BUSINESS SEGMENTS

6 Months Ended

Jun. 30, 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, the Bagdad copper mine became a reportable segment. As a result, FCX revised its segment disclosure for the three and six months ended June 30, 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 second quarters and first six months of 2020 and 2019 follow (in millions):



	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020			2019			2020			2019
Copper:
Cathode	$	1,124		$	959		$	1,961		$	1,818
Concentrate	749			1,134			1,598			2,299
Rod and other refined copper products	303			516			845			1,023
Purchased copper^a	166			325			401			662
Gold	341			305			611			696
Molybdenum	194			327			437			615
Other^b	115			218			272			495
Adjustments to revenues:
Treatment charges	(75		)	(100		)	(155		)	(205		)
Royalty expense^c	(26		)	(19		)	(46		)	(49		)
Export duties^d	(16		)	(10		)	(20		)	(27		)
Revenues from contracts with customers	2,875			3,655			5,904			7,327
Embedded derivatives^e	179			(109		)	(52		)	11
Total consolidated revenues	$	3,054		$	3,546		$	5,852		$	7,338


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 June 30, 2020
Revenues:
Unaffiliated customers	$	20	$	—	$	16		$	36			$	471	$	106		$	577		$	683		^a	$	—		$	1,106		$	464	$	188		^b	$	3,054
Intersegment	447		166		339			952			^c	52		—			52			35				58			8			2		(1,107		)		—
Production and delivery	348		118		321			787				334		104			438			378				61			1,138			446		(854		)		2,394
Depreciation, depletion and amortization	43		13		33			89				88		14			102			124				15			6			7		15				358
Metals inventory adjustments	—		—		(89		)	(89		)		—		(57		)	(57		)	—				1			1			—		5				(139		)
Selling, general and administrative expenses	—		—		1			1				1		—			1			28				—			—			5		56				91
Mining exploration and research expenses	—		—		1			1				—		—			—			—				—			—			—		17				18
Environmental obligations and shutdown costs	—		—		—			—				—		—			—			—				—			—			—		11				11
Operating income (loss)	76		35		88			199				100		45			145			188				(19		)	(31		)	8		(169		)		321

Interest expense, net	1		—		—			1				20		—			20			1				—			—			1		92				115
Provision for (benefit from) income taxes	—		—		—			—				29		16			45			78				—			—			1		(28		)		96
Total assets at June 30, 2020	2,697		794		4,404			7,895				8,515		1,631			10,146			16,848				1,777			259			726		2,579				40,230
Capital expenditures	27		12		109			148				31		20			51			308				4			2			5		9				527

Three Months Ended June 30, 2019
Revenues:
Unaffiliated customers	$	16	$	—	$	69		$	85			$	562	$	128		$	690		$	583		^a	$	—		$	1,171		$	546	$	471		^b	$	3,546
Intersegment	491		204		340			1,035				71		—			71			(1		)		109			4			—		(1,218		)		—
Production and delivery	348		128		348			824				455		126			581			554				78			1,171			515		(718		)		3,005
Depreciation, depletion and amortization	43		11		33			87				101		18			119			99				18			3			7		19				352
Metals inventory adjustments	—		—		1			1				—		—			—			—				—			—			—		1				2
Selling, general and administrative expenses	—		—		—			—				2		—			2			30				—			—			5		55				92
Mining exploration and research expenses	—		—		1			1				—		—			—			—				—			—			—		30				31
Environmental obligations and shutdown costs	—		—		—			—				—		—			—			—				—			—			—		23				23
Net loss on sales of assets	—		—		—			—				—		—			—			—				—			—			—		8				8
Operating income (loss)	116		65		26			207				75		(16		)	59			(101		)		13			1			19		(165		)		33

Interest expense, net	1		—		—			1				25		—			25			1				—			—			6		99				132
Provision for (benefit from) income taxes	—		—		—			—				20		(9		)	11			(35		)		—			—			2		7				(15		)
Total assets at June 30, 2019	2,917		742		4,179			7,838				8,571		1,699			10,270			16,261				1,792			250			764		3,911				41,086
Capital expenditures	49		33		125			207				43		4			47			339				2			1			5		28				629


a.	Includes PT-FI's sales to PT Smelting totaling $433 million in second-quarter 2020 and $470 million in second-quarter 2019.


