Item 6. Selected Financial Data.

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Item 6. Selected Financial Data.

FREEPORT-McMoRan INC.

SELECTED FINANCIAL AND OPERATING DATA



	Years Ended December 31,
	2017			2016a				2015				2014				2013a
CONSOLIDATED FINANCIAL DATA	(In millions, except per share amounts)
Revenues	$	16,403		$	14,830		b	$	14,607		b	$	20,001		b	$	19,331	b
Operating income (loss)c	$	3,633	d	$	(2,792	)	e	$	(13,512	)	f	$	(298	)	g	$	4,820	h
Net income (loss) from continuing operations	$	2,029	i,j,k	$	(3,832	)	j,k	$	(12,180	)	l	$	(1,022	)	j,k	$	3,053	j,k,m
Net income (loss) from discontinued operationsn	$	66		$	(193	)		$	91			$	277			$	388
Net income (loss) attributable to common stock	$	1,817		$	(4,154	)	o	$	(12,236	)		$	(1,308	)		$	2,658
Basic net income (loss) per share attributable to common stock:
Continuing operations	$	1.21		$	(2.96	)		$	(11.32	)		$	(1.37	)		$	2.45
Discontinued operations	0.04			(0.20		)		0.01				0.11				0.20
	$	1.25		$	(3.16	)		$	(11.31	)		$	(1.26	)		$	2.65
Basic weighted-average common shares outstanding	1,447			1,318				1,082				1,039				1,002
Diluted net income (loss) per share attributable to common stock:
Continuing operations	$	1.21		$	(2.96	)		$	(11.32	)		$	(1.37	)		$	2.44
Discontinued operations	0.04			(0.20		)		0.01				0.11				0.20
	$	1.25		$	(3.16	)		$	(11.31	)		$	(1.26	)		$	2.64
Diluted weighted-average common shares outstanding	1,454			1,318				1,082				1,039				1,006
Dividends declared per share of common stock	$	—		$	—			$	0.2605			$	1.25			$	2.25
Operating cash flows	$	4,682		$	3,729			$	3,220			$	5,631			$	6,139
Capital expenditures	$	1,410		$	2,813			$	6,353			$	7,215			$	5,286
At December 31:
Cash and cash equivalents	$	4,447		$	4,245			$	177			$	298			$	1,864
Property, plant, equipment and mine development costs, net	$	22,836		$	23,219			$	23,986			$	22,649			$	20,401
Oil and gas properties, net	$	8		$	74			$	7,093			$	19,274			$	23,359
Assets held for sale, including current portionp	$	598		$	344			$	5,306			$	5,339			$	5,128
Total assets	$	37,302		$	37,317			$	46,577			$	58,674			$	63,385
Total debt, including current portion	$	13,117		$	16,027			$	20,324			$	18,741			$	20,476
Redeemable noncontrolling interest	$	—		$	—			$	764			$	751			$	716
Total stockholders’ equity	$	7,977		$	6,051			$	7,828			$	18,287			$	20,934

The selected consolidated financial data shown above is derived from our audited consolidated financial statements. These historical results are not necessarily indicative of results that you can expect for any future period. You should read this data in conjunction with Items 7. and 7A. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures about Market Risks (MD&A) and Item 8. Financial Statements and Supplementary Data thereto contained in our annual report on Form 10-K for the year ended December 31, 2017. All references to income or losses per share are on a diluted basis, unless otherwise noted.


a.	In 2016 we sold substantially all of our oil and gas properties. The year 2013 includes the results of oil and gas operations beginning June 1, 2013.


b.	Includes net noncash mark-to-market (losses) gains associated with crude oil and natural gas derivative contracts totaling $(41) million ($(41) million to net loss attributable to common stock or $(0.03) per share) in 2016, $(319) million ($(198) million to net loss attributable to common stock or $(0.18) per share) in 2015, $627 million ($389 million to net loss attributable to common stock or $0.37 per share) in 2014 and $(312) million ($(194) million to net income attributable to common stock or $(0.19) per share) for the seven-month period from June 1, 2013, to December 31, 2013.

Includes net noncash mark-to-market (losses) gains associated with crude oil and natural gas derivative contracts totaling $(41) million ($(41) million to net loss attributable to common stock or $(0.03) per share) in 2016, $(319) million ($(198) million to net loss attributable to common stock or $(0.18) per share) in 2015, $627 million ($389 million to net loss attributable to common stock or $0.37 per share) in 2014 and $(312) million ($(194) million to net income attributable to common stock or $(0.19) per share) for the seven-month period from June 1, 2013, to December 31, 2013.


c.	Includes net charges (credits) for adjustments to environmental obligations and related litigation reserves of $210 million ($210 million to net income attributable to common stock or $0.14 per share) in 2017, $(16) million ($(16) million to net loss attributable to common stock or $(0.01) per share) in 2016, $43 million ($28 million to net loss attributable to common stock or $0.03 per share) in 2015, $76 million ($50 million to net loss attributable to common stock or $0.05 per share) in 2014 and $19 million ($17 million to net income attributable to common stock or $0.02 per share) in 2013.

Includes net charges (credits) for adjustments to environmental obligations and related litigation reserves of $210 million ($210 million to net income attributable to common stock or $0.14 per share) in 2017, $(16) million ($(16) million to net loss attributable to common stock or $(0.01) per share) in 2016, $43 million ($28 million to net loss attributable to common stock or $0.03 per share) in 2015, $76 million ($50 million to net loss attributable to common stock or $0.05 per share) in 2014 and $19 million ($17 million to net income attributable to common stock or $0.02 per share) in 2013.


d.	Includes net charges (credits) totaling $57 million to operating income ($(1) million to net income attributable to common stock or less than $0.01 per share) consisting of charges totaling $125 million for workforce reductions at PT Freeport Indonesia (PT-FI) and $26 million at mining operations primarily for asset impairments and metals inventory adjustments, partly offset by net gains on

sales of assets totaling $81 million primarily associated with oil and gas transactions and net credits of $13 million at oil and gas operations mostly associated with drillship settlement.


e.	Includes net charges totaling $4.9 billion to operating loss ($4.8 billion to net loss attributable to common stock or $3.67 per share) consisting of (i) $4.3 billion for impairment of oil and gas properties, (ii) $926 million for drillship settlements/idle rig and contract termination costs, (iii) $196 million for other charges at oil and gas operations primarily associated with inventory adjustments, asset impairment and other restructuring charges and (iv) $69 million for charges at mining operations for metals inventory adjustments, PT-FI asset retirement and Cerro Verde social commitments, partly offset by (v) net gains on sales of assets totaling $649 million mostly associated with the Morenci and Timok transactions, partly offset by estimated losses associated with assets held for sale.

Includes net charges totaling $4.9 billion to operating loss ($4.8 billion to net loss attributable to common stock or $3.67 per share) consisting of (i) $4.3 billion for impairment of oil and gas properties, (ii) $926 million for drillship settlements/idle rig and contract termination costs, (iii) $196 million for other charges at oil and gas operations primarily associated with inventory adjustments, asset impairment and other restructuring charges and (iv) $69 million for charges at mining operations for metals inventory adjustments, PT-FI asset retirement and Cerro Verde social commitments, partly offset by (v) net gains on sales of assets totaling $649 million mostly associated with the Morenci and Timok transactions, partly offset by estimated losses associated with assets held for sale.


f.	Includes net charges totaling $13.8 billion to operating loss ($12.0 billion to net loss attributable to common stock or $11.10 per share) consisting of (i) $13.1 billion for impairment of oil and gas properties, (ii) $338 million for metals inventory adjustments, (iii) $188 million for charges at oil and gas operations primarily associated with other asset impairment and inventory adjustments, idle/terminated rig costs and prior year mineral tax assessments related to the California properties, (iv) $145 million for charges at mining operations primarily associated with asset impairment, restructuring and other net charges and (v) $18 million for executive retirement benefits, partly offset by (vi) a net gain of $39 million for the sale of our interest in the Luna Energy power facility.

Includes net charges totaling $13.8 billion to operating loss ($12.0 billion to net loss attributable to common stock or $11.10 per share) consisting of (i) $13.1 billion for impairment of oil and gas properties, (ii) $338 million for metals inventory adjustments, (iii) $188 million for charges at oil and gas operations primarily associated with other asset impairment and inventory adjustments, idle/terminated rig costs and prior year mineral tax assessments related to the California properties, (iv) $145 million for charges at mining operations primarily associated with asset impairment, restructuring and other net charges and (v) $18 million for executive retirement benefits, partly offset by (vi) a net gain of $39 million for the sale of our interest in the Luna Energy power facility.


g.	Includes net charges totaling $4.8 billion to operating loss ($3.6 billion to net loss attributable to common stock or $3.46 per share) consisting of (i) $3.7 billion for impairment of oil and gas properties, (ii) $1.7 billion to impair the full carrying value of goodwill, (iii) $46 million for charges at oil and gas operations primarily associated with idle/terminated rig costs and inventory adjustments and (iv) $6 million for adjustments to molybdenum inventories, partly offset by (v) net gains on sales of assets of $717 million primarily from the sale of our 80 percent interests in the Candelaria and Ojos del Salado mining operations.

Includes net charges totaling $4.8 billion to operating loss ($3.6 billion to net loss attributable to common stock or $3.46 per share) consisting of (i) $3.7 billion for impairment of oil and gas properties, (ii) $1.7 billion to impair the full carrying value of goodwill, (iii) $46 million for charges at oil and gas operations primarily associated with idle/terminated rig costs and inventory adjustments and (iv) $6 million for adjustments to molybdenum inventories, partly offset by (v) net gains on sales of assets of $717 million primarily from the sale of our 80 percent interests in the Candelaria and Ojos del Salado mining operations.


h.	Includes net charges totaling $232 million to operating income ($137 million to net income attributable to common stock or $0.14 per share) consisting of (i) $80 million for transaction and related costs principally associated with oil and gas acquisitions, (ii) $76 million associated with updated mine plans at Morenci that resulted in a loss in recoverable leach stockpiles, (iii) $37 million for restructuring an executive employment arrangement, (iv) $36 million associated with a labor agreement at Cerro Verde and (v) $3 million for adjustments to molybdenum inventories.

Includes net charges totaling $232 million to operating income ($137 million to net income attributable to common stock or $0.14 per share) consisting of (i) $80 million for transaction and related costs principally associated with oil and gas acquisitions, (ii) $76 million associated with updated mine plans at Morenci that resulted in a loss in recoverable leach stockpiles, (iii) $37 million for restructuring an executive employment arrangement, (iv) $36 million associated with a labor agreement at Cerro Verde and (v) $3 million for adjustments to molybdenum inventories.


i.	Includes net charges at Cerro Verde related to (i) Peruvian government claims for disputed royalties for prior years totaling $186 million to net income attributable to common stock or $0.13 per share (consisting of $203 million to operating income, $145 million to interest expense and $7 million to provision for income taxes, net of $169 million to noncontrolling interests) and (ii) other tax related matters for prior years totaling $14 million to net income attributable to common stock or $0.01 per share (consisting of $11 million to operating income, $8 million to interest expense, $1 million to other income and $7 million to provision for income taxes, net of $13 million to noncontrolling interests).

Includes net charges at Cerro Verde related to (i) Peruvian government claims for disputed royalties for prior years totaling $186 million to net income attributable to common stock or $0.13 per share (consisting of $203 million to operating income, $145 million to interest expense and $7 million to provision for income taxes, net of $169 million to noncontrolling interests) and (ii) other tax related matters for prior years totaling $14 million to net income attributable to common stock or $0.01 per share (consisting of $11 million to operating income, $8 million to interest expense, $1 million to other income and $7 million to provision for income taxes, net of $13 million to noncontrolling interests).


j.	Includes after-tax net gains (losses) on early extinguishment and exchanges of debt totaling $21 million ($0.01 per share) in 2017, $26 million ($0.02 per share) in 2016, $3 million (less than $0.01 per share) in 2014 and $(28) million ($(0.03) per share) in 2013.


k.	As further discussed in “Consolidated Results - Income Taxes” contained in MD&A, amounts include net tax credits (charges) of $438 million ($0.30 per share) in 2017, $370 million ($374 million, net of noncontrolling interests or $0.28 per share) in 2016 and $(121) million ($(103) million, net of noncontrolling interests or $(0.10) per share) in 2014. In addition, the year 2013 includes a net tax benefit of $199 million ($0.20 per share) for reductions in our valuation allowances resulting from the oil and gas acquisitions.

As further discussed in “Consolidated Results - Income Taxes” contained in MD&A, amounts include net tax credits (charges) of $438 million ($0.30 per share) in 2017, $370 million ($374 million, net of noncontrolling interests or $0.28 per share) in 2016 and $(121) million ($(103) million, net of noncontrolling interests or $(0.10) per share) in 2014. In addition, the year 2013 includes a net tax benefit of $199 million ($0.20 per share) for reductions in our valuation allowances resulting from the oil and gas acquisitions.


l.	Includes a gain of $92 million ($92 million to net loss attributable to common stock or $0.09 per share) related to net proceeds received from insurance carriers and other third parties related to the shareholder derivative litigation settlement.


m.	Includes a gain of $128 million ($0.13 per share) related to our preferred stock investments in and the subsequent acquisition of McMoRan Exploration Co.


n.	Discontinued operations reflects the results of TF Holdings Limited (TFHL), through which we held an interest in the Tenke Fungurume (Tenke) mine until it was sold on November 16, 2016, and includes charges for allocated interest expense associated with the portion of the term loan that was required to be repaid as a result of the sale. Net income from discontinued operations in 2017 primarily reflects adjustments to the fair value of the potential $120 million contingent consideration related to the November 2016 sale, which totaled $74 million at December 31, 2017, and will continue to be adjusted through December 31, 2019. Also includes a net charge of $198 million for the loss on disposal in 2016.

Discontinued operations reflects the results of TF Holdings Limited (TFHL), through which we held an interest in the Tenke Fungurume (Tenke) mine until it was sold on November 16, 2016, and includes charges for allocated interest expense associated with the portion of the term loan that was required to be repaid as a result of the sale. Net income from discontinued operations in 2017 primarily reflects adjustments to the fair value of the potential $120 million contingent consideration related to the November 2016 sale, which totaled $74 million at December 31, 2017, and will continue to be adjusted through December 31, 2019. Also includes a net charge of $198 million for the loss on disposal in 2016.


o.	Includes a gain on redemption of a redeemable noncontrolling interest of $199 million ($0.15 per share) associated with the settlement of a preferred stock obligation at our Plains Offshore Operations Inc. subsidiary.


p.	In accordance with accounting guidelines, the assets and liabilities of TFHL, Freeport Cobalt and the Kisanfu exploration project have been presented as held for sale in the consolidated balance sheets for all periods presented.

FREEPORT-McMoRan INC.

SELECTED FINANCIAL AND OPERATING DATA (Continued)



	Years Ended December 31,
	2017		2016		2015		2014		2013
CONSOLIDATED MINING (CONTINUING OPERATIONS)a,b
Copper (millions of recoverable pounds)
Production	3,737		4,222		3,568		3,457		3,669
Sales, excluding purchases	3,700		4,227		3,603		3,463		3,632
Average realized price per pound	$	2.93	$	2.28	$	2.42	$	3.09	$	3.32
Gold (thousands of recoverable ounces)
Production	1,577		1,088		1,257		1,214		1,250
Sales, excluding purchases	1,562		1,079		1,247		1,248		1,204
Average realized price per ounce	$	1,268	$	1,238	$	1,129	$	1,231	$	1,315
Molybdenum (millions of recoverable pounds)
Production	92		80		92		95		94
Sales, excluding purchases	95		74		89		95		93
Average realized price per pound	$	9.33	$	8.33	$	8.70	$	12.74	$	11.85

NORTH AMERICA COPPER MINES
Operating Data, Net of Joint Venture Interests
Copper (millions of recoverable pounds)
Production	1,518		1,831		1,947		1,670		1,431
Sales, excluding purchases	1,484		1,841		1,988		1,664		1,422
Average realized price per pound	$	2.85	$	2.24	$	2.47	$	3.13	$	3.36
Molybdenum (millions of recoverable pounds)
Production	33		33		37		33		32
100% Operating Data
Solution extraction/electrowinning (SX/EW) operations
Leach ore placed in stockpiles (metric tons per day)	679,000		737,400		913,000		1,011,500		1,009,200
Average copper ore grade (percent)	0.28		0.31		0.26		0.25		0.22
Copper production (millions of recoverable pounds)	1,121		1,224		1,134		963		889
Mill operations
Ore milled (metric tons per day)	299,500		300,500		312,100		273,800		246,500
Average ore grade (percent):
Copper	0.39		0.47		0.49		0.45		0.39
Molybdenum	0.03		0.03		0.03		0.03		0.03
Copper recovery rate (percent)	86.4		85.5		85.4		85.8		85.3
Copper production (millions of recoverable pounds)	683		854		972		828		642

SOUTH AMERICA MININGb
Copper (millions of recoverable pounds)
Production	1,235		1,328		869		1,151		1,323
Sales	1,235		1,332		871		1,135		1,325
Average realized price per pound	$	2.97	$	2.31	$	2.38	$	3.08	$	3.30
Molybdenum (millions of recoverable pounds)
Production	27		21		7		11		13
SX/EW operations
Leach ore placed in stockpiles (metric tons per day)	142,800		149,100		208,400		246,400		275,900
Average copper ore grade (percent)	0.37		0.41		0.44		0.48		0.50
Copper production (millions of recoverable pounds)	255		328		430		491		448
Mill operations
Ore milled (metric tons per day)	360,100		353,400		152,100		180,500		192,600
Average ore grade:
Copper (percent)	0.44		0.43		0.46		0.54		0.65
Molybdenum (percent)	0.02		0.02		0.02		0.02		0.02
Copper recovery rate (percent)	81.2		85.8		81.5		88.1		90.9
Copper production (millions of recoverable pounds)	980		1,000		439		660		875

FREEPORT-McMoRan INC.

