors. Operating Data. Following is summary operating data for the North America copper mines for the years ended December 31: 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 (%) Copper production (millions of recoverable pounds) Mill operations Ore milled (metric tons per day) Average ore grade (%): Copper Molybdenum Copper recovery rate (%) Copper production (millions of recoverable pounds) 2022 2021 1,467 1,469 4.08 1,460 1,436 4.30 $ $ 29 34 676,400 0.29 1,019 665,900 0.29 1,056 294,200 269,500 0.37 0.02 81.8 695 0.38 0.03 81.2 649 a. Refer to “Consolidated Results” for our consolidated molybdenum sales volumes, which include sales of molybdenum produced at the North America copper mines. during 2021, which continued into 2022. However, a tight labor Copper sales volumes from our North America copper mines market and increased competition from other employers in North totaled 1.47 billion pounds in 2022 and 1.44 billion pounds in 2021. America represent strategic challenges that are impacting our North America copper sales are estimated to approximate ability to further expand current mining rates. 1.46 billion pounds in 2023. Refer to “Outlook” for projected Lone Star, at our Safford mine, is increasing its operating rates molybdenum sales volumes. to achieve targeted production of approximately 300 million Unit Net Cash Costs. Unit net cash costs per pound of copper pounds of copper per year from oxide ores in 2023 (compared with is a measure intended to provide investors with information about the initial design capacity of 200 million pounds of copper per the cash-generating capacity of our mining operations expressed year). The oxide project at Lone Star advances the opportunity for on a basis relating to the primary metal product for our respective development of the underlying, large-scale sulfide resources. operations. We use this measure for the same purpose and for We are conducting follow-on exploration in the area to support monitoring operating performance by our mining operations. This metallurgical testing and mine development planning for a potential information differs from measures of performance determined significant long-term investment to build additional scale on an in accordance with U.S. GAAP and should not be considered in economically attractive basis. 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. 40 Freeport-McMoRan | The Power of Copper MANAGEMENT’S DISCUSSION AND ANALYSIS Gross Profit per Pound of Copper and Molybdenum. The and Production Costs” for an explanation of the “by-product” following table summarizes unit net cash costs and gross profit and “co-product” methods and a reconciliation of unit net cash per pound of copper at our North America copper mines for costs per pound to production and delivery costs applicable to the two years ended December 31, 2022. Refer to “Product Revenues sales reported in our consolidated financial statements. 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 $ 4.08 2.58 (0.33) 0.10 2.35 0.28 0.01 0.12b 2.76 (0.01) $ 1.31 1,472 2022 Co-Product Method Copper $ 4.08 2.36 — 0.10 2.46 0.26 0.01 0.10 2.83 (0.01) $ 1.24 1,472 Molybdenuma $ 17.87 13.35 — — 13.35 0.90 0.05 0.47 14.77 — $ 3.10 29 By-Product Method $ 4.30 2.13 (0.33) 0.09 1.89 0.25 0.01 0.07b,c 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 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 $0.06 per pound of copper in 2022 and $0.02 per pound of copper in 2021 for feasibility and optimization studies. c. Includes credits totaling $0.02 per pound of copper associated with refunds of Arizona transaction privilege taxes related to purchased electricity. Our North America copper mines have varying cost structures Average unit net cash costs (net of by-product credits) for because of differences in ore grades and characteristics, processing our North America copper mines are expected to approximate costs, by-product credits and other factors. During 2022, our $2.45 per pound of copper in 2023, based on achievement of mining operations experienced significant cost inflation, principally current sales volume and cost estimates and assuming an average associated with higher energy, labor, maintenance and supplies, molybdenum price of $20.00 per pound. North America’s expected explosives and sulfuric acid, resulting in higher average unit net average unit net cash costs for the year 2023 would change by cash costs (net of by-product credits) for the North America approximately $0.03 per pound for each $2 per pound change in copper mines of $2.35 per pound of copper in 2022, compared the average price of molybdenum. with $1.89 per pound of copper in 2021. However, average unit net cash costs for our North America copper mines in 2022, compared with 2021, benefited from higher sales volumes. Because certain assets are depreciated on a straight-line basis, North America’s average unit depreciation rate may vary with asset additions and the level of copper production and sales. Revenue adjustments primarily result from changes in prices on provisionally priced copper sales recognized in prior periods. Refer to “Consolidated Results—Revenues” for further discussion of adjustments to prior period provisionally priced copper sales. South America Mining We operate two copper mines in South America—Cerro Verde in Peru (in which we own a 53.56% interest) and El Abra in Chile (in which we own a 51.0% interest), which are consolidated in our financial statements. South America mining includes open-pit mining, sulfide-ore concentrating, leaching and SX/EW operations. Production from our South America mines is sold as copper concentrate or cathode under long-term contracts. Our South America mines also sell a portion of their copper concentrate production to Atlantic Copper. In addition to copper, the Cerro Verde mine produces molybdenum concentrate and silver. Beginning in late 2022, heightened tensions, protests and social unrest emerged in Peru following a change in the country’s political leadership. Demonstrations have continued in early 2022 Annual Report 41 MANAGEMENT’S DISCUSSION AND ANALYSIS 2023, and the civil unrest continues to disrupt commerce and Consolidated copper sales from our South America mines supply chains in Peru. To date, there has been a limited impact on are expected to approximate 1.2 billion pounds in 2023. Refer to Cerro Verde’s operations. We continue to monitor the situation “Outlook” for projected molybdenum sales volumes. while prioritizing safety and security. A prolonged disruption of Unit Net Cash Costs. Unit net cash costs per pound of copper is logistics and supply chains could impact future operations. a measure intended to provide investors with information about Operating and Development Activities. Increased operating the cash-generating capacity of our mining operations expressed rates at Cerro Verde and higher mining and stacking activities at on a basis relating to the primary metal product for our respective El Abra resulted in a 12% increase in copper production from operations. We use this measure for the same purpose and for South America mining for the year 2022, compared with the year monitoring operating performance by our mining operations. This 2021 (which was impacted by COVID-19 protocols). information differs from measures of performance determined El Abra’s large sulfide resource supports a potential major mill in accordance with U.S. GAAP and should not be considered in project similar to the large-scale concentrator constructed at isolation or as a substitute for measures of performance determined Cerro Verde in 2015. Technical and economic studies continue in accordance with U.S. GAAP. This measure is presented by to be evaluated to determine the optimal scope and timing for other metals mining companies, although our measure may not be the sulfide project. We are advancing plans to invest in water infrastructure to provide options to extend existing operations, comparable to similarly titled measures reported by other companies. Gross Profit per Pound of Copper. The following table summarizes while continuing to monitor potential changes in Chile’s regulatory unit net cash costs and gross profit per pound of copper at our and fiscal matters. We will defer major investment decisions South America mining operations for the two years ended pending clarity on such matters. December 31, 2022. Unit net cash costs per pound of copper are Operating Data. Following is summary operating data for our reflected under the by-product and co-product methods as the South America mining operations for the years ended December 31. South America mining operations also had sales of molybdenum Copper (millions of recoverable pounds) Production Sales Average realized price per pound Molybdenum (millions of recoverable pounds) Productiona 2022 2021 1,176 1,162 3.80 1,047 1,055 4.34 $ $ 23 21 Leach operations Leach ore placed in stockpiles (metric tons per day) Average copper ore grade (%) Copper production (millions of recoverable pounds) 163,000 0.35 302 163,900 0.32 256 Mill operations Ore milled (metric tons per day) Average ore grade (%): Copper Molybdenum Copper recovery rate (%) Copper production (millions of recoverable pounds) 409,200 380,300 0.32 0.01 85.3 874 0.31 0.01 87.3 791 a. Refer to “Consolidated Results” for our consolidated molybdenum sales volumes, which include sales of molybdenum produced at Cerro Verde. Higher consolidated copper sales volumes from South America of 1.2 billion pounds in 2022, compared with 1.1 billion pounds in 2021, primarily reflect increased mining and milling rates at Cerro Verde. 42 Freeport-McMoRan | The Power of Copper 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. 2022 2021 By-Product Co-Product By-Product Co-Product Method Method Method Method 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 Revenue adjustments, primarily for pricing on prior period open sales Gross profit per pound Copper sales (millions of recoverable pounds) $ 3.80 $ 3.80 $ 4.34 $ 4.34 2.52 (0.34) 0.15 0.01 2.34 0.35 0.01 0.07 2.77 2.33 — 0.14 0.01 2.48 0.32 0.01 0.07 2.88 2.23a (0.32) 0.13 0.01 2.05 0.39 — 0.03 2.47 2.06 — 0.13 0.01 2.20 0.37 — 0.03 2.60 0.03 $ 1.06 0.03 $ 0.95 0.09 $ 1.96 0.09 $ 1.83 1,162 1,162 1,055 1,055 a. Includes charges totaling $0.09 per pound of copper associated with nonrecurring labor-related costs at Cerro Verde. MANAGEMENT’S DISCUSSION AND ANALYSIS Our South America mines have varying cost structures because Operating and Development Activities. PT-FI currently has of differences in ore grades and characteristics, processing costs, three underground operating mines in the Grasberg minerals by-product credits and other factors. During 2022, our mining district: Grasberg Block Cave, Deep Mill Level Zone (DMLZ) and operations experienced significant cost inflation, principally Big Gossan. associated with higher energy, sulfuric acid, explosives and other PT-FI’s milling rates for ore extracted from its underground input costs, resulting in higher average unit net cash costs (net of mines averaged 192,600 metric tons of ore per day in 2022. by-product credits) for South America mining of $2.34 per pound of The installation of additional milling facilities at PT-FI is currently copper in 2022, compared with $2.05 per pound of copper in 2021. expected to be completed in late 2023, which would increase However, average unit net cash costs for South America mining milling capacity to approximately 240,000 metric tons of ore per in 2022, compared with 2021, benefited from higher sales volumes. day to provide for continued annualized copper and gold production Revenues from Cerro Verde’s concentrate sales are recorded volumes of approximately 1.6 billion pounds of copper and 1.6 million net of treatment charges, which will vary with Cerro Verde’s sales ounces of gold. PT-FI is also advancing a mill recovery project volumes and the price of copper. with the installation of a new copper cleaner circuit that is expected Because certain assets are depreciated on a straight-line basis, to be completed in 2024, which is expected to provide incremental South America’s unit depreciation rate may vary with asset additions metal production of approximately 60 million pounds of copper and and the level of copper production and sales. 40 thousand ounces of gold per year. Revenue adjustments primarily result from changes in prices on Kucing Liar. Long-term mine development activities are ongoing provisionally priced copper sales recognized in prior periods. for PT-FI’s Kucing Liar deposit in the Grasberg minerals district, Refer to “Consolidated Results—Revenues” for further discussion which is expected to produce over 6 billion pounds of copper and of adjustments to prior period provisionally priced copper sales. 6 million ounces of gold between 2028 and the end of 2041. Average unit net cash costs (net of by-product credits) for our Pre-production development activities commenced in South America mines are expected to approximate $2.30 per 2022 and are expected to continue over an approximate 10-year pound of copper in 2023, based on current sales volume and cost timeframe. Capital investments are estimated to average estimates and assuming an average price of $20.00 per pound approximately $400 million per year over this period (including of molybdenum. Indonesia Mining PT-FI operates one of the world’s largest copper and gold mines at the Grasberg minerals district in Central Papua, Indonesia. PT-FI produces copper concentrate that contains significant quantities of gold and silver. We have a 48.76% ownership interest approximately $470 million for the year 2023). At full operating rates of approximately 90,000 metric tons of ore per day, annual production from Kucing Liar is expected to approximate 550 million pounds of copper and 560 thousand ounces of gold, providing PT-FI with sustained long-term, large-scale and low-cost production. Kucing Liar will benefit from substantial shared infrastructure and PT-FI’s experience and long-term success in in PT-FI and manage its mining operations. PT-FI’s results are block-cave mining. consolidated in our financial statements. As discussed in Note 3, under the terms of the divestment agreement and related documents entered into in 2018, our economic interest in PT-FI approximated 81% through 2022, and beginning January 1, 2023, our economic interest in PT-FI is 48.76%. This arrangement was developed to replicate the economics of PT-FI’s former joint venture partner interests, which were acquired by the Indonesia government in 2018. Substantially all of PT-FI’s copper concentrate is sold under long-term contracts. During 2022, 34% of PT-FI’s copper concentrate was sold to PT Smelting (PT-FI’s 39.5% owned copper smelter and refinery in Gresik, Indonesia). See “Smelting and Refining” below for a discussion of PT-FI’s tolling arrangement with PT Smelting that commenced in 2023. Indonesia Smelter. In connection with PT-FI’s 2018 agreement with the Indonesia government to secure the extension of its long-term mining rights, PT-FI committed to construct additional domestic smelting capacity totaling 2 million dry metric tons of concentrate per year by the end of 2023 (subject to force majeure provisions). In accordance with Indonesia regulations, PT-FI submits a smelter progress report to the Indonesia government for review every six months (refer to Note 12). 2022 Annual Report 43 MANAGEMENT’S DISCUSSION AND ANALYSIS PT-FI is actively engaging in the following projects for additional contained in Part I of our annual report on Form 10-K for the domestic smelting capacity: year ended December 31, 2022, for further discussion of risks • Construction of a greenfield smelter in Gresik, Indonesia with a associated with PT-FI’s export of copper concentrate. capacity to process approximately 1.7 million metric tons of Mining Rights. PT-FI and the Indonesia government continue to copper concentrate per year. At December 31, 2022, smelter engage in preliminary discussions regarding the extension of construction was approximately 50% complete. The facility is PT-FI’s mining rights under its IUPK beyond 2041. PT-FI believes expected to be commissioned during 2024 at an estimated cost an extension beyond 2041 would enable continuity of operations of $3.0 billion, including $2.8 billion for a construction contract and the identification of additional resource development (excluding capitalized interest, owner’s costs and commissioning) opportunities in the Grasberg minerals district. Refer to Item 1A. and $0.2 billion for investment in a desalinization plant. “Risk Factors” contained in Part I of our annual report on Form 10-K • Expansion of PT Smelting’s capacity by 30% to 1.3 million metric for the year ended December 31, 2022, for further discussion of tons of copper concentrate per year, which is expected to be risks associated with PT-FI’s IUPK. completed by the end of 2023. PT-FI is funding the cost of the Operating Data. Following is summary operating data for our expansion, estimated to approximate $250 million, with a Indonesia mining operations for the years ended December 31. loan that will convert to equity, increasing PT-FI’s ownership in PT Smelting upon project completion (refer to Note 3). • Construction of a PMR to process gold and silver from the greenfield smelter and PT Smelting at an estimated cost of $400 million. Construction is in progress with commissioning expected during 2024. Capital expenditures for the Indonesia smelter projects totaled $0.8 billion for the year 2022 and are expected to approximate $1.8 billion for the year 2023. Capital expenditures for the Indonesia smelter projects are being funded with proceeds received from PT-FI’s April 2022 senior notes offering and availability under its revolving credit facility. Construction of the additional domestic smelter capacity will result in the elimination of export duties, which mitigates the economic cost associated with the Indonesia smelter projects. In late 2022, PT-FI received approval, based on construction progress achieved, for a reduction in export duties from 5% to 2.5%. Upon receiving verification and approval from the Indonesia government that construction progress has exceeded 50%, PT-FI expects export duties to be eliminated. Indonesia regulations require PT-FI to renew its export license annually, subject to review by the Indonesia government every six months, depending on, among other things, greenfield smelter 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 extracted and milled (metric tons per day): Grasberg Block Cave underground mine DMLZ underground mine Big Gossan underground mine Other adjustmentsa Total Average ore grade: Copper (%) Gold (grams per metric ton) Recovery rates (%): Copper Gold 2022 2021 1,567 1,582 3.80 $ 1,336 1,316 4.34 $ 1,798 1,811 $ 1,787 1,370 1,349 $ 1,796 103,300 76,300 7,600 5,400 192,600 70,600 58,000 7,500 15,500 151,600 1.19 1.05 90.0 77.7 1.30 1.04 89.8 77.0 a. Includes ore extracted and milled from the Deep Ore Zone (DOZ) underground mine ore body, which was depleted at the end of 2021. construction progress. The current license is scheduled for Higher consolidated sales of 1.6 billion pounds of copper and renewal in March 2023 and PT-FI is preparing its renewal application. 1.8 million ounces of gold in 2022, compared with 1.3 billion PT-FI’s special mining license (IUPK) provides that exports pounds of copper and 1.3 million ounces of gold in 2021, primarily continue through 2023, subject to force majeure considerations. reflect increased operating rates at the Grasberg minerals district, PT-FI plans to work cooperatively with the Indonesia government partly offset by lower copper ore grades. Consolidated sales to continue exports beyond 2023 as required until the smelter is volumes from PT-FI are expected to approximate 1.5 billion pounds fully commissioned. Refer to Note 12 and Item 1A. “Risk Factors” 44 Freeport-McMoRan | The Power of Copper MANAGEMENT’S DISCUSSION AND ANALYSIS of copper and 1.7 million ounces of gold in 2023, net of approximately in accordance with U.S. GAAP. This measure is presented 90 million pounds of copper and 120 thousand ounces of gold by other metal mining companies, although our measure may from mine production in concentrate form that will be deferred not be comparable to similarly titled measures reported by until sale in the form of refined metal under the tolling agreement other companies. with PT Smelting. Gross Profit per Pound of Copper and per Ounce of Gold. The Unit Net Cash Costs. Unit net cash costs per pound of copper is following table summarizes the unit net cash costs and gross a measure intended to provide investors with information about profit per pound of copper and per ounce of gold at our Indonesia the cash-generating capacity of our mining operations expressed mining operations for the two years ended December 31, 2022. on a basis relating to the primary metal product for our respective Refer to “Product Revenues and Production Costs” for an operations. We use this measure for the same purpose and for explanation of “by-product” and “co-product” methods and a monitoring operating performance by our mining operations. This reconciliation of unit net cash costs per pound to production information differs from measures of performance determined and delivery costs applicable to sales reported in our consolidated in accordance with U.S. GAAP and should not be considered in financial statements. isolation or as a substitute for measures of performance determined 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 profit (loss) Gross profit per pound/ounce Copper sales (millions of recoverable pounds) Gold sales (thousands of recoverable ounces) By-Product Method $ 3.80 1.58 (2.13) 0.22 0.19 0.23 0.09 0.65 0.11a 0.85 0.02 0.01 $ 2.98 1,582 2022 Co-Product Method Gold Copper $ 3.80 $ 1,787 1.01 — 0.14 0.12 0.15 1.42 0.42 0.07 1.91 0.01 0.01 $ 1.91 1,582 477 — 65 58 69 669 195 35 899 2 3 $ 893 1,811 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 1,316 2021 Co-Product Method Copper $ 4.34 1.03 — 0.17 0.11 0.17 1.48 0.55 0.18 2.21 0.05 (0.05) $ 2.13 1,316 Gold $ 1,796 424 — 69 47 67 607 228 77 912 (3) (19) $ 862 1,349 a. Includes charges associated with ARO adjustments totaling $0.07 per pound of copper in 2022 and $0.26 per pound of copper in 2021. A significant portion of PT-FI’s costs are fixed and unit costs vary PT-FI’s export duties totaled $307 million in 2022 and $218 million depending on volumes and other factors. PT-FI’s unit net cash costs in 2021, and PT-FI’s royalties totaled $357 million in 2022 and (including gold and silver credits) of $0.09 per pound of copper $319 million in 2021. The increase in export duties and royalties in in 2022 were lower than unit net cash costs of $0.19 per pound of 2022, compared with 2021, primarily reflects higher sales volumes. copper in 2021, primarily reflecting higher copper and gold sales As noted above, in late 2022, PT-FI’s export duty rate declined volumes, partly offset by higher energy costs and the impact of from 5% to 2.5%. Refer to Note 13 for further discussion of PT-FI’s increased operating rates. export duties and royalties. Treatment charges vary with the volume of metals sold and the price of copper, and royalties vary with the volume of metals sold and the prices of copper and gold. 2022 Annual Report 45 MANAGEMENT’S DISCUSSION AND ANALYSIS Because certain assets are depreciated on a straight-line Operating and Development Activities. Production from the basis, PT-FI’s unit depreciation rate may vary with asset additions Molybdenum mines totaled 33 million pounds of molybdenum in and the level of copper production and sales. The decrease in 2022 and 30 million pounds in 2021. Refer to “Consolidated the DD&A rate per pound of copper in 2022, compared with 2021, Results” for our consolidated molybdenum operating data, which primarily reflects higher volumes associated with increased includes sales of molybdenum produced at our Molybdenum operating rates and the depletion of the DOZ underground mine mines and from our North America and South America copper during 2021, partly offset by significant underground development mines. Refer to “Outlook” for projected consolidated molybdenum assets being placed into service. sales volumes. Revenue adjustments primarily result from changes in prices Unit Net Cash Costs Per Pound of Molybdenum. Unit net cash on provisionally priced copper sales recognized in prior periods. costs per pound of molybdenum is a measure intended to provide Refer to “Consolidated Results—Revenues” for further discussion of adjustments to prior period provisionally priced copper sales. PT Smelting intercompany profit (loss) represents the change in the deferral of 39.5% of PT-FI’s profit on sales to PT Smelting. Refer to “Smelting and Refining” below for further discussion. Assuming an average gold price of $1,900 per ounce for 2023 and achievement of current sales volume and cost estimates, unit net cash costs (including gold and silver credits) for PT-FI are expected to approximate $0.22 per pound of copper in 2023. PT-FI’s expected average unit net cash costs for the year 2023 would change by approximately $0.10 per pound of copper for each $100 per ounce change in the average price of gold. PT-FI’s projected sales volumes and unit net cash costs for the year 2023 are dependent on a number of factors, including operational performance, weather-related conditions, timing of shipments and the Indonesia government’s extension of PT-FI’s export permit. 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, 2022, for further discussion of factors that could cause results to differ materially from projections, including the February 2023 weather event at PT-FI’s operations. Molybdenum Mines We have two wholly owned molybdenum mines in Colorado —the Henderson underground mine and the Climax open-pit mine. The Henderson and Climax mines produce high-purity, chemical- grade molybdenum concentrate, which is typically further processed into value-added molybdenum chemical products. The majority of the molybdenum concentrate produced at the Henderson and Climax mines, as well as from our North America and South America copper mines, is processed at our own conversion facilities. investors with information about the cash-generating capacity of our mining operations expressed on a basis relating to the primary metal product for our respective operations. We use this measure for the same purpose and for monitoring operating performance by our mining operations. This information differs from measures of performance determined in accordance with U.S. GAAP and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. This measure is presented by other metals mining companies, although our measure may not be comparable to similarly titled measures reported by other companies. Average unit net cash costs for our Molybdenum mines of $11.43 per pound of molybdenum in 2022 were higher than $8.87 per pound of molybdenum in 2021, primarily reflecting increased contract labor and higher energy and other input costs, partly offset by higher molybdenum production. Based on current sales volume and cost estimates, average unit net cash costs for the Molybdenum mines are expected to approximate $13.80 per pound of molybdenum in 2023. Refer to “Product Revenues and Production Costs” for a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in our consolidated financial statements. Smelting & Refining We wholly own and operate the Miami smelter in Arizona, the El Paso refinery in Texas and Atlantic Copper, a smelter and refinery in Spain. Additionally, PT-FI has a 39.5% ownership interest in PT Smelting (refer to Note 3). Treatment charges for smelting and refining copper concentrate consist of a base rate per pound of copper and per ounce of gold and are generally fixed. Treatment charges represent a cost to our mining operations and income to Atlantic Copper. Thus, higher treatment charges benefit the smelter operations and adversely affect our mining operations. Our North America copper mines are less significantly affected by changes in treatment 46 Freeport-McMoRan | The Power of Copper MANAGEMENT’S DISCUSSION AND ANALYSIScharges because these operations are largely integrated with our of PT-FI’s sales during 2023. We estimate that approximately Miami smelter and El Paso refinery. Through this form of 90 million pounds of copper and 120 thousand ounces of gold from downstream integration, we are able to assure placement of a PT-FI’s first-quarter 2023 production will remain in inventory until significant portion of our concentrate production. final sale later in 2023. Miami Smelter. In 2021, our Miami smelter completed a major PT Smelting received a one-year extension of its anode slimes maintenance turnaround and incurred maintenance charges and export license, which currently expires November 3, 2023. Refer idle facility costs totaling $87 million. Major maintenance turnarounds to Item 1A. “Risk Factors” contained in Part I of our annual are anticipated to occur approximately every two or three years report on Form 10-K for the year ended December 31, 2022, for for the Miami smelter. The next major maintenance turnaround is further discussion of risks associated with PT Smelting’s export scheduled for the last half of 2024. of anode slimes. Atlantic Copper. Atlantic Copper smelts and refines copper PT Smelting’s maintenance turnarounds (which range from concentrate and markets refined copper and precious metals in two weeks to a month to complete) typically are expected to occur slimes. Following is an allocation of Atlantic Copper’s concentrate approximately every two years, with short-term maintenance purchases from unaffiliated third parties and our copper mining turnarounds in the interim. PT Smelting completed a 30-day operations for the years ended December 31: maintenance turnaround during December 2020 and an 18-day maintenance turnaround in October 2022. PT Smelting has a planned 75-day shutdown scheduled for mid-2023 associated with its expansion project and a 7-day shutdown scheduled in fourth- quarter 2023 to complete final tie-in of the expansion project. We defer recognizing profits on sales from our mining operations to Atlantic Copper and on 39.5% of PT-FI’s sales to PT Smelting until final sales to third parties occur. Changes in these deferrals attributable to variability in intercompany volumes resulted in net additions (reductions) to operating income totaling $52 million ($33 million to net income attributable to common stock) in 2022 and $(188) million ($(106) million to net income attributable to common stock) in 2021. Our net deferred profits on our inventories at Atlantic Copper and PT Smelting to be recognized in future periods’ operating income totaled $250 million at December 31, 2022. Quarterly variations in ore grades, the timing of intercompany shipments and changes in product prices will result in variability in our net deferred profits and quarterly earnings. As noted above, beginning in 2023, PT-FI’s commercial arrangement with PT Smelting converted to a tolling arrangement. Under the arrangement, PT-FI pays PT Smelting a tolling fee to smelt and refine its concentrate and will retain title to all products for sale to third parties (i.e., there are no further sales from PT-FI to PT Smelting). Third parties Indonesia mining South America mining North America copper mines 2022 65% 18 10 7 100% 2021 66% 9 7 18 100% In 2022, Atlantic Copper completed a 78-day major maintenance turnaround and incurred maintenance charges and idle facility costs totaling $41 million. Atlantic Copper’s major maintenance turnarounds typically occur approximately every eight years, with shorter-term maintenance turnarounds in the interim. At December 31, 2022, Atlantic Copper had take-or-pay contractual obligations for the procurement of copper concentrate totaling $3.6 billion, which provide for deliveries of specified volumes at market-based prices. PT Smelting. Prior to 2023, PT-FI’s contract with PT Smelting provided for PT-FI to supply 100% 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 could also then sell copper concentrate to PT Smelting at market rates for quantities in excess of 205,000 metric tons of copper annually.  