BUSINESS SEGMENTS INFORMATION

12 Months Ended

Dec. 31, 2017

BUSINESS SEGMENT INFORMATION

Product Revenues. FCX revenues attributable to the products it produced for the years ended December 31 follow:



	2017		2016		2015
Copper in concentrate^a	$	5,373	$	4,502	$	2,927
Copper cathode	4,557		3,925		4,159
Rod, and other refined copper products	2,272		1,963		2,481
Gold	2,032		1,512		1,540
Molybdenum	889		651		783
Oil	73		1,304		1,694
Other	1,207		973		1,023
Total	$	16,403	$	14,830	$	14,607


a.	Amounts are net of treatment and refining charges totaling $536 million in 2017, $652 million in 2016 and $485 million in 2015.

Geographic Area. Information concerning financial data by geographic area follows:



	December 31,
	2017		2016			2015
Long-lived assets:^a
Indonesia	$	8,938	$	8,794		$	7,701
U.S.	8,312		8,282		^b	16,569
Peru	7,485		7,981			8,432
Chile	1,221		1,269			1,387
Other	257		248			4,706		^c
Total	$	26,213	$	26,574		$	38,795


a.	Long-lived assets exclude deferred tax assets and intangible assets.


b.	Decrease in 2016 is primarily because of impairment charges related to oil and gas properties and asset dispositions (refer to Notes 1 and 2 for further discussion).


c.	Includes long-lived assets held for sale totaling $4.4 billion at December 31, 2015, primarily associated with TFHL discontinued operations. Refer to Note 2 for further discussion.



	Years Ended December 31,
	2017		2016		2015
Revenues:^a
U.S.	$	5,344	$	5,896	$	6,842
Indonesia	2,023		1,402		1,054
Japan	1,882		1,350		1,246
Switzerland	1,200		1,147		618
China	1,136		1,125		688
Spain	1,086		878		960
India	782		553		532
Philippines	378		261		169
Korea	364		219		177
Chile	248		250		397
Bermuda	226		273		159
United Kingdom	226		204		83
Other	1,508		1,272		1,682
Total	$	16,403	$	14,830	$	14,607


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 12 percent of FCX’s consolidated revenues for the year ended December 31, 2017, which is the only customer that accounted for 10 percent or more of FCX’s consolidated revenues during the three years ended December 31, 2017.

Consolidated revenues include sales to the noncontrolling interest owners of FCX’s South America mining operations totaling $1.1 billion in 2017 and $1.0 billion in both 2016 and 2015, and PT-FI’s sales to PT Smelting totaling $2.0 billion in 2017, $1.4 billion in 2016 and $1.1 billion in 2015.

Labor Matters. As of December 31, 2017, approximately 40 percent of FCX’s global labor force was covered by collective bargaining agreements, and approximately 15 percent was covered by agreements that expired and are currently being negotiated or will expire within one year.

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 GOM, onshore California and Haynesville oil and gas properties. As a result, beginning in 2017, the U.S. Oil & 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 for further discussion of these sales.

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. In addition, intersegment sales from Tenke to FCX’s other consolidated subsidiaries have been eliminated in discontinued operations (refer to Note 2).

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.

North America Copper Mines. FCX operates seven open-pit copper mines in North America – Morenci, Bagdad, Safford, Sierrita and Miami in Arizona, and Chino and Tyrone in New Mexico. The North America copper mines include open-pit mining, sulfide ore concentrating, leaching and SX/EW operations. A majority of the copper produced at the North America copper mines is cast into copper rod by FCX’s Rod & Refining segment. In addition to copper, certain of FCX’s North America copper mines also produce molybdenum concentrate, gold and silver.

The Morenci open-pit mine, located in southeastern Arizona, produces copper cathode and copper concentrate. In addition to copper, the Morenci mine also produces molybdenum concentrate. The Morenci mine produced 49 percent of FCX’s North America copper during 2017.

South America Mining. South America mining includes two operating copper mines – Cerro Verde in Peru and El Abra in Chile. These operations include open-pit mining, sulfide ore concentrating, leaching and SX/EW operations.

The Cerro Verde open-pit copper mine, located near Arequipa, Peru, produces copper cathode and copper concentrate. In addition to copper, the Cerro Verde mine also produces molybdenum concentrate and silver. The Cerro Verde mine produced 86 percent of FCX’s South America copper during 2017.

Indonesia Mining. Indonesia mining includes PT-FI’s Grasberg minerals district that produces copper concentrate that contains significant quantities of gold and silver.

Molybdenum Mines. Molybdenum mines include the wholly owned Henderson underground mine and Climax open-pit mine, both in Colorado. The Henderson and Climax mines produce high-purity, chemical-grade molybdenum concentrate, which is typically further processed into value-added molybdenum chemical products.

