

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended ~~September~~June 30, ~~2017~~2018
OR
[ ] 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)

333 North Central Avenue
Phoenix, AZ	85004-2189
(Address of principal executive offices)	(Zip Code)
(602) 366-8100
(Registrant’s telephone number, including area code)

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.

þ Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

þ Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 þ			Accelerated filer ¨
Non-accelerated filer ¨ (Do not check if a smaller reporting company)			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 Exchange Act).

o Yes þ No

On ~~October~~July 31, ~~2017,~~2018, there were issued and outstanding ~~1,447,590,668~~1,449,002,815 shares of the registrant’s common stock, par value $0.10 per share.

FREEPORT-McMoRan INC.

TABLE OF CONTENTS




	Page

Part I. Financial Information	3

Item 1. Financial Statements:	3

Consolidated Balance Sheets (Unaudited)	3

Consolidated Statements of ~~Operations~~Income (Unaudited)	4

Consolidated Statements of Comprehensive Income ~~(Loss)~~ (Unaudited)	5

Consolidated Statements of Cash Flows (Unaudited)	6

Consolidated Statement of Equity (Unaudited)	7

Notes to Consolidated Financial Statements (Unaudited)	8

~~Review~~ Report of Independent Registered Public Accounting Firm	3332

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	3433

Item 3. Quantitative and Qualitative Disclosures About Market Risk	7572

Item 4. Controls and Procedures	7572

Part II. Other Information	7572

Item 1. Legal Proceedings	7572

Item 1A. Risk Factors	7572

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	7673

Item 4. Mine Safety Disclosures	7673

Item 6. Exhibits	7774

Signature	S-1

Table of Contents


Part I.	FINANCIAL INFORMATION


Item 1.	Financial Statements.

FREEPORT-McMoRan INC.

CONSOLIDATED BALANCE SHEETS (Unaudited)


	September 30, 2017			December 31, 2016			June 30, 2018			December 31, 2017
	(In millions)						(In millions)
ASSETS
Current assets:
Cash and cash equivalents	$	4,957		$	4,245		$	3,859		$	4,447
Trade accounts receivable	1,024			1,126			1,077			1,246
Income and other tax receivables	522			879			225			325
Inventories:
Materials and supplies, net	1,276			1,306			1,404			1,305
Mill and leach stockpiles	1,393			1,338			1,435			1,422
Product	1,188			998			1,337			1,166
Other current assets	241			199			381			270
Assets held for sale	549			344			625			508
Total current assets	11,150			10,435			10,343			10,689
Property, plant, equipment and mine development costs, net	22,914			23,219			22,923			22,934
Oil and gas properties, subject to amortization, less accumulated amortization and impairments	20			74
Long-term mill and leach stockpiles	1,453			1,633			1,371			1,409
Other assets	1,790			1,956			2,391			2,270
Total assets	$	37,327		$	37,317		$	37,028		$	37,302

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	2,098		$	2,393		$	2,420		$	2,321
Current portion of debt	2,215			1,232
Accrued income taxes	464			66			569			565
Current portion of environmental and asset retirement obligations	419			369			380			388
Dividends payable							73			—
Current portion of debt							4			1,414
Liabilities held for sale	321			205			353			323
Total current liabilities	5,517			4,265			3,799			5,011
Long-term debt, less current portion	12,567			14,795			11,123			11,703
Deferred income taxes	3,771			3,768			3,702			3,649
Environmental and asset retirement obligations, less current portion	3,498			3,487			3,631			3,631
Other liabilities	1,744			1,745			1,931			2,012
Total liabilities	27,097			28,060			24,186			26,006

Equity:
Stockholders’ equity:
Common stock	158			157			158			158
Capital in excess of par value	26,743			26,690			26,667			26,751
Accumulated deficit	(15,763		)	(16,540		)	(13,161		)	(14,722		)
Accumulated other comprehensive loss	(443		)	(548		)	(464		)	(487		)
Common stock held in treasury	(3,722		)	(3,708		)	(3,726		)	(3,723		)
Total stockholders’ equity	6,973			6,051			9,474			7,977
Noncontrolling interests	3,257			3,206			3,368			3,319
Total equity	10,230			9,257			12,842			11,296
Total liabilities and equity	$	37,327		$	37,317		$	37,028		$	37,302

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

FREEPORT-McMoRan INC.

CONSOLIDATED STATEMENTS OF ~~OPERATIONS~~INCOME (Unaudited)


	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
	September 30,						September 30,						June 30,						June 30,
	2017			2016			2017			2016			2018			2017			2018			2017
	(In millions, except per share amounts)												(In millions, except per share amounts)
Revenues	$	4,310		$	3,877		$	11,362		$	10,453		$	5,168		$	3,711		$	10,036		$	7,052
Cost of sales:
Production and delivery	2,802			2,529			7,497			7,984			2,915			2,480			5,723			4,668
Depreciation, depletion and amortization	418			643			1,257			1,937			442			450			893			839
Impairment of oil and gas properties	—			239			—			4,317
Total cost of sales	3,220			3,411			8,754			14,238			3,357			2,930			6,616			5,507
Selling, general and administrative expenses	106			110			366			408			109			107			240			258
Mining exploration and research expenses	27			13			61			46			24			19			45			33
Environmental obligations and shutdown costs (credits)	73			(3		)	81			18
Environmental obligations and shutdown costs													59			(21		)	68			4
Net gain on sales of assets	(33		)	(13		)	(66		)	(762		)	(45		)	(10		)	(56		)	(33		)
Total costs and expenses	3,393			3,518			9,196			13,948			3,504			3,025			6,913			5,769
Operating income (loss)	917			359			2,166			(3,495		)
Operating income													1,664			686			3,123			1,283
Interest expense, net	(304		)	(187		)	(633		)	(574		)	(142		)	(162		)	(293		)	(329		)
Net gain on exchanges and early extinguishment of debt	11			15			8			51
Net gain (loss) on early extinguishment of debt													9			(4		)	8			(3		)
Other income (expense), net	2			(10		)	36			54			20			(7		)	49			—
Income (loss) from continuing operations before income taxes and equity in affiliated companies’ net earnings	626			177			1,577			(3,964		)
(Provision for) benefit from income taxes	(387		)	114			(747		)	(79		)
Equity in affiliated companies’ net earnings	3			1			6			9
Net income (loss) from continuing operations	242			292			836			(4,034		)
Net income (loss) from discontinued operations	3			(6		)	50			(191		)
Net income (loss)	245			286			886			(4,225		)
Net loss (income) attributable to noncontrolling interests:
Income from continuing operations before income taxes and equity in affiliated companies’ net earnings (losses)													1,551			513			2,887			951
Provision for income taxes													(515		)	(186		)	(1,021		)	(360		)
Equity in affiliated companies’ net earnings (losses)													3			(1		)	1			3
Net income from continuing operations													1,039			326			1,867			594
Net (loss) income from discontinued operations													(4		)	9			(15		)	47
Net income													1,035			335			1,852			641
Net income attributable to noncontrolling interests:
Continuing operations	35			(37		)	(106		)	(146		)	(166		)	(66		)	(291		)	(141		)
Discontinued operations	—			(22		)	(4		)	(44		)	—			(1		)	—			(4		)
Preferred dividends attributable to redeemable noncontrolling interest	—			(10		)	—			(31		)
Net income (loss) attributable to common stockholders	$	280		$	217		$	776		$	(4,446	)
Net income attributable to common stockholders													$	869		$	268		$	1,561		$	496

Basic and diluted net income (loss) per share attributable to common stockholders:
Basic net income (loss) per share attributable to common stockholders:
Continuing operations													$	0.60		$	0.18		$	1.08		$	0.31
Discontinued operations													—			—			(0.01		)	0.03
													$	0.60		$	0.18		$	1.07		$	0.34

Diluted net income (loss) per share attributable to common stockholders:
Continuing operations	$	0.19		$	0.18		$	0.50		$	(3.27	)	$	0.59		$	0.18		$	1.08		$	0.31
Discontinued operations	—			(0.02		)	0.03			(0.18		)	—			—			(0.01		)	0.03
	$	0.19		$	0.16		$	0.53		$	(3.45	)	$	0.59		$	0.18		$	1.07		$	0.34

Weighted-average common shares outstanding:
Basic	1,448			1,346			1,447			1,289			1,449			1,447			1,449			1,447

Diluted	1,454			1,351			1,453			1,289			1,458			1,453			1,458			1,453

Dividends declared per share of common stock													$	0.05		$	—		$	0.10		$	—

The accompanying notes are an integral part of these consolidated financial statements.

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FREEPORT-McMoRan INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ~~(LOSS)~~ (Unaudited)

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
(In millions)
Net income (loss) $ 245
$ 286
$ 886
$ (4,225 )

Other comprehensive income, net of taxes:
Unrealized gains on securities —
2
2
3
Defined benefit plans:
Actuarial gains arising during the period, net of taxes of $48 million for the nine months ended September 30, 2017 —
—
69
—
Amortization or curtailment of unrecognized amounts included in net periodic benefit costs 12
11
42
34
Foreign exchange gains (losses) 1
(1 ) —
(11 )
Other comprehensive income 13
12
113
26

Total comprehensive income (loss) 258
298
999
(4,199 )
Total comprehensive loss (income) attributable to noncontrolling interests 35
(59 ) (118 ) (189 )
Preferred dividends attributable to redeemable noncontrolling interest —
(10 ) —
(31 )
Total comprehensive income (loss) attributable to common stockholders $ 293
$ 229
$ 881
$ (4,419 )



	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2018			2017			2018			2017
	(In millions)
Net income	$	1,035		$	335		$	1,852		$	641

Other comprehensive income, net of taxes:
Unrealized gains on securities	—			1			—			2
Defined benefit plans:
Actuarial gains arising during the period, net of taxes of $48 million for the three and six months ended June 30, 2017	—			69			—			69
Amortization of unrecognized amounts included in net periodic benefit costs	11			19			23			30
Foreign exchange losses	—			—			(1		)	(1		)
Other comprehensive income	11			89			22			100

Total comprehensive income	1,046			424			1,874			741
Total comprehensive income attributable to noncontrolling interests	(166		)	(75		)	(290		)	(153		)
Total comprehensive income attributable to common stockholders	$	880		$	349		$	1,584		$	588

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

FREEPORT-McMoRan INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


	Nine Months Ended						Six Months Ended
	September 30,						June 30,
	2017			2016			2018			2017
	(In millions)						(In millions)
Cash flow from operating activities:
Net income (loss)	$	886		$	(4,225	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Net income							$	1,852		$	641
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization	1,257			2,017			893			839
Net charges for Cerro Verde royalty dispute	359			—
Net gain on sales of assets							(56		)	(33		)
Stock-based compensation							60			44
Payments for Cerro Verde royalty dispute	(32		)	(20		)	(21		)	(21		)
Impairment of oil and gas properties	—			4,317
Oil and gas non-cash drillship settlements/idle rig costs and other adjustments	(33		)	705
Net gain on sales of assets	(66		)	(762		)
Net charges for environmental and asset retirement obligations, including accretion	196			149			152			87
Payments for environmental and asset retirement obligations	(85		)	(190		)	(110		)	(59		)
Net charges for defined pension and postretirement plans	95			78			38			70
Pension plan contributions	(152		)	(44		)	(44		)	(56		)
Net gain on exchanges and early extinguishment of debt	(8		)	(51		)
Net (gain) loss on early extinguishment of debt							(8		)	3
Deferred income taxes	77			(22		)	61			55
(Gain) loss on disposal of discontinued operations	(41		)	182
Decrease (increase) in long-term mill and leach stockpiles	181			(84		)
Loss (gain) on disposal of discontinued operations							15			(38		)
Decrease in long-term mill and leach stockpiles							38			80
Non-cash drillship settlements/idle rig costs and other oil and gas adjustments							—			(33		)
Oil and gas contract settlement payments	(70		)	—			—			(70		)
Other, net	59			61			21			(23		)
Changes in working capital and other tax payments, excluding amounts from dispositions:
Changes in working capital and other tax payments:
Accounts receivable	420			257			309			589
Inventories	(314		)	251			(468		)	(101		)
Other current assets	(17		)	(120		)	(20		)	(2		)
Accounts payable and accrued liabilities	(93		)	(80		)	114			(267		)
Accrued income taxes and changes in other tax payments	399			175
Accrued income taxes and timing of other tax payments							(148		)	124
Net cash provided by operating activities	3,018			2,594			2,678			1,829

Cash flow from investing activities:
Capital expenditures:
North America copper mines	(106		)	(87		)	(232		)	(67		)
South America	(65		)	(332		)	(138		)	(45		)
Indonesia	(663		)	(706		)	(449		)	(457		)
Molybdenum mines	(4		)	(2		)	(2		)	(2		)
Other, including oil and gas operations	(182		)	(1,182		)
Net proceeds from the sale of additional interest in Morenci	—			996
Net proceeds from sales of other assets	68			410
Other, net	(22		)	9
Other							(63		)	(135		)
Intangible water rights and other, net							(86		)	3
Net cash used in investing activities	(974		)	(894		)	(970		)	(703		)

Cash flow from financing activities:
Proceeds from debt	795			3,463			352			606
Repayments of debt	(1,991		)	(4,539		)	(2,297		)	(1,250		)
Net proceeds from sale of common stock	—			442
Cash dividends paid:
Common stock	(2		)	(5		)	(73		)	(2		)
Noncontrolling interests	(67		)	(87		)	(241		)	(39		)
Stock-based awards net payments	(10		)	(5		)
Stock-based awards net proceeds (payments)							5			(8		)
Debt financing costs and other, net	(12		)	(17		)	(23		)	(11		)
Net cash used in financing activities	(1,287		)	(748		)	(2,277		)	(704		)

Net increase in cash and cash equivalents	757			952
Increase in cash and cash equivalents in assets held for sale	(45		)	(43		)
Cash and cash equivalents at beginning of year	4,245			177
Cash and cash equivalents at end of period	$	4,957		$	1,086
Net (decrease) increase in cash, cash equivalents, restricted cash and restricted cash equivalents							(569		)	422
Decrease in cash and cash equivalents in assets held for sale							44			7
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of year							4,631			4,403
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period							$	4,106		$	4,832

The accompanying notes are an integral part of these consolidated financial statements.

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FREEPORT-McMoRan INC.

CONSOLIDATED STATEMENT OF EQUITY (Unaudited)

Stockholders’ Equity
Common Stock Accum-ulated Deficit Accumu-
lated
Other Compre-
hensive
Loss
Common Stock
Held in Treasury
Total
Stock-holders’ Equity

Number
of
Shares

At Par
Value

Capital in
Excess of
Par Value

Number
of
Shares

At
Cost

Non-
controlling
Interests

Total
Equity

(In millions)
Balance at December 31, 2016 1,574
$ 157
$ 26,690
$ (16,540 ) $ (548 ) 129
$ (3,708 ) $ 6,051
$ 3,206
$ 9,257
Exercised and issued stock-based awards 4
1
4
—
—
—
—
5
—
5
Stock-based compensation —
—
49
—
—
—
—
49
—
49
Tender of shares for stock-based awards —
—
—
—
—
1
(14 ) (14 ) —
(14 )
Dividends —
—
—
1
—
—
—
1
(67 ) (66 )
Net income attributable to common stockholders —
—
—
776
—
—
—
776
—
776
Net income attributable to noncontrolling interests, including discontinued operations —
—
—
—
—
—
—
—
110
110
Other comprehensive income —
—
—
—
105
—
—
105
8
113
Balance at September 30, 2017 1,578
$ 158
$ 26,743
$ (15,763 ) $ (443 ) 130
$ (3,722 ) $ 6,973
$ 3,257
$ 10,230



	Stockholders’ Equity
	Common Stock						Accum-ulated Deficit			Accumu- lated Other Compre- hensive Loss			Common Stock Held in Treasury				Total Stock-holders’ Equity
	Number of Shares	At Par Value		Capital in Excess of Par Value									Number of Shares	At Cost						Non- controlling Interests			Total Equity
	Number of Shares	At Par Value		Capital in Excess of Par Value									Number of Shares	At Cost						Non- controlling Interests			Total Equity
	(In millions)
Balance at December 31, 2017	1,578	$	158	$	26,751		$	(14,722	)	$	(487	)	130	$	(3,723	)	$	7,977		$	3,319		$	11,296
Exercised and vested stock-based awards	1	—		8			—			—			—	—			8			—			8
Stock-based compensation, including the tender of shares	—	—		53			—			—			—	(3		)	50			—			50
Dividends	—	—		(145		)	—			—			—	—			(145		)	(241		)	(386		)
Net income attributable to common stockholders	—	—		—			1,561			—			—	—			1,561			—			1,561
Net income attributable to noncontrolling interests	—	—		—			—			—			—	—			—			291			291
Other comprehensive income (loss)	—	—		—			—			23			—	—			23			(1		)	22
Balance at June 30, 2018	1,579	$	158	$	26,667		$	(13,161	)	$	(464	)	130	$	(3,726	)	$	9,474		$	3,368		$	12,842

The accompanying notes are an integral part of these consolidated financial statements.

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FREEPORT-McMoRan INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE 1. GENERAL INFORMATION

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all information and disclosures required by generally accepted accounting principles (GAAP) in the United States (U.S.). Therefore, this information should be read in conjunction with Freeport-McMoRan Inc.’s (FCX) consolidated financial statements and notes contained in its annual report on Form 10-K for the year ended December 31, ~~2016.~~2017. The information furnished herein reflects all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim periods reported. With the exception of the accounting for discontinued operations, assets held for sale, and the remeasurement of a pension plan ~~and charges related to a continuing royalty dispute with respect to historical periods at FCX’s mine~~ in ~~Peru,~~second-quarter 2017, all such adjustments are, in the opinion of management, of a normal recurring nature. As a result of FCX’s sale of its interest in TF Holdings Limited (TFHL), FCX has reported TFHL as discontinued operations for all periods presented in the unaudited consolidated financial statements (refer to Note 2). Operating results for the ~~nine-month~~six-month period ended ~~September~~June 30, ~~2017,~~2018, are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2017.~~

~~Indonesia Mining.~~ As a result of the first-quarter 2017 regulatory restrictions and uncertainties regarding long-term investment stability, PT Freeport Indonesia (PT-FI) took actions to adjust its cost structure, reduce its workforce and slow investments in its underground development projects and new smelter. These actions included workforce reductions through furlough and voluntary retirement programs. Following the furlough and voluntary retirement programs, a significant number of employees and contractors elected to participate in an illegal strike action beginning in May 2017, and were subsequently deemed to have voluntarily resigned under existing laws and regulations. As a result, PT-FI recorded charges to operating income for employee severance and related costs totaling $9 million for third-quarter 2017 and $113 million for the first nine months of 2017.

Additionally, because of the significant reduction in workforce, PT-FI was required to remeasure its pension assets and pension benefit obligation as of June 30, 2017. The discount rate and rate of compensation increase used for the June 30, 2017, remeasurement were 7.50 percent and 4.00 percent, respectively, compared to the December 31, 2016, discount rate of 8.25 percent and the rate of compensation increase of 8.00 percent. The expected long-term rate of return on the plan assets was unchanged (7.75 percent). The remeasurement and curtailment resulted in the projected benefit obligation declining by $145 million and plan assets declining by $21 million. In addition, PT-FI recognized a curtailment loss of $4 million in second-quarter 2017 and for the first nine months of 2017. As of September 30, 2017, the funded status of PT-FI’s pension plan was a net asset of $36 million (included in other assets in the consolidated balance sheet), compared with a net liability of $90 million (included in other liabilities in the consolidated balance sheet) as of December 31, 2016.

~~Oil and Gas Properties.~~ During 2016, FCX Oil & Gas LLC (FM O&G, a wholly owned subsidiary of FCX) determined the carrying values of certain of its unevaluated properties were impaired. During the first nine months of 2016, FM O&G transferred $3.2 billion of costs (including $3.1 billion in first-quarter 2016) associated with unevaluated properties to the full cost pool, mostly reflecting impairment of the carrying values of unevaluated properties. The transfer of unevaluated properties to the full cost pool, along with the impact of the reduction in twelve-month historical prices and reserve revisions in 2016 caused net capitalized costs to exceed the related ceiling test limitation under full cost accounting rules. As a result, FM O&G recognized impairment charges of $239 million in third-quarter 2016 and $4.3 billion for the first nine months of 2016. Refer to Note 1 of FCX’s annual report on Form 10-K for the year ended December 31, 2016, for further discussion.

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~~NOTE 2. DISPOSITIONS~~

~~TF Holdings Limited - Discontinued Operations.FCX had~~a~~70 percent interest in TFHL, which owns 80 percent of Tenke Fungurume Mining S.A. (TFM or Tenke) located in the Democratic Republic of Congo (DRC). On~~ ~~November 16, 2016, FCX completed the sale of its interest in TFHL to China Molybdenum Co., Ltd. (CMOC) for~~ ~~$2.65 billion~~ ~~in cash (before closing adjustments) and contingent consideration of up to~~ ~~$120 million~~ ~~in cash, consisting of~~ ~~$60 million~~ ~~if the average copper price exceeds~~ ~~$3.50~~ ~~per pound and~~ ~~$60 million~~ ~~if the average cobalt price exceeds~~ ~~$20~~ ~~per pound, both during calendar years~~ ~~2018~~ ~~and~~ ~~2019~~. The contingent consideration is considered a derivative, and at September 30, 2017, the related fair value of $58 million was recorded in other assets on the consolidated balance sheets. During the first nine months of 2017, the fair value of the contingent consideration derivative increased by $45 million ($3 million in third-quarter 2017), primarily resulting from higher cobalt prices, and was recorded in net income (loss) from discontinued operations.

In accordance with accounting guidance, FCX has reported the results of operations of TFHL as discontinued operations in the consolidated statements of operations. The consolidated statements of cash flows are reported on a combined basis without separately presenting discontinued operations.

~~Net income (loss) from discontinued operations in the consolidated statements of operations consists of the following (in millions):~~

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Revenues $ —
$ 261
^a
$ 13
^a
$ 819
^a
Costs and expenses:
Production and delivery costs —
248
—
730

Depreciation, depletion and amortization —

—
—
80

Interest expense allocated from parent —
12
^b
—
33
^b
Other costs and expenses, net —
4
—
10

Income (loss) before income taxes and net gain (loss) on disposal —
(3 ) 13
(34 )
Net gain (loss) on disposal 3
^c
(5 )
^d
41
^c
(182 )
^d
Net income (loss) before income taxes 3
(8 ) 54
(216 )
Benefit from (provision for) income taxes —
2
(4 ) 25

Net income (loss) from discontinued operations $ 3
$ (6 ) $ 50
$ (191 )


a.	In accordance with accounting guidance, amounts are net of (eliminations) recognition of intercompany sales totaling $(53) million in third-quarter 2016, $13 million for the first nine months of 2017 and $(125) million for the first nine months of 2016.


b.	~~In accordance with accounting guidance, interest associated with FCX’s term loan that was required to be repaid as a result of the sale of TFHL has been allocated to discontinued operations.~~


c.	~~Includes a gain of $3 million in third-quarter 2017 and $45 million for the first nine months of 2017 associated with the change in the fair value of contingent consideration.~~


d.	~~In accordance with accounting guidance, an estimated loss on disposal was recorded and adjusted through closing of the transaction in November 2016.~~

~~Cash flows from discontinued operations included in the consolidated statements of cash flows for the nine months ended September 30, 2016, follow (in millions):~~

Net cash provided by operating activities $ 213
Net cash used in investing activities (71 )
Net cash used in financing activities (103 )
Increase in cash and cash equivalents in assets held for sale $ 39

~~Table of Contents~~

~~Oil and Gas Operations.~~On July 31, 2017, FM O&G sold certain property interests in the Gulf of Mexico Shelf for cash consideration of $62 million, before closing adjustments, with an effective date of April 1, 2017. On March 17, 2017, FM O&G sold property interests in the Madden area in central Wyoming for cash consideration of $17.5 million, before closing adjustments. Under the full cost accounting rules, the sales resulted in the recognition of gains of $33 million in third-quarter 2017 and $49 million for the first nine months of 2017 because the reserves associated with these properties were significant to the full cost pool.

On June 17, 2016, FM O&G sold certain oil and gas royalty interests for cash consideration of $102 million, before closing adjustments. In addition, on July 25, 2016, FM O&G sold its Haynesville shale assets for cash consideration of $87 million, before closing adjustments. Under the full cost accounting rules, the proceeds from these transactions were recorded as a reduction to capitalized oil and gas properties, with no gain or loss recognition for the first nine months of 2016 because the reserves were not significant to the full cost pool.

~~Morenci.~~ On May 31, 2016, FCX sold a 13 percent undivided interest in its Morenci unincorporated joint venture to SMM Morenci, Inc. for $1.0 billion in cash. FCX recorded a $576 million gain for the first nine months of 2016 and used losses to offset cash taxes on the transaction. A portion of the proceeds from the transaction was used to repay borrowings under FCX's unsecured bank term loan and revolving credit facility. As a result of the transaction, the unincorporated joint venture is owned 72 percent by FCX, 15 percent by Sumitomo Metal Mining Arizona, Inc. and 13 percent by SMM Morenci, Inc.

~~Timok.~~ On May 2, 2016, Freeport Minerals Corporation (FMC), a wholly owned subsidiary of FCX, sold an interest in the Timok exploration project in Serbia to Global Reservoir Minerals Inc. (now known as Nevsun Resources, Ltd.) for consideration of $135 million in cash and contingent consideration of up to $107 million payable to FCX in stages upon achievement of defined development milestones. As a result of this transaction, FCX recorded a gain of $133 million for the first nine months of 2016, and no amounts were recorded for contingent consideration under the loss recovery approach.2018.

Assets Held for Sale.~~Freeport Cobalt includes the large-scale cobalt refinery in Kokkola, Finland, and the related sales and marketing business, in which~~ FCX ~~owns an effective 56 percent interest.~~is continuing to assess opportunities for its Kisanfu ~~is a~~ copper and cobalt exploration project, located ~~near Tenke,~~ in ~~which FCX holds a 100 percent interest. As a result~~the Democratic of Republic of Congo, including development of the project on its own or a sale of ~~TFHL, FCX expects to sell its interest~~all or a minority stake in ~~Freeport Cobalt and Kisanfu, and~~ the project. Because management no longer believes that it is probable an outright sale will occur in the near term, the related assets and liabilities ~~of Freeport Cobalt and Kisanfu~~ are no longer classified as held for ~~sale in~~sale. The primary revisions to the consolidated balance ~~sheets. During the first nine months~~sheet as of December 31, 2017, were a ~~favorable adjustment of $13~~$90 million ~~was recorded in~~ increase to property, plant, equipment and mine development costs, net, ~~gain on sales of assets in the consolidated statements of operations associated~~ with ~~the estimated fair value less costs to sell for the Kisanfu exploration project. The adjustment was limited to the~~an offsetting reduction in ~~the carrying value when the Kisanfu exploration project was initially classified as~~current assets held for sale, and a $27 million increase to deferred income taxes, with an offsetting reduction in ~~November 2016.~~current liabilities held for sale.

NOTE 3.2. EARNINGS PER SHARE

FCX calculates its basic net income ~~(loss)~~ per share of common stock under the two-class method and calculates its diluted net income ~~(loss)~~ per share of common stock using the more dilutive of the two-class method or the treasury-stock method. Basic net income ~~(loss)~~ per share of common stock was computed by dividing net income ~~(loss)~~ attributable to common stockholders ~~(after deducting accumulated dividends and undistributed earnings to participating securities)~~ by the weighted-average shares of common stock outstanding during the period. Diluted net income ~~(loss)~~ per share of common stock was calculated by including the basic weighted-average shares of common stock outstanding adjusted for the effects of all potential dilutive shares of common stock, unless their effect would be anti-dilutive.

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Reconciliations of net income ~~(loss)~~ and weighted-average shares of common stock outstanding for purposes of calculating basic and diluted net income ~~(loss)~~ per share follow (in millions, except per share amounts):

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Net income (loss) from continuing operations $ 242
$ 292
$ 836
$ (4,034 )
Net loss (income) from continuing operations attributable to noncontrolling interests 35
(37 ) (106 ) (146 )
Preferred dividends on redeemable noncontrolling interest —
(10 ) —
(31 )
Undistributed earnings allocated to participating securities (3 ) (3 ) (3 ) (3 )
Net income (loss) from continuing operations attributable to common stockholders $ 274
$ 242
$ 727
$ (4,214 )

Net income (loss) from discontinued operations $ 3
$ (6 ) $ 50
$ (191 )
Net income from discontinued operations attributable to noncontrolling interests —
(22 ) (4 ) (44 )
Net income (loss) from discontinued operations attributable to common stockholders $ 3
$ (28 ) $ 46
$ (235 )

Net income (loss) attributable to common stockholders $ 277
$ 214
$ 773
$ (4,449 )

Basic weighted-average shares of common stock outstanding 1,448
1,346
1,447
1,289

Add shares issuable upon exercise or vesting of dilutive stock options and restricted stock units 6
5
6
—
^a
Diluted weighted-average shares of common stock outstanding 1,454
1,351
1,453
1,289

Basic and diluted net income (loss) per share attributable to common stockholders:
Continuing operations $ 0.19
$ 0.18
$ 0.50
$ (3.27 )
Discontinued operations —
(0.02 ) 0.03
(0.18 )
$ 0.19
$ 0.16
$ 0.53
$ (3.45 )



	Three Months Ended							Six Months Ended
	June 30,							June 30,
	2018				2017			2018				2017
Net income from continuing operations	$	1,039			$	326		$	1,867			$	594
Net income from continuing operations attributable to noncontrolling interests	(166		)		(66		)	(291		)		(141		)
Undistributed earnings allocated to participating securities	(3		)		(3		)	(4		)		(3		)
Net income from continuing operations attributable to common stockholders	870				257			1,572				450

Net (loss) income from discontinued operations	(4		)		9			(15		)		47
Net income from discontinued operations attributable to noncontrolling interests	—				(1		)	—				(4		)
Net (loss) income from discontinued operations attributable to common stockholders	(4		)		8			(15		)		43


Net income attributable to common stockholders	$	866			$	265		$	1,557			$	493

Basic weighted-average shares of common stock outstanding	1,449				1,447			1,449				1,447
Add shares issuable upon exercise or vesting of dilutive stock options and restricted stock units	9			^a	6			9			^a	6
Diluted weighted-average shares of common stock outstanding	1,458				1,453			1,458				1,453

Basic net income (loss) per share attributable to common stockholders:
Continuing operations	$	0.60			$	0.18		$	1.08			$	0.31
Discontinued operations	—				—			(0.01		)		0.03
	$	0.60			$	0.18		$	1.07			$	0.34
Diluted net income (loss) per share attributable to common stockholders:
Continuing operations	$	0.59			$	0.18		$	1.08			$	0.31
Discontinued operations	—				—			(0.01		)		0.03
	$	0.59			$	0.18		$	1.07			$	0.34


a.	Excludes 12approximately 2 million shares of common stock for second-quarter 2018 and 3 million shares of common stock for the first ~~nine~~six months of ~~2016~~2018 associated with outstanding stock options with exercise prices less than the average market price of FCX’s common stock ~~and restricted stock units~~ that were anti-dilutive.

Outstanding stock options with exercise prices greater than the average market price of FCX’s common stock during the period are excluded from the computation of diluted net income ~~(loss)~~ per share of common stock. Stock options for 3835 million shares of common stock were excluded for ~~third-quarter 2017, 46~~second-quarter 2018, 44 million for ~~third-quarter 2016, 42~~second-quarter 2017, 34 million for the first ~~nine~~six months of ~~2017~~2018 and 4644 million for the first ~~nine~~six months of ~~2016.~~2017.

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NOTE 4.3. INVENTORIES, INCLUDING LONG-TERM MILL AND LEACH STOCKPILES

The components of inventories follow (in millions):


	September 30, 2017		December 31, 2016		June 30, 2018		December 31, 2017
Current inventories:
Total materials and supplies, net^a	$	1,276	$	1,306	$	1,404	$	1,305

Mill stockpiles	$	336	$	259	$	293	$	360
Leach stockpiles	1,057		1,079		1,142		1,062
Total current mill and leach stockpiles	$	1,393	$	1,338	$	1,435	$	1,422

Raw materials (primarily concentrate)	$	285	$	255	$	435	$	265
Work-in-process	154		114		179		154
Finished goods	749		629		723		747
Total product inventories	$	1,188	$	998	$	1,337	$	1,166

Long-term inventories:
Mill stockpiles	$	346	$	487	$	288	$	300
Leach stockpiles	1,107		1,146		1,083		1,109
Total long-term mill and leach stockpiles^b	$	1,453	$	1,633
Total long-term mill and leach stockpiles					$	1,371	$	1,409


a.	Materials and supplies inventory was net of obsolescence reserves totaling ~~$31~~$25 million at ~~September~~June 30, ~~2017,~~2018, and $29 million at December 31, ~~2016.~~


b.	~~Estimated metals in stockpiles not expected to be recovered within the next 12 months.~~2017.

NOTE 5.4. INCOME TAXES

Variations in the relative proportions of jurisdictional income result in fluctuations to FCX’s consolidated effective income tax rate. FCX’s consolidated effective income tax rate was 4735 percent for the first ~~nine~~six months of ~~2017~~2018 and ~~(2)~~38 percent for the first ~~nine~~six months of ~~2016.~~2017. Geographic sources of FCX’s (provision for) benefit from income taxes follow (in millions):


	Three Months Ended							Nine Months Ended							Three Months Ended								Six Months Ended
	September 30,							September 30,							June 30,								June 30,
	2017				2016			2017				2016			2018				2017				2018				2017
U.S. operations^a	$	2			$	331		$	24			$	293
U.S. operations															$	5		^a	$	29		^b	$	8		^a	$	22		^b
International operations	(389		)	^b	(217		)	(771		)	^b	(372		)	(520		)		(215		)		(1,029		)		(382		)
Total	$	(387	)		$	114		$	(747	)		$	(79	)	$	(515	)		$	(186	)		$	(1,021	)		$	(360	)

Includes ~~net~~a tax ~~(charges) credits~~credit of ~~$(10)~~$5 million ~~for third-quarter 2017~~in second-quarter 2018 and ~~$21 million~~ for the first ~~nine~~six months of ~~2017~~2018 associated with ~~alternative minimum~~the settlement of a state income tax credit carryforwards. The third quarter and first nine months of 2016 include net tax credits of $332 million and $290 million, respectively, associated with alternative minimum tax credits, changes to valuation allowances and net operating loss carryback claims.examination.

Includes net ~~charges~~tax credits of $2$32 million in second-quarter 2017 and $31 million for the first six months of 2017 associated with ~~the Cerro Verde mining royalties dispute, consisting~~anticipated recovery of alternative minimum tax charges of $127 million for disputed royalties and other related mining taxes for the period October 2011 through the year 2013 (when royalties were determined based on operating income), mostly offset by a tax benefit of $125 million associated with disputed royalties and other related mining taxes for the period December 2006 through the year 2013.credit carryforwards.

The December 2017 Tax Cuts and Jobs Act (the Act) included significant modifications to then-existing U.S. tax laws and created many new complex tax provisions. As ~~a result~~of December 31, 2017, FCX recorded provisional impacts of the ~~unfavorable Peruvian Supreme Court ruling on~~tax effects related to specific provisions and continues to evaluate other provisions of the ~~Cerro Verde royalty dispute,~~Act. During the first six months of 2018, no adjustments were made to the provisional amounts recorded at December 31, 2017, as FCX ~~recorded pre-tax charges~~has not fully completed its analysis of ~~$357 million~~the Act, and the provisional amounts continue to ~~income~~represent FCX’s best estimates. FCX’s current analysis of the Act indicates that there may be adjustments to tax receivables associated with minimum tax credit refunds resulting from ~~continuing operations~~an ongoing review of tax positions taken in prior years and ~~$2 million~~impacts from the Act’s Global Intangible Low-Taxed Income provisions resulting in use of net operating loss (NOL) carryforwards against income that would not generate a net tax ~~expense for~~liability absent the ~~first nine months~~availability of ~~2017. FCX’s consolidated effective income tax rate was~~ ~~39 percent~~ ~~for the first nine months of 2017 excluding these charges.~~

~~As a result of the impairment~~NOLs. FCX continues to ~~U.S. oil and gas properties, FCX recorded tax charges of $1.6 billion for the first nine months of 2016 to establish~~carry a valuation allowance ~~primarily~~ against all U.S. federal ~~and state deferred tax assets that~~NOLs. During the remainder of 2018, FCX will ~~not generate a future benefit. FCX’s consolidated effective income tax rate was 32 percent for~~continue to refine its calculations, including quantifying potential impacts discussed above, as it completes its analysis of the ~~first nine months of 2016 excluding these tax charges.~~Act.

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NOTE 6.5. DEBT AND EQUITY

The components of debt follow (in millions):


	September 30, 2017			December 31, 2016			June 30, 2018			December 31, 2017
Senior notes and debentures:
Issued by FCX	$	12,811		$	13,745		$	9,594		$	11,429
Issued by FMC	358			359
Issued by Freeport Minerals Corporation (FMC)							358			358
Issued by Freeport-McMoRan Oil & Gas LLC (FM O&G LLC)	122			267			—			54
Cerro Verde credit facility	1,486			1,390			1,171			1,269
Cerro Verde shareholder loans	—			261
Other	5			5			4			7
Total debt^a	14,782			16,027			11,127			13,117
Less current portion of debt	(2,215		)	(1,232		)	(4		)	(1,414		)
Long-term debt	$	12,567		$	14,795		$	11,123		$	11,703


a.	Includes additions for unamortized fair value adjustments totaling ~~$131~~$63 million at ~~September~~June 30, ~~2017~~2018 ($~~179~~97 million at December 31, ~~2016)~~2017), and is net of reductions for unamortized net discounts and unamortized debt issuance costs totaling ~~$92~~$76 million at ~~September~~June 30, ~~2017~~2018 ($~~100~~85 million at December 31, ~~2016)~~2017).

Revolving Credit Facility. At ~~September~~June 30, ~~2017,~~2018, there were no borrowings outstanding and $3613 million in letters of credit issued under FCX’s revolving credit facility, resulting in availability of approximately $3.5 billion, of which approximately $1.5 billion could be used for additional letters of credit.

In April 2018, FCX, PT Freeport Indonesia (PT-FI) and FM O&G LLC entered into a new $3.5 billion, five-year, unsecured revolving credit facility, which replaced FCX’s prior revolving credit facility (scheduled to mature on May 31, 2019). The new revolving credit facility is available until April 20, 2023, with $500 million available to PT-FI, and up to $1.5 billion available in letters of credit, and has a substantially similar structure and terms as the prior revolving credit facility. Interest on loans made under the new revolving credit facility will, at the option of FCX, be determined based on the adjusted London Interbank Offered rate or the alternate base rate (each as defined in the new revolving credit facility) plus a spread to be determined by reference to FCX’s credit ratings. The new revolving credit facility contains customary affirmative covenants and representations, and also contains a number of negative covenants that, among other things, restrict, subject to certain exceptions, the ability of FCX's subsidiaries that are not borrowers or guarantors to incur additional indebtedness (including guarantee obligations) and FCX's or its subsidiaries’ ability to: create liens on assets; enter into sale and leaseback transactions; engage in mergers, liquidations and dissolutions; and sell assets. FCX’s new revolving credit facility also contains financial ratios governing maximum total leverage and minimum interest expense coverage. FCX’s total leverage ratio (ratio of total debt to consolidated earnings before interest, taxes, depreciation and amortization (EBITDA), as defined in the credit agreement) cannot exceed 3.75x, and the minimum interest expense coverage ratio (ratio of consolidated EBITDA to consolidated cash interest expense, as defined in the credit agreement) is 2.25x.

Senior ~~Notes Issued by FCX.~~Notes. In March ~~2017,~~2018, FCX’s ~~2.15%~~2.375% Senior Notes matured, and the ~~$500 million~~$1.4 billion outstanding principal balance was repaid.

On April 4, 2018, FCX redeemed $454 million of aggregate principal amount of outstanding senior notes (as discussed in Early Extinguishment of Debt).

Cerro Verde Credit ~~Facility and Shareholder Loans.~~ Facility.In ~~June 2017,~~March 2018, Cerro ~~Verde’s credit facility was amended to increase the commitment by~~Verde prepaid $~~225~~100 million to ~~$1.5 billion, modify the amortization schedule and to extend the maturity date to June 19, 2022. The amended credit facility amortizes in four installments, with~~ ~~$225 million~~ ~~due on December 31, 2020, $225 million due on June 30, 2021,~~ ~~$525 million~~ due on December 31, 2021, and the remaining balance due on the maturity date of June 19, 2022. All other terms, including the interest rates, remain the same. The interest rate on Cerro Verde's credit facility was ~~3.14 percent~~ ~~at September 30, 2017. Cerro Verde used proceeds from its amended credit facility plus available cash to repay the balance~~ of its ~~shareholder loans in June 2017. Refer to Note 8 of FCX’s annual report on Form 10-K for the year ended December 31, 2016, for further discussion.~~credit facility.

Early Extinguishment of Debt. During second-quarter 2018, FCX redeemed in full certain senior notes, and holders received the principal amounts together with the redemption premiums and accrued and unpaid interest up to the redemption date. A summary of these redemptions follows (in millions):




	Principal Amount		Net Adjustments		Book Value		Redemption Value		Gain
FCX 6.75% Senior Notes due 2022	$	404	$	22	$	426	$	418	$	8
FM O&G LLC 6⁷/₈% Senior Notes due 2023	50		4		54		52		2
	$	454	$	26	$	480	$	470	$	10

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~~Exchanges and Early Extinguishment of Debt.~~ ~~During third-quarter 2017, FCX redeemed in full certain senior notes. A summary of these early debt extinguishments follows (in millions):~~

Principal Amount Net Adjustments Book Value Redemption Value Gain
FCX 6.125% Senior Notes due 2019 $ 179
$ 5
$ 184
$ 182
$ 2
FM O&G 6.125% Senior Notes due 2019 58
2
60
59
1
FCX 6.625% Senior Notes due 2021 228
12
240
234
6
FM O&G 6.625% Senior Notes due 2021 33
2
35
34
1
FM O&G 6.75% Senior Notes due 2022 45
2
47
46
1
$ 543
$ 23
$ 566
$ 555
$ 11

Partially offsetting the ~~$11~~$10 million gain ~~on early extinguishment~~were losses in second-quarter 2018 and for the first six months of ~~certain senior notes~~2018, primarily associated with entering into the new revolving credit facility.

During second-quarter 2017, a $4 million loss was ~~a net loss of $3 million, primarily~~recognized associated with the modification of Cerro Verde’s credit ~~facility in second-quarter 2017.~~

During the second and third quarters of 2016, FCX redeemed certain senior notes in exchange for its common stock, which resulted in gains of $15 million in third-quarter 2016 and $54 million for the first nine months of 2016. Partially offsetting the gains were $3 million in losses, primarily associated with the modification of FCX’s revolving credit facility in first-quarter 2016. Refer to Notes 8 and 10 of FCX’s annual report on Form 10-K for the year ended December 31, 2016, for further discussion.facility.