SELECTED FINANCIAL AND OPERATING DATA (Continued)



	Years Ended December 31,
	2017		2016		2015		2014		2013
INDONESIA MINING
Operating Data, Net of Joint Venture Interest
Copper (millions of recoverable pounds)
Production	984		1,063		752		636		915
Sales	981		1,054		744		664		885
Average realized price per pound	$	3.00	$	2.32	$	2.33	$	3.01	$	3.58
Gold (thousands of recoverable ounces)
Production	1,554		1,061		1,232		1,130		1,142
Sales	1,540		1,054		1,224		1,168		1,096
Average realized price per ounce	$	1,268	$	1,237	$	1,129	$	1,229	$	1,312
100% Operating Data
Ore milled (metric tons per day)	140,400		165,700		162,500		120,500		179,200
Average ore grade:
Copper (percent)	1.01		0.91		0.67		0.79		0.76
Gold (grams per metric ton)	1.15		0.68		0.79		0.99		0.69
Recovery rates (percent):
Copper	91.6		91.0		90.4		90.3		90.0
Gold	85.0		82.2		83.4		83.2		80.0
Production:
Copper (millions of recoverable pounds)	996		1,063		752		651		928
Gold (thousands of recoverable ounces)	1,554		1,061		1,232		1,132		1,142

MOLYBDENUM MINES
Molybdenum production (millions of recoverable pounds)	32		26		48		51		49
Ore milled (metric tons per day)	22,500		18,300		34,800		39,400		35,700
Average molybdenum ore grade (percent)	0.20		0.21		0.20		0.19		0.19

OIL AND GAS OPERATIONSc
Sales Volumes:
Oil (million barrels)	1.8		34.4		35.3		40.1		26.6
Natural gas (billion cubic feet)	15.8		65.1		89.7		80.8		54.2
Natural gas liquids (NGLs) (million barrels)	0.2		1.8		2.4		3.2		2.4
Million barrels of oil equivalents	4.6		47.1		52.6		56.8		38.1
Average Realizations:
Oil (per barrel)	$	40.71	$	39.13	$	57.11	$	90.00	98.32
Natural gas (per million British thermal units)	$	3.18	$	2.38	$	2.59	$	4.23	3.99
NGLs (per barrel)	$	30.65	$	18.11	$	18.90	$	39.73	38.20

AFRICA MINING (DISCONTINUED OPERATIONS)d
Copper (millions of recoverable pounds)
Production	—		425		449		447		462
Sales	—		424		467		425		454
Average realized price per pound	—		$	2.10	$	2.42	$	3.06	$	3.21
Cobalt (millions of contained pounds)
Production	—		32		35		29		28
Sales	—		33		35		30		25
Average realized price per pound	—		$	7.45	$	8.21	$	9.66	$	8.02
Ore milled (metric tons per day)	—		15,200		14,900		14,700		14,900
Average ore grade (percent):
Copper	—		4.18		4.00		4.06		4.22
Cobalt	—		0.44		0.43		0.34		0.37
Copper recovery rate (percent)	—		93.6		94.0		92.6		91.4


a.	Excludes the results from Africa mining, which is reported as discontinued operations.


b.	Includes the results of the Candelaria and Ojos del Salado mines prior to their sale in November 2014.


c.	Represents the results of our oil and gas operations beginning June 1, 2013. In June 2014, we completed the sale of the Eagle Ford shale assets, in July 2016, we completed the sale of the Haynesville shale assets and in December 2016, we completed the sales of the Deepwater Gulf of Mexico and onshore California oil and gas properties. In March 2017, we completed the sale of property interests in the Madden area and in July 2017, we completed the sale of certain property interests in the Gulf of Mexico Shelf.

Represents the results of our oil and gas operations beginning June 1, 2013. In June 2014, we completed the sale of the Eagle Ford shale assets, in July 2016, we completed the sale of the Haynesville shale assets and in December 2016, we completed the sales of the Deepwater Gulf of Mexico and onshore California oil and gas properties. In March 2017, we completed the sale of property interests in the Madden area and in July 2017, we completed the sale of certain property interests in the Gulf of Mexico Shelf.


d.	On November 16, 2016, we completed the sale of our interest in TFHL, through which we held an interest in the Tenke mine.

Ratio of Earnings to Fixed Charges

For the ratio of earnings to fixed charges calculation, earnings consist of income (loss) from continuing operations before income taxes, noncontrolling interests in consolidated subsidiaries, equity in affiliated companies’ net earnings (losses), cumulative effect of accounting changes and fixed charges. Fixed charges include interest and that portion of rent deemed representative of interest. The ratio of earnings to fixed charges and preferred stock dividends is the same as the ratio of earnings to fixed charges for the years presented because no shares of FCX preferred stock were outstanding during these years. Our ratio of earnings to fixed charges was as follows for the years presented:



	Years Ended December 31,
	2017	2016		2015		2014		2013
Ratio of earnings to fixed charges	4.1x	—	a	—	a	—	a	6.8x


a.	As a result of the losses recorded in 2016, 2015 and 2014, the ratio coverage was less than 1:1. To achieve coverage of 1:1, FCX would have needed to generate additional earnings of $3.5 billion in 2016, $14.3 billion in 2015 and $1.0 billion in 2014.

Items 7. and 7A. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures About Market Risk.

In Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures About Market Risk (MD&A), “we,” “us” and “our” refer to Freeport-McMoRan Inc. (FCX) and its consolidated subsidiaries. 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. Throughout MD&A, all references to earnings or losses per share are on a diluted basis, unless otherwise noted. 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.

We have taken actions to restore our balance sheet strength through a combination of asset sale transactions and capital market transactions. We completed approximately $6.7 billion in asset sale transactions (mostly in 2016), including the sale of substantially all of our oil and gas properties, our interest in TFHL and the sale of an additional 13 percent undivided interest in the Morenci minerals district (refer to Note 2 for further discussion of dispositions). During 2016, we also completed a registered at-the-market offering of our common stock, which generated $1.5 billion in gross proceeds through the sale of 116.5 million shares of our common stock, and redeemed $369 million in senior notes for 27.7 million shares of our common stock (refer to Note 10 for further discussion). Additionally, in 2016, we settled $1.1 billion in aggregate drillship contracts for $755 million, of which $540 million was funded with 48.1 million shares of our common stock (refer to Notes 10 and 13 for further discussion).

These actions, combined with cash flow from operations, resulted in net reductions of debt totaling $2.9 billion during 2017 and $4.3 billion during 2016 and an increase in consolidated cash from $177 million at December 31, 2015, to $4.2 billion at December 31, 2016, and $4.4 billion at December 31, 2017. We continue to manage costs and capital spending and, subject to commodity prices and operational results, expect to generate significant operating cash flows for further debt reduction during 2018.

Net income (loss) attributable to common stock totaled $1.8 billion in 2017, $(4.2) billion in 2016 and $(12.2) billion in 2015. Our results in 2017 benefited from higher copper prices and higher gold sales volumes. Our prior years’ results were unfavorably impacted by charges for the impairment of oil and gas properties totaling $4.3 billion in 2016 and $11.6 billion in 2015. Refer to “Consolidated Results” for discussion of items impacting our consolidated results for the three years ended December 31, 2017.

At December 31, 2017, we had $4.4 billion in consolidated cash and cash equivalents and $13.1 billion in total debt. We had no borrowings and $3.5 billion available under our revolving credit facility.

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. We are also pursuing other opportunities to enhance 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.

We have significant mineral reserves, resources and future development opportunities within our portfolio of mining assets. At December 31, 2017, our estimated consolidated recoverable proven and probable mineral reserves totaled 86.7 billion pounds of copper, 23.5 million ounces of gold and 2.84 billion pounds of molybdenum, which were determined using $2.00 per pound for copper, $1,000 per ounce for gold and $10 per pound for molybdenum. Refer to “Critical Accounting Estimates – Mineral Reserves” for further discussion.

During 2017, production from our mines totaled 3.7 billion pounds of copper, 1.6 million ounces of gold and 92 million pounds of molybdenum. Following is a summary of the geographic locations of our consolidated copper, gold and molybdenum production in 2017:



	Copper		Gold		Molybdenum
North America	41	%	1	%	71	%	a
South America	33		—		29
Indonesia	26		99		—
	100	%	100	%	100	%


a.	Our Henderson and Climax molybdenum mines produced 35 percent of consolidated molybdenum production, and our North America copper mines produced 36 percent.

Copper production from the Grasberg mine in Indonesia, Morenci mine in North America and Cerro Verde mine in Peru together totaled 74 percent of our consolidated copper production in 2017.

As further discussed in Note 13 and “Operations – Indonesia Mining,” PT Freeport Indonesia (PT-FI) continues to actively engage with Indonesian government officials to address regulatory changes that conflict with its contractual rights in a manner that provides long-term stability for PT-FI’s operations and investment plans, and protects value for our shareholders. Following a framework understanding reached in August 2017, the parties have been engaged in negotiation and documentation of a special license (IUPK) and accompanying documentation for assurances on legal and fiscal terms to provide PT-FI with long-term rights through 2041. In addition, the IUPK would provide that PT-FI construct a smelter within five years of reaching a definitive agreement and include agreement for the divestment of 51 percent of the project area interests to Indonesian participants at fair market value. The parties continue to negotiate documentation on a comprehensive agreement for PT-FI’s extended operations and to reach agreement on timing, process and governance matters relating to the divestment. The parties have a mutual objective of completing negotiations and the required documentation during the first half of 2018.

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 and are affected by numerous factors beyond our control. 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.

Refer to “Operations – Indonesia Mining” for further discussion of Indonesia regulatory matters, which could have a significant impact on future results.

Sales Volumes

Following are projected consolidated sales volumes for 2018 and actual consolidated sales volumes from continuing operations for 2017:



	2018		2017
	(Projected)		(Actual)
Copper (millions of recoverable pounds):
North America copper mines	1,495		1,484
South America mining	1,235		1,235
Indonesia mining	1,200		981
Total	3,930		3,700

Gold (thousands of recoverable ounces)	2,440		1,562
Molybdenum (millions of recoverable pounds)	91	a	95


a.	Projected molybdenum sales include 35 million pounds produced by our Molybdenum mines and 56 million pounds produced by our North America and South America copper mines.

Consolidated sales for first-quarter 2018 are expected to approximate 1.0 billion pounds of copper, 675 thousand ounces of gold and 24 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.”

Unit Net Cash Costs

Assuming average prices of $1,300 per ounce of gold and $10.00 per pound of molybdenum for 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 $0.97 per pound of copper in 2018. The impact of price changes in 2018 on consolidated unit net cash costs would approximate $0.03 per pound for each $50 per ounce change in the average price of gold and $0.025 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 $3.15 per pound of copper, $1,300 per ounce of gold and $10.00 per pound of molybdenum, our consolidated operating cash flows are estimated to exceed $5.8 billion in 2018 (including $0.3 billion in working capital sources and timing of other tax payments). Estimated consolidated operating cash flows in 2018 also reflect a projected income tax provision of $2.2 billion (refer to “Consolidated Results - Income Taxes” for further discussion of our projected income tax rate for the year 2018). The impact of price changes in 2018 on consolidated operating cash flows would approximate $360 million for each $0.10 per pound change in the average price of copper, $115 million for each $50 per ounce change in the average price of gold and $130 million for each $2 per pound change in the average price of molybdenum.

Consolidated Capital Expenditures

Consolidated capital expenditures are expected to approximate $2.1 billion in 2018, including $1.2 billion for major mining projects, primarily associated with underground development activities in the Grasberg minerals district and development of the Lone Star oxide project. 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 and will pursue dispute resolution procedures under PT-FI’s Contract of Work (COW).

MARKETS

World prices for copper, gold and molybdenum can fluctuate significantly. During the period from January 2008 through December 2017, the London Metal Exchange (LME) spot copper 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) PM gold price fluctuated from a low of $713 per ounce in 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 our “Risk Factors” contained in Part I, Item 1A. of our annual report on Form 10-K for the year ended December 31, 2017.

This graph presents LME spot copper prices and combined reported stocks of copper at the LME, Commodity Exchange Inc., a division of the New York Mercantile Exchange (NYMEX), and the Shanghai Futures Exchange from January 2008 through December 2017. Beginning in mid-2014, copper prices declined because of concerns about slowing growth rates in China, a stronger United States (U.S.) dollar and a broad-based decline in commodity prices, but began to improve in fourth-quarter 2016 and throughout 2017. For the year 2017, LME spot copper prices ranged from a low of $2.48 per pound to a high of $3.27 per pound, averaged $2.80 per pound and closed at $3.25 per pound on December 31, 2017. The LME spot copper price was $3.22 per pound on January 31, 2018.

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 existing large 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 production levels of mines and copper smelters.

This graph presents London PM gold prices from January 2008 through December 2017. An improving economic outlook, stronger U.S. dollar and positive equity performance contributed to lower demand for gold since 2014. During 2017, London PM gold prices ranged from a low of $1,151 per ounce to a high of $1,346 per ounce, averaged $1,257 per ounce and closed at $1,297 per ounce on December 31, 2017. The London PM gold price was $1,345 per ounce on January 31, 2018.

This graph presents the Metals Week Molybdenum Dealer Oxide weekly average price from January 2008 through December 2017. Molybdenum prices have declined since mid-2014 because of weaker demand from global steel and stainless steel producers but have improved beginning in mid-2016. During 2017, the weekly average price for molybdenum ranged from a low of $6.98 per pound to a high of $10.15 per pound, averaged $8.21 per pound and was $10.15 per pound on December 31, 2017. The Metals Week Molybdenum Dealer Oxide weekly average price was $11.87 per pound on January 31, 2018.

CRITICAL ACCOUNTING ESTIMATES

MD&A is based on our consolidated financial statements, which have been prepared in conformity with generally accepted accounting principles (GAAP) in the U.S. The preparation of these statements requires that we make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. We base these estimates on historical experience and on assumptions that we consider reasonable under the circumstances; however, reported results could differ from those based on the current estimates under different assumptions or conditions. The areas requiring the use of management’s estimates are also discussed in Note 1 under the subheading “Use of Estimates.” Management has reviewed the following discussion of its development and selection of critical accounting estimates with the Audit Committee of our Board of Directors (the Board).

Mineral Reserves

Recoverable proven and probable reserves are the part of a mineral deposit that can be economically and legally extracted or produced at the time of the reserve determination. The determination of reserves involves numerous uncertainties with respect to the ultimate geology of the ore bodies, including quantities, grades and recovery rates. Estimating the quantity and grade of mineral reserves requires us to determine the size, shape and depth of our ore bodies by analyzing geological data, such as samplings of drill holes, tunnels and other underground workings. In addition to the geology of our mines, assumptions are required to determine the economic feasibility of mining these reserves, including estimates of future commodity prices and demand, the mining methods we use and the related costs incurred to develop and mine our reserves. Our estimates of recoverable proven and probable mineral reserves are prepared by and are the responsibility of our employees. A majority of these estimates are reviewed annually and verified by independent experts in mining, geology and reserve determination.

At December 31, 2017, our consolidated estimated recoverable proven and probable reserves were determined using $2.00 per pound for copper, $1,000 per ounce for gold and $10 per pound for molybdenum. The following table summarizes changes in our estimated consolidated recoverable proven and probable copper, gold and molybdenum reserves during 2017 and 2016:



	Coppera (billion pounds)			Gold (million ounces)		Molybdenum (billion pounds)
Consolidated reserves at December 31, 2015	99.5			27.1		3.05
Net additions	0.5			0.1		—
Production	(4.6	)		(1.1	)	(0.08	)
Sale of interest in Tenke	(6.8	)		—		—
Sale of 13 percent interest in Morenci	(1.8	)		—		(0.02	)
Consolidated reserves at December 31, 2016	86.8			26.1		2.95
Net additions (revisions)	3.6		b	(1.0	)	(0.02	)
Production	(3.7	)		(1.6	)	(0.09	)
Consolidated reserves at December 31, 2017	86.7			23.5		2.84


a.	Includes estimated recoverable metals contained in stockpiles. See below for additional discussion of recoverable copper in stockpiles.


b.	Includes 4.4 billion pounds associated with the Lone Star project located near the Safford mine.

Refer to Note 20 for further information regarding estimated recoverable proven and probable mineral reserves.

As discussed in Note 1, we depreciate our life-of-mine mining and milling assets and values assigned to proven and probable mineral reserves using the unit-of-production (UOP) method based on our estimated recoverable proven and probable mineral reserves. Because the economic assumptions used to estimate mineral reserves may change from period to period and additional geological data is generated during the course of operations, estimates of reserves may change, which could have a significant impact on our results of operations, including changes to prospective depreciation rates and impairments of long-lived asset carrying values. Excluding impacts associated with changes in the levels of finished goods inventories and based on projected copper sales volumes, if estimated copper reserves at our mines were 10 percent higher at December 31, 2017, we estimate that our annual depreciation, depletion and amortization (DD&A) expense for 2018 would decrease by $45 million ($24 million to net income attributable to common stockholders), and a 10 percent decrease in copper reserves would increase DD&A expense by $55 million ($29 million to net income attributable to common stockholders). We perform annual assessments of our existing assets in connection with the review of mine operating and development plans. If it is

determined that assigned asset lives do not reflect the expected remaining period of benefit, any change could affect prospective DD&A rates.

