Item 6. Selected Financial Data.

FREEPORT-McMoRan INC.

SELECTED FINANCIAL AND OPERATING DATA

	Years Ended December 31,
	2018				2017				2016				2015				2014
CONSOLIDATED FINANCIAL DATA	(In millions, except per share amounts)
Revenues	$	18,628			$	16,403			$	14,830		a	$	14,607		a	$	20,001		a
Operating income (loss)b	$	4,754		c,d	$	3,690		e	$	(2,729	)	f	$	(13,512	)	g	$	(298	)	h
Net income (loss) from continuing operations	$	2,909		i,j,k,l	$	2,029		i,j,k	$	(3,832	)	j,k	$	(12,180	)	l	$	(1,022	)	j,k
Net (loss) income from discontinued operationsm	$	(15	)		$	66			$	(193	)		$	91			$	277
Net income (loss) attributable to common stock	$	2,602			$	1,817			$	(4,154	)	n	$	(12,236	)		$	(1,308	)
Diluted net income (loss) per share attributable to common stock:
Continuing operations	$	1.79			$	1.21			$	(2.96	)		$	(11.32	)		$	(1.37	)
Discontinued operations	(0.01		)		0.04				(0.20		)		0.01				0.11
	$	1.78			$	1.25			$	(3.16	)		$	(11.31	)		$	(1.26	)
Weighted-average common shares outstanding:
Basic	1,449				1,447				1,318				1,082				1,039
Diluted	1,458				1,454				1,318				1,082				1,039
Dividends declared per share of common stock	$	0.20			$	—			$	—			$	0.2605			$	1.25
Operating cash flows	$	3,863			$	4,666			$	3,737			$	3,220			$	5,631
Capital expenditures	$	1,971			$	1,410			$	2,813			$	6,353			$	7,215
At December 31:
Cash and cash equivalents	$	4,217			$	4,526			$	4,262			$	193			$	315
Property, plant, equipment and mine development costs, net	$	28,010			$	22,994			$	23,348			$	24,245			$	22,927
Oil and gas properties, net	$	—			$	—			$	74			$	7,093			$	19,274
Assets held for sale, including current portiono	$	—			$	—			$	5			$	4,862			$	4,829
Total assets	$	42,216			$	37,302			$	37,317			$	46,577			$	58,674
Total debt, including current portion	$	11,141			$	13,229			$	16,126			$	20,428			$	18,970
Redeemable noncontrolling interest	$	—			$	—			$	—			$	764			$	751
Total stockholders’ equity	$	9,798			$	7,977			$	6,051			$	7,828			$	18,287

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, 2018. All references to income or losses per share are on a diluted basis, unless otherwise noted.

a.

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 and $627 million ($389 million to net loss attributable to common stock or $0.37 per share) in 2014.

b.

Includes net charges (credits) for adjustments to environmental obligations and related litigation reserves of $57 million ($57 million to net income attributable to common stock or $0.04 per share) in 2018, $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 and $76 million ($50 million to net loss attributable to common stock or $0.05 per share) in 2014.

c.

The year 2018 includes net credits totaling $96 million ($156 million to net income attributable to common stock or $0.11 per share) consisting of gains on sales of assets totaling $208 million, partly offset by net charges of $69 million associated with Cerro Verde’s collective labor agreement and $43 million mostly associated with depreciation expense at Freeport Cobalt for the period December 2016 through December 2017, which was suspended while it was classified as held for sale.

d.

The year 2018 also includes net charges at PT Freeport Indonesia (PT-FI) totaling $223 million ($110 million to net income attributable to common stock or $0.08 per share) consisting of $69 million for surface water tax disputes with the local regional tax authority in Papua, Indonesia, $32 million for assessments of prior period permit fees with Indonesia's Ministry of Environment and Forestry, $72 million for disputed payroll withholding taxes for prior years and other tax settlements, and $62 million to write-off certain previously capitalized project costs for the new smelter in Indonesia, partly offset by inventory adjustments totaling $12 million.

e.

The year 2017 includes net charges totaling $68 million to operating income ($12 million to net income attributable to common stock or $0.01 per share) consisting of charges totaling $125 million for workforce reductions at PT-FI and other net charges of $24 million mostly 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.

f.

The year 2016 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, and net of estimated losses associated with assets held for sale.

g.

The year 2015 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.

h.

The year 2014 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.

i.

Includes net charges at Cerro Verde related to disputed royalty matters for prior years totaling $195 million to net income attributable to common stock ($0.13 per share) in 2018 and $186 million to net income attributable to common stock ($0.13 per share) in 2017. Net charges for 2018 consist of charges (credits) of $14 million to operating income, $370 million to interest expense, $22 million to other expense, net of $35 million of net income tax benefits and $176 million to noncontrolling interests. Net charges for 2017 consist 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. Refer to Note 12 for further discussion.

j.	Includes after-tax net gains (losses) on early extinguishment and exchanges of debt totaling $7 million (less than $0.01 per share) in 2018, $21 million ($0.01 per share) in 2017, $26 million ($0.02 per share) in 2016 and $3 million (less than $0.01 per share) in 2014.

k.

As further discussed in “Consolidated Results - Income Taxes” contained in MD&A, amounts include net tax credits (charges) of $632 million ($574 million net of noncontrolling interests or $0.39 per share) in 2018, $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.

l.	The year 2018 includes a gain of $19 million to net income attributable to common stock or $0.01 per share for interest received on tax refunds. The year 2015 includes a gain of $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.

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 (loss) income from discontinued operations in 2018 and 2017 primarily reflect adjustments to the fair value of the potential contingent consideration related to the sale and will continue to be adjusted through December 31, 2019. The year 2016 also includes a net charge of $198 million for the loss on disposal.

n.	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. Refer to Note 2 for further discussion.

