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.
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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