Interest Expense, Net. Consolidated interest costs ~~from continuing operations~~ (before ~~capitalization and excluding $141 million of interest expense associated with disputed Cerro Verde royalties recorded in third-quarter 2017)~~capitalized interest) totaled ~~$196~~$165 million in ~~third-quarter 2017, $211~~second-quarter 2018, $192 million in ~~third-quarter 2016, $583~~second-quarter 2017, $341 million for the first ~~nine~~six months of ~~2017~~2018 and ~~$647~~$387 million for the first ~~nine~~six months of ~~2016.~~2017. Capitalized interest added to property, plant, equipment and mine development costs, net, totaled ~~$33~~$23 million in ~~third-quarter 2017, $24~~second-quarter 2018, $30 million in ~~third-quarter 2016, $91~~second-quarter 2017, $48 million for the first ~~nine~~six months of ~~2017~~2018 and ~~$66~~$58 million for the first ~~nine~~six months of ~~2016. Capitalized interest added~~2017.

Common Stock. In February 2018, FCX’s Board of Directors (the Board) reinstated a cash dividend on FCX’s common stock. On June 27, 2018, the Board declared a quarterly cash dividend of $0.05 per share, which was paid on August 1, 2018, to ~~oil and gas properties not subject to amortization totaled $7 million for the first nine months~~common stockholders of ~~2016 (none in third-quarter 2016 or 2017).~~record as of July 13, 2018.

NOTE 7.6. FINANCIAL INSTRUMENTS

FCX does not purchase, hold or sell derivative financial instruments unless there is an existing asset or obligation, or it anticipates a future activity that is likely to occur and will result in exposure to market risks, which FCX intends to offset or mitigate. FCX does not enter into any derivative financial instruments for speculative purposes, but has entered into derivative financial instruments in limited instances to achieve specific objectives. These objectives principally relate to managing risks associated with commodity price changes, foreign currency exchange rates and interest rates.

Commodity Contracts. From time to time, FCX has entered into derivative contracts to hedge the market risk associated with fluctuations in the prices of commodities it purchases and sells. Derivative financial instruments used by FCX to manage its risks do not contain credit risk-related contingent provisions. As of ~~September~~June 30, ~~2017,~~2018, and December 31, ~~2016,~~2017, FCX had no price protection contracts relating to its mine production. A discussion of FCX’s derivative contracts and programs follows.

Derivatives Designated as Hedging Instruments – Fair Value Hedges

Copper Futures and Swap Contracts. Some of FCX’s U.S. copper rod customers request a fixed market price instead of the Commodity Exchange Inc. (COMEX) average copper price in the month of shipment. FCX hedges this price exposure in a manner that allows it to receive the COMEX average price in the month of shipment while the customers pay the fixed price they requested. FCX accomplishes this by entering into copper futures or swap contracts. Hedging gains or losses from these copper futures and swap contracts are recorded in revenues. FCX did not have any significant gains or losses resulting from hedge ineffectiveness during the ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2017~~2018 and ~~2016.~~2017. At ~~September~~June 30, ~~2017,~~2018, FCX held copper futures and swap contracts that qualified for hedge accounting for 4664 million pounds at an average contract price of ~~$2.83~~$3.08 per pound, with maturities through ~~June~~September 2019.

~~Table of Contents~~

A summary of (losses) gains ~~(losses)~~ recognized in revenues for derivative financial instruments related to commodity contracts that are designated and qualify as fair value hedge transactions, ~~along with~~including the unrealized gains (losses) on the related hedged item follows (in millions):


	Three Months Ended					Nine Months Ended						Three Months Ended						Six Months Ended
	September 30,					September 30,						June 30,						June 30,
	2017		2016			2017			2016			2018			2017			2018			2017
Copper futures and swap contracts:
Unrealized gains (losses):
Unrealized (losses) gains:
Derivative financial instruments	$	—	$	1		$	(1	)	$	11		$	(4	)	$	1		$	(19	)	$	(1	)
Hedged item – firm sales commitments	—		(1		)	1			(11		)	4			(1		)	19			1

Realized gains (losses):
Realized gains:
Matured derivative financial instruments	12		—			21			(8		)	—			1			2			9

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Derivatives Not Designated as Hedging Instruments

Embedded Derivatives. ~~As described~~Certain FCX concentrate and cathode contracts are provisionally priced at the time of shipment. The provisional prices are finalized in ~~Note 1~~a specified future month (generally one to ~~FCX’s annual report~~four months from the shipment date) based on ~~Form 10-K for the year ended December 31, 2016, under “Revenue Recognition,” certain FCX~~quoted monthly average copper ~~concentrate, copper cathode and gold sales contracts provide for provisional pricing primarily based~~settlement prices on the London Metal Exchange (LME) ~~copper price~~ or ~~the~~ COMEX ~~copper price~~ and ~~the~~quoted monthly average London Bullion Market Association ~~(London)~~(LBMA) gold ~~price at the time of shipment~~settlement prices as specified in the contract. FCX receives market prices based on prices in the specified future month, which results in price fluctuations until the date of settlement. Similarly, FCX purchases copper and cobalt under contracts that provide for provisional pricing. FCX applies the normal purchases and normal sales scope exception in accordance with derivatives and hedge accounting guidance to the host sales agreements since the contracts do not allow for net settlement and always result in physical delivery. Sales and purchases with a provisional sales price contain an embedded derivative (i.e., the price settlement mechanism is settled after the time of delivery) that is required to be bifurcated from the host contract. The host contract is the sale or purchase of the metals contained in the concentrate or cathode at the then-current ~~LME or COMEX copper price or the London gold~~metal price as defined in the contract. Mark-to-market price fluctuations from these embedded derivatives ~~related to continuing operations~~ are recorded through the settlement date and are reflected in revenues for sales contracts and in ~~cost of sales as production and delivery costs~~inventory for purchase contracts. Mark-to-market price fluctuations associated with embedded derivatives for discontinued operations, which were minimal, are included in discontinued operations for all periods presented in these financial statements.

A summary of FCX’s embedded derivatives at ~~September~~June 30, ~~2017,~~2018, follows:


	Open Positions	Average Price Per Unit				Maturities Through	Open Positions	Average Price Per Unit				Maturities Through
	Open Positions	Contract		Market		Maturities Through	Open Positions	Contract		Market		Maturities Through
Embedded derivatives in provisional sales contracts:
Copper (millions of pounds)	546	$	2.84	$	2.93	February 2018	532	$	3.12	$	3.01	November 2018
Gold (thousands of ounces)	194	1,318		1,287		December 2017	308	1,296.18		1,254.91		September 2018
Embedded derivatives in provisional purchase contracts:
Copper (millions of pounds)	155	2.83		2.93		January 2018	159	3.11		3.01		October 2018
Cobalt (millions of pounds)^a							8	32.55		28.60		September 2018


a.	Relates to assets held for sale.

Copper Forward Contracts. Atlantic Copper, FCX’s wholly owned smelting and refining unit in Spain, enters into copper forward contracts designed to hedge its copper price risk whenever its physical purchases and sales pricing periods do not match. These economic hedge transactions are intended to hedge against changes in copper prices, with the mark-to-market hedging gains or losses recorded in cost of sales. At ~~September~~June 30, ~~2017,~~2018, Atlantic Copper held net copper forward ~~purchase~~sales contracts for 546 million pounds at an average contract price of ~~$2.95~~$3.16 per pound, with maturities through ~~October 2017.~~August 2018.

~~Table of Contents~~

Summary of ~~Gains~~ (Losses). Gains. A summary of the realized and unrealized (losses) gains ~~(losses)~~ recognized in operating income ~~(loss)~~ for commodity contracts that do not qualify as hedge transactions, including embedded derivatives, follows (in millions):

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Embedded derivatives in provisional copper and gold
sales contracts^a
$ 137
$ 12
$ 297
$ 88
Copper forward contracts^b
(9 ) (1 ) (14 ) 4



	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2018			2017			2018			2017
Embedded derivatives in provisional sales contracts:^a
Copper	$	(14	)	$	35		$	(149	)	$	142
Gold and other metals	(30		)	(1		)	(12		)	18
Copper forward contracts^b	6			(4		)	8			(5		)


a.	Amounts recorded in revenues.


b.	Amounts recorded in cost of sales as production and delivery costs.

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Unsettled Derivative Financial Instruments

A summary of the fair values of unsettled commodity derivative financial instruments follows (in millions):


	September 30, 2017		December 31, 2016		June 30, 2018		December 31, 2017
Commodity Derivative Assets:
Derivatives designated as hedging instruments:
Copper futures and swap contracts	$	7	$	9	$	—	$	11
Derivatives not designated as hedging instruments:
Embedded derivatives in provisional copper and gold
sales/purchase contracts	74		137		17		155
Copper forward contracts					6		1
Total derivative assets	$	81	$	146	$	23	$	167

Commodity Derivative Liabilities:
Derivatives designated as hedging instruments:
Copper futures and swap contracts	$	2	$	2	$	8	$	—
Derivatives not designated as hedging instruments:
Embedded derivatives in provisional copper and gold
sales/purchase contracts	46		56		73		31
Copper forward contracts					—		2
Total derivative liabilities	$	48	$	58	$	81	$	33

~~Table~~The table above and below excludes $31 million of ~~Contents~~

embedded derivatives in provisional cobalt purchase contracts at June 30, 2018, and $24 million at December 31, 2017, which are reflected in liabilities held for sale.

FCX’s commodity contracts have netting arrangements with counterparties with which the right of offset exists, and it is FCX’s policy to generally offset balances by counterparty on its balance sheet. FCX’s embedded derivatives on provisional sales/purchase contracts are netted with the corresponding outstanding receivable/payable balances. A summary of these unsettled commodity contracts that are offset in the balance sheets follows (in millions):


	Assets				Liabilities				Assets				Liabilities
	September 30, 2017		December 31, 2016		September 30, 2017		December 31, 2016		June 30, 2018		December 31, 2017		June 30, 2018		December 31, 2017

Gross amounts recognized:
Commodity contracts:
Embedded derivatives in provisional
sales/purchase contracts	$	74	$	137	$	46	$	56
Embedded derivatives in provisional copper
and gold sales/purchase contracts									$	17	$	155	$	73	$	31
Copper derivatives	7		9		2		2		6		12		8		2
	81		146		48		58		23		167		81		33

Less gross amounts of offset:
Commodity contracts:
Embedded derivatives in provisional
sales/purchase contracts	1		12		1		12
Embedded derivatives in provisional copper
and gold sales/purchase contracts									—		—		—		—
Copper derivatives	2		2		2		2		—		1		—		1
	3		14		3		14		—		1		—		1

Net amounts presented in balance sheet:
Commodity contracts:
Embedded derivatives in provisional
sales/purchase contracts	73		125		45		44
Embedded derivatives in provisional copper
and gold sales/purchase contracts									17		155		73		31
Copper derivatives	5		7		—		—		6		11		8		1
	$	78	$	132	$	45	$	44	$	23	$	166	$	81	$	32

Balance sheet classification:
Trade accounts receivable	$	69	$	119	$	24	$	13	$	—	$	151	$	64	$	—
Other current assets	5		7		—		—		6		11		—		—
Accounts payable and accrued liabilities	4		6		21		31		17		4		17		32
	$	78	$	132	$	45	$	44	$	23	$	166	$	81	$	32

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Credit Risk. FCX is exposed to credit loss when financial institutions with which it has entered into derivative transactions (commodity, foreign exchange and interest rate swaps) are unable to pay. To minimize the risk of such losses, FCX uses counterparties that meet certain credit requirements and periodically reviews the creditworthiness of these counterparties. FCX does not anticipate that any of the counterparties it deals with will default on their obligations. As of ~~September~~June 30, ~~2017,~~2018, the maximum amount of credit exposure associated with derivative transactions was ~~$78~~$23 million.

Other Financial Instruments. Other financial instruments include cash and cash equivalents, restricted cash, restricted cash equivalents, accounts receivable, ~~restricted cash,~~ investment securities, legally restricted funds, accounts payable and accrued liabilities, dividends payable and long-term debt. The carrying value for cash and cash equivalents (which included time deposits of ~~$1.9~~$2.4 billion at ~~September~~June 30, ~~2017,~~2018, and ~~$64 million~~$2.9 billion at December 31, ~~2016)~~2017), restricted cash, restricted cash equivalents, accounts receivable, ~~restricted cash, and~~ accounts payable and accrued liabilities, and dividends payable approximates fair value because of their short-term nature and generally negligible credit losses (refer to Note 87 for the fair values of investment securities, legally restricted funds and long-term debt).

In addition, as of ~~September~~June 30, ~~2017,~~2018, FCX has contingent consideration assets related to certain 2016 asset sales (refer to Note 87 for the related fair ~~value~~values and to Note 2 of FCX’s annual report on Form 10-K for the year ended December 31, ~~2016,~~2017, for further discussion of these instruments).

Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents. The following table provides a reconciliation of total cash, cash equivalents, restricted cash and restricted cash equivalents presented in the consolidated statements of cash flows to the components presented in the consolidated balance sheets (in millions):



	June 30, 2018		December 31, 2017
Balance sheet components:
Cash and cash equivalents	$	3,859	$	4,447
Restricted cash and restricted cash equivalents included in:
Other current assets	120		52
Other assets	127		132
Total cash, cash equivalents, restricted cash and restricted cash equivalents presented in the consolidated statements of cash flows	$	4,106	$	4,631

FCX’s restricted cash and restricted cash equivalents are primarily related to PT-FI’s commitment for smelter development in Indonesia; guarantees and commitments for certain mine closure and reclamation obligations, and customs duty taxes; and funds held as cash collateral for surety bonds related to plugging and abandonment obligations of certain oil and gas properties. Restricted cash and restricted cash equivalents are classified as a current or long-term asset based on the timing and nature of when or how the cash is expected to be used or when the restrictions are expected to lapse. Restricted cash and restricted cash equivalents are comprised of time deposits and money market funds.

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NOTE 8.7. FAIR VALUE MEASUREMENT

Fair value accounting guidance includes a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). FCX recognizes transfers between levels at the end of the reporting period. FCX did not have any significant transfers in or out of Level 1, 2 or 3 ~~for third-quarter 2017.~~during second-quarter 2018.

FCX’s financial instruments are recorded on the consolidated balance sheets at fair value except for contingent consideration associated with the sale of the Deepwater Gulf of Mexico (GOM) oil and gas properties (which was recorded under the loss recovery approach) and debt. A summary of the carrying amount and fair value of FCX’s financial instruments (including those measured at net asset value (NAV) as a practical expedient), other than cash and cash equivalents, ~~accounts receivable,~~ restricted cash, ~~and~~restricted cash equivalents, accounts receivable, accounts payable and accrued liabilities, and dividends payable (refer to Note 7)6) follows (in millions):


	At September 30, 2017												At June 30, 2018
	Carrying		Fair Value										Carrying		Fair Value
	Amount		Total		NAV		Level 1		Level 2		Level 3		Amount		Total		NAV		Level 1		Level 2		Level 3
Assets
Investment securities:^a,b
U.S. core fixed income fund	$	25	$	25	$	25	$	—	$	—	$	—	$	24	$	24	$	24	$	—	$	—	$	—
Money market funds	21		21		—		21		—		—
Equity securities	6		6		—		6		—		—		5		5		—		5		—		—
Total	52		52		25		27		—		—		29		29		24		5		—		—

Legally restricted funds:^a
U.S. core fixed income fund	55		55		55		—		—		—		54		54		54		—		—		—
Government bonds and notes	38		38		—		—		38		—		37		37		—		—		37		—
Government mortgage-backed securities													31		31		—		—		31		—
Corporate bonds	30		30		—		—		30		—		29		29		—		—		29		—
Government mortgage-backed securities	25		25		—		—		25		—
Money market funds	18		18		—		18		—		—
Asset-backed securities	14		14		—		—		14		—		14		14		—		—		14		—
Collateralized mortgage-backed securities	8		8		—		—		8		—		8		8		—		—		8		—
Money market funds													4		4		—		4		—		—
Municipal bonds	1		1		—		—		1		—		1		1		—		—		1		—
Total	189		189		55		18		116		—		178		178		54		4		120		—

Derivatives:
Embedded derivatives in provisional sales/
purchase contracts in a gross asset position^c	74		74		—		—		74		—
Copper futures and swap contracts^c	7		7		—		5		2		—
Contingent consideration for the sales of TFHL
and onshore California oil and gas properties^a	80		80		—		—		80		—
Embedded derivatives in provisional copper and gold
sales/purchase contracts in a gross asset position^c,d													17		17		—		—		17		—
Copper forward contracts^c													6		6		—		3		3		—
Contingent consideration for the sales of
TF Holdings Limited (TFHL) and onshore
California oil and gas properties^a													151		151		—		—		151		—
Total	161		161		—		5		156		—		174		174		—		3		171		—

Contingent consideration for the sale of the
Deepwater GOM oil and gas properties^a	150		138		—		—		—		138		150		132		—		—		—		132

Total assets			$	540	$	80	$	50	$	272	$	138

Liabilities
Derivatives:^c
Embedded derivatives in provisional sales/
purchase contracts in a gross liability position	46		$	46	$	—	$	—	$	46	$	—
Embedded derivatives in provisional copper and gold
sales/purchase contracts in a gross liability position													$	73	$	73	$	—	$	—	$	73	$	—
Copper futures and swap contracts	2		2		—		1		1		—		8		8		—		7		1		—
Total	48		48		—		1		47		—		81		81		—		7		74		—

Long-term debt, including current portion^d	14,782		14,735		—		—		14,735		—
Long-term debt, including current portion^e													11,127		10,662		—		—		10,662		—

Total liabilities			$	14,783	$	—	$	1	$	14,782	$	—

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	At December 31, 2016												At December 31, 2017
	Carrying		Fair Value										Carrying		Fair Value
	Amount		Total		NAV		Level 1		Level 2		Level 3		Amount		Total		NAV		Level 1		Level 2		Level 3
Assets
Investment securities:^a,b
U.S. core fixed income fund	$	23	$	23	$	23	$	—	$	—	$	—	$	25	$	25	$	25	$	—	$	—	$	—
Money market funds	22		22		—		22		—		—
Equity securities	5		5		—		5		—		—		5		5		—		5		—		—
Total	50		50		23		27		—		—		30		30		25		5		—		—

Legally restricted funds:^a
U.S. core fixed income fund	53		53		53		—		—		—		55		55		55		—		—		—
Government bonds and notes	36		36		—		—		36		—		40		40		—		—		40		—
Corporate bonds	32		32		—		—		32		—		32		32		—		—		32		—
Government mortgage-backed securities	25		25		—		—		25		—		27		27		—		—		27		—
Asset-backed securities	16		16		—		—		16		—		15		15		—		—		15		—
Money market funds	12		12		—		12		—		—		11		11		—		11		—		—
Collateralized mortgage-backed securities	8		8		—		—		8		—		8		8		—		—		8		—
Municipal bonds	1		1		—		—		1		—		1		1		—		—		1		—
Total	183		183		53		12		118		—		189		189		55		11		123		—

Derivatives:
Embedded derivatives in provisional sales/
purchase contracts in a gross asset position^c	137		137		—		—		137		—
Embedded derivatives in provisional copper and gold
sales/purchase contracts in a gross asset position^c													155		155		—		—		155		—
Copper futures and swap contracts^c	9		9		—		8		1		—		11		11		—		9		2		—
Copper forward contracts^c													1		1		—		—		1		—
Contingent consideration for the sales of TFHL
and onshore California oil and gas properties^a	46		46		—		—		46		—		108		108		—		—		108		—
Total	192		192		—		8		184		—		275		275		—		9		266		—

Contingent consideration for the sale of the
Deepwater GOM oil and gas properties^a	150		135		—		—		—		135		150		134		—		—		—		134

Total assets			$	560	$	76	$	47	$	302	$	135

Liabilities
Derivatives:^c
Embedded derivatives in provisional sales/
purchase contracts in a gross liability position	56		$	56	$	—	$	—	$	56	$	—
Copper futures and swap contracts	2		2		—		2		—		—
Embedded derivatives in provisional copper and gold
sales/purchase contracts in a gross liability position^d													$	31	$	31	$	—	$	—	$	31	$	—
Copper forward contracts													2		2		—		1		1		—
Total	58		58		—		2		56		—		33		33		—		1		32		—

Contingent payments for the settlements of
drilling rig contracts^e	23		23		—		—		23		—
Long-term debt, including current portion^e													13,117		13,269		—		—		13,269		—

Long-term debt, including current portion^d	16,027		15,196		—		—		15,196		—

Total liabilities			$	15,277	$	—	$	2	$	15,275	$	—


a.	Current portion included in other current assets and long-term portion included in other assets.

Excludes time deposits (which approximated fair value) included in (i) other current assets of ~~$41~~$120 million at ~~September~~June 30, ~~2017,~~2018, and ~~$28~~$52 million at December 31, ~~2016,~~2017, primarily associated with PT-FI’s mine closure and reclamation guarantees and its disputed incremental export duty and (ii) other assets of ~~$122~~$126 million at ~~both September~~June 30, ~~2017,~~2018, and $123 millionatDecember 31, ~~2016,~~2017, primarily associated with an assurance bond to support PT-FI’s commitment for smelter development in Indonesia.


c.	Refer to Note 76 for further discussion and balance sheet classifications.


d.	Excludes embedded derivatives in provisional cobalt purchase contracts of $31 million at June 30, 2018, and $24 million at December 31, 2017 (refer to Note 6 for further discussion).


e.	Recorded at cost except for debt assumed in acquisitions, which were recorded at fair value at the respective acquisition dates. In addition, debt excludes $150 million at June 30, 2018, and $112 millionatDecember 31, 2017, related to assets held for sale (which approximated fair value).


e.	~~Included in accounts payable and accrued liabilities.~~

~~Table of Contents~~

Valuation Techniques. The U.S. core fixed income fund is valued at ~~net asset value (NAV).~~NAV. The fund strategy seeks total return consisting of income and capital appreciation primarily by investing in a broad range of investment-grade debt securities, including U.S. government obligations, corporate bonds, mortgage-backed securities, asset-backed securities and money market instruments. There are no restrictions on redemptions (which are usually within one business day of notice).

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Money market funds are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets.

Equity securities are valued at the closing price reported on the active market on which the individual securities are traded and, as such, are classified within Level 1 of the fair value hierarchy.

Fixed income securities (government securities, corporate bonds, asset-backed securities, collateralized mortgage-backed securities and municipal bonds) are valued using a bid-evaluation price or a mid-evaluation price. A bid-evaluation price is an estimated price at which a dealer would pay for a security. A mid-evaluation price is the average of the estimated price at which a dealer would sell a security and the estimated price at which a dealer would pay for a security. These evaluations are based on quoted prices, if available, or models that use observable inputs and, as such, are classified within Level 2 of the fair value hierarchy.

FCX’s embedded derivatives on provisional copper concentrate, copper cathode and gold purchases and sales are valued using ~~only~~ quoted monthly LME or COMEX copper forward prices and the ~~London~~adjusted LBMA gold ~~forward price~~prices at each reporting date based on the month of maturity (refer to Note 76 for further discussion); however, FCX’s contracts themselves are not traded on an exchange. As a result, these derivatives are classified within Level 2 of the fair value hierarchy.

FCX’s embedded derivatives on provisional cobalt purchases, included in liabilities held for sale, are valued using quoted monthly LME cobalt forward prices or average published Metals Bulletin cobalt prices, subject to certain adjustments as specified by the terms of the contracts, at each reporting date based on the month of maturity (Level 2).

FCX’s derivative financial instruments for copper futures and swap contracts and copper forward contracts that are traded on the respective exchanges are classified within Level 1 of the fair value hierarchy because they are valued using quoted monthly COMEX or LME prices at each reporting date based on the month of maturity (refer to Note 76 for further discussion). Certain of these contracts are traded on the over-the-counter market and are classified within Level 2 of the fair value hierarchy based on COMEX and LME forward prices.

~~The fair value~~As reported in Note 2 of FCX’s annual report on Form 10-K for the year ended December 31, 2017, in November 2016, FCX’s sale of its interest in TFHL included contingent consideration ~~for~~of up to $120 million in cash, consisting of $60 million if the ~~sales~~average copper price exceeds $3.50 per pound and $60 million if the average cobalt price exceeds $20 per pound, both during the 24-month period beginning January 1, 2018. Also in 2016, FCX Oil & Gas LLC’s (FM O&G) sale of ~~TFHL and~~its onshore California oil and gas properties isincluded contingent consideration of up to $150 million, consisting of $50 million per year for 2018, 2019 and 2020 if the price of Brent crude oil averages over $70 per barrel in each of these calendar years. Future changes in the fair value of the contingent consideration derivative for the sale of TFHL will continue to be recorded in discontinued operations and for the onshore California oil and gas properties will continue to be recorded in operating income. The fair value of the contingent consideration derivative was (i) $61 million at June 30, 2018, and $74 million at December 31, 2017, associated with the sale of TFHL and (ii) $90 million at June 30, 2018, and $34 million at December 31, 2017, associated with the sale of the onshore California oil and gas properties. The contingent consideration derivative was included in other assets in the consolidated balance sheets except for $44 million included in other current assets at June 30, 2018. These fair values were calculated based on average commodity price forecasts through applicable maturity dates using a Monte Carlo simulation model. The models use various observable inputs, including Brent crude oil forward prices, historical copper and cobalt prices, volatilities, discount rates and settlement terms. As a result, these contingent consideration assets are classified within Level 2 of the fair value hierarchy.

~~The fair value~~As reported in Note 2 of ~~contingent consideration~~FCX’s annual report on Form 10-K for the year ended December 31, 2017, in December 2016, FM O&G’s sale of its Deepwater GOM oil and gas properties isincluded up to $150 million in contingent consideration that was recorded at the total amount under the loss recovery approach. The contingent consideration will be received over time as future cash flows are realized in connection with a third-party production handling agreement for an offshore platform. The contingent consideration included in (i) other current assets totaled $28 million at June 30, 2018, and $24 million at December 31, 2017, and (ii) other assets totaled $122 million at June 30, 2018, and $126 million at December 31, 2017. The fair value of this contingent consideration was calculated based on a discounted cash flow model using inputs that include third-party ~~reserve~~ estimates for reserves, production rates and production timing, and discount rates. Because significant inputs are not observable in the market, the contingent consideration is classified within Level 3 of the fair value hierarchy.

~~The December 31, 2016, fair value~~

Table of contingent payments for the settlements of drilling rig contracts was calculated based on the average price forecasts of West Texas Intermediate (WTI) crude oil over the 12-month period ending June 30, 2017, using a mean-reverting model. The model used various observable inputs, including WTI crude oil forward prices, volatilities, discount rate and settlement terms. As a result, these contingent payments were classified within Level 2 of the fair value hierarchy. The contingency period for FM O&G’s drilling rig contract settlements ended June 30, 2017, and no additional amounts were paid.Contents

Long-term debt, including current portion, is valued using available market quotes and, as such, is classified within Level 2 of the fair value hierarchy.

The techniques described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while FCX believes its valuation techniques are appropriate and consistent with other market participants, the use of different techniques or assumptions to determine fair value of certain financial instruments could result in a different fair value measurement at the reporting date. There have been no changes in the techniques used at ~~September~~June 30, ~~2017,~~2018, as compared to those techniques used at December 31, ~~2016.~~

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2017.

A summary of the changes in the fair value of FCX’s Level 3 instrument, contingent consideration for the sale of the Deepwater GOM oil and gas properties, during the first ~~nine~~six months of ~~2017~~2018 follows (in millions):

Fair value at January 1, 2017 $ 135

Net unrealized gain related to assets still held at the end of the period 3

Fair value at September 30, 2017 $ 138



Fair value at January 1, 2018	$	134
Net unrealized loss related to assets still held at the end of the period	(2		)
Fair value at June 30, 2018	$	132

NOTE 9.8. CONTINGENCIES AND COMMITMENTS

Environmental

~~Historical Smelter Sites — Borough of Carteret~~Cyprus Tohono

~~As reported in Note 12 of FCX’s annual report on Form 10-K for the year ended December 31, 2016, from 1920 until 1986, United States Metal Refining Company (USMR), an indirect~~Cyprus Tohono, a wholly owned subsidiary of ~~Cyprus Amax Minerals Company, owned~~FMC, had historical mining operations in south central Arizona, and ~~operated a copper smelter and refinery in~~groundwater issues at the Borough of Carteret, New Jersey, on the banks of the Arthur Kill (a narrow waterway that separates New Jersey from Staten Island). As a result of recent off-site soil sampling in public and private areas near the former smelter,site are expected to require remediation. FCX increased its ~~associated~~recorded environmental obligation for ~~known and potential off-site environmental remediation~~this contingency by ~~recording~~$44 million with a ~~$59 million~~corresponding charge to operating income in ~~third-quarter 2017. Additional sampling is ongoing and could result in additional adjustments~~second-quarter 2018 to ~~the related environmental~~reflect an updated assessment of remediation ~~obligation.~~

~~Uranium Mining Sites~~

As reported in Note 12 of FCX’s annual report on Form 10-K for the year ended December 31, 2016, the Department of Justice, the U.S. Environmental Protection Agency, the Navajo Nation and two FCX-related subsidiaries reached an agreement regarding the scope of environmental investigation and remediation work for 94 former uranium mining sites on tribal lands, and the related financial contributions of the U.S. government and the FCX subsidiaries. The related Consent Decree was approved by the U.S. District Court for the District of Arizona in second-quarter 2017. Based on updated cash flow and timing estimates, FCX reduced its associated obligation for that contingency by recording a $41 million credit to operating income in second-quarter 2017 after receiving court approval of the Consent Decree.alternatives.

Litigation

~~During third-quarter 2017, there~~There were no significant updates to previously reported legal proceedings included in Note 12 of FCX’s annual report on Form 10-K for the year ended December 31, ~~2016.~~2017, other than the matter below, which was also disclosed in Note 8 of FCX’s quarterly report on Form 10-Q for the quarter ended March 31, 2018.

On April 1, 2016, a purported class action titled David Garcia v. Freeport-McMoRan Oil & Gas LLC was filed in the Superior Court of the State of California for the County of Santa Barbara (Case No. 16CV01305) against FM O&G LLC, an indirect wholly owned subsidiary of FCX. A former FM O&G LLC employee filed the case, which alleges violations of various California employment laws and seeks relief for past wages, overtime, penalties, interest and attorney’s fees. The primary issue underlying the claims is whether compensation must be paid to non-exempt shift workers on platforms located offshore California on the outer-continental shelf for sleep time and other non-working time. In June 2016, FM O&G LLC removed the case to the U.S. District Court for the Central District of California, Santa Barbara (the District Court). In September 2016, the court dismissed the complaint on the grounds that all four FM O&G LLC platforms potentially involved are located in federal waters, that federal law, not state law, applies, and that federal law does not require an employer to compensate for non-work time. In October 2016, the plaintiff appealed the dismissal to the U.S. Court of Appeals for the Ninth Circuit. In June 2017, the Ninth Circuit stayed the Garcia case pending its decision in another case involving essentially the same legal issues, titled Newton v. Parker Drilling Management Services, Ltd. In February 2018, a three-judge panel of the Ninth Circuit ruled in favor of the plaintiffs in the Newton case. Because that decision conflicts with longstanding precedent in the Fifth Circuit and could set a precedent that will result in a reversal of the dismissal in the Garcia case, FM O&G LLC and others filed amicus briefs in April 2018 in support of Parker Drilling’s petition for an en banc rehearing in the Newton case. The Ninth Circuit denied that request on April 27, 2018, but modified its original opinion noting that the question of whether the Ninth Circuit’s holding should be applied retrospectively is reserved for the District Court’s consideration on remand. On May 16, 2018, the Ninth Circuit granted Parker Drilling’s motion to stay further proceedings in the District Court pending the possible filing of a petition for review by the U.S. Supreme Court, which would be required to be filed by late August 2018. On May 29, 2018, the Ninth Circuit also stayed further proceedings in Garcia pending the U.S. Supreme Court’s consideration of the petition for review in Newton v. Parker Drilling.

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The amount of the exposure in Garciais uncertain because FM O&G LLC has potential defenses to the claims even if state law would be applied; however, absent success on those defenses, FCX estimates that the exposure could be in the range of approximately $50 million to $80 million if California wage and hour law is applied retroactively to FM O&G LLC’s operations offshore California. FCX has not established a reserve for this contingency because it believes that its legal position is correct and does not believe a loss is probable. FCX intends to vigorously defend this matter.

Tax and Other Matters

Cerro Verde Royalty Dispute and Other Peru Tax Matters

As reported in FCX’s annual report on Form 10-K for the year ended December 31, 2016, and as subsequently updated in Note 9 of FCX’s quarterly report on Form 10-Q for the quarter ended June 30, 2017, SUNAT, Peru’s national tax authority, has assessed mining royalties on ore processed by the Cerro Verde concentrator, which commenced operations in late 2006, for the period December 2006During second-quarter 2018, there were no significant updates to September 2011. Cerro Verde contested these assessments because it believes its 1998 stability agreement exempts from royalties all minerals extracted from its mining concession, irrespective of the method used for processing those minerals. No assessments have been issued for the period from October 2011 to December 2013, and no assessments can be issued for years after 2013, as Cerro Verde began paying royalties on all of its production in January 2014 under its new 15-year stability agreement. Since 2014, Cerro Verde has been paying the disputed assessments for the period December 2006 through December 2008 under an installment program ($135 million paid by Cerro Verde through September 30, 2017).

In October 2017, the Peruvian Supreme Court issued a ruling in favor of SUNAT that the assessments of royalties for the year 2008 on ore processed by the Cerro Verde concentrator were proper under Peruvian law.

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As a result of the unfavorable Peruvian Supreme Court ruling on the 2008 royalty dispute, Cerro Verde recorded pre-tax charges totaling $357 million ($359 million including net tax charges and $188 million net of noncontrolling interests) in third-quarter 2017, consisting of $240 million in royalty assessments, $147 million of penalties and interest related to the December 2006 to December 2008 assessments, and $97 million for related items (primarily associated with the special mining tax and net assets tax) that Cerro Verde would have incurred under the view that its concentrator was not stabilized.

~~A summary of the charges recorded in third-quarter 2017 for~~ the Cerro Verde royalty dispute ~~follows (in millions):~~

Royalty and related assessment charges:
Production and delivery $ 216
^a
Interest expense, net 141

Provision for income taxes 2
^b
Net loss attributable to noncontrolling interests (171 )
$ 188


a.	Includes $176 million related to disputed royalty assessments for the period from December 2006 to September 2011 (when royalties were determined based on revenues), $6 million of penalties related to the December 2006 to December 2008 royalty assessments and ~~$34 million primarily associated with the net assets tax.~~


b.	Includes tax charges of $127 million for disputed royalties ($64 million) and other related mining taxes ($63 million) for the period October 2011 through the year 2013 when royalties were determined based on operating income, mostly offset by a tax benefit of $125 million associated with disputed royalties and other related mining taxes for the period December 2006 through the year 2013.

Cerro Verde acted in good faith in applying the provisions of its 1998 stability agreement and continues to evaluate alternatives to defend its rights. Cerro Verde intends to seek a waiver available under Peruvian law of penalties and interest associated with this matter and has not recorded charges for potential unpaid penalties and interest totaling $360 million ($193 million net of noncontrolling interests) at September 30, 2017, as FCX believes that Cerro Verde should be successful under Peruvian law in obtaining a waiver. Cerro Verde also intends to file a reimbursement claim with SUNAT for penalties and interest paid under the installment plan for the December 2006 to December 2008 assessments, and may have claims for reimbursement of payments it would not have made in the absence of the stabilization agreement, such as the overpayments made for a special (voluntary) levy (GEM), import duties and civil association contributions. No amounts have been recorded for these potential gain contingencies at September 30, 2017.

~~Other Peru Tax Matters~~

~~There were no significant changes to~~ other Peru tax matters ~~during third-quarter 2017 (refer to~~included in Note 12 of FCX’s annual report on Form 10-K for the year ended December 31, ~~2016).~~2017.

Indonesia Tax Matters

~~The following information includes a discussion of~~There were no significant updates to previously reported Indonesia tax matters included in Note 12 of FCX’s annual report on Form 10-K for the year ended December 31, ~~2016.~~2017, other than the matter below, which was also updated in Note 8 of FCX’s quarterly report on Form 10-Q for the quarter ended March 31, 2018.

PT-FI received assessments from the local regional tax authority in Papua, Indonesia, for additional taxes and penalties related to surface water taxes for the period from January 2011 through ~~September 2017.~~June 2018. PT-FI ~~is filing objections to~~has filed or will file appeals of these ~~assessments.~~assessments with the Indonesia Tax Court. During ~~2017,~~the first half of 2018, the Indonesia Tax Court ~~issued rulings against~~ruled partially in favor of PT-FI with respect to assessments for ~~additional taxes~~the period January 2016 through April 2016 by reducing these assessments that amounted to $20 million, including penalties, to $12 million, including penalties (based on the exchange rate at June 30, 2018), or an approximate 40 percent reduction. Hearings in the Indonesia Tax Court related to assessments for the period from May 2016 through September 2016 have concluded with no decisions issued, and ~~penalties~~hearings related to assessments for the period from October 2016 through April 2017 are currently underway.

During 2017, PT-FI filed reconsideration request petitions to the Indonesia Supreme Court with respect to assessments for the period from January 2011 through December ~~2015~~2015; and in second-quarter 2018, filed reconsideration request petitions with respect to the ~~amount of $402 million (based on~~Indonesia Tax Court decisions related to the ~~exchange rate as of September 30, 2017, and including $240 million in penalties). The aggregate amount of~~ assessments ~~received~~for the period from January 2016 through ~~September 2017 was an additional $114 million,~~April 2016. In second-quarter 2018, the Indonesia Supreme Court issued favorable decisions relating to surface water tax assessments for the period January 2011 through July 2015. The Indonesia Supreme Court ruling concluded that PT-FI and the Indonesian government are bound by PT-FI’s Contract of Work (COW), which is lex specialis, and prevails as the law for the parties to the COW that should be carried out in good faith. As a result, FCX estimates the total amount of the assessments, including penalties, (based on the exchange rate asat June 30, 2018) for the period from August 2015 through June 2018 totals $169 million, including $85 million in penalties. As of ~~September~~June 30, ~~2017). No~~2018, no charges have been recorded for these assessments ~~as of September 30, 2017,~~ because PT-FI believes its ~~Contract of Work (COW)~~COW exempts it from these payments and that it has the right to contest these assessments (in which FCX estimates the total exposure based on the exchange rate as of September 30, 2017, totals $516 million, including penalties) in the Indonesia Tax Court and ultimately the Indonesia Supreme Court.payments. As of ~~November 7, 2017,~~August 8, 2018, PT-FI has not paid and does not intend to pay these assessments unless there is a mechanism established to secure a refund for any such payments upon the final court decision. Additionally, PT-FI is seeking to address this matter in connection with the ongoing negotiations with the Indonesian government to resolve PT-FI’s long-term operating rights.

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assessments.

Indonesia Mining Contract. The following is the latest information ~~includes updates~~related to ~~the discussion of~~ PT-FI’s COW ~~included in~~(refer to Note 13 of FCX’s annual report on Form 10-K for the year ended December 31, ~~2016.~~2017, for further discussion).

In ~~January~~October 2017, Indonesia’s Ministry of Environment and ~~February 2017,~~Forestry (the Ministry) notified PT-FI of administrative sanctions related to certain activities the Ministry indicated are not reflected in PT-FI’s environmental permit. The Ministry also notified PT-FI that certain operational activities were inconsistent with factors set forth in PT-FI’s environmental permitting studies and that additional monitoring and improvements need to be undertaken related to air quality, water drainage, treatment and handling of certain wastes, and tailings management. PT-FI has been engaged in a process to update its permits through submissions and dialogue with the Ministry that began in late 2014, and PT-FI believes that it has submitted the required documentation to update such permits. In April 2018, the Ministry issued decrees imposing unattainable environmental standards related to PT-FI’s controlled riverine tailings management system that must be complied with by October 2018. The decrees, which PT-FI believes are contrary to the Indonesian government issued new regulations to address the export of unrefined metals, including copper concentrate and anode slimes, and other matters related to the mining sector. The new regulations permit the continuation of copper concentrate exports for a five-year period through January 2022, subject to various conditions, including conversion from a contract of work to a special operating license (known as an IUPK, which does not provide the same level of fiscal and legal protections asgovernment’s obligations under PT-FI’s COW, ~~which remains~~conflict with PT-FI’s approved environmental management programs and existing environmental permits. If these unattainable environmental standards are not modified or delayed, PT-FI could be adversely affected, including possible shutdown of its operations. PT-FI is currently engaged in effect), a commitment to the completion of smelter construction in five years and payment of export duties to be determined by the Ministry of Finance. In addition, the new regulations enable application for an extension of operating rights five years before expiration of the IUPK and require foreign IUPK holders to divest a 51 percent interest in the licensed entity to Indonesian interests no later than the tenth year of production. Export licenses would be valid for one-year periods, subject to review every six months, depending on smelter construction progress.

~~Following the issuance of the January and February 2017 regulations and~~constructive discussions with the Indonesian government, PT-FI advised the government that it was prepared to convert its COW to an IUPK, subject to obtaining an investment stability agreement providing contractual rights with the same levelMinistry in working toward a resolution of legal and fiscal certainty enumerated under its COW, and provided that the COW would remain in effect until it is replaced by a mutually satisfactory alternative. PT-FI also committed to commence constructionthese issues.

Table of ~~a new smelter during a five-year time frame, following approval of the extension of its long-term operating rights.~~Contents

~~On January 12, 2017,~~ PT-FI suspended exports in response to Indonesian regulations adopted in January 2014. In addition, as a result of labor disturbances and a delay in the renewal of its export license for anode slimes, PT Smelting’s operations (PT-FI’s 25 percent-owned smelter in Indonesia) were shut down from January 19, 2017, until early March 2017. On February 10, 2017, PT-FI was forced to suspend production as a result of limited storage capacity at PT-FI and PT Smelting. On April 21, 2017, the Indonesian government issued a permit to PT-FI that allowed exports to resume for a six-month period, and PT-FI commenced export shipments.

In mid-February 2017, pursuant to the COW’s dispute resolution process, PT-FI provided formal notice to the Indonesian government of an impending dispute listing the government's breaches and violations of the COW. PT-FI continues to reserve its rights under these provisions.

As a result of the 2017 regulatory restrictions and uncertainties regarding long-term investment stability, PT-FI took actions to adjust its cost structure, slow investments in its underground development projects and new smelter, and place certain of its workforce on furlough programs.

~~In August 2017, FCX~~ and the Indonesian government ~~reached an understanding~~have been engaged in negotiation and documentation of a special mining license (IUPK) and accompanying documentation for assurances on ~~a framework that would resolve PT-FI’s long-term operating rights. This framework includes (i) conversion from the COW~~legal and fiscal terms to ~~an IUPK providing~~provide PT-FI with long-term ~~operating~~mining rights through ~~2041, (ii) Indonesian government certainty of fiscal and legal terms during the term of~~2041. In addition, the IUPK ~~(iii)~~would provide that PT-FI ~~commitment to~~ construct a ~~new~~ smelter ~~in Indonesia~~ within five years of reaching a definitive agreements and include agreement ~~and (iv)~~for the divestment of 51 percent of the project area interests to Indonesian participants at fair market ~~value structured so~~value.