o.	In accordance with accounting guidelines, the assets and liabilities of TFHL 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,
	2018				2017				2016				2015				2014
CONSOLIDATED MINING (CONTINUING OPERATIONS)a,b
Copper (millions of recoverable pounds)
Production	3,813				3,737				4,222				3,568				3,457
Sales, excluding purchases	3,811				3,700				4,227				3,603				3,463
Average realized price per pound	$	2.91			$	2.93			$	2.28			$	2.42			$	3.09
Gold (thousands of recoverable ounces)
Production	2,439				1,577				1,088				1,257				1,214
Sales, excluding purchases	2,389				1,562				1,079				1,247				1,248
Average realized price per ounce	$	1,254			$	1,268			$	1,238			$	1,129			$	1,231
Molybdenum (millions of recoverable pounds)
Production	95				92				80				92				95
Sales, excluding purchases	94				95				74				89				95
Average realized price per pound	$	12.50			$	9.33			$	8.33			$	8.70			$	12.74
NORTH AMERICA COPPER MINES
Operating Data, Net of Joint Venture Interestsc
Copper (millions of recoverable pounds)
Production	1,404				1,518				1,831				1,947				1,670
Sales, excluding purchases	1,428				1,484				1,841				1,988				1,664
Average realized price per pound	$	2.96			$	2.85			$	2.24			$	2.47			$	3.13
Molybdenum (millions of recoverable pounds)
Production	32				33				33				37				33
100% Operating Data
Leach operations
Leach ore placed in stockpiles (metric tons per day)	681,400				679,000				737,400				913,000				1,011,500
Average copper ore grade (percent)	0.24				0.28				0.31				0.26				0.25
Copper production (millions of recoverable pounds)	951				1,016				1,120				1,086				963
Mill operations
Ore milled (metric tons per day)	301,000				299,500				300,500				312,100				273,800
Average ore grade (percent):
Copper	0.35				0.39				0.47				0.49				0.45
Molybdenum	0.02				0.03				0.03				0.03				0.03
Copper recovery rate (percent)	87.8				86.4				85.5				85.4				85.8
Copper production (millions of recoverable pounds)	719				788				958				1,020				828
SOUTH AMERICA MININGb
Copper (millions of recoverable pounds)
Production	1,249				1,235				1,328				869				1,151
Sales	1,253				1,235				1,332				871				1,135
Average realized price per pound	$	2.87			$	2.97			$	2.31			$	2.38			$	3.08
Molybdenum (millions of recoverable pounds)
Production	28				27				21				7				11
Leach operations
Leach ore placed in stockpiles (metric tons per day)	195,200				142,800				149,100				208,400				246,400
Average copper ore grade (percent)	0.33				0.37				0.41				0.44				0.48
Copper production (millions of recoverable pounds)	287				255				328				430				491
Mill operations
Ore milled (metric tons per day)	387,600				360,100				353,400				152,100				180,500
Average ore grade:
Copper (percent)	0.38				0.44				0.43				0.46				0.54
Molybdenum (percent)	0.01				0.02				0.02				0.02				0.02
Copper recovery rate (percent)	84.3				81.2				85.8				81.5				88.1
Copper production (millions of recoverable pounds)	962				980				1,000				439				660

FREEPORT-McMoRan INC.

SELECTED FINANCIAL AND OPERATING DATA (Continued)

	Years Ended December 31,
	2018				2017				2016				2015				2014
INDONESIA MINING
Operating Data, Net of Rio Tinto Joint Venture Interestd
Copper (millions of recoverable pounds)
Production	1,160				984				1,063				752				636
Sales	1,130				981				1,054				744				664
Average realized price per pound	$	2.89			$	3.00			$	2.32			$	2.33			$	3.01
Gold (thousands of recoverable ounces)
Production	2,416				1,554				1,061				1,232				1,130
Sales	2,366				1,540				1,054				1,224				1,168
Average realized price per ounce	$	1,254			$	1,268			$	1,237			$	1,129			$	1,229
100% Operating Data
Ore milled (metric tons per day)	178,100				140,400				165,700				162,500				120,500
Average ore grade:
Copper (percent)	0.98				1.01				0.91				0.67				0.79
Gold (grams per metric ton)	1.58				1.15				0.68				0.79				0.99
Recovery rates (percent):
Copper	91.8				91.6				91.0				90.4				90.3
Gold	84.7				85.0				82.2				83.4				83.2
Production:
Copper (millions of recoverable pounds)	1,227				996				1,063				752				651
Gold (thousands of recoverable ounces)	2,697				1,554				1,061				1,232				1,132
MOLYBDENUM MINES
Molybdenum production (millions of recoverable pounds)	35				32				26				48				51
Ore milled (metric tons per day)	27,900				22,500				18,300				34,800				39,400
Average molybdenum ore grade (percent)	0.18				0.20				0.21				0.2				0.19
OIL AND GAS OPERATIONSe
Sales Volumes:
Oil (million barrels)	1.4				1.8				34.4				35.3				40.1
Natural gas (billion cubic feet)	10.1				15.8				65.1				89.7				80.8
Natural gas liquids (NGLs) (million barrels)	0.1				0.2				1.8				2.4				3.2
Million barrels of oil equivalents	3.1				4.6				47.1				52.6				56.8
Average Realizations:
Oil (per barrel)	$	54.13			$	40.71			$	39.13			$	57.11			$	90.00
Natural gas (per million British thermal units)	$	3.15			$	3.18			$	2.38			$	2.59			$	4.23
NGLs (per barrel)	$	44.11			$	30.65			$	18.11			$	18.90			$	39.73

a.	Excludes the results from the Tenke mine, 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.	Net of Morenci’s joint venture interest; effective May 31, 2016, our undivided interest in Morenci was prospectively reduced from 85 percent to 72 percent. Refer to Note 2 for further discussion.

d.	Prior to December 21, 2018, PT-FI had an unincorporated joint venture with Rio Tinto. Refer to Notes 2 and 3 for further discussion.

e.	During the three years ended December 31, 2018, we completed sales of substantially all of our oil and gas assets. Refer to Note 2 for further discussion.

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 believe that we have a high-quality portfolio of long-lived copper assets positioned to generate long-term value. We have commenced a project to develop the Lone Star oxide ores near the Safford operation in eastern Arizona, and PT Freeport Indonesia (PT-FI) has several projects in the Grasberg minerals district related to the development of its large-scale, long-lived, high-grade underground ore bodies (refer to “Operations - Indonesia Mining” for further discussion of PT-FI’s transition mining from the open pit to underground). We are also pursuing other opportunities to enhance our mines’ net present values, and we continue to advance studies for future development of our copper resources, the timing of which will be dependent on market conditions.

Net income (loss) attributable to common stock totaled $2.6 billion in 2018, $1.8 billion in 2017 and $(4.2) billion in 2016. Our results in 2018, compared to 2017, benefited from higher copper and gold sales volumes, higher gains on sales of assets and lower adjustments to environmental obligations, partly offset by higher income tax expense mostly at our international operations. Our results for the year 2016 were unfavorably impacted by charges of $5.4 billion at oil and gas operations primarily for the impairment of oil and gas properties, drillship settlements and contract termination costs. Refer to “Consolidated Results” for discussion of items impacting our consolidated results for the three years ended December 31, 2018.

At December 31, 2018, we had $4.2 billion in consolidated cash and cash equivalents, $11.1 billion in total debt, and no borrowings and approximately $3.5 billion available under our revolving credit facility.

As further discussed in Note 2, in December 2018, we completed the transaction with the Indonesian government regarding PT-FI’s long-term mining rights and share ownership. We expect our share of future cash flows of the expanded PT-FI asset base, combined with the cash proceeds received in the transaction, to be comparable to our share of anticipated future cash flows under PT-FI’s former Contract of Work (COW) and joint venture arrangements with Rio Tinto plc (Rio Tinto Joint Venture).

As a result of the transaction, PT Indonesia Asahan Aluminium’s (Persero) (PT Inalum) and PT Indonesia Papua Metal Dan Mineral’s (PTI - formerly known as PT Indocopper Investama) collective share ownership of PT-FI totals 51.24 percent and our share ownership is 48.76 percent. The arrangements provide for us and the other pre-transaction PT-FI shareholders to retain the economics of the revenue and cost sharing arrangements under the former Rio Tinto Joint Venture. As a result, our economic interest in PT-FI is expected to approximate 81 percent from 2019 through 2022.