As discussed below and in Note 1, we review and evaluate our long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amount of such assets may not be recoverable, and changes to our estimates of recoverable proven and probable mineral reserves could have an impact on our assessment of asset recoverability. Refer to “Risk Factors” contained in Part I, Item 1A. of our annual report on Form 10-K for the year ended December 31, 2017, for further discussion of Indonesian regulatory matters that could have a material adverse affect on our cash flow, results of operations and financial position, and could result in asset impairments at PT-FI.

Recoverable Copper in Stockpiles

We record, as inventory, applicable costs for copper contained in mill and leach stockpiles that are expected to be processed in the future based on proven processing technologies. Mill and leach stockpiles are evaluated periodically to ensure that they are stated at the lower of weighted-average cost or net realizable value (refer to Note 4 and “Consolidated Results” for further discussion of inventory adjustments recorded for the three years ended December 31, 2017). Accounting for recoverable copper from mill and leach stockpiles represents a critical accounting estimate because (i) it is impracticable to determine copper contained in mill and leach stockpiles by physical count, thus requiring management to employ reasonable estimation methods and (ii) recovery rates from leach stockpiles can vary significantly. Refer to Note 1 for further discussion of our accounting policy for recoverable copper in stockpiles.

At December 31, 2017, estimated consolidated recoverable copper was 2.1 billion pounds in leach stockpiles (with a carrying value of $2.2 billion) and 0.7 billion pounds in mill stockpiles (with a carrying value of $660 million), compared with 2.2 billion pounds in leach stockpiles (with a carrying value of $2.2 billion) and 1.0 billion pounds in mill stockpiles (with a carrying value of $746 million) at December 31, 2016.

Impairment of Long-Lived Assets

As discussed in Note 1, we assess the carrying values of our long-lived mining assets when events or changes in circumstances indicate that the related carrying amounts of such assets may not be recoverable. In evaluating our long-lived mining assets for recoverability, we use estimates of pre-tax undiscounted future cash flows of our individual mines. Estimates of future cash flows are derived from current business plans, which are developed using near-term metal price forecasts reflective of the current price environment and management’s projections for long-term average metal prices. In addition to near- and long-term metal price assumptions, other key assumptions include estimates of commodity-based and other input costs; proven and probable mineral reserves estimates, including the timing and cost to develop and produce the reserves; value beyond proven and probable mineral reserve estimates (refer to Note 1); and the use of appropriate discount rates in the measurement of fair value. We believe our estimates and models used to determine fair value are similar to what a market participant would use. As quoted market prices are unavailable for our individual mining operations, fair value is determined through the use of after-tax discounted estimated future cash flows.

As a result of declining copper and molybdenum prices, during the second half of 2015, we evaluated our long-lived mining assets for impairment, which resulted in charges of $37 million at our Tyrone mine, net of a revision to asset retirement obligations (AROs). Refer to Note 5 for further discussion of price assumptions used in our December 31, 2015, evaluations of the recoverability of our copper and molybdenum mines. At December 31, 2016 and 2017, we concluded there were no events or changes in circumstances that would indicate that the carrying amount of our long-lived mining assets might not be recoverable.

In addition to decreases in future metal price assumptions, other events that could result in future impairment of our long-lived mining assets include, but are not limited to, decreases in estimated recoverable proven and probable mineral reserves and any event that might otherwise have a material adverse effect on mine site production levels or costs. Refer to “Risk Factors” contained in Part I, Item 1A. of our annual report on Form 10-K for the year ended December 31, 2017, for further discussion of Indonesian regulatory matters that could have a material adverse affect on our cash flow, results of operations and financial position, and could result in asset impairments at PT-FI.

Environmental Obligations

Our current and historical operating activities are subject to various national, state and local environmental laws and regulations that govern the protection of the environment, and compliance with those laws requires significant expenditures. Environmental expenditures are charged to expense or capitalized, depending upon their future economic benefits. The guidance provided by U.S. GAAP requires that liabilities for contingencies be recorded when it is probable that obligations have been incurred, and the cost can be reasonably estimated. At December 31, 2017, environmental obligations recorded in our consolidated balance sheet totaled $1.4 billion, which reflect obligations for environmental liabilities attributed to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) or analogous state programs and for estimated future costs associated with environmental matters. Refer to Notes 1 and 12 for further discussion of environmental obligations, including a summary of changes in our estimated environmental obligations for the three years ended December 31, 2017.

Accounting for environmental obligations represents a critical accounting estimate because changes to environmental laws and regulations and/or circumstances affecting our operations could result in significant changes to our estimates, which could have a significant impact on our results of operations. We perform a comprehensive annual review of our environmental obligations and also review changes in facts and circumstances associated with these obligations at least quarterly. Judgments and estimates are based upon currently available facts, existing technology, presently enacted laws and regulations, remediation experience, whether or not we are a potentially responsible party (PRP), the ability of other PRPs to pay their allocated portions and take into consideration reasonably possible outcomes. Our cost estimates can change substantially as additional information becomes available regarding the nature or extent of site contamination, updated cost assumptions (including increases and decreases to cost estimates), changes in the anticipated scope and timing of remediation activities, the settlement of environmental matters, required remediation methods and actions by or against governmental agencies or private parties.

Asset Retirement Obligations

We record the fair value of our estimated AROs associated with tangible long-lived assets in the period incurred. Fair value is measured as the present value of cash flow estimates after considering inflation and a market risk premium. Our cost estimates are reflected on a third-party cost basis and comply with our legal obligation to retire tangible long-lived assets in the period incurred. These cost estimates may differ from financial assurance cost estimates for reclamation activities because of a variety of factors, including obtaining updated cost estimates for reclamation activities, the timing of reclamation activities, changes in scope and the exclusion of certain costs not considered reclamation and closure costs. At December 31, 2017, AROs recorded in our consolidated balance sheet totaled $2.6 billion, including $0.6 billion associated with our remaining oil and gas operations. Refer to Notes 1 and 12 for further discussion of reclamation and closure costs, including a summary of changes in our AROs for the three years ended December 31, 2017.

Generally, ARO activities are specified by regulations or in permits issued by the relevant governing authority, and management judgment is required to estimate the extent and timing of expenditures. Accounting for AROs represents a critical accounting estimate because (i) we will not incur most of these costs for a number of years, requiring us to make estimates over a long period, (ii) reclamation and closure laws and regulations could change in the future and/or circumstances affecting our operations could change, either of which could result in significant changes to our current plans, (iii) the methods used or required to plug and abandon non-producing oil and gas wellbores, remove platforms, tanks, production equipment and flow lines, and restore the wellsite could change, (iv) calculating the fair value of our AROs requires management to estimate projected cash flows, make long-term assumptions about inflation rates, determine our credit-adjusted, risk-free interest rates and determine market risk premiums that are appropriate for our operations and (v) given the magnitude of our estimated reclamation, mine closure and wellsite abandonment and restoration costs, changes in any or all of these estimates could have a significant impact on our results of operations.

Taxes

In preparing our annual consolidated financial statements, we estimate the actual amount of income taxes currently payable or receivable as well as deferred income tax assets and liabilities attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which these temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in tax rates or laws is recognized in income in the period in which such changes are enacted.

Our operations are in multiple jurisdictions where uncertainties arise in the application of complex tax regulations. Some of these tax regimes are defined by contractual agreements with the local government, while others are defined by general tax laws and regulations. We and our subsidiaries are subject to reviews of our income tax filings and other tax payments, and disputes can arise with the taxing authorities over the interpretation of our contracts or laws. Final taxes paid may be dependent upon many factors, including negotiations with taxing authorities. In certain jurisdictions, we must pay a portion of the disputed amount to the local government in order to formally appeal an assessment. Such payment is recorded as a receivable if we believe the amount is collectible.

A valuation allowance is provided for those deferred income tax assets for which the weight of available evidence suggests that the related benefits will not be realized. In determining the amount of the valuation allowance, we consider estimated future taxable income or loss as well as feasible tax planning strategies in each jurisdiction. If we determine that we will not realize all or a portion of our deferred income tax assets, we will increase our valuation allowance. Conversely, if we determine that we will ultimately be able to realize all or a portion of the related benefits for which a valuation allowance has been provided, all or a portion of the related valuation allowance will be reduced.

Our valuation allowances totaled $4.6 billion at December 31, 2017, which covered U.S. federal and state deferred tax assets, including all of our U.S. foreign tax credit carryforwards, U.S. federal net operating loss carryforwards, U.S. federal capital loss carryforwards, foreign net operating loss carryforwards, and substantially all of our U.S. state net operating loss carryforwards.

The Tax Cuts and Jobs Act (the Act) enacted on December 22, 2017, includes significant modifications to existing U.S. tax laws and creates many new complex tax provisions. The Act reduces the corporate income tax rate to 21 percent, eliminates the corporate alternative minimum tax (AMT), provides for a refund of AMT credit carryover, maintains hard minerals percentage depletion, allows for immediate expensing of certain qualified property and generally broadens the tax base. The Act also creates a territorial tax system (with a one-time mandatory tax on previously deferred foreign earnings), creates anti-base erosion rules that require companies to pay a minimum tax on foreign earnings and disallows certain payments from U.S. corporations to foreign related parties. Our income tax provision for 2017 includes provisional net tax credits associated with the Act totaling $393 million, including the reversal of valuation allowances associated with anticipated refunds of AMT credits over the next four years ($272 million, net of reserves) and a decrease in corporate income tax rates ($121 million). Our income tax provision for 2017 was not impacted by the Act’s one-time tax on deferred foreign earnings, as we have sufficient foreign tax credits to offset the tax. As the Act’s tax provisions are numerous and complex, we continue to evaluate their impact. Refer to Note 11 for further discussion.

CONSOLIDATED RESULTS



	Years Ended December 31,
	2017			2016				2015
SUMMARY FINANCIAL DATA	(in millions, except per share amounts)
Revenuesa,b	$	16,403		$	14,830		c	$	14,607		c
Operating income (loss)a,d,e,f,g,h	$	3,633		$	(2,792	)	i	$	(13,512	)	i
Net income (loss) from continuing operationsj	$	2,029	k,l,m	$	(3,832	)	l,m	$	(12,180	)	n
Net income (loss) from discontinued operationso	$	66		$	(193	)		$	91
Net income (loss) attributable to common stock	$	1,817		$	(4,154	)	p	$	(12,236	)
Diluted net income (loss) per share attributable to common stock:
Continuing operations	$	1.21		$	(2.96	)		$	(11.32	)
Discontinued operations	0.04			(0.20		)		0.01
	$	1.25		$	(3.16	)		$	(11.31	)

Diluted weighted-average common shares outstanding	1,454			1,318				1,082
Operating cash flowsq	$	4,682		$	3,729			$	3,220
Capital expenditures	$	1,410		$	2,813			$	6,353
At December 31:
Cash and cash equivalents	$	4,447		$	4,245			$	177
Total debt, including current portion	$	13,117		$	16,027			$	20,324


a.	As further detailed in Note 16, following is a summary of revenues and operating income (loss) by operating division (in millions):



	Years Ended December 31,
Revenues	2017			2016			2015
North America copper mines	$	4,565		$	4,374		$	5,126
South America mining	3,694			2,938			1,934
Indonesia mining	4,445			3,295			2,653
Molybdenum mines	268			186			348
Rod & Refining	4,482			3,862			4,154
Atlantic Copper Smelting & Refining	2,032			1,830			1,970
Corporate, other & eliminations	(3,083		)	(1,655		)	(1,578		)
Total revenues	$	16,403		$	14,830		$	14,607

Operating income (loss)
North America copper mines	$	1,365		$	1,479		$	648
South America mining	916			618			67
Indonesia mining	2,020			1,027			449
Molybdenum mines	(38		)	(96		)	(72		)
Rod & Refining	2			16			16
Atlantic Copper Smelting & Refining	20			72			67
Corporate, other & eliminations	(652		)	(5,908		)	(14,687		)
Total operating income (loss)	$	3,633		$	(2,792	)	$	(13,512	)


b.	Includes favorable (unfavorable) adjustments to provisionally priced concentrate and cathode copper sales recognized in prior periods totaling $81 million ($34 million to net income attributable to common stock or $0.02 per share) in 2017, $5 million ($2 million to net loss attributable to common stock or less than $0.01 per share) in 2016 and $(100) million ($(50) million to net loss attributable to common stock or $(0.05) per share) in 2015. Refer to “Revenues” for further discussion.

Includes favorable (unfavorable) adjustments to provisionally priced concentrate and cathode copper sales recognized in prior periods totaling $81 million ($34 million to net income attributable to common stock or $0.02 per share) in 2017, $5 million ($2 million to net loss attributable to common stock or less than $0.01 per share) in 2016 and $(100) million ($(50) million to net loss attributable to common stock or $(0.05) per share) in 2015. Refer to “Revenues” for further discussion.


c.	Includes net noncash mark-to-market losses associated with crude oil and natural gas derivative contracts totaling $41 million ($41 million to net loss attributable to common stock or $0.03 per share) in 2016 and $319 million ($198 million to net loss attributable to common stock or $0.18 per share) in 2015. Refer to “Revenues” for further discussion.


d.	Includes net charges at mining operations totaling $143 million ($84 million to net income attributable to common stock or $0.06 per share) in 2017, primarily associated with workforce reductions at PT-FI; $33 million ($14 million to net loss attributable to common stock or $0.01 per share) in 2016, primarily for PT-FI asset retirement and Cerro Verde social commitments and $145 million ($90 million to net loss attributable to common stock or $0.08 per share) in 2015 for asset impairment, restructuring and other net charges. The year 2015 also includes $18 million ($12 million to net loss attributable to common stock or $0.01 per share) for executive retirement benefits.

Includes net charges at mining operations totaling $143 million ($84 million to net income attributable to common stock or $0.06 per share) in 2017, primarily associated with workforce reductions at PT-FI; $33 million ($14 million to net loss attributable to common stock or $0.01 per share) in 2016, primarily for PT-FI asset retirement and Cerro Verde social commitments and $145 million ($90 million to net loss attributable to common stock or $0.08 per share) in 2015 for asset impairment, restructuring and other net charges. The year 2015 also includes $18 million ($12 million to net loss attributable to common stock or $0.01 per share) for executive retirement benefits.


e.	Includes charges for metals inventory adjustments totaling $8 million ($8 million to net income attributable to common stock or less than $0.01 per share) in 2017, $36 million ($36 million to net loss attributable to common stock or $0.03 per share) in 2016 and $338 million ($217 million to net loss attributable to common stock or $0.20 per share) in 2015.


f.	Includes net (credits) charges at oil and gas operations totaling $(13) million ($(13) million to net income attributable to common stock or $(0.01) per share) in 2017, primarily for drillship settlements, partly offset by contract termination costs; $1.1 billion ($1.1 billion to net loss attributable to common stock or $0.84 per share) in 2016, primarily for drillship settlements/idle rig costs, the termination of contracts for support vessels and equipment, inventory adjustments, asset impairment and restructuring charges; and $188 million ($117 million to net loss attributable to common stock or $0.11 per share) in 2015, primarily for asset impairments, inventory adjustments and idle rig costs.

Includes net (credits) charges at oil and gas operations totaling $(13) million ($(13) million to net income attributable to common stock or $(0.01) per share) in 2017, primarily for drillship settlements, partly offset by contract termination costs; $1.1 billion ($1.1 billion to net loss attributable to common stock or $0.84 per share) in 2016, primarily for drillship settlements/idle rig costs, the termination of contracts for support vessels and equipment, inventory adjustments, asset impairment and restructuring charges; and $188 million ($117 million to net loss attributable to common stock or $0.11 per share) in 2015, primarily for asset impairments, inventory adjustments and idle rig costs.


g.	Includes net gain on sales of assets totaling $81 million ($81 million to net income attributable to common stock or $0.06 per share) in 2017, $649 million ($649 million to net loss attributable to common stock or $0.49 per share) in 2016 and $39 million ($25 million to net loss attributable to common stockholders or $0.02 per share) in 2015. Refer to Note 2 and “Net Gain on Sales of Assets” below for further discussion.

Includes net gain on sales of assets totaling $81 million ($81 million to net income attributable to common stock or $0.06 per share) in 2017, $649 million ($649 million to net loss attributable to common stock or $0.49 per share) in 2016 and $39 million ($25 million to net loss attributable to common stockholders or $0.02 per share) in 2015. Refer to Note 2 and “Net Gain on Sales of Assets” below for further discussion.


h.	Includes net charges (credits) for adjustments to environmental obligations and related litigation reserves of $210 million ($210 million to net income attributable to common stock or $0.14 per share) in 2017, $(16) million ($(16) million to net loss attributable to common stock or $(0.01) per share) in 2016 and $43 million ($28 million to net loss attributable to common stock or $0.03 per share) in 2015.


i.	Includes charges to reduce the carrying value of oil and gas properties pursuant to full cost accounting rules of $4.3 billion ($4.3 billion to net loss attributable to common stock or $3.28 per share) in 2016 and $13.1 billion ($11.6 billion to net loss attributable to common stockholders or $10.72 per share) in 2015.