In late 2017, the Indonesian government (including the regional government of Papua Province and Mimika Regency) and PT Indonesia Asahan Aluminium (Persero) (Inalum), a state-owned enterprise, which leads the Indonesian government’s consortium of investors, formed a special purpose company to acquire Grasberg project area interests. Inalum is wholly owned by the Indonesian government and currently holds 9.36 percent of PT-FI’s outstanding common stock.

In July 2018, FCX and PT-FI entered into a Heads of Agreement with Inalum and PT-FI’s joint venture partner Rio Tinto. Under the terms of the non-binding agreement, Inalum would acquire for aggregate cash consideration of $3.85 billion all of Rio Tinto's interests associated with its joint venture with PT-FI (Joint Venture) and all of FCX's interests in PT Indocopper Investama, which owns 9.36 percent of PT-FI.

Inalum would contribute the Rio Tinto interests to PT-FI, which would expand PT-FI’s asset base, in exchange for a 40 percent share ownership in PT-FI, pursuant to arrangements that would enable FCX ~~retains control over~~and existing PT-FI shareholders to retain the economics of the revenue and cost sharing arrangements under the Joint Venture. Following completion of the transaction, Inalum's share ownership would approximate 51 percent of PT-FI (subject to an agreement between shareholders to replicate the Joint Venture economics) and FCX's ownership would approximate 49 percent.

At closing, Rio Tinto would receive $3.5 billion and FCX would receive $350 million in cash proceeds from Inalum. In addition, Rio Tinto would forego in favor of FCX an amount equivalent to Rio Tinto's share of Joint Venture cash flows since January 1, 2018, through closing.

Following completion of the ownership restructuring, FCX does not expect its economic exposure to PT-FI to change significantly. FCX expects its share of future cash flows of the expanded PT-FI asset base, combined with the cash proceeds received in the transaction, to be comparable to its existing share of future cash flows under the current Joint Venture arrangement. FCX would also continue to manage the operations of PT-FI.

The transaction, which is expected to close during the second half of 2018, is subject to the negotiation and documentation of definitive agreements, including purchase and sale agreements, the extension and stability of PT-FI's long-term mining rights through 2041 in a form acceptable to FCX and Inalum, a shareholders’ agreement between FCX and Inalum providing for continuity of FCX’s management of PT-FI’s operations and addressing governance arrangements, and resolution of ~~PT-FI.~~environmental regulatory matters pending before the Ministry satisfactory to the Indonesian government, FCX and Inalum. The terms of these agreements will be subject to approval by the FCX Board, and will require modification or revocation of current regulations and the implementation of new regulations by the Indonesian government. FCX cannot currently predict whether there will be any material accounting and tax ~~implications~~impacts associated with the ~~divestment.~~transaction.

~~The framework requires documentation~~PT-FI’s export license is effective through February 15, 2019. In July 2018, PT-FI’s temporary IUPK was extended to August 31, 2018, and ~~execution of a definitive agreement, which must be approved by the FCX Board of Directors and joint venture partner Rio Tinto. The parties~~PT-FI will continue to ~~negotiate~~seek extensions to ~~reach agreement on important aspects~~its temporary IUPK until definitive agreements are complete. On February 28, 2018, PT Smelting (PT-FI’s 25 percent-owned smelter and refinery in Indonesia) received an extension of implementation of the framework, including the timing and process of divestment, governance matters, and the determination of fair market value, and to complete documentation on a comprehensive agreement for PT-FI’s operationsits anode slimes export license through ~~2041. The parties have expressed a mutual objective of completing the negotiations and documentation during 2017.~~

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February 26, 2019.

~~In October 2017, the Indonesian government extended PT-FI’s export rights to December 31, 2017, while negotiations to reach and document a comprehensive long-term~~FCX cannot predict whether PT-FI will be successful in reaching satisfactory definitive ~~agreement based~~agreements on the ~~agreed framework continue.~~

terms of its long-term mining rights. Until a definitive ~~agreement is~~agreements are reached, PT-FI has reserved all rights under its COW, including pursuing arbitration under the dispute resolution ~~provisions.~~procedures.

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NOTE ~~10.~~9. 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.

FCX’s reportable segments previously included U.S. Oil & Gas operations. During 2016, FCX completed the sales of its Deepwater Gulf of Mexico, onshore California and Haynesville oil and gas properties. As a result, beginning in 2017, the U.S. oil and gas operations no longer qualify as a reportable segment, and oil and gas results for all periods presented have been included in Corporate, Other & Eliminations in the following tables. Refer to Note 2 of FCX’s annual report on Form 10-K for the year ended December 31, 2016, for additional information.

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, ~~(PT-FI’s 25-percent-owned smelter and refinery in Indonesia),~~ 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~~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 2018 and 2017 follow (in millions):



	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2018			2017			2018			2017
Copper:
Concentrate	$	1,703		$	1,241		$	3,350		$	2,222
Cathode	1,465			954			2,888			1,995
Rod and other refined copper products	668			590			1,338			1,214
Gold	933			571			1,741			839
Molybdenum	310			239			596			448
Other^a	400			281			798			512
Adjustments to revenue:
Treatment charges	(139		)	(128		)	(271		)	(231		)
Royalty expense^b	(73		)	(44		)	(142		)	(66		)
Export duties^c	(55		)	(27		)	(101		)	(41		)
Revenue from contracts with customers	5,212			3,677			10,197			6,892
Embedded derivatives^d	(44		)	34			(161		)	160
Total consolidated revenues	$	5,168		$	3,711		$	10,036		$	7,052


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 PT-FI export duties.


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

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Financial Information by Business ~~Segments~~Segment



(In millions)

																							Atlantic		Corporate,																											Atlantic			Corporate,
	North America Copper Mines						South America																Copper		Other							North America Copper Mines						South America														Copper			Other
							Cerro								Indonesia			Molybdenum			Rod &		Smelting		& Elimi-				FCX									Cerro						Indonesia			Molybdenum			Rod &		Smelting			& Elimi-				FCX
	Morenci		Other		Total		Verde			Other			Total		Mining			Mines			Refining		& Refining		nations^a				Total			Morenci		Other		Total		Verde		Other		Total		Mining			Mines			Refining		& Refining			nations^a				Total
Three Months Ended September 30, 2017
Three Months Ended June 30, 2018
Revenues:
Unaffiliated customers	$	57	$	40	$	97	$	850		$	109		$	959	$	1,121	^b	$	—		$	1,137	$	554	$	442		^c	$	4,310		$	25	$	13	$	38	$	719	$	171	$	890	$	1,639	^b	$	—		$	1,387	$	602		$	612		^c	$	5,168
Intersegment	460		548		1,008		64			—			64		—			65			8		1		(1,146		)		—			568		641		1,209		100		—		100		1			111			8		—			(1,429		)		—
Production and delivery	244		414		658		683		^d	76			759		406			58			1,141		533		(753		)		2,802			298		491		789		445		133		578		425			71			1,389		579			(916		)		2,915
Depreciation, depletion and amortization	42		54		96		116			18			134		136			20			2		7		23				418			44		48		92		109		24		133		172			21			3		7			14				442
Selling, general and administrative expenses	1		1		2		2			—			2		32			—			—		4		66				106			1		—		1		2		—		2		28			—			—		5			73				109
Mining exploration and research expenses	—		—		—		—			—			—		—			—			—		—		27				27			—		—		—		—		—		—		—			—			—		—			24				24
Environmental obligations and shutdown costs	—		—		—		—			—			—		—			—			—		—		73				73			—		—		—		—		—		—		—			—			—		—			59				59
Net gain on sales of assets	—		—		—		—			—			—		—			—			—		—		(33		)		(33		)	—		—		—		—		—		—		—			—			—		—			(45		)		(45		)
Operating income (loss)	230		119		349		113			15			128		547			(13		)	2		11		(107		)		917			250		115		365		263		14		277		1,015			19			3		11			(26		)		1,664

Interest expense, net	1		—		1		156		^d	—			156		1			—			—		5		141				304			1		—		1		16		—		16		—			—			—		6			119				142
Provision for income taxes	—		—		—		134		^d	5			139		233			—			—		1		14				387
Total assets at September 30, 2017	2,844		4,223		7,067		8,851			1,595			10,446		11,100			1,885			264		751		5,814			^e	37,327
Provision for (benefit from) income taxes																																—		—		—		102		6		108		429			—			—		—			(22		)		515
Total assets at June 30, 2018																																2,819		4,374		7,193		8,630		1,715		10,345		10,911			1,820			278		931			5,550			^d	37,028
Capital expenditures	26		13		39		17			3			20		206			2			1		5		41				314			41		99		140		68		3		71		246			1			1		3			20				482

Three Months Ended September 30, 2016
Three Months Ended June 30, 2017
Revenues:
Unaffiliated customers	$	115	$	112	$	227	$	505		$	112		$	617	$	984	^b	$	—		$	930	$	445	$	674		^c	$	3,877		$	45	$	32	$	77	$	567	$	111	$	678	$	1,065	^b	$	—		$	1,046	$	400		$	445		^c	$	3,711
Intersegment	358		499		857		54			—			54		2			46			7		—		(966		)		—			478		593		1,071		57		—		57		—			71			6		—			(1,205		)		—
Production and delivery	275		464		739		333			91			424		478			57			931		416		(516		)	^f	2,529			266		454		720		376		87		463		547		^e	58			1,047		400			(755		)		2,480			^f
Depreciation, depletion and amortization	51		78		129		109			25			134		110			15			2		7		246				643			49		69		118		104		21		125		153			19			3		7			25				450
Impairment of oil and gas properties	—		—		—		—			—			—		—			—			—		—		239				239
Selling, general and administrative expenses	1		—		1		1			1			2		24			—			—		5		78				110			1		—		1		3		—		3		30		^e	—			—		4			69				107
Mining exploration and research expenses	—		1		1		—			—			—		—			—			—		—		12				13			—		1		1		—		—		—		—			—			—		—			18				19
Environmental obligations and shutdown costs	—		—		—		—			—			—		—			—			—		—		(3		)		(3		)	—		—		—		—		—		—		—			—			—		—			(21		)		(21		)
Net loss (gain) on sales of assets	1		—		1		—			—			—		—			—			—		—		(14		)		(13		)
Net gain on sales of assets																																—		—		—		—		—		—		—			—			—		—			(10		)		(10		)
Operating income (loss)	145		68		213		116			(5		)	111		374			(26		)	4		17		(334		)		359			207		101		308		141		3		144		335			(6		)	2		(11		)	(86		)		686

Interest expense, net	1		—		1		21			—			21		—			—			—		3		162				187			—		1		1		15		—		15		—			—			—		4			142				162
Provision for (benefit from) income taxes	—		—		—		36			(4		)	32		158			—			—		4		(308		)		(114		)	—		—		—		56		2		58		135			—			—		2			(9		)		186
Total assets at September 30, 2016	2,881		4,540		7,421		9,139			1,551			10,690		9,718			1,953			238		565		10,815			^e	41,400
Total assets at June 30, 2017																																2,830		4,314		7,144		8,828		1,479		10,307		10,769			1,900			253		739			5,931			^d	37,043
Capital expenditures	6		5		11		38			1			39		253			1			—		5		185			^g	494			29		10		39		29		1		30		213			1			1		17			61				362


a.	Includes U.S. oil and gas operations, which were previously a reportable segment.


b.	Includes PT-FI's sales to PT Smelting totaling ~~$652~~$649 million in ~~third-quarter 2017~~second-quarter 2018 and ~~$348~~$536 million in ~~third-quarter 2016.~~second-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 ~~net charges of $216~~assets held for sale, primarily Freeport Cobalt, totaling $625 million ~~in production~~at June 30, 2018, and ~~delivery costs, $141~~$373 million ~~in interest expense and $2 million in provision for income taxes associated with disputed royalties for prior years.~~at June 30, 2017.

Includes ~~assets held for sale totaling $549 million~~net charges at ~~September 30, 2017, primarily~~PT-FI associated with ~~Freeport Cobalt~~workforce reductions totaling $82 million in production and ~~the Kisanfu exploration project,~~delivery costs and ~~$5.1 billion at September 30, 2016, which also included discontinued operations. Also includes assets associated with oil~~$5 million in selling, general and ~~gas operations of $272 million at September 30, 2017, and $3.5 billion at September 30, 2016.~~administrative expenses.


f.	Includes ~~net charges for oil and gas operations totaling $49~~a $15 million ~~primarily for idle rig costs, inventory adjustments and~~decrease related to the ~~termination~~adoption of the ~~Morocco well commitment.~~


g.	~~Includes $160 million associated with oil~~new guidance for the presentation of net periodic benefit cost for pension and ~~gas operations and $15 million associated with discontinued operations.~~other postretirement benefit plans (refer to Note 11 for further discussion).

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(In millions)

																									Atlantic		Corporate,																											Atlantic			Corporate,
	North America Copper Mines								South America Mining																Copper		Other							North America Copper Mines						South America Mining														Copper			Other
									Cerro								Indonesia			Molybdenum			Rod &		Smelting		& Elimi-				FCX									Cerro						Indonesia			Molybdenum			Rod &		Smelting			& Elimi-				FCX
	Morenci			Other		Total			Verde			Other			Total		Mining			Mines			Refining		& Refining		nations^a				Total			Morenci		Other		Total		Verde		Other		Total		Mining			Mines			Refining		& Refining			nations^a				Total
Nine Months Ended September 30, 2017
Six Months Ended June 30, 2018
Revenues:
Unaffiliated customers	$	168		$	122	$	290		$	2,057		$	332		$	2,389	$	2,720	^b	$	—		$	3,290	$	1,412	$	1,261		^c	$	11,362		$	28	$	28	$	56	$	1,344	$	321	$	1,665	$	3,160	^b	$	—		$	2,772	$	1,179		$	1,204		^c	$	10,036
Intersegment	1,354			1,704		3,058			237			—			237		—			199			22		1		(3,517		)		—			1,169		1,330		2,499		202		—		202		53			206			16		2			(2,978		)		—
Production and delivery	772			1,284		2,056			1,450		^d	245			1,695		1,233		^e	169			3,299		1,369		(2,324		)		7,497			588		992		1,580		872		249		1,121		882			138			2,777		1,135			(1,910		)		5,723
Depreciation, depletion and amortization	138			192		330			332			60			392		372			58			7		21		77				1,257			90		96		186		214		46		260		353			40			5		14			35				893
Selling, general and administrative expenses	2			2		4			7			—			7		92		^e	—			—		13		250				366			2		2		4		4		—		4		67			—			—		11			154				240
Mining exploration and research expenses	—			2		2			—			—			—		—			—			—		—		59				61			—		1		1		—		—		—		—			—			—		—			44				45
Environmental obligations and shutdown costs	—			—		—			—			—			—		—			—			—		—		81				81			—		—		—		—		—		—		—			—			—		—			68				68
Net gain on sales of assets	—			—		—			—			—			—		—			—			—		—		(66		)		(66		)	—		—		—		—		—		—		—			—			—		—			(56		)		(56		)
Operating income (loss)	610			346		956			505			27			532		1,023			(28		)	6		10		(333		)		2,166			517		267		784		456		26		482		1,911			28			6		21			(109		)		3,123

Interest expense, net	2			1		3			187		^d	—			187		1			—			—		13		429				633			2		—		2		33		—		33		—			—			—		11			247				293
Provision for income taxes	—			—		—			288		^d	10			298		435			—			—		4		10				747			—		—		—		170		10		180		830			—			—		1			10				1,021
Capital expenditures	78			28		106			60			5			65		663			4			3		30		149				1,020			88		144		232		131		7		138		449			2			2		7			54				884

Nine Months Ended September 30, 2016
Six Months Ended June 30, 2017
Revenues:
Unaffiliated customers	$	356		$	211	$	567		$	1,485		$	379		$	1,864	$	2,014	^b	$	—		$	2,820	$	1,360	$	1,828		^c	$	10,453		$	111	$	82	$	193	$	1,207	$	223	$	1,430	$	1,599	^b	$	—		$	2,153	$	858		$	819		^c	$	7,052
Intersegment	1,119			1,594		2,713			155			—			155		59			136			22		3		(3,088		)		—			894		1,156		2,050		173		—		173		—			134			14		—			(2,371		)		—
Production and delivery	913			1,340		2,253			927			313			1,240		1,228			159			2,820		1,275		(991		)	^f	7,984			523		863		1,386		767		169		936		817		^d	110			2,156		836			(1,573		)		4,668			^e
Depreciation, depletion and amortization	170			237		407			319			83			402		284			51			7		22		764				1,937			96		138		234		216		42		258		236			38			5		14			54				839
Impairment of oil and gas properties	—			—		—			—			—			—		—			—			—		—		4,317				4,317
Selling, general and administrative expenses	2			2		4			5			1			6		60			—			—		13		325			^f	408			1		1		2		5		—		5		60		^d	—			—		9			182				258
Mining exploration and research expenses	—			2		2			—			—			—		—			—			—		—		44				46			—		2		2		—		—		—		—			—			—		—			31				33
Environmental obligations and shutdown costs	—			—		—			—			—			—		—			—			—		—		18				18			—		—		—		—		—		—		—			—			—		—			4				4
Net gain on sales of assets	(576		)	—		(576		)	—			—			—		—			—			—		—		(186		)		(762		)	—		—		—		—		—		—		—			—			—		—			(33		)		(33		)
Operating income (loss)	966			224		1,190			389			(18		)	371		501			(74		)	15		53		(5,551		)		(3,495		)	385		234		619		392		12		404		486			(14		)	6		(1		)	(217		)		1,283

Interest expense, net	2			1		3			63			—			63		—			—			—		11		497				574			1		1		2		31		—		31		—			—			—		8			288				329
Provision for (benefit from) income taxes	—			—		—			126			(12		)	114		212			—			—		5		(252		)		79			—		—		—		154		5		159		202			—			—		3			(4		)		360
Capital expenditures	71			16		87			329			3			332		706			2			1		12		1,169			^g	2,309			52		15		67		43		2		45		457			2			2		25			108				706


a.	Includes U.S. oil and gas operations, which were previously a reportable segment.


b.	Includes PT-FI’s sales to PT Smelting totaling ~~$1.4~~$1.3 billion for the first ~~nine~~six months of ~~2017~~2018 and ~~$912~~$794 million for the first ~~nine~~six months of ~~2016.~~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 net charges ~~of $216~~at PT-FI associated with workforce reductions totaling $103 million in production and delivery costs ~~$141~~and $5 million in ~~interest expense~~selling, general and ~~$2 million in provision for income taxes associated with disputed royalties for prior years.~~administrative expenses.


e.	Includes a $27 million decrease related to the adoption of the new guidance for the presentation of net ~~charges of $112 million in production~~periodic benefit cost for pension and ~~delivery costs and $5 million in selling, general and administrative expenses~~other postretirement benefit plans (refer to Note 11 for ~~PT-FI workforce reductions.~~


f.	Includes net charges for oil and gas operations of $942 million in production and delivery costs, primarily for drillship settlements/idle rig costs and inventory adjustments and $38 million for net restructuring charges.


g.	~~Includes $1.1 billion associated with oil and gas operations and $70 million associated with discontinued operations.~~further discussion).

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NOTE ~~11.~~10. GUARANTOR FINANCIAL STATEMENTS

All of the senior notes issued by FCX are fully and unconditionally guaranteed on a senior basis jointly and severally by FM O&G LLC, as guarantor, which is a 100-percent-owned subsidiary of FM O&G and FCX. The guarantee is an unsecured obligation of the guarantor and ranks equal in right of payment with all existing and future indebtedness of FM O&G LLC, including indebtedness under FCX’s revolving credit facility. The guarantee ranks senior in right of payment with all of FM O&G LLC’s future subordinated obligations and is effectively subordinated in right of payment to any debt of FM O&G LLC’s subsidiaries. The indentures provide that FM O&G LLC’s guarantee may be released or terminated for certain obligations under the following circumstances: (i) all or substantially all of the equity interests or assets of FM O&G LLC are sold to a third party; or (ii) FM O&G LLC no longer has any obligations under any FM O&G senior notes or any refinancing thereof and no longer guarantees any obligations of FCX under the revolving credit facility or any other senior debt or, in each case, any refinancing thereof.

The following condensed consolidating financial information includes information regarding FCX, as issuer, FM O&G LLC, as guarantor, and all other non-guarantor subsidiaries of FCX. Included are the condensed consolidating balance sheets at ~~September~~June 30, ~~2017,~~2018, and December 31, ~~2016,~~2017, and the related condensed consolidating statements of comprehensive income (loss) for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, and the condensed consolidating statements of cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017 (in millions), which should be read in conjunction with FCX’s notes to the consolidated financial statements.

CONDENSED CONSOLIDATING BALANCE SHEET

~~September~~June 30, ~~2017~~2018


	FCX			FM O&G LLC			Non-guarantor					Consolidated		FCX			FM O&G LLC			Non-guarantor					Consolidated
	Issuer			Guarantor			Subsidiaries		Eliminations			FCX		Issuer			Guarantor			Subsidiaries		Eliminations			FCX
ASSETS
Current assets	$	197		$	716		$	10,948	$	(711	)	$	11,150	$	619		$	783		$	10,220	$	(1,279	)	$	10,343
Property, plant, equipment and mine development costs, net	15			11			22,899		(11		)	22,914		19			4			22,900		—			22,923
Oil and gas properties, subject to amortization, less accumulated amortization and impairments	—			—			20		—			20
Investments in consolidated subsidiaries	20,178			—			—		(20,178		)	—		19,003			—			—		(19,003		)	—
Other assets	479			36			3,193		(465		)	3,243		547			53			3,239		(77		)	3,762
Total assets	$	20,869		$	763		$	37,060	$	(21,365	)	$	37,327	$	20,188		$	840		$	36,359	$	(20,359	)	$	37,028

LIABILITIES AND EQUITY
Current liabilities	$	2,402		$	111		$	3,820	$	(816	)	$	5,517	$	237		$	120		$	4,837	$	(1,395	)	$	3,799
Long-term debt, less current portion	10,600			6,428			5,621		(10,082		)	12,567		9,594			6,686			5,054		(10,211		)	11,123
Deferred income taxes	832		^a	—			2,939		—			3,771		727		^a	—			2,975		—			3,702
Environmental and asset retirement obligations, less current portion	—			208			3,290		—			3,498		—			206			3,425		—			3,631
Investments in consolidated subsidiaries	—			850			10,174		(11,024		)	—		—			857			10,368		(11,225		)	—
Other liabilities	62			3,341			1,828		(3,487		)	1,744		156			3,339			1,922		(3,486		)	1,931
Total liabilities	13,896			10,938			27,672		(25,409		)	27,097		10,714			11,208			28,581		(26,317		)	24,186

Equity:
Stockholders’ equity	6,973			(10,175		)	6,782		3,393			6,973		9,474			(10,368		)	4,985		5,383			9,474
Noncontrolling interests	—			—			2,606		651			3,257		—			—			2,793		575			3,368
Total equity	6,973			(10,175		)	9,388		4,044			10,230		9,474			(10,368		)	7,778		5,958			12,842
Total liabilities and equity	$	20,869		$	763		$	37,060	$	(21,365	)	$	37,327	$	20,188		$	840		$	36,359	$	(20,359	)	$	37,028


a.	All U.S.-related deferred income taxes are recorded at the parent company.

Table of Contents

CONDENSED CONSOLIDATING BALANCE SHEET

December 31, ~~2016~~2017


	FCX			FM O&G LLC			Non-guarantor					Consolidated		FCX			FM O&G LLC			Non-guarantor					Consolidated
	Issuer			Guarantor			Subsidiaries		Eliminations			FCX		Issuer			Guarantor			Subsidiaries		Eliminations			FCX
ASSETS
Current assets	$	230		$	1,790		$	11,675	$	(3,260	)	$	10,435	$	75		$	671		$	10,733	$	(790	)	$	10,689
Property, plant, equipment and mine development costs, net	19			24			23,176		—			23,219		14			11			22,919		(10		)	22,934
Oil and gas properties, subject to amortization, less accumulated amortization and impairments	—			—			74		—			74
Investments in consolidated subsidiaries	21,110			—			—		(21,110		)	—		19,570			—			—		(19,570		)	—
Other assets	1,985			47			3,522		(1,965		)	3,589		943			48			3,179		(491		)	3,679
Total assets	$	23,344		$	1,861		$	38,447	$	(26,335	)	$	37,317	$	20,602		$	730		$	36,831	$	(20,861	)	$	37,302

LIABILITIES AND EQUITY
Current liabilities	$	3,895		$	308		$	3,306	$	(3,244	)	$	4,265	$	1,683		$	220		$	4,046	$	(938	)	$	5,011
Long-term debt, less current portion	12,517			6,062			11,297		(15,081		)	14,795		10,021			6,512			5,440		(10,270		)	11,703
Deferred income taxes	826		^a	—			2,942		—			3,768		748		^a	—			2,901		—			3,649
Environmental and asset retirement obligations, less current portion	—			200			3,287		—			3,487		—			201			3,430		—			3,631
Investments in consolidated subsidiary	—			893			8,995		(9,888		)	—		—			853			10,397		(11,250		)	—
Other liabilities	55			3,393			1,784		(3,487		)	1,745		173			3,340			1,987		(3,488		)	2,012
Total liabilities	17,293			10,856			31,611		(31,700		)	28,060		12,625			11,126			28,201		(25,946		)	26,006

Equity:
Stockholders’ equity	6,051			(8,995		)	4,237		4,758			6,051		7,977			(10,396		)	5,916		4,480			7,977
Noncontrolling interests	—			—			2,599		607			3,206		—			—			2,714		605			3,319
Total equity	6,051			(8,995		)	6,836		5,365			9,257		7,977			(10,396		)	8,630		5,085			11,296
Total liabilities and equity	$	23,344		$	1,861		$	38,447	$	(26,335	)	$	37,317	$	20,602		$	730		$	36,831	$	(20,861	)	$	37,302


a.	All U.S.-related deferred income taxes are recorded at the parent company.

Table of Contents

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three Months Ended September 30, 2017
FCX FM O&G LLC Non-guarantor Consolidated
Issuer Guarantor Subsidiaries Eliminations FCX
Revenues $ —
$ 13
$ 4,297
$ —
$ 4,310
Total costs and expenses 8
25
3,361
(1 ) 3,393
Operating (loss) income (8 ) (12 ) 936
1
917
Interest expense, net (116 ) (59 ) (218 ) 89
(304 )
Other income (expense), net 97
3
2
(89 ) 13
(Loss) income before income taxes and equity in affiliated companies’ net earnings (losses) (27 ) (68 ) 720
1
626
Benefit from (provision for) income taxes 21
24
(432 ) —
(387 )
Equity in affiliated companies’ net earnings (losses) 286
20
(20 ) (283 ) 3
Net income (loss) from continuing operations 280
(24 ) 268
(282 ) 242
Net income from discontinued operations —
—
3
—
3
Net income (loss) 280
(24 ) 271
(282 ) 245
Net loss (income) attributable to noncontrolling interests:
Continuing operations —
—
69
(34 ) 35
Discontinued operations —
—
—
—
—
Net income (loss) attributable to common stockholders $ 280
$ (24 ) $ 340
$ (316 ) $ 280

Other comprehensive income (loss) 13
—
13
(13 ) 13
Total comprehensive income (loss) $ 293
$ (24 ) $ 353
$ (329 ) $ 293



Three Months Ended September 30, 2016
Three Months Ended June 30, 2018
	FCX			FM O&G LLC				Non-guarantor							Consolidated			FCX			FM O&G LLC			Non-guarantor						Consolidated
	Issuer			Guarantor				Subsidiaries				Eliminations			FCX			Issuer			Guarantor			Subsidiaries			Eliminations			FCX
Revenues	$	—		$	110			$	3,767			$	—		$	3,877		$	—		$	16		$	5,152		$	—		$	5,168
Total costs and expenses	12			266			^a	3,239			^a	1			3,518			4			(16		)	3,525			(9		)	3,504
Operating (loss) income	(12		)	(156		)		528				(1		)	359			(4		)	32			1,627			9			1,664
Interest expense, net	(126		)	(18		)		(132		)		89			(187		)	(97		)	(76		)	(92		)	123			(142		)
Other income (expense), net	91			—				(10		)		(76		)	5			132			2			18			(123		)	29
(Loss) income before income taxes and equity in affiliated companies’ net (losses) earnings	(47		)	(174		)		386				12			177
Benefit from (provision for) income taxes	343			(197		)		(40		)		8			114
Equity in affiliated companies’ net (losses) earnings	(75		)	(218		)		(589		)		883			1
Income (loss) before income taxes and equity in affiliated companies’ net earnings (losses)																		31			(42		)	1,553			9			1,551
(Provision for) benefit from income taxes																		(11		)	10			(512		)	(2		)	(515		)
Equity in affiliated companies’ net earnings (losses)																		849			2			(45		)	(803		)	3
Net income (loss) from continuing operations	221			(589		)		(243		)		903			292			869			(30		)	996			(796		)	1,039
Net (loss) income from discontinued operations	(4		)	—				10				(12		)	(6		)
Net loss from discontinued operations																		—			—			(4		)	—			(4		)
Net income (loss)	217			(589		)		(233		)		891			286			869			(30		)	992			(796		)	1,035
Net income and preferred dividends attributable to noncontrolling interests:
Net income attributable to noncontrolling interests:
Continuing operations	—			—				(24		)		(23		)	(47		)	—			—			(102		)	(64		)	(166		)
Discontinued operations	—			—				(22		)		—			(22		)
Net income (loss) attributable to common stockholders	$	217		$	(589	)		$	(279	)		$	868		$	217		$	869		$	(30	)	$	890		$	(860	)	$	869

Other comprehensive income (loss)	12			—				12				(12		)	12			11			—			11			(11		)	11
Total comprehensive income (loss)	$	229		$	(589	)		$	(267	)		$	856		$	229		$	880		$	(30	)	$	901		$	(871	)	$	880


a.	Includes charges totaling $95 million at the FM O&G LLC guarantor and $0.2 billion at the non-guarantor subsidiaries related to impairment of FCX’s oil and gas properties pursuant to full cost accounting rules.




Three Months Ended June 30, 2017
	FCX			FM O&G LLC			Non-guarantor						Consolidated
	Issuer			Guarantor			Subsidiaries			Eliminations			FCX
Revenues	$	—		$	12		$	3,699		$	—		$	3,711
Total costs and expenses	14			11			2,990			10			3,025
Operating (loss) income	(14		)	1			709			(10		)	686
Interest expense, net	(117		)	(55		)	(74		)	84			(162		)
Other income (expense), net	80			—			(7		)	(84		)	(11		)
(Loss) income before income taxes and equity in affiliated companies’ net earnings (losses)	(51		)	(54		)	628			(10		)	513
(Provision for) benefit from income taxes	(72		)	19			(136		)	3			(186		)
Equity in affiliated companies’ net earnings (losses)	391			(26		)	(62		)	(304		)	(1		)
Net income (loss) from continuing operations	268			(61		)	430			(311		)	326
Net income from discontinued operations	—			—			9			—			9
Net income (loss)	268			(61		)	439			(311		)	335
Net income attributable to noncontrolling interests:
Continuing operations	—			—			(46		)	(20		)	(66		)
Discontinued operations	—			—			(1		)	—			(1		)
Net income (loss) attributable to common stockholders	$	268		$	(61	)	$	392		$	(331	)	$	268

Other comprehensive income (loss)	81			—			81			(81		)	81
Total comprehensive income (loss)	$	349		$	(61	)	$	473		$	(412	)	$	349

Table of Contents

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)


Nine Months Ended September 30, 2017
Six Months Ended June 30, 2018
	FCX			FM O&G LLC			Non-guarantor						Consolidated			FCX			FM O&G LLC			Non-guarantor						Consolidated
	Issuer			Guarantor			Subsidiaries			Eliminations			FCX			Issuer			Guarantor			Subsidiaries			Eliminations			FCX
Revenues	$	—		$	38		$	11,324		$	—		$	11,362		$	—		$	31		$	10,005		$	—		$	10,036
Total costs and expenses	31			86			9,068			11			9,196			13			(8		)	6,918			(10		)	6,913
Operating (loss) income	(31		)	(48		)	2,256			(11		)	2,166			(13		)	39			3,087			10			3,123
Interest expense, net	(355		)	(167		)	(363		)	252			(633		)	(201		)	(140		)	(177		)	225			(293		)
Other income (expense), net	256			3			37			(252		)	44			233			2			47			(225		)	57
(Loss) income before income taxes and equity in affiliated companies’ net earnings (losses)	(130		)	(212		)	1,930			(11		)	1,577
Income (loss) before income taxes and equity in affiliated companies’ net earnings (losses)																19			(99		)	2,957			10			2,887
(Provision for) benefit from income taxes	(111		)	74			(714		)	4			(747		)	(94		)	22			(947		)	(2		)	(1,021		)
Equity in affiliated companies’ net earnings (losses)	1,017			14			(118		)	(907		)	6			1,636			(4		)	(79		)	(1,552		)	1
Net income (loss) from continuing operations	776			(124		)	1,098			(914		)	836			1,561			(81		)	1,931			(1,544		)	1,867
Net income from discontinued operations	—			—			50			—			50
Net loss from discontinued operations																—			—			(15		)	—			(15		)
Net income (loss)	776			(124		)	1,148			(914		)	886			1,561			(81		)	1,916			(1,544		)	1,852
Net income attributable to noncontrolling interests:
Continuing operations	—			—			(42		)	(64		)	(106		)	—			—			(173		)	(118		)	(291		)
Discontinued operations	—			—			(4		)	—			(4		)
Net income (loss) attributable to common stockholders	$	776		$	(124	)	$	1,102		$	(978	)	$	776		$	1,561		$	(81	)	$	1,743		$	(1,662	)	$	1,561

Other comprehensive income (loss)	105			—			105			(105		)	105			23			—			23			(23		)	23
Total comprehensive income (loss)	$	881		$	(124	)	$	1,207		$	(1,083	)	$	881		$	1,584		$	(81	)	$	1,766		$	(1,685	)	$	1,584

Nine Months Ended September 30, 2016
FCX FM O&G LLC Non-guarantor Consolidated
Issuer Guarantor Subsidiaries Eliminations FCX
Revenues $ —
$ 294
$ 10,159
$ —
$ 10,453
Total costs and expenses 56
2,859
^a
11,026
^a
7
13,948
Operating loss (56 ) (2,565 ) (867 ) (7 ) (3,495 )
Interest expense, net (404 ) (37 ) (370 ) 237
(574 )
Other income (expense), net 248
—
59
(202 ) 105
(Loss) income before income taxes and equity in affiliated companies’ net (losses) earnings (212 ) (2,602 ) (1,178 ) 28
(3,964 )
(Provision for) benefit from income taxes (1,785 ) 725
979
2
(79 )
Equity in affiliated companies’ net (losses) earnings (2,450 ) (3,202 ) (5,072 ) 10,733
9
Net (loss) income from continuing operations (4,447 ) (5,079 ) (5,271 ) 10,763
(4,034 )
Net income (loss) from discontinued operations 1
—
(159 ) (33 ) (191 )
Net (loss) income (4,446 ) (5,079 ) (5,430 ) 10,730
(4,225 )
Net income and preferred dividends attributable to noncontrolling interests:
Continuing operations —
—
(141 ) (36 ) (177 )
Discontinued operations —
—
(44 ) —
(44 )
Net (loss) income attributable to common stockholders $ (4,446 ) $ (5,079 ) $ (5,615 ) $ 10,694
$ (4,446 )

Other comprehensive income (loss) 27
—
27
(27 ) 27
Total comprehensive (loss) income $ (4,419 ) $ (5,079 ) $ (5,588 ) $ 10,667
$ (4,419 )



Six Months Ended June 30, 2017
	FCX			FM O&G LLC			Non-guarantor						Consolidated
	Issuer			Guarantor			Subsidiaries			Eliminations			FCX
Revenues	$	—		$	25		$	7,027		$	—		$	7,052
Total costs and expenses	22			61			5,674			12			5,769
Operating (loss) income	(22		)	(36		)	1,353			(12		)	1,283
Interest expense, net	(239		)	(108		)	(145		)	163			(329		)
Other income (expense), net	158			—			2			(163		)	(3		)
(Loss) income before income taxes and equity in affiliated companies’ net earnings (losses)	(103		)	(144		)	1,210			(12		)	951
(Provision for) benefit from income taxes	(132		)	50			(282		)	4			(360		)
Equity in affiliated companies’ net earnings (losses)	731			(6		)	(98		)	(624		)	3
Net income (loss) from continuing operations	496			(100		)	830			(632		)	594
Net income from discontinued operations	—			—			47			—			47
Net income (loss)	496			(100		)	877			(632		)	641
Net income attributable to noncontrolling interests:
Continuing operations	—			—			(111		)	(30		)	(141		)
Discontinued operations	—			—			(4		)	—			(4		)
Net income (loss) attributable to common stockholders	$	496		$	(100	)	$	762		$	(662	)	$	496

Other comprehensive income (loss)	92			—			92			(92		)	92
Total comprehensive income (loss)	$	588		$	(100	)	$	854		$	(754	)	$	588


a.	Includes charges totaling $1.5 billion at the FM O&G LLC guarantor and $2.8 billion at the non-guarantor subsidiaries related to impairment of FCX’s oil and gas properties pursuant to full cost accounting rules.

Table of Contents

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS


Nine Months Ended September 30, 2017
Six Months Ended June 30, 2018
	FCX			FM O&G LLC			Non-guarantor						Consolidated			FCX			FM O&G LLC			Non-guarantor						Consolidated
	Issuer			Guarantor			Subsidiaries			Eliminations			FCX			Issuer			Guarantor			Subsidiaries			Eliminations			FCX
Net cash (used in) provided by operating activities	$	(222	)	$	(383	)	$	3,623		$	—		$	3,018		$	(163	)	$	(184	)	$	3,025		$	—		$	2,678

Cash flow from investing activities:
Capital expenditures	—			(24		)	(996		)	—			(1,020		)	(2		)	—			(882		)	—			(884		)
Intercompany loans	(609		)	—			—			609			—			(442		)	—			—			442			—
Dividends from (investments in) consolidated subsidiaries	1,757			(16		)	93			(1,834		)	—			2,519			—			45			(2,564		)	—
Asset sales and other, net	—			58			(12		)	—			46			4			1			(91		)	—			(86		)
Net cash provided by (used in) investing activities	1,148			18			(915		)	(1,225		)	(974		)	2,079			1			(928		)	(2,122		)	(970		)

Cash flow from financing activities:
Proceeds from debt	—			—			795			—			795			—			—			352			—			352
Repayments of debt	(915		)	(139		)	(937		)	—			(1,991		)	(1,826		)	(52		)	(419		)	—			(2,297		)
Intercompany loans	—			512			97			(609		)	—			—			228			214			(442		)	—
Cash dividends paid and contributions received, net	(2		)	—			(1,839		)	1,772			(69		)	(73		)	—			(2,789		)	2,548			(314		)
Other, net	(9		)	(11		)	(64		)	62			(22		)	(17		)	—			(17		)	16			(18		)
Net cash (used in) provided by financing activities	(926		)	362			(1,948		)	1,225			(1,287		)	(1,916		)	176			(2,659		)	2,122			(2,277		)

Net increase in cash and cash equivalents	—			(3		)	760			—			757
Increase in cash and cash equivalents in assets held for sale	—			—			(45		)	—			(45		)
Cash and cash equivalents at beginning of period	—			3			4,242			—			4,245
Cash and cash equivalents at end of period	$	—		$	—		$	4,957		$	—		$	4,957
Net decrease in cash, cash equivalents, restricted cash and restricted cash equivalents																—			(7		)	(562		)	—			(569		)
Decrease in cash and cash equivalents in assets held for sale																—			—			44			—			44
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of year																—			7			4,624			—			4,631
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period																$	—		$	—		$	4,106		$	—		$	4,106


Nine Months Ended September 30, 2016
Six Months Ended June 30, 2017
	FCX			FM O&G LLC			Non-guarantor						Consolidated			FCX			FM O&G LLC			Non-guarantor						Consolidated
	Issuer			Guarantor			Subsidiaries			Eliminations			FCX			Issuer			Guarantor			Subsidiaries			Eliminations			FCX
Net cash (used in) provided by operating activities	$	(264	)	$	(294	)	$	3,151		$	1		$	2,594		$	(96	)	$	(284	)	$	2,209		$	—		$	1,829

Cash flow from investing activities:
Capital expenditures	—			(497		)	(1,814		)	2			(2,309		)	—			(23		)	(683		)	—			(706		)
Intercompany loans	(1,021		)	(518		)	—			1,539			—			(427		)	—			—			427			—
Dividends from (investments in) consolidated subsidiaries	1,643			(41		)	124			(1,726		)	—			1,032			(16		)	62			(1,078		)	—
Asset sales and other, net	—			208			1,210			(3		)	1,415			—			(5		)	8			—			3
Net cash provided by (used in) investing activities	622			(848		)	(480		)	(188		)	(894		)	605			(44		)	(613		)	(651		)	(703		)

Cash flow from financing activities:
Proceeds from debt	1,721			—			1,742			—			3,463			—			—			606			—			606
Repayments of debt	(2,498		)	—			(2,041		)	—			(4,539		)	(499		)	—			(751		)	—			(1,250		)
Intercompany loans	—			1,223			316			(1,539		)	—			—			337			90			(427		)	—
Net proceeds from sale of common stock	442			—			374			(374		)	442
Cash dividends paid and contributions received, net	(5		)	(78		)	(2,096		)	2,087			(92		)	(2		)	—			(1,064		)	1,025			(41		)
Other, net	(18		)	(2		)	(15		)	13			(22		)	(8		)	(9		)	(55		)	53			(19		)
Net cash (used in) provided by financing activities	(358		)	1,143			(1,720		)	187			(748		)	(509		)	328			(1,174		)	651			(704		)

Net increase in cash and cash equivalents	—			1			951			—			952
Increase in cash and cash equivalents in assets held for sale	—			—			(43		)	—			(43		)
Cash and cash equivalents at beginning of period	—			—			177			—			177
Cash and cash equivalents at end of period	$	—		$	1		$	1,085		$	—		$	1,086
Net increase in cash, cash equivalents, restricted cash and restricted cash equivalents																—			—			422			—			422
Decrease in cash and cash equivalents in assets held for sale																—			—			7			—			7
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of year																—			11			4,392			—			4,403
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period																$	—		$	11		$	4,821		$	—		$	4,832

Table of Contents

NOTE ~~12.~~11. NEW ACCOUNTING STANDARDS

Revenue Recognition. In May 2014, the Financial Accounting Standards Board (FASB) issued ana new Accounting ~~Standard~~Standards Update (ASU) related to revenue recognition. FCX adopted this standard effective January 1, 2018, under the modified retrospective approach applied to contracts that ~~provides a single comprehensive~~remain in force at the adoption date. The adoption of this standard did not result in any financial statement impacts or changes to FCX’s revenue recognition ~~model,~~policies or processes as revenue is primarily derived from arrangements in which ~~will replace most existing~~the transfer of control coincides with the fulfillment of performance obligations (refer to Note 1 of FCX’s annual report on Form 10-K for disclosure of FCX’s revenue recognition ~~guidance, and also requires expanded disclosures. The core principle~~policy). In connection with the adoption of the ~~model is that revenue is recognized when~~standard and consistent with FCX’s policy prior to adoption of the standard, FCX has elected to account for shipping and handling activities performed after control of goods ~~or services~~ has been transferred to ~~customers at~~a customer as a fulfillment cost recorded in production and delivery costs on the consolidated statements of income.