We, PT-FI, PTI and PT Inalum also entered into a shareholders agreement, which governs certain matters with respect to the governance and management of PT-FI in connection with their ownership of shares in PT-FI, and establishes our control over the management of PT-FI's operations. Concurrent with closing the transaction, the Indonesian government granted PT-FI a new special mining license (IUPK) to replace its former COW, enabling PT-FI to conduct operations in the Grasberg minerals district through 2041. Under the terms of the IUPK, PT-FI has

been granted an extension of mining rights through 2031, with rights to extend mining rights through 2041, subject to PT-FI completing the construction of a new smelter in Indonesia within five years of closing the transaction and fulfilling its defined fiscal obligations to the Indonesian government. 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, 2018, for further discussion of PT-FI’s IUPK.

We have significant mineral reserves, resources and future development opportunities within our portfolio of mining assets. At December 31, 2018, our estimated consolidated recoverable proven and probable mineral reserves totaled 119.6 billion pounds of copper, 30.8 million ounces of gold and 3.78 billion pounds of molybdenum. Refer to “Critical Accounting Estimates – Mineral Reserves” for further discussion.

During 2018, production from our mines totaled 3.8 billion pounds of copper, 2.4 million ounces of gold and 95 million pounds of molybdenum. Following is a summary of the geographic locations of our consolidated copper, gold and molybdenum production in 2018:

	Copper			Gold			Molybdenum
North America	37	%		1	%		71	%	a
South America	33			—			29
Indonesia	30			99			—
	100	%		100	%		100	%

a.	Our Henderson and Climax molybdenum mines produced 37 percent of consolidated molybdenum production, and our North America copper mines produced 34 percent.

Copper production from the Grasberg open-pit mine in Indonesia, Morenci mine in North America and Cerro Verde mine in Peru together totaled 76 percent of our consolidated copper production in 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. Refer to “Markets” for further discussion. Because we cannot control the price of our products, the key measures that management focuses on in operating our business are sales volumes, unit net cash costs, operating cash flow and capital expenditures.

Sales Volumes

Following are our projected consolidated sales volumes for 2019 (which reflects a transition year) and actual consolidated sales volumes for 2018:

	2019			2018
	(Projected)			(Actual)
Copper (millions of recoverable pounds):
North America copper mines	1,400			1,428
South America mining	1,270			1,253
Indonesia mining	615			1,130
Total	3,285			3,811
Gold (thousands of recoverable ounces)	785			2,389
Molybdenum (millions of recoverable pounds)	94		a	94

a.	Projected molybdenum sales include 35 million pounds produced by our Molybdenum mines and 59 million pounds produced by our North America and South America copper mines.

Consolidated sales for first-quarter 2019 are expected to approximate 825 million pounds of copper, 255 thousand ounces of gold and 24 million pounds of molybdenum. As PT-FI transitions mining from the open pit to underground, its production is expected to be significantly lower in 2019 and 2020, compared to 2018. Metal production is expected to improve significantly by 2021 following a ramp-up period. Projected sales volumes for the year 2019 are dependent on operational performance, weather-related conditions, and other factors. For other important factors that could cause results to differ materially from projections, refer to “Cautionary Statement,” and “Risk Factors” contained in Part I, Item 1A. of our annual report on Form 10-K for the year ended December 31, 2018.

Consolidated Unit Net Cash Costs

Assuming average prices of $1,300 per ounce of gold and $12.00 per pound of molybdenum for 2019 and achievement of current sales volume and cost estimates, consolidated unit net cash costs (net of by-product credits) for our copper mines are expected to average $1.73 per pound of copper in 2019. The impact of price changes on 2019 consolidated unit net cash costs would approximate $0.01 per pound for each $50 per ounce change in the average price of gold and $0.03 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 $2.75 per pound of copper, $1,300 per ounce of gold and $12.00 per pound of molybdenum, our consolidated operating cash flows are estimated to approximate $1.8 billion (net of $0.2 billion in working capital uses and timing of other tax payments) for the year 2019. Estimated consolidated operating cash flows in 2019 also reflect a projected income tax provision of $0.5 billion (refer to “Consolidated Results - Income Taxes” for further discussion of our projected income tax rate for the year 2019). The impact of price changes during 2019 on operating cash flows would approximate $315 million for each $0.10 per pound change in the average price of copper, $40 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 $2.4 billion in 2019, including $1.5 billion for major mining projects primarily associated with underground development activities in the Grasberg minerals district and development of the Lone Star oxide project.

MARKETS

World prices for copper, gold and molybdenum can fluctuate significantly. During the period from January 2009 through December 2018, the London Metal Exchange (LME) copper settlement price varied from a low of $1.38 per pound in 2009 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 $810 per ounce in 2009 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 $18.60 per pound in 2010. 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, 2018.

This graph presents LME copper settlement 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 2009 through December 2018. 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 improved throughout 2017. Beginning in second-quarter 2018, copper prices declined in response to global trade actions initiated by the U.S., lower economic growth in China and globally, and concerns about rising interest rates and a stronger U.S. dollar. For the year 2018, LME copper settlement prices ranged from a low of $2.64 per pound to a high of $3.29 per pound, averaged $2.96 per pound and closed at $2.71 per pound on December 31, 2018. The LME copper settlement price was $2.79 per pound on January 31, 2019.

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 2009 through December 2018. An improving economic outlook, stronger U.S. dollar and positive equity performance contributed to lower demand for gold since 2014. During 2018, London PM gold prices ranged from a low of $1,178 per ounce to a high of $1,355 per ounce, averaged $1,268 per ounce and closed at $1,279 per ounce on December 28, 2018 (there was no London PM gold price quote on December 31, 2018). The London PM gold price was $1,323 per ounce on January 31, 2019.

This graph presents the Metals Week Molybdenum Dealer Oxide weekly average price from January 2009 through December 2018. Molybdenum prices have declined beginning in mid-2014 because of weaker demand from global steel and stainless steel producers, but rebounded starting in 2016. During 2018, the weekly average price for molybdenum ranged from a low of $10.67 per pound to a high of $12.97 per pound, averaged $11.93 per pound and was $11.88 per pound on December 31, 2018. The Metals Week Molybdenum Dealer Oxide weekly average price was $10.95 per pound on January 31, 2019.

