Document

333 North Central Avenue

(Address of principal executive offices)

(Zip Code)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark one)



☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2019



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-11307-01

Freeport-McMoRan Inc.

(Exact name of registrant as specified in its charter)



Delaware		74-2480931
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)

(602) 366-8100

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.10 per share	FCX	The New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act ☑ Yes ☐ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☑ No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☑ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☑ No

The aggregate market value of common stock held by non-affiliates of the registrant was $13.1 billion on June 30, 2019.

Common stock issued and outstanding was 1,450,972,426 shares on January 31, 2020.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of our proxy statement for our 2020 annual meeting of stockholders are incorporated by reference into Part III (Items 10, 11, 12, 13 and 14) of this report.

Freeport-McMoRan Inc.



TABLE OF CONTENTS

	Page
Part I	1
Items 1. and 2. Business and Properties	1
Item 1A. Risk Factors	35
Item 1B. Unresolved Staff Comments	52
Item 3. Legal Proceedings	52
Item 4. Mine Safety Disclosures	55
Information About our Executive Officers	55

Part II	56
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities	56
Item 6. Selected Financial Data	57
Items 7. and 7A. Management’s Discussion and Analysis of Financial Condition and Results
of Operations and Quantitative and Qualitative Disclosures about Market Risk	61
Item 8. Financial Statements and Supplementary Data	99
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	174
Item 9A. Controls and Procedures	174
Item 9B. Other Information	174

Part III	174
Item 10. Directors, Executive Officers and Corporate Governance	174
Item 11. Executive Compensation	174
Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters	174
Item 13. Certain Relationships and Related Transactions, and Director Independence	175
Item 14. Principal Accounting Fees and Services	175

Part IV	175
Item 15. Exhibits, Financial Statement Schedules	175
Item 16. Form 10-K Summary	182

Glossary of Terms	182

Signatures	S-1

Table of Contents

PART I

Items 1. and 2. Business and Properties.

All of our periodic reports filed with the United States (U.S.) Securities and Exchange Commission (SEC) pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available, free of charge, through our website, “fcx.com,” including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports. These reports and amendments are available through our website as soon as reasonably practicable after we electronically file or furnish such material to the SEC.

References to “we,” “us” and “our” refer to Freeport-McMoRan Inc. (FCX) and its consolidated subsidiaries. References to “Notes” refer to the Notes to Consolidated Financial Statements included herein (refer to Item 8.), and references to “MD&A” refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures About Market Risk included herein (refer to Items 7. and 7A.).

GENERAL

We are a leading international mining company with headquarters in Phoenix, Arizona. Our company was incorporated under the laws of the state of Delaware on November 10, 1987. We operate large, long-lived geographically diverse assets with significant proven and probable reserves of copper, gold and molybdenum, and we are one of the world’s largest publicly traded copper producers. Our 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.

We believe that we have a high-quality portfolio of long-lived copper assets positioned to generate long-term value. PT Freeport Indonesia (PT-FI) continues to advance several projects in the Grasberg minerals district related to the development of its large-scale, long-lived, high-grade underground ore bodies, and we are nearing completion of a project to develop the Lone Star leachable ores near the Safford operation in eastern Arizona, which is now approximately 75 percent complete. We are also pursuing other opportunities to enhance our mines’ net present values, and we continue to advance studies for future development of our copper resources, the timing of which will be dependent on market conditions.

During 2019, we advanced initiatives in our North America and South America mining operations to enhance productivity, expand margins and reduce the capital intensity of the business through the utilization of new technology applications in combination with a more interactive operating structure. The pilot program initiated at the Bagdad mine in northwest Arizona in late 2018 was successful in utilizing data science, machine learning and integrated functional teams to address bottlenecks, provide cost benefits and drive improved overall performance. The program is now being implemented across our North America and South America operations.

During fourth-quarter 2019, PT-FI completed mining the final phase of the Grasberg open pit and continues to achieve important milestones in ramping-up production of large-scale quantities of copper and gold from its significant underground ore bodies. In aggregate, the Grasberg open pit produced over 27 billion pounds of copper and 46 million ounces of gold in the 30-year period from 1990 through 2019. As PT-FI continues to ramp-up production from its underground ore bodies, our consolidated metal production is expected to improve significantly by 2021.