FCX recognizes revenue for all of its products upon transfer of control in an amount that reflects the consideration ~~to which an entity~~it expects to ~~be entitled~~receive in exchange for those ~~goods~~products. Transfer of control is in accordance with the terms of customer contracts, which is generally upon shipment or ~~services.~~delivery of the product. While payment terms vary by contract, terms generally include payment to be made within 30 days, but not longer than 60 days. Certain of FCX’s concentrate and cathode sales contracts also provide for provisional pricing, which is accounted for as an embedded derivative (refer to Note 6 for further discussion). For provisionally priced sales, 90 percent to 100 percent of the provisional payment is made upon shipment or within 20 days, and final balances are settled in a contractually specified future month (generally one to four months from the shipment date) based on quoted monthly average copper settlement prices on the LME or COMEX and quoted monthly average LBMA gold settlement prices. FCX’s product revenues are also recorded net of treatment charges, royalties and export duties. Refer to Note 9 for a summary of revenue by product type.

Financial Instruments. In January 2016, FASB issued an ASU that amends the guidance on the classification and measurement of financial instruments. This ASU makes limited changes to prior guidance and amends certain disclosure requirements. FCX adopted this ASU effective January 1, 2018, and adoption did not have a material impact on its financial statements.

Leases. In February 2016, FASB issued an ASU that will require lessees to recognize most leases on the balance sheet. This ASU allows lessees to make an accounting policy election to not recognize a lease asset and liability for leases with a term of 12 months or less and do not have a purchase option that is expected to be exercised. For public entities, this ASU is effective for interim and annual reporting periods beginning after December 15, ~~2017, and interim reporting periods within that reporting period. Early~~2018, with early adoption ~~is permitted~~permitted. In July 2018, FASB issued a practical expedient, which FCX expects to elect, allowing for ~~annual reporting periods beginning after December 15, 2016, and interim reporting periods within that reporting period. FCX will adopt this ASU January 1, 2018, and currently expects~~entities to apply the ~~modified retrospective approach under which any cumulative effect adjustment would be recorded to retained earnings as~~provisions of the ~~adoption date.~~updated lease guidance at the January 1, 2019, effective date, without adjusting the comparative periods presented. FCX ~~has substantially completed its review of the impact of this guidance, and based on the terms~~is completing an assessment of its ~~sales contracts, does not expect~~lease portfolio and is in the ~~guidance~~process of implementing a new system, collecting data, and designing processes and controls to ~~have any impact on~~account for its ~~revenue recognition policies or processes. FCX continues to review the impact of~~leases in accordance with the new ~~guidance on its financial reporting and disclosures.~~standard.

Statement of Cash Flows: Restricted Cash.In ~~March~~November 2016, FASB issued an ASU that ~~simplifies various aspects~~changes the classification and presentation of restricted cash and restricted cash equivalents on the ~~accounting for share-based payment transactions, including~~statement of cash flows. The ASU requires that a statement of cash flows include the ~~income tax consequences, statutory tax withholding requirements, an accounting policy election for forfeitures~~change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the ~~classification~~beginning-of-period and end-of-period total amounts shown on the statement of cash flows. FCX adopted this ASU effective January 1, 2018, and adjusted its consolidated statement of cash flows for the six months ended June 30, 2017, to include restricted cash and ~~adoption did not have a material impact on its financial statements.~~restricted cash equivalents with cash and cash equivalents.

Table of Contents

The impact of adopting this ASU for the six months ended June 30, 2017, follows (in millions):



	Previously Reported			Impact of Adoption		Current Presentation
Other, net included in cash flow from investing activities	$	(4	)	$	7	$	3
Cash flow from investing activities	(710		)	7		(703		)
Net increase in cash, cash equivalents, restricted cash and restricted cash equivalents	415			7		422
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of year	4,245			158		4,403
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period	4,667			165		4,832

Net Periodic Pension and Postretirement Benefit Cost.In March 2017, FASB issued an ASU that changes how entities with a defined benefit pension or other postretirement benefit plans present net periodic benefit cost in the income statement. This ASU requires the service cost component of net periodic benefit cost to be presented in the same income statement line item or items as other compensation costs for those employees who are receiving the ~~retirement~~ benefit. In addition, only the service cost component is eligible for capitalization when applicable (i.e., as a cost of inventory or an internally constructed asset). The other components of net periodic benefit cost are required to be presented separately from the service cost component and outside of operating income. These other components of net periodic benefit cost are not eligible for capitalization, and ~~the~~FCX elected to include these other components in other income, ~~statement line item or items must be disclosed. For public entities,~~net. FCX adopted this ASU is effective ~~for annual periods beginning after December 15, 2017, and interim reporting periods within that reporting period. Early adoption is permitted. FCX will adopt this ASU on~~ January 1, 2018, and ~~does not expect it to have a material impact on~~adjusted its presentation ofin the consolidated statements of ~~operations.~~income for the three- and six-month periods ended June 30, 2017, to conform with the new guidance. The impact of adopting this ASU for the three- and six-month periods ended June 30, 2017, follows (in millions):



	Three Months Ended June 30, 2017
	Previously Reported			Impact of Adoption			Current Presentation
Production and delivery	$	2,495		$	(15	)	$	2,480
Total cost of sales	2,945			(15		)	2,930
Environmental obligations and shutdown costs	(19		)	(2		)	(21		)
Total costs and expenses	3,042			(17		)	3,025
Operating income	669			17			686
Other (expense) income, net	10			(17		)	(7		)



	Six Months Ended June 30, 2017
	Previously Reported		Impact of Adoption			Current Presentation
Production and delivery	$	4,695	$	(27	)	$	4,668
Total cost of sales	5,534		(27		)	5,507
Selling, general and administrative expenses	260		(2		)	258
Mining exploration and research expenses	34		(1		)	33
Environmental obligations and shutdown costs	8		(4		)	4
Total costs and expenses	5,803		(34		)	5,769
Operating income	1,249		34			1,283
Other income, net	34		(34		)	—

NOTE ~~13.~~12. SUBSEQUENT EVENTS

FCX evaluated events after ~~September~~June 30, ~~2017,~~2018, and through the date the consolidated financial statements were issued, and determined any events or transactions occurring during this period that would require recognition or disclosure are appropriately addressed in these consolidated financial statements.

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~~REVIEW~~ REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF

FREEPORT-McMoRan INC.

Results of Review of Interim Financial Statements

We have reviewed the accompanying consolidated balance sheet of Freeport-McMoRan Inc. (the Company) as of ~~September~~June 30, ~~2017, and~~2018, the related consolidated statements of ~~operations~~income and comprehensive income ~~(loss)~~ for the ~~three-~~three and ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, the consolidated statements of cash flows for the ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2017~~2018 and ~~2016, and~~2017, the consolidated statement of equity for the ~~nine-month~~six-month period ended ~~September~~June 30, ~~2017. These~~2018, and the related notes (collectively referred to as the “consolidated interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial statements ~~are the responsibility of the Company’s management.~~for them to be in conformity with U.S. generally accepted accounting principles.

We ~~conducted our review~~have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States). (PCAOB), the consolidated balance sheet of the Company as of December 31, 2017, the related consolidated statements of operations, comprehensive income, cash flows and equity for the year then ended, and the related notes (not presented herein); and in our report dated February 20, 2018, we expressed an unqualified audit opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2017, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

These financial statements are the responsibility of the Company's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial ~~information~~statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the ~~Public Company Accounting Oversight Board (United States),~~PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Freeport-McMoRan Inc. as of December 31, 2016, and the related consolidated statements of operations, comprehensive loss, cash flows and equity for the year then ended (not presented herein) and we expressed an unqualified audit opinion on those consolidated financial statements in our report dated February 24, 2017. In our opinion, the accompanying consolidated balance sheet of Freeport-McMoRan Inc. as of December 31, 2016, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ ERNST & YOUNG LLP

Phoenix, Arizona

~~November 7, 2017~~August 8, 2018

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Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.

In Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A), “we,” “us” and “our” refer to Freeport-McMoRan Inc. (FCX) and its consolidated subsidiaries. You should read this discussion in conjunction with our consolidated financial statements, the related ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~MD&A and the discussion of our Business and Properties in our annual report on Form 10-K for the year ended December 31, ~~2016,~~2017, filed with the United States (U.S.) Securities and Exchange Commission (SEC). The results of operations reported and summarized below are not necessarily indicative of future operating results (refer to “Cautionary Statement” for further discussion). References to “Notes” are Notes included in our Notes to Consolidated Financial ~~Statements.~~Statements (Unaudited). Throughout ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations,~~MD&A, all references to ~~earnings~~income or losses per share are on a diluted basis. Additionally, in accordance with accounting guidelines, TF Holdings Limited (TFHL), through which we held a controlling interest in the Tenke Fungurume (Tenke) mine until it was sold on November 16, 2016, is reported as a discontinued operation for all periods presented.

OVERVIEW

We are a leading international mining company with headquarters in Phoenix, Arizona. We operate large, long-lived, geographically diverse assets with significant proven and probable reserves of copper, gold and molybdenum. We are the world’s largest publicly traded copper producer. 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 the Americas, including the large-scale Morenci minerals district in North America and the Cerro Verde operation in South America.

Net income (loss) attributable to common stock totaled $280 million in third-quarter 2017, $217 million in third-quarter 2016, $776 million for the first nine months of 2017 and $(4.4) billion for the first nine months of 2016. The 2017 periods, compared with the 2016 periods, benefited from higher copper prices and higher gold sales volumes, partly offset by lower copper sales volumes and higher tax expense. The 2017 periods also include a net charge of $188 million for accruals related to Peruvian government claims for disputed royalties (refer to “Operations – South America Mining” for further discussion). The first nine months of 2016 included significant charges for the impairment of oil and gas properties and other oil and gas charges for drillship settlements/idle rig costs, inventory adjustments, asset impairment and restructuring, partly offset by net gains on sales of assets. Refer to “Consolidated Results” for further discussion.

~~At September 30, 2017, we had $5.0 billion in consolidated cash and cash equivalents and $14.8 billion in total debt. We had no borrowings and~~ ~~$3.5 billion~~ ~~available under our revolving credit facility. Refer to Note 6 for further discussion of debt.~~

We continue to manage production, exploration and administrative costs and capital spending and, subject to commodity prices and operational results, expect to generate operating cash flows in excess of capital expenditures for the years 2017 and 2018.

We believe that we have a high-quality portfolio of long-lived copper assets positioned to generate long-term value. We continue to advance a project to develop the Lone Star oxide ores near the Safford operation in eastern Arizona, and PT Freeport Indonesia (PT-FI) has several projects in the Grasberg minerals district related to the development of its large-scale, long-lived, high-grade underground ore bodies. 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.

~~In August~~Net income attributable to common stock totaled $869 million in second-quarter 2018, $268 million in second-quarter 2017, ~~we reached an understanding~~$1.6 billion for the first six months of 2018 and $496 million for the first six months of 2017. The 2018 periods, compared with the ~~Indonesian government on a framework that would resolve PT Freeport Indonesia’s (PT-FI) long-term operating rights. This framework includes (i) conversion~~2017 periods, benefited from ~~the Contract of Work (COW)~~higher copper and gold sales volumes and higher copper prices, partly offset by higher production and delivery costs and foreign income tax expense. Refer to a new operating license (IUPK) providing PT-FI with long-term operating rights through 2041, (ii) Indonesian government certainty of fiscal and legal terms during the term of the IUPK, (iii) PT-FI commitment to construct a new smelter in Indonesia within five years of reaching a definitive agreement, and (iv) divestment of 51 percent of the project area interests to Indonesian participants at fair market value structured so that we retain control over operations and governance of PT-FI.“Consolidated Results” for further discussion.

~~The framework requires documentation~~During the first six months of 2018, we had net repayments of debt totaling $1.95 billion, and ~~execution of a definitive agreement, which must be approved by~~ our Board of Directors (Board) reinstated a cash dividend on our common stock. The Board declared quarterly cash dividends of $0.05 per share of our common stock in both the first and second quarters of 2018. Refer to Note 5 for further discussion.

In April 2018, we entered into a new $3.5 billion, five-year, unsecured revolving credit facility with substantially similar structure and terms as our prior credit facility. Refer to Note 5 for further discussion. At June 30, 2018, we had $3.9 billion in consolidated cash and cash equivalents and $11.1 billion in total debt. We had no borrowings and $3.5 billion available under our revolving credit facility.

As further discussed in Note 8, in July 2018, we and PT-FI entered into a Heads of Agreement with the Indonesian state-owned enterprise PT Indonesia Asahan Aluminium (Persero) (Inalum) and PT-FI’s joint venture partner Rio Tinto. ~~The parties~~Under the terms of the non-binding agreement, Inalum would acquire all of Rio Tinto's interests associated with its joint venture with PT-FI and all of our interests in PT Indocopper Investama (PT-II). Until definitive agreements are reached, PT-FI has reserved all rights under its Contract of Work (COW), including pursuing arbitration under the dispute resolution procedures. PT-FI's export license is effective through February 15, 2019. In July 2018, PT-FI's temporary special mining license (IUPK) was extended to August 31, 2018, and PT-FI will continue to ~~negotiate~~seek extensions to ~~reach agreement on important aspects~~its temporary IUPK until definitive agreements are complete.

PT-FI has revised its mine plans to extend mining activities in the open pit by approximately six months through the first half of ~~implementation~~2019 following results of an economic analysis. PT-FI’s revised mine plans also reflect a delay in the ramp-up of the ~~framework, including the timing~~Deep Mill Level Zone (DMLZ) underground mine as a result of mining-induced seismic activity, which began in 2017 and ~~process of divestment, governance matters,~~continued in 2018. Refer to “Indonesia Mining – Operating and ~~the determination of fair market value, and to complete documentation on a comprehensive agreement~~Development Activities” for ~~PT-FI’s operations through 2041. The parties have expressed a mutual objective of~~further discussion.

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completing the negotiations and documentation during 2017. In October 2017, the Indonesian government extended PT-FI’s export rights to December 31, 2017, while negotiations to reach and document a comprehensive long-term definitive agreement based on the agreed framework continue. Until a definitive agreement is reached, PT-FI has reserved all rights under its COW, including pursuing arbitration under the dispute resolution provisions. Refer to “Operations – Indonesia Mining” for further discussion.

OUTLOOK

We continue to view the long-term outlook for our business positively, supported by limitations on supplies of copper and by the requirements for copper in the world’s economy. Our financial results vary as a result of fluctuations in market prices primarily for copper, gold and molybdenum, as well as other factors. World market prices for these commodities have fluctuated historically ~~fluctuated~~ and are affected by numerous factors beyond our control. Refer to “Markets” for further discussion. Because we cannot control the price of our products, the key measures that management focuses on in operating our business are sales volumes, unit net cash costs, operating cash flow and capital expenditures. In July 2018, copper prices declined because of the uncertain impact on the global economy of recent international trade actions. If copper prices continue to decline, we will be prepared to adjust our operating plans if necessary to respond to market conditions.

Projections for 2018 and other forward looking statements in this quarterly report on Form 10-Q assume resolution of PT-FI’s long-term mining rights or an extension of PT-FI’s temporary IUPK after August 31, 2018. Refer to ~~“Operations – Indonesia Mining”~~Note 8 for further discussion of Indonesia regulatory matters, which could have a significant impact on future results. For other important factors that could cause results to differ materially from projections, refer to “Cautionary Statement.”

Consolidated Sales Volumes

Following are our projected consolidated sales volumes for the year ~~2017:~~2018:



Copper (millions of recoverable pounds):
North America copper mines	~~1,470~~1,445
South America mining	~~1,230~~1,227
Indonesia mining	~~1,010~~1,145
Total	~~3,710~~3,817

Gold (thousands of recoverable ounces)	~~1,600~~2,416

Molybdenum (millions of recoverable pounds)	9495	^a


a.	Projected molybdenum sales include 3435 million pounds produced by our Molybdenum mines and 60 million pounds produced by our North America and South America copper mines.

Consolidated sales volumes for ~~fourth-quarter 2017~~third-quarter 2018 are expected to approximate ~~1.0 billion~~970 million pounds of copper, ~~625~~700 thousand ounces of gold and 2324 million pounds of molybdenum.

Projected sales volumes are dependent on operational performance and other factors. For other important factors that could cause results to differ materially from projections, refer to “Cautionary Statement.”

Consolidated Unit Net Cash Costs

Quarterly unit net cash costs vary with fluctuations in sales volumes and realized prices, primarily for gold and molybdenum. Assuming average prices of ~~$1,300~~$1,250 per ounce of gold and ~~$8.00~~$11.00 per pound of molybdenum for ~~fourth-quarter 2017~~the second half of 2018 and achievement of current sales volume and cost estimates, consolidated unit net cash costs (net of by-product credits) for our copper mines are expected to average ~~$1.19~~$1.04 per pound of copper for the year ~~2017.~~2018 (including $0.95 per pound of copper in third-quarter 2018 and $1.29 per pound of copper in fourth-quarter 2018). The impact of price changes for ~~fourth-quarter 2017~~the second half of 2018 on consolidated unit net cash costs would approximate ~~$0.01~~$0.015 per pound for each $50 per ounce change in the average price of gold and ~~$0.005~~$0.015 per pound for each $2 per pound change in the average price of ~~molybdenum. Quarterly unit net cash costs vary with fluctuations in sales volumes and realized prices, primarily for gold and~~ molybdenum. Refer to “Consolidated Results – Production and Delivery Costs” for further discussion of consolidated production costs for our mining operations.

Consolidated Operating Cash Flow

Our consolidated operating cash flows vary with sales volumes, prices realized from copper, gold and molybdenum sales, production costs, income taxes, other working capital changes and other factors. Based on current sales volume and cost estimates, and assuming average prices of ~~$3.00~~$2.75 per pound of copper, ~~$1,300~~$1,250 per ounce of gold and ~~$8.00~~$11.00 per pound of molybdenum for ~~fourth-quarter 2017,~~the second half of 2018, our consolidated operating cash flows are estimated to approximate $4.3 billion for the year ~~2017 (including $0.5~~2018 (net of $0.2 billion in working capital ~~sources~~uses and timing of other tax payments). Projected consolidated operating cash flows for the year ~~2017~~2018 also reflect an estimated income tax provision of ~~$1.3~~$1.7 billion (refer to “Consolidated Results – Income Taxes” for further discussion of our projected income tax rate for the year ~~2017)~~2018). The impact of price changes during ~~fourth-quarter 2017~~the second half of 2018 on operating cash flows would approximate ~~$80~~

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$185 million for each $0.10 per pound change in the average price of copper, ~~$20~~$60 million for each $50 per ounce change in the average price of gold and ~~$15~~$55 million for each $2 per pound change in the average price of molybdenum.

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Consolidated Capital Expenditures

Consolidated capital expenditures are expected to approximate ~~$1.5~~$2.0 billion for the year ~~2017,~~2018, including ~~$0.9~~$1.1 billion for major mining projects primarily ~~for~~associated with underground development activities ~~at Grasberg. As a result~~in the Grasberg minerals district and development of ~~regulatory uncertainty, PT-FI has slowed investments in its underground development projects. If PT-FI is unable to reach a definitive agreement with~~ the ~~Indonesian government on its long-term mining rights, we intend to reduce or defer investments significantly in underground development projects.~~Lone Star oxide project.

MARKETS

World prices for copper, gold and molybdenum can fluctuate significantly. During the period from January ~~2007~~2008 through ~~September 2017,~~June 2018, the London Metal Exchange (LME) ~~spot~~ copper settlement price varied from a low of $1.26 per pound in 2008 to a record high of $4.60 per pound in 2011; the London Bullion Market Association ~~(London)~~(LBMA) PM gold price fluctuated from a low of ~~$608~~$713 per ounce in ~~2007~~2008 to a record high of $1,895 per ounce in 2011; and the Metals Week Molybdenum Dealer Oxide weekly average price ranged from a low of $4.46 per pound in 2015 to a high of $33.88 per pound in 2008. Copper, gold and molybdenum prices are affected by numerous factors beyond our control as described further in “Risk Factors” contained in Part I, Item 1A. of our annual report on Form 10-K for the year ended December 31, ~~2016.~~2017.

This graph presents LME ~~spot~~ copper settlement prices and the combined reported stocks of copper at the LME, Commodity Exchange Inc. (COMEX), a division of the New York Mercantile Exchange (NYMEX), and the Shanghai Futures Exchange from January ~~2007~~2008 through ~~September 2017.~~June 2018. Beginning in mid-2014, copper prices declined because of concerns about slowing growth rates in China, a stronger U.S. dollar and a broad-based decline in commodity prices, but began to improve in fourth-quarter 2016 and ~~into~~throughout 2017. During ~~third-quarter 2017,~~second-quarter 2018, LME ~~spot~~ copper settlement prices ranged from a low of ~~$2.62~~$3.01 per pound to a high of ~~$3.13~~$3.29 per pound, averaged ~~$2.88~~$3.12 per pound and ~~closed~~settled at ~~$2.94~~$3.01 per pound on ~~September~~June 30, ~~2017.~~2018. In July 2018, copper prices declined because of the uncertain impact on the global economy of recent international trade actions. The LME ~~spot~~ copper settlement price was ~~$3.09~~$2.82 per pound on ~~October~~July 31, ~~2017.~~2018.

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We believe the underlying long-term fundamentals of the copper business remain positive, supported by the significant role of copper in the global economy and a challenging long-term supply environment attributable to difficulty in replacing ~~the output of~~ existing large ~~mines~~mines’ output with new production sources. Future copper prices are expected to be volatile and are likely to be influenced by demand from China and emerging markets, as well as economic activity in the U.S. and other industrialized countries, the timing of the development of new supplies of copper and the production levels of mines and copper smelters.

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This graph presents ~~London~~LBMA PM gold prices from January ~~2007~~2008 through ~~September 2017.~~June 2018. An improving economic outlook, stronger U.S. dollar and positive equity performance contributed to lower demand for gold since 2014. During ~~third-quarter 2017, London~~second-quarter 2018, LBMA PM gold prices ranged from a low of ~~$1,211~~$1,250 per ounce to a high of ~~$1,346~~$1,351 per ounce, averaged ~~$1,278~~$1,306 per ounce, and closed at ~~$1,283~~$1,250 per ounce on ~~September~~June 30, ~~2017.~~2018. The ~~London~~LBMA PM gold price was ~~$1,270~~$1,221 per ounce on ~~October~~July 31, ~~2017.~~2018.

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This graph presents the Metals Week Molybdenum Dealer Oxide weekly average prices from January ~~2007~~2008 through ~~September 2017.~~June 2018. Molybdenum prices declined beginning in mid-2014 because of weaker demand from global steel and stainless steel producers but have rebounded ~~slightly~~ starting in ~~mid-2016.~~mid-2016 with further improvement in late-2017 and early 2018 before a decline in second-quarter 2018. During ~~third-quarter 2017,~~second-quarter 2018, the weekly average price of molybdenum ranged from a low of ~~$7.11~~$10.72 per pound to a high of ~~$8.88~~$12.46 per pound, averaged ~~$8.14~~$11.64 per pound, and was ~~$8.49~~$10.72 per pound on ~~September~~June 30, ~~2017.~~2018. The Metals Week Molybdenum Dealer Oxide weekly average price was ~~$8.38~~$12.02 per pound on ~~October~~July 31, ~~2017.~~2018.

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CONSOLIDATED RESULTS


	Three Months Ended September 30,							Nine Months Ended September 30,							Three Months Ended June 30,							Six Months Ended June 30,
	2017			2016				2017			2016				2018				2017			2018				2017
SUMMARY FINANCIAL DATA	(in millions, except per share amounts)														(in millions, except per share amounts)
Revenues^a,b	$	4,310		$	3,877			$	11,362		$	10,453			$	5,168			$	3,711		$	10,036			$	7,052
Operating income (loss)^a,c,d,e,f	$	917	^g	$	359		^h	$	2,166	^g	$	(3,495	)	^h
Net income (loss) from continuing operations^i,j,k	$	242		$	292			$	836		$	(4,034	)
Net income (loss) from discontinued operations^l	$	3		$	(6	)		$	50		$	(191	)
Net income (loss) attributable to common stock	$	280		$	217			$	776		$	(4,446	)
Operating income^a,c,d,e															$	1,664			$	686	^f	$	3,123			$	1,283	^f
Net income from continuing operations^g,h,i															$	1,039		^j	$	326		$	1,867		^j	$	594
Net (loss) income from discontinued operations^k															$	(4	)		$	9		$	(15	)		$	47
Net income attributable to common stock															$	869			$	268		$	1,561			$	496
Diluted net income (loss) per share of common stock:
Continuing operations	$	0.19		$	0.18			$	0.50		$	(3.27	)		$	0.59			$	0.18		$	1.08			$	0.31
Discontinued operations	—			(0.02		)		0.03			(0.18		)		—				—			(0.01		)		0.03
	$	0.19		$	0.16			$	0.53		$	(3.45	)		$	0.59			$	0.18		$	1.07			$	0.34

Diluted weighted-average common shares outstanding	1,454			1,351				1,453			1,289				1,458				1,453			1,458				1,453

Operating cash flows^m	$	1,189		$	980			$	3,018		$	2,594
Operating cash flows^l															$	1,309			$	1,037		$	2,678			$	1,829
Capital expenditures	$	314		$	494			$	1,020		$	2,309			$	482			$	362		$	884			$	706
At September 30:
At June 30:
Cash and cash equivalents	$	4,957		$	1,086			$	4,957		$	1,086			$	3,859			$	4,667		$	3,859			$	4,667
Total debt, including current portion	$	14,782		$	18,882			$	14,782		$	18,882			$	11,127			$	15,354		$	11,127			$	15,354

~~a.As further detailed in Note 10, following is a summary of revenues and operating income (loss) by operating division (in millions):~~

Three Months Ended September 30, Nine Months Ended September 30,
Revenues 2017 2016 2017 2016
North America copper mines $ 1,105
$ 1,084
$ 3,348
$ 3,280

South America mining 1,023
671
2,626
2,019

Indonesia mining 1,121
986
2,720
2,073

Molybdenum mines 65
46
199
136

Rod & Refining 1,145
937
3,312
2,842

Atlantic Copper Smelting & Refining 555
445
1,413
1,363

Corporate, other & eliminations (704 ) (292 ) (2,256 ) (1,260 )
Total revenues $ 4,310
$ 3,877
$ 11,362
$ 10,453

Operating income (loss)
North America copper mines $ 349
$ 213
$ 956
$ 1,190

South America mining 128
111
532
371

Indonesia mining 547
374
1,023
501

Molybdenum mines (13 ) (26 ) (28 ) (74 )
Rod & Refining 2
4
6
15

Atlantic Copper Smelting & Refining 11
17
10
53

Corporate, other & eliminations (107 ) (334 ) (333 ) (5,551 )
Total operating income (loss) $ 917
$ 359
$ 2,166
$ (3,495 )


a.	Refer to Note 9 for a summary of revenues and operating income by operating division.


b.	Includes ~~favorable (unfavorable)~~ adjustments to embedded derivatives for provisionally priced concentrate and cathode ~~copper~~ sales ~~recognized in prior periods~~(refer to Note 6).

Includes net gains on sales of assets totaling ~~$95~~$45 million ($3945 million to net income attributable to common stock or $0.03 per share) in ~~third-quarter 2017, $(15)~~second-quarter 2018, $10 million ($~~(7)~~10 million to net income attributable to common stock or ~~$(0.01)~~$0.01 per share) in ~~third-quarter 2016, $81~~second-quarter 2017, $56 million ($3556 million to net income attributable to common stock or $0.04 per share) for the first six months of 2018, and $33 million ($33 million to net income attributable to common stock or $0.02 per share) for the first ~~nine~~six months of ~~2017~~2017. Refer to “Net Gain on Sales of Assets” for further discussion.

Includes net charges (credits) to environmental obligations and $5related litigation reserves totaling $50 million ($250 million to net ~~loss~~income attributable to common stock or $0.03 per share) in the second quarter and first six months of 2018, $(30) million ($(30) million to net income attributable to common stock or $(0.02) per share) in second-quarter 2017, and $(11) million ($(11) million to net income attributable to common stock or $(0.01) per share) for the first six months of 2017.

Includes net credits to mining operations totaling $10 million ($4 million to net income attributable to common stock or less than $0.01 per share) in the second quarter and first six months of 2018. The 2017 periods include net charges of $87 million ($46 million to net income attributable to common stock or 0.03 per share) in second-quarter 2017 and $108 million ($57 million to net income attributable to common stock or $0.04 per share) for the first ~~nine~~six months of ~~2016. Refer~~2017 associated with workforce reductions at PT-FI. The 2017 periods also include net charges to ~~“Revenues”~~mining operations for ~~further discussion.~~inventory adjustments and asset impairment totaling $9 million ($9 million to net income attributable to common stock or $0.01 per share) in second-quarter 2017 and $28 million ($28 million to net income attributable to common stock or $0.02 per share) for the first six months of 2017.

c.f.

Second-quarter 2017 includes net credits at oil and gas operations totaling $6 million ($6 million to net income attributable to common stock or less than $0.01 per share) primarily related to adjustments to the fair value of the contingent payments related to the 2016 drillship settlements. The first six months of 2017 include net credits at oil and gas operations totaling $4 million ($4 million to net income attributable to common stock or $0.01 per share) primarily related to drillship settlements, including adjustments to the fair value of the contingent payments, partly offset by other contract termination costs.

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Includes net ~~(credits) charges~~gains (losses) on early extinguishment of debt totaling $9 million ($9 million to ~~mining operations totaling~~net income attributable to common stock or $0.01 per share) in second-quarter 2018, $(4) million ($(4) million to net income attributable to common stock or less than $(0.01) per share) in ~~third-quarter~~second-quarter 2017, ~~$40~~$8 million ($40 million to net income attributable to common stock or $0.02 per share) in third-quarter 2016, $24 million ($24 million to net income attributable to common stock or $0.02 per share) for the first nine months of 2017 and $44 million ($44 million to net loss attributable to common stock or $0.03 per share) for the first nine months of 2016, primarily for inventory adjustments and asset impairment/retirement.


d.	~~Includes net credits to oil and gas operations totaling $4 million ($4~~8 million to net income attributable to common stock or less than $0.01 per share) ~~in third-quarter 2017 and $8 million ($8 million to net income attributable to common stock or~~

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$0.01 per share) for the first nine months of 2017, primarily related to drillship settlements, and net charges of $49 million ($49 million to net income attributable to common stock or $0.03 per share) in third-quarter 2016 and $980 million ($980 million to net loss attributable to common stock or $0.76 per share) for the first nine months of 2016, for drillship settlements, inventory adjustments, asset impairment and restructuring charges.

Includes a net gain on sales of assets totaling $33 million ($33 million to net income attributable to common stock or $0.02 per share) in third-quarter 2017 and $66 million ($66 million to net income attributable to common stock or $0.05 per share) for the first ~~nine~~six months of ~~2017, primarily associated with oil~~2018, and ~~gas transactions and $13~~$(3) million ($13 million to net income attributable to common stock or $0.01 per share) in third quarter 2016 and $762 million ($757 million to net loss attributable to common stock or $0.59 per share) for the first nine months of 2016, primarily associated with the sales of a 13 percent undivided interest in the Morenci unincorporated joint venture and our interest in the Timok exploration project in Serbia.

Includes net charges (credits) to environmental obligations and related litigation reserves totaling $64 million ($64 million to net income attributable to common stock or $0.04 per share) in third-quarter 2017, $(12) million ($(12) million to net income attributable to common stock or $(0.01) per share) in third-quarter 2016, $53 million ($53 million to net income attributable to common stock or $0.04 per share) for the first nine months of 2017 and $(11) million ($(11) million to net loss attributable to common stock or $(0.01) per share) for the first nine months of 2016. Refer to Note 9 for further discussion.

Includes a charge of $357 million ($188 million to net income attributable to common stock or $0.13 per share) in the third-quarter and first nine months of 2017 associated with disputed Cerro Verde royalties for prior years as well as net charges of $9 million ($5(3) million to net income attributable to common stock or less than ~~$0.01 per share) in third-quarter 2017 and $117 million ($62 million to net income attributable to common stock or $0.04~~$(0.01) per share) for the first ~~nine~~six months of ~~2017 associated with workforce reductions at PT-FI.~~2017. Refer to Note 5 for further discussion.

Includes ~~$239~~net tax credits of $7 million ~~($239 million to net income attributable to common stock or $0.18~~ (less than $0.01 per share) in ~~third-quarter 2016~~the second quarter and ~~$4.3 billion~~first six months of 2018, $32 million ($~~4.3 billion to net loss attributable to common stock or $3.35~~0.02 per share) in second-quarter 2017 and $31 million ($0.02 per share) for the first ~~nine~~six months of ~~2016~~2017. Refer to ~~reduce the carrying value~~“Income Taxes” for further discussion of ~~oil and gas properties pursuant to full cost accounting rules.~~these net tax credits.

Includes net gains on exchanges and early extinguishment of debt totaling $11 million ($11 million to net income attributable to common stock or $0.01 per share) in third-quarter 2017, $15 million ($15 million to net income attributable to common stock or $0.01 per share) in third-quarter 2016, $8 million ($8 million to net income attributable to common stock or $0.01 per share) for the first nine months of 2017 and $51 million ($51 million to net loss attributable to common stock or $0.04 per share) for the first nine months of 2016.


j.	We defer recognizing profits on intercompany sales until final sales to third parties occur. Refer to “Operations – Smelting & Refining” for a summary of net impacts from changes in these deferrals.

k.j.

Includes ~~net~~interest received on tax ~~(charges) credits of $(10)~~refunds totaling $6 million ($~~(0.01)~~6 million to net income attributable to common stock or less than $0.01 per share) in ~~third-quarter 2017~~second-quarter 2018 and ~~$21~~$30 million ($~~0.01~~19 million to net income attributable to common stock or $0.01 per share) for the first ~~nine~~six months of ~~2017 associated with alternative minimum tax credit carryforwards, and $332~~2018. The 2018 periods also include charges to interest expense totaling $2 million ($~~0.24~~1 million to net income attributable to common stock or less than $0.01 per share) in ~~third-quarter 2016~~second-quarter 2018 and ~~$290~~$6 million ($~~0.22~~2 million to net income attributable to common stock or less than $0.01 per share) for the first ~~nine~~six months of ~~2016 associated with alternative minimum tax credits, changes~~2018 related to ~~valuation allowances~~the Cerro Verde royalty and ~~net operating loss carryback claims.~~related matters.

l.k.

~~Net income from discontinued operations for the third quarter and first nine months of 2017 primarily~~Primarily reflects adjustments to the estimated fair value of ~~the potential $120 million in~~ contingent consideration related to the November 2016 sale of our interest in ~~TFHL,~~TF Holdings Limited (TFHL), which ~~totaled $58 million at September 30, 2017, and~~ will continue to be adjusted through December 31, 2019. Net loss from discontinued operations for the third quarter and first nine months of 2016 includes an estimated loss of $5 million (less than $0.01 per share) and $182 million ($0.14 per share), respectively, on the sale of our interest in TFHL. Refer to Note 2 for a summary of the components of net income (loss) from discontinued operations.


m.l.	Includes net working capital (uses) sources and ~~changes in~~timing of other tax payments of ~~$52~~$(192) million in ~~third-quarter 2017, $8~~second-quarter 2018, $154 million in ~~third-quarter 2016, $395~~second-quarter 2017, $(213) million for the first ~~nine~~six months of ~~2017~~2018 and ~~$483~~$343 million for the first ~~nine~~six months of ~~2016.~~2017.

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	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016^a		2017		2016^a		2018		2017		2018		2017
SUMMARY OPERATING DATA
Copper (millions of recoverable pounds)
Production	996		1,093		2,730		3,091		1,014		883		1,966		1,734
Sales, excluding purchases	932		1,113		2,683		3,100		989		942		1,982		1,751
Average realized price per pound	$	2.94	$	2.19	$	2.79	$	2.17	$	3.08	$	2.65	$	3.10	$	2.65
Site production and delivery costs per pound^b	$	1.57	$	1.37	$	1.60	$	1.42
Unit net cash costs per pound^b	$	1.21	$	1.14	$	1.26	$	1.28
Site production and delivery costs per pound^a									$	1.69	$	1.63	$	1.68	$	1.61
Unit net cash costs per pound^a									$	0.96	$	1.19	$	0.97	$	1.28
Gold (thousands of recoverable ounces)
Production	418		308		1,010		658		746		353		1,345		592
Sales, excluding purchases	355		317		969		674		676		432		1,286		614
Average realized price per ounce	$	1,290	$	1,327	$	1,261	$	1,292	$	1,274	$	1,243	$	1,291	$	1,242
Molybdenum (millions of recoverable pounds)
Production	24		19		70		58		24		23		46		46
Sales, excluding purchases	22		16		71		52		24		25		48		49
Average realized price per pound	$	9.22	$	9.14	$	9.18	$	8.36	$	12.89	$	9.58	$	12.42	$	9.16
Oil Equivalents
Sales volumes
Oil (millions of barrels (MMBbls))	0.4		9.1		1.4		26.1
Natural gas (billion cubic feet (Bcf))	3.1		13.8		13.3		52.2
Natural gas liquids (MMBbls)	—		0.6		0.2		1.8
Million barrels of oil equivalent (MMBOE)	1.0		12.0		3.8		36.6
Thousand BOE (MBOE) per day	11		131		14		133


a.	Excludes the results of the Tenke mine, which was sold in November 2016 and is reported as a discontinued operation. Copper sales from the Tenke mine totaled 118 million pounds in third-quarter 2016 and 365 million for the first nine months of 2016.


b.	Reflects per pound weighted-average production and delivery costs and unit net cash costs (net of by-product credits) for all copper mines, before net noncash and other costs. For reconciliations of per pound unit costs by operating division to production and delivery costs applicable to sales reported in our consolidated financial statements, refer to “Product Revenues and Production Costs.”

Revenues

Consolidated revenues totaled ~~$4.3~~$5.2 billion in ~~third-quarter 2017~~second-quarter 2018 and ~~$11.4~~$10.0 billion for the first ~~nine~~six months of ~~2017,~~2018, compared with ~~$3.9~~$3.7 billion in ~~third-quarter 2016~~second-quarter 2017 and ~~$10.5~~$7.1 billion for the first ~~nine~~six months of ~~2016.~~2017. Revenues from our mining operations primarily include the sale of copper concentrate, copper cathode, copper rod, gold in concentrate and molybdenum. ~~Revenues from our oil and gas operations, most of which were sold in 2016, include the sale of oil, natural gas and natural gas liquids (NGLs).~~

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Following is a summary of changes in our consolidated revenues between periods (in millions):


	Three Months Ended September 30			Nine Months Ended September 30			Three Months Ended June 30			Six Months Ended June 30

Revenues - 2016 period	$	3,877		$	10,453
(Lower) higher sales volumes:
Consolidated revenues - 2017 period							$	3,711		$	7,052
Higher (lower) sales volumes:
Copper	(394		)	(903		)	127			615
Gold	50			381			303			832
Molybdenum	56			161			(10		)	(10		)
Oil and gas	(394		)	(1,031		)
Higher (lower) average realized prices:
Higher average realized prices:
Copper	700			1,664			426			892
Gold	(13		)	(29		)	20			62
Molybdenum	2			59			79			155
Net adjustments for prior period provisionally priced copper sales	110			76
Lower treatment charges	38			83
Adjustments for prior period provisionally priced copper sales							43			(151		)
Higher treatment charges							(11		)	(40		)
Higher revenues from purchased copper	87			256			119			200
Higher Atlantic Copper revenues	110			50			202			323
Other, including intercompany eliminations	81			142			159			106
Revenues - 2017 period	$	4,310		$	11,362
Consolidated revenues - 2018 period							$	5,168		$	10,036

Sales Volumes. Consolidated copper sales ~~decreased~~increased to ~~932~~989 million pounds in ~~third-quarter 2017,~~second-quarter 2018, compared with ~~1.1 billion~~942 million pounds in ~~third-quarter 2016,~~second-quarter 2017, primarily reflecting ~~lower~~higher mining and milling rates and higher ore grades in ~~North America and Indonesia and the timing of shipments.~~Indonesia. Consolidated copper sales ~~decreased~~increased to ~~2.7~~2.0 billion ~~pounds~~ for the first ~~nine~~six months of 2018, compared with 1.75 billion for the first six months of 2017, ~~compared with 3.1 billion pounds for the first nine months of 2016,~~ primarily reflecting ~~lower ore grades~~higher operating rates in ~~North America and the impact of the May 2016 sale of an additional 13 percent interest in Morenci.~~Indonesia.

Consolidated gold sales volumes increased to ~~355~~676 thousand ounces in ~~third-quarter~~second-quarter 2018 and 1.3 million ounces for the first six months of 2018, compared with 432 thousand ounces in second-quarter 2017 and ~~969~~614 thousand ounces for the first ~~nine~~six months of 2017, ~~compared with 317 thousand ounces in third-quarter 2016 and 674 thousand ounces for the first nine months of 2016,~~ primarily reflecting higher ore grades and operating rates in Indonesia.

Consolidated molybdenum sales volumes ~~increased to 22~~of 24 million pounds in ~~third-quarter 2017~~second-quarter 2018 and 7148 million ~~pounds~~ for the first ~~nine~~six months of ~~2017, compared with 16~~2018 were slightly lower than sales of 25 million pounds in ~~third-quarter 2016~~second-quarter 2017 and 5249 million ~~pounds~~ for the first ~~nine~~six months of ~~2016, primarily reflecting higher demand.~~2017.

Refer to “Operations” for further discussion of sales volumes at our mining operations.

Oil and gas sales volumes of 1.0 MMBOE in third-quarter 2017 and 3.8 MMBOE for the first nine months of 2017, were lower than oil and gas sales volumes of 12.0 MMBOE in third-quarter 2016 and 36.6 MMBOE for the first nine months of 2016, primarily reflecting the sales of significant oil and gas properties in 2016.

Realized Prices. Our consolidated revenues can vary significantly as a result of fluctuations in the market prices of copper, gold and molybdenum. ~~Third-quarter 2017~~Second-quarter 2018 average realized prices, compared with ~~third-quarter 2016,~~second-quarter 2017, were 3416 percent higher for copper, 32 percent ~~lower~~higher for gold and 135 percent higher for molybdenum, and average realized prices for the first ~~nine~~six months of ~~2017,~~2018, compared with the first ~~nine~~six months of ~~2016,~~2017, were 2917 percent higher for copper, 24 percent ~~lower~~higher for gold and 1036 percent higher for molybdenum. Refer to “Markets” for further discussion.

As discussed below, substantially all of our copper concentrate and cathode sales contracts provide final copper pricing in a specified future month. We record revenues and invoice customers at the time of shipment based on then-current LME prices, which results in an embedded derivative on provisionally priced concentrate and cathode sales that is adjusted to fair value through earnings each period until final pricing on the date of settlement. Average realized copper prices include net adjustments to current period provisionally priced copper sales totaling $(37) million in second-quarter 2018 and $(79) million for the first six months of 2018, compared with $55 million in second-quarter 2017 and $61 million for the first six months of 2017. Refer to Notes 6 and 9 for a summary of total adjustments to prior period and current period provisionally priced sales.