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.	Includes net charges at Cerro Verde related to (i) Peruvian government claims for disputed royalties for prior years totaling $186 million to net income attributable to common stock or $0.13 per share (consisting of $203 million to operating income, $145 million to interest expense and $7 million to provision for income taxes, net of $169 million to noncontrolling interests) and (ii) other tax related matters for prior years totaling $14 million to net income attributable to common stock or $0.01 per share (consisting of $11 million to operating income, $8 million to interest expense, $1 million to other income and $7 million to provision for income taxes, net of $13 million to noncontrolling interests).


l.	Includes net gains on early extinguishment and exchanges of debt totaling $21 million ($0.01 per share) in 2017 and $26 million ($0.02 per share) in 2016. Refer to Note 8 for further discussion.


m.	Includes net tax credits of $438 million ($0.30 per share) in 2017 and $374 million ($0.28 per share) in 2016. Refer to “Income Taxes” below for further discussion.


n.	Includes a gain of $92 million ($0.09 per share) related to net proceeds received from insurance carriers and other third parties related to the shareholder derivative litigation settlement.


o.	Net income from discontinued operations in 2017 primarily reflects adjustments to the fair value of the potential $120 million in contingent consideration related to the November 2016 sale of our interest in TFHL, which totaled $74 million at December 31, 2017, and will continue to be adjusted through December 31, 2019. The years 2016 and 2015 reflect the results of TFHL through the November 16, 2016, sale date and include charges for allocated interest expense associated with the portion of our term loan that was required to be repaid as a result of the sale of our interest in TFHL. Net loss from discontinued operations for 2016 also includes a net charge of $198 million ($0.15 per share) for the loss on disposal. Refer to Note 2 and “Net Income (Loss) from Discontinued Operations” below for further discussion.

Net income from discontinued operations in 2017 primarily reflects adjustments to the fair value of the potential $120 million in contingent consideration related to the November 2016 sale of our interest in TFHL, which totaled $74 million at December 31, 2017, and will continue to be adjusted through December 31, 2019. The years 2016 and 2015 reflect the results of TFHL through the November 16, 2016, sale date and include charges for allocated interest expense associated with the portion of our term loan that was required to be repaid as a result of the sale of our interest in TFHL. Net loss from discontinued operations for 2016 also includes a net charge of $198 million ($0.15 per share) for the loss on disposal. Refer to Note 2 and “Net Income (Loss) from Discontinued Operations” below for further discussion.


p.	Includes a gain on redemption of noncontrolling interest of $199 million for the settlement of our preferred stock obligation at our Plains Offshore Operations Inc. (Plains Offshore) subsidiary.


q.	Includes net working capital sources and timing of other tax payments of $589 million in 2017, $87 million in 2016 and $407 million in 2015.



	Years Ended December 31,
	2017		2016a		2015a
SUMMARY OPERATING DATA
Copper (millions of recoverable pounds)
Production	3,737		4,222		3,568
Sales, excluding purchases	3,700		4,227		3,603
Average realized price per pound	$	2.93	$	2.28	$	2.42
Site production and delivery costs per poundb	$	1.61	$	1.42	$	1.81
Unit net cash costs per poundb	$	1.20	$	1.26	$	1.57
Gold (thousands of recoverable ounces)
Production	1,577		1,088		1,257
Sales, excluding purchases	1,562		1,079		1,247
Average realized price per ounce	$	1,268	$	1,238	$	1,129
Molybdenum (millions of recoverable pounds)
Production	92		80		92
Sales, excluding purchases	95		74		89
Average realized price per pound	$	9.33	$	8.33	$	8.70


a.	Excludes results from the Tenke mine, which is reported as a discontinued operation. Copper sales from the Tenke mine totaled 424 million pounds in 2016 and 467 million pounds in 2015.

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 the 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 $16.4 billion in 2017, $14.8 billion in 2016 and $14.6 billion in 2015. Revenues from our mining operations primarily include the sale of copper concentrate, copper cathode, copper rod, gold and molybdenum. Revenue from our oil and gas operations include the sale of oil, natural gas and natural gas liquids (NGLs). Following is a summary of changes in our consolidated revenues between periods (in millions):



	2017			2016

Consolidated revenues - prior year	$	14,830		$	14,607
Mining operations:
(Lower) higher sales volumes:
Copper	(1,201		)	1,508
Gold	598			(190		)
Molybdenum	175			(128		)
Higher (lower) averaged realized prices:
Copper	2,405			(592		)
Gold	47			117
Molybdenum	95			(27		)
Net adjustments for prior year provisionally priced copper sales	76			105
Higher revenues from purchased copper	361			117
Higher (lower) Atlantic Copper revenues	201			(140		)
Oil and gas operations:
Lower oil sales volumes	(1,269		)	(40		)
Higher (lower) oil average realized prices, excluding derivative contracts	3			(228		)
Net mark-to-market adjustments on derivative contracts	35			(122		)
Other, including intercompany eliminations	47			(157		)
Consolidated revenues - current year	$	16,403		$	14,830

Mining Operations

Sales Volumes. Consolidated copper sales volumes totaled 3.7 billion pounds in 2017, 4.2 billion pounds in 2016 and 3.6 billion pounds in 2015. Lower copper sales volumes in 2017, compared to 2016, primarily reflect lower sales volumes in North America mainly caused by lower ore grades. Higher copper sales volumes in 2016, compared to 2015, primarily reflect higher volumes from Cerro Verde and PT-FI; partly offset by lower sales volumes in North America, primarily reflecting reduced mining rates and the impact of the May 2016 sale of an additional 13 percent undivided interest in Morenci.

Consolidated gold sales volumes totaled 1.6 million ounces in 2017, 1.1 million ounces in 2016 and 1.25 million ounces in 2015. Higher gold sales volumes in 2017, compared with 2016, primarily reflect higher ore grades at PT-FI. Lower gold sales volumes in 2016, compared with 2015, primarily reflect lower ore grades at PT-FI.

Consolidated molybdenum sales volumes totaled 95 million pounds in 2017, 74 million pounds in 2016 and 89 million pounds in 2015. Higher molybdenum sales volumes in 2017, compared with 2016, primarily reflect increased demand and higher production. Lower molybdenum sales volumes in 2016, compared with 2015, primarily reflect reduced operating rates in response to weak demand.

Refer to “Operations” for further discussion of sales volumes at our operating divisions.

Metals Realized Prices. Our consolidated revenues can vary significantly as a result of fluctuations in the market prices of copper, gold and molybdenum. Our average realized prices were 29 percent higher for copper, 2 percent higher for gold and 12 percent higher for molybdenum in 2017, compared with 2016. In 2016, our average realized prices were 6 percent lower for copper, 10 percent higher for gold and 4 percent lower for molybdenum, compared with 2015.

Provisionally Priced Copper Sales. Impacts of net adjustments for prior year provisionally priced sales primarily relate to 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 (refer to “Disclosures About Market Risks-Commodity Price Risk” for further discussion). Revenues include favorable (unfavorable) net adjustments to prior years’ provisionally priced copper sales totaling $81 million in 2017, $5 million in 2016 and $(100) million in 2015.

Purchased Copper. We purchased copper cathode primarily for processing by our Rod & Refining operations. Purchased copper volumes totaled 273 million pounds in 2017, 188 million pounds in 2016 and 121 million pounds in 2015.

Atlantic Copper Revenues. Atlantic Copper revenues totaled $2.0 billion in 2017, $1.8 billion in 2016 and $2.0 billion in 2015. Higher Atlantic Copper revenues in 2017, compared with 2016, primarily reflect higher copper prices. Lower Atlantic Copper revenues in 2016, compared with 2015, primarily reflect lower copper prices.

Oil & Gas Operations

Oil Sales Volumes. Oil sales volumes totaled 1.8 million barrels (MMBbls) in 2017, 34.4 MMBbls in 2016 and 35.3 MMBbls in 2015. Lower volumes in 2017, compared with 2016 and 2015, reflect the sale of substantially all of our oil and gas properties in late 2016. Refer to “Operations” for further discussion of sales volumes at our oil and gas operations.

Realized Oil Prices Excluding Derivative Contracts. Our average realized price per barrel for oil (excluding the impact of derivative contracts) of $40.71 in 2017 was 4 percent higher than our average realized price of $38.96 in 2016. Our average realized price for oil (excluding the impact of derivative contracts) of $38.96 in 2016 was 15 percent lower than our average realized price of $45.58 per barrel for 2015.

Oil and Gas Derivative Contracts. During 2016 and 2015, we had derivative contracts that were not designated as hedging instruments; accordingly, they were recorded at fair value with the mark-to-market gains and losses recorded in revenues each period (refer to Note 14 for further discussion of oil and gas derivative contracts). Net mark-to-market (losses) gains on oil and gas derivative contracts totaled $(35) million in 2016 and $87 million in 2015. We did not have any oil and gas derivative contracts in 2017 and do not have any in place for future periods.

Production and Delivery Costs

Consolidated production and delivery costs totaled $10.3 billion in 2017 and $10.7 billion in both 2016 and 2015. Lower production and delivery costs in 2017, compared to 2016, primarily reflected lower costs related to our oil and gas operations because of the sale of substantially all of our oil and gas properties in late 2016, partly offset by charges of $203 million in 2017 related to disputed Cerro Verde royalties for prior years (refer to Note 12 for further discussion) and charges of $120 million at PT-FI for workforce reductions.

Production and delivery costs in 2016, compared to 2015, reflected lower costs associated with the impact of cost reduction initiatives, offset by higher charges for drillship settlements/idle rig and contract termination costs at U.S. oil and gas operations (which totaled $926 million in 2016, compared to $26 million in 2015).

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 $1.61 per pound of copper in 2017, $1.42 per pound in 2016 and $1.81 per pound in 2015. Higher consolidated unit site production and delivery costs in 2017, compared with 2016, primarily reflected lower consolidated copper sales volumes and higher mining, milling and employee costs at our South America mining operations. Lower consolidated unit site production and delivery costs in 2016, compared with 2015, primarily reflected higher copper sales volumes and the impact of cost reduction initiatives. 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.

Our copper mining operations require significant amounts of energy, principally diesel, electricity, coal and natural gas, most of which is obtained from third parties under long-term contracts. Energy represented 18 percent of our copper mine site operating costs in 2017, including purchases of approximately 196 million gallons of diesel fuel; 7,900 gigawatt hours of electricity at our North America and South America copper mining operations (we generate all of our power at our Indonesia mining operation); 700 thousand metric tons of coal for our coal power plant in Indonesia; and 1 million MMBtu (million British thermal units) of natural gas at certain of our North America mines. Based on current cost estimates, energy will approximate 20 percent of our copper mine site operating costs for 2018.

Depreciation, Depletion and Amortization

Depreciation will vary under the UOP method as a result of changes in sales volumes and the related UOP rates at our mining operations. Consolidated DD&A totaled $1.7 billion in 2017, $2.5 billion in 2016 and $3.2 billion in 2015. Lower DD&A in 2017, compared with 2016, primarily reflected the impact of the sale of substantially all of our oil and gas properties in late 2016. Lower DD&A in 2016, compared with 2015, primarily reflected lower DD&A rates as a result of impairment of oil and gas properties, partly offset by higher DD&A at the Cerro Verde mine.

Impairment of Oil and Gas Properties

Under the full cost accounting rules, we recognized impairment charges totaling $4.3 billion in 2016 and $13.0 billion in 2015 for U.S. oil and gas properties. We also recognized impairment charges of $18 million in 2016 and $164 million in 2015 for international oil and gas properties, primarily related to Morocco. Refer to Note 1 for further discussion.

Metals Inventory Adjustments

We recorded adjustments to copper and molybdenum inventory carrying values totaling $8 million in 2017, $36 million in 2016 and $338 million in 2015. Refer to Notes 1 and 4 for further discussion.

Selling, General and Administrative Expenses

Consolidated selling, general and administrative expenses totaled $484 million in 2017, $607 million in 2016 and $558 million in 2015. Selling, general and administrative expenses included $17 million in 2017 for oil and gas contract termination costs, $85 million in 2016 for oil and gas restructuring costs and $18 million in 2015 for executive retirement benefits.

Consolidated selling, general and administrative expenses were net of capitalized general and administrative expenses at our oil and gas operations totaling $78 million in 2016 and $124 million in 2015.

Mining Exploration and Research Expenses

Consolidated exploration and research expenses for our mining operations totaled $94 million in 2017, $64 million in 2016 and $107 million in 2015. Our mining exploration activities are generally associated with our existing mines and focus 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 $65 million in 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 (refer to “Critical Accounting Estimates – Environmental Obligations” for further discussion). Shutdown costs include care-and-maintenance costs and any litigation, remediation or related expenditures associated with closed facilities or operations. Net charges for environmental obligations and shutdown costs totaled $251 million in 2017, $20 million in 2016 and $78 million in 2015. Higher costs in 2017 primarily reflect adjustments to environmental obligations resulting from revised cost estimates. Refer to Note 12 for further discussion of environmental obligations and litigation matters.

Net Gain on Sales of Assets

Net gain on sales of assets totaled $81 million in 2017, primarily associated with oil and gas transactions and adjustments to assets held for sale.

Net gain on sales of assets totaled $649 million in 2016, primarily related to the gains recognized for the Morenci and Timok transactions, partly offset by estimated losses on assets held for sale. Net gain on sales of assets for the year 2016 also included $183 million for contingent consideration, including $150 million associated with the sale of the Deepwater Gulf of Mexico (GOM) oil and gas properties, which is payable to us as the buyer realizes future cash flows in connection with a third-party production handling agreement, and $33 million for the fair value of the potential $150 million in contingent consideration from the sale of the onshore California oil and gas properties, which in accordance with accounting guidelines will continue to be adjusted to fair value through December 31, 2020.

Net gain on sales of assets totaled $39 million in 2015 related to the sale of our one-third interest in the Luna Energy power facility in New Mexico.

Refer to Note 2 for further discussion of dispositions.

Interest Expense, Net

Interest expense, net, includes $145 million in 2017 associated with disputed Cerro Verde royalties (refer to Note 12 for further discussion). Consolidated interest costs (before capitalization, excluding interest expense associated with disputed Cerro Verde royalties) totaled $777 million in 2017, $854 million in 2016 and $832 million in 2015. Lower interest expense in 2017, compared to 2016, reflects a decrease in total debt.

Capitalized interest varies with the level of expenditures for our development projects and average interest rates on our borrowings, and totaled $121 million in 2017, $99 million in 2016 and $215 million in 2015. Refer to “Operations” and “Capital Resources and Liquidity – Investing Activities” for further discussion of current development projects.

Net Gain on Early Extinguishment and Exchanges of Debt

Net gain on early extinguishment of debt totaled $21 million in 2017, primarily related to the redemption of certain senior notes. Net gain on exchanges and early extinguishment of debt totaled $26 million in 2016, primarily related to the redemption of certain senior notes in exchange for common stock, partly offset by losses associated with prepayments of an unsecured bank term loan and fees associated with the exchange of Freeport-McMoRan Oil & Gas LLC senior notes for new FCX senior notes. Refer to Note 8 for further discussion.

Other Income, Net

Other income, net, primarily included foreign currency translation adjustments and interest income, and totaled $49 million in both 2017 and 2016, and $1 million in 2015. The year 2015 also included a gain of $92 million associated

with net proceeds received from insurance carriers and other third parties related to the shareholder derivative litigation.

Income Taxes

Following is a summary of the approximate amounts used in the calculation of our consolidated income tax (provision) benefit from continuing operations for the years ended December 31 (in millions, except percentages):



	2017								2016
	Income (Loss)a			Effective Tax Rate	Income Tax (Provision) Benefit				Income (Loss)a			Effective Tax Rate	Income Tax (Provision) Benefit
U.S.	$	41		(156)%	$	64		b	$	(865	)	41%	$	357		c
South America	1,059			41%	(439		)		501			43%	(216		)	d
Indonesia	2,033			43%	(869		)		1,058			42%	(442		)
U.S. tax reform	—			N/A	393			e	—			N/A	—
Cerro Verde royalty dispute	(348		)	N/A	(7		)	f	—			N/A	—
Impairment of oil and gas properties	—			N/A	—				(4,317		)	N/A	—			g
Eliminations and other	117			N/A	(25		)		151			N/A	(70		)
Consolidated FCX	$	2,902		30%	$	(883	)		$	(3,472	)	(11)%	$	(371	)



	2015
	Income (Loss)a				Effective Tax Rate	Income Tax (Provision) Benefit
U.S.	$	(1,626	)	h	44%	$	720
South America	(40		)		(10)%	(4		)
Indonesia	430				45%	(195		)
Impairment of oil and gas properties	(13,144		)		N/A	1,546			g
Eliminations and other	252				N/A	(116		)
Consolidated FCX	$	(14,128	)		14%	$	1,951


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


b.	Includes net tax credits of $24 million associated with changes in valuation allowances; also includes net tax credits of $21 million associated with AMT credit carryforwards. These credits are not related to the benefit resulting from U.S. tax reform presented separately in the above table (refer to footnote e below).


c.	Includes tax credits of $357 million associated with AMT credits, changes to valuation allowances and net operating loss carryback claims.


d.	Includes a net tax credit of $13 million ($17 million net of noncontrolling interests) related to changes in Peruvian tax rules.