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, 2018, our consolidated estimated recoverable proven and probable reserves were assessed using long-term prices of $2.50 per pound for copper in North America and South America and $2.00 per pound of copper in Indonesia, $1,000 per ounce of gold and $10 per pound of molybdenum. Reserves for Indonesia would not significantly change if assessed under a long-term price of $2.50 per pound of copper as PT-FI’s reserve plan is mill-constrained by the term of its IUPK, which contains rights to extend mining rights through 2041. The following table summarizes changes in our estimated consolidated recoverable proven and probable copper, gold and molybdenum reserves during 2018 and 2017:

		Coppera (billion pounds)			Gold (million ounces)			Molybdenum (billion pounds)
Consolidated reserves at December 31, 2016		86.8			26.1			2.95
Net additions (revisions)		3.6			(1.0	)		(0.02	)
Production		(3.7	)		(1.6	)		(0.09	)
Consolidated reserves at December 31, 2017		86.7			23.5			2.84
PT-FI acquisition of Rio Tinto Joint Venture interest		13.0			10.1			—
Other net additions (revisions)		23.7		b	(0.4	)		1.04		c
Production		(3.8	)		(2.4	)		(0.10	)
Consolidated reserves at December 31, 2018		119.6			30.8			3.78

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

b.	Primarily reflects an increase in the copper price assumption from $2.00 per pound to $2.50 per pound for determining reserves in North America and South America.

c.	Primarily reflects an increase in molybdenum reserves at North America copper mines and the Cerro Verde mine in Peru.

Refer to Note 20 and “Risk Factors” contained in Part I, Item 1A. of our annual report on Form 10-K for the year ended December 31, 2018, for further information regarding, and risks associated with, our 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, 2018, we estimate that our annual depreciation, depletion and amortization (DD&A) expense for 2019 would decrease by $44 million ($22 million to net income attributable to common stock), and a 10 percent decrease in copper reserves would increase DD&A expense by $53 million ($26 million to net income attributable to common stock). 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.

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, 2018). 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, 2018, estimated consolidated recoverable copper was 2.0 billion pounds in leach stockpiles (with a carrying value of $2.2 billion) and 0.6 billion pounds in mill stockpiles (with a carrying value of $0.5 billion).

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.

For the three years ended December 31, 2018, 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, 2018.

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, 2018, environmental obligations recorded in our consolidated balance sheet totaled $1.5 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, 2018.

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 asset retirement obligations (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, 2018, AROs recorded in our consolidated balance sheet totaled $2.5 billion, including $0.5 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, 2018.

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 $4.5 billion at December 31, 2018, which covered all of our U.S. foreign tax credits, U.S. federal net operating loss carryforwards, foreign net operating loss carryforwards, and substantially all of our U.S. state net operating losses. Refer to Note 11 for further discussion.

CONSOLIDATED RESULTS

	Years Ended December 31,
	2018				2017				2016
SUMMARY FINANCIAL DATA	(in millions, except per share amounts)
Revenuesa,b	$	18,628			$	16,403			$	14,830		c
Operating income (loss)a,d,e	$	4,754		f,g	$	3,690		h	$	(2,729	)	i
Net income (loss) from continuing operationsj,k,l	$	2,909		m,n	$	2,029		n	$	(3,832	)
Net (loss) income from discontinued operationso	$	(15	)		$	66			$	(193	)
Net income (loss) attributable to common stock	$	2,602			$	1,817			$	(4,154	)	p
Diluted net income (loss) per share attributable to common stock:
Continuing operations	$	1.79			$	1.21			$	(2.96	)
Discontinued operations	(0.01		)		0.04				(0.20		)
	$	1.78			$	1.25			$	(3.16	)
Diluted weighted-average common shares outstanding	1,458				1,454				1,318
Operating cash flowsq	$	3,863			$	4,666			$	3,737
Capital expenditures	$	1,971			$	1,410			$	2,813
At December 31:
Cash and cash equivalents	$	4,217			$	4,526			$	4,262
Total debt, including current portion	$	11,141			$	13,229			$	16,126

a.	Refer to Note 16 for a summary of revenues and operating income by operating division.

b.	Includes adjustments to embedded derivatives for provisionally priced concentrate and cathode sales (refer to Note 14).

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). Refer to Note 14 for further discussion.

d.

Includes net gains on sales of assets totaling $208 million ($208 million to net income attributable to common stock or $0.14 per share) in 2018, $81 million ($81 million to net income attributable to common stock or $0.06 per share) in 2017 and $649 million ($649 million to net loss attributable to common stockholders or $0.49 per share) in 2016. Refer to Note 2 and “Net Gain on Sales of Assets” below for further discussion.

e.

Includes net charges (credits) for adjustments to environmental obligations and related litigation reserves of $57 million ($57 million to net income attributable to common stock or $0.04 per share) in 2018, $210 million ($210 million to net income attributable to common stock or $0.14 per share) in 2017 and $(16) million ($(16) million to net loss attributable to common stock or $(0.01) per share) in 2016.

f.

The year 2018 includes net charges of $112 million ($52 million to net income attributable to common stock or $0.04 per share) consisting of $69 million for Cerro Verde’s new three-year collective labor agreement (CLA) and $43 million mostly associated with depreciation expense at Freeport Cobalt for the period December 2016 through December 2017, which was suspended while it was classified as held for sale.

g.

The year 2018 also includes net charges at PT-FI of $223 million ($110 million to net income attributable to common stock or $0.08 per share) consisting of $69 million for surface water tax disputes with the local regional tax authority in Papua, Indonesia, $32 million for assessments of prior period permit fees with Indonesia's Ministry of Environment and Forestry (MOEF), $72 million for disputed payroll withholding taxes for prior years and other tax settlements, and $62 million to write-off certain previously capitalized project costs for the new smelter in Indonesia, partly offset by inventory adjustments totaling $12 million.

h.	The year 2017 includes net charges of $149 million ($93 to net income attributable to common stock or $0.06 per share) mostly associated with workforce reductions at PT-FI.

i.

The year 2016 also includes charges of $5.5 billion ($5.5 billion to net loss attributable to common stockholders or $4.16 per share) consisting of (i) $4.3 billion to reduce the carrying value of oil and gas properties pursuant to full cost accounting rules, (ii) $1.1 billion of other net oil and gas charges, primarily for drillship settlements/idle rig costs, the termination of contracts for support vessels and equipment, inventory adjustments, asset impairment and restructuring charges, and (iii) $69 million of net charges at mining operations primarily reflecting inventory adjustments, PT-FI asset retirement and Cerro Verde social commitments.

j.	Includes net gains on early extinguishment and exchanges of debt totaling $7 million (less than $0.01 per share) in 2018, $21 million ($0.01 per share) in 2017 and $26 million ($0.02 per share) in 2016. Refer to Note 8 for further discussion.

k.	Includes net tax credits of $632 million ($574 million net of noncontrolling interests or $0.39 per share) in 2018, $438 million ($0.30 per share) in 2017 and $370 million ($374 million net of noncontrolling interests or $0.28 per share) in 2016. Refer to “Income Taxes” below for further discussion.

l.	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.

m.	Includes interest received on tax refunds totaling $30 million ($19 million to net income attributable to common stock or $0.01 per share), mostly associated with the refund of PT-FI’s prior years’ tax receivables.

n.