Prior Period Provisionally Priced Copper Sales. Substantially all of our copper concentrate and cathode sales contracts provide final copper pricing in a specified future month (generally one to four months from the shipment date) based primarily on quoted LME monthly average ~~spot~~ copper prices. We receive market prices based on prices in the specified future period, which results in price fluctuations recorded through revenues until the date of settlement. We record revenues and invoice customers at the time of shipment based on then-current LME prices, which results in an embedded derivative on our provisionally priced concentrate and cathode sales that is adjusted to fair value through earnings each period, using the period-end forward prices, until final pricing on the date of

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settlement. To the extent final prices are higher or lower than what was recorded on a provisional basis, an increase or decrease to revenues is recorded each reporting period until the date of final pricing. Accordingly, in times of rising copper prices, our revenues benefit from adjustments to the final pricing of provisionally priced sales pursuant to contracts entered into in prior periods; in times of falling copper prices, the opposite occurs. ~~Favorable (unfavorable)~~

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~~impacts of net~~Net adjustments to prior periods’ provisionally priced copper sales ~~from continuing operations~~recorded in consolidated revenues totaled ~~$95~~$23 million in ~~third-quarter~~second-quarter 2018 and $(70) million for the first six months of 2018, compared with $(20) million in second-quarter 2017 and $81 million for the first ~~nine~~six months of ~~2017, compared with $(15) million in third-quarter 2016~~2017. Refer to Notes 6 and ~~$5 million~~9 for ~~the first nine months~~a summary of ~~2016, primarily reflecting higher copper prices in the 2017 periods.~~total adjustments to prior period and current period provisionally priced sales.

At ~~September~~June 30, ~~2017,~~2018, we had provisionally priced copper sales ~~at our copper mining operations~~ totaling ~~338~~336 million pounds of copper (net of intercompany sales and noncontrolling interests) recorded at an average of ~~$2.93~~$3.01 per pound, subject to final pricing over the next several months. We estimate that each $0.05 change in the price realized from the ~~September~~June 30, ~~2017,~~2018, provisional price recorded would have an approximate ~~$11~~$10 million effect on our ~~2017~~2018 net income attributable to common stock. The LME ~~spot~~ copper price ~~was $3.09~~settled at $2.82 per pound on ~~October~~July 31, ~~2017.~~2018.

Treatment Charges. Revenues from our concentrate sales are recorded net of treatment charges. ~~Lower~~Higher treatment charges in the ~~2017~~2018 periods, compared with the ~~2016~~2017 periods, primarily reflect ~~lower concentrate~~higher sales volumes ~~at North America copper mines.~~from Indonesia.

Purchased Copper. We purchase copper cathode primarily for processing by our Rod & Refining operations. ~~In addition to higher copper prices, we had higher purchased~~Purchased copper volumes ~~in the 2017 periods (75~~totaled 90 million pounds in ~~third-quarter 2017~~second-quarter 2018 and ~~195 million for the first nine months of 2017, compared with 61 million pounds in third-quarter 2016 and 131~~164 million pounds for the first ~~nine~~six months of ~~2016).~~2018, compared with 62 million pounds in second-quarter 2017 and 120 million for the first six months of 2017.

Atlantic Copper Revenues. Atlantic Copper revenues totaled ~~$555~~$602 million in ~~third-quarter 2017~~second-quarter 2018 and ~~$1.4~~$1.2 billion for the first ~~nine~~six months of ~~2017,~~2018, compared with ~~$445~~$400 million in ~~third-quarter 2016~~second-quarter 2017 and ~~$1.4 billion~~$858 million for the first ~~nine~~six months of ~~2016.~~2017. Higher revenues in ~~third-quarter 2017,~~the 2018 periods, compared with ~~third-quarter 2016,~~the 2017 periods, primarily reflect higher copper sales volumes and higher copper prices.

Production and Delivery Costs

Consolidated production and delivery costs totaled ~~$2.8~~$2.9 billion in ~~third-quarter 2017,~~second-quarter 2018, $2.5 billion in ~~third-quarter 2016, $7.5~~second-quarter 2017, $5.7 billion for the first ~~nine~~six months of ~~2017~~2018 and ~~$8.0~~$4.7 billion for the first ~~nine~~six months of ~~2016.~~2017. Production and delivery costs for the ~~third quarter~~2017 periods included charges totaling $82 million in second-quarter 2017 and $103 million for the first ~~nine~~six months of 2017 ~~included charges totaling $216 million at Cerro Verde~~ associated with ~~disputed royalties for prior years (refer to “Operations – South America Mining” for further discussion). Production~~PT-FI workforce reductions. Higher consolidated production and delivery costs ~~for~~in the ~~first nine months of 2016 included charges totaling $942 million~~2018 periods, compared with the 2017 periods, primarily reflect higher concentrate purchases at ~~oil~~Atlantic Copper and ~~gas~~copper purchases at Rod & Refining operations, ~~primarily for drillship settlements~~as well as higher mining, repairs and ~~inventory adjustments.~~maintenance costs in North America and South America.

Mining Unit Site Production and Delivery Costs. Site production and delivery costs for our copper mining operations primarily include labor, energy and commodity-based inputs, such as sulphuric acid, reagents, liners, tires and explosives. Consolidated unit site production and delivery costs (before net noncash and other costs) for our copper mines averaged ~~$1.57~~$1.69 per pound of copper in ~~third-quarter 2017~~second-quarter 2018 and ~~$1.60~~$1.68 per pound of copper for the first ~~nine~~six months of ~~2017,~~2018, compared with ~~$1.37~~$1.63 per pound of copper in ~~third-quarter 2016~~second-quarter 2017 and ~~$1.42~~$1.61 per pound of copper for the first ~~nine~~six months of ~~2016.~~2017. Higher consolidated unit site production and delivery costs ~~for~~in the ~~2017~~2018 periods, compared with the ~~2016~~2017 periods, primarily reflect ~~lower~~higher mining, repairs and maintenance costs in North America and South America, partly offset by higher copper sales ~~volumes.~~volumes at PT-FI. Refer to “Operations – Unit Net Cash Costs” for further discussion of unit net cash costs associated with our operating divisions and to “Product Revenues and Production Costs” for reconciliations of per pound costs by operating division to production and delivery costs applicable to sales reported in our consolidated financial statements.

Depreciation, Depletion and Amortization

Depreciation will vary under the unit-of-production (UOP) method as a result of changes in sales volumes and the related UOP rates at our ~~individual mines.~~mining operations. Consolidated depreciation, depletion and amortization (DD&A) totaled ~~$418~~$442 million in ~~third-quarter 2017~~second-quarter 2018 and ~~$1.3 billion~~$893 million for the first ~~nine~~six months of ~~2017,~~2018, compared with ~~$643~~$450 million in ~~third-quarter 2016~~second-quarter 2017 and ~~$1.9 billion~~$839 million for the first ~~nine~~six months of ~~2016. Lower DD&A in the 2017 periods, compared with the 2016 periods, primarily reflects lower DD&A from oil and gas operations resulting from sales of significant oil and gas properties in 2016.~~

~~Impairment of Oil and Gas Properties~~

The review of the carrying value of our oil and gas properties for impairment under full cost accounting rules resulted in the recognition of impairment charges totaling $239 million for third-quarter 2016 and $4.3 billion for the first nine months of 2016.2017.

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Selling, General and Administrative Expenses

Consolidated selling, general and administrative expenses totaled ~~$106~~$109 million in ~~third-quarter 2017, $110~~second-quarter 2018, $107 million in ~~third-quarter 2016, $366~~second-quarter 2017, $240 million for the first ~~nine~~six months of ~~2017~~2018 and ~~$408~~$258 million for the first ~~nine~~six months of 2016. Selling, general and administrative expenses include net oil and gas-related charges totaling $17 million for the first nine months of 2017 for contract termination and $38 million for the first nine months of 2016 for restructuring.

Consolidated selling, general and administrative expenses were net of capitalized general and administrative expenses at our oil and gas operations totaling $16 million in third-quarter 2016 and $66 million for the first nine months of 2016.2017.

Mining Exploration and Research Expenses

Consolidated exploration and research expenses for our mining operations totaled ~~$27~~$24 million in ~~third-quarter 2017, $13~~second-quarter 2018, $19 million in ~~third-quarter 2016, $61~~second-quarter 2017, $45 million for the first ~~nine~~six months of ~~2017~~2018 and ~~$46~~$33 million for the first ~~nine~~six months of ~~2016.~~2017. Our mining exploration activities are generally associated with our existing mines, ~~and focus~~focusing on opportunities to expand reserves and resources to support development of additional future production capacity. Exploration results continue to indicate opportunities for significant future potential reserve additions in North America and South America. Exploration spending is expected to approximate ~~$75~~$90 million for the year ~~2017.~~2018.

Environmental Obligations and Shutdown Costs

Environmental obligation costs reflect net revisions to our long-term environmental obligations, which vary from period to period because of changes to environmental laws and regulations, the settlement of environmental matters and/or circumstances affecting our operations that could result in significant changes in our estimates. Shutdown costs include care-and-maintenance costs and any litigation, remediation or related expenditures associated with closed facilities or operations. Net charges (credits) for environmental obligations and shutdown costs totaled ~~$73~~$59 million in ~~third-quarter 2017, $(3)~~second-quarter 2018, $(21) million in ~~third-quarter 2016, $81~~second-quarter 2017, $68 million for the first ~~nine~~six months of ~~2017~~2018 and ~~$18~~$4 million for the first ~~nine~~six months of ~~2016.~~2017. Refer to Note 98 for further discussion.

Net Gain on Sales of Assets

Net gain on sales of assets totaled ~~$33~~$45 million in ~~third-quarter 2017~~second-quarter 2018 and ~~$66~~$56 million for the first ~~nine~~six months of ~~2017,~~2018, primarily ~~associated with~~reflecting adjustments to the fair value of the potential $150 million in contingent consideration related to the 2016 sale of onshore California oil and gas ~~transactions.~~ properties, which will continue to be adjusted through December 31, 2020.

Net gain on sales of assets totaled ~~$13~~$10 million in ~~third-quarter 2016~~second-quarter 2017 and ~~$762~~$33 million for the first ~~nine~~six months of 2017, primarily reflecting an adjustment to assets held for sale, partly offset by an adjustment to the estimated fair value of the contingent consideration related to the 2016 ~~primarily~~sale of onshore California oil and gas properties. The first six months of 2017 also included gains associated with ~~the sales of a 13 percent undivided interest in the Morenci unincorporated joint venture~~oil and ~~a portion of our interest in the Timok exploration project in Serbia.~~gas transactions.

Interest Expense, Net

~~Interest expense, net, for the third quarter and first nine months of 2017 includes $141 million associated with disputed Cerro Verde royalties (refer to Note 9 for additional discussion).~~ Consolidated interest costs (before ~~capitalization and excluding interest expense associated with disputed Cerro Verde royalties)~~capitalization) totaled ~~$196~~$165 million in ~~third-quarter 2017, $211~~second-quarter 2018, $192 million in ~~third-quarter 2016, $583~~second-quarter 2017, $341 million for the first ~~nine~~six months of ~~2017~~2018 and ~~$647~~$387 million for the first ~~nine~~six months of ~~2016.~~2017. Lower interest ~~cost for~~costs in the 2018 periods, compared with the 2017 periods, ~~compared to the 2016 periods, reflects~~reflect a decrease in total ~~debt .~~debt.

Capitalized interest varies with the level of expenditures for our development projects and average interest rates on our borrowings, and totaled ~~$33~~$23 million in ~~third-quarter 2017, $24~~second-quarter 2018, $30 million in ~~third-quarter 2016, $91~~second-quarter 2017, $48 million for the first ~~nine~~six months of ~~2017~~2018 and ~~$73~~$58 million for the first ~~nine~~six months of ~~2016.~~

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2017.

Income Taxes

Following is a summary of the approximate amounts used in the calculation of our consolidated income tax provision ~~from continuing operations for the 2017 and 2016 periods~~ (in millions, except percentages):


	Nine Months Ended September 30,																	Six Months Ended June 30,
	2017									2016								2018								2017
	Income (Loss)^a			Effective Tax Rate		Income Tax Benefit (Provision)				Income (Loss)^a			Effective Tax Rate	Income Tax Benefit (Provision)				Income^a		Effective Tax Rate		Income Tax (Provision) Benefit				Income^a		Effective Tax Rate	Income Tax (Provision) Benefit
U.S.	$	66		(40)%		$	27		^b	$	(616	)	47%	$	292		^c	$	311	(3)%		$	9		^b	$	61	(39)%	$	24		^c
South America	709			42%		(296		)		290			39%	(114		)		459		39%		(180		)	^d	386		41%	(159		)
Indonesia	1,035			42%		(435		)		544			39%	(212		)		1,945		43%		(830		)		487		41%	(202		)
Cerro Verde royalty dispute	(357		)	N/A		(2		)	^d	—			N/A	—
Impairment of oil and gas properties	—			N/A		—				(4,317		)	38%	1,632
Valuation allowance, net	—			N/A		—				—			N/A	(1,632		)	^e
Eliminations and other	124			N/A		(38		)		135			N/A	(46		)		172		N/A		(31		)		17		N/A	(24		)
Rate adjustment^f	—			N/A		(3		)		—			N/A	1
Rate adjustment^e																		—		N/A		11				—		N/A	1
Consolidated FCX	$	1,577		47%	^g	$	(747	)		$	(3,964	)	(2)%	$	(79	)		$	2,887	35%	^f	$	(1,021	)		$	951	38%	$	(360	)


a.	Represents income ~~(loss)~~ from continuing operations by geographic location before income taxes and equity in affiliated companies’ net ~~earnings.~~earnings (losses).

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b.	Includes ~~net~~a tax ~~credits~~credit of ~~$21~~$5 million associated with ~~alternative minimum~~the settlement of a state income tax ~~credit carryforwards.~~examination.


c.	Includes net tax credits of ~~$290~~$31 million associated with anticipated recovery of alternative minimum tax ~~credits, changes to valuation allowances and net operating loss carryback claims.~~credit carryforwards.

Includes a tax ~~charges~~credit of ~~$127~~$5 million ~~for~~($2 million net of noncontrolling interest) associated with Cerro Verde’s disputed royalties and other related mining taxes for the period October 2011 through the year 2013 (when royalties were determined based on operating income), mostly offset by a tax benefit of $125 million associated with disputed royalties and other related mining taxes for the period December 2006 through the year 2013.taxes.


e.	As a result of the impairment to U.S. oil and gas properties, we recorded tax charges to establish valuation allowances against U.S. federal and state deferred tax assets that will not generate a future benefit.


f.	In accordance with applicable accounting rules, we adjust our interim provision for income taxes to equal our consolidated tax rate.

g.f.

The consolidated effective income tax rate is a function of the combined effective tax rates for the jurisdictions in which we operate. Accordingly, variations in the relative proportions of jurisdictional income result in fluctuations to our consolidated effective income tax rate. Assuming achievement of current sales volume and cost estimates and average prices of ~~$3.00~~$2.75 per pound for copper, ~~$1,300~~$1,250 per ounce for gold and ~~$8.00~~$11.00 per pound for molybdenum for ~~fourth-quarter 2017,~~the second half of 2018, we estimate our consolidated effective tax rate ~~related to continuing operations~~ for the year ~~2017 will~~2018 would approximate 4538 percent, which would result in a consolidated effective tax rate of approximately 46 percent in third-quarter 2018 and 38 percent in fourth-quarter 2018. We expect that our consolidated effective tax rate for the year 2018 would decrease with higher prices.

Net (Loss) Income ~~(Loss)~~ from Discontinued Operations

In November 2016, we completed the sale of our interest in TFHL, through which we had an effective 56 percent interest in the Tenke copper and cobalt concessions in the Democratic Republic of Congo. In accordance with accounting guidelines, the results of TFHL have been reported as discontinued operations for all periods presented. Net (loss) income from discontinued operations ~~totaled $3~~of $(4) million in ~~third-quarter~~second-quarter 2018, $9 million in second-quarter 2017, ~~and $50~~$15 million for the first ~~nine~~six months of 2018 and $47 million for the first six months of 2017, ~~which~~ primarily reflected adjustments to the fair value of the potential $120 million contingent consideration related to the November 2016 sale of our interest in TFHL, which ~~totaled $58 million at September 30, 2017, and~~ will continue to be adjusted through December 31, 2019. Net loss from discontinued operations of $6 million in third-quarter 2016 and $191 million for the first nine months of 2016 include an estimated loss on disposal of $5 million for third-quarter 2016 and $182 million for the first nine months of 2016. Refer to Note 2 for a summary of the components of net income (loss) from discontinued operations.

OPERATIONS

North America Copper Mines

We operate seven open-pit copper mines in North America – Morenci, Bagdad, Safford, Sierrita and Miami in Arizona, and Chino and Tyrone in New Mexico. All of the North America mining operations are wholly owned, except for Morenci.

We record our 72 percent undivided joint venture interest in Morenci using the proportionate consolidation method. On May 31, 2016, we completed the sale of an additional 13 percent undivided interest in Morenci. As a result of the transaction, our undivided interest in Morenci was prospectively reduced from 85 percent to 72 percent.

~~Table of Contents~~

The North America copper mines include open-pit mining, sulfide ore concentrating, leaching and solution extraction/electrowinning (SX/EW) operations. A majority of the copper produced at our North America copper mines is cast into copper rod by our Rod & Refining segment. The remainder of our North America copper sales is in the form of copper cathode or copper concentrate, a portion of which is shipped to Atlantic Copper (our wholly owned smelter). Molybdenum concentrate, gold and silver are also produced by certain of our North America copper mines.

Operating and Development Activities. We have significant undeveloped reserves and resources in North America and a portfolio of potential long-term development projects. Future investments will be undertaken based on the results of economic and technical feasibility studies, and are dependent on market conditions. We continue to study opportunities to reduce the capital intensity of our potential long-term development projects.

Through exploration drilling, we have identified a significant resource at our wholly owned Lone Star project located near the Safford operation in eastern Arizona. ~~The Safford mine is expected~~An initial project to ~~have copper production through 2024. Initial production from~~develop the Lone Star oxide ores ~~could begin~~commenced in ~~2021 assuming an~~first-quarter 2018, with first production expected by the end of 2020. Total capital costs, including mine equipment and pre-production stripping, are expected to approximate ~~three-year development period~~$850 million and ~~using~~will benefit from the utilization of existing infrastructure at the adjacent Safford operation. ~~Total preliminary capital cost estimates~~As of June 30, 2018, $113 million has been incurred for ~~development, including mine equipment and pre-production stripping, approximates $850 million. Projected production~~this project. Production from the Lone Star oxide ores ~~would~~is expected to average approximately 200 million pounds of copper per year with an approximate 20-year mine life. ~~Considering the long-term nature and size of the project, results could vary from these estimates.~~ The project ~~would~~ also ~~advance~~advances the potential for development of a larger-scale district opportunity. We ~~have obtained regulatory approvals for this project and are assessing the timing to commence pre-stripping activities. We~~ are conducting additional drilling ~~as we~~following positive exploration results and continue to evaluate longer term opportunities available from the significant long-term sulfide potential in the Lone Star/Safford minerals district.

For further discussion of the risks associated with development projects, refer to Part I, Item 1A. “Risk Factors” of our annual report on Form 10-K for the year ended December 31, 2017, as updated by Part II, Item 1A. “Risk Factors” of this quarterly report on Form 10-Q.

Table of Contents

Operating Data. Following is a summary of consolidated operating data for the North America copper mines for the ~~third~~second quarters and first ~~nine~~six months of ~~2017~~2018 and ~~2016:~~2017:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016		2018		2017		2018		2017
Operating Data, Net of Joint Venture Interests
Copper (millions of recoverable pounds)
Production	375		455		1,151		1,411		354		384		702		776
Sales, excluding purchases	347		458		1,130		1,425		361		408		745		783
Average realized price per pound	$	2.92	$	2.19	$	2.74	$	2.18	$	3.12	$	2.62	$	3.14	$	2.65

Molybdenum (millions of recoverable pounds)
Production^a	8		9		25		25		8		8		15		17

100% Operating Data
SX/EW operations
Leach ore placed in stockpiles (metric tons per day)	655,600		681,400		681,200		764,900		689,500		692,700		682,100		697,300
Average copper ore grade (percent)	0.27		0.31		0.28		0.32		0.24		0.29		0.26		0.28
Copper production (millions of recoverable pounds)	280		316		839		921		268		282		530		559

Mill operations
Ore milled (metric tons per day)	297,200		300,500		300,000		299,900		307,000		299,100		297,900		301,400
Average ore grade (percent):
Copper	0.38		0.47		0.40		0.48		0.35		0.39		0.35		0.40
Molybdenum	0.03		0.03		0.03		0.03		0.02		0.03		0.02		0.03
Copper recovery rate (percent)	86.6		87.8		86.6		86.3		89.1		86.7		88.5		86.6
Copper production (millions of recoverable pounds)	167		216		527		661		157		174		308		360


a.	Refer to “Consolidated Results” for our consolidated molybdenum sales volumes, which include sales of molybdenum produced at the North America copper mines.

~~Table of Contents~~

North America’s consolidated copper sales volumes of ~~347~~361 million pounds in ~~third-quarter 2017~~second-quarter 2018 and ~~1.1 billion~~745 million pounds for the first ~~nine~~six months of ~~2017~~2018 were lower than ~~third-quarter 2016~~second-quarter 2017 sales of ~~458~~408 million pounds and ~~1.4 billion~~783 million pounds for the first ~~nine~~six months of ~~2016,~~2017, primarily reflecting lower ore grades. ~~Additionally, third-quarter 2017 was impacted by the timing of shipments.~~

North America copper sales are estimated to approximate ~~1.5~~1.45 billion pounds for the year ~~2017,~~2018, compared with ~~1.8~~1.5 billion pounds in ~~2016.~~2017.

Unit Net Cash Costs. Unit net cash costs per pound of copper is a measure intended to provide investors with information about the cash-generating capacity of our mining operations expressed on a basis relating to the primary metal product for our respective operations. We use this measure for the same purpose and for monitoring operating performance by our mining operations. This information differs from measures of performance determined in accordance with U.S. GAAP and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. This measure is presented by other metals mining companies, although our measure may not be comparable to similarly titled measures reported by other companies.

Table of Contents

Gross Profit per Pound of Copper and Molybdenum

The following table summarizes unit net cash costs and gross profit per pound at our North America copper ~~mines for the third quarters and first nine months of 2017 and 2016.~~mines. Refer to “Product Revenues and Production Costs” for an explanation of the “by-product” and “co-product” methods and a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in our consolidated financial statements.

Three Months Ended September 30,
2017 2016
By- Product Method Co-Product Method By- Product Method Co-Product Method
Copper
Molyb-
denum^a
Copper
Molyb-
denum^a

Revenues, excluding adjustments $ 2.92
$ 2.92
$ 7.59
$ 2.19
$ 2.19
$ 7.39

Site production and delivery, before net noncash
and other costs shown below
1.67
1.56
5.58
1.44
1.34
5.51

By-product credits (0.17 ) —
—
(0.17 ) —
—

Treatment charges 0.11
0.11
—
0.10
0.09
—

Unit net cash costs 1.61
1.67
5.58
1.37
1.43
5.51

DD&A 0.28
0.27
0.49
0.28
0.26
0.70

Noncash and other costs, net 0.04
0.04
0.05
0.06
0.05
0.13

Total unit costs 1.93
1.98
6.12
1.71
1.74
6.34

Revenue adjustments, primarily for pricing
on prior period open sales
0.03
0.03
—
—
—
—

Gross profit per pound $ 1.02
$ 0.97
$ 1.47
$ 0.48
$ 0.45
$ 1.05

Copper sales (millions of recoverable pounds) 345
345
457
457

Molybdenum sales (millions of recoverable pounds)^a
8
9

~~Table of Contents~~




	Three Months Ended June 30,
	2018							2017
	By- Product Method			Co-Product Method				By- Product Method			Co-Product Method
	By- Product Method			Copper		Molyb- denum^a		By- Product Method			Copper		Molyb- denum^a
Revenues, excluding adjustments	$	3.12		$	3.12	$	12.13	$	2.62		$	2.62	$	8.17

Site production and delivery, before net noncash and other costs shown below	1.94			1.78		9.09		1.58			1.49		6.12
By-product credits	(0.25		)	—		—		(0.16		)	—		—
Treatment charges	0.10			0.10		—		0.10			0.09		—
Unit net cash costs	1.79			1.88		9.09		1.52			1.58		6.12
DD&A	0.25			0.23		0.80		0.29			0.27		0.66
Noncash and other costs, net	0.07			0.06		0.15		0.05			0.04		0.05
Total unit costs	2.11			2.17		10.04		1.86			1.89		6.83
Revenue adjustments, primarily for pricing on prior period open sales	—			—		—		—			—		—
Gross profit per pound	$	1.01		$	0.95	$	2.09	$	0.76		$	0.73	$	1.34

Copper sales (millions of recoverable pounds)	361			361				408			408
Molybdenum sales (millions of recoverable pounds)^a						8							8



	Nine Months Ended September 30,																			Six Months Ended June 30,
	2017								2016											2018											2017
	By- Product Method				Co-Product Method				By- Product Method				Co-Product Method							By- Product Method				Co-Product Method							By- Product Method				Co-Product Method
					Copper		Molyb- denum^a					Copper				Molyb- denum^a							Copper				Molyb- denum^a							Copper				Molyb- denum^a
Revenues, excluding adjustments	$	2.74			$	2.74	$	7.57		$	2.18			$	2.18			$	6.24		$	3.14			$	3.14			$	11.52		$	2.65			$	2.65			$	7.56

Site production and delivery, before net noncash and other costs shown below	1.59				1.50		5.62		1.41				1.34				4.86			1.89				1.75				8.47			1.54				1.45				5.62
By-product credits	(0.16		)		—		—		(0.12		)		—				—			(0.22		)		—				—			(0.15		)		—				—
Treatment charges	0.11				0.10		—		0.11				0.10				—			0.10				0.10				—			0.10				0.10				—
Unit net cash costs	1.54				1.60		5.62		1.40				1.44				4.86			1.77				1.85				8.47			1.49				1.55				5.62
DD&A	0.29				0.27		0.56		0.29				0.27				0.61			0.25				0.23				0.74			0.30				0.28				0.59
Noncash and other costs, net	0.06			^b	0.06		0.06		0.05				0.05				0.06			0.05				0.05				0.12			0.07				0.07				0.06
Total unit costs	1.89				1.93		6.24		1.74				1.76				5.53			2.07				2.13				9.33			1.86				1.90				6.27
Revenue adjustments, primarily for pricing on prior period open sales	—				—		—		—				—				—
Other revenue adjustments, primarily for pricing on prior period open sales																				(0.01		)		(0.01		)		—			0.01				0.01				—
Gross profit per pound	$	0.85			$	0.81	$	1.33	$	0.44			$	0.42			$	0.71		$	1.06			$	1.00			$	2.19		$	0.80			$	0.76			$	1.29

Copper sales (millions of recoverable pounds)	1,127				1,127				1,421				1,421							744				744							782				782
Molybdenum sales (millions of recoverable pounds)^a							25										25											15											17


a.	Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing.


b.	~~Includes $21 million ($0.02 per pound of copper) for asset impairment charges at Morenci.~~

Our North America copper mines have varying cost structures because of differences in ore grades and characteristics, processing costs, by-product credits and other factors. Average unit net cash costs (net of by-product credits) for the North America copper mines of $~~1.61~~1.79 per pound of copper in ~~third-quarter~~second-quarter ~~2017~~2018 and ~~$1.54 per pound~~$1.77 for the first ~~nine~~six months of ~~2017~~2018 were higher than unit net cash costs of $~~1.37~~1.52 per pound in ~~third-quarter~~second-quarter ~~2016~~2017 and ~~$1.40 per pound~~$1.49 for the first ~~nine~~six months of ~~2016,~~2017, primarily reflecting lower sales ~~volumes.~~volumes and higher mining and milling costs, partly offset by higher by-product credits.

Because certain assets are depreciated on a straight-line basis, North America’s average unit depreciation rate may vary with asset additions and the level of copper production and sales.

Table of Contents

Average unit net cash costs (net of by-product credits) for our North America copper mines are expected to approximate $~~1.58~~1.78 per pound of copper for the year ~~2017,~~2018, based on achievement of current sales volume and cost estimates and assuming an average molybdenum price of $~~8.00~~11.00 per pound for ~~fourth-quarter 2017.~~the second half of 2018. North

America’s average unit net cash costs for the year ~~2017~~2018 would change by approximately $~~0.007~~0.02 per pound for each $2 per pound change in the average price of ~~molybdenum.~~molybdenum for the second half of 2018.

South America Mining

We operate two copper mines in South America – Cerro Verde in Peru (in which we own a 53.56 percent interest) and El Abra in Chile (in which we own a 51 percent interest)~~. These operations~~, which are consolidated in our financial statements.

South America mining includes open-pit mining, sulfide ore concentrating, leaching and SX/EW operations. Production from our South America mines is sold as copper concentrate or cathode under long-term contracts. Our South America mines also sell a portion of their copper concentrate production to Atlantic Copper. In addition to copper, the Cerro Verde mine produces molybdenum concentrate and silver.

In August 2018, Cerro Verde ~~Royalty Dispute.In October 2017, the Peruvian Supreme Court issued~~and its workers’ union agreed to a ~~ruling in favor of SUNAT, Peru’s national tax authority,~~new three year collective labor agreement effective September 1, 2018. The terms include bonuses that the assessments of royalties for the year 2008 on ore processed by the Cerro Verde concentrator were proper under Peruvian law. As previously reported in our annual report on Form 10-K for the year ended December 31, 2016, SUNAT has assessed mining royalties on ore processed by the Cerro Verde concentrator for the period December 2006are expected to September 2011, which Cerro Verde has contested on the basis that its 1998 stability agreement exempts from royalties all minerals extracted from its mining concessions, irrespective of the method used for processing those minerals.

~~Table of Contents~~

As a result of the unfavorable Peruvian Supreme Court decision on the 2008 royalty dispute, Cerro Verde recorded pre-tax charges totaling $357 million ($359 million including net tax charges and $188 million net of noncontrolling interests)be paid in third-quarter 2017 associated with prior assessments and potential royalty and related assessments for December 2006 through the year 2013. Effective January 1, 2014, Cerro Verde entered into a new 15-year stability agreement and has been paying royalties in accordance with the new stability agreement.

Operating and Development Activities. ~~The Cerro Verde expansion project commenced operations in September 2015 and achieved capacity operating rates during first-quarter 2016.~~ Cerro Verde’s expanded operations benefit from its large-scale, long-lived reserves and cost efficiencies. The Cerro Verde expansion project, which achieved capacity operating rates in early 2016, expanded the concentrator ~~facilities~~facilities’ capacity from 120,000 metric tons of ore per day to 360,000 metric tons of ore per day. In March 2018, Cerro Verde received a modified environmental permit allowing it to operate its existing concentrator facilities at rates up to 409,500 metric tons of ore per day. Cerro Verde's concentrator facilities have continued to perform well, with average mill throughput rates of 385,300 metric tons of ore per day for the first six months of 2018.

~~We continue to evaluate a major expansion at El Abra to process additional sulfide material and to achieve higher recoveries.~~ Exploration results at El Abra indicate a significant sulfide resource, which could potentially support a major mill project similar to facilities ~~recently~~ constructed at Cerro Verde. We continue to evaluate a large-scale expansion at El Abra to process additional sulfide material and to achieve higher recoveries. Future investments will depend on technical studies, which are being advanced, economic factors and market conditions.

Operating Data. Following is a summary of consolidated operating data for our South America mining ~~operations for the third quarters and first nine months of 2017 and 2016:~~operations:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016		2018		2017		2018		2017
Copper (millions of recoverable pounds)
Production	328		317		932		986		313		300		606		604
Sales	327		323		923		973		312		287		602		596
Average realized price per pound	$	2.95	$	2.19	$	2.82	$	2.17	$	3.07	$	2.67	$	3.09	$	2.65

Molybdenum (millions of recoverable pounds)
Production^a	8		5		21		14		7		7		13		13

SX/EW operations
Leach ore placed in stockpiles (metric tons per day)	180,400		163,000		153,100		158,100		246,700		126,000		207,600		123,100
Average copper ore grade (percent)	0.36		0.41		0.37		0.41		0.30		0.36		0.32		0.39
Copper production (millions of recoverable pounds)	65		78		190		250		75		59		142		125

Mill operations
Ore milled (metric tons per day)	379,200		355,300		355,400		348,900		385,200		347,600		385,300		343,300
Average ore grade (percent):
Copper	0.44		0.41		0.44		0.42		0.38		0.44		0.39		0.44
Molybdenum	0.02		0.02		0.02		0.02		0.01		0.02		0.01		0.02
Copper recovery rate (percent)	80.9		84.4		82.7		86.1		84.4		83.0		81.7		83.8
Copper production (millions of recoverable pounds)	263		239		742		736		238		241		464		479


a.	Refer to “Consolidated Results” for our consolidated molybdenum sales volumes, which include sales of molybdenum produced at Cerro Verde.

Table of Contents

South America’s consolidated copper sales volumes of ~~327~~312 million pounds in ~~third-quarter~~second-quarter ~~2017 approximated~~ ~~third-quarter2016~~ ~~sales of 323 million pounds. South America’s lower consolidated copper sales volumes of 923~~2018 and 602 million pounds for the first ~~nine~~six months of 2018 were higher than sales of 287 million pounds in second-quarter2017 and 596 million for the first six months of 2017, ~~compared with 973 million pounds for~~primarily reflecting higher mining and milling rates, partly offset by lower ore grades. Lower second-quarter2017 sales volumes also reflected the ~~first nine months~~impact of ~~2016, reflect the Cerro Verde operation being unfavorably impacted by unusually high rainfall and a 21-day labor strike during first-quarter 2017.~~

timing of shipments. Copper sales from South America mines are expected to approximate 1.2 billion pounds of copper for the year ~~2017,~~2018, compared with ~~1.3~~1.2 billion pounds of copper in ~~2016~~2017.

~~Table of Contents~~

Gross Profit per Pound of Copper

The following table summarizes unit net cash costs and gross profit per pound of copper at the South America mining ~~operations for the third quarters and first nine months of 2017 and 2016.~~operations. Unit net cash costs per pound of copper are reflected under the by-product and co-product methods as the South America mining operations also had sales of molybdenum and silver. Refer to “Product Revenues and Production Costs” for an explanation of the “by-product” and “co-product” methods and a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in our consolidated financial statements.

Three Months Ended September 30,
2017 2016

By-Product
Method

Co-Product
Method

By-Product
Method

Co-Product
Method

Revenues, excluding adjustments $ 2.95
$ 2.95
$ 2.19
$ 2.19

Site production and delivery, before net noncash
and other costs shown below
1.60
1.50
1.27
1.20

By-product credits (0.19 ) —
(0.12 ) —

Treatment charges 0.22
0.22
0.24
0.24

Royalty on metals 0.01
0.01
0.01
—

Unit net cash costs 1.64
1.73
1.40
1.44

DD&A 0.41
0.38
0.41
0.39

Noncash and other costs, net 0.69
^a
0.63
0.01
0.01

Total unit costs 2.74
2.74
1.82
1.84

Revenue adjustments, primarily for pricing
on prior period open sales
0.18
0.18
(0.02 ) (0.02 )
Gross profit per pound $ 0.39
$ 0.39
$ 0.35
$ 0.33

Copper sales (millions of recoverable pounds) 327
327
323
323



	Nine Months Ended September 30,											Three Months Ended June 30,
	2017						2016					2018					2017
	By-Product Method				Co-Product Method		By-Product Method			Co-Product Method		By-Product Method			Co-Product Method		By-Product Method			Co-Product Method
Revenues, excluding adjustments	$	2.82			$	2.82	$	2.17		$	2.17	$	3.07		$	3.07	$	2.67		$	2.67

Site production and delivery, before net noncash and other costs shown below	1.55				1.45		1.23			1.17		1.77			1.65		1.55			1.47
By-product credits	(0.17		)		—		(0.10		)	—		(0.22		)	—		(0.13		)	—
Treatment charges	0.22				0.22		0.24			0.24		0.18			0.18		0.22			0.22
Royalty on metals	0.01				0.01		—			—		0.01			0.01		0.01			0.01
Unit net cash costs	1.61				1.68		1.37			1.41		1.74			1.84		1.65			1.70
DD&A	0.42				0.40		0.41			0.39		0.43			0.40		0.44			0.41
Noncash and other costs, net	0.25			^a	0.23		0.02			0.02		0.05			0.05		0.02			0.02
Total unit costs	2.28				2.31		1.80			1.82		2.22			2.29		2.11			2.13
Revenue adjustments, primarily for pricing on prior period open sales	0.04				0.04		0.01			0.01		0.04			0.04		(0.05		)	(0.05		)
Gross profit per pound	$	0.58			$	0.55	$	0.38		$	0.36	$	0.89		$	0.82	$	0.51		$	0.49

Copper sales (millions of recoverable pounds)	923				923		973			973		312			312		287			287


a.	Includes charges totaling $216 million ($0.66 per pound of copper in third-quarter 2017 and $0.23 per pound of copper for the first nine months of 2017) associated with disputed Cerro Verde royalties for prior years.

Table of Contents



	Six Months Ended June 30,
	2018						2017
	By-Product Method			Co-Product Method			By-Product Method			Co-Product Method
Revenues, excluding adjustments	$	3.09		$	3.09		$	2.65		$	2.65

Site production and delivery, before net noncash and other costs shown below	1.78			1.64			1.52			1.42
By-product credits	(0.24		)	—			(0.16		)	—
Treatment charges	0.19			0.19			0.22			0.22
Royalty on metals	0.01			0.01			0.01			0.01
Unit net cash costs	1.74			1.84			1.59			1.65
DD&A	0.43			0.40			0.43			0.40
Noncash and other costs, net	0.05			0.05			0.02			0.02
Total unit costs	2.22			2.29			2.04			2.07
Other revenue adjustments, primarily for pricing on prior period open sales	(0.06		)	(0.06		)	0.07			0.07
Gross profit per pound	$	0.81		$	0.74		$	0.68		$	0.65

Copper sales (millions of recoverable pounds)	602			602			596			596

Our South America mines have varying cost structures because of differences in ore grades and characteristics, processing costs, by-product credits and other factors. Average unit net cash costs (net of by-product credits) of ~~$1.64~~$1.74 per pound of copper in ~~third-quarter~~second-quarter ~~2017~~2018 and ~~$1.61 per pound~~ for the first ~~nine~~six months of ~~2017~~2018 were higher than unit net cash costs of ~~$1.40~~$1.65 per pound in ~~third-quarter~~second-quarter ~~2016~~2017 and ~~$1.37 per pound~~$1.59 for the first ~~nine~~six months of ~~2016,~~2017, primarily reflecting higher mining ~~milling~~ and ~~employee~~input costs, ~~at Cerro Verde.~~partly offset by higher by-product credits.

Revenues from Cerro Verde’s concentrate sales are recorded net of treatment ~~charges. Accordingly, treatment~~ charges, which will vary with Cerro Verde’s sales volumes and the price of copper.

Because certain assets are depreciated on a straight-line basis, South America’s unit depreciation rate may vary with asset additions and the level of copper production and sales.

Revenue adjustments primarily result from changes in prices on provisionally priced copper sales recognized in prior periods. Refer to “Consolidated Results – Revenues” for further discussion of adjustments to prior period provisionally priced copper sales.

Average unit net cash costs (net of by-product credits) for our South America mining operations are expected to approximate $~~1.64~~1.67 per pound of copper for the year ~~2017,~~2018, based on current sales volume and cost estimates and assuming an average price of $~~8.00~~11.00 per pound of molybdenum for ~~fourth-quarter 2017.~~the second half of 2018.

Indonesia Mining

Indonesia mining includes PT-FI’s Grasberg minerals district, one of the world’s largest copper and gold deposits, in Papua, Indonesia. We own 90.64 percent of PT-FI, including 9.36 percent owned through our wholly owned subsidiary, ~~PT Indocopper Investama.~~PT-II.

PT-FI operates a proportionately ~~consolidates an~~consolidated unincorporated joint venture with Rio Tinto ~~plc (Rio Tinto)~~(Joint Venture), under which Rio Tinto has a 40 percent interest in certain assets and a 40 percent interest through 2022 in production exceeding specified annual amounts of copper, gold and silver. After 2022, all production and related revenues and costs are shared 60 percent PT-FI and 40 percent Rio Tinto. Refer to Note 3 in our annual report on Form 10-K for the year ended December 31, ~~2016,~~2017, for discussion of ~~our joint venture with Rio Tinto.~~the Joint Venture.

PT-FI produces copper concentrate that contains significant quantities of gold and silver. Substantially all of PT-FI’s copper concentrate is sold under long-term contracts, and during the first ~~nine~~six months of ~~2017,~~2018, approximately ~~half~~40 percent of PT-FI’s concentrate production was sold to PT Smelting ~~its~~(PT-FI’s 25-percent-owned smelter and refinery in Gresik, ~~Indonesia.~~Indonesia).

~~Regulatory Matters.~~ In January and February 2017, the Indonesian government issued new regulations to address the export of unrefined metals, including copper concentrate and anode slimes, and other matters related to the mining sector. The new regulations permit the continuation of copper concentrate exports for a five-year period through January 2022, subject to various conditions, including conversion from a contract of work to a special operating license (known as an IUPK, which does not provide the same level of fiscal and legal protections as PT-FI’s Contract of Work (COW), which remains in effect), a commitment to the completion of smelter construction in five years and payment of export duties to be determined by the Ministry of Finance. In addition, the new regulations enable application for an extension of operating rights five years before expiration of the IUPK and require foreign IUPK holders to divest a 51 percent interest in the licensed entity to Indonesian interests no later than the tenth year of production. Export licenses would be valid for one-year periods, subject to review every six months, depending on smelter construction progress.

Following the issuance of the January and February 2017 regulations and discussions with the Indonesian government, PT-FI advised the government that it was prepared to convert its COW to an IUPK, subject to obtaining an investment stability agreement providing contractual rights with the same level of legal and fiscal certainty enumerated under its COW, and provided that the COW would remain in effect until it is replaced by a mutually satisfactory alternative. PT-FI also committed to commence construction of a new smelter during a five-year timeframe, following approval of the extension of its long-term operating rights.

On January 12, 2017, PT-FI suspended exports in response to Indonesian regulations adopted in January 2014. In addition, as a result of labor disturbances and a delay in the renewal of its export license for anode slimes, PT Smelting’s operations were shut down from January 19, 2017, until early March 2017. On February 10, 2017, PT-FI was forced to suspend production as a result of limited storage capacity at PT-FI and PT Smelting. On April 21,

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~~2017, the Indonesian government issued a permit to PT-FI that allowed exports to resume for a six-month period,~~Regulatory Matters. In July 2018, we and ~~PT-FI commenced export shipments.~~

In mid-February 2017, pursuant to the COW’s dispute resolution process, PT-FI provided formal notice to the Indonesian government of an impending dispute listing the government’s breaches and violations of the COW. PT-FI continues to reserve its rights under these provisions.