Following are our ownership interests at December 31, 2019, in operating mines through our consolidated subsidiaries, Freeport Minerals Corporation (FMC) and PT-FI:


a.	Prior to December 21, 2018, we owned 90.64 percent of PT-FI and PT-FI had an unincorporated joint venture with Rio Tinto plc (Rio Tinto). Refer to Note 2 for further discussion of the PT-FI divestment transaction and Note 3 for discussion of the former joint venture with Rio Tinto (Rio Tinto Joint Venture).


b.	FMC has a 72 percent undivided interest in Morenci via an unincorporated joint venture. Refer to Note 3 for further discussion.

At December 31, 2019, our estimated consolidated recoverable proven and probable mineral reserves totaled 116.0 billion pounds of copper, 29.6 million ounces of gold and 3.58 billion pounds of molybdenum. Following is a summary of our estimated consolidated recoverable proven and probable mineral reserves at December 31, 2019, by geographic location (refer to “Mining Operations” for further discussion):



	Copper		Gold		Molybdenum
North America	40	%	2	%	80	%	^a
South America	29		—		20
Indonesia	31		98		—
	100	%	100	%	100	%


a.	Our Henderson and Climax molybdenum mines contain 20 percent of our estimated consolidated recoverable proven and probable molybdenum reserves, and our North America copper mines contain 60 percent.

In North America, we operate seven copper mines - Morenci, Bagdad, Safford, Sierrita and Miami in Arizona, and Chino and Tyrone in New Mexico, and two molybdenum mines - Henderson and Climax in Colorado. In addition to copper, certain of our North America copper mines also produce molybdenum concentrate, gold and silver. In South America, we operate two copper mines - Cerro Verde in Peru and El Abra in Chile. In addition to copper, the Cerro Verde mine also produces molybdenum concentrate and silver. In Indonesia, PT-FI operates in the Grasberg minerals district. In addition to copper, the Grasberg minerals district also produces gold and silver.

Following is a summary of the geographic locations of our consolidated copper, gold and molybdenum production for the year 2019 (refer to “Mining Operations” for further information):



	Copper		Gold		Molybdenum
North America	45	%	2	%	68	%	^a
South America	36		—		32
Indonesia	19		98		—
	100	%	100	%	100	%


a.	Our Henderson and Climax molybdenum mines produced 32 percent of our consolidated molybdenum production, and our North America copper mines produced 36 percent.

The geographic locations of our operating mines are shown on the world map below.

COPPER, GOLD AND MOLYBDENUM

Following is a brief discussion of our primary natural resources – copper, gold and molybdenum. For further discussion of historical and current market prices of these commodities, refer to MD&A and Item 1A. “Risk Factors.”

Copper

Copper is an internationally traded commodity, and its prices are determined by the major metals exchanges – the London Metal Exchange (LME), New York Mercantile Exchange (NYMEX) and Shanghai Futures Exchange. Prices on these exchanges generally reflect the worldwide balance of copper supply and demand, and can be volatile and cyclical. During 2019, the LME copper settlement price averaged $2.72 per pound, ranging from a low of $2.51 per pound to a high of $2.98 per pound, and was $2.79 per pound at December 31, 2019.

In general, demand for copper reflects the rate of underlying world economic growth, particularly in industrial production and construction. According to Wood Mackenzie, a widely followed independent metals market consultant, copper’s end-use markets (and their estimated shares of total consumption) are construction (28 percent), electrical applications (28 percent), consumer products (21 percent), transportation (12 percent) and industrial machinery (11 percent). We believe copper will continue to be essential in these basic uses as well as contribute significantly to new technologies for energy efficiencies, to advance communications and to enhance public health. Examples of areas we believe will require additional copper in the future include: (i) high efficiency motors, which consume up to 75 percent more copper than a standard motor; (ii) electric vehicles, which consume up to four times the amount of copper in terms of weight compared to vehicles of similar size with an internal combustion engine, and require copper-intensive charging station infrastructure to refuel; and (iii) renewable energy such as wind and solar, which consume four to five times the amount of copper compared to traditional fossil fuel generated power.

