COMMITMENTS AND GUARANTEES

12 Months Ended

Dec. 31, 2022

Commitments and Contingencies Disclosure [Abstract]

Leases. The components of FCX’s leases presented in the consolidated balance sheet for the years ended December 31 follow:



	December 31,
	2022		2021
Lease right-of-use assets (included in property, plant, equipment and mine development costs, net)	$	342	$	337

Short-term lease liabilities (included in accounts payable and accrued liabilities)	$	38	$	38
Long-term lease liabilities (included in other liabilities)a	294		281
Total lease liabilities	$	332	$	319

a.Includes a land lease by PT-FI for the greenfield smelter totaling $141 million at December 31, 2022 and $126 million at December 31, 2021. This is FCX’s only significant finance lease.

Operating lease costs, primarily included in production and delivery expense in the consolidated statements of income, for the years ended December 31 follow:


	2022		2021		2020

Operating leases	$	46	$	42	$	42

Variable and short-term leases	84		62		74
Total operating lease costs	$	130	$	104	$	116

FCX payments included in operating cash flows for its lease liabilities totaled $41 million in 2022, $54 million in 2021 and $36 million in 2020. FCX payments included in financing cash flows for its lease liabilities totaled $7 million in 2022, $25 million in 2021 and $4 million in 2020. As of December 31, 2022, the weighted-average discount rate used to determine the lease liabilities was 4.1% (4.2% as of December 31, 2021) and the weighted-average remaining lease term was 12.0 years (12.4 years as of December 31, 2021).

The future minimum payments for leases presented in the consolidated balance sheet at December 31, 2022, follow:



2023	$	48
2024	85
2025	34
2026	29
2027	24
Thereafter	186
Total payments	406
Less amount representing interest	(74)
Present value of net minimum lease payments	332
Less current portion	(38)
Long-term portion	$	294

Contractual Obligations. At December 31, 2022, based on applicable prices on that date, FCX has unconditional purchase obligations (including take-or-pay contracts with terms less than one year) of $4.8 billion, primarily comprising the procurement of copper concentrate ($3.6 billion), transportation services ($0.5 billion) and electricity ($0.3 billion). Some of FCX’s unconditional purchase obligations are settled based on the prevailing market rate for the service or commodity purchased. In some cases, the amount of the actual obligation may change over time because of market conditions. Obligations for copper concentrate provide for deliveries of specified volumes to Atlantic Copper at market-based prices. Transportation obligations are primarily for South America contracted ocean freight. Electricity obligations are primarily for long-term power purchase agreements in North America and contractual minimum demand at the South America mines.

FCX’s unconditional purchase obligations total $1.6 billion in 2023, $1.5 billion in 2024, $1.0 billion in 2025, $0.3 billion in 2026, $0.1 billion in 2027 and $0.3 billion thereafter. During the three-year period ended December 31, 2022, FCX fulfilled its minimum contractual purchase obligations.

IUPK - Indonesia. In December 2018, FCX completed the 2018 Transaction with the Indonesia government regarding PT-FI’s long-term mining rights and share ownership. Concurrent with the closing of the 2018 Transaction, the Indonesia government granted PT-FI an IUPK to replace its former Contract of Work, enabling PT-FI to conduct operations in the Grasberg minerals district through 2041. Under the terms of the IUPK, PT-FI was granted an extension of mining rights through 2031, with rights to extend mining rights through 2041, subject to PT-FI completing the development of additional smelting capacity in Indonesia by the end of 2023 (an extension of which has been requested as a result of COVID-19 mitigation measures, subject to the approval of the Indonesia government, refer to Note 12), and fulfilling its defined fiscal obligations to the Indonesia government. The IUPK, and related documentation, contains legal and fiscal terms and is legally enforceable through 2041, assuming the additional extension is received. In addition, FCX, as a foreign investor, has rights to resolve investment disputes with the Indonesia government through international arbitration.

The key fiscal terms set forth in the IUPK include a 25% corporate income tax rate, a 10% profits tax on net income, and royalty rates of 4% for copper, 3.75% for gold and 3.25% for silver. PT-FI’s royalties charged against revenues totaled $357 million in 2022, $319 million in 2021 and $160 million in 2020.

Dividend distributions from PT-FI to FCX totaled $2.5 billion in 2022 and $1.0 billion in 2021 and are subject to a 10% withholding tax. There were no dividend distributions from PT-FI to FCX in 2020.