In late March 2017, the Indonesian government amended the regulations to enable PT-FI to retain its COW until replaced with an IUPK accompanied by an investment stability agreement, and to grant PT-FI a temporary IUPK through October 10, 2017, that would allow concentrate exports to resume during this period. In April 2017, PT-FI entered into a ~~Memorandum~~Heads of ~~Understanding~~Agreement with Inalum and PT-FI’s joint venture partner Rio Tinto. Under the terms of the non-binding agreement, Inalum would acquire for aggregate cash consideration of $3.85 billion all of Rio Tinto's interests associated with the ~~Indonesian government confirming that the COW would continue to be valid~~Joint Venture and ~~honored until replaced by a mutually agreed IUPK and investment stability agreement. PT-FI agreed to continue to pay a five percent export duty during this period.~~all of our interests in PT-II.

~~In August 2017, we reached an understanding with~~Inalum would contribute the ~~Indonesian government on~~Rio Tinto interests to PT-FI, which would expand PT-FI’s asset base, in exchange for a ~~framework~~40 percent share ownership in PT-FI, pursuant to arrangements that would ~~resolve PT-FI’s long-term operating rights. This framework includes (i) conversion from~~enable us and existing PT-FI shareholders to retain the ~~COW to an IUPK providing PT-FI with long-term operating rights through 2041, (ii) Indonesian government certainty of fiscal and legal terms during the term~~economics of the ~~IUPK, (iii) PT-FI commitment to construct a new smelter in Indonesia within five years~~revenue and cost sharing arrangements under the Joint Venture. Following completion of ~~reaching a definitive agreement, and (iv) divestment of~~the transaction, Inalum's share ownership would approximate 51 percent of PT-FI (subject to an agreement between shareholders to replicate the ~~project area interests~~Joint Venture economics) and our ownership would approximate 49 percent.

At closing, Rio Tinto would receive $3.5 billion and we would receive $350 million in cash proceeds from Inalum. In addition, Rio Tinto would forego in favor of us an amount equivalent to ~~Indonesian participants at fair market value structured so that~~its share of Joint Venture cash flows since January 1, 2018, through closing.

Following completion of the ownership restructuring, we ~~retain control over~~do not expect our economic exposure to PT-FI to change significantly. We expect our share of future cash flows of the expanded PT-FI asset base, combined with the cash proceeds received in the transaction, to be comparable to our existing share of future cash flows under the current Joint Venture arrangement. We would also continue to manage the operations ~~and governance~~ of PT-FI.

The ~~framework requires~~transaction, which is expected to close during the second half of 2018, is subject to the negotiation and documentation of definitive agreements, including purchase and ~~execution~~sale agreements, the extension and stability of PT-FI's long-term mining rights through 2041 in a ~~definitive~~form acceptable to us and Inalum, a shareholders’ agreement ~~which must~~between us and Inalum providing for continuity of our management of PT-FI’s operations and addressing governance arrangements, and resolution of environmental regulatory matters pending before Indonesia's Ministry of Environment and Forestry satisfactory to the Indonesian government, us and Inalum (refer to Note 8 for further discussion of these environmental regulatory matters). The terms of these agreements will be ~~approved~~subject to approval by our Board, and ~~joint venture partner Rio Tinto. The parties~~will require modification or revocation of current regulations and the implementation of new regulations by the Indonesian government.

PT-FI's export license is effective through February 15, 2019. In July 2018, PT-FI's temporary IUPK was extended to August 31, 2018, and PT-FI will continue to ~~negotiate~~seek extensions to reach agreement on important aspects of implementation of the framework, including the timing and process of divestment, governance matters, and the determination of fair market value, and to complete documentation on a comprehensive agreement for PT-FI’s extended operations through 2041. The parties have expressed a mutual objective of completing the negotiations and documentation during 2017.its temporary IUPK until definitive agreements are complete.

~~In October 2017, the Indonesian government extended PT-FI’s export rights to December 31, 2017, while negotiations to reach and document a comprehensive long-term~~We cannot predict whether PT-FI will be successful in reaching satisfactory definitive ~~agreement based~~agreements on the ~~agreed framework continue.~~terms of its long-term mining rights. Until a definitive ~~agreement is~~agreements are reached, PT-FI has reserved all rights under its COW, including pursuing arbitration under the dispute resolution ~~provisions.~~procedures.

~~We cannot predict whether PT-FI will be successful~~For further discussion of the regulatory matters and risks associated with operations in ~~reaching a satisfactory definitive agreement on the terms of its long-term mining rights. Refer~~Indonesia, refer to ~~“Risk Factors” contained in~~ Part I, Item ~~1A.~~IA. “Risk Factors” of our annual report on Form 10-K for the year ended December 31, ~~2016, for further discussion of risks associated with our operations in Indonesia.~~2017.

Operating and Development Activities. PT-FI is currently mining the final phase of the Grasberg open pit, which contains high copper and gold ore grades. PT-FI has revised its mine plans to extend mining activities in the open pit by approximately six months through the first half of 2019 following results of an economic analysis. PT-FI expects to mine ~~high-grade~~ ore ~~over~~from the ~~next several quarters prior to~~open pit until transitioning to the Grasberg Block Cave underground mine in ~~early~~the first half of 2019. Lower copper and gold production from Indonesia mining is expected during the transition period in 2019 and 2020.

PT-FI has several projects in the Grasberg minerals district related to the development of its large-scale, long-lived, high-grade underground ore bodies. In aggregate, these underground ore bodies are expected to produce large-scale quantities of copper and gold following the transition from the Grasberg open pit. ~~Assuming a~~Substantial progress has been made to prepare for the transition to mining of the Grasberg Block Cave underground mine. Mine development activities are sufficiently advanced to commence caving in the first half of 2019. The ore flow and underground rail haulage systems are expected to be fully commissioned and operational in the second half of 2018.

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Subject to reaching definitive ~~agreement is reached to support~~agreements with the Indonesian government on PT-FI’s long-term ~~investment plans,~~mining rights, estimated annual capital spending on ~~these~~PT-FI’s development projects would average ~~$1.0~~$0.8 billion per year ($~~0.8~~0.7 billion per year net to PT-FI) over the next five years. Considering the long-term nature and size of these projects, actual costs could vary from these estimates. In response to market conditions and Indonesian regulatory uncertainty, the timing of these expenditures continues to be ~~reviewed. If PT-FI is unable to reach a definitive agreement with the Indonesian government on its long-term mining rights, we intend to reduce~~reviewed and could be reduced or ~~defer investments significantly in our underground development projects and pursue arbitration under PT-FI’s COW.~~deferred significantly.

The following provides additional information on the continued development of the Common Infrastructure project, the Grasberg Block Cave underground mine and the ~~Deep Mill Level Zone (DMLZ)~~DMLZ ore body that lies below the

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Deep Ore Zone (DOZ) underground mine. Our current plans and mineral reserves in Indonesia assume that PT-FI’s long-term mining rights will be extended through 2041, as stated in the COW.

Common Infrastructure and Grasberg Block Cave Mine. In 2004, PT-FI commenced its Common Infrastructure project to provide access to its large undeveloped underground ore bodies located in the Grasberg minerals district through a tunnel system located approximately 400 meters deeper than its existing underground tunnel system. In addition to providing access to our underground ore bodies, the tunnel system will enable PT-FI to conduct future exploration in prospective areas associated with currently identified ore bodies. The tunnel system was completed to the Big Gossan terminal, and the Big Gossan mine was brought into production in 2010. The Big Gossan underground mine ~~is currently preparing to restart production.~~was on care-and-maintenance status during most of 2017 and production restarted in fourth-quarter 2017. Development of the ~~DMLZ and~~ Grasberg Block Cave and DMLZ underground mines is advancing using the Common Infrastructure project tunnels as access.

The Grasberg Block Cave underground mine accounts for approximately half of our recoverable proven and probable reserves in Indonesia. Production from the Grasberg Block Cave ~~underground~~ mine is expected to commence in ~~early~~the first half of 2019, following the end of mining of the Grasberg open pit. Targeted production rates once the Grasberg Block Cave mining operation reaches full capacity in 2023 are expected to approximate ~~130,000-160,000~~130,000 to 160,000 metric tons of ore per day. PT-FI ~~is reviewing~~continues to review its operating plans to determine the optimum mine plan for the Grasberg Block Cave underground mine.

Aggregate mine development capital for the Grasberg Block Cave underground mine and associated Common Infrastructure is expected to approximate ~~$6.3~~$6.4 billion (incurred between 2008 and ~~2022)~~2023), with PT-FI’s share totaling approximately ~~$5.8~~$5.9 billion. Aggregate project costs totaling ~~$3.2~~$3.6 billion have been incurred through ~~September~~June 30, ~~2017,~~2018, including ~~$118 million~~$0.3 billion during ~~third-quarter~~ ~~2017. As a result~~the first six months of regulatory uncertainty, PT-FI has slowed investments in its underground development projects. If PT-FI is unable to reach a definitive agreement with the Indonesian government on its long-term mining rights, we intend to reduce or defer investments significantly in our underground development projects and pursue arbitration under PT-FI’s COW.2018.

DMLZ. The DMLZ ore body lies below the DOZ mine at the 2,590-meter elevation and represents the downward continuation of mineralization in the Ertsberg East Skarn system and neighboring Ertsberg porphyry. In September 2015, PT-FI initiated pre-commercial production that ~~represents~~represented ore extracted during the development phase for the purpose of obtaining access to the ore body. ~~In June 2017, production from the DMLZ underground mine was impacted by~~Following mining-induced seismic activity, which ~~is not uncommon~~began in 2017 and continued in 2018, PT-FI revised its mine plans, which resulted in a delay in the ramp-up of the DMLZ underground mine. During second-quarter 2018, PT-FI initiated plans to conduct hydraulic fracturing activities to address rock stresses and pre-condition the DMLZ with an objective of enabling commencement of large-scale production. PT-FI's revised mine plans for DMLZ, which will continue to be reviewed, currently project block cave ~~mining. To mitigate~~mining activities in the ~~impact of these events, PT-FI implemented a revised mine sequence and start-up plan in~~ ~~third-quarter~~ ~~2017. PT-FI expects~~ DMLZ to ~~ramp up~~commence in mid-2019 following a period of hydraulic fracturing activities designed to safely manage production. PT-FI continues to expect the DMLZ to reach full ~~capacity~~production rates of 80,000 metric tons ~~of ore~~ per day in ~~2021, but at a slower pace than previous estimates.~~2022. The current outlook for future DMLZ production reflects management’s expectations based on currently available information and involves uncertainties. Estimates of future production will be revised as additional information becomes available.

Drilling efforts continue to determine the extent of the ore body. Aggregate mine development capital costs for the DMLZ underground mine are expected to approximate ~~$3.2~~$3.1 billion (incurred between 2009 and 2021), with PT-FI’s share totaling approximately $1.9 billion. Aggregate project costs totaling ~~$2.1~~$2.3 billion have been incurred through ~~September~~June 30, ~~2017,~~2018, including ~~$62~~$159 million during ~~third-quarter~~ ~~2017. As a result~~the first six months of regulatory uncertainty, PT-FI has slowed investments in its underground development projects. If PT-FI is unable to reach a definitive agreement with the Indonesian government on its long-term mining rights, we intend to reduce or defer investments significantly in our underground development projects and pursue arbitration under PT-FI’s COW.2018.

Other Matters. In late October 2017, Indonesia’s Ministry of Environment and Forestry (the Ministry) notified PT-FI of administrative sanctions related to certain activities the Ministry indicated are not reflected in its environmental permit. The Ministry also notified PT-FI that certain operational activities were inconsistent with factors set forth in its environmental permitting studies and that additional monitoring and improvements need to be undertaken related to air quality, water drainage, treatment and handling of certain wastes, and tailings management. PT-FI has been engaged in a process to update its permits through submissions and dialogue with the Ministry, which began in late 2014. PT-FI believes that it has submitted the required documentation to update its permits, and is in the process of addressing other points raised by the Ministry.

As further discussed in “Risk Factors” contained in Part I. Item 1A of our annual report on Form 10-K for the year ended December 31, ~~2016, in 2009,~~2017, there ~~were~~have been a series of shooting incidents within the PT-FI project area ~~with sporadic~~and in nearby areas. During the first six months of 2018, there were 11 additional shooting incidents, ~~continuing through January 1, 2015. From August 2017 through November 3, 2017, there were six shooting incidents within the PT-FI project area and five shooting incidents in nearby areas,~~ which resulted

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in ~~one fatality and 12~~four injuries. The safety of our workforce is a critical concern, and PT-FI ~~is working~~

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~~cooperatively~~continues to work with the Indonesian government to address security issues. We also continue to limit the use of the road leading to our mining and milling operations to secured convoys.

Operating Data. Following is a summary of consolidated operating data for our Indonesia mining ~~operations for the third quarters and first nine months of 2017 and 2016:~~operations:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016		2018		2017		2018		2017
Operating Data, Net of Joint Venture Interest
Copper (millions of recoverable pounds)
Production	293		321		647		694		347		199		658		354
Sales	258		332		630		702		316		247		635		372
Average realized price per pound	$	2.95	$	2.20	$	2.81	$	2.17	$	3.05	$	2.67	$	3.07	$	2.64

Gold (thousands of recoverable ounces)
Production	412		301		992		637		740		348		1,335		580
Sales	352		307		956		653		671		427		1,274		604
Average realized price per ounce	$	1,290	$	1,327	$	1,261	$	1,292	$	1,274	$	1,243	$	1,291	$	1,242

100% Operating Data
Ore milled (metric tons per day):^a
Grasberg open pit	130,500		135,600		91,200		117,200		148,400		88,600		136,800		71,200
DOZ underground mine^b	34,500		35,100		29,400		38,700
DOZ underground mine									29,200		27,300		34,300		26,800
DMLZ underground mine	2,400		6,000		3,100		5,000		2,700		3,800		2,700		3,500
Grasberg Block Cave	4,200		2,800		3,600		2,600
Grasberg Block Cave underground mine									3,800		3,800		3,900		3,200
Big Gossan underground mine	—		1,000		500		700		3,800		—		3,100		800
Total	171,600		180,500		127,800		164,200		187,900		123,500		180,800		105,500
Average ore grades:
Copper (percent)	0.91		1.02		1.00		0.86		1.06		1.03		1.09		1.08
Gold (grams per metric ton)	0.98		0.69		1.08		0.58		1.77		1.16		1.71		1.17
Recovery rates (percent):
Copper	91.1		91.4		91.6		90.5		92.7		91.8		92.4		92.0
Gold	84.7		82.7		84.9		81.4		86.1		85.3		85.5		85.1
Production:
Copper (millions of recoverable pounds)	277		327		670		736		353		221		693		393
Gold (thousands of recoverable ounces)	405		300		993		664		816		347		1,489		588


a.	Amounts represent the approximate average daily throughput processed at PT-FI’s mill facilities from each producing mine and from development activities that result in metal production.


b.	~~Ore milled from the DOZ underground mine is expected to ramp up to 60,000 metric tons of ore per day in 2018.~~

Indonesia mining’s consolidated ~~copper~~ sales ~~volumes~~ of ~~258~~316 million pounds of copper and 671 thousand ounces of gold in ~~third-quarter~~second-quarter ~~2017~~2018 and 635 million pounds of copper and 1.3 million ounces of gold for the first six months of 2018 were ~~lower~~higher than sales of ~~332~~247 million pounds of copper and 427 thousand ounces of gold in ~~third-quarter~~second-quarter ~~2016, primarily reflecting lower~~2017 and 372 million pounds of copper ~~ore grades~~ and ~~timing~~604 thousand ounces of ~~shipments. Indonesia mining’s consolidated copper sales volumes of 630 million pounds~~gold for the first ~~nine~~six months of 2017, ~~were lower than sales of 702 million pounds~~primarily reflecting higher operating rates and ore grades. Lower operating rates for the ~~first nine months of 2016, primarily reflecting~~2017 periods reflected the ~~impact of~~ regulatory restrictions on PT-FI’s concentrate exports ~~at the beginning of~~from mid-January 2017 ~~(see discussion above in “Regulatory Matters”).~~

~~Indonesia’s consolidated gold sales of 352 thousand ounces in~~ ~~third-quarter~~to mid-April 2017 and ~~956 thousand ounces for~~ the ~~first nine months~~impact of ~~2017 were higher than sales of 307 thousand ounces in~~ ~~third-quarter~~ ~~2016 and 653 thousand ounces for the first nine months of 2016, primarily reflecting higher gold ore grades, partly offset by timing of shipments.~~

~~During third-quarter 2017, PT-FI's~~ labor productivity improved significantly following a recovery from disruptions that occurred in the first half of the year. Mining and milling rates improved throughout the quarter, and PT-FI continues to assess opportunities to advance mining of a section of high-grade material during 2018 and 2019 through open-pit mining rather than over time through the Grasberg Block Cave underground mine.

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~~In October 2017, PT-FI and union officials commenced discussions for a new two-year labor agreement. The existing agreement will continue in effect until a new agreement is consummated.~~disruptions.

Assuming ~~achieving~~achievement of planned operating rates for ~~fourth-quarter 2017,~~the second half of 2018, consolidated sales volumes from Indonesia mining are expected to approximate ~~1.0~~1.15 billion pounds of copper and ~~1.6~~2.4 million ounces of gold for the year ~~2017,~~2018, compared with ~~1.1~~1.0 billion pounds of copper and ~~1.1~~1.5 million ounces of gold for the year ~~2016. At~~2017. Because of the ~~Grasberg mine, the sequencing of~~transition to underground mining, ~~areas with varying ore grades causes fluctuations~~PT-FI’s production is expected to be significantly lower in ~~quarterly~~2019 and ~~annual production of copper and gold.~~2020, compared to 2018.

Indonesia ~~mining’s~~mining's projected sales volumes and unit net cash credits for the year ~~2017~~2018 are dependent on a number of factors, including operational performance, workforce productivity, ~~and the~~ timing of ~~shipments.~~shipments, and Indonesia regulatory matters.

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primary metal product for our respective operations. We use this measure for the same purpose and for monitoring operating performance by our mining operations. This information differs from measures of performance determined in accordance with U.S. GAAP and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. This measure is presented by other metals mining companies, although our measure may not be comparable to similarly titled measures reported by other companies.

Gross Profit per Pound of Copper and per Ounce of Gold

The following table summarizes the unit net cash costs and gross profit per pound of copper and per ounce of gold at our Indonesia mining ~~operations for the third quarters and first nine months of 2017 and 2016.~~operations. Refer to “Product Revenues and Production Costs” for an explanation of “by-product” and “co-product” methods and a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in our consolidated financial statements.

Three Months Ended September 30,
2017 2016
By-Product Method Co-Product Method By-Product Method Co-Product Method
Copper Gold Copper Gold
Revenues, excluding adjustments $ 2.95
$ 2.95
$ 1,290
$ 2.20
$ 2.20
$ 1,327

Site production and delivery, before net noncash and other costs shown below 1.41
0.87
383
1.37
0.86
520
Gold and silver credits (1.80 ) —
—
(1.29 ) —
—
Treatment charges 0.27
0.17
74
0.27
0.17
104
Export duties 0.08
0.05
22
0.10
0.07
39
Royalty on metals 0.17
0.10
48
0.12
0.07
50
Unit net cash costs 0.13
1.19
527
0.57
1.17
713
DD&A 0.53
0.33
143
0.33
0.21
125
Noncash and other costs, net 0.09
^a
0.06
25
0.05
^b
0.03
19
Total unit costs 0.75
1.58
695
0.95
1.41
857
Revenue adjustments, primarily for pricing on prior period open sales 0.11
0.11
4
(0.02 ) (0.02 ) 1
PT Smelting intercompany loss (0.07 ) (0.04 ) (19 ) (0.03 ) (0.02 ) (10 )
Gross profit per pound/ounce $ 2.24
$ 1.44
$ 580
$ 1.20
$ 0.75
$ 461

Copper sales (millions of recoverable pounds) 258
258
332
332

Gold sales (thousands of recoverable ounces) 352
307

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	Three Months Ended June 30,
	2018									2017
	By-Product Method			Co-Product Method						By-Product Method				Co-Product Method
	By-Product Method			Copper			Gold			By-Product Method				Copper			Gold
Revenues, excluding adjustments	$	3.05		$	3.05		$	1,274		$	2.67			$	2.67		$	1,243

Site production and delivery, before net noncash and other (credits) costs shown below	1.33			0.70			291			1.77				0.97			451
Gold and silver credits	(2.76		)	—			—			(2.21		)		—			—
Treatment charges	0.26			0.14			57			0.26				0.14			67
Export duties	0.18			0.09			38			0.11				0.06			28
Royalty on metals	0.22			0.11			51			0.17				0.09			47
Unit net cash (credits) costs	(0.77		)	1.04			437			0.10				1.26			593
DD&A	0.54			0.28			119			0.62				0.34			158
Noncash and other (credits) costs, net	(0.01		)	—			(2		)	0.34			^a	0.18			86
Total unit (credits) costs	(0.24		)	1.32			554			1.06				1.78			837
Revenue adjustments, primarily for pricing on prior period open sales	0.04			0.04			(2		)	(0.03		)		(0.03		)	5
PT Smelting intercompany loss	(0.03		)	(0.01		)	(6		)	(0.10		)		(0.06		)	(26		)
Gross profit per pound/ounce	$	3.30		$	1.76		$	712		$	1.48			$	0.80		$	385

Copper sales (millions of recoverable pounds)	316			316						247				247
Gold sales (thousands of recoverable ounces)							671										427


	Nine Months Ended September 30,																					Six Months Ended June 30,
	2017										2016											2018											2017
	By-Product Method				Co-Product Method						By-Product Method				Co-Product Method							By-Product Method				Co-Product Method							By-Product Method				Co-Product Method
					Copper			Gold						Copper				Gold							Copper				Gold							Copper				Gold
Revenues, excluding adjustments	$	2.81			$	2.81		$	1,261			$	2.17			$	2.17			$	1,292		$	3.07			$	3.07			$	1,291		$	2.64			$	2.64			$	1,242

Site production and delivery, before net noncash and other costs shown below	1.71				1.01			451			1.70				1.08				639			1.34				0.72				304			1.89				1.05				497
Gold and silver credits	(1.98		)		—			—			(1.28		)		—				—			(2.67		)		—				—			(2.10		)		—				—
Treatment charges	0.27				0.16			71			0.29				0.18				109			0.25				0.14				57			0.27				0.15				71
Export duties	0.10				0.06			26			0.09				0.06				34			0.16				0.09				36			0.11				0.06				29
Royalty on metals	0.16				0.09			47			0.12				0.07				48			0.22				0.11				50			0.17				0.10				47
Unit net cash costs	0.26				1.32			595			0.92				1.39				830
Unit net cash (credits) costs																						(0.70		)		1.06				447			0.34				1.36				644
DD&A	0.59				0.35			156			0.40				0.25				152			0.55				0.30				125			0.63				0.35				167
Noncash and other costs, net	0.22			^a	0.13			58			0.04			^b	0.03				16			0.02				0.01				4			0.32			^a	0.18				82
Total unit costs	1.07				1.80			809			1.36				1.67				998
Revenue adjustments, primarily for pricing on prior period open sales	0.06				0.06			9			—				—				25
PT Smelting intercompany loss	(0.03		)		(0.01		)	(7		)	(0.01		)		(0.01		)		(4		)
Total unit (credits) costs																						(0.13		)		1.37				576			1.29				1.89				893
Other revenue adjustments, primarily for pricing on prior period open sales																						(0.05		)		(0.05		)		13			0.11				0.11				15
PT Smelting intercompany (loss) profit																						(0.04		)		(0.01		)		(7		)	—				—				1
Gross profit per pound/ounce	$	1.77			$	1.06		$	454		$	0.80			$	0.49			$	315		$	3.11			$	1.64			$	721		$	1.46			$	0.86			$	365

Copper sales (millions of recoverable pounds)	630				630						702				702							635				635							372				372
Gold sales (thousands of recoverable ounces)								956											653											1,274											604


a.	Includes fixed costs charged directly to production and delivery costs totaling $9$82 million ($~~0.03~~0.33 per pound of copper) for ~~third-quarter~~second-quarter 2017 and ~~$112~~$103 million ($~~0.18~~0.28 per pound of copper) for the first ~~nine~~six months of 2017 ~~as a result of~~associated with workforce reductions.


b.	~~Includes asset retirement charges of $17 million ($0.05 per pound of copper in third-quarter 2016 and $0.02 per pound of copper for the first nine months of 2016).~~

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A significant portion of PT-FI’s costs are fixed, and unit costs vary depending on production volumes and other factors. ~~Indonesia’s~~As a result of higher sales volumes and gold and silver credits, Indonesia had unit net cash ~~costs~~credits (including gold and silver credits) of ~~$0.13~~$0.77 per pound of copper in ~~third-quarter~~second-quarter ~~2017~~2018 and ~~$0.26~~$0.70 per pound of copper for the first ~~nine~~six months of ~~2017 were lower than~~2018, compared with unit net cash costs of ~~$0.57~~$0.10 per pound of copper in ~~third-quarter~~second-quarter ~~2016~~2017 and ~~$0.92~~$0.34 per pound of copper for the first ~~nine~~six months of ~~2016, primarily reflecting higher gold and silver credits, partly offset by lower copper sales volumes.~~2017.

Treatment charges vary with the volume of metals sold and the price of copper, and royalties vary with the volume of metals sold and the prices of copper and gold.

PT-FI’s royalties totaled ~~$43~~$71 million in ~~third-quarter 2017, $40 million in third-quarter 2016, $106~~second-quarter 2018 and $138 million for the first ~~nine~~six months of ~~2017 and $84 million for the first nine months of 2016. Export duties totaled $21~~2018, compared with $43 million in ~~third-quarter 2017, $34 million in third-quarter 2016, $62 million for the first nine months of~~second-quarter 2017 and $63 million for the first ~~nine~~six months of ~~2016. As further discussed above~~2017. Export duties totaled $55 million in ~~“Regulatory Matters,” PT-FI agreed to continue to pay a five percent export duty.~~second-quarter 2018 and $101 million for the first six months of 2018, compared with $27 million in second-quarter 2017 and $41 million for the first six months of 2017.

Higher depreciation rates for the 2017 periods, compared with the 2016 periods, primarily relate to higher amortization of asset retirement costs associated with revised estimates at the end of 2016 for an overburden stockpile. Additionally, becauseBecause certain assets are depreciated on a straight-line basis, PT-FI’s unit depreciation rate varies with the level of copper ~~production and sales.~~production.

PT Smelting intercompany ~~loss~~(loss) profit represents the change in the deferral of 25 percent of PT-FI’s profit on sales to PT Smelting. Refer to ~~“Operations – Smelting~~“Smelting & Refining” below for further discussion.

Assuming an average gold price of $1,300 per ounce for fourth-quarter 2017 and achievement of current sales volume and cost estimates, unit net cash costs (net of gold and silver credits) for Indonesia mining are expected to approximate $0.07 per pound of copper for the year 2017. Indonesia mining’s unit net cash costs for the year 2017 would change by approximately $0.04 per pound for each $50 per ounce change in the average price of gold.

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Because of the fixed nature of a large portion of Indonesia’s costs, unit net cash credits/costs vary from quarter to quarter depending on copper and gold volumes. Assuming an average gold price of $1,250 per ounce for the second half of 2018 and achievement of current sales volume and cost estimates, unit net cash credits (including gold and silver credits) for Indonesia mining are expected to approximate $0.58 per pound of copper for the year 2018. Indonesia mining’s unit net cash credits for the year 2018 would change by approximately $0.06 per pound for each $50 per ounce change in the average price of gold for the second half of 2018. As a result of lower expected copper and gold production during the transition from the open pit to the Grasberg Block Cave underground mine, Indonesia mining's unit net cash costs are expected to be higher in 2019 and 2020.

Molybdenum Mines

We have two wholly owned molybdenum mines in North America – the Henderson underground mine and the Climax open-pit mine, both in Colorado. The Henderson and Climax mines produce high-purity, chemical-grade molybdenum concentrate, which is typically further processed into value-added molybdenum chemical products. The majority of the molybdenum concentrate produced at the Henderson and Climax mines, as well as from our North America and South America copper mines, is processed at our own conversion facilities.

Operating and Development Activities. ~~In response to market conditions, the Henderson molybdenum mine continues to operate at reduced rates.~~ Production from the Molybdenum mines totaled 89 million pounds of molybdenum in ~~third-quarter~~second-quarter ~~2017~~2018, 58 million pounds in ~~third-quarter~~second-quarter ~~2016, 24~~2017, 18 million ~~pounds~~ for the first ~~nine~~six months of ~~2017~~2018 and 1916 million ~~pounds~~ for the first ~~nine~~six months of ~~2016.~~2017. Refer to “Consolidated Results” for our consolidated molybdenum operating data, which includes sales of molybdenum produced at our Molybdenum mines, and from our North America and South America copper mines, and refer to “Outlook” for projected consolidated molybdenum sales volumes.

Unit Net Cash Costs Per Pound of Molybdenum. Unit net cash costs per pound of molybdenum is a measure intended to provide investors with information about the cash-generating capacity of our mining operations expressed on a basis relating to the primary metal product for our respective operations. We use this measure for the same purpose and for monitoring operating performance by our mining operations. This information differs from measures of performance determined in accordance with U.S. GAAP and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. This measure is presented by other metals mining companies, although our measure may not be comparable to similarly titled measures reported by other companies.

Average unit net cash costs for our Molybdenum mines of ~~$7.90~~$8.36 per pound of molybdenum in ~~third-quarter~~second-quarter ~~2017~~2018 and ~~$7.60~~$8.46 per pound of molybdenum for the first ~~nine~~six months of ~~2017~~2018 were ~~lower~~higher than average unit ~~net cash~~ costs of ~~$10.28~~$7.73 per pound of molybdenum in ~~third-quarter~~second-quarter ~~2016~~2017 and ~~$8.39~~$7.38 per pound of molybdenum for the first ~~nine~~six months of ~~2016,~~2017, primarily reflecting higher ~~volumes. Assuming achievement of~~milling rates. Based on current sales volume and cost estimates, ~~we estimate~~average unit net

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cash costs for the Molybdenum mines are expected to ~~average $7.85~~approximate $8.75 per pound of molybdenum for the year ~~2017.~~2018. Refer to “Product Revenues and Production Costs” for a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in our consolidated financial statements.

Smelting and Refining

We wholly own and operate a smelter in Arizona (Miami smelter), a refinery in Texas (El Paso refinery) and a smelter and refinery in Spain (Atlantic Copper). Additionally, PT-FI owns 25 percent of a smelter and refinery in Gresik, Indonesia (PT Smelting). Treatment charges for smelting and refining copper concentrate consist of a base rate per pound of copper and per ounce of gold and are generally fixed. Treatment charges represent a cost to our mining operations and income to Atlantic Copper and PT Smelting. Thus, higher treatment charges benefit our smelter operations and adversely affect our mining operations. Our North America copper mines are less significantly affected by changes in treatment charges because these operations are largely integrated with our Miami ~~smelter.~~smelter and El Paso refinery. Through this form of downstream integration, we are assured placement of a significant portion of our concentrate production.

Atlantic Copper smelts and refines copper concentrate and markets refined copper and precious metals in slimes. During the first ~~nine~~six months of ~~2017,~~2018, Atlantic Copper’s concentrate purchases from our copper mining operations included 1614 percent from our North America copper mines and 109 percent from our South America copper mining operations, with the remainder purchased from third parties.

~~In March 2017, PT Smelting’s anode slimes export license was renewed through March 1, 2018.~~ PT-FI’s contract with PT Smelting provides for PT-FI to supply 100 percent of the copper concentrate requirements (subject to a minimum or maximum rate) necessary for PT Smelting to produce 205,000 metric tons of copper annually on a priority basis. PT-FI may also sell copper concentrate to PT Smelting at market rates for quantities in excess of 205,000 metric tons of copper annually. During the first ~~nine~~six months of ~~2017,~~2018, PT-FI supplied substantially all of PT Smelting’s concentrate requirements. ~~Minimum and maximum treatment charge rates have been approved through April 2020.~~

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We defer recognizing profits on sales from our mining operations to Atlantic Copper and on 25 percent of PT-FI’s sales to PT Smelting until final sales to third parties occur. Changes in these deferrals attributable to variability in intercompany volumes resulted in net additions (reductions) to net income attributable to common stock of ~~$24~~$27 million in ~~third-quarter~~second-quarter ~~2017~~2018, ~~$17~~$(51) million ~~for~~in ~~third-quarter~~second-quarter ~~2016, less than $1~~2017, $20 million for the first ~~nine~~six months of ~~2017~~2018 and $6$(24) million for the first ~~nine~~six months of ~~2016.~~2017. Our net deferred profits on our inventories at Atlantic Copper and PT Smelting to be recognized in future periods’ net income attributable to common stock totaled ~~$62~~$71 million at ~~September~~June 30, ~~2017.~~2018. Quarterly variations in ore grades, the timing of intercompany shipments and changes in product prices will result in variability in our net deferred profits and quarterly earnings.

CAPITAL RESOURCES AND LIQUIDITY

Our consolidated operating cash flows vary with ~~sales volumes,~~ prices realized from copper, gold and ~~molybdenum~~molybdenum; our sales volumes; production ~~costs,~~costs; income ~~taxes,~~taxes; other working capital ~~changes~~changes; and other factors. We believe that we have a high-quality portfolio of long-lived copper assets positioned to generate long-term value. We have commenced a project to develop the Lone Star oxide ores near the Safford operation in eastern Arizona, and PT-FI has several projects in the Grasberg minerals district related to the development of its large-scale, long-lived, high-grade underground ore bodies. 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.

Cash

Following is a summary of the U.S. and international components of consolidated cash and cash equivalents available to the parent company, net of noncontrolling interests’ share, taxes and other costs at ~~September~~June 30, ~~2017~~2018 (in billions):


Cash at domestic companies	$	3.7		$	2.9
Cash at international operations	1.3			1.0
Total consolidated cash and cash equivalents	5.0			3.9
Noncontrolling interests’ share	(0.4		)	(0.4		)
Cash, net of noncontrolling interests’ share	4.6			3.5
Withholding taxes and other	(0.1		)	(0.1		)
Net cash available	$	4.5		$	3.4

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Cash held at our international operations is generally used to support our foreign operations’ capital expenditures, operating expenses, debt repayment, working capital and other tax payments, or other cash needs. Management believes that

sufficient liquidity is available in the U.S. from cash balances and availability from our revolving credit facility. We have not elected to permanently reinvest earnings from our foreign subsidiaries, and we have recorded deferred tax liabilities for foreign earnings that are available to be repatriated to the U.S. From time to time, our foreign subsidiaries distribute earnings to the U.S. through dividends that are subject to applicable withholding taxes and noncontrolling interests’ share.

Debt

Following is a summary of our total debt and the related weighted-average interest rates at ~~September~~June 30, ~~2017~~2018 (in billions, except percentages):

Weighted-
Average
Interest Rate
Senior Notes $ 13.3
4.4%
Cerro Verde credit facility 1.5
3.1%
Total debt $ 14.8
4.2%

In September 2017, we redeemed $543 million aggregate principal amount of senior notes, resulting in annual cash interest savings of approximately $35 million. We recognized an $11 million gain on early extinguishment of debt in connection with the redemptions. During the first nine months of 2017, we have reduced our total debt balance by $1.25 billion. Maturities of debt at September 30, 2017, total $0.7 billion in fourth-quarter 2017, $1.5 billion in 2018, $1.9 billion in 2020, $1.3 billion in 2021 and $9.4 billion thereafter.



			Weighted-
			Average
			Interest Rate
Senior Notes	$	9.9	4.6%
Cerro Verde credit facility	1.2		4.0%
Total debt	$	11.1	4.5%

At ~~September~~June 30, ~~2017,~~2018, we had no borrowings, ~~$36~~$13 million in letters of credit issued and availability of $3.5 billion under our revolving credit facility. In April 2018, we entered into a new $3.5 billion, five-year, unsecured revolving credit facility with substantially similar structure and terms as our prior facility, which ~~matures on~~was scheduled to mature in May ~~31,~~ 2019.

Refer to Note 65 for further discussion of debt.

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Operating Activities

We generated consolidated operating cash flows of ~~$3.0~~$2.7 billion (net of $0.2 billion in working capital uses and timing of other tax payments) for the first six months of 2018 and $1.8 billion (including ~~$0.4~~$0.3 billion in working capital sources and ~~changes in~~timing of other tax payments) for the first ~~nine~~six months of 2017. Higher operating cash flows for the first six months of 2018, compared to the first six months of 2017, primarily reflect higher copper and ~~$2.6 billion (including $0.5 billion in working capital sources~~gold sales volumes and ~~changes in tax payments) for the first nine months of 2016.~~higher metal prices, partly offset by higher inventories.

Subject to future commodity prices for copper, gold and molybdenum, we expect estimated consolidated operating cash flows for the ~~years 2017 and~~year 2018, plus available cash and availability under our credit facility, ~~and uncommitted lines of credit,~~ to be sufficient to fund our budgeted capital expenditures, ~~scheduled debt maturities,~~cash dividends, noncontrolling interest distributions and other cash requirements for the year. Refer to “Outlook” for further discussion of projected operating cash flows for the year ~~2017, and~~2018. For a discussion of regulatory matters in Indonesia that could have a significant impact on future results, refer to “Risk Factors,” contained in Part I, Item 1A. of our annual report on Form 10-K for the year ended December 31, ~~2016, for discussion of regulatory matters in Indonesia, which could have a significant impact on future results.~~2017.

Investing Activities

Capital Expenditures. Capital expenditures, including capitalized interest, totaled ~~$1.0~~$0.9 billion for the first ~~nine~~six months of ~~2017,~~2018, including ~~$0.6~~$0.5 billion for major mining projects. Capital expenditures, including capitalized interest, totaled ~~$2.3~~$0.7 billion for the first ~~nine~~six months of ~~2016, consisting of $1.2 billion for mining operations (including approximately $0.9~~2017, including $0.4 billion for major ~~projects) and $1.1 billion for oil and gas operations.~~

~~Lower~~mining projects. Higher capital expenditures for the first ~~nine~~six months of ~~2017,~~2018, compared with the first ~~nine~~six months of ~~2016,~~2017, primarily reflect ~~a decrease in oil and gas activities as a result of the sales of significant oil and gas properties in 2016 and a decrease in~~increased spending on major mining projects mostly associated with ~~the completion~~development of the ~~Cerro Verde expansion.~~Lone Star oxide project. Refer to “Outlook” for further discussion of projected capital expenditures for the year ~~2017.~~

~~Dispositions.~~ Net proceeds from asset sales totaled $1.4 billion for the first nine months of 2016 primarily associated with the $1.0 billion sale of an additional 13 percent undivided interest in Morenci, the sale of an interest in the Timok exploration project in Serbia and from oil and gas asset sales, including the Haynesville shale assets and certain oil and gas royalty interests. Refer to Note 2 for further discussion of these transactions.2018.

Financing Activities

Debt Transactions. Net repayments of debt for the first ~~nine~~six months of 2018 totaled $1.95 billion, primarily consisting of $1.4 billion for senior notes due March 2018 and $454 million for senior notes due in 2022 and 2023. Refer to Note 5 for further discussion.

Net repayments of debt for the first six months of 2017 totaled ~~$1.2 billion~~$644 million primarily for the ~~redemption and~~ repayment of senior notes due March 2017 and the repayment of Cerro Verde’s shareholder loans, partly offset by the additional borrowings on Cerro Verde’s credit facility.

~~Net repayments~~

Table of debt for the first nine months of 2016 totaled $1.1 billion, primarily reflecting payments of $0.6 billion on our term loan, $0.2 billion on the Cerro Verde credit facility and $0.2 billion on lines of credit.Contents

Dividends. ~~The~~In February 2018, the Board ~~suspended~~reinstated a cash dividend on our ~~annual~~common stock. We paid dividends on our common stock totaling $73 million for the first six months of 2018. On June 27, 2018, FCX declared a quarterly cash dividend ~~in December 2015.~~of $0.05 per share, which was paid August 1, 2018, to shareholders of record as of July 13, 2018. The declaration of dividends is at the discretion of our Board and will depend upon our financial results, cash requirements, future prospects and other factors deemed relevant by our Board.

Common stock dividends of $2 million for the first ~~nine~~six months of 2017 ~~and $5 million for the first nine months of 2016~~ related to accumulated dividends paid for vested stock-based compensation.

Cash dividends paid to noncontrolling interests totaled ~~$67~~$241 million for the first ~~nine~~six months of ~~2017~~2018 and ~~$87~~$39 million for the first ~~nine~~six months of ~~2016.~~2017. These payments will vary based on the operating results and cash requirements of our consolidated subsidiaries.

CONTRACTUAL OBLIGATIONS

~~As further discussed in Note 6, during the first nine months of 2017, we have reduced our December 31, 2016, total debt balance by $1.25 billion.~~ There have been no ~~other~~ material changes in our contractual obligations since December 31, ~~2016.~~2017. Refer to Part II, Items 7. and 7A. in our annual report on Form 10-K for the year ended December 31, ~~2016,~~2017, for information regarding our contractual obligations.

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CONTINGENCIES

Environmental and Asset Retirement Obligations

Our current and historical operating activities are subject to stringent laws and regulations governing the protection of the environment. We perform a comprehensive annual review of our environmental and asset retirement obligations and also review changes in facts and circumstances associated with these obligations at least quarterly.

Other than as ~~disclosed~~discussed in Note 9,8, there have been no material changes to our environmental and asset retirement obligations since December 31, ~~2016.~~2017. Updated cost assumptions, including increases and decreases to cost estimates, changes in the anticipated scope and timing of remediation activities, and settlement of environmental matters may result in additional revisions to certain of our environmental obligations. Refer to Note 12 in our annual report on Form 10-K for the year ended December 31, ~~2016,~~2017, for further information regarding our environmental and asset retirement obligations.

Litigation and Other Contingencies

Other than as discussed in Note 9,8, there have been no material changes to our contingencies associated with legal proceedings, environmental and other matters since December 31, ~~2016.~~2017. Refer to Note 12 and “Legal Proceedings” contained in Part I, Item 3. of our annual report on Form 10-K for the year ended December 31, ~~2016,~~2017, as updated inby Note ~~9 in~~8 and Part II, Item 1. “Legal Proceedings” of our quarterly ~~reports~~report on Form 10-Q for the quarters ended March 31, ~~2017,~~2018, and June 30, ~~2017,~~2018, for further information regarding legal proceedings, environmental and other matters.

NEW ACCOUNTING STANDARDS

Refer to Note 1211 for a summary of recently adopted accounting standards.

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PRODUCT REVENUES AND PRODUCTION COSTS

~~Mining Product Revenues and Unit Net Cash Cost~~

Unit net cash costs (credits) per pound of copper and molybdenum are measures intended to provide investors with information about the cash-generating capacity of our mining operations expressed on a basis relating to the primary metal product for the respective operations. We use this measure for the same purpose and for monitoring operating performance by our mining operations. This information differs from measures of performance determined in accordance with U.S. GAAP and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. These measures are presented by other metals mining companies, although our measures may not be comparable to similarly titled measures reported by other companies.