Includes net charges associated with disputed Cerro Verde royalties for prior years of $195 million to net income attributable to common stock ($0.13 per share) in 2018 and $186 million to net income attributable to common stock ($0.13 per share) in 2017. Net charges for the year 2018 consist of charges to production and delivery costs ($14 million), interest expense ($370 million) and other expense ($22 million), net of income tax benefits ($35 million) and noncontrolling interests ($176 million). Net charges for the year 2017 primarily reflect charges to production and delivery ($203 million), interest expense ($145 million) and income taxes ($7 million), net of noncontrolling interests ($169 million). Refer to Note 12 for further discussion.

o.	Primarily reflects adjustments to the estimated fair value of contingent consideration related to the November 2016 sale of our interest in TFHL, which will continue to be adjusted through December 31, 2019.

p.	Includes a gain on redemption of noncontrolling interest of $199 million ($0.15 per share) for the settlement of a preferred stock obligation. Refer to Note 2 for further discussion.

q.	Includes net working capital (uses) sources and timing of other tax payments of $(0.6) billion in 2018, $0.6 billion in 2017 and $87 million in 2016.

	Years Ended December 31,
	2018				2017				2016a
SUMMARY OPERATING DATA
Copper (millions of recoverable pounds)
Production	3,813				3,737				4,222
Sales, excluding purchases	3,811				3,700				4,227
Average realized price per pound	$	2.91			$	2.93			$	2.28
Site production and delivery costs per poundb	$	1.76			$	1.60			$	1.42
Unit net cash costs per poundb	$	1.07			$	1.19			$	1.26
Gold (thousands of recoverable ounces)
Production	2,439				1,577				1,088
Sales, excluding purchases	2,389				1,562				1,079
Average realized price per ounce	$	1,254			$	1,268			$	1,238
Molybdenum (millions of recoverable pounds)
Production	95				92				80
Sales, excluding purchases	94				95				74
Average realized price per pound	$	12.50			$	9.33			$	8.33

a.	Excludes results from the Tenke mine, which is reported as a discontinued operation.

b.	Reflects per pound weighted-average production and delivery costs and unit net cash costs (net of by-product credits) for all copper mines, before net noncash and other costs. For reconciliations of 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 $18.6 billion in 2018, $16.4 billion in 2017 and $14.8 billion in 2016. Our revenues primarily include the sale of copper concentrate, copper cathode, copper rod, gold in concentrate and molybdenum. Following is a summary of changes in our consolidated revenues between periods (in millions):

	2018				2017
Consolidated revenues - prior year	$	16,403			$	14,830
Mining operations:
Higher (lower) sales volumes:
Copper	326				(1,201		)
Gold	1,049				598
Molybdenum	(9		)		175
(Lower) higher averaged realized prices:
Copper	(76		)		2,405
Gold	(33		)		47
Molybdenum	299				95
Adjustments for prior year provisionally priced copper sales	(151		)		76
Higher revenues from sales of purchased copper	264				361
Higher Atlantic Copper revenues	270				202
Higher royalties and export duties	(130		)		(63		)
Lower oil sales volumes	(17		)		(1,269		)
Other, including intercompany eliminations	433				147
Consolidated revenues - current year	$	18,628			$	16,403

Mining Operations

Sales Volumes. Higher copper sales volumes in 2018, compared to 2017, primarily reflect higher operating rates in Indonesia. Lower copper sales volumes in 2017, compared to 2016, primarily reflect lower sales volumes in North America mainly caused by lower ore grades.

Higher gold sales volumes in 2018, compared with 2017, primarily reflect higher operating rates and ore grades at PT-FI. Higher gold sales volumes in 2017, compared with 2016, primarily reflect higher ore grades at PT-FI.

Consolidated molybdenum sales volumes in 2018 approximated 2017 sales volumes. Higher molybdenum sales volumes in 2017, compared with 2016, primarily reflect increased demand and higher production.

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

Realized Prices. Our consolidated revenues can vary significantly as a result of fluctuations in the market prices of copper, gold and molybdenum. In 2018, our average realized prices were 1 percent lower for copper and gold and 34 percent higher for molybdenum in 2018, compared with 2017. In 2017, our average realized prices were 29 percent higher for copper, 2 percent higher for gold and 12 percent higher for molybdenum, compared with 2016.

As discussed below and in “Disclosures About Market Risks-Commodity Price Risk”, 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). We record revenues and invoice customers at the time of shipment based on then-current LME prices, which results in an embedded derivative on provisionally priced concentrate and cathode sales that is adjusted to fair value through earnings each period until final pricing on the date of settlement. Average realized copper prices include net adjustments to current period provisionally priced copper sales totaling $(240) million for 2018, $408 million for 2017 and $257 million for 2016. Refer to Note 14 for a summary of total adjustments to prior period and current period provisionally priced sales.

Prior Year Provisionally Priced Copper Sales. Net adjustments to prior years’ provisionally priced copper sales recorded in consolidated revenues totaled $(70) million in 2018, $81 million in 2017 and $5 million in 2016. Refer to Note 14 for a summary of total adjustments to prior period and current period provisionally priced sales.

Purchased Copper. We purchase copper cathode primarily for processing by our Rod & Refining operations. Purchased copper volumes totaled 356 million pounds in 2018, 273 million pounds in 2017 and 188 million pounds in 2016.

Atlantic Copper Revenues. Atlantic Copper revenues totaled $2.3 billion in 2018, $2.0 billion in 2017 and $1.8 billion in 2016. Higher Atlantic Copper revenues in 2018, compared with 2017, primarily reflect higher copper and gold sales volumes. Higher Atlantic Copper revenues in 2017, compared with 2016, primarily reflect higher copper prices.

Royalties and Export Duties. Primarily reflects royalties for sales from PT-FI that will vary with the volume of metal sold and the prices of copper and gold. PT-FI also pays export duties until development progress for the new smelter in Indonesia exceeds 50 percent. Refer to Note 13 for a summary of PT-FI’s royalties and export duties.

Oil & Gas Operations

Oil sales volumes totaled 1.4 million barrels (MMBbls) in 2018, 1.8 MMBbls in 2017 and 34.4 MMBbls in 2016. During the three years ended December 31, 2018, we completed the sales of substantially all of our oil and gas properties. As a result, oil sales volumes have significantly declined in 2018 and 2017, compared to 2016.

Production and Delivery Costs

Consolidated production and delivery costs totaled $11.7 billion in 2018, $10.3 billion in 2017 and $10.7 billion in 2016. Higher production and delivery costs in 2018, compared to 2017, primarily reflected higher mining and milling costs in North America and South America and higher copper purchases at our rod and refining operations. 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.

The year 2018 included net charges at PT-FI totaling $223 million (refer to the “Summary Financial Data” table above for a summary of these charges) and charges at Cerro Verde totaling $69 million related to its new three-year CLA.

The year 2017 included charges totaling $203 million associated with disputed royalties at Cerro Verde for prior years and $120 million associated with workforce reductions at PT-FI.

The year 2016 included charges totaling $926 million associated with drillship settlements/idle rig and contract termination costs at U.S. oil and gas operations.