Table of Contents

Gold

Gold is used for jewelry, coinage and bullion as well as various industrial and electronic applications. Gold can be readily sold on numerous markets throughout the world. Benchmark prices are generally based on London Bullion Market Association (London) quotations. During 2019, the London PM gold price averaged $1,393 per ounce, ranging from a low of $1,270 per ounce to a high of $1,546 per ounce, and was $1,515 per ounce on December 30, 2019 (there was no London PM gold price quote on December 31, 2019).

Molybdenum

Molybdenum is a key alloying element in steel and the raw material for several chemical-grade products used in catalysts, lubrication, smoke suppression, corrosion inhibition and pigmentation. Molybdenum, as a high-purity metal, is also used in electronics such as flat-panel displays and in super alloys used in aerospace. Reference prices for molybdenum are available in several publications, including Metals Week, CRU Report and Metal Bulletin. During 2019, the weekly average price of molybdenum quoted by Metals Week averaged $11.37 per pound, ranging from a low of $8.55 per pound to a high of $12.66 per pound, and was $9.23 per pound at December 31, 2019.

PRODUCTS AND SALES

Our consolidated revenues for 2019 primarily included sales of copper (79 percent), gold (11 percent) and molybdenum (8 percent). Copper concentrate sales to PT Smelting (PT-FI’s 25-percent-owned copper smelter and refinery in Gresik, Indonesia) totaled 13 percent of our consolidated revenues for the year ended December 31, 2019, and 12 percent for both the years ended December 31, 2018 and 2017, which is the only customer that accounted for 10 percent or more of our consolidated revenues during the three years ended December 31, 2019. Refer to Note 16 for a summary of our consolidated revenues and operating income (loss) by business segment and geographic area.

Copper Products

We are one of the world’s leading producers of copper concentrate, cathode and continuous cast copper rod. During 2019, 56 percent of our mined copper was sold in concentrate, 22 percent as cathode and 22 percent as rod from our North America operations. The copper ore from our mines is generally processed either by smelting and refining or by solution extraction and electrowinning (SX/EW) as described below.

Copper Concentrate. We produce copper concentrate at six of our mines in which mined ore is crushed and treated to produce a copper concentrate with copper content of approximately 20 to 30 percent. In North America, copper concentrate is produced at the Morenci, Bagdad, Sierrita and Chino mines, and a significant portion is shipped to our Miami smelter in Arizona for further processing. Copper concentrate is also produced at the Cerro Verde mine in Peru and the Grasberg minerals district in Indonesia.

Copper Cathode. We produce copper cathode at our electrolytic refinery located in El Paso, Texas, and at nine of our mines.

SX/EW cathode is produced from the Morenci, Bagdad, Safford, Sierrita, Miami, Chino and Tyrone mines in North America, and from the Cerro Verde and El Abra mines in South America. For ore subject to the SX/EW process, the ore is placed on stockpiles and copper is extracted from the ore by dissolving it with a weak sulphuric acid solution. The copper content of the solution is increased in two additional SX stages, and then the copper-bearing solution undergoes an EW process to produce cathode that is, on average, 99.99 percent copper. Our copper cathode is used as the raw material input for copper rod, brass mill products and for other uses.

Copper cathode is also produced at Atlantic Copper (our wholly owned copper smelting and refining unit in Spain) and PT Smelting. Copper concentrate is smelted (i.e., subjected to extreme heat) to produce copper anode, which weighs between 800 and 900 pounds and has an average copper content of 99.5 percent. The anode is further treated by electrolytic refining to produce copper cathode, which weighs between 100 and 350 pounds and has an average copper content of 99.99 percent. Refer to “Mining Operations - Smelting Facilities and Other Mining Properties” for further discussion of Atlantic Copper and PT Smelting.

Continuous Cast Copper Rod. We manufacture continuous cast copper rod at our facilities in El Paso, Texas; Norwich, Connecticut; and Miami, Arizona, primarily using copper cathode produced at our North America copper mines.