We present gross profit per pound of copper in the following tables using both a “by-product” method and a “co-product” method. We use the by-product method in our presentation of gross profit per pound of copper because (i) the majority of our revenues are copper revenues, (ii) we mine ore, which contains copper, gold, molybdenum and other metals, (iii) it is not possible to specifically assign all of our costs to revenues from the copper, gold, molybdenum and other metals we produce and (iv) it is the method used by our management and ~~our~~ Board to monitor our mining operations and to compare mining operations in certain industry publications. In the co-product method presentations, shared costs are allocated to the different products based on their relative revenue values, which will vary to the extent our metals sales volumes and realized prices change.

We show revenue adjustments for prior period open sales as a separate line item. Because these adjustments do not result from current period sales, these amounts have been reflected separately from revenues on current period

sales. Noncash and other costs, which are removed from site production and delivery costs in the calculation of unit

net cash costs (credits), consist of items such as stock-based compensation costs, start-up costs, inventory adjustments,

long-lived asset impairments, restructuring and/or unusual charges. As discussed above, gold, molybdenum and

other metal revenues at copper mines are reflected as credits against site production and delivery costs in the by-product method. The following schedules are presentations under both the by-product and co-product methods

together with reconciliations to amounts reported in our consolidated financial statements.

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North America Copper Mines Product Revenues, Production Costs and Unit Net Cash Costs



Three Months Ended September 30, 2017
Three Months Ended June 30, 2018
(In millions)		By-Product			Co-Product Method										By-Product			Co-Product Method
		Method			Copper			Molybdenum^a		Other^b		Total			Method			Copper			Molybdenum^a		Other^b		Total
Revenues, excluding adjustments		$	1,011		$	1,011		$	62	$	19	$	1,092		$	1,126		$	1,126		$	91	$	22	$	1,239
Site production and delivery, before net noncash and other costs shown below		576			541			45		11		597			701			644			68		12		724
By-product credits		(60		)	—			—		—		—			(90		)	—			—		—		—
Treatment charges		39			38			—		1		39			37			36			—		1		37
Net cash costs		555			579			45		12		636			648			680			68		13		761
DD&A		96			90			4		2		96			91			83			6		2		91
Noncash and other costs, net		15			14			1		—		15			23			21			1		1		23
Total costs		666			683			50		14		747			762			784			75		16		875
Revenue adjustments, primarily for pricing on prior period open sales		7			7			—		—		7
Other revenue adjustments, primarily for pricing on prior period open sales															1			1			—		—		1
Gross profit		$	352		$	335		$	12	$	5	$	352		$	365		$	343		$	16	$	6	$	365

Copper sales (millions of recoverable pounds)		345			345										361			361
Molybdenum sales (millions of recoverable pounds)^a								8													8

Gross profit per pound of copper/molybdenum:	Gross profit per pound of copper/molybdenum:													Gross profit per pound of copper/molybdenum:

Revenues, excluding adjustments		$	2.92		$	2.92		$	7.59						$	3.12		$	3.12		$	12.13
Site production and delivery, before net noncash and other costs shown below		1.67			1.56			5.58							1.94			1.78			9.09
By-product credits		(0.17		)	—			—							(0.25		)	—			—
Treatment charges		0.11			0.11			—							0.10			0.10			—
Unit net cash costs		1.61			1.67			5.58							1.79			1.88			9.09
DD&A		0.28			0.27			0.49							0.25			0.23			0.80
Noncash and other costs, net		0.04			0.04			0.05							0.07			0.06			0.15
Total unit costs		1.93			1.98			6.12							2.11			2.17			10.04
Revenue adjustments, primarily for pricing on prior period open sales		0.03			0.03			—
Other revenue adjustments, primarily for pricing on prior period open sales															—			—			—
Gross profit per pound		$	1.02		$	0.97		$	1.47						$	1.01		$	0.95		$	2.09

Reconciliation to Amounts Reported
(In millions)		Revenues			Production and Delivery			DD&A							Revenues			Production and Delivery			DD&A
Totals presented above		$	1,092		$	597		$	96						$	1,239		$	724		$	91
Treatment charges		(8		)	31			—							(5		)	32			—
Noncash and other costs, net		—			15			—							—			23			—
Revenue adjustments, primarily for pricing on prior period open sales		7			—			—
Other revenue adjustments, primarily for pricing on prior period open sales															1			—			—
Eliminations and other		14			15			—							12			10			1
North America copper mines		1,105			658			96							1,247			789			92
Other mining^c		3,909			2,897			299							4,738			3,042			336
Corporate, other & eliminations		(704		)	(753		)	23							(817		)	(916		)	14
As reported in FCX’s consolidated financial statements		$	4,310		$	2,802		$	418						$	5,168		$	2,915		$	442


a.	Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing.


b.	Includes gold and silver product revenues and production costs.


c.	Represents the combined total for our other mining operations, including South America mining, Indonesia mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note ~~10.~~9.

Table of Contents

North America Copper Mines Product Revenues, Production Costs and Unit Net Cash Costs



Three Months Ended September 30, 2016
Three Months Ended June 30, 2017
(In millions)	By-Product			Co-Product Method										By-Product			Co-Product Method
	Method			Copper			Molybdenum^a		Other^b		Total			Method			Copper			Molybdenum^a		Other^b		Total
Revenues, excluding adjustments	$	1,002		$	1,002		$	65	$	35	$	1,102		$	1,068		$	1,068		$	63	$	23	$	1,154
Site production and delivery, before net noncash and other costs shown below	659			610			48		25		683			645			605			47		14		666
By-product credits	(76		)	—			—		—		—			(65		)	—			—		—		—
Treatment charges	45			42			—		3		45			40			38			—		2		40
Net cash costs	628			652			48		28		728			620			643			47		16		706
DD&A	127			117			6		4		127			117			110			5		2		117
Noncash and other costs, net	26			25			1		—		26			19			18			1		—		19
Total costs	781			794			55		32		881			756			771			53		18		842
Revenue adjustments, primarily for pricing on prior period open sales	(3		)	(3		)	—		—		(3		)
Other revenue adjustments, primarily for pricing on prior period open sales														(2		)	(2		)	—		—		(2		)
Gross profit	$	218		$	205		$	10	$	3	$	218		$	310		$	295		$	10	$	5	$	310

Copper sales (millions of recoverable pounds)	457			457										408			408
Molybdenum sales (millions of recoverable pounds)^a	Molybdenum sales (millions of recoverable pounds)^a						9							Molybdenum sales (millions of recoverable pounds)^a						8

Gross profit per pound of copper/molybdenum:	Gross profit per pound of copper/molybdenum:													Gross profit per pound of copper/molybdenum:

Revenues, excluding adjustments	$	2.19		$	2.19		$	7.39						$	2.62		$	2.62		$	8.17
Site production and delivery, before net noncash and other costs shown below	1.44			1.34			5.51							1.58			1.49			6.12
By-product credits	(0.17		)	—			—							(0.16		)	—			—
Treatment charges	0.10			0.09			—							0.10			0.09			—
Unit net cash costs	1.37			1.43			5.51							1.52			1.58			6.12
DD&A	0.28			0.26			0.70							0.29			0.27			0.66
Noncash and other costs, net	0.06			0.05			0.13							0.05			0.04			0.05
Total unit costs	1.71			1.74			6.34							1.86			1.89			6.83
Revenue adjustments, primarily for pricing on prior period open sales	—			—			—
Other revenue adjustments, primarily for pricing on prior period open sales														—			—			—
Gross profit per pound	$	0.48		$	0.45		$	1.05						$	0.76		$	0.73		$	1.34

Reconciliation to Amounts Reported
(In millions)	Revenues			Production and Delivery			DD&A							Revenues			Production and Delivery			DD&A
Totals presented above	$	1,102		$	683		$	127						$	1,154		$	666		$	117
Treatment charges	(26		)	19			—							(19		)	21			—
Noncash and other costs, net	—			26			—							—			19			—
Revenue adjustments, primarily for pricing on prior period open sales	(3		)	—			—
Other revenue adjustments, primarily for pricing on prior period open sales														(2		)	—			—
Eliminations and other	11			11			2							15			14			1
North America copper mines	1,084			739			129							1,148			720			118
Other mining^c	3,085			2,306			268							3,323			2,515			307
Corporate, other & eliminations	(292		)	(516		)	246							(760		)	(755		)	25
As reported in FCX’s consolidated financial statements	$	3,877		$	2,529		$	643						$	3,711		$	2,480		$	450


a.	Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing.


b.	Includes gold and silver product revenues and production costs.


c.	Represents the combined total for our other mining operations, including South America mining, Indonesia mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note ~~10.~~9.

Table of Contents

North America Copper Mines Product Revenues, Production Costs and Unit Net Cash Costs

Nine Months Ended September 30, 2017
(In millions) By-Product Co-Product Method
Method Copper
Molybdenum^a

Other^b
Total
Revenues, excluding adjustments $ 3,091
$ 3,091
$ 184
$ 62
$ 3,337

Site production and delivery, before net noncash
and other costs shown below 1,794
1,688
137
34
1,859

By-product credits (181 ) —
—
—
—

Treatment charges 121
116
—
5
121

Net cash costs 1,734
1,804
137
39
1,980

DD&A 329
309
14
6
329

Noncash and other costs, net 68
^c
66
1
1
68

Total costs 2,131
2,179
152
46
2,377

Revenue adjustments, primarily for pricing
on prior period open sales 4
4
—
—
4

Gross profit $ 964
$ 916
$ 32
$ 16
$ 964

Copper sales (millions of recoverable pounds) 1,127
1,127

Molybdenum sales (millions of recoverable pounds)^a
25

Gross profit per pound of copper/molybdenum:

Revenues, excluding adjustments $ 2.74
$ 2.74
$ 7.57

Site production and delivery, before net noncash
and other costs shown below 1.59
1.50
5.62

By-product credits (0.16 ) —
—

Treatment charges 0.11
0.10
—

Unit net cash costs 1.54
1.60
5.62

DD&A 0.29
0.27
0.56

Noncash and other costs, net 0.06
^c
0.06
0.06

Total unit costs 1.89
1.93
6.24

Revenue adjustments, primarily for pricing
on prior period open sales —
—
—

Gross profit per pound $ 0.85
$ 0.81
$ 1.33

Reconciliation to Amounts Reported
(In millions)
Production
Revenues and Delivery DD&A
Totals presented above $ 3,337
$ 1,859
$ 329

Treatment charges (36 ) 85
—

Noncash and other costs, net —
68
—

Revenue adjustments, primarily for pricing
on prior period open sales 4
—
—

Eliminations and other 43
44
1

North America copper mines 3,348
2,056
330

Other mining^d
10,270
7,765
850

Corporate, other & eliminations (2,256 ) (2,324 ) 77

As reported in FCX’s consolidated financial statements $ 11,362
$ 7,497
$ 1,257


a.	~~Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing.~~


b.	~~Includes gold and silver product revenues and production costs.~~


c.	~~Includes $21 million ($0.02 per pound of copper) for asset impairment charges at Morenci.~~


d.	Represents the combined total for our other mining operations, including South America mining, Indonesia mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 10.

~~Table of Contents~~

~~North America Copper Mines Product Revenues, Production Costs and Unit Net Cash Costs~~



Nine Months Ended September 30, 2016
Six Months Ended June 30, 2018
(In millions)		By-Product			Co-Product Method											By-Product			Co-Product Method
		Method			Copper			Molybdenum^a		Other^b		Total				Method			Copper			Molybdenum^a		Other^b		Total
Revenues, excluding adjustments		$	3,092		$	3,092		$	155	$	76	$	3,323			$	2,337		$	2,337		$	167	$	45	$	2,549
Site production and delivery, before net noncash
and other costs shown below		2,008			1,904			121		46		2,071				1,405			1,304			123		25		1,452
By-product credits		(168		)	—			—		—		—				(165		)	—			—		—		—
Treatment charges		148			142			—		6		148				74			71			—		3		74
Net cash costs		1,988			2,046			121		52		2,219				1,314			1,375			123		28		1,526
DD&A		405			381			15		9		405				185			171			10		4		185
Noncash and other costs, net		74			72			1		1		74				42			40			2		—		42
Total costs		2,467			2,499			137		62		2,698				1,541			1,586			135		32		1,753
Revenue adjustments, primarily for pricing
Other revenue adjustments, primarily for pricing
on prior period open sales		(1		)	(1		)	—		—		(1		)		(5		)	(5		)	—		—		(5		)
Gross profit		$	624		$	592		$	18	$	14	$	624			$	791		$	746		$	32	$	13	$	791

Copper sales (millions of recoverable pounds)		1,421			1,421											744			744
Molybdenum sales (millions of recoverable pounds)^a								25														15

Gross profit per pound of copper/molybdenum:	Gross profit per pound of copper/molybdenum:														Gross profit per pound of copper/molybdenum:

Revenues, excluding adjustments		$	2.18		$	2.18		$	6.24							$	3.14		$	3.14		$	11.52
Site production and delivery, before net noncash
and other costs shown below		1.41			1.34			4.86								1.89			1.75			8.47
By-product credits		(0.12		)	—			—								(0.22		)	—			—
Treatment charges		0.11			0.10			—								0.10			0.10			—
Unit net cash costs		1.40			1.44			4.86								1.77			1.85			8.47
DD&A		0.29			0.27			0.61								0.25			0.23			0.74
Noncash and other costs, net		0.05			0.05			0.06								0.05			0.05			0.12
Total unit costs		1.74			1.76			5.53								2.07			2.13			9.33
Revenue adjustments, primarily for pricing
Other revenue adjustments, primarily for pricing
on prior period open sales		—			—			—								(0.01		)	(0.01		)	—
Gross profit per pound		$	0.44		$	0.42		$	0.71							$	1.06		$	1.00		$	2.19

Reconciliation to Amounts Reported
(In millions)					Production
		Revenues			and Delivery			DD&A											Production
																Revenues			and Delivery			DD&A
Totals presented above		$	3,323		$	2,071		$	405							$	2,549		$	1,452		$	185
Treatment charges		(74		)	74			—								(13		)	61			—
Noncash and other costs, net		—			74			—								—			42			—
Revenue adjustments, primarily for pricing
Other revenue adjustments, primarily for pricing
on prior period open sales		(1		)	—			—								(5		)	—			—
Eliminations and other		32			34			2								24			25			1
North America copper mines		3,280			2,253			407								2,555			1,580			186
Other mining^c		8,433			6,722			766								9,255			6,053			672
Corporate, other & eliminations		(1,260		)	(991		)	764								(1,774		)	(1,910		)	35
As reported in FCX’s consolidated financial statements		$	10,453		$	7,984		$	1,937							$	10,036		$	5,723		$	893


a.	Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing.


b.	Includes gold and silver product revenues and production costs.


c.	Represents the combined total for our other mining operations, including South America mining, Indonesia mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note ~~10.~~9.

Table of Contents

North America Copper Mines Product Revenues, Production Costs and Unit Net Cash Costs




Six Months Ended June 30, 2017
(In millions)	By-Product			Co-Product Method
	Method			Copper			Molybdenum^a		Other^b		Total
Revenues, excluding adjustments	$	2,072		$	2,072		$	122	$	43	$	2,237
Site production and delivery, before net noncash
and other costs shown below	1,207			1,135			91		24		1,250
By-product credits	(122		)	—			—		—		—
Treatment charges	82			79			—		3		82
Net cash costs	1,167			1,214			91		27		1,332
DD&A	233			219			10		4		233
Noncash and other costs, net	52			51			1		—		52
Total costs	1,452			1,484			102		31		1,617
Other revenue adjustments, primarily for pricing
on prior period open sales	4			4			—		—		4
Gross profit	$	624		$	592		$	20	$	12	$	624

Copper sales (millions of recoverable pounds)	782			782
Molybdenum sales (millions of recoverable pounds)^a							17

Gross profit per pound of copper/molybdenum:

Revenues, excluding adjustments	$	2.65		$	2.65		$	7.56
Site production and delivery, before net noncash
and other costs shown below	1.54			1.45			5.62
By-product credits	(0.15		)	—			—
Treatment charges	0.10			0.10			—
Unit net cash costs	1.49			1.55			5.62
DD&A	0.30			0.28			0.59
Noncash and other costs, net	0.07			0.07			0.06
Total unit costs	1.86			1.90			6.27
Other revenue adjustments, primarily for pricing
on prior period open sales	0.01			0.01			—
Gross profit per pound	$	0.80		$	0.76		$	1.29

Reconciliation to Amounts Reported
(In millions)				Production
	Revenues			and Delivery			DD&A
Totals presented above	$	2,237		$	1,250		$	233
Treatment charges	(28		)	54			—
Noncash and other costs, net	—			52			—
Other revenue adjustments, primarily for pricing
on prior period open sales	4			—			—
Eliminations and other	30			30			1
North America copper mines	2,243			1,386			234
Other mining^c	6,361			4,855			551
Corporate, other & eliminations	(1,552		)	(1,573		)	54
As reported in FCX’s consolidated financial statements	$	7,052		$	4,668		$	839


a.	Reflects sales of molybdenum produced by certain of the North America copper mines to our molybdenum sales company at market-based pricing.


b.	Includes gold and silver product revenues and production costs.


c.	Represents the combined total for our other mining operations, including South America mining, Indonesia mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 9.

Table of Contents

South America Mining Product Revenues, Production Costs and Unit Net Cash Costs


Three Months Ended September 30, 2017
Three Months Ended June 30, 2018
(In millions)		By-Product				Co-Product Method								By-Product			Co-Product Method
		Method				Copper			Other^a		Total			Method			Copper			Other^a		Total
Revenues, excluding adjustments		$	965			$	965		$	75	$	1,040		$	958		$	958		$	81	$	1,039
Site production and delivery, before net noncash
and other costs shown below		524				490			46		536			552			513			50		563
By-product credits		(63		)		—			—		—			(70		)	—			—		—
Treatment charges		73				73			—		73			59			59			—		59
Royalty on metals		2				2			—		2			2			2			—		2
Net cash costs		536				565			46		611			543			574			50		624
DD&A		134				125			9		134			133			123			10		133
Noncash and other costs, net		225			^b	207			18		225			17			17			—		17
Total costs		895				897			73		970			693			714			60		774
Revenue adjustments, primarily for pricing
Other revenue adjustments, primarily for pricing
on prior period open sales		59				59			—		59			13			13			—		13
Gross profit		$	129			$	127		$	2	$	129		$	278		$	257		$	21	$	278

Copper sales (millions of recoverable pounds)		327				327								312			312

Gross profit per pound of copper:	Gross profit per pound of copper:												Gross profit per pound of copper:

Revenues, excluding adjustments		$	2.95			$	2.95							$	3.07		$	3.07
Site production and delivery, before net noncash
and other costs shown below		1.60				1.50								1.77			1.65
By-product credits		(0.19		)		—								(0.22		)	—
Treatment charges		0.22				0.22								0.18			0.18
Royalty on metals		0.01				0.01								0.01			0.01
Unit net cash costs		1.64				1.73								1.74			1.84
DD&A		0.41				0.38								0.43			0.40
Noncash and other costs, net		0.69			^b	0.63								0.05			0.05
Total unit costs		2.74				2.74								2.22			2.29
Revenue adjustments, primarily for pricing
Other revenue adjustments, primarily for pricing
on prior period open sales		0.18				0.18								0.04			0.04
Gross profit per pound		$	0.39			$	0.39							$	0.89		$	0.82

Reconciliation to Amounts Reported
(In millions)
						Production											Production
		Revenues				and Delivery			DD&A					Revenues			and Delivery			DD&A
Totals presented above		$	1,040			$	536		$	134				$	1,039		$	563		$	133
Treatment charges		(73		)		—			—					(59		)	—			—
Royalty on metals		(2		)		—			—					(2		)	—			—
Noncash and other costs, net		—				225			—					—			17			—
Revenue adjustments, primarily for pricing
Other revenue adjustments, primarily for pricing
on prior period open sales		59				—			—					13			—			—
Eliminations and other		(1		)		(2		)	—					(1		)	(2		)	—
South America mining		1,023				759			134					990			578			133
Other mining^c		3,991				2,796			261
Other mining^b														4,995			3,253			295
Corporate, other & eliminations		(704		)		(753		)	23					(817		)	(916		)	14
As reported in FCX’s consolidated financial statements		$	4,310			$	2,802		$	418				$	5,168		$	2,915		$	442


a.	Includes silver sales of ~~1.0~~1.1 million ounces ($~~16.15 per ounce average realized price). Also reflects sales of molybdenum produced by Cerro Verde to our molybdenum sales company at market-based pricing.~~


b.	~~Includes charges totaling $216 million ($0.66 per pound of copper) associated with disputed Cerro Verde royalties for prior years.~~


c.	Represents the combined total for our other mining operations, including North America copper mines, Indonesia mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 10.

~~Table of Contents~~

~~South America Mining Product Revenues, Production Costs and Unit Net Cash Costs~~

Three Months Ended September 30, 2016
(In millions) By-Product Co-Product Method
Method Copper
Other^a
Total
Revenues, excluding adjustments $ 709
$ 709
$ 50
$ 759

Site production and delivery, before net noncash
and other costs shown below 409
386
35
421

By-product credits (38 ) —
—
—

Treatment charges 79
79
—
79

Royalty on metals 2
2
—
2

Net cash costs 452
467
35
502

DD&A 134
126
8
134

Noncash and other costs, net 4
3
1
4

Total costs 590
596
44
640

Revenue adjustments, primarily for pricing
on prior period open sales (7 ) (7 ) —
(7 )
Gross profit $ 112
$ 106
$ 6
$ 112

Copper sales (millions of recoverable pounds) 323
323

Gross profit per pound of copper:

Revenues, excluding adjustments $ 2.19
$ 2.19

Site production and delivery, before net noncash
and other costs shown below 1.27
1.20

By-product credits (0.12 ) —

Treatment charges 0.24
0.24

Royalty on metals 0.01
—

Unit net cash costs 1.40
1.44

DD&A 0.41
0.39

Noncash and other costs, net 0.01
0.01

Total unit costs 1.82
1.84

Revenue adjustments, primarily for pricing
on prior period open sales (0.02 ) (0.02 )
Gross profit per pound $ 0.35
$ 0.33

Reconciliation to Amounts Reported
(In millions) Production
Revenues and Delivery DD&A
Totals presented above $ 759
$ 421
$ 134

Treatment charges (79 ) —
—

Royalty on metals (2 ) —
—

Noncash and other costs, net —
4
—

Revenue adjustments, primarily for pricing
on prior period open sales (7 ) —
—

Eliminations and other —
(1 ) —

South America mining 671
424
134

Other mining^b
3,498
2,621
263

Corporate, other & eliminations (292 ) (516 ) 246

As reported in FCX’s consolidated financial statements $ 3,877
$ 2,529
$ 643


a.	~~Includes silver sales of 952 thousand ounces ($21.72~~16.38 per ounce average realized price). Also reflects sales of molybdenum produced by Cerro Verde to our molybdenum sales company at market-based pricing.


b.	Represents the combined total for our other mining operations, including North America copper mines, Indonesia mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note ~~10.~~

~~Table of Contents~~

~~South America Mining Product Revenues, Production Costs and Unit Net Cash Costs~~

Nine Months Ended September 30, 2017
(In millions) By-Product Co-Product Method
Method Copper
Other^a
Total
Revenues, excluding adjustments $ 2,605
$ 2,605
$ 190
$ 2,795
Site production and delivery, before net noncash
and other costs shown below 1,429
1,340
123
1,463
By-product credits (156 ) —
—
—
Treatment charges 204
204
—
204
Royalty on metals 6
5
1
6
Net cash costs 1,483
1,549
124
1,673
DD&A 392
365
27
392
Noncash and other costs, net 234
^b
217
17
234
Total costs 2,109
2,131
168
2,299
Revenue adjustments, primarily for pricing
on prior period open sales 40
40
—
40
Gross profit $ 536
$ 514
$ 22
$ 536

Copper sales (millions of recoverable pounds) 923
923

Gross profit per pound of copper:

Revenues, excluding adjustments $ 2.82
$ 2.82

Site production and delivery, before net noncash
and other costs shown below 1.55
1.45

By-product credits (0.17 ) —

Treatment charges 0.22
0.22

Royalty on metals 0.01
0.01

Unit net cash costs 1.61
1.68

DD&A 0.42
0.40

Noncash and other costs, net 0.25
^b
0.23

Total unit costs 2.28
2.31

Revenue adjustments, primarily for pricing
on prior period open sales 0.04
0.04

Gross profit per pound $ 0.58
$ 0.55

Reconciliation to Amounts Reported
(In millions) Production
Revenues and Delivery DD&A
Totals presented above $ 2,795
$ 1,463
$ 392

Treatment charges (204 ) —
—

Royalty on metals (6 ) —
—

Noncash and other costs, net —
234
—

Revenue adjustments, primarily for pricing
on prior period open sales 40
—
—

Eliminations and other 1
(2 ) —

South America mining 2,626
1,695
392

Other mining^c
—
10,992
8,126
788

Corporate, other & eliminations —
(2,256 ) (2,324 ) 77

As reported in FCX’s consolidated financial statements $ 11,362
$ 7,497
$ 1,257


a.	Includes silver sales of 2.8 million ounces ($16.66 per ounce average realized price). Also reflects sales of molybdenum produced by Cerro Verde to our molybdenum sales company at market-based pricing.


b.	~~Includes charges totaling $216 million ($0.23 per pound of copper) associated with disputed Cerro Verde royalties for prior years.~~


c.	Represents the combined total for our other mining operations, including North America copper mines, Indonesia mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 10.9.

Table of Contents

South America Mining Product Revenues, Production Costs and Unit Net Cash Costs



Nine Months Ended September 30, 2016
Three Months Ended June 30, 2017
(In millions)		By-Product			Co-Product Method								By-Product			Co-Product Method
		Method			Copper			Other^a		Total			Method			Copper			Other^a		Total
Revenues, excluding adjustments		$	2,115		$	2,115		$	129	$	2,244		$	766		$	766		$	47	$	813
Site production and delivery, before net noncash
and other costs shown below		1,199			1,140			88		1,228			448			424			34		458
By-product credits		(100		)	—			—		—			(37		)	—			—		—
Treatment charges		230			230			—		230			63			63			—		63
Royalty on metals		5			5			—		5			2			2			—		2
Net cash costs		1,334			1,375			88		1,463			476			489			34		523
DD&A		401			379			22		401			125			118			7		125
Noncash and other costs, net		15			14			1		15			5			5			—		5
Total costs		1,750			1,768			111		1,879			606			612			41		653
Revenue adjustments, primarily for pricing
Other revenue adjustments, primarily for pricing
on prior period open sales		9			9			—		9			(14		)	(14		)	—		(14		)
Gross profit		$	374		$	356		$	18	$	374		$	146		$	140		$	6	$	146

Copper sales (millions of recoverable pounds)		973			973								287			287

Gross profit per pound of copper:	Gross profit per pound of copper:											Gross profit per pound of copper:

Revenues, excluding adjustments		$	2.17		$	2.17							$	2.67		$	2.67
Site production and delivery, before net noncash
and other costs shown below		1.23			1.17								1.55			1.47
By-product credits		(0.10		)	—								(0.13		)	—
Treatment charges		0.24			0.24								0.22			0.22
Royalty on metals		—			—								0.01			0.01
Unit net cash costs		1.37			1.41								1.65			1.70
DD&A		0.41			0.39								0.44			0.41
Noncash and other costs, net		0.02			0.02								0.02			0.02
Total unit costs		1.80			1.82								2.11			2.13
Revenue adjustments, primarily for pricing
Other revenue adjustments, primarily for pricing
on prior period open sales		0.01			0.01								(0.05		)	(0.05		)
Gross profit per pound		$	0.38		$	0.36							$	0.51		$	0.49

Reconciliation to Amounts Reported
(In millions)					Production											Production
		Revenues			and Delivery			DD&A					Revenues			and Delivery			DD&A
Totals presented above		$	2,244		$	1,228		$	401				$	813		$	458		$	125
Treatment charges		(230		)	—			—					(63		)	—			—
Royalty on metals		(5		)	—			—					(2		)	—			—
Noncash and other costs, net		—			15			—					—			5			—
Revenue adjustments, primarily for pricing
Other revenue adjustments, primarily for pricing
on prior period open sales		9			—			—					(14		)	—			—
Eliminations and other		1			(3		)	1					1			—			—
South America mining		2,019			1,240			402					735			463			125
Other mining^b		9,694			7,735			771					3,736			2,772			300
Corporate, other & eliminations		(1,260		)	(991		)	764					(760		)	(755		)	25
As reported in FCX’s consolidated financial statements		$	10,453		$	7,984		$	1,937				$	3,711		$	2,480		$	450


a.	Includes silver sales of ~~2.8 million~~848 thousand ounces ($~~17.99~~17.97 per ounce average realized price). Also reflects sales of molybdenum produced by Cerro Verde to our molybdenum sales company at market-based pricing.


b.	Represents the combined total for our other mining operations, including North America copper mines, Indonesia mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note ~~10.~~9.

Table of Contents

South America Mining Product Revenues, Production Costs and Unit Net Cash Costs




Six Months Ended June 30, 2018
(In millions)		By-Product			Co-Product Method
		Method			Copper			Other^a		Total
Revenues, excluding adjustments		$	1,859		$	1,859		$	167	$	2,026
Site production and delivery, before net noncash
and other costs shown below		1,069			990			102		1,092
By-product credits		(144		)	—			—		—
Treatment charges		117			117			—		117
Royalty on metals		4			4			—		4
Net cash costs		1,046			1,111			102		1,213
DD&A		260			239			21		260
Noncash and other costs, net		32			32			—		32
Total costs		1,338			1,382			123		1,505
Other revenue adjustments, primarily for pricing
on prior period open sales		(37		)	(37		)	—		(37		)
Gross profit		$	484		$	440		$	44	$	484

Copper sales (millions of recoverable pounds)		602			602

Gross profit per pound of copper:

Revenues, excluding adjustments		$	3.09		$	3.09
Site production and delivery, before net noncash
and other costs shown below		1.78			1.64
By-product credits		(0.24		)	—
Treatment charges		0.19			0.19
Royalty on metals		0.01			0.01
Unit net cash costs		1.74			1.84
DD&A		0.43			0.40
Noncash and other costs, net		0.05			0.05
Total unit costs		2.22			2.29
Other revenue adjustments, primarily for pricing
on prior period open sales		(0.06		)	(0.06		)
Gross profit per pound		$	0.81		$	0.74

Reconciliation to Amounts Reported
(In millions)					Production
		Revenues			and Delivery			DD&A
Totals presented above		$	2,026		$	1,092		$	260
Treatment charges		(117		)	—			—
Royalty on metals		(4		)	—			—
Noncash and other costs, net		—			32			—
Other revenue adjustments, primarily for pricing
on prior period open sales		(37		)	—			—
Eliminations and other		(1		)	(3		)	—
South America mining		1,867			1,121			260
Other mining^b	—	9,943			6,512			598
Corporate, other & eliminations	—	(1,774		)	(1,910		)	35
As reported in FCX’s consolidated financial statements		$	10,036		$	5,723		$	893


a.	Includes silver sales of 2.1 million ounces ($16.45 per ounce average realized price). Also reflects sales of molybdenum produced by Cerro Verde to our molybdenum sales company at market-based pricing.


b.	Represents the combined total for our other mining operations, including North America copper mines, Indonesia mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 9.

Table of Contents

South America Mining Product Revenues, Production Costs and Unit Net Cash Costs




Six Months Ended June 30, 2017
(In millions)	By-Product			Co-Product Method
	Method			Copper			Other^a		Total
Revenues, excluding adjustments	$	1,581		$	1,581		$	115	$	1,696
Site production and delivery, before net noncash
and other costs shown below	905			850			77		927
By-product credits	(93		)	—			—		—
Treatment charges	130			130			—		130
Royalty on metals	4			4			—		4
Net cash costs	946			984			77		1,061
DD&A	258			241			17		258
Noncash and other costs, net	10			10			—		10
Total costs	1,214			1,235			94		1,329
Other revenue adjustments, primarily for pricing
on prior period open sales	41			41			—		41
Gross profit	$	408		$	387		$	21	$	408

Copper sales (millions of recoverable pounds)	596			596

Gross profit per pound of copper:

Revenues, excluding adjustments	$	2.65		$	2.65
Site production and delivery, before net noncash
and other costs shown below	1.52			1.42
By-product credits	(0.16		)	—
Treatment charges	0.22			0.22
Royalty on metals	0.01			0.01
Unit net cash costs	1.59			1.65
DD&A	0.43			0.40
Noncash and other costs, net	0.02			0.02
Total unit costs	2.04			2.07
Other revenue adjustments, primarily for pricing
on prior period open sales	0.07			0.07
Gross profit per pound	$	0.68		$	0.65

Reconciliation to Amounts Reported
(In millions)				Production
	Revenues			and Delivery			DD&A
Totals presented above	$	1,696		$	927		$	258
Treatment charges	(130		)	—			—
Royalty on metals	(4		)	—			—
Noncash and other costs, net	—			10			—
Other revenue adjustments, primarily for pricing
on prior period open sales	41			—			—
Eliminations and other	—			(1		)	—
South America mining	1,603			936			258
Other mining^b	7,001			5,305			527
Corporate, other & eliminations	(1,552		)	(1,573		)	54
As reported in FCX’s consolidated financial statements	$	7,052		$	4,668		$	839


a.	Includes silver sales of 1.8 million ounces ($16.95 per ounce average realized price). Also reflects sales of molybdenum produced by Cerro Verde to our molybdenum sales company at market-based pricing.


b.	Represents the combined total for our other mining operations, including North America copper mines, Indonesia mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 9.

Table of Contents

Indonesia Mining Product Revenues, Production Costs and Unit Net Cash Costs



Three Months Ended September 30, 2017
Three Months Ended June 30, 2018
(In millions)		By-Product				Co-Product Method												By-Product			Co-Product Method
		Method				Copper			Gold			Silver^a		Total				Method			Copper			Gold			Silver^a		Total
Revenues, excluding adjustments		$	762			$	762		$	453		$	11	$	1,226			$	965		$	965		$	855		$	17	$	1,837
Site production and delivery, before net noncash
and other costs shown below		364				226			134			4		364
and other credits shown below																		420			221			195			4		420
Gold and silver credits		(466		)		—			—			—		—				(871		)	—			—			—		—
Treatment charges		71				44			26			1		71				82			43			38			1		82
Export duties		21				13			8			—		21				55			29			26			—		55
Royalty on metals		43				26			17			—		43				71			36			34			1		71
Net cash costs		33				309			185			5		499
Net cash (credits) costs																		(243		)	329			293			6		628
DD&A		136				85			50			1		136				172			90			80			2		172
Noncash and other costs, net		24			^b	15			9			—		24
Total costs		193				409			244			6		659
Revenue adjustments, primarily for pricing on
Noncash and other credits, net																		(3		)	(1		)	(2		)	—		(3		)
Total (credits) costs																		(74		)	418			371			8		797
Other revenue adjustments, primarily for pricing
prior period open sales		28				28			2			—		30				12			12			(2		)	1		11
PT Smelting intercompany loss		(18		)		(11		)	(7		)	—		(18		)		(8		)	(4		)	(4		)	—		(8		)
Gross profit		$	579			$	370		$	204		$	5	$	579			$	1,043		$	555		$	478		$	10	$	1,043

Copper sales (millions of recoverable pounds)		258				258												316			316
Gold sales (thousands of recoverable ounces)									352															671

Gross profit per pound of copper/per ounce of gold:	Gross profit per pound of copper/per ounce of gold:																Gross profit per pound of copper/per ounce of gold:

Revenues, excluding adjustments		$	2.95			$	2.95		$	1,290								$	3.05		$	3.05		$	1,274
Site production and delivery, before net noncash
and other costs shown below		1.41				0.87			383
and other credits shown below																		1.33			0.70			291
Gold and silver credits		(1.80		)		—			—									(2.76		)	—			—
Treatment charges		0.27				0.17			74									0.26			0.14			57
Export duties		0.08				0.05			22									0.18			0.09			38
Royalty on metals		0.17				0.10			48									0.22			0.11			51
Unit net cash costs		0.13				1.19			527
Unit net cash (credits) costs																		(0.77		)	1.04			437
DD&A		0.53				0.33			143									0.54			0.28			119
Noncash and other costs, net		0.09			^b	0.06			25
Total unit costs		0.75				1.58			695
Revenue adjustments, primarily for pricing on
Noncash and other credits, net																		(0.01		)	—			(2		)
Total unit (credits) costs																		(0.24		)	1.32			554
Other revenue adjustments, primarily for pricing
prior period open sales		0.11				0.11			4									0.04			0.04			(2		)
PT Smelting intercompany loss		(0.07		)		(0.04		)	(19		)							(0.03		)	(0.01		)	(6		)
Gross profit per pound/ounce		$	2.24			$	1.44		$	580								$	3.30		$	1.76		$	712

Reconciliation to Amounts Reported
(In millions)						Production															Production
		Revenues				and Delivery			DD&A									Revenues			and Delivery			DD&A
Totals presented above		$	1,226			$	364		$	136								$	1,837		$	420		$	172
Treatment charges		(71		)		—			—									(82		)	—			—
Export duties		(21		)		—			—									(55		)	—			—
Royalty on metals		(43		)		—			—									(71		)	—			—
Noncash and other costs, net		—				24			—
Revenue adjustments, primarily for pricing on
Noncash and other credits, net																		—			(3		)	—
Other revenue adjustments, primarily for pricing
prior period open sales		30				—			—									11			—			—
PT Smelting intercompany loss		—				18			—									—			8			—
Indonesia mining		1,121				406			136									1,640			425			172
Other mining^c		3,893				3,149			259
Other mining^b																		4,345			3,406			256
Corporate, other & eliminations		(704		)		(753		)	23									(817		)	(916		)	14
As reported in FCX’s consolidated financial statements		$	4,310			$	2,802		$	418								$	5,168		$	2,915		$	442


a.	Includes silver sales of ~~666~~1.1 million ounces ($15.89 per ounce average realized price).


b.	Represents the combined total for our other mining operations, including North America copper mines, South America mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 9.

Table of Contents

Indonesia Mining Product Revenues, Production Costs and Unit Net Cash Costs




Three Months Ended June 30, 2017
(In millions)	By-Product				Co-Product Method
	Method				Copper			Gold			Silver^a		Total
Revenues, excluding adjustments	$	660			$	660		$	531		$	14	$	1,205
Site production and delivery, before net noncash
and other costs shown below	437				239			193			5		437
Gold and silver credits	(547		)		—			—			—		—
Treatment charges	65				35			29			1		65
Export duties	27				15			12			—		27
Royalty on metals	43				22			20			1		43
Net cash costs	25				311			254			7		572
DD&A	153				84			67			2		153
Noncash and other costs, net	84			^b	46			37			1		84
Total costs	262				441			358			10		809
Revenue adjustments, primarily for pricing on
prior period open sales	(7		)		(7		)	2			—		(5		)
PT Smelting intercompany loss	(26		)		(15		)	(11		)	—		(26		)
Gross profit	$	365			$	197		$	164		$	4	$	365

Copper sales (millions of recoverable pounds)	247				247
Gold sales (thousands of recoverable ounces)								427

Gross profit per pound of copper/per ounce of gold:

Revenues, excluding adjustments	$	2.67			$	2.67		$	1,243
Site production and delivery, before net noncash
and other costs shown below	1.77				0.97			451
Gold and silver credits	(2.21		)		—			—
Treatment charges	0.26				0.14			67
Export duties	0.11				0.06			28
Royalty on metals	0.17				0.09			47
Unit net cash costs	0.10				1.26			593
DD&A	0.62				0.34			158
Noncash and other costs, net	0.34			^b	0.18			86
Total unit costs	1.06				1.78			837
Revenue adjustments, primarily for pricing on
prior period open sales	(0.03		)		(0.03		)	5
PT Smelting intercompany loss	(0.10		)		(0.06		)	(26		)
Gross profit per pound/ounce	$	1.48			$	0.80		$	385

Reconciliation to Amounts Reported
(In millions)					Production
	Revenues				and Delivery			DD&A
Totals presented above	$	1,205			$	437		$	153
Treatment charges	(65		)		—			—
Export duties	(27		)		—			—
Royalty on metals	(43		)		—			—
Noncash and other costs, net	—				84			—
Revenue adjustments, primarily for pricing on
prior period open sales	(5		)		—			—
PT Smelting intercompany loss	—				26			—
Indonesia mining	1,065				547			153
Other mining^c	3,406				2,688			272
Corporate, other & eliminations	(760		)		(755		)	25
As reported in FCX’s consolidated financial statements	$	3,711			$	2,480		$	450


a.	Includes silver sales of 851 thousand ounces ($~~16.64~~16.26 per ounce average realized price).


b.	Includes $9$82 million ($~~0.03~~0.33 per pound of copper) of costs charged directly to production and delivery costs as a result of the impact of workforce reductions.


c.	Represents the combined total for our other mining operations, including North America copper mines, South America mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 9.

Table of Contents

Indonesia Mining Product Revenues, Production Costs and Unit Net Cash Costs




Six Months Ended June 30, 2018
(In millions)	By-Product			Co-Product Method
	Method			Copper			Gold			Silver^a		Total
Revenues, excluding adjustments	$	1,949		$	1,949		$	1,644		$	36	$	3,629
Site production and delivery, before net noncash
and other costs shown below	853			458			387			8		853
Gold and silver credits	(1,697		)	—			—			—		—
Treatment charges	160			86			72			2		160
Export duties	101			54			46			1		101
Royalty on metals	138			73			64			1		138
Net cash (credits) costs	(445		)	671			569			12		1,252
DD&A	353			189			160			4		353
Noncash and other costs, net	12			7			5			—		12
Total (credits) costs	(80		)	867			734			16		1,617
Other revenue adjustments, primarily for pricing
on prior period open sales	(34		)	(34		)	17			—		(17		)
PT Smelting intercompany loss	(17		)	(9		)	(8		)	—		(17		)
Gross profit	$	1,978		$	1,039		$	919		$	20	$	1,978

Copper sales (millions of recoverable pounds)	635			635
Gold sales (thousands of recoverable ounces)							1,274

Gross profit per pound of copper/per ounce of gold:

Revenues, excluding adjustments	$	3.07		$	3.07		$	1,291
Site production and delivery, before net noncash
and other costs shown below	1.34			0.72			304
Gold and silver credits	(2.67		)	—			—
Treatment charges	0.25			0.14			57
Export duties	0.16			0.09			36
Royalty on metals	0.22			0.11			50
Unit net cash (credits) costs	(0.70		)	1.06			447
DD&A	0.55			0.30			125
Noncash and other costs, net	0.02			0.01			4
Total unit (credits) costs	(0.13		)	1.37			576
Other revenue adjustments, primarily for pricing
on prior period open sales	(0.05		)	(0.05		)	13
PT Smelting intercompany loss	(0.04		)	(0.01		)	(7		)
Gross profit per pound/ounce	$	3.11		$	1.64		$	721

Reconciliation to Amounts Reported
(In millions)				Production
	Revenues			and Delivery			DD&A
Totals presented above	$	3,629		$	853		$	353
Treatment charges	(160		)	—			—
Export duties	(101		)	—			—
Royalty on metals	(138		)	—			—
Noncash and other costs, net	—			12			—
Other revenue adjustments, primarily for pricing
on prior period open sales	(17		)	—			—
PT Smelting intercompany loss	—			17			—
Indonesia mining	3,213			882			353
Other mining^b	8,597			6,751			505
Corporate, other & eliminations	(1,774		)	(1,910		)	35
As reported in FCX’s consolidated financial statements	$	10,036		$	5,723		$	893


a.	Includes silver sales of 2.3 million ounces ($15.93 per ounce average realized price).


b.	Represents the combined total for our other mining operations, including North America copper mines, South America mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 9.