Beginning in 2023, PT-FI’s commercial arrangement with PT Smelting converted to a tolling arrangement. Under the arrangement, PT-FI pays PT Smelting a tolling fee to smelt and refine its concentrate and will retain title of all products for sale to third parties. This arrangement is not expected to result in a significant change in PT-FI’s economics but will impact the timing 2022 Annual Report 47 MANAGEMENT’S DISCUSSION AND ANALYSIS CAPITAL RESOURCES AND LIQUIDITY Our consolidated operating cash flows vary with sales volumes; prices realized from copper, gold and molybdenum sales; production costs; income taxes; other working capital changes; and other factors. 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, 2022, for further discussion of our energy requirements and related costs. We believe the actions we have taken in recent years to build a solid balance sheet, successfully expand low-cost operations and maintain flexible organic growth options while maintaining sufficient liquidity, will allow us to continue to execute our business plans in a prudent manner during periods of economic uncertainty while preserving substantial future asset values. We closely monitor market conditions and will adjust our operating plans to protect liquidity and preserve our asset values, if necessary. We expect to maintain a solid balance sheet and strong liquidity position as we focus on building long-term value in our business, executing our operating plans safely, responsibly and efficiently, and prudently managing costs and capital expenditures. Based on current sales volume, cost and metal price estimates discussed in “Outlook,” our available cash and cash equivalents plus our projected consolidated operating cash flows of $7.2 billion for the year 2023 exceed our expected consolidated capital expenditures of $5.2 billion (which includes $1.8 billion for the Indonesia smelter projects that are being funded with proceeds from PT-FI’s senior notes and its available credit facility). We have cash on hand and the financial flexibility to fund capital expenditures and our other cash requirements for the year, including noncontrolling interest distributions, income tax payments, debt repayments, current common stock dividends (base and variable) and any share repurchases. At December 31, 2022, we had $8.1 billion of consolidated cash and cash equivalents (which includes $1.8 billion of cash for Indonesia smelter projects). In October 2022, we entered into a $3.0 billion, five-year, fully available unsecured revolving credit facility that replaced our prior revolving credit facility and PT-FI and Cerro Verde have $1.3 billion and $350 million, respectively, of availability under their revolving credit facilities. Refer to “Outlook” for further discussion of projected operating cash flows and capital expenditures for 2023 and to “Debt” below and Note 8 for further discussion. Financial Policy. Our financial policy is aligned with our strategic objectives of maintaining a solid 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% of available cash flows generated after planned capital spending and distributions to noncontrolling interests would be allocated to shareholder returns and the balance to debt reduction and investments in value enhancing growth projects, subject to us maintaining our net debt at a level not to exceed the net debt target of $3.0 billion to $4.0 billion (excluding project net debt for additional smelting capacity in Indonesia). The Board will review the structure of the performance-based payout framework at least annually. At December 31, 2022, our net debt, excluding net debt for the Indonesia smelter projects, totaled $1.3 billion. Refer to “Net Debt” for further discussion. In December 2022, our Board declared cash dividends totaling $0.15 per share on our common stock (including a $0.075 per share quarterly base cash dividend and a $0.075 per share quarterly variable, performance-based cash dividend), which was paid on February 1, 2023, to shareholders of record as of January 13, 2023. Based on current market conditions, the base and variable dividends on our common stock are anticipated to total $0.60 per share for 2023 (including the dividends paid on February 1, 2023), comprised of a $0.30 per share base dividend and $0.30 per share variable dividend. The declaration and payment of dividends (base or variable) is at the discretion of our Board and will depend on our financial results, cash requirements, global economic conditions and other factors deemed relevant by our Board. Refer to Item 1A. “Risk Factors” contained in Part I of our annual report on Form 10-K for the year ended December 31, 2022, and “Cautionary Statement” below for further discussion. Cash Following is a summary of the U.S. and international components of consolidated cash and cash equivalents available to the parent company, net of noncontrolling interests’ share, taxes and other costs at December 31, 2022 (in billions): Cash at domestic companies Cash at international operations Total consolidated cash and cash equivalents Cash for Indonesia smelter projects Noncontrolling interests’ share Cash, net of noncontrolling interests’ share Withholding taxes Net cash available $ 4.9 3.2 8.1 (1.8)a (0.4) 5.9 (0.1) $ 5.8 a. Estimated remaining net proceeds from PT-FI’s April 2022 senior notes offering. Cash held at our international operations is generally used to support our foreign operations’ capital expenditures, operating expenses, debt repayments, working capital or other cash needs. Management believes that sufficient liquidity is available in the U.S. from cash balances and availability from our revolving credit 48 Freeport-McMoRan | The Power of Copper MANAGEMENT’S DISCUSSION AND ANALYSIS facility. We have not elected to permanently reinvest earnings A large portion of the capital expenditures relate to projects from our foreign subsidiaries, and we have recorded deferred tax that are expected to add significant production and cash flow in liabilities for foreign earnings that are available to be repatriated future periods, enabling us to continue to generate operating to the U.S. From time to time, our foreign subsidiaries distribute cash flows exceeding capital expenditures in future years. Refer to earnings to the U.S. through dividends that are subject to “Outlook” for further discussion of projected capital expenditures applicable withholding taxes and noncontrolling interests’ share. for 2023. See Item 1A. “Risk Factors” contained in Part I of our annual Proceeds from Sales of Assets. In September 2021, we completed report on Form 10-K for the year ended December 31, 2022, for the sale of our remaining Freeport Cobalt assets to Jervois Global further discussion of our holding company structure and the Limited (Jervois) for $208 million, including net cash proceeds potential impact of changes in tax laws. of $150 million and shares of Jervois. In May 2022, we sold all our Debt At December 31, 2022, consolidated debt totaled $10.6 billion (including $1.0 billion of 3.875% Senior Notes maturing in March 2023, which we expect to pay using cash on hand), with a related weighted-average interest rate of 5.0%. Substantially all of our outstanding debt is fixed rate. We had no borrowings and $8 million in letters of credit issued under our $3.0 billion revolving credit facility. Additionally, no amounts were drawn under PT-FI’s $1.3 billion revolving credit facility or Cerro Verde’s $350 million revolving credit facility. shares in Jervois for proceeds of $60 million. Refer to Note 2 for further discussion. Loans to PT Smelting for Expansion. PT-FI made loans to PT Smelting totaling $65 million in 2022 and $36 million in 2021 to fund PT Smelting’s expansion project. Refer to Note 3 and “Operations—Indonesia Mining” for further discussion. Acquisition of Minority Interest in PT Smelting. On April 30, 2021, PT-FI acquired 14.5% of the outstanding common stock of PT Smelting for $33 million, increasing its ownership interest from 25.0% to 39.5%. Refer to Note 2 for further discussion. Refer to Note 8 for further discussion of the above items and Financing Activities for information regarding our debt arrangements. Debt Transactions. Net borrowings of debt totaled $1.2 billion in Operating Activities We generated consolidated operating cash flows of $5.1 billion in 2022 (net of $1.5 billion from working capital and other uses) and $7.7 billion in 2021 (including $0.8 billion from working capital and other sources). Lower operating cash flows for 2022, compared with 2021, primarily reflect the timing of tax payments at our international operations and lower copper prices, partly offset by higher copper and gold sales volumes, and other working capital changes. Investing Activities Capital Expenditures. Capital expenditures, including capitalized interest, totaled $3.5 billion for the year 2022, including $1.7 billion for major mining projects primarily associated with the underground development activities in the Grasberg minerals district and $0.8 billion for the Indonesia smelter projects. Capital expenditures, including capitalized interest, totaled $2.1 billion for the year 2021, including $1.25 billion for major projects primarily associated with underground development activities in the Grasberg minerals district. 2022 and net repayments of debt totaled $0.3 billion in 2021. Net borrowings for 2022 included PT-FI’s $3.0 billion senior notes offering that was completed in April 2022, partly offset by the purchases of our senior notes in open market transactions ($1.0 billion), and the repayment of borrowings under PT-FI’s term loan ($0.6 billion) and Cerro Verde’s term loan ($0.3 billion). Net repayments of debt totaled $0.3 billion in 2021, primarily reflecting the redemption of $0.5 billion of senior notes and repayments of $0.2 billion under Cerro Verde’s term loan, partly offset by borrowings under the PT-FI term loan ($0.4 billion). Refer to Note 8 for further discussion. Cash Dividends on Common Stock. We paid cash dividends on our common stock totaling $0.9 billion in 2022 and $0.3 billion in 2021. The increase in cash dividends in 2022 relates to the quarterly variable, performance-based cash dividend paid on our common stock. The declaration and payment of dividends (base or variable) is at the discretion of our Board and will depend on our financial results, cash requirements, global economic conditions and other factors deemed relevant by our Board. Refer to Item 1A. “Risk Factors” contained in Part I of our annual report on Form 10-K for the year ended December 31, 2022, and “Cautionary Statement” below. 2022 Annual Report 49 MANAGEMENT’S DISCUSSION AND ANALYSIS Cash Dividends and Distributions Paid to Noncontrolling Environmental Interests. Cash dividends and distributions paid to noncontrolling The cost of complying with environmental laws is a fundamental interests at our international operations totaled $0.8 billion in and substantial cost of our business. At December 31, 2022, 2022 and $0.6 billion in 2021. Based on the current sales volume, we had $1.7 billion recorded in our consolidated balance sheet for cost estimates and assumed average prices in 2023 discussed in “Outlook,” and the change in FCX’s economic interest in PT-FI (refer to Note 3), we currently expect cash dividends and environmental obligations attributed to CERCLA or analogous state programs and for estimated future costs associated with environmental obligations that are considered probable based on distributions paid to noncontrolling interests to exceed $1.8 billion specific facts and circumstances. in 2023. Cash dividends and distributions to noncontrolling We incurred environmental capital expenditures and other interests vary based on the operating results and cash requirements environmental costs (including our joint venture partners’ shares) of our consolidated subsidiaries. to comply with applicable environmental laws and regulations Treasury Stock Purchases. In July 2022, the Board authorized an that affect our operations totaling $0.4 billion in 2022 and increase in the share repurchase program up to $5.0 billion. We $0.3 billion in 2021. For 2023, we expect to incur approximately have acquired 47.86 million shares of our common stock for a total $0.6 billion of aggregate environmental capital expenditures and cost of $1.8 billion ($38.35 average cost per share), including other environmental costs. The timing and amount of estimated 35.12 million shares for a total cost of $1.3 billion ($38.36 cost per payments could change as a result of changes in regulatory share) during 2022 and 12.74 million shares for a total cost of $0.5 billion ($38.32 cost per share) in 2021. requirements, changes in scope and timing of remediation, the settlement of environmental matters and the rate at which actual As of February 15, 2023, $3.2 billion remains available under spending occurs on continuing matters. the share repurchase program. The timing and amount of share repurchases is at the discretion of management and will depend Asset Retirement Obligations on a variety of factors. The share repurchase program may be We recognize AROs as liabilities when incurred, with the initial modified, increased, suspended or terminated at any time at the measurement at fair value. These obligations, which are initially Board’s discretion. Refer to Item 1A. “Risk Factors” contained estimated based on discounted cash flow estimates, are accreted in Part I of our annual report on Form 10-K for the year ended to full value over time through charges to cost of sales. Mine December 31, 2022, “Cautionary Statement” below and discussion reclamation costs for disturbances are recorded as an ARO and of our financial policy above. as a related asset retirement cost (included in property, plant, Contributions from Noncontrolling Interests. We received equity equipment and mine development costs) in the period of contributions totaling $0.2 billion in both 2022 and 2021 from disturbance. For non-operating properties without mineral reserves, PT Indonesia Asahan Aluminum (Persero) (PT Inalum, also known changes to the ARO are recorded in earnings. Our cost estimates as MIND ID) for its share of capital spending on the underground are reflected on a third-party cost basis and comply with our legal mine development projects in the Grasberg minerals district. obligation to retire tangible, long-lived assets. At December 31, Beginning on January 1, 2023, capital spending at PT-FI is being 2022, we had $3.0 billion recorded in our consolidated balance shared in accordance with the shareholders’ ownership interests. sheet for AROs, including $0.3 billion related to our oil and gas Stock-based awards. Proceeds from exercised stock options properties. Spending on AROs totaled $0.2 billion in 2022 and 2021 totaled $125 million in 2022 and $210 million in 2021, and payments (including $0.1 billion in 2022 and 2021 for our oil and gas for related employee taxes totaled $55 million in 2022 and $29 million operations). For 2023, we expect to incur approximately $0.2 billion in 2021. See Note 10 for a discussion of stock-based awards. in aggregate ARO expenditures (including $0.1 billion for our oil and gas operations). CONTINGENCIES Refer to Note 12 and “Critical Accounting Estimates,” 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, 2022, for further information about contingencies associated with environmental matters and AROs. 50 Freeport-McMoRan | The Power of Copper MANAGEMENT’S DISCUSSION AND ANALYSISPT-FI recorded ARO adjustments of $131 million in 2022 and revenues until the date of settlement. We record revenues and $397 million in 2021, of which $116 million and $340 million, invoice customers at the time of shipment based on then-current respectively, were charged to production and delivery costs as LME prices, which results in an embedded derivative on our they relate to the depleted Grasberg open pit. Our Morenci and provisionally priced concentrate and cathode sales that is adjusted Bagdad mines recorded ARO adjustments in 2022 totaling to fair value through earnings each period, using the period-end $118 million and $65 million, respectively, associated with their forward prices, until final pricing on the date of settlement. To updated closure strategies and plans for stockpiles and tailings the extent final prices are higher or lower than what was recorded impoundments that were submitted to the Arizona Department on a provisional basis, an increase or decrease to revenues is of Environmental Quality for approval. recorded each reporting period until the date of final pricing. Litigation and Other Contingencies Refer to Note 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, 2022, for further discussion of contingencies associated with legal proceedings and other matters. DISCLOSURES ABOUT MARKET RISKS Commodity Price Risk 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. Following are the favorable impacts of net adjustments to the prior years’ provisionally priced copper sales for the years ended December 31 (in millions, except per share amounts): 2022 $ 60 $ 25 $ 0.02 2021 $ 169 $ 65 $ 0.04 Our 2022 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 Revenues Net income attributable to common stock Net income per share attributable to common stock and South America mines, the sale of copper concentrate (which At December 31, 2022, we had provisionally priced copper sales also contains significant quantities of gold and silver) by our at our copper mining operations totaling 535 million pounds of Indonesia mining operations, the sale of molybdenum in various copper (net of intercompany sales and noncontrolling interests) forms by our molybdenum operations, and the sale of copper recorded at an average price of $3.80 per pound, subject to cathode, copper anode and gold in anode and slimes by Atlantic final pricing over the next several months. We estimate that each Copper. Our financial results will vary with fluctuations in the $0.05 change in the price realized from the December 31, 2022, market prices of the commodities we produce, primarily copper provisional price recorded would have an approximate $40 million and gold, and to a lesser extent molybdenum. For projected effect on 2023 revenues ($13 million to net income attributable sensitivities of our operating cash flow to changes in commodity to common stock). The LME copper settlement price closed at prices, refer to “Outlook.” World market prices for these $4.12 per pound on January 31, 2023. commodities have fluctuated historically and are affected by numerous factors beyond our control. Refer to Item 1A. “Risk Foreign Currency Exchange Risk Factors” contained in Part I of our annual report on Form 10-K for The functional currency for most of our operations is the U.S. the year ended December 31, 2022, for further discussion of financial risks associated with fluctuations in the market prices of the commodities we sell. During 2022, our mined copper was sold 61% in concentrate, 18% as cathode and 21% as rod from North America operations. Substantially all of our copper concentrate and cathode sales 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, Peruvian sol, Chilean peso and euro. We recognized foreign currency translation gains on balances denominated in foreign currencies totaling $9 million contracts provide final copper pricing in a specified future month in 2022 and $66 million in 2021. Generally, our operating results (generally one to four months from the shipment date) based primarily on quoted LME monthly average copper settlement are positively affected when the U.S. dollar strengthens in relation to those foreign currencies and are adversely affected when the prices. We receive market prices based on prices in the specified U.S. dollar weakens in relation to those foreign currencies. future period, which results in price fluctuations recorded through 2022 Annual Report 51 MANAGEMENT’S DISCUSSION AND ANALYSIS Following is a summary of estimated annual payments and the impact of changes in foreign currency rates on our annual operating costs: Exchange Rate per $1 at December 31, Estimated Annual Payments 10% Change in Exchange Rate (in millions of U.S. dollars)a 2022 2021 (in local currency) (in millions of U.S. dollars)b Increase Decrease Indonesia Rupiah Australian dollar South America Peruvian sol Chilean peso Atlantic Copper Euro 15,652 1.47 3.82 856 0.94 14,198 1.37 13.0 trillion 277 million 3.1 billion 201 billion 4.00 845 0.88 179 million $ 191 $ 831 $ 188 $ 809 $ 235 $ (76) $ (17) $ (74) $ (21) $ (17) $ 92 $ 21 $ 90 $ 26 $ 21 a. Reflects the estimated impact on annual operating costs assuming a 10% increase or decrease in the exchange rate reported at December 31, 2022. b. Based on exchange rates at December 31, 2022. Interest Rate Risk At December 31, 2022, we had total debt maturities based on for our scheduled maturities of principal for our outstanding debt and the related fair values at December 31, 2022 (in millions, principal amounts of $10.7 billion, substantially all of which was except percentages): fixed-rate debt. The table below presents average interest rates Fixed-rate debt Average interest rate Variable-rate debt Average interest rate 2023 $ 1,000 $ 3.9% 37 3.3% 2024 $ 731 4.5% $ — —% 2025 $ 4 —% $ — —% 2026 $ 4 —% $ — —% 2027 Thereafter Fair Value $ 1,338 5.0% $ — —% $ 7,581 5.2% $ — —% $ 10,060 $ 5.0% 37 3.3% NEW ACCOUNTING STANDARDS We did not adopt any new accounting standards in 2022 that had Our net debt, which may not be comparable to similarly titled measures reported by other companies, follows (in billions): a material impact on our consolidated financial statements. December 31, Current portion of debt Long-term debt, less current portion Consolidated debt Less: consolidated cash and cash equivalents Net debt Less: net debt for Indonesia smelter projectsa FCX net debt, excluding Indonesia smelter projects 2022 $ 1.0 9.6 10.6 8.1 2.5 1.2 $ 1.3 2021 $ 0.4 9.1 9.5 8.1 1.4 0.2 $ 1.2 a. Includes consolidated debt of $3.0 billion and consolidated cash and cash equivalents of $1.8 billion as of December 31, 2022, and consolidated debt of $0.4 billion and consolidated cash and cash equivalents of $0.2 billion as of December 31, 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 target in the range of $3 billion to $4 billion (excluding project debt for additional smelting capacity in Indonesia). This information differs from consolidated debt determined in accordance with U.S. GAAP and should not be considered in isolation or as a substitute for consolidated debt determined in accordance with U.S. GAAP. 52 Freeport-McMoRan | The Power of Copper MANAGEMENT’S DISCUSSION AND ANALYSIS 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, feasibility and optimization study 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. 2022 Annual Report 53 MANAGEMENT’S DISCUSSION AND ANALYSIS North America Copper Mines Product Revenues, Production Costs and Unit Net Cash Costs Year Ended December 31, 2022 (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 $ 127 96 — 5 101 6 — 3 110 — $ 17 $ 6,646 3,957 — 149 4,106 409 16 167 4,698 (13) $ 1,935 $ 6,007 $ 6,007 $ 512 3,799 (481) 149 3,467 409 16 167c 4,059 (13) $ 1,935 3,478 — 144 3,622 377 14 152 4,165 (13) $ 1,829 1,472 1,472 $ 4.08 $ 4.08 2.58 (0.33) 0.10 2.35 0.28 0.01 0.12c 2.76 (0.01) $ 1.31 2.36 — 0.10 2.46 0.26 0.01 0.10 2.83 (0.01) $ 1.24 383 — — 383 26 2 12 423 — 89 29 $ $ 17.87 13.35 — — 13.35 0.90 0.05 0.47 14.77 — $ 3.10 Revenues Production and Delivery Metals Inventory Adjustments DD&A $ 6,646 (22) — (13) 99 6,710 22,464 (6,394) $ 22,780 $ 3,957 127 167 — 110 4,361 14,886 (6,206) $ 13,041 $ 409 — — — 1 410 1,539 70 $ 2,019 $ 16 — — — — 16 13 — $ 29 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 charges totaling $86 million ($0.06 per pound of copper) for feasibility and optimization studies. d. Represents the combined total for our other mining operations as presented in Note 16. 54 Freeport-McMoRan | The Power of Copper MANAGEMENT’S DISCUSSION AND ANALYSIS North America Copper Mines Product Revenues, Production Costs and Unit Net Cash Costs (continued) 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 charges totaling $32 million ($0.02 per pound of copper) for feasibility and optimization studies. Also, 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. 2022 Annual Report 55 MANAGEMENT’S DISCUSSION AND ANALYSIS South America Mining Product Revenues, Production Costs and Unit Net Cash Costs Year Ended December 31, 2022 (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 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 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 miningb Corporate, other & eliminations As reported in our consolidated financial statements By-Product Method $ 4,413 2,929 (394) 170 10 2,715 408 13 80 3,216 35 $ 1,232 1,162 $ 3.80 2.52 (0.34) 0.15 0.01 2.34 0.35 0.01 0.07 2.77 0.03 $ 1.06 Revenues $ 4,864 (170) (10) — 35 (1) 4,718 24,456 (6,394) $ 22,780 Copper $ 4,413 2,705 — 170 9 2,884 370 12 76 3,342 35 $ 1,106 1,162 $ 3.80 2.33 — 0.14 0.01 2.48 0.32 0.01 0.07 2.88 0.03 $ 0.95 Production and Delivery $ 2,986 — — 80 — (5) 3,061 16,186 (6,206) $ 13,041 Co-Product Method Othera Total $ 451 281 — — 1 282 38 1 4 325 — $ 126 $ 4,864 2,986 — 170 10 3,166 408 13 80 3,667 35 $ 1,232 Metals Inventory Adjustments $ 13 — — — — 13 16 — 29 $ DD&A $ 408 — — — — — 408 1,541 70 $ 2,019 a. Includes silver sales of 4.4 million ounces ($20.82 per ounce average realized price). Also reflects sales of molybdenum produced by Cerro Verde to our molybdenum sales company at market-based pricing. b. Represents the combined total for our other mining operations as presented in Note 16. 56 Freeport-McMoRan | The Power of Copper MANAGEMENT’S DISCUSSION AND ANALYSIS South America Mining Product Revenues, Production Costs and Unit Net Cash Costs (continued) 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 costs at Cerro Verde. 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. 2022 Annual Report 57 MANAGEMENT’S DISCUSSION AND ANALYSIS Indonesia Mining Product Revenues, Production Costs and Unit Net Cash Costs Year Ended December 31, 2022 (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 profit 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 profit 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 profit Eliminations and other Indonesia mining Other miningc Corporate, other & eliminations As reported in our consolidated financial statements Total $ 9,389 2,507 — 341 307 357 3,512 1,025 182 4,719 31 14 $ 4,715 By-Product Method Copper Co-Product Method Gold Silvera $ 134 36 — 5 4 3 48 15 2 65 1 — $ 70 $ 6,018 $ 6,018 2,507 (3,375) 341 307 357 137 1,025 182b 1,344 27 14 $ 4,715 1,607 — 218 197 230 2,252 657 117 3,026 27 9 $ 3,028 1,582 1,582 $ 3.80 $ 3.80 1.58 (2.13) 0.22 0.19 0.23 0.09 0.65 0.11b 0.85 0.02 0.01 $ 2.98 1.01 — 0.14 0.12 0.15 1.42 0.42 0.07 1.91 0.01 0.01 $ 1.91 Revenues Production and Delivery $ 9,389 (341) (307) (357) 11 31 — — 8,426 20,748 (6,394) $ 22,780 $ 2,507 — — — 193 — (14) (2) 2,684 16,563 (6,206) $ 13,041 $ 3,237 864 — 118 106 124 1,212 353 63 1,628 3 5 $ 1,617 1,811 $ 1,787 477 — 65 58 69 669 195 35 899 2 3 $ 893 DD&A $ 1,025 — — — — — — — 1,025 924 70 $ 2,019 a. Includes silver sales of 6.3 million ounces ($21.41 per ounce average realized price). b. Includes charges totaling $116 million ($0.07 per pound of copper) associated with an ARO adjustment. Also, includes a net charge of $30 million ($0.02 per pound of copper) associated with a settlement of an administrative fine levied by the Indonesia government and a reserve for exposure associated with export duties in prior periods, partially offset by credits for adjustments to prior year treatment and refining charges and historical tax audits. c. Represents the combined total for our other mining operations as presented in Note 16. 58 Freeport-McMoRan | The Power of Copper MANAGEMENT’S DISCUSSION AND ANALYSIS Indonesia Mining Product Revenues, Production Costs and Unit Net Cash Costs (continued) 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 credits 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 and refining charges and charges of $16 million ($0.01 per pound of copper) associated with an administrative fine levied by the Indonesia government. c. Represents the combined total for our other mining operations as presented in Note 16. 2022 Annual Report 59 MANAGEMENT’S DISCUSSION AND ANALYSIS 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 Molybdenum sales (millions of recoverable pounds)a Gross profit 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 per pound 2022 2021 $ 593 $ 470 347 28 375 74 — 12 461 132 33 $ $ 18.08 10.59 0.84 11.43 2.27 — 0.37 14.07 $ 4.01 243 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 Reconciliation to Amounts Reported (In millions) Year Ended December 31, 2022 Totals presented above Treatment charges and other Noncash and other costs, net Molybdenum mines Other miningb Corporate, other & eliminations As reported in our consolidated financial statements Year Ended December 31, 2021 Totals presented above Treatment charges and other Noncash and other costs, net Molybdenum mines Other miningb Corporate, other & eliminations As reported in our consolidated financial statements Revenues Production and Delivery DD&A Metals Inventory Adjustments $ 593 (28) — 565 28,609 (6,394) $ 22,780 $ 470 (26) — 444 28,610 (6,209) $ 22,845 $ 347 — 12 359 18,888 (6,206) $ 13,041 $ 243 — 10 253 17,603 (5,840) $ 12,016 $ 74 — — 74 1,875 70 $ 2,019 $ 67 — — 67 1,864 67 $ 1,998 $ — — — — 29 — $ 29 $ 1 — — 1 13 2 $ 16 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. 