As further discussed in Note 11, the Act enacted on December 22, 2017, includes significant modifications to existing U.S. tax laws and creates many new complex tax provisions. The Act reduces the corporate income tax rate to 21 percent, eliminates the corporate AMT, provides for a refund of AMT credit carryover, maintains hard minerals percentage depletion, allows for immediate expensing of certain qualified property and generally broadens the tax base. The Act also creates a territorial tax system (with a one-time mandatory tax on previously deferred foreign earnings), creates anti-base erosion rules that require companies to pay a minimum tax on foreign earnings and disallows certain payments from U.S. corporations to foreign related parties. Our income tax provision for the year 2017 includes provisional net tax credits associated with the Act totaling $393 million, including the reversal of valuation allowances associated with anticipated refunds of AMT credits over the next four years ($272 million, net of reserves) and a decrease in corporate income tax rates ($121 million). Our income tax provision for the year 2017 was not impacted by the Act’s one-time tax on deferred foreign earnings, as we have sufficient foreign tax credits to offset the tax. As the Act’s tax provisions are numerous and complex, we continue to evaluate their impact.


f.	Includes tax charges of $136 million for disputed royalties and other related mining taxes for the period October 2011 through the year 2013, mostly offset by a tax benefit of $129 million associated with disputed royalties and other related mining taxes for the period December 2006 through the year 2013.


g.	Net of tax charges to establish valuation allowances against U.S. federal and state deferred tax assets that will not generate a future benefit.


h.	Includes a gain of $92 million related to net proceeds received from insurance carriers and other third parties related to the shareholder derivative litigation settlement for which there was no related tax provision.

Our 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 $3.15 per pound for copper, $1,300 per ounce for gold and $10.00 per pound for molybdenum for 2018, we estimate our consolidated effective tax rate for the year 2018 will approximate 37 percent and would decrease with higher prices.

Refer to Note 11 for further discussion of income taxes.

Net Income (Loss) from Discontinued Operations

As further discussed in Note 2, 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 income from discontinued operations totaled $66 million in 2017, primarily reflecting adjustments to the fair value of the potential $120 million contingent consideration related to the sale, which totaled $74 million at December 31, 2017, and will continue to be adjusted through December 31, 2019. Net (loss) income from discontinued operations of $(193) million in 2016 and $91 million in 2015 included allocated interest expense of $39 million in 2016 and $28 million in 2015 associated with the portion of the term loan that was required to be repaid as a result of the sale of our interest in TFHL. The year 2016 also included $198 million for the estimated loss on disposal.

Gain on Redemption and Preferred Dividends Attributable to Redeemable Noncontrolling Interest

In connection with the December 2016 sale of the Deepwater GOM oil and gas properties, we settled a preferred stock obligation at our Plains Offshore subsidiary, which resulted in the recognition of a $199 million gain on redemption. Refer to Note 2 for further discussion.

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 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. Refer to Note 2 for further discussion.

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. We have commenced a project to develop the Lone Star oxide ores with first production expected by the end of 2020. Total estimated capital costs, including mine equipment and pre-production stripping, approximates $850 million and will benefit from the utilization of existing infrastructure at the adjacent Safford operation. Production from the Lone Star oxide ores is expected to average approximately 200 million pounds of copper per year with an approximate 20-year mine life. The project also advances the potential for

development of a larger-scale district opportunity. We are conducting additional drilling as we continue to evaluate longer term opportunities available from the significant sulfide potential in the Lone Star/Safford minerals district.

Operating Data. Following is summary operating data for the North America copper mines for the years ended December 31:



	2017		2016		2015
Operating Data, Net of Joint Venture Interests
Copper (millions of recoverable pounds)
Production	1,518		1,831		1,947
Sales, excluding purchases	1,484		1,841		1,988
Average realized price per pound	$	2.85	$	2.24	$	2.47

Molybdenum (millions of recoverable pounds)
Productiona	33		33		37

100% Operating Data
SX/EW operations
Leach ore placed in stockpiles (metric tons per day)	679,000		737,400		913,000
Average copper ore grade (percent)	0.28		0.31		0.26
Copper production (millions of recoverable pounds)	1,121		1,224		1,134

Mill operations
Ore milled (metric tons per day)	299,500		300,500		312,100
Average ore grade (percent):
Copper	0.39		0.47		0.49
Molybdenum	0.03		0.03		0.03
Copper recovery rate (percent)	86.4		85.5		85.4
Copper production (millions of recoverable pounds)	683		854		972


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

Copper sales volumes from our North America copper mines decreased to 1.5 billion pounds in 2017, compared with 1.8 billion pounds in 2016, primarily reflecting lower ore grades. The year 2016 included approximately 60 million pounds of copper from the 13 percent undivided interest in Morenci that we sold in May 2016.

Copper sales volumes from our North America copper mines decreased to 1.8 billion pounds in 2016, compared with 2.0 billion pounds in 2015, primarily reflecting the impact of the May 2016 sale of an additional 13 percent undivided interest in Morenci and reduced mining rates.

North America copper sales are estimated to approximate 1.5 billion pounds of copper in 2018. Refer to “Outlook” for projected molybdenum sales volumes.

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.

Gross Profit per Pound of Copper and Molybdenum

The following tables summarize unit net cash costs and gross profit per pound of copper at our North America copper mines for the years ended December 31. 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.



	2017							2016
	By-			Co-Product Method				By-			Co-Product Method
	Product Method			Copper		Molyb- denuma		Product Method			Copper		Molyb- denuma
Revenues, excluding adjustments	$	2.85		$	2.85	$	7.80	$	2.24		$	2.24	$	6.34
Site production and delivery, before net noncash
and other costs shown below	1.64			1.54		5.78		1.42			1.35		4.93
By-product credits	(0.17		)	—		—		(0.12		)	—		—
Treatment charges	0.10			0.10		—		0.11			0.10		—
Unit net cash costs	1.57			1.64		5.78		1.41			1.45		4.93
DD&A	0.29			0.27		0.54		0.29			0.27		0.60
Metals inventory adjustments	—			—		—		—			—		—
Noncash and other costs, net	0.06			0.06		0.07		0.05			0.05		0.06
Total unit costs	1.92			1.97		6.39		1.75			1.77		5.59
Revenue adjustments, primarily for pricing on prior period open sales	—			—		—		—			—		—
Gross profit per pound	$	0.93		$	0.88	$	1.41	$	0.49		$	0.47	$	0.75

Copper sales (millions of recoverable pounds)	1,481			1,481				1,836			1,836
Molybdenum sales (millions of recoverable pounds)a						33							33


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

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. During 2017, average unit net cash costs (net of by-product credits) for the North America copper mines ranged from $1.32 per pound to $2.35 per pound at the individual mines and averaged $1.57 per pound. Higher average unit net cash costs (net of by-product credits) in 2017, compared with $1.41 per pound in 2016, primarily reflected lower copper sales volumes.

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.

Average unit net cash costs (net of by-product credits) for our North America copper mines are expected to

approximate $1.67 per pound of copper in 2018, based on achievement of current sales volume and cost

estimates, and assuming an average molybdenum price of $10.00 per pound. North America’s average unit net cash costs in 2018 would change by approximately $0.04 per pound for each $2 per pound change in the average price of molybdenum.



	2016							2015
	By-			Co-Product Method				By-				Co-Product Method
	Product Method			Copper		Molyb- denuma		Product Method				Copper			Molyb- denuma
Revenues, excluding adjustments	$	2.24		$	2.24	$	6.34	$	2.47			$	2.47		$	7.02
Site production and delivery, before net noncash
and other costs shown below	1.42			1.35		4.93		1.68				1.59			5.61
By-product credits	(0.12		)	—		—		(0.13		)		—			—
Treatment charges	0.11			0.10		—		0.12				0.12			—
Unit net cash costs	1.41			1.45		4.93		1.67				1.71			5.61
DD&A	0.29			0.27		0.60		0.28				0.27			0.53
Metals inventory adjustments	—			—		—		0.07				0.07			0.07
Noncash and other costs, net	0.05			0.05		0.06		0.12			b	0.11			0.16
Total unit costs	1.75			1.77		5.59		2.14				2.16			6.37
Revenue adjustments, primarily for pricing on prior period open sales	—			—		—		(0.01		)		(0.01		)	—
Gross profit per pound	$	0.49		$	0.47	$	0.75	$	0.32			$	0.30		$	0.65

Copper sales (millions of recoverable pounds)	1,836			1,836				1,985				1,985
Molybdenum sales (millions of recoverable pounds)a						33									37


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 $99 million ($0.05 per pound) in 2015 for asset impairment, restructuring and other net charges.

Unit net cash costs (net of by-product credits) for our North America copper mines decreased to $1.41 per pound of copper in 2016, compared with $1.67 per pound in 2015, primarily reflecting cost reduction initiatives.

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), 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 and cathode to Atlantic Copper. In addition to copper, the Cerro Verde mine produces molybdenum concentrate and silver.

Operating and Development Activities. The Cerro Verde expansion project, which commenced operations in September 2015, achieved capacity operating rates in early 2016. The project expanded the concentrator facilities’ capacity from 120,000 metric tons of ore per day to 360,000 metric tons of ore per day. Cerro Verde’s expanded operations benefit from its large-scale, long-lived reserves and cost efficiencies.

Beginning in the second half of 2015, El Abra operated at reduced rates to achieve lower operating and labor costs, defer capital expenditures and extend the life of the existing operations. El Abra’s is expected to operate at full capacity during 2018.

Exploration results in recent years 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 potential major 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 summary operating data for our South America mining operations for the years ended December 31.



	2017		2016		2015
Copper (millions of recoverable pounds)
Production	1,235		1,328		869
Sales	1,235		1,332		871
Average realized price per pound	$	2.97	$	2.31	$	2.38

Molybdenum (millions of recoverable pounds)
Productiona	27		21		7

SX/EW operations
Leach ore placed in stockpiles (metric tons per day)	142,800		149,100		208,400
Average copper ore grade (percent)	0.37		0.41		0.44
Copper production (millions of recoverable pounds)	255		328		430

Mill operations
Ore milled (metric tons per day)	360,100		353,400		152,100
Average ore grade (percent):
Copper	0.44		0.43		0.46
Molybdenum	0.02		0.02		0.02
Copper recovery rate (percent)	81.2		85.8		81.5
Copper production (millions of recoverable pounds)	980		1,000		439


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

Lower consolidated copper sales volumes from South America of 1.2 billion pounds in 2017, compared with 1.3 billion in 2016, primarily reflected lower recovery rates at Cerro Verde and lower ore grades at El Abra.

Copper sales volumes from our South America mining operations totaled 1.3 billion pounds in 2016, and were higher compared with 871 million pounds in 2015, primarily reflecting Cerro Verde’s expanded operations.

Copper sales from South America mines are expected to approximate 1.2 billion pounds of copper in 2018. Refer to “Outlook” for projected molybdenum sales volumes.

Gross Profit per Pound of Copper

The following tables summarize unit net cash costs and gross profit per pound of copper at our South America mining operations for the years ended December 31. 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, gold 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.



	2017						2016					2015
	By-Product Method				Co-Product Method		By-Product Method			Co-Product Method		By-Product Method			Co-Product Method
Revenues, excluding adjustments	$	2.97			$	2.97	$	2.31		$	2.31	$	2.38		$	2.38
Site production and delivery, before net noncash
and other costs shown below	1.59				1.49		1.26			1.20		1.60			1.56
By-product credits	(0.18		)		—		(0.10		)	—		(0.05		)	—
Treatment charges	0.22				0.22		0.24			0.24		0.19			0.19
Royalty on metals	0.01				0.01		0.01			—		—			—
Unit net cash costs	1.64				1.72		1.41			1.44		1.74			1.75
DD&A	0.43				0.39		0.41			0.39		0.40			0.39
Metals inventory adjustments	—				—		—			—		0.08			0.08
Noncash and other costs, net	0.19			a	0.18		0.03			0.03		0.05			0.05
Total unit costs	2.26				2.29		1.85			1.86		2.27			2.27
Revenue adjustments, primarily for pricing on
prior period open sales	0.03				0.03		0.01			0.01		(0.03		)	(0.03		)
Gross profit per pound	$	0.74			$	0.71	$	0.47		$	0.46	$	0.08		$	0.08

Copper sales (millions of recoverable pounds)	1,235				1,235		1,332			1,332		871			871


a.	Includes charges totaling $203 million ($0.16 per pound of copper) associated with disputed Cerro Verde royalties for prior years (refer to Note 12 for further discussion).

During 2017, unit net cash costs (net of by-product credits) for the South America mines were $1.58 per pound of copper for the Cerro Verde mine and $2.00 per pound for the El Abra mine, and averaged $1.64 per pound. Higher average unit net cash costs (net of by-product credits) for our South America mining operations in 2017, compared with $1.41 per pound in 2016, primarily reflected lower sales volumes and higher mining, milling and employee costs at Cerro Verde, partly offset by higher by-product credits.

Unit net cash costs (net of by-product credits) for our South America mining operations decreased to $1.41 per pound of copper in 2016, compared with $1.74 per pound in 2015, primarily reflecting higher copper sales volumes and efficiencies associated with the Cerro Verde expansion.

Revenues from Cerro Verde’s concentrate sales are recorded net of 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 $1.63 per pound of copper in 2018, based on current sales volume and cost estimates, and assuming average prices of $10.00 per pound of molybdenum in 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-FI proportionately consolidates an unincorporated joint venture with Rio Tinto plc (Rio Tinto), 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 for further discussion of our joint venture with Rio Tinto. Under the joint venture arrangements, PT-FI was allocated nearly 100 percent of copper, gold and silver production and sales for each of the three years ended December 31, 2017. At December 31, 2017, the amounts allocated 100 percent to PT-FI remaining to be produced totaled 4.7 billion pounds of copper, 7.1 million ounces of gold and 12.7 million ounces of silver. Based on the current mine plans, PT-FI anticipates that it will be allocated most of the production and related revenues and costs through 2022.

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 in 2017, approximately 46 percent of PT-FI’s copper concentrate was sold to PT Smelting (PT-FI’s 25 percent-owned smelter and refinery in Gresik, Indonesia).

Regulatory Matters. Following the issuance of new regulations by the Indonesian government in early 2017 (which resulted in a temporary suspension of PT-FI’s concentrate exports), PT-FI entered into a Memorandum of Understanding in April 2017 confirming that the COW would continue to be valid and honored until replaced by a mutually agreed IUPK and investment stability agreement.

Following a framework understanding reached in August 2017, the parties have been engaged in negotiation and documentation of an IUPK and accompanying documentation for assurances on legal and fiscal terms to replace the COW while providing PT-FI with long-term mining rights through 2041. In addition, the IUPK would provide that PT-FI construct a smelter within five years of reaching a definitive agreement and include agreement for the divestment of 51 percent of the project area interests to Indonesian participants at fair market value. The parties continue to negotiate documentation on a comprehensive agreement for PT-FI’s extended operations and to reach agreement on timing, process and governance matters relating to the divestment, with a mutual objective of completing negotiations and the required documentation during the first half of 2018.

In December 2017, PT-FI was granted an extension of its temporary IUPK through June 30, 2018, to enable exports to continue while negotiations on a definitive agreement proceed. In February 2018, PT-FI received an extension of its export license through February 15, 2019.

Until a definitive agreement is reached, PT-FI has reserved all rights under its COW, including dispute resolution procedures. We cannot predict whether PT-FI will be successful in reaching a satisfactory agreement on the terms of its long-term mining rights. 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 and will pursue dispute resolution procedures under PT-FI’s COW. Refer to Note 13 and “Risk Factors” contained in Part I, Item 1A. of our annual report on Form 10-K for the year ended December 31, 2017, for further discussion of these regulatory matters and risks associated with operations in Indonesia.

Refer to Note 12 for discussion of Indonesia tax matters, including surface water tax assessments that PT-FI is seeking to address in connection with the ongoing negotiations to resolve PT-FI’s long-term mining rights.

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 expects to mine high-grade ore over the next several quarters

prior to transitioning to the Grasberg Block Cave underground mine in the first half of 2019.

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. 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 early 2019. The ore flow system and underground rail line are expected to be installed during 2018.

Subject to reaching a definitive agreement to support PT-FI’s long-term investment plans, estimated annual capital spending on these projects would average $0.9 billion per year ($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 or defer investments significantly in underground development projects and will pursue dispute resolution procedures under PT-FI’s COW.

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) ore body that lies below the 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 first brought into production in 2010. The Big Gossan underground mine 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 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 mine is expected to commence in early 2019, following the end of mining of the Grasberg open pit. Targeted production rates once the Grasberg Block Cave mining operation reaches full capacity are expected to approximate 130,000 to 160,000 metric tons of ore per day. PT-FI 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 mine and associated Common Infrastructure is expected to approximate $6.4 billion (incurred between 2008 to 2023), with PT-FI’s share totaling approximately $5.9 billion. Aggregate project costs totaling $3.3 billion have been incurred through December 31, 2017 ($0.5 billion during 2017).

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 ore extracted during the development phase for the purpose of obtaining access to the ore body. During 2017 and late January 2018, the DMLZ underground mine was impacted by mining-seismic activity, which is not uncommon in block cave mining. To mitigate the impact of these events, PT-FI implemented a revised mine sequence; upgraded support systems, blasting and re-entry protocols; and improved mine monitoring and analysis processes. Development activities and mining are taking place in unaffected areas while impacted areas are being assessed, rehabilitated and prepared to be placed back into use. PT-FI expects DMLZ to ramp up to full capacity of 80,000 metric tons of ore per day in 2021.