Table of Contents

Copper Sales

North America. The majority of the copper produced at our North America copper mines and refined in our El Paso, Texas refinery is consumed at our rod plants to produce copper rod which is sold to wire and cable manufacturers. The remainder of our North America copper production is sold in the form of copper cathode or copper concentrate under U.S. dollar-denominated annual contracts. Cathode and rod contract prices are generally based on the prevailing Commodity Exchange Inc. (COMEX - a division of NYMEX) monthly average settlement price for the month of shipment and include a premium. Generally, copper cathode is sold to rod, brass or tube fabricators. During 2019, 23 percent of our North America mines’ copper concentrate sales volumes were shipped to Atlantic Copper for smelting and refining and sold as copper anode and copper cathode.

South America. Production from our South America mines is sold as copper concentrate or copper cathode under U.S. dollar-denominated, annual and multi-year contracts. During 2019, our South America mines sold approximately 77 percent of their copper production in concentrate and 23 percent as cathode.

Substantially all of our South America copper concentrate and cathode sales contracts provide final copper pricing in a specified future month (generally one to four months from the shipment date) primarily based on quoted LME monthly average settlement copper prices. Revenues from our South America concentrate sales are recorded net of royalties and treatment charges (i.e., fees paid to smelters that are generally negotiated annually). In addition, because a portion of the metals contained in copper concentrate is unrecoverable from the smelting process, revenues from our South America concentrate sales are also recorded net of allowances for unrecoverable metals, which are a negotiated term of the contracts and vary by customer.

Indonesia. PT-FI sells its production in the form of copper concentrate, which contains significant quantities of gold and silver, primarily under U.S. dollar-denominated, long-term contracts. PT-FI also sells a small amount of copper concentrate in the spot market. Following is a summary of PT-FI’s aggregate percentage of concentrate sales to unaffiliated third parties, PT Smelting and Atlantic Copper for the years ended December 31:



	2019		2018		2017
Third parties	34	%	60	%	54	%
PT Smelting	64		38		46
Atlantic Copper	2		2		—
	100	%	100	%	100	%

Substantially all of PT-FI’s concentrate sales contracts provide final copper pricing in a specified future month (generally one to four months from the shipment date) primarily based on quoted LME monthly average settlement copper prices. Revenues from PT-FI’s concentrate sales are recorded net of royalties, export duties, treatment charges and allowances for unrecoverable metals.

Gold Products and Sales

We produce gold almost exclusively from the Grasberg minerals district. The gold we produce is primarily sold as a component of our copper concentrate or in slimes, which are a product of the smelting and refining process. Gold generally is priced at the average London price for a specified month near the month of shipment. Revenues from gold sold as a component of our copper concentrate are recorded net of treatment and refining charges, royalties, export duties and allowances for unrecoverable metals. Revenues from gold sold in slimes are recorded net of refining charges.

Molybdenum Products and Sales

We are the world’s largest producer of molybdenum and molybdenum-based chemicals. In addition to production from the Henderson and Climax molybdenum mines, we produce molybdenum concentrate at certain of the North America copper mines and the Cerro Verde copper mine in Peru. The majority of our molybdenum concentrate is processed in our own conversion facilities. Our molybdenum sales are primarily priced based on the average published Metals Week price for the month prior to the month of shipment.

LABOR MATTERS

At December 31, 2019, we employed approximately 27,500 people (12,800 in North America, 6,900 in Indonesia, 6,500 in South America and 1,300 in Europe and other locations). We also had contractors that employ personnel at many of our operations, including approximately 22,300 at the Grasberg minerals district in Indonesia, 11,700 in North America, 5,900 at our South America mining operations and 700 in Europe and other locations. Employees represented by unions at December 31, 2019, are listed below, with the number of employees represented and the expiration date of the applicable union agreements:



Location	Number of Unions	Number of Union- Represented Employees	Expiration Date
Location	Number of Unions	Number of Union- Represented Employees	Expiration Date
PT-FI – Indonesia	2	5,020	September 2019	^a
Cerro Verde – Peru	1	3,421	August 2021
El Abra – Chile	2	788	April 2023
Atlantic Copper – Spain	3	484	December 2019	^b
Kokkola - Finland	3	187	No