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 Freeport-McMoRan | The Power of Copper MANAGEMENT’S DISCUSSION AND ANALYSIS CAUTIONARY STATEMENT Our discussion and analysis contains forward-looking statements in which we discuss our potential future performance. Forward- looking statements are all statements other than statements of historical facts, such as plans, projections, or expectations relating to business outlook, strategy, goals or targets; global market conditions; ore grades and milling rates; production and sales volumes; unit net cash costs and operating costs; capital expenditures; 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 IUPK; extension of PT-FI’s IUPK beyond 2041; our commitment to deliver responsibly produced copper and molybdenum, including plans to implement, validate and maintain validation of our operating sites under specific frameworks; execution of our energy and climate strategies and the underlying assumptions and estimated impacts on our business related thereto; achievement of 2030 climate targets and 2050 net zero aspiration; improvements in operating procedures and technology innovations; exploration efforts and results; development and production activities, rates and costs; future organic growth opportunities; tax rates; export quotas and duties; the impact of copper, gold and molybdenum price changes; the impact of deferred intercompany profits on earnings; mineral reserve and mineral resource estimates; final resolution of settlements associated with ongoing legal proceedings; debt repurchases and the ongoing implementation of our financial policy and future returns to shareholders, including dividend payments (base or variable) and share repurchases. The words “anticipates,” “may,” “can,” “plans,” “believes,” “estimates,” “expects,” “projects,” “targets,” “intends,” “likely,” “will,” “should,” “could,” “to be,” ”potential,” “assumptions,” “guidance,” “aspirations,” “future,” “commitments,” “pursues,” “initiatives,” “objectives,” “opportunities,” “strategy” and any similar expressions are intended to identify those assertions as forward-looking statements. The declaration and payment of dividends (base or variable), and timing and amount of any share repurchases 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 availability, our financial results, cash requirements, 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. 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; price and availability of consumables and components we purchase as well as constraints on supply and logistics, and transportation services; changes in our cash requirements, financial position, financing or investment plans; changes in general market, economic, regulatory or industry conditions, including as a result of Russia’s invasion of Ukraine or potential global economic downturn or recession; reductions in liquidity and access to capital; changes in tax laws and regulations, including the impact of the Act; any major public health crisis; political and social risks, including the potential effects of violence in Indonesia, civil unrest in Peru, and relations with local communities and Indigenous Peoples; operational risks inherent in mining, with higher inherent risks in underground mining; 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 Indonesia government’s extension of PT-FI’s copper concentrate export license after March 19, 2023; PT-FI’s ability to export and sell copper concentrate and anode slimes; satisfaction of requirements in accordance with PT-FI’s IUPK to extend mining rights from 2031 through 2041; the Indonesia government’s approval of a deferred schedule for completion of additional domestic smelting capacity in Indonesia; discussions relating to the extension of PT-FI’s IUPK beyond 2041; cybersecurity incidents; labor relations, including labor-related work stoppages and costs; the results of the PT-FI human health assessment to evaluate the potential impacts of tailings and mining waste, and compliance with applicable environmental, health and safety laws and regulations; weather- and climate-related risks; environmental risks, including availability of secure water supplies, 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 December 31, 2022. 2022 Annual Report 61 MANAGEMENT’S DISCUSSION AND ANALYSIS 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 Our annual report on Form 10-K for the year ended December 31, which our forward-looking statements are based are likely to 2022, also contains financial measures such as net debt and unit change after the date the forward-looking statements are made, net cash costs per pound of copper and molybdenum, which are including for example commodity prices, which we cannot control, not recognized under U.S. GAAP. Refer to “Operations—Unit Net and production volumes and costs or technological solutions Cash Costs” for further discussion of unit net cash costs associated and innovation, some aspects of which we may not be able to with our operating divisions, and to “Product Revenues and control. Further, we may make changes to our business plans that Production Costs” for reconciliations of per pound costs by operating could affect our results. We caution investors that we undertake division to production and delivery costs applicable to sales no obligation to update any forward-looking statements, which reported in our consolidated financial statements. Refer to “Net speak only as of the date made, notwithstanding any changes in Debt” for reconciliations of consolidated debt and consolidated our assumptions, changes in business plans, actual experience cash and cash equivalents to net debt. or other changes. Estimates of mineral reserves and mineral resources are subject to considerable uncertainty. Such estimates are, to a large extent, based on metal prices for the commodities we produce and interpretations of geologic data, which may not necessarily be indicative of future results or quantities ultimately recovered. Our annual report on Form 10-K for the year ended December 31, 2022, 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 modifying factors. Accordingly, no assurance can be given that the estimated mineral resources will become proven and probable mineral reserves. 62 Freeport-McMoRan | The Power of Copper 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 financial responsible for establishing and maintaining adequate internal reporting may not prevent or detect misstatements. Projections control over financial reporting. Internal control over financial of any evaluation of effectiveness to future periods are subject to reporting is defined in Rule 13a-15(f) or 15d-15(f) under the Securities the risk that controls may become inadequate because of Exchange Act of 1934 as a process designed by, or under the changes in conditions, or that the degree of compliance with the supervision of, the Company’s principal executive and principal policies or procedures may deteriorate. financial officers and effected by the Company’s Board of Our management, including our principal executive officer and Directors, management and other personnel, to provide reasonable principal financial officer, assessed the effectiveness of our assurance regarding the reliability of financial reporting and the internal control over financial reporting as of the end of the fiscal preparation of financial statements for external purposes in year covered by this annual report on Form 10-K. In making this accordance with generally accepted accounting principles and assessment, our management used the criteria set forth in 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 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). Based on its assessment, the Company’s assets; • Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in management concluded that, as of December 31, 2022, 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 firm, who audited the Company’s consolidated financial statements made only in accordance with authorizations of management included in this Form 10-K, has issued an attestation report on and directors of the Company; and the Company’s internal control over financial reporting, which is • 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. included herein. Richard C. Adkerson Maree E. Robertson Chairman of the Board and Senior Vice President and Chief Executive Officer Chief Financial Officer 2022 Annual Report 63 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, 2022, 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, 2022, 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, 2022 and 2021, the related consolidated statements of income, comprehensive income, equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and our report dated February 15, 2023 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, 2023 64 Freeport-McMoRan | The Power of Copper 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, 2022 and 2021, the related consolidated statements of income, comprehensive income, equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, 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, 2022, 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, 2023 expressed an unqualified opinion thereon. 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 the PCAOB. 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. 2022 Annual Report 65 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 Description of the Matter Uncertain tax positions As discussed in Note 12 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 Notes 11 and 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, 2022, the Company’s consolidated environmental obligations totaled $1.7 billion. Auditing management’s accounting for environmental obligations was challenging because significant judgment was required by the Company 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 extent of required cleanup efforts under existing environmental regulations, 66 Freeport-McMoRan | The Power of Copper 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 How We Addressed the Matter in Our Audit 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. We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s 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 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, 2023 2022 Annual Report 67 C O N S O L I D A T E D S T A T E M E N T S O F I N C O M E 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 gain (loss) on early extinguishment of debt Other income (expense), 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 Net income attributable to noncontrolling interests Net income attributable to common stockholders Net income per share attributable to common stockholders: Basic Diluted 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. 2022 2021 2020 $ 22,780 $ 22,845 $ 14,198 13,041 2,019 29 15,089 420 115 121 (2) 15,743 7,037 (560) 31 207 6,715 (2,267) 31 4,479 (1,011) $ 3,468 $ 2.40 $ 2.39 1,441 1,451 $ 0.60 12,016 1,998 16 14,030 383 55 91 (80) 14,479 8,366 (602) — (105) 7,659 (2,299) 5 5,365 (1,059) $ 4,306 $ 2.93 $ 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 (266) 599 $ $ 0.41 $ 0.41 1,453 1,461 $ — 68 Freeport-McMoRan | The Power of Copper 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 Years Ended December 31, (In millions) Net income Other comprehensive income, net of taxes: Defined benefit plans: Actuarial gains arising during the period, net of taxes Prior service costs arising during the period Amortization or curtailment of unrecognized amounts included in net periodic benefit costs Foreign exchange losses Other comprehensive income Total comprehensive income Total comprehensive income attributable to noncontrolling interests Total comprehensive income attributable to common stockholders The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements. 2022 2021 2020 $ 4,479 $ 5,365 $ 865 62 (1) 8 (1) 68 4,547 (1,011) $ 3,536 179 — 18 (1) 196 5,561 (1,060) $ 4,501 46 — 45 (1) 90 955 (263) $ 692 2022 Annual Report 69 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 Years Ended December 31, (In millions) Cash flow from operating activities: Net income Adjustments to reconcile net income 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 (gain) loss on early extinguishment of debt Deferred income taxes 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 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. 2022 2021 2020 $ 4,479 $ 5,365 2,019 29 (2) 95 369 (274) — 45 (54) (31) 36 — (44) 56 (573) (12) — (999) 5,139 (597) (304) (1,575) (806) (33) (154) 108 (65) — (14) (3,440) 5,735 (4,515) (866) (840) (1,347) 189 125 (55) (49) (1,623) 76 8,314 $ 8,390 1,998 16 (80) 98 540 (273) — 4 (109) — (171) (421) (7) (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 $ 865 1,528 96 (473) 99 181 (216) 130 65 (121) 101 181 (139) 55 132 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 70 Freeport-McMoRan | The Power of Copper 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 Current portion of debt Accrued income taxes Current portion of environmental and asset retirement obligations Dividends payable Total current liabilities Long-term debt, less current portion Environmental and asset retirement obligations, less current portion Deferred income taxes Other liabilities Total liabilities Equity: Stockholders’ equity: Common stock, par value $0.10, 1,613 shares and 1,603 shares issued, respectively Capital in excess of par value Accumulated deficit Accumulated other comprehensive loss Common stock held in treasury—183 shares and 146 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. 2022 2021 $ 8,146 1,336 459 1,964 1,383 1,833 492 15,613 32,627 1,252 1,601 $ 51,093 $ 4,027 1,037 744 320 217 6,345 9,583 4,463 4,269 1,562 26,222 161 25,322 (3,907) (320) (5,701) 15,555 9,316 24,871 $ 51,093 $ 8,068 1,168 574 1,669 1,170 1,658 523 14,830 30,345 1,387 1,460 $ 48,022 $ 3,495 372 1,541 264 220 5,892 9,078 4,116 4,234 1,683 25,003 160 25,875 (7,375) (388) (4,292) 13,980 9,039 23,019 $ 48,022 2022 Annual Report 71 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, 2020 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 Balance at December 31, 2021 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 1,582 8 — — — — — — 1,590 13 — — — — — — — 1,603 10 — — — — — — — $ 158 1 — — — — — — 159 1 — — — — — — — 160 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 $ 25,830 $ (12,280) $ (676) — — — — — — 93 — — — — 599 — — 57 74 — 76 — — — 26,037 225 75 — (551) 89 — — — 25,875 131 88 — (864) 92 — — — (11,681) — — — — — 4,306 — — (7,375) — — — — — 3,468 — — (583) — — — — — — — 195 (388) — — — — — — — 68 131 — 1 — — — — — 132 — 1 13 — — — — — 146 — 2 35 — — — — — $ (3,734) — (24) — — — — — (3,758) — (46) (488) — — — — — (4,292) — (62) (1,347) — — — — — $ 9,298 58 50 — 76 599 — 93 10,174 226 29 (488) (551) 89 4,306 — 195 13,980 132 26 (1,347) (864) 92 3,468 — 68 $ 8,150 — — 1 80 — 266 (3) 8,494 — (5) — (603) 93 — 1,059 1 9,039 — (11) — (820) 97 — 1,011 — $ 17,448 58 50 1 156 599 266 90 18,668 226 24 (488) (1,154) 182 4,306 1,059 196 23,019 132 15 (1,347) (1,684) 189 3,468 1,011 68 Balance at December 31, 2022 1,613 $ 161 $ 25,322 $ (3,907) $ (320) 183 $ (5,701) $ 15,555 $ 9,316 $ 24,871 The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements. 72 Freeport-McMoRan | The Power of Copper  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% of the voting rights and/or has control over the subsidiary. As of December 31, 2022, the most significant entities that FCX consolidates include its 48.76%-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, 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 exchange rates. Gains and losses resulting from translation of such account balances are included in other income (expense), net, as are gains and losses from foreign currency transactions. Foreign currency gains totaled $9 million in 2022, $66 million in 2021 and $34 million including FCX’s conclusion to consolidate PT-FI. in 2020. 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 over which FCX has the ability to exercise significant influence, but does not control, are accounted for under the equity method and include PT-FI’s investment in PT Smelting (refer to Note 3 for further discussion). Investments in unconsolidated companies owned less than 20%, 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. Cash Equivalents. Highly liquid investments purchased with maturities of three months or less are considered cash equivalents. Restricted Cash and Cash Equivalents. FCX’s restricted cash and 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 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 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. Each mine site maintains one work-in-progress balance on a weighted-average cost basis for each process (i.e., leach, mill or concentrate leach) regardless of the number of stockpile systems at that site. 2022 Annual Report 73 Because it is impracticable to determine copper contained in work-in-process (i.e., not raw materials) inventories include mill and leach stockpiles by physical count, reasonable estimation labor and benefits, supplies, energy, depreciation, depletion, methods are employed. The quantity of material delivered to amortization, site overhead costs and other necessary mill and leach stockpiles is based on surveyed volumes of mined costs associated with the extraction and processing of ore, material and daily production records. Sampling and assaying such as mining, milling, smelting, leaching, SX/EW, refining, of blasthole cuttings determine the estimated copper grade of the roasting and chemical processing. material delivered to mill and leach stockpiles. Property, Plant, Equipment and Mine Development Costs. Expected copper recoveries for mill stockpiles are determined Property, plant, equipment and mine development costs are by metallurgical testing. The recoverable copper in mill stockpiles, carried at cost. Mineral exploration costs, as well as drilling and once entered into the production process, can be produced into other costs incurred for the purpose of converting mineral copper concentrate almost immediately. resources to proven and probable mineral reserves or identifying Expected copper recoveries for leach stockpiles are determined new mineral resources at development or production stage using small-scale laboratory tests, small- to large-scale column properties, are charged to expense as incurred. Development costs testing (which simulates the production process), historical trends are capitalized beginning after proven and probable mineral and other factors, including mineralogy of the ore and rock type. reserves have been established. Development costs include costs Total copper recovery in leach stockpiles can vary significantly from incurred resulting from mine pre-production activities undertaken a low percentage to more than 90% depending on several to gain access to proven and probable mineral reserves, including variables, including processing methodology, processing variables, shafts, adits, drifts, ramps, permanent excavations, infrastructure mineralogy and particle size of the rock. For newly placed material and removal of overburden. For underground mines certain costs on active stockpiles, as much as 80% of the total copper recovery related to panel development, such as undercutting and drawpoint may occur during the first year, and the remaining copper may be development, are also capitalized as mine development costs recovered over many years. until production reaches sustained design capacity for the mine. Process rates and copper recoveries for mill and leach stockpiles After reaching design capacity, the mine transitions to the are monitored regularly, and recovery estimates are adjusted production phase and panel development costs are allocated to periodically as additional information becomes available and as inventory and then included as a component of cost of goods sold. related technology changes. Recovery adjustments will typically Additionally, interest expense allocable to the cost of developing result in a future impact to the value of the material removed from mining properties and to constructing new facilities is capitalized the stockpiles at a revised weighted-average cost per pound of until assets are ready for their intended use. recoverable copper. Expenditures for replacements and improvements are Product. Product inventories include raw materials, work-in- capitalized. Costs related to periodic scheduled maintenance (i.e., process and finished goods. Corporate general and administrative turnarounds) are charged to expense as incurred. Depreciation costs are not included in inventory costs. for mining and milling life-of-mine assets, infrastructure and other Raw materials are primarily unprocessed concentrate at Atlantic common costs is determined using the unit-of-production (UOP) Copper’s smelting and refining operations. method based on total estimated recoverable proven and probable Work-in-process inventories are primarily copper concentrate at copper reserves (for primary copper mines) and proven and various stages of conversion into anode and cathode at Atlantic probable molybdenum reserves (for primary molybdenum mines). Copper’s operations. Atlantic Copper’s in-process inventories are Development costs and acquisition costs for proven and probable valued at the weighted-average cost of the material fed to the mineral reserves that relate to a specific ore body are depreciated smelting and refining process plus in-process conversion costs. using the UOP method based on estimated recoverable proven and Finished goods for mining operations represent salable products probable mineral reserves for the ore body benefited. Depreciation, (e.g., copper and molybdenum concentrate, copper anode, depletion and amortization using the UOP method is recorded copper cathode, copper rod, molybdenum oxide, and high-purity upon extraction of the recoverable copper or molybdenum from molybdenum chemicals and other metallurgical products). the ore body or production of finished goods (as applicable), at Finished goods are valued based on the weighted-average cost which time it is allocated to inventory cost and then included as a of source material plus applicable conversion costs relating component of cost of goods sold. Other assets are depreciated to associated process facilities. Costs of finished goods and on a straight-line basis over estimated useful lives for the related assets of up to 50 years for buildings and 3 to 50 years for machinery and equipment, and mobile equipment. 74 Freeport-McMoRan | The Power of Copper NOTES TO CONSOLIDATED FINANCIAL STATEMENTSIncluded in property, plant, equipment and mine development Deferred Mining Costs. Stripping costs (i.e., the costs costs is value beyond proven and probable mineral reserves (VBPP), of removing overburden and waste material to access mineral primarily resulting from FCX’s acquisition of FMC. The concept of deposits) incurred during the production phase of an open-pit mine VBPP may be interpreted differently by different mining companies. are considered variable production costs and are included as a FCX’s VBPP is attributable to (i) measured and indicated mineral component of inventory produced during the period in which resources that FCX believes could be brought into production with stripping costs are incurred. Major development expenditures, the establishment or modification of required permits and should including stripping costs to prepare unique and identifiable areas market conditions and technical assessments warrant, (ii) inferred outside the current mining area for future production that are mineral resources and (iii) exploration potential. considered to be pre-production mine development, are capitalized Carrying amounts assigned to VBPP are not charged to expense and amortized using the UOP method based on estimated until the VBPP becomes associated with additional proven and recoverable proven and probable mineral reserves for the ore body probable mineral reserves and the reserves are produced or the benefited. However, where a second or subsequent pit or major VBPP is determined to be impaired. Additions to proven and expansion is considered to be a continuation of existing mining probable mineral reserves for properties with VBPP will carry with activities, stripping costs are accounted for as a current production them the value assigned to VBPP at the date acquired, less any cost and a component of the associated inventory. impairment amounts. Refer to Note 5 for further discussion. Environmental Obligations. Environmental expenditures are Impairment of Long-Lived Mining Assets. FCX assesses the charged to expense or capitalized, depending upon their future carrying values of its long-lived mining assets for impairment economic benefits. Accruals for such expenditures are recorded when events or changes in circumstances indicate that the related when it is probable that obligations have been incurred and the carrying amounts of such assets may not be recoverable. In costs can be reasonably estimated. Environmental obligations evaluating long-lived mining assets for recoverability, estimates of attributed to the Comprehensive Environmental Response, pre-tax undiscounted future cash flows of FCX’s individual mines Compensation, and Liability Act of 1980 (CERCLA) or analogous are used. An impairment is considered to exist if total estimated state programs are considered probable when a claim is asserted, undiscounted future cash flows are less than the carrying amount or is probable of assertion, and FCX, or any of its subsidiaries, of the asset. Once it is determined that an impairment exists, an have been associated with the site. Other environmental remediation impairment loss is measured as the amount by which the asset obligations are considered probable based on specific facts and carrying value exceeds its fair value. The estimated undiscounted circumstances. FCX’s estimates of these costs are based on an cash flows used to assess recoverability of long-lived assets and evaluation of various factors, including currently available facts, to measure the fair value of FCX’s mining operations are derived existing technology, presently enacted laws and regulations, from current business plans, which are developed using near-term remediation experience, whether or not FCX is a potentially price forecasts reflective of the current price environment and responsible party (PRP) and the ability of other PRPs to pay their management’s projections for long-term average metal prices. In allocated portions. With the exception of those obligations addition to near- and long-term metal price assumptions, other key assumed in the acquisition of FMC that were initially recorded at assumptions include estimates of commodity-based and other estimated fair values (refer to Note 12 for further discussion), input costs; proven and probable mineral reserves estimates, environmental obligations are recorded on an undiscounted basis. including the timing and cost to develop and produce the reserves; Where the available information is sufficient to estimate the VBPP estimates; and the use of appropriate discount rates in the amount of the obligation, that estimate has been used. Where the measurement of fair value. FCX believes its estimates and models information is only sufficient to establish a range of probable used to determine fair value are similar to what a market participant liability and no point within the range is more likely than any other, would use. As quoted market prices are unavailable for FCX’s the lower end of the range has been used. Possible recoveries of individual mining operations, fair value is determined through some of these costs from other parties are not recognized in the the use of after-tax discounted estimated future cash flows consolidated financial statements until they become probable. (i.e., Level 3 measurement). Legal costs associated with environmental remediation (such as fees to third-party legal firms for work relating to determining the extent and type of remedial actions and the allocation of costs among PRPs) are included as part of the estimated obligation. 