DISPOSITIONS AND ACQUISITIONS

TF Holdings Limited - Discontinued Operations. FCX had a 70 percent interest in TF Holdings Limited (TFHL), and TFHL owns 80 percent of Tenke Fungurume Mining S.A. (TFM or Tenke) located in the Democratic Republic of Congo (DRC). On November 16, 2016, FCX completed the sale of its interest in TFHL to China Molybdenum Co., Ltd. (CMOC) for $2.65 billion in cash (before closing adjustments) and contingent consideration of up to $120 million in cash, consisting of $60 million if the average copper price exceeds $3.50 per pound and $60 million if the average cobalt price exceeds $20 per pound, both during calendar years 2018 and 2019. One-half of the proceeds from this transaction was used to repay borrowings under FCX's unsecured bank term loan. The contingent consideration is considered a derivative, and at December 31, 2016, the fair value was $13 million and was recorded in other assets on the consolidated balance sheets and reduced the loss on disposal, which is reflected in net (loss) income from discontinued operations. Future changes in the fair value of the contingent consideration derivative will be recorded in discontinued operations.

In October 2016, La Générale des Carrières et des Mines (Gécamines), which is wholly owned by the DRC government and holds a 20 percent non-dilutable interest in TFM, filed an arbitration proceeding with the International Chamber of Commerce (ICC) International Court of Arbitration challenging the sale of TFHL. In January 2017, a settlement agreement was entered into with Gécamines that resolved all claims brought by Gécamines against FCX, including the arbitration proceeding. The parties to the settlement are FCX, CMOC, Lundin Mining Corporation (Lundin), TFHL, TFM, BHR Newwood Investment Management Limited and Gécamines. The settlement resulted in a charge of $33 million to the 2016 loss on disposal.

In accordance with accounting guidance, FCX reported the results of operations of TFHL as discontinued operations in the consolidated statements of operations because the disposal represents a strategic shift that had a major effect on operations, and presented the assets and liabilities of TFHL as held for sale in the consolidated balance sheets for all periods presented. The consolidated statements of comprehensive loss were not impacted by discontinued operations as TFHL did not have any other comprehensive (loss) income, and the consolidated statements of cash flows are reported on a combined basis without separately presenting discontinued operations.

The carrying amounts of TFHL's major classes of assets, liabilities and noncontrolling interests, which were held for sale in the consolidated balance sheets at December 31, 2015, follow:



Assets
Cash and cash equivalents	$	29
Inventories	584
Receivables and other current assets	131
Total current assets held for sale	$	744	^a

Property, plant, equipment and mine development costs, net	$	3,261
Inventories	608
Other assets	241
Total long-term assets held for sale	$	4,110	^a

Liabilities
Accounts payable and accrued liabilities	$	108
Total current liabilities held for sale	$	108	^a

Deferred income taxes	$	681
Asset retirement obligations and other liabilities	37
Total long-term liabilities held for sale	$	718	^a

Noncontrolling interests	$	1,178


a.	Amount differs from the totals on FCX's consolidated balance sheets because of other assets held for sale.

Net (loss) income from discontinued operations in the consolidated statements of operations consists of the following:



	Years Ended December 31,
	2016				2015			2014
Revenues^a	$	959			$	1,270		$	1,437
Costs and expenses:
Production and delivery costs	833				852			782
Depreciation, depletion and amortization	80			^b	257			228
Interest expense allocated from parent^c	39				28			24
Other costs and expenses, net	10				26			27
(Loss) income before income taxes and loss on disposal	(3		)		107			376
Loss on disposal	(198		)	^d	—			—
Net (loss) income before income taxes	(201		)		107			376
Benefit from (provision for) income taxes	8				(16		)	(99		)
Net (loss) income from discontinued operations	$	(193	)		$	91		$	277


a.	In accordance with accounting guidance, amounts are net of eliminations of intercompany sales totaling $157 million in 2016, $114 million in 2015 and $121 million in 2014.


b.	In accordance with accounting guidance, depreciation, depletion and amortization is not recognized subsequent to classification as assets held for sale, which occurred in May 2016.


c.	In accordance with accounting guidance, interest associated with FCX's unsecured bank term loan that was required to be repaid as a result of the sale of TFHL has been allocated to discontinued operations.


d.	Includes a charge of $33 million associated with the settlement agreement entered into with Gécamines, partly offset by a gain of $13 million for the fair value of contingent consideration.