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 $1.76 per pound of copper in 2018, $1.60 per pound in 2017 and $1.42 per pound in 2016. Higher consolidated unit site production and delivery costs in 2018, compared with 2017, primarily reflected higher mining and milling costs at our North America and South America mining operations as well as charges associated with Cerro Verde’s new three-year CLA. 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. 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 approximately 20 percent of our copper mine site operating costs in 2018, including purchases of approximately 220 million gallons of diesel fuel; 8,150 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); 740 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 2019.

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 $1.75 billion in 2018, $1.7 billion in 2017 and $2.5 billion in 2016. The year 2018 included $31 million of depreciation expense at Freeport Cobalt from December 2016 through December 2017 that was suspended while it was classified as held for sale. 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.

Impairment of Oil and Gas Properties

Under full cost accounting rules, we recognized impairment charges totaling $4.3 billion in 2016 primarily for U.S. oil and gas properties. Refer to Note 1 for further discussion.

Selling, General and Administrative Expenses

Consolidated selling, general and administrative expenses totaled $443 million in 2018, $477 million in 2017 and $597 million in 2016. Selling, general and administrative expenses included oil and gas contract termination costs of $17 million in 2017 and $85 million for restructuring costs in 2016.

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; no such costs were capitalized in subsequent periods.

Mining Exploration and Research Expenses

Consolidated exploration and research expenses for our mining operations totaled $105 million in 2018, $93 million in 2017 and $63 million in 2016. Our mining exploration activities are generally associated with our existing mines, focusing on opportunities to expand reserves and resources to support development of additional future production capacity. A drilling program to further delineate the Lone Star resource continues to indicate significant additional mineralization in this district, with higher ore grades than our other North America copper mines. 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 2019.

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 $89 million in 2018, $244 million in 2017 and $14 million in 2016. Higher costs in 2018 and 2017, compared with 2016, primarily reflect adjustments to environmental obligations resulting from revised cost estimates. Refer to Note 12 for environmental obligations and litigation matters.

Net Gain on Sales of Assets

Net gain on sales of assets totaled $208 million in 2018, primarily reflecting gains on sales of assets, adjustments to the carrying value of assets no longer held for sale and fair value adjustments associated with contingent consideration related to the 2016 sale of onshore California oil and gas properties. Relative to 2018, we realized $50 million in contingent consideration related to the 2016 sale of oil and gas properties, which was received in 2019, and we would receive additional contingent consideration related to this transaction consisting of $50 million per year for 2019 and 2020 if the price of Brent crude oil averages over $70 per barrel in each of these calendar years.

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, 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 discussed above.

Refer to Note 2 for further discussion of dispositions.

Interest Expense, Net

Consolidated interest costs (before capitalization and excluding interest expense associated with disputed Cerro Verde royalties) totaled $671 million in 2018, $777 million in 2017 and $854 million in 2016. Lower interest expense in 2018 and 2017, compared to 2016, reflects a decrease in total debt. Interest expense associated with disputed Cerro Verde royalties (refer to Note 12 for further discussion) totaled $370 million in 2018 and $145 million in 2017.

Capitalized interest varies with the level of expenditures for our development projects and average interest rates on our borrowings, and totaled $96 million in 2018, $121 million in 2017 and $99 million in 2016. 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 and exchanges of debt totaled $7 million in 2018, $21 million in 2017 and $26 million in 2016. Refer to Note 8 for further discussion.

Other Income (Expense), Net

Other income (expense), net primarily includes foreign currency translation adjustments and interest income, and totaled $76 million in 2018, $(8) million in 2017 and $(14) million in 2016. The year 2018, compared to the year 2017, reflects higher interest income and $30 million of interest received on tax refunds, mostly associated with the refund of PT-FI’s prior years’ tax receivables.

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):

	2018										2017
	Income (Loss)a				Effective Tax Rate		Income Tax (Provision) Benefit				Income (Loss)a				Effective Tax Rate		Income Tax (Provision) Benefit
U.S.	$	352			7%		$	(24	)	b,c	$	41			(156)%		$	64		d
South America	706				43%		(303		)		1,059				41%		(439		)
Indonesia	3,027				42%		(1,284		)	e	2,033				43%		(869		)
U.S. tax reform	—				N/A		123			f	—				N/A		393			f
Cerro Verde royalty dispute	(406		)		N/A		35			g	(348		)		N/A		(7		)	g
Change in PT-FI tax rates	—				N/A		504			h	—				N/A		—
Eliminations and other	213				N/A		(42		)		117				N/A		(25		)
Consolidated FCX	$	3,892			25%		$	(991	)		$	2,902			30%		$	(883	)

	2016
	Income (Loss)a				Effective Tax Rate		Income Tax (Provision) Benefit
U.S.	$	(865	)		41%		$	357		i
South America	501				43%		(216		)	j
Indonesia	1,058				42%		(442		)
Impairment of oil and gas properties	(4,317		)		N/A		—			k
Eliminations and other	151				N/A		(70		)
Consolidated FCX	$	(3,472	)		(11)%		$	(371	)

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

b.	The year 2018 includes net tax credits of $9 million for changes in valuation allowances and a tax credit of $5 million associated with the settlement of a state income tax examination.

c.	The year 2018 also includes a tax charge of $29 million associated with adjustments to the calculation of transition tax resulting from recently released guidance by the U.S. Internal Revenue Service.

d.	The year 2017 includes net tax credits of $24 million for changes in valuation allowances and $21 million associated with alternative minimum tax (AMT) credit carryforwards, which are not related to the AMT credits resulting from U.S. tax reform that are presented separately in the above tables.

e.	Includes a tax credit of $20 million ($17 million net of noncontrolling interest) for adjustments to PT-FI's historical tax positions.

f.

The Tax Cuts and Jobs Act (the Act), which was enacted on December 22, 2017, included significant modifications to U.S. tax laws and created many new complex tax provisions. In December 2018, we completed our analysis of the Act and recognized benefits totaling $123 million ($119 million net of noncontrolling interest) in 2018 associated with AMT credit refunds. During 2017, we recorded net tax benefits related to specific provisions of the Act totaling $393 million, reflecting the reversal of valuation allowances associated with anticipated refunds of AMT credits through 2021 ($272 million) and a decrease in corporate income tax rates ($121 million).

g.	Refer to Note 12 for a summary of charges related to Cerro Verde’s disputed royalties for prior years.

h.	Reflects a tax credit of $504 million ($453 million net of noncontrolling interest) resulting from the change in PT-FI's tax rates in accordance with its IUPK.

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

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

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

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 $2.75 per pound for copper, $1,300 per ounce for gold and $12.00 per pound for molybdenum for 2019, we estimate our consolidated effective tax rate for the year 2019 would approximate 46 percent (comprised of an estimated effective rate of 0 percent on U.S. income, 38 percent on Indonesia income and 40 percent on South America income). Because of our U.S. tax position, we do not record a financial statement impact for income or losses generated in the U.S.; therefore, our consolidated effective rate is generally higher than the international rates at lower copper prices and lower than international rates at higher copper prices.