2022 Annual Report 75 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Environmental obligations assumed in the acquisition of FMC, settled in a contractually specified future month (generally one to which were initially recorded at fair value and estimated on a four months from the shipment date) based on quoted monthly discounted basis, are accreted to full value over time through charges average copper settlement prices on the London Metal Exchange to interest expense. Adjustments arising from changes in amounts (LME) or the Commodity Exchange Inc. (COMEX), and quoted and timing of estimated costs and settlements may result in monthly average London Bullion Market Association (London) increases and decreases in these obligations and are calculated PM gold prices. in the same manner as they were initially estimated. Unless these FCX’s product revenues are also recorded net of treatment adjustments qualify for capitalization, changes in environmental charges, royalties and export duties. Moreover, because a portion of obligations are charged to operating income when they occur. the metals contained in copper concentrate is unrecoverable as FCX performs a comprehensive review of its environmental a result of the smelting process, FCX’s revenues from concentrate obligations annually and also reviews changes in facts and sales are also recorded net of allowances based on the quantity circumstances associated with these obligations at least quarterly. and value of these unrecoverable metals. These allowances are a Asset Retirement Obligations. FCX records the fair value of negotiated term of FCX’s contracts and vary by customer. Treatment estimated asset retirement obligations (AROs) associated with and refining charges represent payments or price adjustments to tangible long-lived assets in the period incurred. AROs associated smelters and refiners that are generally fixed. Refer to Note 16 for with long-lived assets are those for which there is a legal obligation a summary of revenue by product type. to settle under existing or enacted law, statute, written or oral contract Gold sales are priced according to individual contract terms, or by legal construction. These obligations, which are initially generally the average London PM gold price for a specified month estimated based on discounted cash flow estimates, are accreted near the month of shipment. to full value over time through charges to cost of sales. In addition, The majority of FCX’s molybdenum sales are priced based on asset retirement costs (ARCs) are capitalized as part of the the average published Platts Metals Daily price, plus conversion related asset’s carrying value and are depreciated over the asset’s premiums for products that undergo additional processing, such useful life. as ferromolybdenum and molybdenum chemical products, for the For mining operations, reclamation costs for disturbances are month prior to the month of shipment. recognized as an ARO and as a related ARC in the period of the Stock-Based Compensation. Compensation costs for share- disturbance and depreciated primarily on a UOP basis. FCX’s based payments to employees are measured at fair value and AROs for mining operations consist primarily of costs associated charged to expense over the requisite service period for awards with mine reclamation and closure activities. These activities, which that are expected to vest. The fair value of stock options is are site specific, generally include costs for earthwork, revegetation, determined using the Black-Scholes-Merton option valuation water treatment and demolition. model. The fair value for stock-settled restricted stock units (RSUs) For non-operating properties without reserves, changes to the is based on FCX’s stock price on the date of grant. Shares of ARO are recorded in earnings. common stock are issued at the vesting date for stock-settled RSUs. At least annually, FCX reviews its ARO estimates for changes in The fair value of performance share units (PSUs) are determined the projected timing of certain reclamation and closure/restoration using FCX’s stock price and a Monte-Carlo simulation model. The costs, changes in cost estimates and additional AROs incurred fair value for liability-classified awards (i.e., cash-settled RSUs) during the period. Refer to Note 12 for further discussion. is remeasured each reporting period using FCX’s stock price. FCX Revenue Recognition. FCX recognizes revenue for its products has elected to recognize compensation costs for stock option upon transfer of control in an amount that reflects the consideration awards that vest over several years on a straight-line basis over the it expects to receive in exchange for those products. Transfer of vesting period, and for RSUs on the graded-vesting method over control is in accordance with the terms of customer contracts, the vesting period. Refer to Note 10 for further discussion. which is generally upon shipment or delivery of the product. While Earnings Per Share. FCX calculates its basic net income per payment terms vary by contract, terms generally include payment share of common stock under the two-class method and to be made within 30 days, but not longer than 60 days. Certain of calculates its diluted net income per share of common stock using FCX’s concentrate and cathode sales contracts also provide the more dilutive of the two-class method or the treasury-stock for provisional pricing, which is accounted for as an embedded method. Basic net income per share of common stock was computed derivative (refer to Note 14 for further discussion). For provisionally by dividing net income attributable to common stockholders (after priced sales, 90% to 100% of the provisional invoice amount is deducting undistributed dividends and earnings allocated to collected upon shipment or within 20 days, and final balances are participating securities) by the weighted-average shares of common stock outstanding during the year. Diluted net income per share of common stock was calculated by including the basic 76 Freeport-McMoRan | The Power of Copper NOTES TO CONSOLIDATED FINANCIAL STATEMENTSweighted-average shares of common stock outstanding adjusted Reconciliations of net income and weighted-average shares of for the effects of all potential dilutive shares of common stock, common stock outstanding for purposes of calculating basic and unless their effect would be antidilutive. diluted net income per share for the years ended December 31 follow: Net income Net income attributable to noncontrolling interests Undistributed dividends and earnings allocated to participating securities Net income attributable to common stockholders (shares in millions) Basic weighted-average shares of common stock outstanding Add shares issuable upon exercise or vesting of dilutive stock options and RSUs Diluted weighted-average shares of common stock outstanding Net income per share attributable to common stockholders: Basic Diluted 2022 $ 4,479 (1,011) (7) $ 3,461 1,441 10 1,451 $ 2.40 $ 2.39 2021 $ 5,365 (1,059) (7) $ 4,299 1,466 16 1,482 $ 2.93 $ 2.90 2020 $ 865 (266) (3) $ 596 1,453 8 1,461 $ 0.41 $ 0.41 Outstanding stock options with exercise prices greater than approximately $20 million and other net assets of $125 million. In the average market price of FCX’s common stock during the year 2021, FCX recorded a gain of $60 million ($34 million to net income are excluded from the computation of diluted net income per attributable to common stock) associated with this transaction. share of common stock. Excluded shares of common stock totaled In addition, KCHL has the right to receive contingent consideration 1 million shares in 2022, 5 million shares in 2021 and 31 million through 2026 of up to $40 million based on the future performance shares in 2020. of Freeport Cobalt. Any gain related to the contingent consideration Global Intangible Low-Taxed Income (GILTI). FCX has elected will be recognized when received. Following this transaction, to treat taxes due on future U.S. inclusions in taxable income related FCX no longer has cobalt operations. to GILTI as a current period expense when incurred. PT Smelting. On April 30, 2021, PT-FI acquired 14.5% of the Subsequent Events. Since February 11, 2023, PT-FI’s operations outstanding common stock of PT Smelting, a smelter and refinery have been temporarily disrupted because of significant rainfall and in Gresik, Indonesia, for $33 million, increasing its ownership landslides, which restricted access to infrastructure near its milling interest from 25.0% to 39.5%. The remaining outstanding shares operations. Recovery activities are in progress to clear debris from of PT Smelting are owned by Mitsubishi Materials Corporation the affected areas and PT-FI is in the process of gradually resuming (MMC). PT-FI accounts for its investment in PT Smelting under the operations. Operations are expected to be fully restored by the end equity method (refer to Note 3 for further discussion). of February 2023. Kisanfu Transaction. In December 2020, FCX completed the FCX evaluated events after December 31, 2022, and through sale of its interests in the Kisanfu undeveloped copper and cobalt the date the financial statements were issued, and determined any resource in the Democratic Republic of Congo to a wholly owned events or transactions occurring during this period that would subsidiary of China Molybdenum Co., Ltd. (CMOC) for $550 million, require recognition or disclosure are appropriately addressed in with after-tax net cash proceeds totaling $415 million. FCX did these financial statements. NOTE 2. ACQUISITIONS AND DISPOSITIONS not have any proven and probable mineral reserves associated with the Kisanfu project. FCX recorded a gain of $486 million in 2020 associated with this transaction. Cobalt Business. In September 2021, FCX’s 56% owned subsidiary, Timok Transactions. In 2016, FCX sold an interest in the upper Koboltti Chemicals Holdings Limited (KCHL), completed the sale of zone of the Timok exploration project in Serbia (the 2016 Transaction). its remaining cobalt business based in Kokkola, Finland (Freeport In December 2019, FCX completed the sale of its interest in the Cobalt) to Jervois Global Limited (Jervois) for $208 million (before lower zone of the Timok exploration project to an affiliate of post-closing adjustments), consisting of cash consideration of the purchaser in the 2016 Transaction, which included the right to $173 million and 7% of Jervois common stock (valued at $35 million future contingent payments of up to $150 million. These future at the time of closing). In 2022, KCHL sold these shares for contingent payments will be based on the future sale of products $60 million. At closing, Freeport Cobalt’s assets included cash of (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 lower zone, the purchaser can settle, or 2022 Annual Report 77 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FCX can demand payment of, such deferred payment obligation, PT-FI Divestment. On December 21, 2018, FCX completed the in each case, for a total of $60 million. As these deferred payments transaction with the Indonesia government regarding PT-FI’s are contingent upon future production (the Timok lower zone long-term mining rights and share ownership (the 2018 project is still pre-operational) and would result in gain recognition, Transaction). Pursuant to the divestment agreement and related no amounts were recorded upon the closing of the transaction. documents, PT Indonesia Asahan Aluminium (Persero) (PT Inalum, Subsequent recognition will be based on the gain contingency also known as MIND ID), an Indonesia state-owned enterprise, model, in which the consideration would be recorded in the period acquired all of Rio Tinto plc’s (Rio Tinto) interests associated with its in which all contingencies are resolved and the gain is realized. joint venture with PT-FI (the former Rio Tinto Joint Venture) and This is expected to be when FCX (i) is provided periodic product 100% of FCX’s interests in PT Indonesia Papua Metal Dan Mineral sales information by the purchaser or (ii) gives notice to the (PTI—formerly known as PT Indocopper Investama). purchaser or receives notice from the purchaser regarding the In connection with the 2018 Transaction, PT-FI acquired all of settlement of the deferred payments for $60 million. the common stock of PT Rio Tinto Indonesia that held the former In addition and in connection with the transaction in 2019, in Rio Tinto Joint Venture interest. After the 2018 Transaction, MIND lieu of payment upon achievement of defined development ID’s (26.24%) and PTI’s (25.00%) collective share ownership of milestones provided for in the 2016 Transaction, the purchaser paid PT-FI totals 51.24% and FCX’s share ownership totals 48.76%. The $107 million in three installments of $12 million in 2022, $50 million arrangements provide for FCX and the other pre-transaction in 2021 and $45 million in 2020. PT-FI shareholders (i.e., MIND ID) to retain the economics of the TF Holdings Limited—Discontinued Operations. In 2016, FCX revenue and cost sharing arrangements under the former Rio Tinto completed the sale of its 70% interest in TF Holdings Limited to Joint Venture. As a result, FCX’s economic interest in PT-FI CMOC for $2.65 billion in cash (before closing adjustments) and approximated 81% through 2022 and is 48.76% thereafter (see contingent consideration of up to $120 million in cash. In 2020, further discussion below). FCX realized and collected contingent consideration of $60 million FCX, PT-FI, PTI and MIND ID entered into a shareholders and no additional amount is realizable. agreement (the PT-FI Shareholders Agreement), which includes NOTE 3. OWNERSHIP IN SUBSIDIARIES AND JOINT VENTURES Ownership in Subsidiaries. FMC produces copper and molybdenum from mines in North America and South America. At December 31, 2022, FMC’s operating mines in North America were Morenci, Bagdad, Safford (including Lone Star), Sierrita and Miami located in Arizona; Tyrone and Chino located in New Mexico; and Henderson and Climax located in Colorado. FMC has a 72% interest in Morenci (refer to “Joint Venture. Sumitomo and SMM Morenci, Inc.”) and owns 100% of the other North America mines. At December 31, 2022, operating mines in South America were Cerro Verde (53.56% owned) located in Peru and El Abra (51% owned) located in Chile. At December 31, 2022, FMC’s net assets totaled $19.0 billion and its accumulated deficit totaled $12.2 billion. FCX had $1 million in loans to FMC outstanding at December 31, 2022. FCX owns 48.76% of PT-FI (refer to “PT-FI Divestment”). At December 31, 2022, PT-FI’s net assets totaled $13.0 billion and its retained earnings totaled $8.4 billion. FCX had no loans to PT-FI outstanding at December 31, 2022. FCX owns 100% of the outstanding Atlantic Copper (FCX’s wholly owned smelting and refining unit in Spain) common provisions related to the governance and management of PT-FI. FCX considered the terms of the PT-FI Shareholders Agreement and related governance structure, including whether MIND ID has substantive participating rights, and concluded that it has retained control and would continue to consolidate PT-FI in its financial statements following the 2018 Transaction. Among other terms, 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 by FCX. Additionally, as discussed above, the existing PT-FI shareholders will retain the economics of the revenue and cost 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 2018 Transaction. FCX believes its conclusion to continue to consolidate PT-FI in its financial statements is in accordance with the U.S. Securities and Exchange 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. stock. At December 31, 2022, Atlantic Copper’s net assets totaled Attribution of PT-FI Net Income or Loss. FCX concluded that $104 million and its accumulated deficit totaled $440 million. FCX had $456 million in loans to Atlantic Copper outstanding at December 31, 2022. the attribution of PT-FI’s net income or loss from December 21, 2018 (the date of the divestment transaction), through December 31, 2022 (the Initial Period), should be based on the economics 78 Freeport-McMoRan | The Power of Copper NOTES TO CONSOLIDATED FINANCIAL STATEMENTSreplacement agreement included in the PT-FI Shareholders PT-FI’s maximum exposure to loss is its investment in PT Smelting Agreement, as previously discussed. The economics replacement and its loan to fund the expansion (refer to Note 6). Additionally, agreement entitled FCX to approximately 81% of PT-FI dividends refer to Note 6 for the carrying values of PT-FI’s trade receivable paid during the Initial Period, with the remaining 19% paid to balances from PT Smelting for sales of concentrate. PT-FI’s equity the noncontrolling interests. PT-FI’s cumulative net income during in PT Smelting’s earnings totaled $24 million in 2022, $6 million the Initial Period totaled $6.0 billion, of which $4.9 billion was in 2021 and $11 million in 2020. attributed to FCX. In addition, because PT-FI did not achieve the Beginning in 2023, PT-FI’s commercial arrangement with Gold Target (as defined in the PT-FI Shareholders Agreement) PT Smelting converted to a tolling arrangement. Under the during the Initial Period, PT-FI’s net income and cash dividends arrangement, PT-FI pays PT Smelting a tolling fee to smelt and associated with the sale of approximately 190,000 ounces of gold refine its concentrate and will retain title to all products for in 2023 will be attributed approximately 81% to FCX and 19% to sale to third parties (i.e., there are no further sales from PT-FI to MIND ID. PT Smelting). Beginning January 1, 2023, the attribution of PT-FI’s net income or loss will be based on equity ownership percentages (48.76% for FCX, 26.24% for MIND ID and 25.00% for PTI), except for the net NOTE 4. INVENTORIES, INCLUDING LONG-TERM MILL AND LEACH STOCKPILES income attributable to the approximately 190,000 ounces of gold The components of inventories follow: sales discussed above. For all of its other partially owned consolidated subsidiaries, FCX attributes net income or loss based on equity ownership percentages. Joint Ventures. Sumitomo and SMM Morenci, Inc. FMC owns a 72% undivided interest in Morenci via an unincorporated joint venture. The remaining 28% is owned by Sumitomo (15%) and SMM Morenci, Inc. (13%). Each partner takes in kind its share of Morenci’s production. FMC purchased 62 million pounds of Morenci’s copper cathode from Sumitomo and SMM Morenci, Inc. at market prices for $245 million during 2022. FMC had receivables from Sumitomo and SMM Morenci, Inc. totaling $25 million at December 31, 2022, and $20 million at December 31, 2021. December 31, 2022 2021 Current inventories: Total materials and supplies, neta Mill stockpiles Leach stockpiles Total current mill and leach stockpiles Raw materials (primarily concentrate) Work-in-process Finished goods Total product Long-term inventories: Mill stockpiles Leach stockpiles Total long-term mill and leach stockpilesb $ 1,964 $ 216 1,167 $ 1,383 $ 443 221 1,169 $ 1,833 $ 199 1,053 $ 1,252 $ 1,669 $ 193 977 $ 1,170 $ 536 195 927 $ 1,658 $ 226 1,161 $ 1,387 PT Smelting. PT Smelting is an Indonesia company that owns a a. Materials and supplies inventory was net of obsolescence reserves totaling $39 million at December 31, 2022, and $36 million at December 31, 2021. copper smelter and refinery in Gresik, Indonesia. In 1996, PT-FI b. Estimated metals in stockpiles not expected to be recovered within the next 12 months. entered into a joint venture and shareholder agreement with MMC to jointly construct the PT Smelting facilities. PT Smelting, which commenced operations in 1999, was the first and currently the only operating copper smelter facility in Indonesia. PT-FI owns 39.5% of the outstanding common stock of PT Smelting. MMC owns the remaining 60.5% of PT Smelting’s outstanding common stock and serves as the operator of the facilities. On November 30, 2021, PT-FI entered into a convertible loan agreement to fund an expansion of PT Smelting’s facilities. Upon completion of the expansion project, targeted for year-end 2023, PT-FI’s loan is expected to convert into PT Smelting equity resulting in a majority ownership interest. FCX has determined that PT Smelting is a variable interest entity (VIE), however, as mutual consent of both PT-FI and MMC is required to make the decisions that most significantly impact the economic performance of PT Smelting, PT-FI is not the primary beneficiary. As PT-FI has the ability to exercise significant influence over PT Smelting, it accounts for its investment in PT Smelting under the equity method (refer to Note 6). FCX recorded metal inventory adjustments totaling $29 million in 2022, including $19 million associated with NRV adjustments related to lower market prices for copper and $10 million for stockpile write-offs at Cerro Verde; $16 million in 2021, primarily associated with stockpiles at the Morenci mine no longer expected to be leached; and $96 million in 2020 associated with NRV adjustments related to lower market prices for copper and molybdenum. Refer to Note 16 for metal inventory adjustments by business segment. El Abra Stockpile Adjustment. In 2022, the El Abra mine revised its estimated recovery rate assumptions for specific ore types expected to be processed from its existing leach stockpile. The revised estimates resulted in a 135 million pound reduction in future estimated recoverable copper from this leach stockpile, which is being phased out. This revised estimate did not have a significant impact on FCX’s consolidated site production and delivery costs in 2022. 2022 Annual Report 79 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Morenci Stockpile Adjustments. The Morenci mine has NOTE 6. OTHER ASSETS experienced improved recoveries at certain of its leach stockpiles and following an analysis of column testing results in 2021, Morenci The components of other assets follow: concluded it had sufficient evidence to increase its estimated recoveries for certain of its leach stockpiles. As a result of the revised recoveries, Morenci increased its estimated recoverable copper in leach stockpiles by 191 million pounds (net of joint venture interest). The effect of this change in estimate reduced FCX’s consolidated site production and delivery costs and increased net income by $112 million ($0.08 per share) in 2021. In 2022, based on an annual review of leach stockpiles, FCX increased its estimated recoverable copper in leach stockpiles at Morenci by 213 million pounds (net of joint venture interest). This revised estimate did not have a significant impact on FCX’s consolidated site production and delivery costs in 2022. 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 development costs, net 2022 2021 $ 7,159 360 12,314 9,746 14,790 4,756 4,419 27,356 80,900 (48,273) $ 7,142 376 11,309 9,412 14,399 4,605 2,477 27,298 77,018 (46,673) December 31, 2022 2021 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 Smelting for expansionh Long-term employee receivables Prepaid rent and deposits Other Total other assets $ 416 182 333 12 54 133 79 50 47 101 24 26 144 $ 1,601 $ 412 209 237 57 84 132 74 26 70 36 20 2 101 $ 1,460 a. Indefinite-lived intangible assets totaled $214 million at December 31, 2022, and $215 million at December 31, 2021. Accumulated amortization for definite-lived intangible assets totaled $39 million at December 31, 2022, and $35 million at December 31, 2021. b. Includes $181 million at December 31, 2022, and $208 million at December 31, 2021, 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 $112 million at December 31, 2022, and $126 million at December 31, 2021. Trade accounts receivable from PT Smelting totaled $277 million at December 31, 2022, and $411 million at December 31, 2021. g. Refer to Note 15 for further discussion. h. Refer to Note 3 for further discussion. NOTE 7. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES The components of accounts payable and accrued liabilities follow: $ 32,627 $ 30,345 December 31, 2022 2021 a. Includes accumulated amortization for oil and gas properties of $27.3 billion at December 31, 2022 and 2021. FCX recorded $1.6 billion for VBPP in connection with the FMC acquisition (excluding $634 million associated with mining operations that were subsequently sold) and transferred $827 million to proven and probable mineral reserves through 2022 ($16 million in 2022 and none in 2021). 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 $150 million in 2022, $72 million in 2021 and $147 million in 2020. During the three-year period ended December 31, 2022, no material impairments of FCX’s long-lived mining assets were recorded. Accounts payable Salaries, wages and other compensation Accrued interesta PT-FI contingenciesb Pension, postretirement, postemployment and other employee benefitsc Litigation accruals Deferred revenue Accrued taxes, other than income taxes Accrued mining royalties Leasesd Other Total accounts payable and accrued liabilities $ 2,701 329 218 179 143 99 76 75 41 38 128 $ 4,027 $ 2,035 334 203 259 190 28 191 64 33 38 120 $ 3,495 a. Third-party interest paid, net of capitalized interest, was $417 million in 2022, $640 million in 2021 and $472 million in 2020. b. Refer to Note 12 for further discussion. c. Refer to Note 9 for long-term portion. d. Refer to Note 13 for further discussion. 80 Freeport-McMoRan | The Power of Copper NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FCX or PT-FI, be determined based on the Secured Overnight Financing Rate plus a spread to be determined by reference to a grid based on FCX’s credit rating. The revolving credit facility contains customary affirmative covenants and representations, and also contains various negative covenants that, among other things and subject to certain exceptions, restrict the ability of FCX’s subsidiaries that are not borrowers or guarantors to incur additional indebtedness (including guarantee obligations) and the ability of FCX or FCX’s subsidiaries to: create liens on assets; enter into sale and leaseback transactions; engage in mergers, liquidations and dissolutions; and sell assets. In addition, the revolving credit facility contains a total leverage ratio financial covenant. PT-FI. In July 2021, PT-FI entered into a $1.0 billion, five-year, unsecured 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. In April 2022, PT-FI amended and restated its five-year, unsecured revolving credit facility to, among other things, increase the availability to $1.3 billion. The amended and restated credit facility matures in July 2026. At December 31, 2022, PT-FI had no borrowings under its revolving credit facility and was in compliance with its covenants. PT-FI’s revolving credit facility contains customary affirmative covenants and representations and also contains standard negative 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 covenants governing maximum total leverage and minimum interest expense coverage and other covenants addressing certain environmental and social compliance requirements. Cerro Verde. In May 2022, Cerro Verde entered into a $350 million, five-year, unsecured revolving credit facility that matures in May 2027. At December 31, 2022, Cerro Verde had no borrowings outstanding under its revolving credit facility and was in compliance with its covenants. NOTE 8. DEBT FCX’s debt at December 31, 2022, is net of reductions of $78 million ($86 million at December 31, 2021) for unamortized net discounts and unamortized debt issuance costs. The components of debt follow: December 31, Revolving credit facilities: FCX PT-FI Cerro Verde Senior notes and debentures: Issued by FCX: 3.875% Senior Notes due 2023a 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 PT-FI: 4.763% Senior Notes due 2027 5.315% Senior Notes due 2032 6.200% Senior Notes due 2052 Issued by FMC: 7 ⅛% Debentures due 2027 9 1/2% Senior Notes due 2031 6 1/8% Senior Notes due 2034 PT-FI Term Loan Cerro Verde Term Loan Other Total debt Less current portion of debt Long-term debt a. Maturing in March 2023. Revolving Credit Facilities. 2022 2021 $ — — — $ — — — 995 729 465 543 475 499 494 615 723 1,687 745 1,489 744 115 122 118 — — 62 10,620 (1,037) $ 9,583 995 728 594 693 643 593 593 841 742 1,846 — — — 115 123 117 432 325 70 9,450 (372) $ 9,078 FCX. At December 31, 2022, FCX had no borrowings outstanding and $8 million in letters of credit issued under its revolving credit facility and was in compliance with its revolving credit facility covenants. In October 2022, FCX and PT-FI entered into a $3.0 billion, five-year, unsecured revolving credit facility, which replaced FCX’s prior revolving credit facility that was scheduled to mature in April 2024. The revolving credit facility matures in October 2027. Under the terms of the revolving credit facility, FCX may obtain loans and issue letters of credit in an aggregate amount of up to $3.0 billion, with PT-FI’s capacity limited to $500 million, and letters of credit issuance limited to $1.5 billion. Interest on loans made under the revolving credit facility may, at the option of 2022 Annual Report 81 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Senior Notes. FCX. In May 2022, FCX began purchasing certain of its senior notes in open-market transactions. Listed below are the FCX senior notes, purchased or redeemed in full during the three-year period ended December 31, 2022. 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 15, 2022 August 14, 2024 May 14, 2034 September 15, 2042 Year Ended December 31, 2022 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 Total 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 Principal Net Amount Adjustments Value Book Redemption (Gain) /Loss Value FCX’s senior notes contain limitations on liens and rank equally with FCX’s other existing and future unsecured and unsubordinated $ 131 153 171 97 101 228 20 160 $ 1,061 $ (1) $ 130 152 169 96 100 226 20 158 $ (10) $ 1,051 (1) (2) (1) (1) (2) — (2) $ 130 $ — (9) 143 (6) 163 (3) 93 (7) 93 (11) 215 — 20 150 (8) $ 1,007 $ (44) indebtedness. PT-FI. In April 2022, PT-FI completed the sale of $3.0 billion aggregate principal amount of unsecured senior notes, consisting of $750 million of 4.763% Senior Notes due 2027, $1.5 billion of 5.315% Senior Notes due 2032 and $750 million of 6.200% Senior Notes due 2052. PT-FI used $0.6 billion of the net proceeds to repay the borrowings under its term loan and expects to use the remaining net proceeds to finance its smelter projects. The senior notes listed below are redeemable in whole or in part, $ 524 $ — $ 524 $ 524 $ — at the option of PT-FI, at a make-whole redemption price prior to the dates stated below and beginning on the dates stated below at $ 195 1,356 927 120 $ 2,598 $ (1) $ 194 1,350 923 119 $ (12) $ 2,586 (6) (4) (1) $ 205 $ 11 41 1,391 41 964 7 126 $ 2,686 $ 100 100% of principal. Debt Instrument 4.763% Senior Notes due 2027 5.315% Senior Notes due 2032 6.200% Senior Notes due 2052 Date March 14, 2027 January 14, 2032 October 14, 2051 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 Term Loans. dates stated below, at specified redemption prices beginning on PT-FI. In April 2022, PT-FI repaid the principal balance of the term the dates stated below, and at 100% of principal two years before loan portion of its unsecured credit facility, which cannot be 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% of principal. redrawn, and recorded a loss on early extinguishment of debt of $10 million. Cerro Verde. In May 2022, Cerro Verde repaid the principal balance of its term loan. Cerro Verde Shareholder Loans. In December 2014, Cerro Verde entered into loan agreements with three of its shareholders, which will mature in May 2024. No amounts were outstanding at December 31, 2022 and 2021, and availability under these agreements totals $200 million. Maturities. Maturities of debt instruments based on the principal amounts outstanding at December 31, 2022, total $1.0 billion in 2023, $731 million in 2024, $4 million in 2025, $4 million in 2026, $1.3 billion in 2027 and $7.6 billion thereafter. 82 Freeport-McMoRan | The Power of Copper NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 9. OTHER LIABILITIES, INCLUDING EMPLOYEE BENEFITS The components of other liabilities follow: December 31, Pension, postretirement, postemployment and other employment benefitsa Leasesb Provision for tax positions Litigation accruals Indemnification of MIND IDb Other Total other liabilities a. Refer to Note 7 for current portion. b. Refer to Note 13 for further discussion. 2022 2021 $ 775 294 161 109 74 149 $ 1,562 $ 845 281 232 131 78 116 $ 1,683 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%); long-duration U.S. government/credit (20%); core fixed income (16%); long-term U.S. Treasury Separate Trading of Registered Interest and Principal Securities (STRIPS) (13%); and cash equivalents (1%). 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 5% per annum beginning January 1, 2023, which is Pension Plans. Following is a discussion of FCX’s pension plans. based on the target asset allocation and long-term capital market FMC Plans. FMC has U.S. trusteed, non-contributory pension return expectations. plans covering some U.S. employees and some employees of its international subsidiaries hired before 2007. The applicable FMC For estimation purposes, FCX assumes the long-term asset mix for these plans generally will be consistent with the current plan design determines the manner in which benefits are calculated mix. Changes in the asset mix could impact the amount of for any particular group of employees. Benefits are calculated based on final average monthly compensation and years of service recorded pension costs, the funded status of the plans and the need for future cash contributions. A lower-than-expected return or based on a fixed amount for each year of service. Non-bargained on assets also would decrease plan assets and increase the amount FMC employees hired after December 31, 2006, are not eligible to participate in the FMC U.S. pension plan. In August 2020, the of recorded pension costs in future years. When calculating the expected return on plan assets, FCX uses the market value of assets. FMC Retirement Plan, the largest FMC plan, was amended such that, Among the assumptions used to estimate the pension benefit effective September 1, 2020, participants no longer accrue any additional benefits. 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 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 held in a master trust (Master Trust) are to maintain funds sufficient coupon) interest rates at one-half-year increments for each to pay all benefit and expense obligations when due, minimize the volatility of the plan’s funded status to the extent practical, and to of the next 30 years and is developed based on pricing and yield information for high-quality corporate bonds. Changes in the maintain prudent levels of risk consistent with the plan’s investment discount rate are reflected in FCX’s benefit obligation and, policy. Historically, FMC plan assets have been invested in a therefore, in future pension costs. balanced portfolio of return-seeking and risk-mitigating assets, with the allocation between these portfolios dependent on the funded status of the plan. During 2021, FCX reallocated essentially 2022 Annual Report 83 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SERP Plan. FCX has an unfunded Supplemental Executive Plan Information. FCX uses a measurement date of December 31 Retirement Plan (SERP) for its chief executive officer. The SERP for its plans. Information for qualified and non-qualified plans provides for retirement benefits payable in the form of a joint where the projected benefit obligations and the accumulated benefit and survivor annuity, life annuity or an equivalent lump sum. The obligations exceed the fair value of plan assets follows: participant has elected to receive an equivalent lump sum payment. The payment will equal a percentage of the participant’s highest average compensation for any consecutive three-year period during the five years immediately preceding the completion December 31, Projected and accumulated benefit obligation Fair value of plan assets 2022 2021 $ 1,831 1,422 $ 2,476 1,988 of 25 years of credited service. The SERP benefit will be reduced Information on the qualified and non-qualified FCX (FMC and SERP by the value of all benefits from current and former retirement plans plans) and PT-FI plans as of December 31 follows: (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. 