Cash flows from discontinued operations included in the consolidated statements of cash flows follow:



	Years Ended December 31,
	2016			2015			2014
Net cash provided by operating activities	$	241		$	217		$	529
Net cash used in investing activities	(73		)	(253		)	(174		)
Net cash used in financing activities	(123		)	(82		)	(285		)
Increase (decrease) in cash and cash equivalents in assets held for sale	$	45		$	(118	)	$	70

FCX has also agreed to negotiate exclusively with CMOC (until February 28, 2017) to enter into a definitive agreement to sell its interest in Freeport Cobalt for $100 million and the Kisanfu exploration project in the DRC for $50 million in separate transactions. Freeport Cobalt includes the large-scale cobalt refinery in Kokkola, Finland, and the related sales and marketing business, in which FCX owns an effective 56 percent interest. Kisanfu is a copper and cobalt exploration project, located near Tenke, in which FCX holds a 100 percent interest. The assets and liabilities of Freeport Cobalt and Kisanfu are classified as held for sale in the consolidated balance sheets, and a $110 million estimated loss on disposal was included in net gain on sales of assets in 2016 in the consolidated statements of operations.

Oil and Gas Operations. On December 30, 2016, FM O&G completed the sale of its onshore California oil and gas properties to Sentinel Peak Resources California LLC (Sentinel) for cash consideration of $592 million (before closing adjustments from the July 1, 2016, effective date) and contingent consideration of up to $150 million, consisting of $50 million per year for 2018, 2019 and 2020 if the price of Brent crude oil averages over $70 per barrel in each of these calendar years. The contingent consideration is considered a derivative, and at December 31, 2016, the fair value was $33 million, which was recorded in other assets on the consolidated balance sheets and included in the gain on the sale. Future changes in the fair value of the contingent consideration derivative will be recorded in operating income. Sentinel assumed abandonment obligations associated with the properties.

On December 15, 2016, FM O&G completed the sale of its Deepwater GOM oil and gas properties to Anadarko Petroleum Corporation (Anadarko) for cash consideration of $2.0 billion (before closing adjustments from the August 1, 2016, effective date) and up to $150 million in contingent payments. The contingent payments were recorded under the loss recovery approach, whereby contingent gains are recorded up to the amount of any loss on the sale, and was included in other assets ($150 million) on the consolidated balance sheets and reduced the loss on the sale. The contingent payments will be received over time as Anadarko realizes future cash flows in connection with a third-party production handling agreement for an offshore platform. Anadarko assumed abandonment obligations associated with these properties. A portion of the proceeds from this transaction was used to repay FCX's remaining outstanding borrowings under its unsecured bank term loan.

Under the full cost accounting rules, the sales of the Deepwater GOM and onshore California oil and gas properties required gain (loss) recognition (net loss of $9 million, which was net of $150 million for contingent payments associated with the Deepwater GOM sale and $33 million for the fair value of contingent consideration from the onshore California sale) because of their significance to the full cost pool.

In connection with the sale of the Deepwater GOM oil and gas properties, FM O&G entered into an agreement to amend the terms of the Plains Offshore Preferred Stock that was reported as redeemable noncontrolling interest on FCX's consolidated balance sheets. The amendment provided FM O&G the right to call these securities for $582 million. FM O&G exercised this option in December 2016 and recorded a $199 million gain on redemption to retained earnings.

