BUSINESS SEGMENTS

3 Months Ended

Mar. 31, 2018

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.

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, 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.

Product Revenues. FCX’s revenues attributable to the products it produced for the first quarters of 2018 and 2017 follow (in millions):



	Three Months Ended
	March 31,
	2018			2017
Copper:
Concentrate	$	1,647		$	981
Cathode	1,423			1,041
Rod and other refined copper products	670			624
Gold	808			268
Molybdenum	286			209
Other^a	398			231
Adjustments to revenue:
Treatment charges	(132		)	(103		)
Royalty expense^b	(69		)	(22		)
Export duties^c	(46		)	(14		)
Revenue from contracts with customers	4,985			3,215
Embedded derivatives^d	(117		)	126
Total consolidated revenues	$	4,868		$	3,341


a.	Primarily includes revenues associated with cobalt, silver, oil, gas and natural gas liquids.


b.	Reflects royalties for sales from PT-FI and Cerro Verde that will vary with the volume of metal sold and the prices of copper and gold.


c.	Reflects export duties paid by PT-FI.


d.	Refer to Note 6 for discussion of embedded derivatives related to FCX’s provisionally priced concentrate and cathode sales contracts.

Financial Information by Business Segment




(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
Three Months Ended March 31, 2018
Revenues:
Unaffiliated customers	$	3	$	15	$	18	$	625	$	150	$	775	$	1,521	^b	$	—		$	1,385	$	577	$	592		^c	$	4,868
Intersegment	601		689		1,290		102		—		102		52			95			8		2		(1,549		)		—
Production and delivery	290		501		791		427		116		543		457			67			1,388		556		(994		)		2,808
Depreciation, depletion and amortization	46		48		94		105		22		127		181			19			2		7		21				451
Selling, general and administrative expenses	1		2		3		2		—		2		39			—			—		6		81				131
Mining exploration and research expenses	—		1		1		—		—		—		—			—			—		—		20				21
Environmental obligations and shutdown costs	—		—		—		—		—		—		—			—			—		—		9				9
Net gain on sales of assets	—		—		—		—		—		—		—			—			—		—		(11		)		(11		)
Operating income (loss)	267		152		419		193		12		205		896			9			3		10		(83		)		1,459

Interest expense, net	1		—		1		17		—		17		—			—			—		5		128				151
Provision for income taxes	—		—		—		68		4		72		401			—			—		1		32				506
Total assets at March 31, 2018	2,817		4,340		7,157		8,740		1,715		10,455		10,992			1,836			290		809		5,098			^d	36,637
Capital expenditures	47		45		92		63		4		67		203			1			1		4		34				402

Three Months Ended March 31, 2017
Revenues:
Unaffiliated customers	$	66	$	50	$	116	$	640	$	112	$	752	$	534	^b	$	—		$	1,107	$	458	$	374		^c	$	3,341
Intersegment	416		563		979		116		—		116		—			63			8		—		(1,166		)		—
Production and delivery	257		409		666		391		82		473		270			52			1,109		436		(818		)		2,188			^e
Depreciation, depletion and amortization	47		69		116		112		21		133		83			19			2		7		29				389
Selling, general and administrative expenses	—		1		1		2		—		2		30			—			—		5		113				151
Mining exploration and research expenses	—		1		1		—		—		—		—			—			—		—		13				14
Environmental obligations and shutdown costs	—		—		—		—		—		—		—			—			—		—		25				25
Net gain on sales of assets	—		—		—		—		—		—		—			—			—		—		(23		)		(23		)
Operating income (loss)	178		133		311		251		9		260		151			(8		)	4		10		(131		)		597

Interest expense, net	1		—		1		16		—		16		—			—			—		4		146				167
Provision for income taxes	—		—		—		98		3		101		67			—			—		1		5				174
Total assets at March 31, 2017	2,814		4,361		7,175		9,081		1,525		10,606		10,418			1,917			261		652		5,547			^d	36,576
Capital expenditures	23		5		28		14		1		15		244			1			1		8		47				344


a.	Includes U.S. oil and gas operations.


b.	Includes PT-FI’s sales to PT Smelting totaling $628 million in first-quarter 2018 and $258 million in first-quarter 2017.


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 assets held for sale totaling $708 million at March 31, 2018, and $408 million at March 31, 2017, primarily associated with Freeport Cobalt and the Kisanfu exploration project.


e.	Includes a decrease of $12 million for the new guidance for the presentation of net periodic benefit cost for pension and other postretirement benefit plans (refer to Note 11 for further discussion).