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 15,652 rupiah to one U.S. dollar on December 31, 2022, and 14,198 rupiah to one U.S. dollar on December 31, 2021. Indonesia labor laws require that companies provide a minimum severance to employees upon employment termination based on the reason for termination and Change in benefit obligation: Benefit obligation at beginning of year Service cost Interest cost Actuarial gains Special termination benefits and plan amendments Foreign exchange gains Benefits and administrative expenses paid Benefit obligation at end of year Change in plan assets: Fair value of plan assets at FCX PT-FI 2022 2021 2022 2021 $ 2,553 15 71 (623) $ 2,722 12 66 (117) $ 237 12 14 (2) $ 238 13 14 (3) — (3) — (1) 2 (22) (2) (3) (129) 1,884 (129) 2,553 (26) 215 (20) 237 the employee’s years of service. PT-FI’s pension benefit obligation beginning of year 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 Actual return on plan assets Employer contributionsa Foreign exchange losses Benefits and administrative 2,071 (509) 52 (2) 1,946 150 105 (1) 240 10 2 (21) 251 8 4 (3) return for the plan based on the asset mix. Based on these factors, expenses paid (129) (129) (26) (20) PT-FI expects its pension assets will earn an average of 7% per annum beginning January 1, 2023. 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. Fair value of plan assets at end of year Funded status 1,483 $ (401) 2,071 $ (482) 205 $ (10) Accumulated benefit obligation $ 1,882 $ 2,551 $ 176 240 $ 3 $ 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 5.41% N/A 2.85% N/A 7.00% 4.00% 6.50% 4.00% $ 8 $ 6 $ — $ 3 (4) (405) $ (401) (4) (484) $ (482) — (10) $ (10) — — $ 3 a. Employer contributions for 2023 are currently expected to approximate $60 million for the FCX plans and $11 million for the PT-FI plan (based on a December 31, 2022, exchange rate of 15,652 Indonesia rupiah to one U.S. dollar). 84 Freeport-McMoRan | The Power of Copper NOTES TO CONSOLIDATED FINANCIAL STATEMENTS During 2022, the actuarial gain of $623 million for the FCX pension Plan assets are classified within a fair value hierarchy that plans primarily resulted from the increase in the discount rate from prioritizes the inputs to valuation techniques used to measure fair 2.85% to 5.41%. During 2021, the actuarial gain of $117 million for value. The hierarchy gives the highest priority to unadjusted quoted the FCX pension plans primarily resulted from the increase in the prices in active markets for identical assets or liabilities (Level 1), discount rate from 2.50% to 2.85%. then to prices derived using significant observable inputs (Level 2) The weighted-average assumptions used to determine net and the lowest priority to prices derived using significant periodic benefit cost and the components of net periodic benefit cost unobservable inputs (Level 3). for FCX’s pension plans for the years ended December 31 follow: A summary of the fair value for pension plan assets, including 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 2022 2021 2020 2.85% 3.00% N/A 2.50% 5.25% N/A 2.98% 6.25% 3.25% $ 15 71 (62) 15 — $ 39 $ 12 66 (98) 25 — $ 5 $ 37 77 (105) 45 4 $ 58 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 Special termination benefit Net periodic benefit cost 2022 2021 2020 6.50% 7.00% 4.00% 6.25% 7.75% 4.00% 7.25% 7.75% 4.00% $ 12 14 (15) 1 (1) 2 $ 13 $ 13 14 (19) 1 (1) — $ 8 $ 11 14 (19) 2 (3) — 5 $ The service cost component of net periodic benefit cost is included in operating income, and the other components are those measured at net asset value (NAV) as a practical expedient, associated with the FCX plans follows: Fair Value at December 31, 2022 Level 1 NAV Level 2 Level 3 Total Commingled/collective funds: Fixed income securities 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 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 712 282 25 55 1,439 49 (5) $ 1,483 Total $ 522 72 38 911 437 11 74 2,065 18 (12) $ 2,071 $ 335 30 $ 335 30 $ — — $ — — — — 25 — $ 390 — — — 1 $ 1 712 282 — 54 $ 1,048 $ — — — — — — $ — Fair Value at December 31, 2021 Level 1 NAV Level 2 Level 3 $ 522 72 38 — — 11 — $ 643 $ — — — — — — 1 $ 1 $ — — — 911 437 — 73 $ 1,421 $ — — — — — — — $ — included in other income (expense), net in the consolidated Following is a description of the pension plan asset categories statements of income. included in the above tables and the valuation techniques used to Included in accumulated other comprehensive loss are the measure fair value. There have been no changes to the techniques following amounts that have not been recognized in net periodic used to measure fair value. pension cost as of December 31: Net actuarial losses Prior service costs 2022 After Taxes and Before Noncontrolling Taxes Interests 2021 After Taxes and Before Noncontrolling Taxes Interests $ 426 — $ 426 $ 305 (2) $ 303 $ 488 2 $ 490 $ 369 — $ 369 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 2022 Annual Report 85 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS fund) primarily require up to a two-business-day notice for The techniques described above may produce a fair value redemptions. The real estate property fund is valued at NAV using calculation that may not be indicative of NRV or reflective of future information from independent appraisal firms, who have fair values. Furthermore, while FCX believes its valuation techniques knowledge and expertise about the current market values of are appropriate and consistent with those used by other market real property in the same vicinity as the investments. participants, the use of different techniques or assumptions Fixed income investments include corporate and government to determine the fair value of certain financial instruments could bonds held directly by the Master Trust. Fixed income securities are result in a different fair value measurement at the reporting date. valued using a bid-evaluation price or a mid-evaluation price and, The expected benefit payments for FCX’s and PT-FI’s pension as such, are classified within Level 2 of the fair value hierarchy. plans follow: A bid-evaluation price is an estimated price at which a dealer would pay for a security. A mid-evaluation price is the average of the estimated price at which a dealer would sell a security and the estimated price at which a dealer would pay for a security. These evaluations are based on quoted prices, if available, or models that use observable inputs. 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: 2023 2024 2025 2026 2027 2028 through 2032 FCX $ 127 183 131 132 132 648 PT-FIa $ 29 26 26 28 29 127 a. Based on a December 31, 2022, exchange rate of 15,652 Indonesia rupiah to one U.S. dollar. Postretirement and Other Benefits. FCX also provides postretirement medical and life insurance benefits for certain U.S. employees and, in some cases, employees of certain international subsidiaries. These postretirement benefits vary among plans, and Fair Value at December 31, 2022 Total Level 1 Level 2 Level 3 many plans require contributions from retirees. The expected cost of providing such postretirement benefits is accrued during Government bonds Common stocks Mutual funds Total investments Cash and receivablesa Payables Total pension plan net assets $ 95 72 12 179 27 (1) $ 205 $ 95 72 12 $ 179 $ — — — $ — $ — — — $ — Fair Value at December 31, 2021 Total Level 1 Level 2 Level 3 Government bonds Common stocks Mutual funds Total investments Cash and receivablesa Payables Total pension plan net assets $ 114 80 18 212 29 (1) $ 240 a. Cash consists primarily of short-term time deposits. $ 114 80 18 $ 212 $ — — — $ — $ — — — $ — Following is a description of the valuation techniques used for pension plan assets measured at fair value associated with the PT-FI plan. There have been no changes to the techniques used to measure fair value. Government bonds, common stocks and mutual funds are valued at the closing price reported on the active market on which the individual securities are traded and, as such, are classified within Level 1 of the fair value hierarchy. 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 $6 million (included in accounts payable and accrued liabilities) and a long-term portion of $43 million (included in other liabilities) at December 31, 2022, and a current portion of $7 million and a long-term portion of $57 million at December 31, 2021. 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 $7 million (included in accounts payable and accrued liabilities) and a long-term portion of $41 million (included in other liabilities) at December 31, 2022, and a current portion of $6 million and a long-term portion of $35 million at December 31, 2021. 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 $56 million at 86 Freeport-McMoRan | The Power of Copper NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022, and $51 million at December 31, 2021, all of which The declaration and payment of dividends (base or variable) was included in other liabilities. and timing and amount of any share repurchases is at the The costs charged to operations for the employee savings plan discretion of FCX’s Board and management, respectively, and is totaled $101 million in 2022, $95 million in 2021 and $40 million in subject to a number of factors, including maintaining FCX’s 2020. The costs were lower in 2020, compared with 2022 and 2021, net debt target, capital availability, FCX’s financial results, cash because of a temporary suspension of FCX contributions implemented requirements, global economic conditions, changes in laws, as part of its April 2020 revised operating plans. FCX contributions contractual restrictions and other factors deemed relevant by FCX’s resumed on January 1, 2021. FCX has other employee benefit Board or management, as applicable. FCX’s share repurchase plans, certain of which are related to FCX’s financial results, which program may be modified, increased, suspended or terminated at are recognized in operating costs. any time at the Board’s discretion. NOTE 10. STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION FCX’s authorized shares of capital stock total 3.05 billion shares, consisting of 3.0 billion shares of common stock and 50 million shares of preferred stock. 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% 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 $3.0 billion to $4.0 billion (excluding project net Accumulated Other Comprehensive Loss. A summary of changes in the balances of each component of accumulated other comprehensive loss, net of tax, follows: Balance at January 1, 2020 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 Amounts arising during the perioda,b Amounts reclassifiedc Balance at December 31, 2022 Defined Benefit Plans Translation Adjustment $ (686) 47 46 (593) 176 19 (398) 61 7 $ (330) $ 10 — — 10 — — 10 — — $ 10 Total $ (676) 47 46 (583) 176 19 (388) 61 7 $ (320) a. Includes net actuarial gains, net of noncontrolling interest, totaling $40 million for 2020, $174 million for 2021 and $59 million for 2022. b. Includes tax provision totaling $7 million for 2020, $2 million for 2021 and 2022. c. Includes amortization primarily related to actuarial losses, net of taxes of less than $1 million for 2020, 2021 and 2022. debt for additional smelting capacity in Indonesia). Stock Award Plans. FCX currently has awards outstanding under In February 2021, the Board reinstated a cash dividend on FCX’s various stock-based compensation plans. The stockholder- common stock (base dividend), and on November 1, 2021, the approved 2016 Stock Incentive Plan (the 2016 Plan) provides for the Board approved (i) a new share repurchase program authorizing issuance of stock options, stock appreciation rights, restricted repurchases of up to $3.0 billion of FCX common stock and (ii) a stock, RSUs, PSUs and other stock-based awards for up to 72 million variable cash dividend on FCX’s common stock for 2022. In July 2022, common shares. As of December 31, 2022, 25.5 million shares the Board authorized an increase in the share repurchase program were available for grant under the 2016 Plan, and no shares were from up to $3.0 billion to up to $5.0 billion. Refer to Note 11 for further available under other plans. discussion of the U.S. Inflation Reduction Act (the Act), including a Stock-Based Compensation Cost. Compensation cost charged 1% excise tax on corporate stock repurchases beginning in 2023. against earnings for stock-based awards for the years ended In 2021, FCX acquired 12.74 million shares of its common stock December 31 follows: for a total cost of $0.5 billion ($38.32 average cost per share) and in 2022, FCX acquired 35.12 million shares of its common stock under its share repurchase program for a total cost of $1.3 billion ($38.36 average cost per share). As of February 15, 2023, FCX has $3.2 billion available for repurchases under the program. Selling, general and administrative expenses Production and delivery Total stock-based compensation Tax benefit and noncontrolling interests’ sharea On December 21, 2022, FCX declared quarterly cash dividends Impact on net income 2022 $ 57 38 95 (4) $ 91 2021 $ 64 34 98 (5) $ 93 2020 $ 70 29 99 (5) $ 94 totaling $0.15 per share ($0.075 per share base dividend and $0.075 per share variable dividend) on its common stock, which were paid on February 1, 2023, to common stockholders of record as of January 13, 2023. a. Charges in the U.S. are not expected to generate a future tax benefit. 2022 Annual Report 87 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Stock Options. Stock options granted under the plans generally Stock-Settled PSUs and RSUs. Since 2014, FCX’s executive officers expire 10 years after the date of grant. Stock options vest in one-third received annual grants of PSUs that vest after a three-year annual increments beginning one year from the date of grant. performance period. The total grant date target shares related to The award agreements provide that participants will receive the the PSU grants were 0.4 million for 2022, 0.3 million for 2021 following year’s vesting upon retirement. Therefore, on the date and 0.8 million for 2020, of which the executive officers will earn of grant, FCX accelerates one year of amortization for retirement- (i) between 0% and 200% of the target shares based on eligible employees. The award agreements also provide for achievement of financial metrics and (ii) may be increased or accelerated vesting upon certain qualifying terminations of decreased up to 25% of the target shares based on FCX’s total employment within one year following a change of control. There shareholder return compared to the total shareholder return of a were no stock options granted by FCX in 2022. peer group. PSU awards for FCX’s executive officers who are A summary of stock options outstanding as of December 31, retirement-eligible are non-forfeitable. As such, FCX charges the 2022, and activity during the year ended December 31, 2022, follows: estimated fair value of the non-forfeitable PSU awards to expense Weighted- Average Exercise Price Per Share Weighted- Average Remaining Aggregate Intrinsic Contractual Value Term (years) Number of Options at the time the financial and operational metrics are established, which is typically grant date. The fair value of PSU awards for FCX’s executive officers who are not retirement-eligible are expensed over the performance period. FCX grants RSUs that vest over a period of three years or at the end of three years to certain employees. Some award agreements 4.7 $ 235 allow for participants to receive the following year’s vesting upon retirement. Therefore, on the date of grant of these RSU awards, 11,171,890 17.65 4.6 $ 227 FCX accelerates one year of amortization for retirement-eligible employees. FCX also grants RSUs to its directors, which vest on Balance at January 1 Exercised Expired/Forfeited Balance at December 31 Vested and exercisable at December 31 21,822,562 (6,371,610) (3,836,900) 11,614,052 $ 23.78 21.07 46.56 17.75 The fair value of each stock option is estimated on the date of the first anniversary of the date of grant. The fair value of the RSUs grant using the Black-Scholes-Merton option valuation model. is amortized over the vesting period or the period until the Expected volatility is based on implied volatilities from traded director becomes retirement eligible, whichever is shorter. Upon a options on FCX’s common stock and historical volatility of FCX’s director’s retirement, all of their unvested RSUs immediately vest. common stock. FCX uses historical data to estimate future option For retirement-eligible directors, the fair value of RSUs is recognized exercises, forfeitures and expected life. When appropriate, in earnings on the date of grant. separate groups of employees who have similar historical exercise The award agreements provide for accelerated vesting of all behavior are considered separately for valuation purposes. The RSUs held by directors if there is a change of control (as defined in expected dividend rate is calculated using the expected annual the award agreements) and for accelerated vesting of all RSUs dividend at the date of grant. The risk-free interest rate is based on held by employees if they experience a qualifying termination within Federal Reserve rates in effect for bonds with maturity dates one year following a change of control. equal to the expected term of the option. Dividends attributable to RSUs and PSUs accrue and are paid Information related to stock options during the years ended if the awards vest. A summary of outstanding stock-settled RSUs December 31 follows: and PSUs as of December 31, 2022, and activity during the year 2022a 2021 2020 ended December 31, 2022, follows: 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 a. FCX did not grant stock options in 2022. N/A N/A N/A N/A N/A $ 148 $ 23 58.1% 5.90 2.5% 0.6% $ 11.92 $ 194 16 $ 47.7% 5.83 1.7% 1.5% $ 4.72 $ 82 $ 28 Balance at January 1 Granted Vested Forfeited Balance at December 31 Weighted- Average Grant-Date Aggregate Intrinsic Fair Value Value Per Award $ 19.82 36.26 14.64 34.94 28.05 $ 253 Number of Awards 7,800,885 2,274,340 (3,405,769) (18,583) 6,650,873 88 Freeport-McMoRan | The Power of Copper NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The total fair value of stock-settled RSUs and PSUs granted was Other Information. The following table includes amounts related $83 million during 2022, $62 million during 2021 and $47 million to exercises of stock options and vesting of RSUs and PSUs during during 2020. The total intrinsic value of stock-settled RSUs and the years ended December 31: PSUs vested was $138 million during 2022, $56 million during 2021 and $18 million during 2020. As of December 31, 2022, FCX had $25 million of total unrecognized compensation cost related to unvested stock-settled RSUs and PSUs expected to be recognized over approximately 1.2 years. Cash-Settled RSUs. Cash-settled RSUs are similar to stock- settled RSUs, but are settled in cash rather than in shares of common stock. These cash-settled RSUs generally vest over three years of service. Some award agreements allow for participants to receive the following year’s vesting upon retirement. Therefore, on the date of grant of these cash-settled RSU awards, FCX accelerates one year of amortization for retirement-eligible employees. The cash- settled RSUs are classified as liability awards, and the fair value of these awards is remeasured each reporting period until the vesting dates. The award agreements for cash-settled RSUs provide for accelerated vesting upon certain qualifying terminations of employment within one year following a change of control. Dividends attributable to cash-settled RSUs accrue and are paid if the awards vest. A summary of outstanding cash-settled RSUs as of December 31, 2022, and activity during the year ended December 31, 2022, follows: Weighted- Average Grant-Date Aggregate Intrinsic Fair Value Value Per Award Balance at January 1 Granted Vested Forfeited Balance at December 31 Number of Awards 1,053,924 389,950 (603,686) (25,899) 6814,289 $ 16.56 38.78 14.84 30.12 28.04 2022 2021 2020 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 1,511,072 1,358,101 1,193,183 $ $ $ 125 13 55 $ $ $ 210 9 29 $ $ $ 51 2 17 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 Geographic sources of income (losses) before income taxes and equity in affiliated companies’ net earnings for the years ended December 31 consist of the following: U.S. Foreign Total 2022 2021 2020 $ 840 5,875 $ 6,715 $ 1,861 5,798 $ 7,659 $ (40) 1,837 $ 1,797 Income taxes are provided on the earnings of FCX’s material foreign subsidiaries under the assumption that these earnings will be distributed. FCX has not provided deferred income taxes for other differences between the book and tax carrying amounts of its investments in material foreign subsidiaries as FCX considers its ownership positions to be permanent in duration, and quantification of the related deferred tax liability is not practicable. $ 31 FCX’s provision for income taxes for the years ended December 31 The total grant-date fair value of cash-settled RSUs was $15 million during 2022, $9 million during 2021 and $11 million during 2020. The intrinsic value of cash-settled RSUs vested was $26 million during 2022, $24 million during 2021 and $11 million during 2020. The accrued liability associated with cash-settled RSUs consisted of a current portion of $19 million (included in accounts payable and accrued liabilities) and a long-term portion of $5 million (included in other liabilities) at December 31, 2022, and a current portion of $26 million and a long-term portion of $6 million at December 31, 2021. consists of the following: Current income taxes: Federal State Foreign Total current Deferred income taxes: Federal State Foreign Total deferred Adjustments Operating loss carryforwards 2022 2021 2020 $ — 1 (2,232) (2,231) $ — (11) (2,460) (2,471) (149) (6) (144) (299) 1 262 (184) (4) (23) (211) 193c 190 $ 53a (1) (816)b (764) 3 5 (306) (298) 37 81 Provision for income taxes $ (2,267) $ (2,299) $ (944) a. Includes a credit of $53 million associated with the reversal of the charge associated with the sale of FCX’s interest in the lower zone of the Timok exploration project. b. Includes a charge of $135 million associated with the gain on sale of FCX’s interest in the Kisanfu undeveloped project. c. Primarily reflects the release of valuation allowances on NOLs at PT Rio Tinto (see below). 2022 Annual Report 89 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A reconciliation of the U.S. federal statutory tax rate to FCX’s effective income tax rate for the years ended December 31 follows: U.S. federal statutory tax rate Withholding and other impacts on foreign earnings Effect of foreign rates different than the U.S. federal statutory rate Percentage depletion Foreign tax credit limitation Uncertain tax positions PT-FI historical tax disputesa Valuation allowanceb State income taxes PT Rio Tinto valuation allowanceb Sale of Kisanfu Timok exploration project sale Cerro Verde historical tax disputes Other items, net Provision for income taxes a. Refer to “Indonesia Tax Matters” below. b. Refer to “Valuation Allowances” below. 2022 2021 2020 Amount % Amount % Amount % $ (1,410) (673) (314) 189 (28) (17) (8) 6 (4) — — — — (8) $ (2,267) (21)% (10) (5) 3 (1) — — — — — — — — — (34)% $ (1,608) (678) (328) 221 (11) 13 (193) 221 (14) 189 — — — (111) $ (2,299) (21)% (9) (4) 3 — — (3) 3 — 2 — — — (1) (30)% $ (377) (193) (109) 104 28 (15) (8) (210) (2) — (135) 53 (39) (41) $ (944) (21)% (11) (6) 6 2 (1) — (12) — — (8) 3 (2) (3) (53)% FCX paid federal, state and foreign income taxes totaling $3.1 billion Valuation Allowances. On the basis of available information at in 2022, $1.3 billion in 2021 and $397 million in 2020. FCX received December 31, 2022, including positive and negative evidence, refunds of federal, state and foreign income taxes totaling $46 million FCX has provided valuation allowances for certain of its deferred in 2022, $109 million in 2021 and $265 million in 2020. tax assets where it believes it is more-likely-than-not that some The components of deferred taxes follow: portion or all of such assets will not be realized. Valuation allowances December 31, Deferred tax assets: Foreign tax credits NOLs Accrued expenses 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 2022 2021 $ 1,514 1,923 1,303 99 230 5,069 (3,985) 1,084 (4,330) (810) (211) (5,351) $ (4,267) $ 1,536 2,220 1,193 105 252 5,306 (4,087) 1,219 (4,492) (807) (152) (5,451) $ (4,232) Tax Attributes. At December 31, 2022, FCX had (i) U.S. foreign tax credits of $1.5 billion that will expire between 2023 and 2027, (ii) U.S. federal NOLs of $5.5 billion that primarily expire between 2036 and 2037, of which $0.4 billion can be carried forward indefinitely, (iii) U.S. state NOLs of $10.5 billion that primarily expire between 2023 and 2042, (iv) Spanish NOLs of $0.5 billion that can be carried forward indefinitely and (v) Indonesia NOLs of $0.5 billion that expire between 2024 and 2026. totaled $4.0 billion at December 31, 2022, and covered all of FCX’s U.S. foreign tax credits and U.S. federal NOLs, substantially all of its U.S. state NOLs, as well as a portion of its U.S. federal, state and foreign deferred tax assets and foreign NOLs. The valuation allowance related to FCX’s U.S. foreign tax credits totaled $1.5 billion at December 31, 2022. 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. The valuation allowance related to FCX’s U.S. federal, state and foreign NOLs totaled $1.8 billion and other deferred tax assets totaled $0.7 billion at December 31, 2022. NOLs and deferred tax assets represent future deductions for which a benefit will only be realized to the extent these deductions offset future income. 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 90 Freeport-McMoRan | The Power of Copper NOTES TO CONSOLIDATED FINANCIAL STATEMENTS generates taxable income against which any of the assets, credits communicated an unfavorable ruling regarding the treatment of or NOLs can be used, (ii) forecasts of future income provide mine development costs on PT-FI’s 2014 tax return. During sufficient positive evidence to support reversal of the valuation fourth-quarter 2019, PT-FI met with the Indonesia Tax Office and allowances or (iii) FCX identifies a prudent and feasible means developed a framework for resolution of the disputed matters. of securing the benefit of the assets, credits or NOLs that can be On December 30, 2019, PT-FI made a payment of $250 million implemented. based on its understanding of the framework for resolution of The $102 million net decrease in the valuation allowances disputes arising from the audits of the tax years 2012 through during 2022 is primarily related to $163 million of U.S. federal NOLs 2016, as well as tax years 2017 and 2018, and recorded net charges utilized during 2022, and a $22 million decrease related to totaling $304 million for the year 2019. expirations of U.S. foreign tax credits partially offset by an increase During 2020, in connection with progress of the framework for of $104 million, primarily associated with current year changes in resolution of the disputed matters, PT-FI recorded additional U.S. federal temporary differences. net charges of $46 million, including $9 million for non-deductible U.S. Inflation Reduction Act of 2022. In August 2022, the Act was penalties recorded to other (expense) income, net and $35 million signed into law, which includes, among other provisions, for non-deductible interest recorded to interest expense, net, and a new Corporate Alternative Minimum Tax (CAMT) of 15% on the $2 million to provision for income tax expense. adjusted financial statement income (AFSI) of corporations with During 2021, PT-FI participated in discussions with the average AFSI exceeding $1.0 billion over a three-year period, and a Indonesia Tax Office regarding progress on the framework for new excise tax of 1% on the fair market value of net corporate resolution of disputes arising from the audits of tax years 2012 stock repurchases. The Act had no impact on FCX’s consolidated through 2016. As a result of these discussions and the revised financial statements for the year ended December 31, 2022. The positions taken by both the Indonesia Tax Office and PT-FI, provisions of the Act are applicable to FCX beginning January 1, FCX could no longer conclude a resolution of all of the disputed 2023. Additional guidance related to how the CAMT provisions of tax items at a more-likely-than-not threshold and PT-FI recorded the Act will be applied or otherwise administered is yet to be additional net charges of $384 million, including $155 million for released by the U.S. Department of the Treasury, and may differ non-deductible penalties recorded to other income (expense), from FCX’s interpretations. FCX will continue to analyze the net, $43 million for non-deductible interest recorded to interest impacts as additional guidance is released. FCX expects the CAMT expense, net, and $186 million to provision for income tax expense. provisions will impact its U.S. tax position, and may further limit its During 2022, in conjunction with the framework for resolution ability to benefit from its U.S. NOLs. of disputed matters and the closure of the 2018 corporate income Other Events. In connection with the negative impacts of the tax audit, PT-FI recorded net charges of $13 million, including COVID-19 pandemic on the global economy, governments $5 million for non-deductible interest recorded to interest expense, throughout the world announced measures that are intended to net, and $8 million to provision for income taxes. PT-FI continues provide tax and other financial relief. Such measures include to engage with the Indonesia Tax Office in pursuit of clarification on the American Rescue Plan Act of 2021, enacted in March 2021, and certain aspects of the original framework for resolution of the the Coronavirus Aid, Relief, and Economic Security Act (CARES disputed matters. Act), enacted in March 2020. None of these measures resulted in In conjunction with the issuance of Government Regulation material impacts to FCX’s provision for income taxes for the years Number 50 of 2022, which stipulates that objection, tax court, and ended December 31, 2021 or 2020. However, certain provisions of judicial review verdicts issued after the issuance of the harmonization the CARES Act provided FCX with the opportunity to accelerate law qualify for reduced penalties, PT-FI recorded net credits collections