Refer to Note 11 for further discussion of income taxes.

Net (Loss) Income from Discontinued Operations

In November 2016, we completed the sale of our interest in TFHL. In accordance with accounting guidelines, the results of TFHL have been reported as discontinued operations for all periods presented. Net (loss) income from discontinued operations totaled $(15) million in 2018 and $66 million in 2017, primarily reflecting adjustments to the estimated fair value of contingent consideration related to the sale of our interest in TFHL, which will continue to be adjusted through December 31, 2019. Net loss from discontinued operations of $193 million in 2016 primarily reflected the loss on disposal. Refer to Note 2 for further discussion.

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, 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. In May 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. An initial project to develop the Lone Star oxide ores commenced in first-quarter 2018, with first production expected by the end of 2020. Initial production from the Lone Star oxide ores is expected to average approximately 200 million pounds of copper per year. Total capital costs, including mine equipment and pre-production stripping, are expected to approximate $850 million and will benefit from the utilization of existing infrastructure at the adjacent Safford operation. As of December 31, 2018, approximately $290 million has been incurred for this project. The project also advances exposure to a significant sulfide resource. We expect to incorporate recent positive drilling and ongoing results in our future development plans.

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

	2018				2017				2016
Operating Data, Net of Joint Venture Interests
Copper (millions of recoverable pounds)
Production	1,404				1,518				1,831
Sales, excluding purchases	1,428				1,484				1,841			a
Average realized price per pound	$	2.96			$	2.85			$	2.24
Molybdenum (millions of recoverable pounds)
Productionb	32				33				33
100% Operating Data
Leach operations
Leach ore placed in stockpiles (metric tons per day)	681,400				679,000				737,400
Average copper ore grade (percent)	0.24				0.28				0.31
Copper production (millions of recoverable pounds)	951				1,016				1,120
Mill operations
Ore milled (metric tons per day)	301,000				299,500				300,500
Average ore grade (percent):
Copper	0.35				0.39				0.47
Molybdenum	0.02				0.03				0.03
Copper recovery rate (percent)	87.8				86.4				85.5
Copper production (millions of recoverable pounds)	719				788				958

a.	Included approximately 60 million pounds of copper from the 13 percent undivided interest in Morenci that we sold in May 2016.

b.	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 totaled 1.4 billion pounds in 2018, 1.5 billion pounds in 2017 and 1.8 billion pounds in 2016. The decreases in 2018 and 2017, compared with 2016, primarily reflect lower ore grades.

North America copper sales are estimated to approximate 1.4 billion pounds of copper in 2019. 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 three years ended December 31, 2018. 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.

	2018												2017
	By-				Co-Product Method								By-				Co-Product Method
	Product Method				Copper				Molyb- denuma				Product Method				Copper				Molyb- denuma
Revenues, excluding adjustments	$	2.96			$	2.96			$	11.64			$	2.85			$	2.85			$	7.80
Site production and delivery, before net noncash
and other costs shown below	1.94				1.77				9.03				1.63				1.52				5.75
By-product credits	(0.26		)		—				—				(0.17		)		—				—
Treatment charges	0.11				0.10				—				0.10				0.10				—
Unit net cash costs	1.79				1.87				9.03				1.56				1.62				5.75
DD&A	0.25				0.23				0.73				0.29				0.27				0.54
Noncash and other costs, net	0.07				0.06				0.17				0.06				0.06				0.07
Total unit costs	2.11				2.16				9.93				1.91				1.95				6.36
Revenue adjustments, primarily for pricing on prior period open sales	—				—				—				—				—				—
Gross profit per pound	$	0.85			$	0.80			$	1.71			$	0.94			$	0.90			$	1.44
Copper sales (millions of recoverable pounds)	1,426				1,426								1,481				1,481
Molybdenum sales (millions of recoverable pounds)a									32												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 2018, average unit net cash costs (net of by-product credits) for the North America copper mines ranged from $1.55 per pound to $2.63 per pound at the individual mines and averaged $1.79 per pound. Higher average unit net cash costs (net of by-product credits) of $1.79 in 2018, compared with $1.56 per pound in 2017, primarily reflected higher mining and milling costs, partly offset by higher molybdenum credits.

Because certain assets are depreciated on a straight-line basis, North America’s average unit depreciation rate may vary with asset additions and the level of copper production and sales. North America’s average unit depreciation rate is expected to be lower in 2019, compared to 2018, as a result of reserve additions. See “Critical Accounting Estimates-Mineral Reserves” for further discussion.

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

approximate $1.86 per pound of copper in 2019, based on achievement of current sales volume and cost

estimates and assuming an average molybdenum price of $12.00 per pound. North America’s average unit net cash costs in 2019 would change by approximately $0.04 per pound for each $2 per pound change in the average price of molybdenum.

	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	1.63				1.52				5.75				1.41				1.34				4.91
By-product credits	(0.17		)		—				—				(0.12		)		—				—
Treatment charges	0.10				0.10				—				0.11				0.10				—
Unit net cash costs	1.56				1.62				5.75				1.40				1.44				4.91
DD&A	0.29				0.27				0.54				0.29				0.27				0.60
Noncash and other costs, net	0.06				0.06				0.07				0.04				0.04				0.06
Total unit costs	1.91				1.95				6.36				1.73				1.75				5.57
Revenue adjustments, primarily for pricing on prior period open sales	—				—				—				—				—				—
Gross profit per pound	$	0.94			$	0.90			$	1.44			$	0.51			$	0.49			$	0.77
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.

Unit net cash costs (net of by-product credits) for our North America copper mines increased to $1.56 per pound of copper in 2017, compared with $1.40 per pound in 2016, primarily reflecting lower copper sales volumes.

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

Operating and Development Activities. Cerro Verde’s expanded operations benefit from its large-scale, long-lived reserves and cost efficiencies. Cerro Verde’s concentrator facilities have continued to perform well, with average mill throughput rates of 387,600 metric tons of ore per day for the year 2018. During 2018, Cerro Verde received a modified environmental permit allowing it to operate its existing concentrator facilities at rates up to 409,500 metric tons of ore per day.

We continue to evaluate a large-scale expansion at El Abra to process additional sulfide material and to achieve higher recoveries. El Abra’s large sulfide resource could potentially support a major mill project similar to facilities constructed at Cerro Verde. Technical and economic studies are being advanced to determine the optimal scope and timing of the project.

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

	2018				2017				2016
Copper (millions of recoverable pounds)
Production	1,249				1,235				1,328
Sales	1,253				1,235				1,332
Average realized price per pound	$	2.87			$	2.97			$	2.31
Molybdenum (millions of recoverable pounds)
Productiona	28				27				21
Leach operations
Leach ore placed in stockpiles (metric tons per day)	195,200				142,800				149,100
Average copper ore grade (percent)	0.33				0.37				0.41
Copper production (millions of recoverable pounds)	287				255				328
Mill operations
Ore milled (metric tons per day)	387,600				360,100				353,400
Average ore grade (percent):
Copper	0.38				0.44				0.43
Molybdenum	0.01				0.02				0.02
Copper recovery rate (percent)	84.3				81.2				85.8
Copper production (millions of recoverable pounds)	962				980				1,000

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

Consolidated copper sales volumes from South America of 1.25 billion pounds in 2018 were approximately 1 percent higher than 1.24 billion pounds in 2017, primarily reflecting higher mining and milling rates, partly offset by lower ore grades.