Table of Contents

Indonesia Mining Product Revenues, Production Costs and Unit Net Cash Costs




Six Months Ended June 30, 2017
(In millions)	By-Product				Co-Product Method
	Method				Copper			Gold		Silver^a		Total
Revenues, excluding adjustments	$	982			$	982		$	752	$	21	$	1,755
Site production and delivery, before net noncash
and other costs shown below	702				393			301		8		702
Gold and silver credits	(782		)		—			—		—		—
Treatment charges	100				56			43		1		100
Export duties	41				23			18		—		41
Royalty on metals	63				34			28		1		63
Net cash costs	124				506			390		10		906
DD&A	236				132			101		3		236
Noncash and other costs, net	116			^b	65			49		2		116
Total costs	476				703			540		15		1,258
Other revenue adjustments, primarily for pricing
on prior period open sales	39				39			9		—		48
PT Smelting intercompany profit	1				1			—		—		1
Gross profit	$	546			$	319		$	221	$	6	$	546

Copper sales (millions of recoverable pounds)	372				372
Gold sales (thousands of recoverable ounces)								604

Gross profit per pound of copper/per ounce of gold:

Revenues, excluding adjustments	$	2.64			$	2.64		$	1,242
Site production and delivery, before net noncash
and other costs shown below	1.89				1.05			497
Gold and silver credits	(2.10		)		—			—
Treatment charges	0.27				0.15			71
Export duties	0.11				0.06			29
Royalty on metals	0.17				0.10			47
Unit net cash costs	0.34				1.36			644
DD&A	0.63				0.35			167
Noncash and other costs, net	0.32			^b	0.18			82
Total unit costs	1.29				1.89			893
Other revenue adjustments, primarily for pricing
on prior period open sales	0.11				0.11			15
PT Smelting intercompany profit	—				—			1
Gross profit per pound/ounce	$	1.46			$	0.86		$	365

Reconciliation to Amounts Reported
(In millions)					Production
	Revenues				and Delivery			DD&A
Totals presented above	$	1,755			$	702		$	236
Treatment charges	(100		)		—			—
Export duties	(41		)		—			—
Royalty on metals	(63		)		—			—
Noncash and other costs, net	—				116			—
Other revenue adjustments, primarily for pricing
on prior period open sales	48				—			—
PT Smelting intercompany profit	—				(1		)	—
Indonesia mining	1,599				817			236
Other mining^c	7,005				5,424			549
Corporate, other & eliminations	(1,552		)		(1,573		)	54
As reported in FCX’s consolidated financial statements	$	7,052			$	4,668		$	839


a.	Includes silver sales of 1.3 million ounces ($16.66 per ounce average realized price).


b.	Includes $103 million ($0.28 per pound of copper) of costs charged directly to production and delivery costs as a result of workforce reductions.


c.	Represents the combined total for our other mining operations, including North America copper mines, South America mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note ~~10.~~

~~Table of Contents~~

~~Indonesia Mining Product Revenues, Production Costs and Unit Net Cash Costs~~

Three Months Ended September 30, 2016
(In millions) By-Product Co-Product Method
Method Copper Gold
Silver^a
Total
Revenues, excluding adjustments $ 729
$ 729
$ 408
$ 18
$ 1,155

Site production and delivery, before net noncash
and other costs shown below 453
286
160
7
453

Gold and silver credits (427 ) —
—
—
—

Treatment charges 90
57
32
1
90

Export duties 34
21
12
1
34

Royalty on metals 40
24
15
1
40

Net cash costs 190
388
219
10
617

DD&A 110
69
39
2
110

Noncash and other costs, net 16
^b
11
5
—
16

Total costs 316
468
263
12
743

Revenue adjustments, primarily for pricing on
prior period open sales (6 ) (6 ) —
1
(5 )
PT Smelting intercompany loss (9 ) (6 ) (3 ) —
(9 )
Gross profit $ 398
$ 249
$ 142
$ 7
$ 398

Copper sales (millions of recoverable pounds) 332
332

Gold sales (thousands of recoverable ounces) 307

Gross profit per pound of copper/per ounce of gold:

Revenues, excluding adjustments $ 2.20
$ 2.20
$ 1,327

Site production and delivery, before net noncash
and other costs shown below 1.37
0.86
520

Gold and silver credits (1.29 ) —
—

Treatment charges 0.27
0.17
104

Export duties 0.10
0.07
39

Royalty on metals 0.12
0.07
50

Unit net cash costs 0.57
1.17
713

DD&A 0.33
0.21
125

Noncash and other costs, net 0.05
^b
0.03
19

Total unit costs 0.95
1.41
857

Revenue adjustments, primarily for pricing on
prior period open sales (0.02 ) (0.02 ) 1

PT Smelting intercompany loss (0.03 ) (0.02 ) (10 )
Gross profit per pound/ounce $ 1.20
$ 0.75
$ 461

Reconciliation to Amounts Reported
(In millions) Production
Revenues and Delivery DD&A
Totals presented above $ 1,155
$ 453
$ 110

Treatment charges (90 ) —
—

Export duties (34 ) —
—

Royalty on metals (40 ) —
—

Noncash and other costs, net —
16
—

Revenue adjustments, primarily for pricing on
prior period open sales (5 ) —
—

PT Smelting intercompany loss —
9
—

Indonesia mining 986
478
110

Other mining^c
3,183
2,567

287

Corporate, other & eliminations (292 ) (516 ) 246

As reported in FCX’s consolidated financial statements $ 3,877
$ 2,529
$ 643


a.	~~Includes silver sales of 928 thousand ounces ($18.97 per ounce average realized price).~~


b.	~~Includes asset retirement charges of $17 million ($0.05 per pound of copper).~~


c.	Represents the combined total for our other mining operations, including North America copper mines, South America mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 10.

~~Table of Contents~~

~~Indonesia Mining Product Revenues, Production Costs and Unit Net Cash Costs~~

Nine Months Ended September 30, 2017
(In millions) By-Product Co-Product Method
Method Copper Gold
Silver^a
Total
Revenues, excluding adjustments $ 1,772
$ 1,772
$ 1,206
$ 32
$ 3,010
Site production and delivery, before net noncash
and other costs shown below 1,076
634
431
11
1,076
Gold and silver credits (1,247 ) —
—
—
—
Treatment charges 170
100
68
2
170
Export duties 62
36
25
1
62
Royalty on metals 106
60
45
1
106
Net cash costs 167
830
569
15
1,414
DD&A 372
219
149
4
372
Noncash and other costs, net 140
^b
82
56
2
140
Total costs 679
1,131
774
21
1,926
Revenue adjustments, primarily for pricing on
prior period open sales 39
39
9
—
48
PT Smelting intercompany loss (17 ) (10 ) (7 ) —
(17 )
Gross profit $ 1,115
$ 670
$ 434
$ 11
$ 1,115

Copper sales (millions of recoverable pounds) 630
630

Gold sales (thousands of recoverable ounces) 956

Gross profit per pound of copper/per ounce of gold:

Revenues, excluding adjustments $ 2.81
$ 2.81
$ 1,261

Site production and delivery, before net noncash
and other costs shown below 1.71
1.01
451

Gold and silver credits (1.98 ) —
—

Treatment charges 0.27
0.16
71

Export duties 0.10
0.06
26

Royalty on metals 0.16
0.09
47

Unit net cash costs 0.26
1.32
595

DD&A 0.59
0.35
156

Noncash and other costs, net 0.22
^b
0.13
58

Total unit costs 1.07
1.80
809

Revenue adjustments, primarily for pricing on
prior period open sales 0.06
0.06
9

PT Smelting intercompany loss (0.03 ) (0.01 ) (7 )
Gross profit per pound/ounce $ 1.77
$ 1.06
$ 454

Reconciliation to Amounts Reported
(In millions) Production
Revenues and Delivery DD&A
Totals presented above $ 3,010
$ 1,076
$ 372

Treatment charges (170 ) —
—

Export duties (62 ) —
—

Royalty on metals (106 ) —
—

Noncash and other costs, net —
140
—

Revenue adjustments, primarily for pricing on
prior period open sales 48
—
—

PT Smelting intercompany loss —
17
—

Indonesia mining 2,720
1,233
372

Other mining^c
10,898
8,588
808

Corporate, other & eliminations (2,256 ) (2,324 ) 77

As reported in FCX’s consolidated financial statements $ 11,362
$ 7,497
$ 1,257


a.	~~Includes silver sales of 1.9 million ounces ($16.70 per ounce average realized price).~~


b.	~~Includes $112 million ($0.18 per pound of copper) of costs charged directly to production and delivery costs as a result of workforce reductions.~~


c.	Represents the combined total for our other mining operations, including North America copper mines, South America mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 10.

~~Table of Contents~~

~~Indonesia Mining Product Revenues, Production Costs and Unit Net Cash Costs~~

Nine Months Ended September 30, 2016
(In millions) By-Product Co-Product Method
Method Copper Gold
Silver^a
Total
Revenues, excluding adjustments $ 1,525
$ 1,525
$ 844
$ 36
$ 2,405

Site production and delivery, before net noncash
and other costs shown below 1,190
754
418
18
1,190

Gold and silver credits (897 ) —
—
—
—

Treatment charges 202
128
71
3
202

Export duties 63
40
22
1
63

Royalty on metals 84
51
32
1
84

Net cash costs 642
973
543
23
1,539

DD&A 284
180
100
4
284

Noncash and other costs, net 31
^b
20
10
1
31

Total costs 957
1,173
653
28
1,854

Revenue adjustments, primarily for pricing on
prior period open sales —
—
17
—
17

PT Smelting intercompany loss (7 ) (5 ) (2 ) —
(7 )
Gross profit $ 561
$ 347
$ 206
$ 8
$ 561

Copper sales (millions of recoverable pounds) 702
702

Gold sales (thousands of recoverable ounces) 653

Gross profit per pound of copper/per ounce of gold:

Revenues, excluding adjustments $ 2.17
$ 2.17
$ 1,292

Site production and delivery, before net noncash
and other costs shown below 1.70
1.08
639

Gold and silver credits (1.28 ) —
—

Treatment charges 0.29
0.18
109

Export duties 0.09
0.06
34

Royalty on metals 0.12
0.07
48

Unit net cash costs 0.92
1.39
830

DD&A 0.40
0.25
152

Noncash and other costs, net 0.04
^b
0.03
16

Total unit costs 1.36
1.67
998

Revenue adjustments, primarily for pricing on
prior period open sales —
—
25

PT Smelting intercompany loss (0.01 ) (0.01 ) (4 )
Gross profit per pound/ounce $ 0.80
$ 0.49
$ 315

Reconciliation to Amounts Reported
(In millions) Production
Revenues and Delivery DD&A
Totals presented above $ 2,405
$ 1,190
$ 284

Treatment charges (202 ) —
—

Export duties (63 ) —
—

Royalty on metals (84 ) —
—

Noncash and other costs, net —
31
—

Revenue adjustments, primarily for pricing on
prior period open sales 17
—
—

PT Smelting intercompany loss —
7
—

Indonesia mining 2,073
1,228
284

Other mining^c
9,640
7,747
889

Corporate, other & eliminations (1,260 ) (991 ) 764

As reported in FCX’s consolidated financial statements $ 10,453
$ 7,984
$ 1,937


a.	~~Includes silver sales of 2.0 million ounces ($17.95 per ounce average realized price).~~


b.	~~Includes asset retirement charges of $17 million ($0.02 per pound of copper).~~


c.	Represents the combined total for our other mining operations, including North America copper mines, South America mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 10.9.

Table of Contents

Molybdenum Mines Product Revenues, Production Costs and Unit Net Cash Costs



	Three Months Ended September 30,								Three Months Ended June 30,
(In millions)	2017			2016					2018			2017

Revenues, excluding adjustments^a	$	72		$	51				$	119		$	78
Site production and delivery, before net noncash and other costs shown below	56			53					71			56
Treatment charges and other	7			5					8			7
Net cash costs	63			58					79			63
DD&A	20			15					21			19
Noncash and other costs, net	2			4					—			2
Total costs	85			77					100			84
Gross loss	$	(13	)	$	(26	)
Gross profit (loss)									$	19		$	(6	)

Molybdenum sales (millions of recoverable pounds)^a	8			5					9			8

Gross loss per pound of molybdenum:
Gross profit (loss) per pound of molybdenum:									Gross profit (loss) per pound of molybdenum:

Revenues, excluding adjustments^a	$	9.02		$	9.08				$	12.72		$	9.57
Site production and delivery, before net noncash and other costs shown below	7.05			9.42					7.51			6.88
Treatment charges and other	0.85			0.86					0.85			0.85
Unit net cash costs	7.90			10.28					8.36			7.73
DD&A	2.44			2.63					2.24			2.32
Noncash and other costs, net	0.28			0.77					0.05			0.27
Total unit costs	10.62			13.68					10.65			10.32
Gross loss per pound	$	(1.60	)	$	(4.60	)
Gross profit (loss) per pound									$	2.07		$	(0.75	)

Reconciliation to Amounts Reported
(In millions)

				Production								Production
Three Months Ended September 30, 2017	Revenues			and Delivery			DD&A
Three Months Ended June 30, 2018									Revenues			and Delivery			DD&A
Totals presented above	$	72		$	56		$	20	$	119		$	71		$	21
Treatment charges and other	(7		)	—			—		(8		)	—			—
Noncash and other costs, net	—			2			—		—			—			—
Molybdenum mines	65			58			20		111			71			21
Other mining^b	4,949			3,497			375		5,874			3,760			407
Corporate, other & eliminations	(704		)	(753		)	23		(817		)	(916		)	14
As reported in FCX’s consolidated financial statements	$	4,310		$	2,802		$	418	$	5,168		$	2,915		$	442

Three Months Ended September 30, 2016
Three Months Ended June 30, 2017
Totals presented above	$	51		$	53		$	15	$	78		$	56		$	19
Treatment charges and other	(5		)	—			—		(7		)	—			—
Noncash and other costs, net	—			4			—		—			2			—
Molybdenum mines	46			57			15		71			58			19
Other mining^b	4,123			2,988			382		4,400			3,177			406
Corporate, other & eliminations	(292		)	(516		)	246		(760		)	(755		)	25
As reported in FCX’s consolidated financial statements	$	3,877		$	2,529		$	643	$	3,711		$	2,480		$	450


a.	Reflects sales of the Molybdenum mines’ production to our molybdenum sales company at market-based pricing. On a consolidated basis, realizations are based on the actual contract terms for sales to third parties; as a result, our consolidated average realized price per pound of molybdenum will differ from the amounts reported in this table.

Represents the combined total for our other mining operations, including North America copper mines, South America mining, Indonesia mining, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note ~~10.~~9. Also includes amounts associated with our 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.

Table of Contents

Molybdenum Mines Product Revenues, Production Costs and Unit Net Cash Costs



	Nine Months Ended September 30,								Six Months Ended June 30,
(In millions)	2017			2016					2018			2017

Revenues, excluding adjustments^a	$	220		$	153				$	221		$	148
Site production and delivery, before net noncash and other costs shown below	164			146					136			107
Treatment charges and other	21			17					15			14
Net cash costs	185			163					151			121
DD&A	58			51					40			38
Noncash and other costs, net	5			13					2			3
Total costs	248			227					193			162
Gross loss	$	(28	)	$	(74	)
Gross profit (loss)									$	28		$	(14	)

Molybdenum sales (millions of recoverable pounds)^a	24			19					18			16

Gross loss per pound of molybdenum:
Gross profit (loss) per pound of molybdenum:									Gross profit (loss) per pound of molybdenum:

Revenues, excluding adjustments^a	$	9.05		$	7.94				$	12.38		$	9.07
Site production and delivery, before net noncash and other costs shown below	6.75			7.53					7.61			6.53
Treatment charges and other	0.85			0.86					0.85			0.85
Unit net cash costs	7.60			8.39					8.46			7.38
DD&A	2.38			2.65					2.24			2.34
Noncash and other costs, net	0.23			0.72					0.10			0.21
Total unit costs	10.21			11.76					10.80			9.93
Gross loss per pound	$	(1.16	)	$	(3.82	)
Gross profit (loss) per pound									$	1.58		$	(0.86	)

Reconciliation to Amounts Reported
(In millions)

				Production								Production
Nine Months Ended September 30, 2017	Revenues			and Delivery			DD&A
Six Months Ended June 30, 2018									Revenues			and Delivery			DD&A
Totals presented above	$	220		$	164		$	58	$	221		$	136		$	40
Treatment charges and other	(21		)	—			—		(15		)	—			—
Noncash and other costs, net	—			5			—		—			2			—
Molybdenum mines	199			169			58		206			138			40
Other mining^b	13,419			9,652			1,122		11,604			7,495			818
Corporate, other & eliminations	(2,256		)	(2,324		)	77		(1,774		)	(1,910		)	35
As reported in FCX’s consolidated financial statements	$	11,362		$	7,497		$	1,257	$	10,036		$	5,723		$	893

Nine Months Ended September 30, 2016
Six Months Ended June 30, 2017
Totals presented above	$	153		$	146		$	51	$	148		$	107		$	38
Treatment charges and other	(17		)	—			—		(14		)	—			—
Noncash and other costs, net	—			13			—		—			3			—
Molybdenum mines	136			159			51		134			110			38
Other mining^b	11,577			8,816			1,122		8,470			6,131			747
Corporate, other & eliminations	(1,260		)	(991		)	764		(1,552		)	(1,573		)	54
As reported in FCX’s consolidated financial statements	$	10,453		$	7,984		$	1,937	$	7,052		$	4,668		$	839


a.	Reflects sales of the Molybdenum mines’ production to our molybdenum sales company at market-based pricing. On a consolidated basis, realizations are based on the actual contract terms for sales to third parties; as a result, our consolidated average realized price per pound of molybdenum will differ from the amounts reported in this table.

Table of Contents

CAUTIONARY STATEMENT

Our discussion and analysis contains forward-looking statements in which we discuss our potential future performance. Forward-looking statements are all statements other than statements of historical facts, such as projections or expectations relating to ore grades and milling rates, production and sales volumes, unit net cash costs, operating cash flows, capital expenditures, the transaction contemplated by the non-binding Heads of Agreement between FCX, PT-FI, Inalum and Rio Tinto, exploration efforts and results, development and production activities and costs, liquidity, tax rates, the impact of copper, gold and molybdenum price changes, the impact of deferred intercompany profits on earnings, reserve estimates, future dividend payments, and share purchases and sales. The words “anticipates,” “may,” “can,” “plans,” “believes,” “estimates,” “expects,” “projects,” “targets,” “intends,” “likely,” “will,” “should,” “to be,” “potential” and any similar expressions are intended to identify those assertions as forward-looking statements. The declaration of dividends is at the discretion of the Board and will depend on our financial results, cash requirements, future prospects, and other factors deemed relevant by the Board.

We caution readers that forward-looking statements are not guarantees of future performance and actual results may differ materially from those anticipated, projected or assumed in the forward-looking statements. Important factors that can cause our actual results to differ materially from those anticipated in the forward-looking statements include supply of and demand for, and prices of, copper, gold and molybdenum; mine sequencing; production rates; potential ~~effects of cost and capital expenditure reductions and production curtailments on financial results and cash flow; potential~~ inventory adjustments; potential impairment of long-lived mining assets; our ability to complete the ~~outcome~~transaction contemplated by the non-binding Heads of ~~negotiations with~~Agreement, which is subject to the negotiation and documentation of definitive agreements, including purchase and sale agreements, the extension and stability of PT-FI's long-term mining rights through 2041 in a form acceptable to us and Inalum, a shareholders’ agreement between us and Inalum providing for continuity of our management of PT-FI’s operations and addressing governance arrangements, and resolution of administrative sanctions and environmental regulatory matters pending before Indonesia’s Ministry of Environment and Forestry satisfactory to the Indonesian government, ~~regarding~~us and Inalum, the terms of all of which will be subject to Board approval; PT-FI’s ~~long-term operating rights;~~ability to obtain an extension of its temporary IUPK after August 31, 2018; the potential effects of violence in Indonesia generally and in the province of Papua; industry risks; regulatory ~~changes (including adoption of financial assurance regulations as proposed by the U.S. Environmental Protection Agency under CERCLA for the hard rock mining industry);~~changes; political risks; labor relations; weather- and climate-related risks; environmental ~~risks;~~risks (including resolution of the administrative sanctions and other environmental matters pending before Indonesia's Ministry of Environment and Forestry); litigation results (including the final disposition of ~~the unfavorable Indonesia Tax Court ruling relating to surface water taxes~~Indonesian tax disputes and the outcome of Cerro Verde’s royalty dispute with the Peruvian national tax authority); and other factors described in more detail in Part I, Item 1A. “Risk Factors” of our annual report on Form 10-K for the year ended December 31, ~~2016,~~2017, and Part II, Item 1A. “Risk Factors” of this quarterly report on Form 10-Q, filed with the ~~SEC as updated by our subsequent filings with the~~ SEC. ~~With respect to our operations in Indonesia, such factors include whether PT-FI will be able to resolve complex regulatory matters in Indonesia and continue to export copper after December 31, 2017.~~

Investors are cautioned that many of the assumptions upon which our forward-looking statements are based are likely to change after the forward-looking statements are made, including for example commodity prices, which we cannot control, and production volumes and costs, some aspects of which we may not be able to control. Further, we may make changes to our business plans that could affect our results. We caution investors that we do not intend to update forward-looking statements more frequently than quarterly notwithstanding any changes in our assumptions, changes in business plans, actual experience or other changes, and we undertake no obligation to update any forward-looking statements.

Table of Contents


Item 3.	Quantitative and Qualitative Disclosures About Market Risk.

There have been no material changes in our market risks during the ~~nine-month~~six-month period ended ~~September~~June 30, ~~2017.~~2018. For additional information on market risks, refer to “Disclosures About Market Risks” included in Part II, Items 7. and 7A. of our annual report on Form 10-K for the year ended December 31, ~~2016.~~2017. For projected sensitivities of our operating cash flow to changes in commodity prices, refer to “Outlook” in Part I, Item 2. of this quarterly report on Form 10-Q for the period ended ~~September~~June 30, ~~2017;~~2018; for projected sensitivities of our provisionally priced copper sales ~~and derivative instruments~~ to changes in commodity prices refer to “Consolidated Results – Revenues” in Part I, Item 2. of this quarterly report on Form 10-Q for the period ended ~~September~~June 30, ~~2017.~~2018.


Item 4.	Controls and Procedures.

(a)

Evaluation of disclosure controls and procedures. Our chief executive officer and chief financial officer, with the participation of management, have evaluated the effectiveness of our “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this quarterly report on Form 10-Q. Based on their evaluation, they have concluded that our disclosure controls and procedures are effective as of ~~September~~June 30, ~~2017.~~2018.


(b)	Changes in internal control over financial reporting. There has been no change in our internal control over financial reporting that occurred during the quarter ended ~~September~~June 30, ~~2017,~~2018, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


Part II.	OTHER INFORMATION


Item 1.	Legal Proceedings.

We are involved in numerous legal proceedings that arise in the ordinary course of our business or that are associated with environmental issues arising from legacy operations conducted over the years by Freeport Minerals Corporation and its affiliates. We are also involved from time to time in other reviews, investigations and proceedings by government agencies, some of which may result in adverse judgments, settlements, fines, penalties, injunctions or other relief.

Management does not believe, based on currently available information, that the outcome of any proceeding reported in Note 98 of this quarterly report on Form 10-Q for the ~~period~~quarter ended ~~September~~June 30, ~~2017,~~2018, Part II, Item 1. “Legal Proceedings” and inNote 8 of our quarterly report on Form 10-Q for the quarter ended March 31, 2018, and Part I, Item 3. “Legal Proceedings” and Note 12 of our annual report on Form 10-K for the year ended December 31, ~~2016, as updated in Note 9 in our quarterly reports on Form 10-Q for the quarters ended March 31, 2017, and June 30,~~ 2017, will have a material adverse effect on our financial condition; although individual outcomes could be material to our operating results for a particular period, depending on the nature and magnitude of the outcome and the operating results for the period.

~~Environmental Proceedings~~

~~Notices of Violation - Cerro Verde~~

In September 2017, Cerro Verde paid approximately $148,000, including interest, in connection with final resolution of a Notice of Violation (NOV) issued in December 2006 by Peru’s Agency for Environmental Assessment and Enforcement (OEFA) alleging a spill of dry tailings from a pipeline near the Enlozada tailings dam and findings of dissolved oxidized copper in excess of permissible limits near the Hyuarondo dam. In September 2017, Cerro Verde also paid approximately $169,000, including interest, in connection with final resolution of an NOV issued in October 2008 by OEFA alleging findings of dissolved oxidized copper in excess of permissible limits, that sprinklers were not being used to moisten stockpiles or the conveyer belt at a concentrator plant, and that the uncleanliness of septic tanks at the transfer station resulted in findings of raw sewage in the treated water used for landscaping around administrative buildings.

~~Table of Contents~~

Item 1A. Risk Factors.

The risk factor titled “Development projects are inherently risky and may require more capital than anticipated, which could adversely affect our business,” which was included in our annual report on Form 10-K for the year ended December 31, 2017, is amended and restated as follows:

Development projects are inherently risky and could require more time and capital than anticipated, which could adversely affect our business.

Currently, our major mining projects include underground development activities in the Grasberg minerals district and development of the Lone Star oxide project in Arizona. There are many risks and uncertainties inherent in all development projects including, but not limited to, unexpected or difficult geological formations or conditions, potential delays, cost overruns, shortages of material or labor, construction defects, breakdowns and injuries to persons and property. The development of our underground mines and operations are also subject to other unique risks including, but not limited to, underground fires or floods, ventilating harmful gases, fall-of-ground accidents, and seismic activity resulting from unexpected or difficult geological formations or conditions. While we anticipate taking all measures that we deem reasonable and prudent in connection with the development of our underground mines to safely manage production, there is no assurance that these risks will not cause schedule delays, revised mine plans, injuries to persons and property, or increased capital costs, any of which may have a material adverse

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impact on our cash flows, results of operations and financial condition. Additionally, although we devote significant time and resources to our project planning, approval and review processes, many of our development projects are highly complex and rely on factors that are outside of our control, which may cause us to underestimate the time and capital required to complete a development project.

In September 2015, we initiated pre-commercial production at the Deep Mill Level Zone (DMLZ) underground mine. Following mining-induced seismic activity, which began in 2017 and continued in 2018, PT Freeport Indonesia (PT-FI) revised its mine plan, which resulted in a delay in the ramp-up of the DMLZ underground mine. During second-quarter 2018, PT-FI initiated plans to conduct hydraulic fracturing activities to address rock stress encountered during cave development and pre-condition the DMLZ with an objective of enabling commencement of large-scale production. The current outlook for future DMLZ production reflects management’s expectations based on currently available information and involves uncertainties. PT-FI's revised mine plans for DMLZ will continue to be reviewed, and estimates of future production will be revised as additional information becomes available.

In addition, the economic feasibility of development projects is based on many factors, including the accuracy of estimated reserves, estimated capital and operating costs, and estimated future prices of the relevant commodity. Consolidated capital expenditures are expected to approximate $2.0 billion for the year 2018, including $1.1 billion for major mining projects primarily associated with underground development activities in the Grasberg minerals district and development of the Lone Star oxide project. Refer to the risk factor “Because our Grasberg mining operation in Indonesia is a significant operating asset, our business may continue to be adversely affected by political, economic and social uncertainties in Indonesia” for further discussion of regulatory matters in Indonesia that may impact future investments in PT-FI’s underground development projects. The capital expenditures and time required to develop new mines or other projects are considerable, and changes in costs or timing can adversely affect project economics.

New development projects have no operating history upon which to base estimates of future cash flow. The actual costs, production rates and economic returns of our development projects may differ materially from our estimates, which may have a material adverse impact on our cash flows, results of operations and financial condition.

Except as described above, there have been no material changes to our risk factors ~~previously disclosed in~~during the six-month period ended June 30, 2018. For additional information on risk factors, refer to Part I, Item 1A. “Risk Factors” of our annual report on Form 10-K for the year ended December 31, ~~2016, except as disclosed in Part II, Item 1A. “Risk Factors” of our quarterly report on Form 10-Q for the quarter ended March 31, 2017, which provided as follows:~~

The risk factor “Mine closure and reclamation regulations impose substantial costs on our operations and include requirements that we provide financial assurance supporting those obligations. We also have plugging and abandonment obligations related to our remaining oil and gas properties, and are required to provide bonds or other forms of financial assurance in connection with those operations. Changes in or the failure to comply with these requirements could have a material adverse effect on us” which was included in our annual report on Form 10-K for the year ended December 31, 2016, is updated to add the following:

~~The United States (U.S.) Environmental Protection Agency extended the comment period for the proposed regulations under Section 108(b) of CERCLA to July 11,~~ 2017. Since filing our annual report on Form 10-K in February 2017, we have evaluated the potential impact of these proposed rules. Based on this evaluation, we believe that, if adopted without material modification, the rules would impose financial responsibility obligations on U.S. hard rock mining operations that are unnecessary, duplicative of existing state and other federal requirements, and unreasonable. Our initial calculations also suggest that the financial responsibility amounts would be difficult, if not impossible, for us and others to meet with corporate resources, and would be extremely expensive, if not impossible, to finance with third-party financial instruments such as letters of credit, bonds or insurance. We and others in the industry will continue to participate in the public comment process and oppose the adoption of these rules in anything like their proposed form, as adoption in that form would severely harm the international competitiveness of the U.S. hard rock mining industry and would materially and adversely affect our cash flows, results of operations and financial condition.


Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.

There were no unregistered sales of equity securities during the three months ended ~~September~~June 30, ~~2017.~~2018.

There were no shares of common stock purchased by us during the three months ended ~~September~~June 30, ~~2017.~~2018. On July 21, 2008, our Board of Directors approved an increase in our open-market share purchase program for up to 30 million shares. There have been no purchases under this program since 2008. This program does not have an expiration date. At ~~September~~June 30, ~~2017,~~2018, there were 23.7 million shares that could still be purchased under the program.


Item 4.	Mine Safety Disclosures.

The safety and health of all employees is our highest priority. Management believes that safety and health considerations are integral to, and compatible with, all other functions in the organization and that proper safety and health management will enhance production and reduce costs. Our approach towards the safety and health of our workforce is to continuously improve performance through implementing robust management systems and providing adequate training, safety incentive and occupational health programs. The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95.1 to this quarterly report on Form 10-Q.

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Item 6.	Exhibits.



		Filed
Exhibit		with this	Incorporated by Reference
Number	Exhibit Title	Form 10-Q	Form	File No.	Date Filed
3.1	Amended and Restated Certificate of Incorporation of FCX, effective as of June 8, 2016.		8-K	001-11307-01	6/9/2016
3.2	Amended and Restated By-Laws of FCX, effective as of June 8, 2016.		8-K	001-11307-01	6/9/2016
4.1	Indenture dated as of February 13, 2012, between FCX and U.S. Bank National Association, as Trustee (relating to the 3.55% Senior Notes due 2022, the ~~2.30% Senior Notes due 2017, the~~ 4.00% Senior Notes due 2021, the 4.55% Senior Notes due 2024, and the 5.40% Senior Notes due 2034).		8-K	001-11307-01	2/13/2012
4.2	Third Supplemental Indenture dated as of February 13, 2012, between FCX and U.S. Bank National Association, as Trustee (relating to the 3.55% Senior Notes due 2022).		8-K	001-11307-01	2/13/2012
4.3	Fourth Supplemental Indenture dated as of May 31, 2013, among FCX, Freeport-McMoRan Oil & Gas LLC and U.S. Bank National Association, as Trustee (relating to the 3.55% Senior Notes due 2022, the ~~2.30% Senior Notes due 2017, the~~ 4.00% Senior Notes due 2021, the 4.55% Senior Notes due 2024, and the 5.40% Senior Notes due 2034).		8-K	001-11307-01	6/3/2013
4.4	~~Fifth Supplemental Indenture dated as of November 14, 2014 among FCX, Freeport-McMoRan Oil & Gas LLC and U.S. Bank National Association, as Trustee (relating to the 2.30% Senior Notes due 2017).~~		~~8-K~~	~~001-11307-01~~	~~11/14/2014~~
~~4.5~~	Sixth Supplemental Indenture dated as of November 14, 2014 among FCX, Freeport-McMoRan Oil & Gas LLC and U.S. Bank National Association, as Trustee (relating to the 4.00% Senior Notes due 2021).		8-K	001-11307-01	11/14/2014
~~4.6~~4.5	Seventh Supplemental Indenture dated as of November 14, 2014 among FCX, Freeport-McMoRan Oil & Gas LLC and U.S. Bank National Association, as (relating to the 4.55% Senior Notes due 2024).		8-K	001-11307-01	11/14/2014
~~4.7~~4.6	Eighth Supplemental Indenture dated as of November 14, 2014 among FCX, Freeport-McMoRan Oil & Gas LLC and U.S. Bank National Association, as Trustee (relating to the 5.40% Senior Notes due 2034).		8-K	001-11307-01	11/14/2014
~~4.8~~4.7	Indenture dated as of March 7, 2013, between FCX and U.S. Bank National Association, as Trustee (relating to ~~the 2.375% Senior Notes due 2018,~~ the 3.100% Senior Notes due 2020, the 3.875% Senior Notes due 2023, and the 5.450% Senior Notes due 2043).		8-K	001-11307-01	3/7/2013

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		~~Filed~~
~~Exhibit~~		~~with this~~	~~Incorporated by Reference~~
~~Number~~	~~Exhibit Title~~	~~Form 10-Q~~	~~Form~~	~~File No.~~	~~Date Filed~~
~~4.9~~	Indenture dated as of March 13, 2007, among Plains Exploration & Production Company, the Subsidiary Guarantors parties thereto, and Wells Fargo Bank, N.A., as Trustee (relating to the 6.5% Senior Notes due 2020 and the 6.875% Senior Notes due 2023).		~~8-K~~	~~001-31470~~	~~3/13/2007~~
~~4.10~~	Sixteenth Supplemental Indenture dated as of October 26, 2012 to the Indenture dated as of March 13, 2007, among Plains Exploration & Production Company, the Subsidiary Guarantors parties thereto and Wells Fargo Bank, N.A., as Trustee (relating to the 6.5% Senior Notes due 2020).		~~8-K~~	~~001-31470~~	~~10/26/2012~~
~~4.11~~	Seventeenth Supplemental Indenture dated as of October 26, 2012 to the Indenture dated as of March 13, 2007, among Plains Exploration & Production Company, the Subsidiary Guarantors parties thereto and Wells Fargo Bank, N.A., as Trustee (relating to the 6.875% Senior Notes due 2023).		~~8-K~~	~~001-31470~~	~~10/26/2012~~
~~4.12~~	Eighteenth Supplemental Indenture dated as of May 31, 2013 to the Indenture dated as of March 13, 2007, among Freeport-McMoRan Oil & Gas LLC, as Successor Issuer, FCX Oil & Gas Inc., as Co-Issuer, FCX, as Parent Guarantor, Plains Exploration & Production Company, as Original Issuer, and Wells Fargo Bank, N.A., as Trustee (relating to the 6.5% Senior Notes due 2020 and the 6.875% Senior Notes due 2023).		~~8-K~~	~~001-11307-01~~	~~6/3/2013~~
~~4.13~~	Nineteenth Supplemental Indenture dated as of September 30, 2016 to the Indenture dated as of March 13, 2007, among Freeport-McMoRan Oil & Gas LLC, as Successor Issuer, FCX Oil & Gas Inc., as Co-Issuer, FMSTP Inc., as Additional Co-Issuer, FCX, as Parent Guarantor, and Wells Fargo Bank, N.A., as Trustee (relating to the 6.50% Senior Notes due 2020 and the 6.875% Senior Notes due 2023).		~~10-Q~~	~~001-11307-01~~	~~11/9/2016~~
~~4.14~~	Twentieth Supplemental Indenture dated as of December 13, 2016 to the Indenture dated as of March 13, 2007, among Freeport-McMoRan Oil & Gas LLC, as Successor Issuer, FCX Oil & Gas LLC, as Co-Issuer, FMSTP Inc., as Additional Co-Issuer, FCX, as Parent Guarantor, and Wells Fargo Bank, N.A., as Trustee (relating to the 6.50% Senior Notes due 2020 and the 6.875% Senior Notes due 2023).		~~8-K~~	~~001-11307-01~~	~~12/13/2016~~
~~4.15~~4.8	Form of Indenture dated as of September 22, 1997, between Phelps Dodge Corporation and The Chase Manhattan Bank, as Trustee (relating to the 7.125% Senior Notes due 2027, the 9.50% Senior Notes due 2031, and the 6.125% Senior Notes due 2034).		S-3	333-36415	9/25/1997
~~4.16~~4.9	Form of 7.125% Debenture due November 1, 2027 of Phelps Dodge Corporation issued on November 5, 1997, pursuant to the Indenture dated as of September 22, 1997, between Phelps Dodge Corporation and The Chase Manhattan Bank, as Trustee (relating to the 7.125% Senior Notes due 2027).		8-K	01-00082	11/3/1997
~~4.17~~4.10	Form of 9.5% Note due June 1, 2031 of Phelps Dodge Corporation issued on May 30, 2001, pursuant to the Indenture dated as of September 22, 1997, between Phelps Dodge Corporation and First Union National Bank, as successor Trustee (relating to the 9.50% Senior Notes due 2031).		8-K	01-00082	5/30/2001

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		Filed
Exhibit		with this	Incorporated by Reference
Number	Exhibit Title	Form 10-Q	Form	File No.	Date Filed
~~4.18~~4.11	Form of 6.125% Note due March 15, 2034 of Phelps Dodge Corporation issued on March 4, 2004, pursuant to the Indenture dated as of September 22, 1997, between Phelps Dodge Corporation and First Union National Bank, as successor Trustee (relating to the 6.125% Senior Notes due 2034).		10-K	01-00082	3/7/2005

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		~~Filed~~
~~Exhibit~~		~~with this~~	~~Incorporated by Reference~~
~~Number~~	~~Exhibit Title~~	~~Form 10-Q~~	~~Form~~	~~File No.~~	~~Date Filed~~
~~4.19~~4.12	Supplemental Indenture dated as of April 4, 2007 to the Indenture dated as of September 22, 1997, among Phelps Dodge Corporation, as Issuer, Freeport-McMoRan Copper & Gold Inc., as Parent Guarantor, and U.S. Bank National Association, as Trustee (relating to the 7.125% Senior Notes due 2027, the 9.50% Senior Notes due 2031, and the 6.125% Senior Notes due 2034).		10-K	001-11307-01	2/26/2016
~~4.20~~4.13	Indenture dated as of December 13, 2016, among FCX, Freeport-McMoRan Oil & Gas LLC, as guarantor, and U.S. Bank National Association, as Trustee (relating to the ~~6.125% Senior Notes due 2019, the 6.50% Senior Notes due 2020, the 6.625% Senior Notes due 2021, the 6.75% Senior Notes due 2022, and the~~ 6.875% Senior Notes due 2023).		8-K	001-11307-01	12/13/2016
~~4.21~~10.1	~~Registration Rights~~Revolving Credit Agreement dated as of ~~December 13, 2016~~April 20, 2018, among FCX, PT Freeport Indonesia, Freeport-McMoRan Oil & Gas LLC, JPMorgan Chase Bank, N.A., as ~~Guarantor,~~administrative agent, Bank of America, N.A., as syndication agent, and ~~J.P. Morgan Securities LLC~~each of the lenders and ~~Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Dealer Managers, relating to the 6.125% Senior Notes due 2019.~~issuing banks party thereto.		8-K	001-11307-01	~~12/13/2016~~
~~4.22~~	Registration Rights Agreement dated as of December 13, 2016 among FCX, Freeport-McMoRan Oil & Gas LLC, as Guarantor, and J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Dealer Managers, relating to the 6.50% Senior Notes due 2020.		~~8-K~~	~~001-11307-01~~	~~12/13/2016~~
~~4.23~~	Registration Rights Agreement dated as of December 13, 2016 among FCX, Freeport-McMoRan Oil & Gas LLC, as Guarantor, and J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Dealer Managers, relating to the 6.625% Senior Notes due 2021.		~~8-K~~	~~001-11307-01~~	~~12/13/2016~~
~~4.24~~	Registration Rights Agreement dated as of December 13, 2016 among FCX, Freeport-McMoRan Oil & Gas LLC, as Guarantor, and J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Dealer Managers, relating to the 6.75% Senior Notes due 2022.		~~8-K~~	~~001-11307-01~~	~~12/13/2016~~
~~4.25~~	Registration Rights Agreement dated as of December 13, 2016 among FCX, Freeport-McMoRan Oil & Gas LLC, as Guarantor, and J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Dealer Managers, relating to the 6.875% Senior Notes due 2023.		~~8-K~~	~~001-11307-01~~	~~12/13/2016~~4/23/2018
15.1	Letter from Ernst & Young LLP regarding unaudited interim financial statements.	X
31.1	Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d – 14(a).	X
31.2	Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d – 14(a).	X
32.1	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350.	X
32.2	Certification of Principal Financial Officer pursuant to 18 U.S.C Section 1350.	X
95.1	Mine Safety and Health Administration Safety Data.	X

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		~~Filed~~
~~Exhibit~~		~~with this~~	~~Incorporated by Reference~~
~~Number~~	~~Exhibit Title~~	~~Form 10-Q~~	~~Form~~	~~File No.~~	~~Date Filed~~
101.INS	XBRL Instance Document.	X
101.SCH	XBRL Taxonomy Extension Schema.	X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase.	X
101.DEF	XBRL Taxonomy Extension Definition Linkbase.	X
101.LAB	XBRL Taxonomy Extension Label Linkbase.	X
101.PRE	XBRL Taxonomy Extension Presentation Linkbase.	X

* Indicates management contract or compensatory plan or arrangement.

Note: Certain instruments with respect to long-term debt of FCX have not been filed as exhibits to this Quarterly Report on Form 10-Q since the total amount of securities authorized under any such instrument does not exceed 10 percent of the total assets of FCX and its subsidiaries on a consolidated basis. FCX agrees to furnish a copy of each such instrument upon request of the Securities and Exchange Commission.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	~~FREEPORT-McMoRan INC.~~Freeport-McMoRan Inc.

	By:	/s/ C. Donald Whitmire, Jr.
		C. Donald Whitmire, Jr.
		Vice President and
		Controller - Financial Reporting
		(authorized signatory
		and Principal Accounting Officer)

Date: ~~November 7, 2017~~August 8, 2018

S-1



Fair value at January 1, 2017	$	135
Net unrealized gain related to assets still held at the end of the period	3
Fair value at September 30, 2017	$	138



Royalty and related assessment charges:
	Production and delivery	$	216		^a
	Interest expense, net	141
	Provision for income taxes	2			^b
Net loss attributable to noncontrolling interests		(171		)
		$	188