The IUPK requires PT-FI to pay export duties of 5%, declining to 2.5% when smelter development progress exceeds 30% and eliminated when development progress for additional smelting capacity in Indonesia exceeds 50%. In December 2022, PT-FI received approval, based on construction progress achieved, for a reduction in export duties from 5% to 2.5%, which was effective immediately. At December 31, 2022, construction of the greenfield smelter was approximately 50% complete. PT-FI’s export duties totaled $325 million in 2022, $218 million in 2021 and $92 million in 2020. Upon receiving verification and approval from the Indonesia government that construction progress has exceeded 50%, PT-FI expects export duties may be eliminated.

Beginning in 2019, the IUPK also requires PT-FI to pay surface water taxes of $15 million annually, which are recognized in production and delivery costs.

In connection with a memorandum of understanding previously entered into with the Indonesia government in July 2014, PT-FI provided an assurance bond to support its commitment to construct a greenfield smelter in Indonesia ($133 million based on exchange rate as of December 31, 2022).

Chiyoda Contract. In July 2021, PT-FI awarded a construction contract to Chiyoda for the construction of a greenfield smelter in Gresik, Indonesia with an estimated contract cost of $2.8 billion. The smelter is expected to be commissioned during 2024.

Indemnification. The PT-FI divestment agreement, discussed in Note 3, provides that FCX will indemnify MIND ID and PTI from any losses (reduced by receipts) arising from any tax disputes of PT-FI disclosed to MIND ID in a Jakarta, Indonesia tax court letter limited to PTI’s respective percentage share at the time the loss is finally incurred. Any net obligations arising from any tax settlement would be paid on December 21, 2025. FCX had accrued $74 million as of December 31, 2022, and $78 million as of December 31, 2021, (included in other liabilities in the consolidated balance sheets) related to this indemnification.

Community Development Programs. FCX has adopted policies that govern its working and engagement relationships with the communities where it operates. These policies are designed to guide FCX’s practices and programs in a manner that respects and promotes basic human rights and the culture of the local people impacted by FCX’s operations. FCX continues to make significant expenditures on community development, education, health, training, and cultural programs.

PT-FI provides funding and technical assistance to support various community development programs in areas such as health, education, economic development and local infrastructure. In 1996, PT-FI established a social investment fund with the aim of contributing to social and economic development in the Mimika Regency. Prior to 2019, the fund was mainly managed by the Amungme and Kamoro Community Development Organization, a community-led institution. In 2019, a new foundation, the Amungme and Kamoro Community Empowerment Foundation (Yayasan Pemberdayaan Masyarakat Amungme dan Kamoro, or YPMAK) was established, and in 2020, PT-FI appointed YPMAK to assist in distributing a significant portion of PT-FI’s funding to support the development and empowerment of the local indigenous Papuan people. YPMAK is governed by a Board of Governors consisting of seven representatives, including four from PT-FI.

In addition, since 2001, PT-FI has voluntarily established and contributed to land rights trust funds administered by Amungme and Kamoro representatives that focus on socioeconomic initiatives, human rights and environmental issues.

PT-FI is committed to the continued funding of YPMAK programs and the land rights trust funds, as well as for other local-community development initiatives through 2041 and has made and expects to continue making annual investments in public health, education and local economic development. PT-FI recorded charges totaling $123 million in 2022, $109 million in 2021 and $67 million in 2020 to cost of sales for social and economic development programs.

Guarantees. FCX provides certain financial guarantees (including indirect guarantees of the indebtedness of others) and indemnities.

Prior to its acquisition by FCX, FMC and its subsidiaries have, as part of merger, acquisition, divestiture and other transactions, from time to time, indemnified certain sellers, buyers or other parties related to the transaction from and against certain liabilities associated with conditions in existence (or claims associated with actions taken) prior to the closing date of the transaction. As part of these transactions, FMC indemnified the counterparty from and against certain excluded or retained liabilities existing at the time of sale that would otherwise have been transferred to the party at closing. These indemnity provisions generally now require FCX to indemnify the party against certain liabilities that may arise in the future from the pre-closing activities of FMC for assets sold or purchased. The indemnity classifications include environmental, tax and certain operating liabilities, claims or litigation existing at closing and various excluded liabilities or obligations. Most of these indemnity obligations arise from transactions that closed many years ago, and given the nature of these indemnity obligations, it is not possible to estimate the maximum potential exposure. Except as described in the following sentence, FCX does not consider any of such obligations as having a probable likelihood of payment that is reasonably estimable, and accordingly, has not recorded any obligations associated with these indemnities. With respect to FCX’s environmental indemnity obligations, any expected costs from these guarantees are accrued when potential environmental obligations are considered by management to be probable and the costs can be reasonably estimated.