BUSINESS SEGMENTS

3 Months Ended

Mar. 31, 2020

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, Bagdad, Cerro Verde and Grasberg (Indonesia Mining) copper mines, the Rod & Refining operations and Atlantic Copper Smelting & Refining.

Beginning in fourth-quarter 2019, Bagdad became a reportable segment. As a result, FCX revised its segment disclosure for the three months ended March 31, 2019, to conform with the current year presentation.

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 segments, including Atlantic Copper Smelting & Refining, 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 Financial Information by Business Segment 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 sold for the first quarters of 2020 and 2019 follow (in millions):



	Three Months Ended
	March 31,
	2020			2019
Copper:
Concentrate	$	849		$	1,165
Cathode	837			859
Rod and other refined copper products	542			507
Purchased copper^a	235			337
Gold	270			391
Molybdenum	243			288
Other^b	157			277
Adjustments to revenues:
Treatment charges	(80		)	(105		)
Royalty expense^c	(20		)	(30		)
Export duties^d	(4		)	(17		)
Revenues from contracts with customers	3,029			3,672
Embedded derivatives^e	(231		)	120
Total consolidated revenues	$	2,798		$	3,792


a.	FCX purchases copper cathode primarily for processing by its Rod & Refining operations.


b.	Primarily includes revenues associated with cobalt and silver.


c.	Reflects royalties on sales from PT-FI and Cerro Verde that will vary with the volume of metal sold and prices.


d.	Reflects PT-FI export duties.

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		Bagdad		Other			Total			Verde			Other			Total			Mining				Mines			Refining			& Refining		nations				Total
Three Months Ended March 31, 2020
Revenues:
Unaffiliated customers	$	2	$	—	$	7		$	9		$	376		$	98		$	474		$	445		^a	$	—		$	1,115		$	429	$	326		^b	$	2,798
Intersegment	442		159		375			976			38			—			38			—				71			8			11		(1,104		)		—
Production and delivery	349		126		385			860			424			110			534			343				66			1,119			411		(788		)		2,545
Depreciation, depletion and amortization	44		14		34			92			93			15			108			101				16			2			7		15				341
Metals inventory adjustments	4		—		141			145			—			60			60			—				4			—			—		13				222
Selling, general and administrative expenses	1		—		—			1			2			—			2			28				—			—			5		74				110
Mining exploration and research expenses	—		—		1			1			—			—			—			—				—			—			—		15				16
Environmental obligations and shutdown costs	—		—		—			—			—			—			—			—				—			1			—		25				26
Net loss on sales of assets	—		—		—			—			—			—			—			—				—			—			—		11				11
Operating income (loss)	46		19		(179		)	(114		)	(105		)	(87		)	(192		)	(27		)		(15		)	1			17		(143		)		(473		)

Interest expense, net	1		—		—			1			28			—			28			1				—			—			3		94				127
(Benefit from) provision for income taxes	—		—		—			—			(52		)	(26		)	(78		)	12				—			—			—		6				(60		)
Total assets at March 31, 2020	2,814		800		4,293			7,907			8,471			1,655			10,126			16,711				1,788			231			635		2,821				40,219
Capital expenditures	44		25		115			184			59			15			74			326				7			2			6		11				610

Three Months Ended March 31, 2019
Revenues:
Unaffiliated customers	$	12	$	—	$	95		$	107		$	727		$	98		$	825		$	705		^a	$	—		$	1,128		$	571	$	456		^b	$	3,792
Intersegment	458		178		291			927			126			—			126			58				91			6			5		(1,213		)		—
Production and delivery	295		120		328			743			439			100			539			556				71			1,133			552		(675		)		2,919
Depreciation, depletion and amortization	40		10		33			83			100			14			114			105				16			2			7		20				347
Metals inventory adjustments	—		—		—			—			—			—			—			—				—			—			—		57				57
Selling, general and administrative expenses	1		—		1			2			2			—			2			30				—			—			5		73				112
Mining exploration and research expenses	—		—		—			—			—			—			—			—				—			—			—		27				27
Environmental obligations and shutdown costs	—		—		—			—			—			—			—			—				—			—			—		42				42
Net gain on sales of assets	—		—		—			—			—			—			—			—				—			—			—		(33		)		(33		)
Operating income (loss)	134		48		24			206			312			(16		)	296			72				4			(1		)	12		(268		)		321

Interest expense, net	1		—		—			1			29			—			29			—				—			—			6		110				146
Provision for (benefit from) income taxes	—		—		—			—			110			(5		)	105			26				—			—			1		(27		)		105
Total assets at March 31, 2019	2,904		709		4,051			7,664			8,674			1,720			10,394			15,792				1,785			232			771		4,421				41,059
Capital expenditures	62		25		123			210			56			5			61			319				4			1			4		23				622


a.	Includes PT-FI's sales to PT Smelting totaling $380 million in first-quarter 2020 and $409 million in first-quarter 2019.

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.