BUSINESS SEGMENTS

9 Months Ended

Sep. 30, 2017

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.

FCX’s reportable segments previously included U.S. Oil & Gas operations. During 2016, FCX completed the sales of its Deepwater Gulf of Mexico, onshore California and Haynesville oil and gas properties. As a result, beginning in 2017, the U.S. oil and gas operations no longer qualify as a reportable segment, and oil and gas results for all periods presented have been included in Corporate, Other & Eliminations in the following tables. Refer to Note 2 of FCX’s annual report on Form 10-K for the year ended December 31, 2016, for additional information.

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.

FCX defers recognizing profits on sales from its mines to other divisions, including Atlantic Copper (FCX’s wholly owned smelter and refinery in Spain) and on 25 percent of PT-FI’s sales to PT Smelting (PT-FI’s 25-percent-owned smelter and refinery in Indonesia), until final sales to third parties occur. Quarterly variations in ore grades, the timing of intercompany shipments and changes in product prices result in variability in FCX’s net deferred profits and quarterly earnings.

FCX allocates certain operating costs, expenses and capital expenditures to its operating divisions and individual segments. However, not all costs and expenses applicable to an operation are allocated. U.S. federal and state income taxes are recorded and managed at the corporate level (included in Corporate, Other & Eliminations), whereas foreign income taxes are recorded and managed at the applicable country level. In addition, most mining exploration and research activities are managed on a consolidated basis, and those costs, along with some selling, general and administrative costs, are not allocated to the operating divisions or individual segments. Accordingly, the following segment information reflects management determinations that may not be indicative of what the actual financial performance of each operating division or segment would be if it was an independent entity.

Financial Information by Business Segments




(In millions)

																							Atlantic		Corporate,
	North America Copper Mines						South America																Copper		Other
							Cerro								Indonesia			Molybdenum			Rod &		Smelting		& Elimi-				FCX
	Morenci		Other		Total		Verde			Other			Total		Mining			Mines			Refining		& Refining		nations^a				Total
Three Months Ended September 30, 2017
Revenues:
Unaffiliated customers	$	57	$	40	$	97	$	850		$	109		$	959	$	1,121	^b	$	—		$	1,137	$	554	$	442		^c	$	4,310
Intersegment	460		548		1,008		64			—			64		—			65			8		1		(1,146		)		—
Production and delivery	244		414		658		683		^d	76			759		406			58			1,141		533		(753		)		2,802
Depreciation, depletion and amortization	42		54		96		116			18			134		136			20			2		7		23				418
Selling, general and administrative expenses	1		1		2		2			—			2		32			—			—		4		66				106
Mining exploration and research expenses	—		—		—		—			—			—		—			—			—		—		27				27
Environmental obligations and shutdown costs	—		—		—		—			—			—		—			—			—		—		73				73
Net gain on sales of assets	—		—		—		—			—			—		—			—			—		—		(33		)		(33		)
Operating income (loss)	230		119		349		113			15			128		547			(13		)	2		11		(107		)		917

Interest expense, net	1		—		1		156		^d	—			156		1			—			—		5		141				304
Provision for income taxes	—		—		—		134		^d	5			139		233			—			—		1		14				387
Total assets at September 30, 2017	2,844		4,223		7,067		8,851			1,595			10,446		11,100			1,885			264		751		5,814			^e	37,327
Capital expenditures	26		13		39		17			3			20		206			2			1		5		41				314

Three Months Ended September 30, 2016
Revenues:
Unaffiliated customers	$	115	$	112	$	227	$	505		$	112		$	617	$	984	^b	$	—		$	930	$	445	$	674		^c	$	3,877
Intersegment	358		499		857		54			—			54		2			46			7		—		(966		)		—
Production and delivery	275		464		739		333			91			424		478			57			931		416		(516		)	^f	2,529
Depreciation, depletion and amortization	51		78		129		109			25			134		110			15			2		7		246				643
Impairment of oil and gas properties	—		—		—		—			—			—		—			—			—		—		239				239
Selling, general and administrative expenses	1		—		1		1			1			2		24			—			—		5		78				110
Mining exploration and research expenses	—		1		1		—			—			—		—			—			—		—		12				13
Environmental obligations and shutdown costs	—		—		—		—			—			—		—			—			—		—		(3		)		(3		)
Net loss (gain) on sales of assets	1		—		1		—			—			—		—			—			—		—		(14		)		(13		)
Operating income (loss)	145		68		213		116			(5		)	111		374			(26		)	4		17		(334		)		359

Interest expense, net	1		—		1		21			—			21		—			—			—		3		162				187
Provision for (benefit from) income taxes	—		—		—		36			(4		)	32		158			—			—		4		(308		)		(114		)
Total assets at September 30, 2016	2,881		4,540		7,421		9,139			1,551			10,690		9,718			1,953			238		565		10,815			^e	41,400
Capital expenditures	6		5		11		38			1			39		253			1			—		5		185			^g	494


a.	Includes U.S. oil and gas operations, which were previously a reportable segment.