of tax refunds, primarily those associated with the U.S. totaling $69 million in 2022 (including a credit of $76 million alternative minimum tax (AMT). FCX fully collected all outstanding recorded to other income (expense), net and a charge of $7 million U.S. AMT refunds of $24 million in 2021 and $244 million in 2020. to provision for income taxes), which mostly related to the Indonesia Tax Matters. In 2018, PT-FI received unfavorable disputed matters discussed above. Indonesia Tax Court decisions with respect to its appeal of capitalized mine development costs on its 2012 and 2014 corporate income tax returns. PT-FI appealed those decisions to the Indonesia Supreme Court. In 2019, the Indonesia Supreme Court 2022 Annual Report 91 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Peru Tax Matters. In 2016, the Peru parliament passed tax A summary of the activities associated with FCX’s reserve for legislation that, in part, modified the applicable tax rates established unrecognized tax benefits for the years ended December 31 follows. in its 2014 tax legislation, which progressively decreased the corporate income tax rate to 26% in 2019 and thereafter, and also increased the dividend tax rate on distributions to 9.3% in 2019 and thereafter. Under the tax legislation, which was effective January 1, 2017, the corporate income tax rate was 29.5%, and the dividend tax rate on distributions of earnings was 5%. Cerro Verde’s current mining stability agreement subjects it to a stable income tax rate of 32% through the expiration of the agreement on December 31, 2028. The tax rate on dividend distributions is not stabilized by 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 2022 $ 808 26 25 (12) (37) $ 810 2021 $ 474 330 71 (30) (37) $ 808 2020 $ 491 56 60 (82) (51) $ 474 the agreement. The total amount of accrued interest and penalties associated Chile Tax Matters. In 2014, the Chile legislature approved a with unrecognized tax benefits was $551 million at December 31, tax reform package that implemented a dual tax system, which was 2022, primarily relating to unrecognized tax benefits associated amended in 2016. Under previous rules, FCX’s share of income with cost recovery methods and royalties and other related mining from El Abra was subject to an effective 35% tax rate allocated taxes, $620 million at December 31, 2021, and $307 million at between income taxes and dividend withholding taxes. Under the December 31, 2020. amended tax reform package, El Abra is subject to the “Partially- The reserve for unrecognized tax benefits of $810 million at Integrated System,” resulting in FCX’s share of income from El Abra December 31, 2022, included $689 million ($485 million net of income being subject to progressively increasing effective tax rates of tax benefits and valuation allowances) that, if recognized, would 35% through 2019 and 44.5% in 2020 and thereafter. In 2017, the reduce FCX’s provision for income taxes. Changes in the reserve for progression of increasing tax rates was delayed by the Chile unrecognized tax benefits associated with current and prior-year legislature so that the 35% rate continued through 2021, increasing tax positions were primarily related to uncertainties associated with to 44.5% in 2022 and thereafter. In January 2020, the Chile FCX’s tax treatment of cost recovery methods and various legislature approved a tax reform package that would further delay non-deductible costs. There continues to be uncertainty related to the 44.5% rate until 2027 and thereafter. the timing of settlements with taxing authorities, but if additional In 2010, the Chile legislature approved an increase in mining settlements are agreed upon during the year 2023, FCX could royalty taxes to help fund earthquake reconstruction activities, experience a change in its reserve for unrecognized tax benefits. education and health programs. Beginning in 2018, and through 2023 FCX or its subsidiaries file income tax returns in the U.S. federal mining royalty rates at FCX’s El Abra mine are based on a sliding jurisdiction and various state and foreign jurisdictions. The tax scale of 5% to 14% (depending on a defined operational margin). years for FCX’s major tax jurisdictions that remain subject to Uncertain Tax Positions. Tax positions reflected in the examination are as follows: consolidated financial statements are based on their technical merits, more-likely-than-not to be sustained upon examination by taxing authorities or have otherwise been effectively settled. Such tax positions reflect the largest amount of benefit, determined on a cumulative probability basis, that is more-likely-than-not to be realized upon settlement with the applicable taxing authority with full knowledge of all relevant information. FCX’s policy associated with uncertain tax positions is to record accrued interest in interest expense and accrued penalties in other income (expense), net rather than in the provision for income taxes. Jurisdiction U.S. Federal Indonesia Peru Chile Years Subject to Examination Additional Open Years 2017-2018 2012-2017 — 2020-2021 2014-2016, 2019-2022 2020-2022 2017-2022 2019, 2022 NOTE 12. CONTINGENCIES 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 92 Freeport-McMoRan | The Power of Copper NOTES TO CONSOLIDATED FINANCIAL STATEMENTS the facility into the environment, including damages to natural timing of these estimated payments will change as a result of resources, in some cases irrespective of when the damage to the changes in regulatory requirements, changes in scope and timing environment occurred or who caused it. Remediation liability also of remediation activities, the settlement of environmental matters extends to persons who arranged for the disposal of hazardous and as actual spending occurs. substances or transported the hazardous substances to a disposal At December 31, 2022, FCX’s environmental obligations totaled site selected by the transporter. These liabilities are often shared $1.7 billion, including $1.6 billion recorded on a discounted basis on a joint and several basis, meaning that each responsible party is for those obligations assumed in the FMC acquisition at fair value. fully responsible for the remediation if some or all of the other FCX estimates it is reasonably possible that these obligations historical owners or operators no longer exist, do not have the could range between $3.3 billion and $4.1 billion on an undiscounted financial ability to respond or cannot be found. As a result, because and de-escalated basis. of FCX’s acquisition of FMC, many of the subsidiary companies At December 31, 2022, the most significant environmental FCX now owns are responsible for a wide variety of environmental obligations were associated with the Pinal Creek site in Arizona; remediation projects throughout the U.S., and FCX expects to the Newtown Creek site in New York City; historical smelter sites spend substantial sums annually for many years to address those principally located in Arizona, Indiana, Kansas, Missouri, New remediation issues. Certain FCX subsidiaries have been advised by Jersey, Oklahoma and Pennsylvania; and uranium mining sites in the U.S. Environmental Protection Agency (EPA), the Department the western U.S. The recorded environmental obligations for these of the Interior, the Department of Agriculture and various state sites totaled $1.5 billion at December 31, 2022. FCX may also be agencies that, under CERCLA or similar state laws and regulations, subject to litigation brought by private parties, regulators and local they may be liable for costs of responding to environmental conditions governmental authorities related to these historical sites. A at a number of sites that have been or are being investigated to discussion of these sites follows. determine whether releases of hazardous substances have occurred Pinal Creek. The Pinal Creek site was listed under the Arizona and, if so, to develop and implement remedial actions to address Department of Environmental Quality’s (ADEQ) Water Quality environmental concerns. FCX is also subject to claims where the Assurance Revolving Fund program in 1989 for contamination in release of hazardous substances is alleged to have damaged the shallow alluvial aquifers within the Pinal Creek drainage near natural resources (NRD) and to litigation by individuals allegedly Miami, Arizona. Since that time, environmental remediation has exposed to hazardous substances. As of December 31, 2022, been performed by members of the Pinal Creek Group, consisting FCX had more than 100 active remediation projects, including NRD of Freeport-McMoRan Miami Inc. (Miami), an indirect wholly claims, in 24 U.S. states. The aggregate environmental obligation owned subsidiary of FCX, and two other companies. Pursuant to a for approximately 60% of the active remediation projects totaled 2010 settlement agreement, Miami agreed to take full responsibility less than $20 million at December 31, 2022. for future groundwater remediation at the Pinal Creek site, with A summary of changes in estimated environmental obligations limited exceptions. Remediation work consisting of groundwater for the years ended December 31 follows: extraction and treatment plus source control capping is expected Balance at beginning of year Accretion expensea Additionsb Reductionsb Spending Balance at end of year Less current portion Long-term portion 2022 2021 2020 $ 1,664 110 57 (14) (77) 1,740 (125) $ 1,615 $ 1,584 104 60 (20) (64) 1,664 (64) $ 1,600 $ 1,561 102 38 (58) (59) 1,584 (83) $ 1,501 a. Represents accretion of the fair value of environmental obligations assumed in the acquisition of FMC, which were determined on a discounted cash flow basis. b. Adjustments to environmental obligations are charged to operating income. Adjustments primarily reflect revisions for changes in the anticipated scope and timing of projects and other noncash adjustments. Estimated future environmental cash payments (on an undiscounted and de-escalated basis) total $3.7 billion, including $125 million in 2023, $120 million in 2024, $93 million in 2025, $100 million in 2026, $97 million in 2027 and $3.2 billion thereafter. The amount and to continue for many years. FCX’s environmental liability balance for this site was $437 million at December 31, 2022. 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, 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 industrial uses on and around 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 companies and the City of New York that EPA considers them PRPs under CERCLA. The notified parties began working with EPA to identify other PRPs. In 2010, EPA designated the creek as a Superfund site, and in 2011, PDRC and four other companies (the Newtown Creek Group, NCG) and the City of New York entered an Administrative Order on Consent to perform a remedial investigation/feasibility study (RI/FS) to 2022 Annual Report 93 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS assess the nature and extent of environmental contamination in and could result in additional adjustments to the related the creek and identify remedial options. The NCG’s RI/FS work and environmental remediation obligation in future periods. The extent efforts to identify other PRPs are ongoing. The NCG submitted a of contamination and potential remedial actions are uncertain and final draft RI report to EPA in December 2022. The NCG expects to may take several years to evaluate. submit a draft FS report to EPA in late 2025 and currently expects FCX’s environmental liability balance for historical smelter sites, EPA to select a creek-wide remedy in 2028, with the actual including in the Borough of Carteret, New Jersey, was $268 million remediation construction starting several years later. In early 2022, at December 31, 2022. EPA asked the NCG to develop and evaluate remedial alternatives On January 30, 2017, a putative class action titled Juan Duarte, for an early action in the East Branch tributary of the creek. FCX’s Betsy Duarte and N.D., Infant, by Parents and Natural Guardians environmental liability balance for this site was $338 million at Juan Duarte and Betsy Duarte, Leroy Nobles and Betty Nobles, December 31, 2022. The final costs of fulfilling this remedial on behalf of themselves and all others similarly situated v. United obligation and the allocation of costs among PRPs are uncertain States Metals Refining Company, Freeport-McMoRan Copper & and subject to change based on the results of the RI/FS, the Gold Inc. and Amax Realty Development, Inc., Docket No. 734-17, remedy ultimately selected by EPA and related allocation was filed in the Superior Court of New Jersey against USMR, FCX, determinations. Changes to the overall cost of this remedial and Amax Realty Development, Inc. The defendants removed this obligation and the portion ultimately allocated to PDRC could be litigation to the U.S. District Court for the District of New Jersey, material to FCX. where it remains pending, and FMC was added as a defendant. Historical Smelter Sites. FCX subsidiaries and their predecessors The suit alleges that USMR generated and disposed of smelter at various times owned or operated copper, zinc and lead smelters waste at the site and allegedly released contaminants on-site and or refineries in states including Arizona, Indiana, Kansas, Missouri, off-site through discharges to surface water and air emissions New Jersey, Oklahoma and Pennsylvania. For some of these former over a period of decades and seeks unspecified compensatory and processing sites, certain FCX subsidiaries have been advised by punitive damages for economic losses, including diminished EPA or state agencies that they may be liable for costs of investigating property values, additional soil investigation and remediation and and, if appropriate, remediating environmental conditions associated other damages. In September 2022, the parties completed with these former processing facilities. At other sites, certain FCX re-briefing on the plaintiffs’ motion for class certification. The judge subsidiaries have entered into state voluntary remediation indicated in late 2022 that there likely would not be a decision on programs to investigate and, if appropriate, remediate on-site and class certification until late 2023 or 2024. In December 2022, the off-site conditions associated with the facilities. The historical parties reached an agreement in principle to settle the class action processing sites are in various stages of assessment and remediation. suit and individual claims by some property owners outside the At some of these sites, disputes with local residents and elected settlement class area. The potential settlement (if effected in officials regarding alleged health effects or the effectiveness of accordance with the agreement in principle) would not have a remediation efforts have resulted in litigation of various types, and material effect on our financial condition, results of operations or similar litigation at other sites is possible. cash flows. However, there can be no assurance that a settlement From 1920 until 1986, United States Metals Refining Company will be reached and, if an agreement among the parties is reached, (USMR), an indirect wholly owned subsidiary of FCX, owned and the implementation of a settlement would require, among other operated a copper smelter and refinery in the Borough of Carteret, things, court approval. Given the uncertainties and complexities New Jersey. Since the early 1980s, the site has been the subject involved, FCX continues to prepare for trial and intends to of environmental investigation and remediation, under the direction vigorously defend the matter. and supervision of the New Jersey Department of Environmental Uranium Mining Sites. During a period between 1940 and the Protection (NJDEP). On-site contamination is in the later stages of early 1980s, certain FCX subsidiaries and their predecessors remediation. In 2012, after receiving a request from NJDEP, USMR were involved in uranium exploration and mining in the western also began investigating and remediating off-site properties, U.S., primarily on federal and tribal lands in the Four Corners which is ongoing. As a result of off-site soil sampling in public and region of the southwest. Similar exploration and mining activities private areas near the former Carteret smelter, FCX established by other companies have also caused environmental impacts an environmental obligation for known and potential off-site warranting remediation. environmental remediation. Assessments of sediments in the In 2017, the Department of Justice, EPA, Navajo Nation, and adjacent Arthur Kill and sampling and analysis within the offsite two FCX subsidiaries reached an agreement regarding the financial area as we obtain access to residential properties are ongoing contribution of the U.S. Government and the FCX subsidiaries and the scope of the environmental investigation and remediation work 94 Freeport-McMoRan | The Power of Copper NOTES TO CONSOLIDATED FINANCIAL STATEMENTSfor 94 former uranium mining sites on tribal lands. Under the terms ARO costs may increase or decrease significantly in the future as a of the Consent Decree executed in May 2017, and approved by the result of changes in regulations, changes in engineering designs U.S. District Court for the District of Arizona, the U.S. contributed and technology, permit modifications or updates, changes in mine $335 million into a trust fund to cover the government’s initial share plans, settlements, inflation or other factors and as reclamation of the costs, and FCX’s subsidiaries are proceeding with the (concurrent with mining operations or post mining) spending environmental investigation and remediation work at the 94 sites. The occurs. ARO activities and expenditures for mining operations program is expected to take more than 20 years to complete. In 2020, generally are made over an extended period of time commencing FCX reduced its associated obligation and recorded a $47 million near the end of the mine life; however, certain reclamation credit to operating income to reflect the discounting effect of the activities may be accelerated if legally required or if determined to recent and expected pace of project work under post-COVID-19 be economically beneficial. The methods used or required to plug pandemic conditions. By letter dated September 29, 2021, EPA and abandon non-producing oil and gas wellbores; remove informed an FCX subsidiary that it does not expect to have funds platforms, tanks, production equipment and flow lines; and restore sufficient to remediate sites covered by a bankruptcy settlement wellsites could change over time. with Tronox and EPA considers a subsidiary of FCX to be potentially Financial Assurance. New Mexico, Arizona, Colorado and other liable for 23 of these sites. However, based on recently available states, as well as federal regulations governing mine operations information from EPA, it is currently considered unlikely that EPA will on federal land, require financial assurance to be provided for the deplete the available settlement dollars, at least in the near-term, estimated costs of mine reclamation and closure, including and seek additional funds from FCX. groundwater quality protection programs. FCX has satisfied FCX is also conducting site surveys of historical uranium mining financial assurance requirements by using a variety of claims associated with FCX subsidiaries on non-tribal federal lands mechanisms, primarily involving parent company performance in the Four Corners region. Under a memorandum of understanding guarantees and financial capability demonstrations, but also with the U.S. Bureau of Land Management (BLM), site surveys are including trust funds, surety bonds, letters of credit and other being performed on approximately 15,000 mining claims, ranging collateral. The applicable regulations specify financial strength tests from undisturbed claims to claims with mining features. Based on that are designed to confirm a company’s or guarantor’s financial these surveys, BLM has issued no further action determinations capability to fund estimated reclamation and closure costs. for certain undisturbed claims. A similar agreement is in place with The amount of financial assurance FCX subsidiaries are required to the U.S. Forest Service for mine features on U.S. Forest Service provide will vary with changes in laws, regulations, reclamation land. Either BLM or the U.S. Forest Service may request additional and closure requirements, and cost estimates. At December 31, assessment or remediation activities for other claims with mining 2022, FCX’s financial assurance obligations associated with these features. FCX will update this obligation when it has a sufficient U.S. mine closure and reclamation/restoration costs totaled number of remedy decisions from the BLM or the U.S. Forest Service $1.5 billion, of which $0.9 billion was in the form of guarantees to support a reasonably certain range of outcomes. FCX expects it issued by FCX and FMC. At December 31, 2022, FCX had trust will take several years to complete this work. assets totaling $0.2 billion (included in other assets), which are FCX’s environmental liability balance for the uranium mining sites legally restricted to be used to satisfy its financial assurance was $439 million at December 31, 2022. obligations for its mining properties in New Mexico. In addition, AROs. FCX’s ARO estimates are reflected on a third-party cost FCX subsidiaries have financial assurance obligations for its oil basis and are based on FCX’s legal obligation to retire tangible, and gas properties associated with plugging and abandoning wells long-lived assets. A summary of changes in FCX’s AROs for the years and facilities totaling $0.4 billion. Where oil and gas guarantees ended December 31 follows: 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 2022 $ 2,716 9 381a 134 — (197) 3,043 (195) $ 2,848 2021 $ 2,472 2 331a 112 — (201) 2,716 (200) $ 2,516 2020 $ 2,505 7 (13) 131 (2) (156) 2,472 (268) $ 2,204 a. Includes adjustments at PT-FI, Morenci and Bagdad totaling $314 million for the year 2022 and adjustments at PT-FI totaling $397 million for the year 2021, see further discussion below. 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 operations to submit closure plans for NMED’s approval. The closure plans must include measures to assure meeting applicable groundwater quality standards following the closure of discharging facilities and to abate groundwater or surface water contamination 2022 Annual Report 95 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS to meet applicable standards. FCX’s New Mexico operations also are Colorado Reclamation Programs. FCX’s Colorado operations are subject to regulation under the 1993 New Mexico Mining Act (the regulated by the Colorado Mined Land Reclamation Act Mining Act) and the related rules that are administered by the (Reclamation Act) and regulations promulgated thereunder. Under Mining and Minerals Division of the New Mexico Energy, Minerals the Reclamation Act, mines are required to obtain approval of and Natural Resources Department. Under the Mining Act, mines plans for reclamation of lands affected by mining operations to be are required to obtain approval of reclamation plans. The agencies performed during mining or upon cessation of mining operations. approved updates to the closure plan and financial assurance In March 2020, the Division of Reclamation, Mining, and Safety instruments and completed a permit renewal for Chino in 2020 and (DRMS) approved Henderson’s proposed update to its closure plan Tyrone in 2021. At December 31, 2022, FCX had accrued reclamation and closure cost estimate. and closure costs of $534 million for its New Mexico operations. In 2019, Colorado enacted legislation that requires proof of an Additional accruals may be required based on the state’s periodic end date for water treatment as a condition of permit authorizations review of FCX’s updated closure plans and any resulting permit for new mining operations and expansions beyond current permit conditions, and the amount of those accruals could be material. authorizations. While this requirement does not apply to existing Arizona Environmental and Reclamation Programs. FCX’s Arizona operations, it may lead to changes in long-term water management operations are subject to regulatory oversight by the ADEQ. ADEQ requirements at Climax and Henderson operations and AROs. has adopted regulations for its aquifer protection permit (APP) In accordance with its permit from DRMS, Climax will submit an program that require permits for, among other things, certain updated reclamation plan and cost estimate in 2024. facilities, activities and structures used for mining, leaching, As of December 31, 2022, FCX had accrued reclamation and concentrating and smelting, and require compliance with aquifer closure costs of $162 million for its Colorado operations. water quality standards during operations and closure. An Chile Reclamation and Closure Programs. El Abra is subject application for an APP requires a proposed closure strategy that to regulation under the Mine Closure Law administered by the will meet applicable groundwater protection requirements following Chile Mining and Geology Agency. In compliance with the cessation of operations and an estimate of the implementation requirement for five-year updates, in November 2018, El Abra cost, with a more detailed closure plan required at the time submitted an updated plan with closure cost estimates based on operations cease. A permit applicant must demonstrate its financial the existing approved closure plan. Approval of the updated ability to meet the closure costs approved by ADEQ. Closure costs closure plan and cost estimates was received in August 2020, for facilities covered by APPs are required to be updated every and did not result in a material increase to closure costs. At six years and financial assurance mechanisms are required to be December 31, 2022, FCX had accrued reclamation and closure updated every two years. During 2022, the Morenci and Bagdad costs of $98 million for its El Abra operation. mines increased their AROs by $118 million and $65 million, Peru Reclamation and Closure Programs. Cerro Verde is subject respectively, associated with their updated closure strategies and to regulation under the Mine Closure Law administered plans for stockpiles and tailings impoundments that were submitted by the Peru Ministry of Energy and Mines. Under the closure to ADEQ for approval. FCX will continue evaluating and, as regulations, mines must submit a closure plan that includes the necessary, updating its closure plans and closure cost estimates reclamation methods, closure cost estimates, methods of control at other Arizona sites, and any such updates may also result in and verification, closure and post-closure plans, and financial increased costs that could be significant. assurance. In compliance with the requirement for five-year updates, Portions of Arizona mining facilities that operated after January 1, Cerro Verde is preparing to submit its updated closure plan and 1986, also are subject to the Arizona Mined Land Reclamation Act cost estimate in February 2023. At December 31, 2022, FCX had (AMLRA). AMLRA requires reclamation to achieve stability and accrued reclamation and closure costs of $171 million for its safety consistent with post-mining land use objectives specified in Cerro Verde operation, which includes preliminary cost estimates a reclamation plan. Reclamation plans must be approved by the associated with Cerro Verde’s updated closure plan. State Mine Inspector and must include an estimate of the cost to Indonesia Reclamation and Closure Programs. The ultimate perform the reclamation measures specified in the plan along amount of reclamation and closure costs to be incurred at PT-FI’s with financial assurance. FCX will continue to evaluate options for operations will be determined based on applicable laws and future reclamation and closure activities at its operating and regulations and PT-FI’s assessment of appropriate remedial non-operating sites, which are likely to result in adjustments to activities under the circumstances, after consultation with FCX’s AROs, and those adjustments could be material. governmental authorities, affected local residents and other At December 31, 2022, FCX had accrued reclamation and closure affected parties and cannot currently be projected with precision. costs of $581 million for its Arizona operations. 