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 $3.1 billion (incurred between 2009 and 2021), with PT-FI’s share totaling approximately $1.9 billion. Aggregate project costs totaling $2.1 billion have been incurred through December 31, 2017 ($0.3 billion during 2017).

Operating Data. Following is summary operating data for our Indonesia mining operations for the years ended December 31.



	2017		2016		2015
Operating Data, Net of Joint Venture Interest
Copper (millions of recoverable pounds)
Production	984		1,063		752
Sales	981		1,054		744
Average realized price per pound	$	3.00	$	2.32	$	2.33

Gold (thousands of recoverable ounces)
Production	1,554		1,061		1,232
Sales	1,540		1,054		1,224
Average realized price per ounce	$	1,268	$	1,237	$	1,129

100% Operating Data
Ore milled (metric tons per day):a
Grasberg open pit	101,800		119,700		115,900
DOZ underground mine	31,200		38,000		43,700
DMLZ underground mine	3,200		4,400		2,900
Grasberg Block Cave underground mine	3,600		2,700		—
Big Gossan underground mine	600		900		—
Total	140,400		165,700		162,500

Average ore grade:
Copper (percent)	1.01		0.91		0.67
Gold (grams per metric ton)	1.15		0.68		0.79
Recovery rates (percent):
Copper	91.6		91.0		90.4
Gold	85.0		82.2		83.4
Production (recoverable):
Copper (millions of pounds)	996		1,063		752
Gold (thousands of ounces)	1,554		1,061		1,232


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.

Sales volumes from our Indonesia mining operations totaled 981 million pounds of copper and 1.5 million ounces of gold in 2017, compared with 1.1 billion pounds of copper and 1.1 million ounces of gold in 2016. Lower copper sales in 2017, compared to 2016, primarily reflected the impact of regulatory restrictions on PT-FI’s concentrate exports at the beginning of 2017 (see discussion above in “Regulatory Matters”), partly offset by higher copper ore grades. Higher gold sales volumes in 2017 primarily reflected higher gold ore grades.

Sales volumes from our Indonesia mining operations totaled 1.1 billion pounds of copper and 1.1 million ounces of gold in 2016, compared with 744 million pounds of copper and 1.2 million ounces of gold in 2015. Higher copper sales volumes in 2016 primarily reflected higher copper ore grades. Lower gold sales volumes in 2016 primarily reflected lower gold ore grades.

Assuming achievement of planned operating rates during 2018, consolidated sales volumes from Indonesia mining are expected to approximate 1.2 billion pounds of copper and 2.4 million ounces of gold in 2018. Indonesia mining’s projected sales volumes in 2018 are dependent on a number of factors, including operational performance, workforce productivity, the timing of shipments and whether PT-FI will be able to resolve complex regulatory matters in Indonesia and continue to operate after June 30, 2018.

performance determined in accordance with U.S. GAAP. This measure is presented by other metal 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 tables summarize the unit net cash costs and gross profit per pound of copper and per ounce of gold at our Indonesia mining operations for the years ended December 31. 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.



	2017										2016
	By- Product				Co-Product Method						By- Product			Co-Product Method
	Method				Copper			Gold			Method			Copper			Gold
Revenues, excluding adjustments	$	3.00			$	3.00		$	1,268		$	2.32		$	2.32		$	1,237
Site production and delivery, before net noncash
and other costs shown below	1.58				0.94			398			1.63			1.05			559
Gold and silver credits	(2.05		)		—			—			(1.30		)	—			—
Treatment charges	0.27				0.16			67			0.28			0.18			97
Export duties	0.12				0.07			30			0.09			0.06			31
Royalty on metals	0.17				0.10			47			0.13			0.07			47
Unit net cash costs	0.09				1.27			542			0.83			1.36			734
DD&A	0.57				0.34			142			0.36			0.24			125
Noncash and other costs, net	0.17			a	0.10			42			0.05			0.03			17
Total unit costs	0.83				1.71			726			1.24			1.63			876
Revenue adjustments, primarily for pricing on
prior period open sales	0.04				0.04			6			—			—			16
PT Smelting intercompany loss	(0.02		)		(0.01		)	(7		)	(0.02		)	(0.02		)	(8		)
Gross profit per pound/ounce	$	2.19			$	1.32		$	541		$	1.06		$	0.67		$	369

Copper sales (millions of recoverable pounds)	981				981						1,054			1,054
Gold sales (thousands of recoverable ounces)								1,540									1,054


a.	Includes $120 million ($0.12 per pound of copper) of costs charged directly to production and delivery costs as a result of workforce reductions.

A significant portion of PT-FI’s costs are fixed, and unit costs vary depending on volumes and other factors. As a result of higher gold and silver credits, Indonesia had unit net cash costs (including gold and silver credits) of $0.09 per pound of copper in 2017, compared with $0.83 per pound in 2016.

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 export duties totaled $115 million in 2017, $95 million in 2016 and $109 million in 2015. PT-FI’s royalties totaled $173 million in 2017, $131 million in 2016 and $114 million in 2015. Refer to Note 13 for further discussion of PT-FI’s export duties and royalties.

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

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

Assuming an average gold price of $1,300 per ounce for 2018 and achievement of the sales volume and cost estimates, unit net cash credits (net of gold and silver credits) for Indonesia mining are expected to approximate

$0.57 per pound of copper in 2018. Indonesia mining’s unit net cash credits for 2018 would change by approximately $0.09 per pound for each $50 per ounce change in the average price of gold. 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.



	2016									2015
	By- Product			Co-Product Method						By- Product			Co-Product Method
	Method			Copper			Gold			Method			Copper			Gold
Revenues, excluding adjustments	$	2.32		$	2.32		$	1,237		$	2.33		$	2.33		$	1,129
Site production and delivery, before net noncash
and other costs shown below	1.63			1.05			559			2.39			1.32			638
Gold and silver credits	(1.30		)	—			—			(1.91		)	—			—
Treatment charges	0.28			0.18			97			0.31			0.17			83
Export duties	0.09			0.06			31			0.15			0.08			39
Royalty on metals	0.13			0.07			47			0.15			0.09			41
Unit net cash costs	0.83			1.36			734			1.09			1.66			801
DD&A	0.36			0.24			125			0.39			0.22			105
Noncash and other costs, net	0.05			0.03			17			0.05			0.03			14
Total unit costs	1.24			1.63			876			1.53			1.91			920
Revenue adjustments, primarily for pricing on
prior period open sales	—			—			16			(0.07		)	(0.06		)	7
PT Smelting intercompany (loss) profit	(0.02		)	(0.02		)	(8		)	0.01			0.01			4
Gross profit per pound/ounce	$	1.06		$	0.67		$	369		$	0.74		$	0.37		$	220

Copper sales (millions of recoverable pounds)	1,054			1,054						744			744
Gold sales (thousands of recoverable ounces)							1,054									1,224

Unit net cash costs (net of gold and silver credits) for our Indonesia mining operations of $0.83 per pound of copper in 2016 were lower than unit net cash costs of $1.09 per pound in 2015, primarily reflecting higher copper sales volumes, partly offset by lower gold and silver credits.

Molybdenum Mines

We have two wholly owned molybdenum mines – 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 32 million pounds of molybdenum in 2017, 26 million pounds in 2016 and 48 million pounds in 2015. 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 totaled $7.79 per pound of molybdenum in 2017, $8.36 per pound in 2016 and $7.11 per pound in 2015. The decrease in the average unit net cash costs for molybdenum in 2017, compared to 2016, primarily reflected higher sales volumes. The increase in the average unit net cash costs

for molybdenum in 2016, compared to 2015, primarily reflected lower volumes. Assuming achievement of current sales volume and cost estimates, we estimate unit net cash costs for the Molybdenum mines to average $9.00 per pound of molybdenum in 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 & 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 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. Following is a summary of Atlantic Copper’s concentrate purchases from our copper mining operations and third parties for the years ended December 31:



	2017		2016		2015
Third parties	67	%	77	%	71	%
North America copper mines	18		13		23
South America mining	15		7		3
Indonesia mining	—		3		3
	100	%	100	%	100	%

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 treatment charge 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. PT-FI supplied 93 percent of PT Smelting’s concentrate requirements in 2017, 88 percent in 2016 and 80 percent in 2015. PT Smelting processed 46 percent in 2017, 42 percent in 2016 and 37 percent in 2015 of PT-FI’s concentrate production. On February 15, 2018, PT Smelting submitted an application to renew its export license, which expires March 1, 2018.

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 (reductions) additions to net income attributable to common stock of $(21) million ($(0.01) per share) in 2017, $(8) million ($(0.01) per share) in 2016 and $42 million ($0.04 per share) in 2015. 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 $96 million at December 31, 2017. 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.

Oil and Gas Operations

During 2016 and 2017, we completed the sales of our Deepwater GOM, onshore California and Haynesville oil and gas properties, and property interests in the GOM Shelf and in the Madden area of central Wyoming. As a result, our portfolio of oil and gas assets includes oil and natural gas production onshore in South Louisiana and on the GOM Shelf and oil production offshore California. At December 31, 2017, we had $8 million remaining in our consolidated balance sheet for proved oil and gas properties, and no amounts recorded for unproved oil and gas properties.

U.S. Oil and Gas Operations. Following is summary operating results for the U.S. oil and gas operations for the years ended December 31:



	2017		2016			2015
Sales Volumes
Oil (MMBbls)	1.8		34.4			35.3
Natural gas (billion cubic feet)	15.8		65.1			89.7
NGLs (MMBbls)	0.2		1.8			2.4
MMBOE	4.6		47.1			52.6

Average Realizations
Oil (per barrel)	$	40.71	$	39.13	a	$	57.11	a
Natural gas (per MMBtu)	$	3.18	$	2.38		$	2.59
NGLs (per barrel)	$	30.65	$	18.11		$	18.90


a.	Excludes noncash mark-to-market losses on derivative contracts totaling $41 million in 2016 and $319 million in 2015.

The average realized price for oil was $40.71 per barrel in 2017 (74 percent of the average Brent crude oil price of $54.81 per barrel). Excluding the impact of realized cash gains on derivative contracts, which totaled $0.17 per barrel in 2016 and $11.53 per barrel in 2015, average realized prices for oil were $38.96 per barrel in 2016 (86 percent of the average Brent crude oil price of $45.13 per barrel) and $45.58 per barrel in 2015 (85 percent of the average Brent crude oil price of $53.64 per barrel).

The average realized price for natural gas was $3.18 per MMBtu in 2017, $2.38 per MMBtu in 2016 and $2.59 per MMBtu in 2015, compared to the NYMEX natural gas price average of $3.10 per MMBtu in 2017 contracts, $2.46 per MMBtu in 2016 contracts and $2.66 per MMBtu in 2015 contracts.

CAPITAL RESOURCES AND LIQUIDITY

Our consolidated operating cash flows vary with prices realized from copper, gold and molybdenum; our sales volumes; production costs; income taxes; other working capital changes; and other factors. We have taken actions to restore our balance sheet strength through a combination of asset sale and capital market transactions. These actions, combined with cash flow from operations, resulted in significant debt reductions during 2017 and 2016. 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. We are also pursuing other opportunities to enhance 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 December 31, 2017 (in billions):



Cash at domestic companies	$	3.3
Cash at international operations	1.1
Total consolidated cash and cash equivalents	4.4
Noncontrolling interests’ share	(0.4		)
Cash, net of noncontrolling interests’ share	4.0
Withholding taxes and other	—
Net cash available	$	4.0

Cash held at our international operations is generally used to support our foreign operations’ capital expenditures, operating expenses, debt repayments, 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. Refer to Note 11 for discussion of U.S. tax reform. 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 related weighted-average interest rates at December 31, 2017 (in billions, except percentages):



			Weighted-
			Average
			Interest Rate
Senior Notes	$	11.8	4.4%
Cerro Verde credit facility	1.3		3.5%
Total debt	$	13.1	4.3%

At December 31, 2017, we had no borrowings, $13 million in letters of credit issued and availability of $3.5 billion under our revolving credit facility.

Refer to “Financing Activities” below and Note 8 for further discussion of debt.

Operating Activities

We generated consolidated operating cash flows totaling $4.7 billion in 2017 (including $0.6 billion in working capital sources and timing of other tax payments), $3.7 billion in 2016 (including $87 million in working capital sources and timing of other tax payments) and $3.2 billion in 2015 (net of $0.4 billion in working capital sources and timing of other tax payments).

Higher operating cash flows for 2017, compared with 2016, primarily reflected the impact of higher copper prices and an increase in working capital sources from income tax refunds and other tax receivable collections, partly offset by increases in inventories.

Higher operating cash flows for 2016, compared with 2015, primarily reflected the impact of cost reduction efforts, partly offset by a decrease in working capital sources mostly resulting from higher trade receivables, partly offset by lower tax payments by our international mining operations.

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

Investing Activities

Capital Expenditures. Capital expenditures, including capitalized interest, totaled $1.4 billion in 2017, including $0.9 billion for major mining projects; $2.8 billion in 2016, consisting of $1.6 billion for mining operations (including $1.2 billion for major projects) and $1.2 billion for oil and gas operations; and $6.4 billion in 2015, consisting of $3.3 billion for mining operations (including $2.4 billion for major projects) and $3.0 billion for oil and gas operations.

Lower capital expenditures in 2017, compared with 2016, primarily reflected a decrease in oil and gas exploration and development activities as a result of the sale of substantially all of our oil and gas properties in late 2016.

Lower capital expenditures in 2016, compared with 2015, primarily reflected a decrease in oil and gas exploration and development activities in Deepwater GOM and lower spending for major mining projects, mostly resulting from the completion of the Cerro Verde expansion project.

Refer to “Outlook” for further discussion of projected capital expenditures in 2018.

Dispositions. Proceeds, net of closing adjustments, from asset sales totaled $6.4 billion in 2016, primarily associated with the sales of our interest in TFHL; the Deepwater GOM; onshore California and Haynesville oil and gas properties; an additional 13 percent undivided interest in Morenci; and an interest in the Timok exploration project in Serbia.

Refer to Note 2 for further discussion of these dispositions.

Financing Activities

Debt Transactions. Net repayments of debt in 2017 totaled $2.9 billion, primarily for the redemption and repayment of senior notes.

Net repayments of debt in 2016 totaled $3.9 billion, primarily for the repayment of an unsecured bank term loan and payments on the Cerro Verde credit facility.

Net proceeds from debt in 2015 totaled $1.6 billion primarily, reflecting borrowings of $1.4 billion under Cerro Verde’s credit facility to fund its expansion project.

Refer to Note 8 for further discussion of debt transactions.

Equity Transactions. Net proceeds from the sale of common stock of $1.5 billion in 2016 and $1.9 billion in 2015 reflected sales of our common stock under registered at-the-market equity offerings.

Refer to Note 10 for further discussion of equity transactions.

Dividends. The Board reduced our annual common stock dividend from $1.25 per share to $0.20 per share in March 2015, and subsequently suspended the annual common stock dividend in December 2015. In February 2018, the Board reinstated a cash dividend on our common stock. The Board intends to declare a quarterly dividend of $0.05 per share, with the initial dividend expected to be paid May 1, 2018. The declaration of dividends is at the discretion of the Board and will depend upon our financial results, cash requirements, future prospects and other factors deemed relevant.

We paid dividends on our common stock totaling $2 million in 2017, $6 million in 2016, and $605 million in 2015 (including $115 million for a special dividend paid in accordance with the settlement terms of the shareholder derivative litigation). Dividends paid in 2017 and 2016 all relate to accumulated dividends paid for vested stock-based compensation.

Cash dividends and other distributions paid to noncontrolling interests totaled $174 million in 2017, $693 million in 2016 (including $582 million for the redemption of a redeemable noncontrolling interest) and $120 million in 2015. These payments will vary based on the operating results and cash requirements of our consolidated subsidiaries.

CONTRACTUAL OBLIGATIONS

We have contractual and other long-term obligations, including debt maturities, which we expect to fund with available cash, projected operating cash flows, availability under our revolving credit facility or future financing transactions, if necessary. Following is a summary of these various obligations at December 31, 2017, excluding amounts related to assets held for sale (in millions):



	Total		2018		2019 to 2020		2021 to 2022		Thereafter
Debt maturitiesa	$	13,105	$	1,414	$	1,006	$	4,171	$	6,514
Scheduled interest payment obligationsb	5,400		546		1,042		885		2,927
ARO and environmental obligationsc	8,251		420		819		551		6,461
Take-or-pay contractsd	3,408		2,383		628		127		270
Operating lease obligations	208		34		44		35		95
Totale	$	30,372	$	4,797	$	3,539	$	5,769	$	16,267


a.	Reflects principal amounts. In addition, debt excludes $112 million related to assets held for sale.


b.	Scheduled interest payment obligations were calculated using stated coupon rates for fixed-rate debt and interest rates applicable at December 31, 2017, for variable-rate debt.