b.	Includes PT-FI's sales to PT Smelting totaling $652 million in third-quarter 2017 and $348 million in third-quarter 2016.


c.	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.


d.	Includes net charges of $216 million in production and delivery costs, $141 million in interest expense and $2 million in provision for income taxes associated with disputed royalties for prior years.


e.	Includes assets held for sale totaling $549 million at September 30, 2017, primarily associated with Freeport Cobalt and the Kisanfu exploration project, and $5.1 billion at September 30, 2016, which also included discontinued operations. Also includes assets associated with oil and gas operations of $272 million at September 30, 2017, and $3.5 billion at September 30, 2016.


f.	Includes net charges for oil and gas operations totaling $49 million, primarily for idle rig costs, inventory adjustments and the termination of the Morocco well commitment.


g.	Includes $160 million associated with oil and gas operations and $15 million associated with discontinued operations.




(In millions)

																									Atlantic		Corporate,
	North America Copper Mines								South America Mining																Copper		Other
									Cerro								Indonesia			Molybdenum			Rod &		Smelting		& Elimi-				FCX
	Morenci			Other		Total			Verde			Other			Total		Mining			Mines			Refining		& Refining		nations^a				Total
Nine Months Ended September 30, 2017
Revenues:
Unaffiliated customers	$	168		$	122	$	290		$	2,057		$	332		$	2,389	$	2,720	^b	$	—		$	3,290	$	1,412	$	1,261		^c	$	11,362
Intersegment	1,354			1,704		3,058			237			—			237		—			199			22		1		(3,517		)		—
Production and delivery	772			1,284		2,056			1,450		^d	245			1,695		1,233		^e	169			3,299		1,369		(2,324		)		7,497
Depreciation, depletion and amortization	138			192		330			332			60			392		372			58			7		21		77				1,257
Selling, general and administrative expenses	2			2		4			7			—			7		92		^e	—			—		13		250				366
Mining exploration and research expenses	—			2		2			—			—			—		—			—			—		—		59				61
Environmental obligations and shutdown costs	—			—		—			—			—			—		—			—			—		—		81				81
Net gain on sales of assets	—			—		—			—			—			—		—			—			—		—		(66		)		(66		)
Operating income (loss)	610			346		956			505			27			532		1,023			(28		)	6		10		(333		)		2,166

Interest expense, net	2			1		3			187		^d	—			187		1			—			—		13		429				633
Provision for income taxes	—			—		—			288		^d	10			298		435			—			—		4		10				747
Capital expenditures	78			28		106			60			5			65		663			4			3		30		149				1,020

Nine Months Ended September 30, 2016
Revenues:
Unaffiliated customers	$	356		$	211	$	567		$	1,485		$	379		$	1,864	$	2,014	^b	$	—		$	2,820	$	1,360	$	1,828		^c	$	10,453
Intersegment	1,119			1,594		2,713			155			—			155		59			136			22		3		(3,088		)		—
Production and delivery	913			1,340		2,253			927			313			1,240		1,228			159			2,820		1,275		(991		)	^f	7,984
Depreciation, depletion and amortization	170			237		407			319			83			402		284			51			7		22		764				1,937
Impairment of oil and gas properties	—			—		—			—			—			—		—			—			—		—		4,317				4,317
Selling, general and administrative expenses	2			2		4			5			1			6		60			—			—		13		325			^f	408
Mining exploration and research expenses	—			2		2			—			—			—		—			—			—		—		44				46
Environmental obligations and shutdown costs	—			—		—			—			—			—		—			—			—		—		18				18
Net gain on sales of assets	(576		)	—		(576		)	—			—			—		—			—			—		—		(186		)		(762		)
Operating income (loss)	966			224		1,190			389			(18		)	371		501			(74		)	15		53		(5,551		)		(3,495		)

Interest expense, net	2			1		3			63			—			63		—			—			—		11		497				574
Provision for (benefit from) income taxes	—			—		—			126			(12		)	114		212			—			—		5		(252		)		79
Capital expenditures	71			16		87			329			3			332		706			2			1		12		1,169			^g	2,309


a.	Includes U.S. oil and gas operations, which were previously a reportable segment.


b.	Includes PT-FI’s sales to PT Smelting totaling $1.4 billion for the first nine months of 2017 and $912 million for the first nine months of 2016.


c.	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.


d.	Includes net charges of $216 million in production and delivery costs, $141 million in interest expense and $2 million in provision for income taxes associated with disputed royalties for prior years.


e.	Includes net charges of $112 million in production and delivery costs and $5 million in selling, general and administrative expenses for PT-FI workforce reductions.


f.	Includes net charges for oil and gas operations of $942 million in production and delivery costs, primarily for drillship settlements/idle rig costs and inventory adjustments and $38 million for net restructuring charges.


g.	Includes $1.1 billion associated with oil and gas operations and $70 million associated with discontinued operations.