On July 25, 2016, FM O&G sold its Haynesville shale assets for cash consideration of $87 million, before closing adjustments. On June 17, 2016, FM O&G sold certain oil and gas royalty interests to Black Stone Minerals, L.P. for cash consideration of $102 million, before closing adjustments. Under the full cost accounting rules, the proceeds from these transactions were recorded as a reduction of capitalized oil and gas properties, with no gain or loss recognition.

In 2014, FCX completed the acquisition of Deepwater GOM oil and gas interests, including (i) an interest in the Vito oil discovery in the Mississippi Canyon area and a significant lease position in the Vito Basin area for $496 million, and (ii) interests in the Lucius and Heidelberg oil fields and several exploration leases for $918 million. These Deepwater GOM acquisitions were funded primarily by the like-kind exchange escrow from the sale of the Eagle Ford shale assets discussed below.

Also in 2014, FCX completed the sale of its Eagle Ford shale assets to a subsidiary of Encana Corporation for cash consideration of $3.1 billion, before closing adjustments from the April 1, 2014, effective date. Under full cost accounting rules, the proceeds were recorded as a reduction of capitalized oil and gas properties, with no gain or loss recognition, except for $84 million of deferred tax expense recorded in connection with the allocation of $221 million of goodwill (for which deferred taxes were not previously provided) to the Eagle Ford shale assets. Approximately $1.3 billion of proceeds from this transaction was placed in a like-kind exchange escrow and was used to reinvest in additional Deepwater GOM oil and gas interests, as discussed above. The remaining proceeds were used to repay debt.

Morenci. On May 31, 2016, FCX sold a 13 percent undivided interest in its Morenci unincorporated joint venture to SMM Morenci, Inc. for $1.0 billion in cash. FCX recorded a $576 million gain on the transaction and used losses to offset cash taxes on the transaction. A portion of the proceeds from the transaction was used to repay borrowings under FCX's unsecured bank term loan and revolving credit facility.

The Morenci unincorporated joint venture was owned 85 percent by FCX and 15 percent by Sumitomo. As a result of the transaction, the unincorporated joint venture is owned 72 percent by FCX, 15 percent by Sumitomo and 13 percent by SMM Morenci, Inc.

Timok. On May 2, 2016, FMC sold an interest in the Timok exploration project in Serbia to Global Reservoir Minerals Inc. (now known as Nevsun Resources, Ltd.) for consideration of $135 million in cash and contingent consideration of up to $107 million payable to FCX in stages upon achievement of defined development milestones. As a result of this transaction, FCX recorded a gain of $133 million in 2016, and no amounts were recorded for contingent consideration under the loss recovery approach. A portion of the proceeds from the transaction was used to repay borrowings under FCX's unsecured bank term loan.

Candelaria and Ojos del Salado. On November 3, 2014, FCX completed the sale of its 80 percent ownership interests in the Candelaria and Ojos del Salado copper mining operations and supporting infrastructure located in Chile to Lundin for $1.8 billion in cash, before closing adjustments, and contingent consideration of up to $200 million. Contingent consideration is calculated as five percent of net copper revenues in any annual period over the ensuing five years when the average realized copper price exceeds $4.00 per pound. Excluding contingent consideration (for which no amounts were recorded under the loss recovery approach), after-tax net proceeds totaled $1.5 billion, and FCX recorded a gain of $671 million associated with this transaction. The transaction had an effective date of June 30, 2014. FCX used the proceeds from this transaction to repay indebtedness.

This sale did not meet the criteria for classification as a discontinued operation. The following table provides balances of the major classes of assets and liabilities for the Candelaria and Ojos del Salado mines at November 3, 2014:



Current assets	$	482
Long-term assets	1,155
Current liabilities	129
Long-term liabilities	89
Noncontrolling interests	243

For the period from January 1, 2014, to November 3, 2014, net income before income taxes was $270 million and net income attributable to common stockholders was $144 million for the Candelaria and Ojos del Salado mines.