Represents estimated cash payments, on an undiscounted and unescalated basis, associated with ARO and environmental activities (including $659 million for our oil and gas operations). The timing and the amount of these payments could change as a result of changes in regulatory requirements, changes in scope and timing of ARO activities, the settlement of environmental matters and as actual spending occurs. Refer to Note 12 for additional discussion of environmental and ARO matters.


d.	Represents contractual obligations for purchases of goods or services agreements enforceable and legally binding and that specify all significant terms, and primarily include the procurement of copper concentrate ($2.4 billion), electricity ($0.4

billion) and transportation services ($0.3 billion). Some of our take-or-pay contracts are settled based on the prevailing market rate for the service or commodity purchased, and in some cases, the amount of the actual obligation may change over time because of market conditions. Obligations for copper concentrate provide for deliveries of specified volumes to Atlantic Copper at market-based prices. Electricity obligations are primarily for long-term power purchase agreements in North America and contractual minimum demand at the South America mines. Transportation obligations are primarily for South America contracted ocean freight. Amounts exclude approximately $0.8 billion in total contractual obligations related to assets held for sale, which is primarily for the procurement of cobalt. Obligations for cobalt provide for deliveries of specified volumes to Freeport Cobalt (an asset held for sale) at market-based prices.

This table excludes certain other obligations in our consolidated balance sheets, such as estimated funding for pension, postretirement and other employee benefit obligations as the funding may vary from year to year based on changes in the fair value of plan assets and actuarial assumptions, commitments and contingencies totaling $98 million and unrecognized tax benefits totaling $291 million where the timing of settlement is not determinable, and other less significant amounts. This table also excludes purchase orders for inventory and other goods and services, as purchase orders typically represent authorizations to purchase rather than binding agreements.

In addition to our debt maturities and other contractual obligations discussed above, we have other commitments, which we expect to fund with available cash, projected operating cash flows, available credit facilities or future financing transactions, if necessary. These include (i) PT-FI’s commitment to provide one percent of its annual revenue for the development of the local people in its area of operations through the Freeport Partnership Fund for Community Development, (ii) Cerro Verde’s scheduled installment payments for disputed mining royalty assessments and (iii) other commercial commitments, including standby letters of credit, surety bonds and guarantees. Refer to Notes 12 and 13 for further discussion.

CONTINGENCIES

Environmental

The cost of complying with environmental laws is a fundamental and substantial cost of our business. At December 31, 2017, we had $1.4 billion recorded in our consolidated balance sheet for environmental obligations attributed to CERCLA or analogous state programs and for estimated future costs associated with environmental obligations that are considered probable based on specific facts and circumstances.

We incurred environmental capital expenditures and other environmental costs (including our joint venture partners’ shares) to comply with applicable environmental laws and regulations that affect our operations totaling $0.5 billion in 2017 and $0.4 billion in each of 2016 and 2015. For 2018, we expect to incur approximately $0.5 billion of aggregate environmental capital expenditures and other environmental costs. The timing and amount of estimated payments could change as a result of changes in regulatory requirements, changes in scope and timing of reclamation and plug and abandonment activities, the settlement of environmental matters and the rate at which actual spending occurs on continuing matters.

Refer to Note 12 and “Risk Factors” contained in Part I, Item 1A. of our annual report on Form 10-K for the year ended December 31, 2017, for further information about environmental regulation, including significant environmental matters.

Asset Retirement Obligations

We recognize AROs as liabilities when incurred, with the initial measurement at fair value. These obligations, which are initially estimated based on discounted cash flow estimates, are accreted to full value over time through charges to cost of sales. Mine reclamation costs for disturbances are recorded as an ARO and as a related asset retirement cost (ARC) (included in property, plant, equipment and mine development costs) in the period of disturbance. Oil and gas plugging and abandonment costs are recognized as an ARO and as a related ARC (included in oil and gas properties) in the period in which the well is drilled or acquired. Our cost estimates are reflected on a third-party cost basis and comply with our legal obligation to retire tangible, long-lived assets. At December 31, 2017, we had $2.6 billion recorded in our consolidated balance sheet for AROs, including $0.6 billion related to our oil and gas properties. Spending on AROs totaled $71 million in 2017, $188 million in 2016 and $132 million in 2015 (including $30 million in 2017, $133 million in 2016 and $92 million in 2015 for our oil and gas operations). For 2018, we expect to incur approximately $0.3 billion in aggregate ARO payments (including $157 million for our oil and gas operations). Refer to Note 12 for further discussion.

Litigation and Other Contingencies

Refer to Notes 2 and 12 and “Legal Proceedings” contained in Part I, Item 3. of our annual report on Form 10-K for the year ended December 31, 2017, for further discussion of contingencies associated with legal proceedings and other matters.

DISCLOSURES ABOUT MARKET RISKS

Commodity Price Risk

Our consolidated revenues from our mining operations include the sale of copper concentrate, copper cathode, copper rod, gold, molybdenum and other metals by our North America and South America mines, the sale of copper concentrate (which also contains significant quantities of gold and silver) by our Indonesia mining operations, the sale of molybdenum in various forms by our molybdenum operations, and the sale of copper cathode, copper anode and gold in anode and slimes by Atlantic Copper. Our financial results will vary with fluctuations in the market prices of the commodities we produce, primarily copper and gold, and to a lesser extent molybdenum and silver. For projected sensitivities of our operating cash flow to changes in commodity prices, refer to “Outlook.” World market prices for these commodities have fluctuated historically and are affected by numerous factors beyond our control. Refer to “Risk Factors” contained in Part I, Item 1A. of our annual report on Form 10-K for the year ended December 31, 2017, for further discussion of financial risks associated with fluctuations in the market prices of the commodities we sell.

During 2017, our mined copper was sold 59 percent in concentrate, 19 percent as cathode and 22 percent as rod from North America operations. 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 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.

Following are the favorable (unfavorable) impacts of net adjustments to the prior years’ provisionally priced copper sales for the years ended December 31 (in millions, except per share amounts):



	2017		2016		2015
Revenues	$	81	$	5	$	(100	)
Net income attributable to common stock	$	34	$	2	$	(50	)
Net income per share attributable to common stock	$	0.02	$	—	$	(0.05	)

At December 31, 2017, we had provisionally priced copper sales at our copper mining operations totaling 438 million pounds of copper (net of intercompany sales and noncontrolling interests) recorded at an average price of $3.28 per pound, subject to final pricing over the next several months. We estimate that each $0.05 change in the price realized from the December 31, 2017, provisional price recorded would have an approximate $13 million effect on 2018 net income attributable to common stock. The LME spot copper price closed at $3.22 per pound on January 31, 2018.

Foreign Currency Exchange Risk

The functional currency for most of our operations is the U.S. dollar. Substantially all of our revenues and a significant portion of our costs are denominated in U.S. dollars; however, some costs and certain asset and liability accounts are denominated in local currencies, including the Indonesian rupiah, Australian dollar, Peruvian sol, Chilean peso and euro. We recognized foreign currency translation (losses) gains on balances denominated in foreign currencies totaling $(5) million in 2017, $32 million in 2016 and $(90) million in 2015, primarily at our Indonesia and South America mines. Generally, our operating results are positively affected when the U.S. dollar strengthens in relation to those foreign currencies and are adversely affected when the U.S. dollar weakens in relation to those foreign currencies.

Following is a summary of estimated annual payments and the impact of changes in foreign currency rates on our annual operating costs:



	Exchange Rate per $1 at December 31,			Estimated Annual Payments			10% Change in Exchange Rate (in millions of U.S. dollars)a
	2017	2016	2015	(in local currency)	(in millions of U.S. dollars)b		Increase			Decrease
Indonesia
Rupiah	13,480	13,369	13,726	9.8 trillion	$	727	$	(66	)	$	81
Australian dollar	1.28	1.39	1.37	215 million	$	168	$	(15	)	$	19
South America
Peruvian sol	3.25	3.36	3.41	1.7 billion	$	509	$	(46	)	$	57
Chilean peso	615	670	710	105 billion	$	171	$	(16	)	$	19
Atlantic Copper
Euro	0.83	0.95	0.92	137 million	$	164	$	(15	)	$	18


a.	Reflects the estimated impact on annual operating costs assuming a 10 percent increase or decrease in the exchange rate reported at December 31, 2017.


b.	Based on exchange rates at December 31, 2017.

Interest Rate Risk

At December 31, 2017, we had total debt maturities based on principal amounts of $13.1 billion, of which approximately 10 percent was variable-rate debt with interest rates based on the London Interbank Offered Rate. The table below presents average interest rates for our scheduled maturities of principal for our outstanding debt (excluding fair value adjustments and amounts related to assets held for sale) and the related fair values at December 31, 2017 (in millions, except percentages):



	2018			2019	2020			2021			2022			Thereafter			Fair Value
Fixed-rate debt	$	1,414		—	$	1,001		$	600		$	2,296		$	6,514		$	11,989
Average interest rate	2.4		%	—	3.1		%	4.0		%	4.1		%	5.1		%	4.4		%

Variable-rate debt	—			—	$	5		$	750		$	525		—			$	1,280
Average interest rate	—			—	3.5		%	3.5		%	3.5		%	—			3.5		%

NEW ACCOUNTING STANDARDS

Refer to Note 1 for discussion of recently issued accounting standards and their projected impact on our future financial statements and disclosures.

OFF-BALANCE SHEET ARRANGEMENTS

Refer to Note 13 for discussion of off-balance sheet arrangements.

PRODUCT REVENUES AND PRODUCTION COSTS

Mining Product Revenues and Unit Net Cash Costs

Unit net cash costs 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, (iv) it is the method used to compare mining operations in certain industry publications and (v) it is the method used by our management and the Board to monitor 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 separate line items. 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, 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.

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



Year Ended December 31, 2017
(In millions)	By-Product			Co-Product Method
	Method			Copper			Molybdenuma		Otherb		Total
Revenues, excluding adjustments	$	4,215		$	4,215		$	254	$	90	$	4,559
Site production and delivery, before net noncash
and other costs shown below	2,429			2,277			188		52		2,517
By-product credits	(256		)	—			—		—		—
Treatment charges	157			150			—		7		157
Net cash costs	2,330			2,427			188		59		2,674
DD&A	423			397			18		8		423
Metals inventory adjustments	2			2			—		—		2
Noncash and other costs, net	88			85			2		1		88
Total costs	2,843			2,911			208		68		3,187
Revenue adjustments, primarily for pricing on prior period open sales	4			4			—		—		4
Gross profit	$	1,376		$	1,308		$	46	$	22	$	1,376

Copper sales (millions of recoverable pounds)	1,481			1,481
Molybdenum sales (millions of recoverable pounds)a							33

Gross profit per pound of copper/molybdenum:

Revenues, excluding adjustments	$	2.85		$	2.85		$	7.80
Site production and delivery, before net noncash
and other costs shown below	1.64			1.54			5.78
By-product credits	(0.17		)	—			—
Treatment charges	0.10			0.10			—
Unit net cash costs	1.57			1.64			5.78
DD&A	0.29			0.27			0.54
Metals inventory adjustments	—			—			—
Noncash and other costs, net	0.06			0.06			0.07
Total unit costs	1.92			1.97			6.39
Revenue adjustments, primarily for pricing
on prior period open sales	—			—			—
Gross profit per pound	$	0.93		$	0.88		$	1.41

Reconciliation to Amounts Reported
(In millions)									Metals
				Production					Inventory
	Revenues			and Delivery			DD&A		Adjustments
Totals presented above	$	4,559		$	2,517		$	423	$	2
Treatment charges	(52		)	105			—		—
Noncash and other costs, net	—			88			—		—
Revenue adjustments, primarily for pricing on prior period open sales	4			—			—		—
Eliminations and other	54			57			2		—
North America copper mines	4,565			2,767			425		2
Other miningc	14,921			10,652			1,195		1
Corporate, other & eliminations	(3,083		)	(3,119		)	94		5
As reported in FCX’s consolidated financial statements	$	16,403		$	10,300		$	1,714	$	8


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 all other mining operations, including South America mining, Indonesia mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 16.

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



Year Ended December 31, 2016
(In millions)	By-Product			Co-Product Method
	Method			Copper			Molybdenuma		Otherb		Total
Revenues, excluding adjustments	$	4,113		$	4,113		$	213	$	94	$	4,420
Site production and delivery, before net noncash
and other costs shown below	2,613			2,474			166		58		2,698
By-product credits	(222		)	—			—		—		—
Treatment charges	193			185			—		8		193
Net cash costs	2,584			2,659			166		66		2,891
DD&A	527			496			20		11		527
Metals inventory adjustments	1			1			—		—		1
Noncash and other costs, net	87			84			2		1		87
Total costs	3,199			3,240			188		78		3,506
Revenue adjustments, primarily for pricing on prior period open sales	(1		)	(1		)	—		—		(1		)
Gross profit	$	913		$	872		$	25	$	16	$	913

Copper sales (millions of recoverable pounds)	1,836			1,836
Molybdenum sales (millions of recoverable pounds)a							33

Gross profit per pound of copper/molybdenum:

Revenues, excluding adjustments	$	2.24		$	2.24		$	6.34
Site production and delivery, before net noncash
and other costs shown below	1.42			1.35			4.93
By-product credits	(0.12		)	—			—
Treatment charges	0.11			0.10			—
Unit net cash costs	1.41			1.45			4.93
DD&A	0.29			0.27			0.60
Metals inventory adjustments	—			—			—
Noncash and other costs, net	0.05			0.05			0.06
Total unit costs	1.75			1.77			5.59
Revenue adjustments, primarily for pricing
on prior period open sales	—			—			—
Gross profit per pound	$	0.49		$	0.47		$	0.75

Reconciliation to Amounts Reported
(In millions)									Metals
				Production					Inventory
	Revenues			and Delivery			DD&A		Adjustments
Totals presented above	$	4,420		$	2,698		$	527	$	1
Treatment charges	(90		)	103			—		—
Noncash and other costs, net	—			87			—		—
Revenue adjustments, primarily for pricing on prior period open sales	(1		)	—			—		—
Eliminations and other	45			44			3		—
North America copper mines	4,374			2,932			530		1
Other miningc	12,111			9,299			1,044		15
Corporate, other & eliminations	(1,655		)	(1,534		)	956		20
As reported in FCX’s consolidated financial statements	$	14,830		$	10,697		$	2,530	$	36


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 all other mining operations, including South America mining, Indonesia mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 16.

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



Year Ended December 31, 2015
(In millions)	By-Product				Co-Product Method
	Method				Copper			Molybdenuma		Otherb		Total
Revenues, excluding adjustments	$	4,907			$	4,907		$	261	$	102	$	5,270
Site production and delivery, before net noncash
and other costs shown below	3,339				3,161			209		71		3,441
By-product credits	(261		)		—			—		—		—
Treatment charges	240				233			—		7		240
Net cash costs	3,318				3,394			209		78		3,681
DD&A	558				528			20		10		558
Metals inventory adjustments	142				139			2		1		142
Noncash and other costs, net	233			c	225			6		2		233
Total costs	4,251				4,286			237		91		4,614
Revenue adjustments, primarily for pricing on prior period open sales	(28		)		(28		)	—		—		(28		)
Gross profit	$	628			$	593		$	24	$	11	$	628

Copper sales (millions of recoverable pounds)	1,985				1,985
Molybdenum sales (millions of recoverable pounds)a								37

Gross profit per pound of copper/molybdenum:

Revenues, excluding adjustments	$	2.47			$	2.47		$	7.02
Site production and delivery, before net noncash
and other costs shown below	1.68				1.59			5.61
By-product credits	(0.13		)		—			—
Treatment charges	0.12				0.12			—
Unit net cash costs	1.67				1.71			5.61
DD&A	0.28				0.27			0.53
Metals inventory adjustments	0.07				0.07			0.07
Noncash and other costs, net	0.12			c	0.11			0.16
Total unit costs	2.14				2.16			6.37
Revenue adjustments, primarily for pricing
on prior period open sales	(0.01		)		(0.01		)	—
Gross profit per pound	$	0.32			$	0.30		$	0.65

Reconciliation to Amounts Reported
(In millions)										Metals
					Production					Inventory
	Revenues				and Delivery			DD&A		Adjustments
Totals presented above	$	5,270			$	3,441		$	558	142
Treatment charges	(150		)		90			—		—
Noncash and other costs, net	—				233			—		—
Revenue adjustments, primarily for pricing on prior period open sales	(28		)		—			—		—
Eliminations and other	34				35			2		—
North America copper mines	5,126				3,799			560		142
Other miningd	11,059				9,535			790		84
Corporate, other & eliminations	(1,578		)		(2,641		)	1,890		112
As reported in FCX’s consolidated financial statements	$	14,607			$	10,693		$	3,240	$	338


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 $99 million ($0.05 per pound) for asset impairment, restructuring and other net charges.


d.	Represents the combined total for all other mining operations, including South America mining, Indonesia mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 16.