Rod & Refining. The Rod & Refining segment consists of copper conversion facilities located in North America, and includes a refinery, three rod mills and a specialty copper products facility, which are combined in accordance with segment reporting aggregation guidance. These operations process copper produced at FCX’s North America copper mines and purchased copper into copper cathode, rod and custom copper shapes. At times these operations refine copper and produce copper rod and shapes for customers on a toll basis. Toll arrangements require the tolling customer to deliver appropriate copper-bearing material to FCX’s facilities for processing into a product that is returned to the customer, who pays FCX for processing its material into the specified products.

Atlantic Copper Smelting & Refining. Atlantic Copper smelts and refines copper concentrate and markets refined copper and precious metals in slimes. During 2017, Atlantic Copper purchased 18 percent of its concentrate requirements from the North America copper mines and 15 percent from the South America mining operations, with the remainder purchased from third parties.

Corporate, Other & Eliminations. Corporate, Other & Eliminations consists of FCX’s other mining and eliminations, oil and gas operations and other corporate and elimination items. Other mining and eliminations include the Miami smelter (a smelter at FCX’s Miami, Arizona, mining operation), Freeport Cobalt (a cobalt chemical refinery in Kokkola, Finland), molybdenum conversion facilities in the U.S. and Europe, five non-operating copper mines in North America (Ajo, Bisbee, Tohono, Twin Buttes and Christmas in Arizona) and other mining support entities.

Financial Information by Business Segment



	North America Copper Mines								South America
																									Atlantic		Corporate,
																									Copper		Other
									Cerro								Indonesia			Molybdenum			Rod &		Smelting		& Elimi-				FCX
	Morenci			Other		Total			Verde			Other			Total		Mining			Mines			Refining		& Refining		nations^a				Total
Year Ended December 31, 2017
Revenues:
Unaffiliated customers	$	228		$	180	$	408		$	2,811		$	498		$	3,309	$	4,445		$	—		$	4,456	$	2,031	$	1,754		^b	$	16,403
Intersegment	1,865			2,292		4,157			385			—			385		—			268			26		1		(4,837		)		—
Production and delivery	1,052			1,715		2,767			1,878		^c	366			2,244		1,743		^d	229			4,470		1,966		(3,119		)		10,300
Depreciation, depletion and amortization	178			247		425			441			84			525		556			76			10		28		94				1,714
Metals inventory adjustments	—			2		2			—			—			—		—			1			—		—		5				8
Selling, general and administrative expenses	2			2		4			9			—			9		126		^d	—			—		18		327				484
Mining exploration and research expenses	—			2		2			—			—			—		—			—			—		—		92				94
Environmental obligations and shutdown costs	—			—		—			—			—			—		—			—			—		—		251				251
Net gain on sales of assets	—			—		—			—			—			—		—			—			—		—		(81		)		(81		)
Operating income (loss)	861			504		1,365			868			48			916		2,020			(38		)	2		20		(652		)		3,633

Interest expense, net	3			1		4			212		^c	—			212		4			—			—		18		563				801
Provision for (benefit from) income taxes	—			—		—			436		^c	10			446		869			—			—		5		(437		)	^e	883
Total assets at December 31, 2017	2,861			4,241		7,102			8,878			1,702			10,580		10,911			1,858			277		822		5,752			^f	37,302
Capital expenditures	114			53		167			103			12			115		875			5			4		41		203				1,410

Year Ended December 31, 2016
Revenues:
Unaffiliated customers	$	444		$	240	$	684		$	2,241		$	510		$	2,751	$	3,233		$	—		$	3,833	$	1,825	$	2,504		^b,g	$	14,830
Intersegment	1,511			2,179		3,690			187			—			187		62			186			29		5		(4,159		)		—
Production and delivery	1,169			1,763		2,932			1,351			407			1,758		1,794			199			3,836		1,712		(1,534		)	^h	10,697
Depreciation, depletion and amortization	217			313		530			443			110			553		384			68			10		29		956				2,530
Impairment of oil and gas properties	—			—		—			—			—			—		—			—			—		—		4,317				4,317
Metals inventory adjustments	—			1		1			—			—			—		—			15			—		—		20				36
Selling, general and administrative expenses	2			3		5			8			1			9		90			—			—		17		486			^h	607
Mining exploration and research expenses	—			3		3			—			—			—		—			—			—		—		61				64
Environmental obligations and shutdown costs	—			—		—			—			—			—		—			—			—		—		20				20
Net gain on sales of assets	(576		)	—		(576		)	—			—			—		—			—			—		—		(73		)		(649		)
Operating income (loss)	1,143			336		1,479			626			(8		)	618		1,027			(96		)	16		72		(5,908		)		(2,792		)