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 hedging losses totaling $24 million related to forward sales contracts covering 150 million pounds of copper sales for May and June 2020 at a fixed price of $2.34 per pound.



(In millions)

																														Atlantic		Corporate,
	North America Copper Mines										South America Mining																			Copper		Other
					Other						Cerro			Other						Indonesia				Molybdenum			Rod &			Smelting		& Elimi-				FCX
	Morenci		Bagdad		Mines			Total			Verde			Mines			Total			Mining				Mines			Refining			& Refining		nations				Total
Six Months Ended June 30, 2020
Revenues:
Unaffiliated customers	$	22	$	—	$	23		$	45		$	847		$	204		$	1,051		$	1,128		^a	$	—		$	2,221		$	893	$	514		^b	$	5,852
Intersegment	889		325		714			1,928		^c	90			—			90			35				129			16			13		(2,211		)		—
Production and delivery	697		244		706			1,647			758			214			972			721				127			2,257			857		(1,642		)		4,939
Depreciation, depletion and amortization	87		27		67			181			181			29			210			225				31			8			14		30				699
Metals inventory adjustments	4		—		52			56			—			3			3			—				5			1			—		18				83
Selling, general and administrative expenses	1		—		1			2			3			—			3			56				—			—			10		130				201
Mining exploration and research expenses	—		—		2			2			—			—			—			—				—			—			—		32				34
Environmental obligations and shutdown costs	—		—		—			—			—			—			—			—				—			1			—		36				37
Net loss on sales of assets	—		—		—			—			—			—			—			—				—			—			—		11				11
Operating income (loss)	122		54		(91		)	85			(5		)	(42		)	(47		)	161				(34		)	(30		)	25		(312		)		(152		)

Interest expense, net	2		—		—			2			48			—			48			2				—			—			4		186				242
(Benefit from) provision for income taxes	—		—		—			—			(23		)	(10		)	(33		)	90				—			—			1		(22		)		36
Capital expenditures	71		37		224			332			90			35			125			634				11			4			11		20				1,137

Six Months Ended June 30, 2019
Revenues:
Unaffiliated customers	$	28	$	—	$	164		$	192		$	1,289		$	226		$	1,515		$	1,288		^a	$	—		$	2,299		$	1,117	$	927		^b	$	7,338
Intersegment	949		382		631			1,962			197			—			197			57				200			10			5		(2,431		)		—
Production and delivery	643		248		676			1,567			894			226			1,120			1,110				149			2,304			1,067		(1,388		)		5,929
Depreciation, depletion and amortization	83		21		66			170			201			32			233			204				34			5			14		39				699
Metals inventory adjustments	—		—		1			1			—			—			—			—				—			—			—		58				59
Selling, general and administrative expenses	1		—		1			2			4			—			4			60				—			—			10		123				199
Mining exploration and research expenses	—		—		1			1			—			—			—			—				—			—			—		57				58
Environmental obligations and shutdown costs	—		—		—			—			—			—			—			—				—			—			—		65				65
Net gain on sales of assets	—		—		—			—			—			—			—			—				—			—			—		(25		)		(25		)
Operating income (loss)	250		113		50			413			387			(32		)	355			(29		)		17			—			31		(433		)		354

Interest expense, net	2		—		—			2			54			—			54			1				—			—			12		209				278
Provision for (benefit from) income taxes	—		—		—			—			130			(14		)	116			(9		)		—			—			3		(20		)		90
Capital expenditures	111		58		248			417			99			9			108			658				6			2			9		51				1,251


a.	Includes PT-FI's sales to PT Smelting totaling $813 million for the first six months of 2020 and $879 million for the first six months of 2019.


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.

Includes hedging losses totaling $24 million related to forward sales contracts covering 150 million pounds of copper sales for May and June 2020 at a fixed price of $2.34 per pound.