96 Freeport-McMoRan | The Power of Copper NOTES TO CONSOLIDATED FINANCIAL STATEMENTSSome reclamation costs will be incurred during mining activities, proceedings is required. Management does not believe, based on while the remaining reclamation costs will be incurred at the end currently available information, that the outcome of any current of mining activities, which are currently estimated to continue pending legal proceeding will have a material adverse effect on through 2041. In 2021, the construction time frame for reclamation FCX’s financial condition, although individual or cumulative of the West Wanagon overburden stockpile was extended from outcomes could be material to FCX’s operating results for a 2025 to 2029 because safety constraints for working in steep particular period, depending on the nature and magnitude of the and difficult terrain have reduced labor and equipment operating outcome and the operating results for the period. efficiencies. The time frame extension resulted in longer and Louisiana Parishes Coastal Erosion Cases. Certain FCX affiliates escalating fixed costs, combined with additional anticipated were named as defendants in 13 cases filed in Louisiana state volumes of stockpile material to be moved. In 2022, estimated courts by six south Louisiana parishes (Cameron, Jefferson, costs associated with West Wanagon slope stabilization Plaquemines, St. Bernard, St. John the Baptist and Vermilion), remediation and reclamation activities increased primarily as a alleging that certain oil and gas exploration and production result of increased material needed for stockpile stabilization and operations and sulfur mining and production operations in coastal increased costs for equipment, operations and maintenance, Louisiana contaminated and damaged coastal wetlands and increased manpower/headcount allocation and contractor/consultant caused significant land loss along the Louisiana coast. The state cost impacts. As a result of these changes, ARO adjustments of of Louisiana, through the Attorney General and separately through $131 million were recorded in 2022 (of which $116 million related to the Louisiana Department of Natural Resources, intervened in the the depleted Grasberg open pit and charged to production and litigation in support of the parishes’ claims. Certain FCX affiliates delivery costs) and $397 million in 2021 (of which $340 million were named as defendants in two of the five cases that had been related to the depleted Grasberg open pit and charged to production set for trial, both originally filed on November 8, 2013: Parish of and delivery costs). At December 31, 2022, FCX had accrued Plaquemines v. ConocoPhillips Company et al., 25th Judicial reclamation and closure costs of $1.1 billion for its PT-FI operations. District Court, Plaquemines Parish, Louisiana; No. 60-982, Div. B Indonesia government regulations issued in 2010 require a and Parish of Plaquemines v. Hilcorp Energy Company et al., 25th company to provide a mine closure guarantee in the form of a time Judicial District Court, Plaquemines Parish, Louisiana; No. 60-999, deposit placed in a state-owned bank in Indonesia. At December 31, Div. B. In 2019, affiliates of FCX reached an agreement in principle 2022, PT-FI had restricted time deposits totaling $103 million for to settle all 13 cases, and as of October 2022, all parties have mine closure and reclamation guarantees. executed the settlement agreement. The settlement agreement Oil and Gas Properties. Substantially all of FM O&G’s oil and gas does not include any admission of liability by FCX or its affiliates. leases require that, upon termination of economic production, the FCX recorded a charge in 2019 for the initial payment of $15 million, working interest owners plug and abandon non-producing which FCX expects to pay in trust to later be deposited into a wellbores, remove equipment and facilities from leased acreage, newly formed Coastal Zone Recovery Fund (the Fund) if the state and restore land in accordance with applicable local, state and of Louisiana passes enabling legislation to establish the Fund federal laws. Following several sales transactions, FM O&G’s within three years of execution of the settlement agreement. Upon remaining operating areas primarily include offshore California and payment of the $15 million, the FCX affiliates will be fully released the Gulf of Mexico (GOM). As of December 31, 2022, FM O&G and dismissed from all 13 pending cases. The maximum out-of- AROs cover approximately 110 wells and 105 platforms and other pocket settlement payment will be $23.5 million, including the structures and it had accrued reclamation and closure costs of initial $15 million payment. The settlement agreement will also $328 million. require the FCX affiliates to pay into the Fund twenty annual Litigation. In addition to the material pending legal proceedings installments of $4.25 million beginning in 2023 provided the state discussed below and above under “Environmental,” we are involved of Louisiana passes the enabling legislation. The first two of periodically in ordinary routine litigation incidental to our business, those annual installments are conditioned only on the enactment some of which may result in adverse judgments, settlements, fines, of the enabling legislation within three years of execution of the penalties, injunctions or other relief. SEC regulations require us settlement agreement, but all subsequent installments are also to disclose environmental proceedings involving a governmental conditioned on the FCX affiliates receiving simultaneous authority if we reasonably believe that such proceedings may reimbursement on a dollar-for-dollar basis from the proceeds of result in monetary sanctions above a stated threshold. Pursuant to environmental credit sales generated by the Fund, resulting in the the SEC regulations, we use a threshold of $1 million for purposes $23.5 million maximum total payment obligation. of determining whether disclosure of any such environmental 2022 Annual Report 97 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Asbestos and Talc Claims. Since approximately 1990, various emergency relief from the bankruptcy court to gain access to FCX affiliates have been named as defendants in a large number of the insurance until the question of ownership and contractual lawsuits alleging personal injury from exposure to asbestos or access could be decided in an adversary proceeding before the talc allegedly contained in industrial products such as electrical bankruptcy court, which is currently on hold. wire and cable, raw materials such as paint and joint compounds, In January 2021, Imerys filed the form of a settlement and release talc-based lubricants used in rubber manufacturing or from agreement to be entered into by CAMC, Cyprus Mines, FCX, Imerys asbestos contained in buildings and facilities located at properties and the other debtors, tort claimants’ committee and future claims owned or operated by affiliates of FCX. Many of these suits involve representative in the Imerys bankruptcy. In accordance with the a large number of codefendants. Based on litigation results to date global settlement, among other things, (1) CAMC will pay a total of and facts currently known, FCX believes there is a reasonable $130 million in cash to a settlement trust in seven annual possibility that losses may have been incurred related to these installments, which will be guaranteed by FCX, and (2) CAMC and matters; however, FCX also believes that the amounts of any such Cyprus Mines and their affiliates will contribute to the settlement losses, individually or in the aggregate, are not material to its trust all rights that they have to the proceeds of certain legacy consolidated financial statements. There can be no assurance that insurance policies as well as indemnity rights they have against future developments will not alter this conclusion. Johnson & Johnson, and Imerys also obtained an injunction There has been a significant increase in the number of cases temporarily staying approximately 950 talc lawsuits against CAMC alleging the presence of asbestos contamination in talc-based and Cyprus Mines, which has been extended through July 2023. cosmetic and personal care products and in cases alleging exposure The interim stay is a component of the global settlement but there to talc products that are not alleged to be contaminated with can be no assurance that the bankruptcy court will continue to asbestos. The primary targets have been the producers of those impose the interim stay. products, but defendants in many of these cases also include talc As part of the global settlement, Cyprus Mines filed for Chapter 11 miners. Cyprus Amax Minerals Company (CAMC), an indirect bankruptcy protection in February 2021. In connection with wholly owned subsidiary of FCX, and Cyprus Mines Corporation executing the settlement and release agreement, FCX concluded (Cyprus Mines), a wholly owned subsidiary of CAMC, are among that it has a probable loss and, in 2020, recorded a $130 million those targets. Cyprus Mines was engaged in talc mining and charge to environmental obligations and shutdown costs. processing from 1964 until 1992 when it exited its talc business by Mediation to resolve open issues in the Imerys and Cyprus conveying it to a third party in two related transactions. Those Mines bankruptcy cases, including the adequacy of the global transactions involved (1) a transfer by Cyprus Mines of the assets settlement, is ongoing, and FCX expects it to continue at least of its talc business to a newly formed subsidiary that assumed through first-quarter 2023. all pre-sale and post-sale talc liabilities, subject to limited FCX’s global settlement is subject to, among other things, votes reservations, and (2) a sale of the stock of that subsidiary to the by claimants in both the Imerys and Cyprus Mines bankruptcy third party. In 2011, the third party sold that subsidiary to Imerys cases as well as bankruptcy court approvals in both cases, and Talc America (Imerys), an affiliate of Imerys S.A. In accordance there can be no assurance that the global settlement will be with the terms of the 1992 transactions and subsequent successfully implemented. FCX has a $130 million liability balance agreements, Imerys undertook the defense and indemnification at December 31, 2022, associated with the proposed settlement. of Cyprus Mines and CAMC in talc lawsuits. Tax and Other Matters. FCX’s operations are in multiple Cyprus Mines has contractual indemnification rights, subject jurisdictions where uncertainties arise in the application of complex to limited reservations, against Imerys, which historically tax regulations. Some of these tax regimes are defined by acknowledged those indemnification obligations and took contractual agreements with the local government, while others responsibility for all cases tendered to it. However, in February 2019, are defined by general tax laws and regulations. FCX and its Imerys filed for Chapter 11 bankruptcy protection, which triggered subsidiaries are subject to reviews of its income tax filings and an immediate automatic stay under the federal bankruptcy code other tax payments, and disputes can arise with the taxing prohibiting any party from continuing or initiating litigation or authorities over the interpretation of its contracts or laws. The final asserting new claims against Imerys. As a result, Imerys stopped taxes paid may be dependent upon many factors, including defending the talc lawsuits against Cyprus Mines and CAMC. negotiations with taxing authorities. In certain jurisdictions, FCX In addition, Imerys took the position that it alone owns, and has the pays a portion of the disputed amount before formally appealing an sole right to access, the proceeds of the legacy insurance coverage assessment. Such payment is recorded as a receivable if FCX of Cyprus Mines and CAMC for talc liabilities. In March 2019, believes the amount is collectible. Cyprus Mines and CAMC challenged this position and obtained 98 Freeport-McMoRan | The Power of Copper NOTES TO CONSOLIDATED FINANCIAL STATEMENTSCerro Verde Royalty Dispute. SUNAT (National Superintendency Indonesia Tax Matters. PT-FI has received assessments from the of Customs and Administration) assessed mining royalties on ore Indonesia tax authorities for additional taxes and interest related to processed by the Cerro Verde concentrator for the period from various audit exceptions for income and other taxes. PT-FI has December 2006 to December 2013. No royalty assessments were filed objections to the assessments because it believes issued for the years after 2013, as Cerro Verde began paying royalties it has properly determined and paid its taxes. Excluding surface on all of its production in January 2014 under its new 15-year stability water tax assessments discussed below and the Indonesia agreement. Cerro Verde contested each of these assessments government’s previous imposition of a 7.5% export duty that PT-FI because it believes that its 1998 stability agreement exempts paid under protest during the period April 2017 to December 21, from royalties all minerals extracted from its mining concession, 2018 (refer to Note 13), a summary of these assessments, including irrespective of the method used for processing such minerals. potential penalties follows: During 2021, Cerro Verde paid the balance of its royalty dispute liabilities and has no remaining exposure associated with the royalty dispute with the Peruvian tax authorities. On February 28, 2020, FCX filed on its own behalf and on behalf of Cerro Verde international arbitration proceedings against the Peruvian government 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. (SMM Cerro Verde), another shareholder of Cerro Verde, filed parallel international arbitration proceedings against the Peruvian government under the Netherlands-Peru Bilateral Investment Treaty. SMM Cerro Verde’s hearing on the merits took place in February 2023. No amounts have been recorded for potential gain contingencies associated with the international arbitration proceedings. 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 and paid its taxes. A summary of these assessments follows: Tax Year 2003 to 2008 2009 2010 2011 and 2012 2013 2014 to 2017 Tax Assessment Penalties and Interest $ 48 56 54 42 48 73 $ 321 $ 130 52 125 73 66 30 $ 476 Total $ 178 108 179 115 114 103 $ 797 As of December 31, 2022, Cerro Verde had paid $741 million on these disputed tax assessments. A reserve has been applied against these payments totaling $408 million, resulting in a net receivable of $333 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 $0.7 billion at December 31, 2022, of which $0.4 billion has not been charged to expense. Tax Year 2005 2007 2012 and 2013 2014 and 2015 2016 2017 Tax Assessment Penalties and Interest $ 62 45 41 108 257 7 $ 520 $ 29 22 41 — 336 2 $ 430 Total $ 91 67 82 108 593 9 $ 950 As of December 31, 2022, PT-FI had paid $193 million on these disputed tax assessments. A reserve has been applied against these payments totaling $181 million, resulting in a net receivable of $12 million (included in other assets), which PT-FI believes is collectible. PT-FI’s income tax assessments, penalties and interest included in the table above totaled $0.9 billion at December 31, 2022, of which $0.4 billion has not been charged to expense. Surface Water Taxes. PT-FI received assessments from the local regional tax authority in Central 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 disputes and charged $69 million to production and delivery costs in 2018. In 2019, PT-FI agreed to a final settlement of 1.394 trillion rupiah (approximately $99 million) and recorded an incremental charge of $28 million. PT-FI paid 708.5 billion rupiah ($50 million) in October 2019, and paid the balance of 685.5 billion rupiah ($48 million) during 2021. Withholding Tax Assessments. In January 2019, the Indonesia Supreme Court rendered an unfavorable decision related to a PT-FI 2005 withholding tax matter. PT-FI had also received an unfavorable Indonesia Supreme Court decision in November 2017. PT-FI currently has other pending cases at the Indonesia Supreme Court related to withholding taxes for employees and other service providers for the year 2005 and the year 2007, which total $42 million (based on the exchange rate as of December 31, 2022, and included in accounts payable and accrued liabilities in the consolidated balance sheet at December 31, 2022), including penalties and interest. 2022 Annual Report 99 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Smelter Development Progress. In January 2021, the Indonesia Insurance. FCX purchases a variety of insurance products to government levied an administrative fine of $149 million for the mitigate potential losses, which typically have specified deductible period from March 30, 2020, through September 30, 2020, on PT-FI amounts or self-insured retentions and policy limits. FCX generally for failing to achieve physical development progress on its is self-insured for U.S. workers’ compensation, but purchases greenfield smelter as of July 31, 2020. On January 13, 2021, PT-FI excess insurance up to statutory limits. An actuarial analysis is responded to the Indonesia government objecting to the fine performed twice a year on the various casualty insurance programs because of events outside of its control causing a delay of the covering FCX’s U.S.-based mining operations, including workers’ greenfield smelter’s development progress. PT-FI believes that its compensation, to estimate expected losses. At December 31, 2022, communications during 2020 with the Indonesia government were FCX’s liability for expected losses under these insurance programs not properly considered before the administrative fine was levied. totaled $62 million, which consisted of a current portion of $10 million In June 2021, the Indonesia government issued a ministerial (included in accounts payable and accrued liabilities) and a long- decree for the calculation of an administrative fine for lack of smelter term portion of $52 million (included in other liabilities). In addition, development in light of the COVID-19 pandemic, and in 2021, FCX has receivables of $23 million (a current portion of $5 million PT-FI recorded charges totaling $16 million for a potential settlement included in other accounts receivable and a long-term portion of of the administrative fine. In January 2022, the Indonesia government $18 million included in other assets) for expected claims associated submitted a new estimate of the administrative fine totaling with these losses to be filed with insurance carriers. $57 million, and in March 2022, PT-FI paid the administrative fine FCX’s oil and gas operations are subject to all of the risks and recorded an additional charge of $41 million. Based on PT-FI’s normally incidental to the production of oil and gas, including well revised smelter construction schedule, PT-FI does not believe blowouts, cratering, explosions, oil spills, releases of gas or well any additional fines should be applied and will dispute any fluids, fires, pollution and releases of toxic gas, each of which could attempts by the Indonesia government to levy additional fines, result in damage to or destruction of oil and gas wells, production which could be significant. facilities or other property, or injury to persons. While FCX is not fully PT-FI and PT Smelting Export Licenses. Indonesia regulations insured against all risks related to its oil and gas operations, its require PT-FI and PT Smelting to renew their export licenses insurance policies provide limited coverage for losses or liabilities annually (PT-FI’s export license for copper concentrate is subject relating to pollution, with broader coverage for sudden and to review by the Indonesia government every six months, depending accidental occurrences. FCX is self-insured for named windstorms on greenfield smelter construction progress). PT-FI’s current in the GOM. export license is scheduled for renewal in March 2023, and PT-FI is preparing its renewal application. PT Smelting’s current anodes NOTE 13. COMMITMENTS AND GUARANTEES slimes export license expires in November 2023. Leases. The components of FCX’s leases presented in the While PT-FI’s special mining license (IUPK) provides that exports consolidated balance sheets for the years ended December 31 follow: continue through 2023 (subject to force majeure considerations), recent press reports have indicated that the Indonesia government is considering a ban of copper concentrate exports effective in June 2023 under regulations that were issued in 2020 and 2021. In addition, PT Smelting exports may also be restricted (contrary to the expiration date of PT Smelting’s current export license noted above). PT-FI plans to work cooperatively with the Indonesia government to continue exports as required until the smelter is fully commissioned. Letters of Credit, Bank Guarantees and Surety Bonds. Letters of credit and bank guarantees totaled $312 million at December 31, 2022, primarily associated with environmental obligations, AROs and for copper concentrate shipments from PT-FI to Atlantic Copper as required by Indonesia regulations. In addition, FCX had surety bonds totaling $488 million at December 31, 2022, primarily associated with environmental obligations and AROs. 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)a Total lease liabilities 2022 2021 $ 342 $ 337 $ 38 294 $ 332 $ 38 281 $ 319 a. Includes a land lease by PT-FI for the greenfield smelter totaling $141 million at December 31, 2022, and $126 million at December 31, 2021. This is FCX’s only significant finance lease. Operating lease costs, primarily included in production and delivery expense in the consolidated statements of income, for the years ended December 31 follow: Operating leases Variable and short-term leases Total operating lease costs 2022 $ 46 84 $ 130 2021 $ 42 62 $ 104 2020 $ 42 74 $ 116 100 Freeport-McMoRan | The Power of Copper NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FCX payments included in operating cash flows for its lease liabilities mining rights through 2041, subject to PT-FI completing the totaled $41 million in 2022, $54 million in 2021 and $36 million in development of additional smelting capacity in Indonesia by the 2020. FCX payments included in financing cash flows for its lease end of 2023 (an extension of which has been requested as a result liabilities totaled $7 million in 2022, $25 million in 2021 and of COVID-19 mitigation measures, subject to the approval of the $4 million in 2020. As of December 31, 2022, the weighted-average Indonesia government, refer to Note 12), and fulfilling its defined discount rate used to determine the lease liabilities was 4.1% fiscal obligations to the Indonesia government. The IUPK, and (4.2% as of December 31, 2021) and the weighted-average remaining related documentation, contains legal and fiscal terms and is lease term was 12.0 years (12.4 years as of December 31, 2021). legally enforceable through 2041, assuming the additional extension The future minimum payments for leases presented in the is received. In addition, FCX, as a foreign investor, has rights to consolidated balance sheet at December 31, 2022, follow: resolve investment disputes with the Indonesia government through 2023 2024 2025 2026 2027 Thereafter Total payments Less amount representing interest Present value of net minimum lease payments Less current portion Long-term portion $ 48 85 34 29 24 186 406 (74) 332 (38) $ 294 international arbitration. The key fiscal terms set forth in the IUPK include a 25% corporate income tax rate, a 10% profits tax on net income, and royalty rates of 4% for copper, 3.75% for gold and 3.25% for silver. PT-FI’s royalties charged against revenues totaled $357 million in 2022, $319 million in 2021 and $160 million in 2020. Dividend distributions from PT-FI to FCX totaled $2.5 billion in 2022 and $1.0 billion in 2021 and are subject to a 10% withholding tax. There were no dividend distributions from PT-FI to FCX in 2020. The IUPK requires PT-FI to pay export duties of 5%, declining to 2.5% when smelter development progress exceeds 30% and Contractual Obligations. At December 31, 2022, based on applicable eliminated when development progress for additional smelting prices on that date, FCX has unconditional purchase obligations capacity in Indonesia exceeds 50%. In December 2022, PT-FI (including take-or-pay contracts with terms less than one year) received approval, based on construction progress achieved, for a of $4.8 billion, primarily comprising the procurement of copper reduction in export duties from 5% to 2.5%, which was effective concentrate ($3.6 billion), transportation services ($0.5 billion) and immediately. At December 31, 2022, construction of the greenfield electricity ($0.3 billion). Some of FCX’s unconditional purchase smelter was approximately 50% complete. PT-FI’s export duties obligations are settled based on the prevailing market rate for the totaled $325 million in 2022, $218 million in 2021 and $92 million in service or commodity purchased. In some cases, the amount 2020. Upon receiving verification and approval from the Indonesia of the actual obligation may change over time because of market government that construction progress has exceeded 50%, PT-FI conditions. Obligations for copper concentrate provide for expects export duties may be eliminated. deliveries of specified volumes to Atlantic Copper at market-based Beginning in 2019, the IUPK also requires PT-FI to pay surface prices. Transportation obligations are primarily for South America water taxes of $15 million annually, which are recognized in contracted ocean freight. Electricity obligations are primarily production and delivery costs. for long-term power purchase agreements in North America and In connection with a memorandum of understanding previously contractual minimum demand at the South America mines. entered into with the Indonesia government in July 2014, PT-FI FCX’s unconditional purchase obligations total $1.6 billion in provided an assurance bond to support its commitment to construct 2023, $1.5 billion in 2024, $1.0 billion in 2025, $0.3 billion in 2026, a greenfield smelter in Indonesia ($133 million based on exchange $0.1 billion in 2027 and $0.3 billion thereafter. During the three- rate as of December 31, 2022). year period ended December 31, 2022, FCX fulfilled its minimum Chiyoda Contract. In July 2021, PT-FI awarded a construction contractual purchase obligations. contract to Chiyoda for the construction of a greenfield smelter in IUPK—Indonesia. In December 2018, FCX completed the 2018 Gresik, Indonesia with an estimated contract cost of $2.8 billion. Transaction with the Indonesia government regarding PT-FI’s The smelter is expected to be commissioned during 2024. long-term mining rights and share ownership. Concurrent with the Indemnification. The PT-FI divestment agreement, discussed in closing of the 2018 Transaction, the Indonesia government granted Note 3, provides that FCX will indemnify MIND ID and PTI from any PT-FI an IUPK to replace its former Contract of Work, enabling losses (reduced by receipts) arising from any tax disputes of PT-FI PT-FI to conduct operations in the Grasberg minerals district disclosed to MIND ID in a Jakarta, Indonesia tax court letter limited through 2041. Under the terms of the IUPK, PT-FI was granted an to PTI’s respective percentage share at the time the loss is finally extension of mining rights through 2031, with rights to extend incurred. Any net obligations arising from any tax settlement would be paid on December 21, 2025. FCX had accrued $74 million as of 2022 Annual Report 101 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2022, and $78 million as of December 31, 2021, sale that would otherwise have been transferred to the party at (included in other liabilities in the consolidated balance sheets) closing. These indemnity provisions generally now require FCX to related to this indemnification. indemnify the party against certain liabilities that may arise in the Community Development Programs. FCX has adopted policies future from the pre-closing activities of FMC for assets sold or that govern its working and engagement relationships with the purchased. The indemnity classifications include environmental, communities where it operates. These policies are designed to tax and certain operating liabilities, claims or litigation existing at guide FCX’s practices and programs in a manner that respects and closing and various excluded liabilities or obligations. Most of these promotes basic human rights and the culture of the local people indemnity obligations arise from transactions that closed many impacted by FCX’s operations. FCX continues to make significant years ago, and given the nature of these indemnity obligations, it is expenditures on community development, education, health, not possible to estimate the maximum potential exposure. Except training, and cultural programs. as described in the following sentence, FCX does not consider any PT-FI provides funding and technical assistance to support of such obligations as having a probable likelihood of payment various community development programs in areas such as health, that is reasonably estimable, and accordingly, has not recorded any education, economic development and local infrastructure. In obligations associated with these indemnities. With respect to 1996, PT-FI established a social investment fund with the aim of FCX’s environmental indemnity obligations, any expected costs contributing to social and economic development in the Mimika from these guarantees are accrued when potential environmental Regency. Prior to 2019, the fund was mainly managed by the obligations are considered by management to be probable and the Amungme and Kamoro Community Development Organization, a costs can be reasonably estimated. community-led institution. In 2019, a new foundation, the Amungme and Kamoro Community Empowerment Foundation (Yayasan NOTE 14. FINANCIAL INSTRUMENTS Pemberdayaan Masyarakat Amungme dan Kamoro, or YPMAK) was FCX does not purchase, hold or sell derivative financial instruments established, and in 2020, PT-FI appointed YPMAK to assist in unless there is an existing asset or obligation, or it anticipates a distributing a significant portion of PT-FI’s funding to support the future activity that is likely to occur and will result in exposure to development and empowerment of the local indigenous Papuan market risks, which FCX intends to offset or mitigate. FCX does not people. YPMAK is governed by a Board of Governors consisting of enter into any derivative financial instruments for speculative seven representatives, including four from PT-FI. purposes, but has entered into derivative financial instruments in In addition, since 2001, PT-FI has voluntarily established and limited instances to achieve specific objectives. These objectives contributed to land rights trust funds administered by Amungme and principally relate to managing risks associated with commodity Kamoro representatives that focus on socioeconomic initiatives, price changes, foreign currency exchange rates and interest rates. human rights and environmental issues. Commodity Contracts. From time to time, FCX has entered PT-FI is committed to the continued funding of YPMAK programs into derivative contracts to hedge the market risk associated with and the land rights trust funds, as well as for other local-community fluctuations in the prices of commodities it purchases and sells. development initiatives through 2041 and has made and expects to Derivative financial instruments used by FCX to manage its risks do continue making annual investments in public health, education and not contain credit risk-related contingent provisions. local economic development. PT-FI recorded charges totaling In April 2020, FCX entered into forward sales contracts for $123 million in 2022, $109 million in 2021 and $67 million in 2020 to 150 million pounds of copper for settlement in May and June of cost of sales for social and economic development programs. 