Interest expense, net	3			1		4			82			—			82		—			—			—		15		654				755
Provision for (benefit from) income taxes	—			—		—			222			(6		)	216		442			—			—		9		(296		)		371
Total assets at December 31, 2016	2,863			4,448		7,311			9,076			1,533			10,609		10,493			1,934			220		658		6,092			^f	37,317
Capital expenditures	77			25		102			380			2			382		1,025			2			1		17		1,284			ⁱ	2,813


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


b.	Includes revenues from FCX’s molybdenum sales company, which includes sales of molybdenum produced by the Molybdenum mines and by certain of the North America and South America copper mines.


c.	Includes net charges of $203 million in production and delivery costs, $145 million in interest expense and $7 million in provision for income taxes associated with disputed royalties for prior years.


d.	Includes net charges of $120 million in production and delivery costs and $5 million in selling, general and administrative expenses for PT-FI workforce reductions.


e.	Includes provisional tax credits totaling $393 million related to U.S. tax reform, primarily for the reversal of valuation allowances associated with the anticipated refund of AMT credits and a decrease in corporate income tax rates.


f.	Includes (i) assets held for sale totaling $598 million at December 31, 2017, and $344 million at December 31, 2016, primarily associated with Freeport Cobalt and the Kisanfu exploration project and (ii) includes assets associated with oil and gas operations totaling $271 million at December 31, 2017, and $467 million at December 31, 2016.


g.	Includes net mark-to-market losses of $35 million associated with oil derivative contracts, which were entered into as part of the terms to sell the onshore California oil and gas properties in 2016.


h.	Includes net charges for oil and gas operations totaling $1.0 billion in production and delivery costs, primarily for drillship settlements/idle rig and contract termination costs, inventory adjustments, asset impairments and other net charges, and $85 million in selling, general and administrative expenses for net restructuring charges.


i.	Includes $1.2 billion associated with oil and gas operations and $73 million associated with discontinued operations. Refer to Note 2 for a summary of the results of discontinued operations.




	North America Copper Mines								South America
																								Atlantic		Corporate,
																								Copper		Other
									Cerro								Indonesia		Molybdenum			Rod &		Smelting		& Elimi-				FCX
	Morenci		Other			Total			Verde		Other				Total		Mining		Mines			Refining		& Refining		nations^a				Total
Year Ended December 31, 2015
Revenues:
Unaffiliated customers	$	558	$	351		$	909		$	1,065	$	808			$	1,873	$	2,617	$	—		$	4,125	$	1,955	$	3,128		^b,c	$	14,607
Intersegment	1,646		2,571			4,217			68		(7		)	^d	61		36		348			29		15		(4,706		)		—
Production and delivery^e	1,523		2,276			3,799			815		623				1,438		1,808		312			4,129		1,848		(2,641		)	^f	10,693
Depreciation, depletion and amortization	217		343			560			219		133				352		293		97			9		39		1,890				3,240
Impairment of oil and gas properties	—		—			—			—		—				—		—		—			—		—		13,144				13,144
Metals inventory adjustments	—		142			142			—		73				73		—		11			—		—		112				338
Selling, general and administrative expenses	3		3			6			3		1				4		103		—			—		16		429				558
Mining exploration and research expenses	—		7			7			—		—				—		—		—			—		—		100				107
Environmental obligations and shutdown costs	—		3			3			—		—				—		—		—			—		—		75				78
Net gain on sales of assets	—		(39		)	(39		)	—		—				—		—		—			—		—		—				(39		)
Operating income (loss)	461		187			648			96		(29		)		67		449		(72		)	16		67		(14,687		)		(13,512		)

Interest expense, net	2		2			4			16		—				16		—		—			—		10		587				617
Provision for (benefit from) income taxes	—		—			—			13		(9		)		4		195		—			—		4		(2,154		)		(1,951		)
Total assets at December 31, 2015	3,567		4,878			8,445			9,445		1,661				11,106		9,306		1,999			219		612		14,890			^g	46,577
Capital expenditures	253		102			355			1,674		48				1,722		901		13			4		23		3,335			^g	6,353


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


b.	Includes revenues from FCX’s molybdenum sales company, which included sales of molybdenum produced by the Molybdenum mines and by certain of the North America and South America copper mines.


c.	Includes net mark-to-market gains associated with crude oil and natural gas derivative contracts totaling $87 million.


d.	Reflects net reductions for provisional pricing adjustments to prior open sales.


e.	Includes asset impairment and restructuring charges totaling $145 million, including $99 million at other North America copper mines, and restructuring charges totaling $13 million at South America mines, $7 million at Molybdenum mines, $3 million at Rod & Refining and $23 million at Corporate, Other & Eliminations.


f.	Includes charges for oil and gas operations totaling $188 million primarily for idle/terminated rig costs, inventory adjustments, asset impairments and other charges.


g.	Includes (i) assets held for sale totaling $4.9 billion and (ii) capital expenditures totaling $229 million associated with discontinued operations. Refer to Note 2 for a summary of the results of discontinued operations.