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



Year Ended December 31, 2017
(In millions)	By-Product				Co-Product Method
	Method				Copper			Othera		Total
Revenues, excluding adjustments	$	3,668			$	3,668		$	267	$	3,935
Site production and delivery, before net noncash
and other costs shown below	1,960				1,838			171		2,009
By-product credits	(218		)		—			—		—
Treatment charges	272				272			—		272
Royalty on metals	8				7			1		8
Net cash costs	2,022				2,117			172		2,289
DD&A	525				489			36		525
Noncash and other costs, net	241			b	224			17		241
Total costs	2,788				2,830			225		3,055
Revenue adjustments, primarily for pricing on prior period open sales	41				41			—		41
Gross profit	$	921			$	879		$	42	$	921

Copper sales (millions of recoverable pounds)	1,235				1,235

Gross profit per pound of copper:

Revenues, excluding adjustments	$	2.97			$	2.97
Site production and delivery, before net noncash
and other costs shown below	1.59				1.49
By-product credits	(0.18		)		—
Treatment charges	0.22				0.22
Royalty on metals	0.01				0.01
Unit net cash costs	1.64				1.72
DD&A	0.43				0.39
Noncash and other costs, net	0.19			b	0.18
Total unit costs	2.26				2.29
Revenue adjustments, primarily for pricing
on prior period open sales	0.03				0.03
Gross profit per pound	$	0.74			$	0.71

Reconciliation to Amounts Reported
(In millions)
					Production
	Revenues				and Delivery			DD&A
Totals presented above	$	3,935			$	2,009		$	525
Treatment charges	(272		)		—			—
Royalty on metals	(8		)		—			—
Noncash and other costs, net	—				241			—
Revenue adjustments, primarily for pricing on prior period open sales	41				—			—
Eliminations and other	(2		)		(6		)	—
South America mining	3,694				2,244			525
Other miningc	15,792				11,175			1,095
Corporate, other & eliminations	(3,083		)		(3,119		)	94
As reported in FCX’s consolidated financial statements	$	16,403			$	10,300		$	1,714


a.	Includes silver sales of 3.8 million ounces ($16.74 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 $203 million ($0.16 per pound of copper) associated with disputed Cerro Verde royalties for prior years.


c.	Represents the combined total for all other mining operations, including North America copper mines, Indonesia mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 16.

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



Year Ended December 31, 2016
(In millions)	By-Product			Co-Product Method
	Method			Copper			Othera		Total
Revenues, excluding adjustments	$	3,077		$	3,077		$	176	$	3,253
Site production and delivery, before net noncash
and other costs shown below	1,681			1,601			120		1,721
By-product credits	(136		)	—			—		—
Treatment charges	320			320			—		320
Royalty on metals	7			6			1		7
Net cash costs	1,872			1,927			121		2,048
DD&A	552			523			29		552
Noncash and other costs, net	40			38			2		40
Total costs	2,464			2,488			152		2,640
Revenue adjustments, primarily for pricing on prior period open sales	11			11			—		11
Gross profit	$	624		$	600		$	24	$	624

Copper sales (millions of recoverable pounds)	1,332			1,332

Gross profit per pound of copper:

Revenues, excluding adjustments	$	2.31		$	2.31
Site production and delivery, before net noncash
and other costs shown below	1.26			1.20
By-product credits	(0.10		)	—
Treatment charges	0.24			0.24
Royalty on metals	0.01			—
Unit net cash costs	1.41			1.44
DD&A	0.41			0.39
Noncash and other costs, net	0.03			0.03
Total unit costs	1.85			1.86
Revenue adjustments, primarily for pricing
on prior period open sales	0.01			0.01
Gross profit per pound	$	0.47		$	0.46

Reconciliation to Amounts Reported
(In millions)
				Production
	Revenues			and Delivery			DD&A
Totals presented above	$	3,253		$	1,721		$	552
Treatment charges	(320		)	—			—
Royalty on metals	(7		)	—			—
Noncash and other costs, net	—			40			—
Revenue adjustments, primarily for pricing on prior period open sales	11			—			—
Eliminations and other	1			(3		)	1
South America mining	2,938			1,758			553
Other miningb	13,547			10,473			1,021
Corporate, other & eliminations	(1,655		)	(1,534		)	956
As reported in FCX’s consolidated financial statements	$	14,830		$	10,697		$	2,530


a.	Includes silver sales of 3.7 million ounces ($18.05 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 all other mining operations, including North America copper mines, Indonesia mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 16.

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



Year Ended December 31, 2015
(In millions)	By-Product			Co-Product Method
	Method			Copper			Othera			Total
Revenues, excluding adjustments	$	2,075		$	2,075		$	65		$	2,140
Site production and delivery, before net noncash
and other costs shown below	1,393			1,355			59			1,414
By-product credits	(44		)	—			—			—
Treatment charges	161			161			—			161
Royalty on metals	4			4			—			4
Net cash costs	1,514			1,520			59			1,579
DD&A	352			341			11			352
Metals inventory adjustments	73			73			—			73
Noncash and other costs, net	41			41			—			41
Total costs	1,980			1,975			70			2,045
Revenue adjustments, primarily for pricing on prior period open sales	(28		)	(28		)	—			(28		)
Gross profit (loss)	$	67		$	72		$	(5	)	$	67

Copper sales (millions of recoverable pounds)	871			871

Gross profit per pound of copper:

Revenues, excluding adjustments	$	2.38		$	2.38
Site production and delivery, before net noncash
and other costs shown below	1.60			1.56
By-product credits	(0.05		)	—
Treatment charges	0.19			0.19
Royalty on metals	—			—
Unit net cash costs	1.74			1.75
DD&A	0.40			0.39
Metals inventory adjustments	0.08			0.08
Noncash and other costs, net	0.05			0.05
Total unit costs	2.27			2.27
Revenue adjustments, primarily for pricing
on prior period open sales	(0.03		)	(0.03		)
Gross profit per pound	$	0.08		$	0.08

Reconciliation to Amounts Reported
(In millions)										Metals
				Production						Inventory
	Revenues			and Delivery			DD&A			Adjustments
Totals presented above	$	2,140		$	1,414		$	352		$	73
Treatment charges	(161		)	—			—			—
Royalty on metals	(4		)	—			—			—
Noncash and other costs, net	—			41			—			—
Revenue adjustments, primarily for pricing on prior period open sales	(28		)	—			—			—
Eliminations and other	(13		)	(17		)	—			—
South America mining	1,934			1,438			352			73
Other miningb	14,251			11,896			998			153
Corporate, other & eliminations	(1,578		)	(2,641		)	1,890			112
As reported in FCX’s consolidated financial statements	$	14,607		$	10,693		$	3,240		$	338


a.	Includes silver sales of 2.0 million ounces ($14.48 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 all other mining operations, including North America copper mines, Indonesia mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 16.

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



Year Ended December 31, 2017
(In millions)	By-Product				Co-Product Method
	Method				Copper			Gold			Silvera		Total
Revenues, excluding adjustments	$	2,945			$	2,945		$	1,952		$	49	$	4,946
Site production and delivery, before net noncash
and other costs shown below	1,552				924			612			16		1,552
Gold and silver credits	(2,010		)		—			—			—		—
Treatment charges	261				156			103			2		261
Export duties	115				68			46			1		115
Royalty on metals	173				98			73			2		173
Net cash costs	91				1,246			834			21		2,101
DD&A	556				331			220			5		556
Noncash and other costs, net	163			b	97			64			2		163
Total costs	810				1,674			1,118			28		2,820
Revenue adjustments, primarily for pricing on prior period open sales	39				39			9			—		48
PT Smelting intercompany loss	(28		)		(17		)	(11		)	—		(28		)
Gross profit	$	2,146			$	1,293		$	832		$	21	$	2,146

Copper sales (millions of recoverable pounds)	981				981
Gold sales (thousands of recoverable ounces)								1,540

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

Revenues, excluding adjustments	$	3.00			$	3.00		$	1,268
Site production and delivery, before net noncash
and other costs shown below	1.58				0.94			398
Gold and silver credits	(2.05		)		—			—
Treatment charges	0.27				0.16			67
Export duties	0.12				0.07			30
Royalty on metals	0.17				0.10			47
Unit net cash costs	0.09				1.27			542
DD&A	0.57				0.34			142
Noncash and other costs, net	0.17			b	0.10			42
Total unit costs	0.83				1.71			726
Revenue adjustments, primarily for pricing
on prior period open sales	0.04				0.04			6
PT Smelting intercompany loss	(0.02		)		(0.01		)	(7		)
Gross profit per pound/ounce	$	2.19			$	1.32		$	541

Reconciliation to Amounts Reported
(In millions)
					Production
	Revenues				and Delivery			DD&A
Totals presented above	$	4,946			$	1,552		$	556
Treatment charges	(261		)		—			—
Export duties	(115		)		—			—
Royalty on metals	(173		)		—			—
Noncash and other costs, net	—				163			—
Revenue adjustments, primarily for pricing on prior period open sales	48				—			—
PT Smelting intercompany loss	—				28			—
Indonesia mining	4,445				1,743			556
Other miningc	15,041				11,676			1,064
Corporate, other & eliminations	(3,083		)		(3,119		)	94
As reported in FCX’s consolidated financial statements	$	16,403			$	10,300		$	1,714

a.Includes silver sales of 3.0 million ounces ($16.56 per ounce average realized price).


b.	Includes $120 million ($0.12 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 all other mining operations, including North America copper mines, South America mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 16.

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



Year Ended December 31, 2016
(In millions)	By-Product			Co-Product Method
	Method			Copper			Gold			Silvera		Total
Revenues, excluding adjustments	$	2,448		$	2,448		$	1,304		$	50	$	3,802
Site production and delivery, before net noncash
and other costs shown below	1,717			1,106			589			22		1,717
Gold and silver credits	(1,371		)	—			—			—		—
Treatment charges	297			191			102			4		297
Export duties	95			61			33			1		95
Royalty on metals	131			79			50			2		131
Net cash costs	869			1,437			774			29		2,240
DD&A	384			247			132			5		384
Noncash and other costs, net	51			33			17			1		51
Total costs	1,304			1,717			923			35		2,675
Revenue adjustments, primarily for pricing on prior period open sales	(1		)	(1		)	17			—		16
PT Smelting intercompany loss	(26		)	(17		)	(9		)	—		(26		)
Gross profit	$	1,117		$	713		$	389		$	15	$	1,117

Copper sales (millions of recoverable pounds)	1,054			1,054
Gold sales (thousands of recoverable ounces)							1,054

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

Revenues, excluding adjustments	$	2.32		$	2.32		$	1,237
Site production and delivery, before net noncash
and other costs shown below	1.63			1.05			559
Gold and silver credits	(1.30		)	—			—
Treatment charges	0.28			0.18			97
Export duties	0.09			0.06			31
Royalty on metals	0.13			0.07			47
Unit net cash costs	0.83			1.36			734
DD&A	0.36			0.24			125
Noncash and other costs, net	0.05			0.03			17
Total unit costs	1.24			1.63			876
Revenue adjustments, primarily for pricing
on prior period open sales	—			—			16
PT Smelting intercompany loss	(0.02		)	(0.02		)	(8		)
Gross profit per pound/ounce	$	1.06		$	0.67		$	369

Reconciliation to Amounts Reported
(In millions)
				Production
	Revenues			and Delivery			DD&A
Totals presented above	$	3,802		$	1,717		$	384
Treatment charges	(297		)	—			—
Export duties	(95		)	—			—
Royalty on metals	(131		)	—			—
Noncash and other costs, net	—			51			—
Revenue adjustments, primarily for pricing on prior period open sales	16			—			—
PT Smelting intercompany loss	—			26			—
Indonesia mining	3,295			1,794			384
Other miningb	13,190			10,437			1,190
Corporate, other & eliminations	(1,655		)	(1,534		)	956
As reported in FCX’s consolidated financial statements	$	14,830		$	10,697		$	2,530


a.	Includes silver sales of 2.9 million ounces ($17.09 per ounce average realized price).


b.	Represents the combined total for all other mining operations, including North America copper mines, South America mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 16.

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



Year Ended December 31, 2015
(In millions)	By-Product			Co-Product Method
	Method			Copper			Gold		Silvera		Total
Revenues, excluding adjustments	$	1,735		$	1,735		$	1,382	$	31	$	3,148
Site production and delivery, before net noncash
and other costs shown below	1,780			981			781		18		1,780
Gold and silver credits	(1,422		)	—			—		—		—
Treatment charges	231			127			101		3		231
Export duties	109			60			48		1		109
Royalty on metals	114			63			50		1		114
Net cash costs	812			1,231			980		23		2,234
DD&A	293			161			129		3		293
Noncash and other costs, net	38			21			17		—		38
Total costs	1,143			1,413			1,126		26		2,565
Revenue adjustments, primarily for pricing on prior period open sales	(50		)	(50		)	8		1		(41		)
PT Smelting intercompany profit	10			5			5		—		10
Gross profit	$	552		$	277		$	269	$	6	$	552

Copper sales (millions of recoverable pounds)	744			744
Gold sales (thousands of recoverable ounces)							1,224

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

Revenues, excluding adjustments	$	2.33		$	2.33		$	1,129
Site production and delivery, before net noncash
and other costs shown below	2.39			1.32			638
Gold and silver credits	(1.91		)	—			—
Treatment charges	0.31			0.17			83
Export duties	0.15			0.08			39
Royalty on metals	0.15			0.09			41
Unit net cash costs	1.09			1.66			801
DD&A	0.39			0.22			105
Noncash and other costs, net	0.05			0.03			14
Total unit costs	1.53			1.91			920
Revenue adjustments, primarily for pricing
on prior period open sales	(0.07		)	(0.06		)	7
PT Smelting intercompany profit	0.01			0.01			4
Gross profit per pound/ounce	$	0.74		$	0.37		$	220

Reconciliation to Amounts Reported
(In millions)
				Production
	Revenues			and Delivery			DD&A
Totals presented above	$	3,148		$	1,780		$	293
Treatment charges	(231		)	—			—
Export duties	(109		)	—			—
Royalty on metals	(114		)	—			—
Noncash and other costs, net	—			38			—
Revenue adjustments, primarily for pricing on prior period open sales	(41		)	—			—
PT Smelting intercompany profit	—			(10		)	—
Indonesia mining	2,653			1,808			293
Other miningb	13,532			11,526			1,057
Corporate, other & eliminations	(1,578		)	(2,641		)	1,890
As reported in FCX’s consolidated financial statements	$	14,607		$	10,693		$	3,240


a.	Includes silver sales of 2.1 million ounces ($14.81 per ounce average realized price).


b.	Represents the combined total for all other mining operations, including North America copper mines, South America mining, Molybdenum mines, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 16.

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



				Years Ended December 31,
(In millions)				2017			2016			2015
Revenues, excluding adjustmentsa				$	295		$	208		$	388
Site production and delivery, before net noncash
and other costs shown below				223			195			299
Treatment charges and other				27			22			40
Net cash costs				250			217			339
DD&A				76			68			97
Metals inventory adjustments				1			15			11
Noncash and other costs, net				6			4			13			b
Total costs				333			304			460
Gross loss				$	(38	)	$	(96	)	$	(72	)

Molybdenum sales (millions of recoverable pounds)a				32			26			48

Gross loss per pound of molybdenum:

Revenues, excluding adjustmentsa				$	9.22		$	8.02		$	8.14
Site production and delivery, before net noncash
and other costs shown below				6.94			7.50			6.27
Treatment charges and other				0.85			0.86			0.84
Unit net cash costs				7.79			8.36			7.11
DD&A				2.39			2.62			2.04
Metals inventory adjustments				0.02			0.58			0.22
Noncash and other costs, net				0.21			0.15			0.28			b
Total unit costs				10.41			11.71			9.65
Gross loss per pound				$	(1.19	)	$	(3.69	)	$	(1.51	)

Reconciliation to Amounts Reported
(In millions)										Metals
				Production						Inventory
Year Ended December 31, 2017	Revenues			and Delivery			DD&A			Adjustments
Totals presented above	$	295		$	223		$	76		$	1
Treatment charges and other	(27		)	—			—			—
Noncash and other costs, net	—			6			—			—
Molybdenum mines	268			229			76			1
Other miningc	19,218			13,190			1,544			2
Corporate, other & eliminations	(3,083		)	(3,119		)	94			5
As reported in FCX’s consolidated financial statements	$	16,403		$	10,300		$	1,714		$	8

Year Ended December 31, 2016
Totals presented above	$	208		$	195		$	68		$	15
Treatment charges and other	(22		)	—			—			—
Noncash and other costs, net	—			4			—			—
Molybdenum mines	186			199			68			15
Other miningc	16,299			12,032			1,506			1
Corporate, other & eliminations	(1,655		)	(1,534		)	956			20
As reported in FCX’s consolidated financial statements	$	14,830		$	10,697		$	2,530		$	36

Year Ended December 31, 2015
Totals presented above	$	388		$	299		$	97		$	11
Treatment charges and other	(40		)	—			—			—
Noncash and other costs, net	—			13			—			—
Molybdenum mines	348			312			97			11
Other miningc	15,837			13,022			1,253			215
Corporate, other & eliminations	(1,578		)	(2,641		)	1,890			112
As reported in FCX’s consolidated financial statements	$	14,607		$	10,693		$	3,240		$	338


a.	Reflects sales of the Molybdenum mines’ production to the 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, the consolidated average realized price per pound of molybdenum will differ from the amounts reported in this table.


b.	Includes restructuring charges of $7 million ($0.15 per pound).

Represents the combined total for all other mining operations, including North America copper mines, South America mining, Indonesia mining, Rod & Refining and Atlantic Copper Smelting & Refining, as presented in Note 16. Also includes amounts associated with the 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.

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, anticipated tax refunds resulting from U.S. tax reform, capital expenditures, 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. Our discussion also contains forward-looking statements and estimates regarding the anticipated effects of the Tax Cuts and Jobs Act enacted on December 22, 2017. These statements and estimates are based on our current interpretation of this legislation, which may change as a result of additional implementation guidance, changes in assumptions, and potential future refinements of or revisions to calculations.

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 inventory adjustments; potential impairment of long-lived mining assets, the outcome of negotiations with the Indonesian government regarding PT-FI’s long-term mining rights; the potential effects of violence in Indonesia generally and in the province of Papua; industry risks; regulatory changes; political risks; labor relations; weather- and climate-related risks; environmental risks; litigation results (including the final disposition of 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, 2017. 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 operate after June 30, 2018.

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.

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