2020. The forward sales provided for fixed pricing of $2.34 per Guarantees. FCX provides certain financial guarantees (including pound of copper on approximately 60% of North America’s sales indirect guarantees of the indebtedness of others) and indemnities. volumes for May and June 2020. These contracts resulted in Prior to its acquisition by FCX, FMC and its subsidiaries have, hedging losses totaling $24 million for the year ended December 31, as part of merger, acquisition, divestiture and other transactions, 2020. There were no remaining forward sales contracts after from time to time, indemnified certain sellers, buyers or other June 30, 2020. parties related to the transaction from and against certain liabilities A discussion of FCX’s other derivative contracts and associated with conditions in existence (or claims associated with programs follows. actions taken) prior to the closing date of the transaction. As part of these transactions, FMC indemnified the counterparty from and against certain excluded or retained liabilities existing at the time of 102 Freeport-McMoRan | The Power of Copper NOTES TO CONSOLIDATED FINANCIAL STATEMENTS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 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 of the COMEX average copper price in the month of shipment. FCX under contracts that provide for provisional pricing. Mark-to-market hedges this price exposure in a manner that allows it to receive the price fluctuations from these embedded derivatives are recorded COMEX average price in the month of shipment while the customers through the settlement date and are reflected in revenues for sales pay the fixed price they requested. FCX accomplishes this by contracts and in inventory for purchase contracts. entering into copper futures or swap contracts. Hedging gains or A summary of FCX’s embedded derivatives at December 31, losses from these copper futures and swap contracts are recorded 2022, follows: in revenues. FCX did not have any significant gains or losses resulting from hedge ineffectiveness during the years ended December 31, 2022, 2021 and 2020. At December 31, 2022, FCX held copper futures and swap contracts that qualified for hedge accounting for 82 million pounds at an average contract price of $3.80 per pound, with maturities through May 2024. A summary of (losses) gains recognized in revenues for derivative financial instruments related to commodity contracts that are designated and qualify as fair value hedge transactions, including on the related hedged item for the years ended December 31 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: 861 240 $ 3.62 1,769 $ 3.80 1,823 June 2023 April 2023 Copper (millions of pounds) 180 3.59 3.80 April 2023 Copper Forward Contracts. Atlantic Copper, FCX’s wholly owned smelting and refining unit in Spain, enters into copper forward 2022 2021 2020 contracts designed to hedge its copper price risk whenever its Copper futures and swap contracts: Unrealized (losses) gains: Derivative financial instruments Hedged item—firm sales commitments $ (11) 11 $ (4) 4 $ 9 (9) Realized (losses) gains: physical purchases and sales pricing periods do not match. These economic hedge transactions are intended to hedge against changes in copper prices, with the mark-to-market hedging gains or losses recorded in production and delivery costs. At December Matured derivative financial instruments (63) 65 22 31, 2022, Atlantic Copper held net copper forward purchase Derivatives Not Designated as Hedging Instruments contracts for 6 million pounds at an average contract price of $3.82 per pound, with maturities through February 2023. Embedded Derivatives. Certain FCX concentrate, copper cathode Summary of (Losses) Gains. A summary of the realized and and gold sales contracts provide for provisional pricing primarily unrealized (losses) gains recognized in operating income for based on the LME copper price or the COMEX copper price and commodity contracts that do not qualify as hedge transactions, the London gold price at the time of shipment as specified in the including embedded derivatives, for the years ended December 31 contract. FCX receives market prices based on prices in the follows: specified future month, which results in price fluctuations recorded in revenues until the date of settlement. FCX records revenues and invoices customers at the time of shipment based on then-current Embedded derivatives in provisional 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 sales contracts:a Copper Gold and other Copper forward contractsb contract is the sale of the metals contained in the concentrate or a. Amounts recorded in revenues. 2022 2021 2020 $ (479) (12) 37 $ 425 (2) (15) $ 259 45 3 cathode at the then-current LME or COMEX copper price and the b. Amounts recorded in cost of sales as production and delivery costs. 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 2022 Annual Report 103 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Unsettled Derivative Financial Instruments Credit Risk. FCX is exposed to credit loss when financial institutions A summary of the fair values of unsettled commodity derivative with which it has entered into derivative transactions (commodity, financial instruments follows: foreign exchange and interest rate swaps) are unable to pay. To minimize the risk of such losses, FCX uses counterparties that meet December 31, 2022 2021 certain credit requirements and periodically reviews the creditworthiness of these counterparties. As of December 31, 2022, the maximum amount of credit exposure associated with derivative transactions was $170 million. Other Financial Instruments. Other financial instruments include cash, cash equivalents, restricted cash and cash equivalents, accounts receivable, investment securities, legally restricted trust assets, accounts payable and accrued liabilities, accrued income taxes, dividends payable and debt. The carrying value for these financial instruments classified as current assets or liabilities approximates fair value because of their short-term nature and generally negligible credit losses (refer to Note 15 for the fair values of investment securities, legally restricted funds and debt). In addition, as of December 31, 2022, 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 2021, PT-FI entered into agreements to sell certain trade accounts receivables to unrelated third-party financial institutions. The agreements were entered into in the normal course of business to fund the working capital for the additional quantity of copper to be supplied by PT-FI to PT Smelting. The balances sold under the agreements were excluded from trade accounts receivable on the consolidated balance sheets at December 31, 2022 and 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 $444 million in 2022 and $431 million in 2021. Discounts on the sold receivables totaled $4 million in 2022 and $2 million in 2021. As a result of the new tolling arrangements discussed in Note 3, no additional receivables will be sold under these agreements beginning in 2023. Commodity Derivative Assets: Derivatives designated as hedging instruments: Copper futures and swap contracts $ 3 $ 12 Derivatives not designated as hedging instruments: Embedded derivatives in provisional sales/ purchase contracts Copper forward contracts Total derivative assets 166 1 $ 170 64 1 $ 77 Commodity Derivative Liabilities: Derivatives designated as hedging instruments: Copper futures and swap contracts $ 3 $ — Derivatives not designated as hedging instruments: Embedded derivatives in provisional sales/ purchase contracts Copper forward contracts Total derivative liabilities 39 — $ 42 27 1 $ 28 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 contracts are netted with the corresponding outstanding receivable/ payable balances. A summary of these unsettled commodity contracts that are offset in the balance sheet follows: 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 Other liabilities Assets 2022 2021 Liabilities 2021 2022 $ 166 4 170 $ 64 13 77 $ 39 3 42 $ 27 1 28 — — — 3 1 4 — — — 3 1 4 166 4 $ 170 $ 163 4 3 — $ 170 61 12 $ 73 $ 51 12 10 — $ 73 39 3 $ 42 $ 7 — 34 1 $ 42 24 — $ 24 $ 14 — 10 — $ 24 104 Freeport-McMoRan | The Power of Copper NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Cash, Cash Equivalents, Restricted Cash and Restricted Cash NOTE 15. FAIR VALUE MEASUREMENT 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: Fair value accounting guidance includes a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices December 31, 2022 2021 in active markets for identical assets or liabilities (Level 1) and the $ 8,146b $ 8,068 any significant transfers in or out of Level 3 for 2022. lowest priority to unobservable inputs (Level 3). FCX did not have Balance sheet components: Cash and cash equivalentsa Restricted cash and restricted cash equivalents included in: Other current assets Other assets Total cash, cash equivalents, restricted cash and restricted cash equivalents presented in the consolidated statements of cash flows 111 133 114 132 $ 8,390 $ 8,314 a. Includes time deposits of $0.5 billion at December 31, 2022, and $0.2 billion at December 31, 2021. b. Includes $1.8 billion of cash designated for smelter development projects related to PT-FI’s April 2022 senior notes offering. 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 mortgage-backed securities Government bonds and notes Corporate bonds Asset-backed securities Money market funds Collateralized mortgage-backed securities Total Derivatives:c Embedded derivatives in provisional sales/purchase contracts in a gross asset position Copper futures and swap contracts Copper forward contracts 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 futures and swap contracts Total Long-term debt, including current portiond FCX’s financial instruments are recorded on the consolidated balance sheets at fair value except for contingent consideration associated with the sale of the Deepwater GOM oil and gas properties (which was recorded under the loss recovery approach) and debt. A summary of the carrying amount and fair value of FCX’s financial instruments (including those measured at NAV as a practical expedient), other than cash and cash equivalents, restricted cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, accrued income taxes and dividends payable (refer to Note 14) follows: At December 31, 2022 Carrying Amount Total NAV Fair Value Level 1 Level 2 Level 3 $ 25 7 32 $ 25 7 32 56 37 34 31 17 3 3 181 166 3 1 170 67 39 3 42 56 37 34 31 17 3 3 181 166 3 1 170 39 3 42 10,620 10,097 $ 25 — 25 56 — — — — — — 56 — — — — — — — — 57 — $ — 7 7 $ — — — $ — — — — — — — — 3 — 3 — 3 1 4 — — — — — — 37 34 31 17 — 3 122 166 — — 166 — 39 3 42 10,097 — — — — — — — — — — — — 57 — — — — 2022 Annual Report 105 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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:c Embedded derivatives in provisional sales/purchase contracts in a gross asset position Copper futures and swap contracts Copper forward contracts 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 At December 31, 2021 Carrying Amount 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 90 27 1 28 9,450 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 — — — — — 8 — 8 — 9 1 10 — — 1 1 — $ — — — — 53 45 20 18 — 1 137 64 3 — 67 — 27 — 27 10,630 $ — — — — — — — — — — — — — — — 81 — — — — 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 $118 million at December 31, 2022, and $114 million at December 31, 2021, and (ii) other assets of $133 million at December 31, 2022, and $132 million at December 31, 2021, 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. 106 Freeport-McMoRan | The Power of Copper NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Valuation Techniques. The U.S. core fixed income fund is valued at as future cash flows are realized from a third-party production NAV. The fund strategy seeks total return consisting of income handling agreement for an offshore platform, with the related and capital appreciation primarily by investing in a broad range of payments commencing in third-quarter 2018. The contingent investment-grade debt securities, including U.S. government consideration included in (i) other current assets totaled $20 million obligations, corporate bonds, mortgage-backed securities, asset- at December 31, 2022 and 2021, and (ii) other assets totaled backed securities and money market instruments. There are no $47 million at December 31, 2022, and $70 million at December 31, restrictions on redemptions (which are usually within one business 2021. The fair value of this contingent consideration was calculated day of notice). based on a discounted cash flow model using inputs that include Equity securities are valued at the closing price reported on the third-party estimates for reserves, production rates and production active market on which the individual securities are traded and, timing, and discount rates. Because significant inputs are not as such, are classified within Level 1 of the fair value hierarchy. observable in the market, the contingent consideration is classified Fixed income securities (government mortgage-backed within Level 3 of the fair value hierarchy. securities, government securities, corporate bonds, asset-backed Long-term debt, including current portion, is primarily valued securities, collateralized mortgage-backed securities and municipal using available market quotes and, as such, is classified within bonds) are valued using a bid-evaluation price or a mid-evaluation Level 2 of the fair value hierarchy. price. These evaluations are based on quoted prices, if available, or The techniques described above may produce a fair value that models that use observable inputs and, as such, are classified may not be indicative of NRV or reflective of future fair values. within Level 2 of the fair value hierarchy. Furthermore, while FCX believes its valuation techniques are Money market funds are classified within Level 1 of the fair value appropriate and consistent with other market participants, the use hierarchy because they are valued using quoted market prices in of different techniques or assumptions to determine fair value of active markets. certain financial instruments could result in a different fair value FCX’s embedded derivatives on provisional copper concentrate, measurement at the reporting date. There have been no changes in copper cathode and gold purchases and sales are valued using the techniques used at December 31, 2022, as compared to those only quoted monthly LME or COMEX copper forward prices and techniques used at December 31, 2021. the adjusted London gold prices at each reporting date based on A summary of the changes in the fair value of FCX’s Level 3 the month of maturity (refer to Note 14 for further discussion); instrument, contingent consideration for the sale of the however, FCX’s contracts themselves are not traded on an exchange. Deepwater GOM oil and gas properties, for the years ended As a result, these derivatives are classified within Level 2 of the fair December 31 follows: Balance at beginning of year Net unrealized (losses) gains related to assets still held at the end of the year Settlements Balance at end of year 2022 $ 81 (1) (23) $ 57 2021 $ 88 12 (19) $ 81 2020 $ 108 (6) (14) $ 88 value hierarchy. 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 2022 Annual Report 107 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 16. BUSINESS SEGMENT INFORMATION Years Ended December 31, 2022 2021 2020 Product Revenues. FCX’s revenues attributable to the products it sold for the years ended December 31 follow: Copper: Concentrate Cathode Rod and other refined copper products Purchased coppera Gold Molybdenum Otherb Adjustments to revenues: Treatment charges Royalty expensec PT-FI export duties Revenues from contracts with customers Embedded derivativese Total consolidated revenues 2022 2021 2020 $ 9,650 5,134 3,699 481 3,397 1,416 688 (503) (366) (325)d 23,271 (491) $ 22,780 $ 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 a. FCX purchases copper cathode primarily for processing by its Rod & Refining operations. b. Primarily includes revenues associated with silver and, prior to 2022, cobalt. c. Reflects royalties on sales from PT-FI and Cerro Verde that will vary with the volume of metal sold and prices. d. Includes a charge of $18 million associated with an adjustment to prior-period export duties. e. Refer to Note 14 for discussion of embedded derivatives related to FCX’s provisionally priced concentrate and cathode sales contracts. Geographic Area. Information concerning financial data by geographic area follows: Revenues:a U.S. Indonesia Switzerland Japan Singapore Spain China Germany Chile United Kingdom India South Korea Philippines Other Total $ 7,339 3,026 2,740 2,462 1,492 1,174 929 632 383 355 330 302 249 1,367 $ 22,780 $ 7,168 3,132 3,682 2,372 156 1,495 1,044 469 343 659 207 270 264 1,584 $ 22,845 $ 5,248 1,760 2,032 1,205 191 785 692 248 221 491 152 89 34 1,050 $ 14,198 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 13% of FCX’s consolidated revenues in 2022, 14% in 2021 and 12% in 2020, and they are the only customer that accounted for 10% or more of FCX’s annual consolidated revenues during the three years ended December 31, 2022. Consolidated revenues include sales to the noncontrolling interest owners of FCX’s South America mining operations totaling $1.7 billion in 2022, $1.4 billion in 2021 and $0.9 billion in 2020, and PT-FI’s sales to PT Smelting totaling $3.0 billion in 2022, $3.1 billion December 31, Long-lived assets:a Indonesia U.S. Peru Chile Other Total 2022 2021 in 2021 and $1.8 billion in 2020. $ 18,121 8,801 6,727 1,103 309 $ 35,061 $ 16,288 8,292 6,827 1,110 261 $ 32,778 Labor Matters. As of December 31, 2022, approximately 30% of FCX’s global labor force was covered by collective bargaining agreements, and approximately 2% was covered by agreements that will or were scheduled to expire during 2023 or that had expired as of December 31, 2022, and continue to be negotiated. In February 2022, PT-FI completed negotiations with its unions on a two-year collective bargaining agreement that is effective through a. Excludes deferred tax assets and intangible assets. 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 arms-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. 108 Freeport-McMoRan | The Power of Copper NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 39.5% of PT-FI’s sales to PT Smelting (25.0% prior to April 30, addition to copper, the Cerro Verde mine also produces molybdenum 2021) until final sales to third parties occur. Quarterly variations in concentrate and silver. During 2022, the Cerro Verde mine ore grades, the timing of intercompany shipments and changes produced 83% of FCX’s South America copper and 23% of FCX’s in product prices result in variability in FCX’s net deferred profits consolidated copper production. and quarterly earnings. Indonesia Mining. Indonesia mining includes PT-FI’s Grasberg Beginning in 2023, PT-FI’s commercial arrangement with minerals district that produces copper concentrate that contains PT Smelting converted to a tolling arrangement. Under this significant quantities of gold and silver. During 2022, PT-FI’s arrangement, PT-FI pays PT Smelting a tolling fee to smelt and Grasberg minerals district produced 37% of FCX’s consolidated refine its concentrate and will retain title to all products for sale to third copper production and 99% of FCX’s consolidated gold production. parties (i.e., there are no further sales from PT-FI to PT Smelting). Molybdenum Mines. Molybdenum mines include the wholly FCX allocates certain operating costs, expenses and capital owned Henderson underground mine and Climax open-pit mine, expenditures to its operating divisions and individual segments. both in Colorado. The Henderson and Climax mines produce However, not all costs and expenses applicable to an operation are high-purity, chemical-grade molybdenum concentrate, which is allocated. U.S. federal and state income taxes are recorded and typically further processed into value-added molybdenum managed at the corporate level (included in Corporate, Other & chemical products. Eliminations), whereas foreign income taxes are recorded and Rod & Refining. The Rod & Refining segment consists of copper managed at the applicable country level. In addition, most mining conversion facilities located in North America, and includes a exploration and research activities are managed on a consolidated refinery and two rod mills, which are combined in accordance with basis, and those costs, along with some selling, general and segment reporting aggregation guidance. These operations administrative costs, are not allocated to the operating divisions or process copper produced at FCX’s North America copper mines individual segments. Accordingly, the following Financial Information and purchased copper into copper cathode and rod. At times these by Business Segment reflects management determinations that operations refine copper and produce copper rod for customers may not be indicative of what the actual financial performance of on a toll basis. Toll arrangements require the tolling customer to each operating division or segment would be if it was an deliver appropriate copper-bearing material to FCX’s facilities independent entity. for processing into a product that is returned to the customer, who North America Copper Mines. FCX operates seven open-pit pays FCX for processing its material into the specified products. copper mines in North America—Morenci, Safford (including Atlantic Copper Smelting & Refining. Atlantic Copper smelts and Lone Star), Bagdad, Sierrita and Miami in Arizona, and Chino and refines copper concentrate and markets refined copper and Tyrone in New Mexico. The North America copper mines include precious metals in slimes. During 2022, Atlantic Copper purchased open-pit mining, sulfide-ore concentrating, leaching and SX/EW 7% of its concentrate requirements from FCX’s North America operations. A majority of the copper produced at the North America copper mines, 10% from FCX’s South America mining operations copper mines is cast into copper rod by FCX’s Rod & Refining and 18% from FCX’s Indonesia mining operations, with the segment. In addition to copper, certain of FCX’s North America copper remainder purchased from unaffiliated third parties. mines also produce molybdenum concentrate, gold and silver. Corporate, Other & Eliminations. Corporate, Other & Eliminations The Morenci open-pit mine, located in southeastern Arizona, consists of FCX’s other mining, oil and gas operations and other produces copper cathode and copper concentrate. In addition to corporate and elimination items, which include the Miami smelter, copper, the Morenci mine also produces molybdenum concentrate. Freeport Cobalt (until its sale in September 2021), molybdenum During 2022, the Morenci mine produced 43% of FCX’s North conversion facilities in the U.S. and Europe, the greenfield smelter America copper and 15% of FCX’s consolidated copper production. and PMR in Indonesia, certain non-operating copper mines in North South America Mining. South America mining includes two America (Ajo, Bisbee and Tohono in Arizona) and other mining operating copper mines—Cerro Verde in Peru and El Abra in Chile. support entities. These operations include open-pit mining, sulfide-ore concentrating, leaching and SX/EW operations. 2022 Annual Report 109 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL INFORMATION BY BUSINESS SEGMENT Year Ended December 31, 2022 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, 2022 Capital expenditures North America Copper Mines South America Mining Morenci Other Total Cerro Verde Other Total Indonesia Molybdenum Mining Mines Atlantic Copper Smelting Rod & Refining & Refining Corporate, Other & Eliminations FCX Total $ 175 2,514 1,542 177 8 2 — (5) — 965 1 — 3,052 263 $ 253 3,768 2,819 233 8 3 1 1 — 956 1 — 5,552 334 $ 428 6,282 4,361 410 16 5 1 (4) — 1,921 2 — 8,604 597 $ 3,444 506 2,359 357 10 8 — — — 1,216 15 461 8,398 164 $ 768 — 702 51 3 — — — — 12 $ 4,212 506 3,061 408 13 8 — — — 1,228 $ 8,028a $ — 565 398 2,684c 359 74 1,025 — — — 117 — — — — — — 132 4,600 $ 6,281 $ 2,439 4 31 2,452d 6,330 27 5 — — 25 — — — — — — — (61) (23) $ 1,392b (7,786) (6,206) 70 — 265 114 125 (2) (760) — (8) 1,873 140 15 453 10,271 304 40 1,820 20,639 1,575 — — 1,697 33 — — 183 9 15 (1) 1,262 76 488 (5) 8,437 875e $ 22,780 — 13,041 2,019 29 420 115 121 (2) 7,037 560 2,267 51,093 3,469 a. Includes sales to PT Smelting totaling $3.0 billion. 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 charges totaling $116 million associated with an unfavorable ARO change. Refer to Note 12 for further discussion. d. Includes maintenance charges and idle facility costs associated with major maintenance turnarounds totaling $41 million. e. Primarily includes capital expenditures for the Indonesia smelter projects. 110 Freeport-McMoRan | The Power of Copper NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL INFORMATION BY BUSINESS SEGMENT (continued) 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 2,000c 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 $ 7,241a 282 2,425d 1,049 — 111 — — — 3,938 48 1,524g 18,971 1,296 $ — 444 253 67 1 — — — — 123 — — 1,713 6 $ 6,356 29 6,381 5 — — — — — (1) — — 228 2 $ 2,961 — 2,907 28 — 24 — — (19) 21 6 — 1,318 34 $ 1,569b (7,778) (5,840)e 67 2 236 54 92 (61)f (759) 519 (45) 7,261 273h $ 22,845 — 12,016 1,998 16 383 55 91 (80) 8,366 602 2,299 48,022 2,115 a. Includes sales to PT Smelting totaling $3.1 billion. 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 nonrecurring charges totaling $92 million associated with labor-related costs at Cerro Verde for agreements reached with its hourly employees. d. Includes charges totaling $340 million associated with an unfavorable ARO change. Refer to Note 12 for further discussion. e. Includes charges associated with the major maintenance turnaround at the Miami smelter totaling $87 million. f. g. 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. h. Primarily includes capital expenditures for the Indonesia smelter projects. 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. 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 $ 431 — 242 379 1,599 54 367 3 — — 6 — — — — — — 552e (5) 139 238 8,474 141 — 1 1,678 42 $ 2,713 242 1,978 421 3 6 — — — 547 139 239 10,152 183 $ 3,534a 80 1,606 580 — 108 — — — 1,320 39f 606 16,918 1,161 $ — 222 230 57 10 — — — — (75) — — 1,760 19 $ 4,781 33 4,819 16 3 — — 1 — (25)e — — 211 6 $ 2,020 17 1,962 29 — 21 — — — 25 6 2 877 29 $ 1,073b (4,881) (3,664) 70 28 231 48 159c (473)d (207)e 412 97g 4,489 135h $ 14,198 — 10,031 1,528 96 370 50 159 (473) 2,437e 598 944 42,144 1,961 a. Includes sales to PT Smelting totaling $1.8 billion. 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 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. d. 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. e. 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). Includes charges totaling $35 million associated with PT-FI’s historical contested tax audits. Refer to Note 12 for further discussion. f. g. 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. h. Primarily includes capital expenditures for the Indonesia smelter projects. 2022 Annual Report 111 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Estimated recoverable proven and probable mineral reserves at December 31, 2022, were determined using metals price assumptions of $3.00 per pound for copper, $1,500 per ounce for gold and $12 per pound for molybdenum. For the three-year period ended December 31, 2022, LME copper settlement prices averaged $3.67 per pound, London PM gold prices averaged $1,789 per ounce and the weekly average price for molybdenum quoted by Platts Metals Daily averaged $14.44 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, 2022 Gold (million ounces) Coppera (billion pounds) Molybdenum (billion pounds) North America South America Indonesiab Consolidated basisc Net equity interestb,d 48.6 31.7 30.8 111.0 80.4 0.6 — 26.3 26.9 13.5 2.83 0.70 — 3.53 3.20 Note: Totals may not foot because of rounding. a. Estimated consolidated recoverable copper reserves included 1.8 billion pounds in leach stockpiles 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 46% of its proven and probable recoverable mineral reserves at December 31, 2022, representing 49% of FCX’s net equity share of recoverable copper reserves and 51% 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 340 million ounces of silver, which were determined using $20 per ounce. d. 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). Excluded from the table above were FCX’s estimated recoverable proven and probable mineral reserves of 226 million ounces of silver. NOTE 17. SUPPLEMENTARY MINERAL RESERVE INFORMATION (UNAUDITED) Recoverable proven and probable mineral reserves as of December 31, 2022, 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 cases, a measured mineral resource. The qualified person’s level 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. 112 Freeport-McMoRan | The Power of Copper NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Estimated Recoverable Proven and Probable Mineral Reserves at December 31, 2022 Orea (million metric tons) Average Ore Grade Per Metric Tona FCX’s Interest FCX’s Interest 100% Basis Copper (%) Gold (grams) Molybdenum (%) 72% 100% 100% 100% 100% 100% 100% 100% 100% 3,525 2,735 2,637 1,071 319 151 51 91 — 4,895 2,735 2,637 1,071 319 151 51 91 — 0.23 0.22 0.33 0.40 0.44 — — 0.17 — — —c —c — 0.04 — — — — 53.56% 51.00% 2,268 368 4,235 722 0.35 0.42 — — 48.76% 48.76% 48.76% 48.76% 395 186 24 186 1.10 0.75 2.27 0.75 0.62 0.95 0.99 0.88 810 382 49 381 18,528 17,158 14,007 0.01 0.02 0.02 — — 0.14 0.16 — — 0.01 — — — — — Recoverable Proven and Probable Reservesb Copper (billion pounds) Gold Molybdenum (million ounces) (billion pounds) 15.7 11.1 16.2 7.0 2.6 — — 0.3 0.1 — 0.1 0.2 — 0.3 — — — — 0.29 1.10 0.91 — — 0.45 0.16 — — 28.0 3.6 — — 0.70 — 16.5 5.4 2.2 6.8 115.4 111.0 80.4 12.9 5.9 1.0 6.5 26.9 26.9 13.5 — — — — 3.61 3.53 3.20 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% basis Consolidated basise FCX’s net equity interest f Note: Totals may not foot because of rounding. 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. Consolidated mineral reserves represent estimated metal quantities after reduction for Morenci’s joint venture partner interests (refer to Note 3 for further discussion). f. 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). 2022 Annual Report 113 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 mining sub-industry. This comparison assumes $100 invested on total return of the S&P 500 Stock Index and the S&P Metals and December 31, 2017, in (a) Freeport-McMoRan Inc. common stock, Mining Select Industry Index from 2018 through 2022. 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 $250 $200 $150 $100 $50 $0 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 Freeport-McMoRan Inc. S&P 500 Stock Index December 31, 2017 2018 2019 2020 2021 2022 $ 100.00 $ 54.90 $ 71 .11 $ 141.57 $ 228.47 $ 211.71 100.00 95.62 125.72 148.85 191.58 156.89 S&P Metals and Mining Select Industry Index 100.00 73.95 84.91 98.87 133.95 151.98 114 Freeport-McMoRan | The Power of Copper 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 150 Royall Street, Suite 101 Canton, MA 02021 Telephone 800.953.2493 https://www-us.computershare.com/investor/contact NOTICE OF ANNUAL MEETING The annual meeting of stockholders will be held June 6, 2023. Notice of the annual meeting will be sent to stockholders of record as of the close of business on April 10, 2023. 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, 2023, the number of holders of record of FCX’s common stock was 10,142. NYSE composite tape common share price ranges during 2022 and 2021 were: 2022 2021 High Low High First Quarter $ 51.99 $ 34.94 $ 39.10 Second Quarter Third Quarter Fourth Quarter 51.85 33.89 41.16 28.87 24.80 27.50 46.10 39.20 42.77 Low $ 24.71 33.03 30.02 30.93 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. 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 annual rate of $0.30 per share. The combined annual rate of the base dividend and the variable dividend totaled $0.60 per share. 2022 Amount per Share Record Date Payment Date Base Variable First Quarter $0.075 $0.075 Jan. 14, 2022 Feb. 1, 2022 Second Quarter $0.075 $0.075 April 14, 2022 May 2, 2022 Third Quarter $0.075 $0.075 July 15, 2022 Aug. 1, 2022 Fourth Quarter $0.075 $0.075 Oct. 14, 2022 Nov. 1, 2022 2021 Amount per Share Record Date Payment Date Second Quarter Third Quarter Fourth Quarter $0.075 $0.075 $0.075 April 15, 2021 May 3, 2021 July 15, 2021 Aug. 2, 2021 Oct. 15, 2021 Nov. 1, 2021 Based on current market conditions, the base and variable dividends on FCX’s common stock are anticipated to total $0.60 per share for 2023 (including the dividends paid on February 1, 2023), comprised of a $0.30 per share base dividend and $0.30 per share variable dividend. Additionally, in July 2022, FCX’s Board authorized an increase in the share repurchase program from $3.0 billion to up to $5.0 billion. Through March 31, 2023, FCX acquired 47.9 million shares of its common stock for a total cost of $1.8 billion ($38.35 per share) and has $3.2 billion available under this program. FM_FCX FreeportFCX Freeport-McMoRan freeportfcx 2022 Annual Report 115 333 North Central Avenue Phoenix, Arizona 85004 602.366.8100 FCX.COM 

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