Lower consolidated copper sales volumes from South America of 1.24 billion pounds in 2017, compared with 1.33 billion pounds in 2016, primarily reflected lower recovery rates at Cerro Verde and lower ore grades at El Abra.

Copper sales from South America mines are expected to approximate 1.3 billion pounds of copper in 2019. Refer to “Outlook” for projected molybdenum sales volumes. Since late January 2019, our El Abra operation has experienced heavy rainfall and electrical storms, resulting in a suspension of operations since February 4, 2019. We have been unable to assess damages because of poor road conditions and inaccessible areas and we do not currently know when normal operations will resume. We estimate the impact on 2019 production will approximate 8 million pounds of copper through mid-February 2019, and additional impacts of approximately 600 thousand pounds of copper per day are expected until normal operations resume.

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

The following tables summarize unit net cash costs and gross profit per pound of copper at our South America mining operations for the three years ended December 31, 2018. Unit net cash costs per pound of copper are reflected under the by-product and co-product methods as the South America mining operations also had sales of molybdenum and silver. Refer to “Product Revenues and Production Costs” for an explanation of the “by-product” and “co-product” methods and a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in our consolidated financial statements.

	2018								2017								2016
	By-Product Method				Co-Product Method				By-Product Method				Co-Product Method				By-Product Method				Co-Product Method
Revenues, excluding adjustments	$	2.87			$	2.87			$	2.97			$	2.97			$	2.31			$	2.31
Site production and delivery, before net noncash
and other costs shown below	1.79			a	1.65				1.59				1.49				1.26				1.20
By-product credits	(0.24		)		—				(0.18		)		—				(0.10		)		—
Treatment charges	0.19				0.19				0.22				0.22				0.24				0.24
Royalty on metals	0.01				0.01				0.01				0.01				0.01				—
Unit net cash costs	1.75				1.85				1.64				1.72				1.41				1.44
DD&A	0.44				0.40				0.43				0.39				0.41				0.39
Noncash and other costs, net	0.06			b	0.06				0.19			b	0.18				0.03				0.03
Total unit costs	2.25				2.31				2.26				2.29				1.85				1.86
Revenue adjustments, primarily for pricing on
prior period open sales	(0.03		)		(0.03		)		0.03				0.03				0.01				0.01
Gross profit per pound	$	0.59			$	0.53			$	0.74			$	0.71			$	0.47			$	0.46
Copper sales (millions of recoverable pounds)	1,253				1,253				1,235				1,235				1,332				1,332

a.	Includes $0.06 per pound of copper for the year 2018 associated with charges for Cerro Verde's new three-year CLA.

b.	Includes charges totaling $0.01 per pound of copper for the year 2018 and $0.16 per pound of copper for the year 2017, associated with disputed Cerro Verde royalties for prior years (refer to Note 12 for further discussion).

During 2018, unit net cash costs (net of by-product credits) for the South America mines averaged $1.75 per pound, including $1.67 per pound of copper for the Cerro Verde mine and $2.13 per pound for the El Abra mine. Higher average unit net cash costs (net of by-product credits) for our South America mining operations in 2018, compared with $1.64 per pound in 2017, primarily reflected higher mining and milling costs and costs associated with Cerro Verde’s new three-year CLA, partly offset by higher by-product credits.

Unit net cash costs (net of by-product credits) for our South America mining operations increased to $1.64 per pound of copper in 2017, compared with $1.41 per pound in 2016, primarily reflecting lower sales volumes and higher mining, milling and employee costs at Cerro Verde, partly offset by higher by-product credits.

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. South America’s average unit depreciation rate is expected to be lower in 2019, compared to 2018, as a result of reserve additions. See “Critical Accounting Estimates-Mineral Reserves” for further discussion.

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 $1.66 per pound of copper in 2019, based on current sales volume and cost estimates and assuming average prices of $12.00 per pound of molybdenum in 2019.

Indonesia Mining

We operate PT-FI’s mining operations, in which we own a 48.76 percent interest and consolidate in our financial statements. PT-FI’s assets include one of the world’s largest copper and gold deposits at the Grasberg minerals district in Papua, Indonesia. 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 2018, approximately 38 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. On December 21, 2018, we completed the transaction with the Indonesian government regarding PT-FI’s long-term mining rights and share ownership. We expect our share of future cash flows of the expanded PT-FI asset base, combined with the cash proceeds received in the transaction, to be comparable to our share of anticipated future cash flows under PT-FI’s former COW and Rio Tinto Joint Venture.

In connection with the transaction, a 40 percent share ownership in PT-FI was issued to PT Inalum and PTI (which is expected to be owned by PT Inalum and the provincial/regional government in Papua) and the Rio Tinto Joint Venture interests were effectively merged into PT-FI. As a result, PT Inalum's and PTI's collective share ownership of PT-FI totals 51.24 percent and our share ownership is 48.76 percent. The arrangements provide for us and the other pre-transaction PT-FI shareholders to retain the economics of the revenue and cost sharing arrangements under the former Rio Tinto Joint Venture. As a result, our economic interest in PT-FI is expected to approximate 81 percent from 2019 through 2022.

We, PT-FI, PTI and PT Inalum also entered into a shareholders agreement at closing, which includes provisions related to the governance and management of PT-FI, and establishes our control over the management of PT-FI's operations. As a result, we continue to consolidate PT-FI in our financial statements.

Refer to Note 2 for further discussion of the transaction.

Concurrent with closing the transaction, the Indonesian government granted PT-FI an IUPK to replace its former COW, enabling PT-FI to conduct operations in the Grasberg minerals district through 2041. Under the terms of the IUPK, PT-FI has been granted an extension of mining rights through 2031, with rights to extend mining rights through 2041, subject to PT-FI completing the construction of a new smelter in Indonesia within five years of closing the transaction and fulfilling its defined fiscal obligations to the Indonesian government. The IUPK, and related documentation, contains legal and fiscal terms and is legally enforceable through 2041. In addition, we, as a foreign investor, have rights to resolve investment disputes with the Indonesian government through international arbitration. Refer to Note 13 for further discussion of PT-FI’s IUPK.

Refer to “Risk Factors” contained in Part I, Item 1A. of our annual report on Form 10-K for the year ended December 31, 2018, for further discussion of risks associated with our mining operations in Indonesia.

Operating and Development Activities. PT-FI is currently mining the final phase of the Grasberg open pit and expects to transition to the Grasberg Block Cave (GBC) underground mine in the first half of 2019.

PT-FI continues to advance 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.

PT-FI's estimated annual capital spending on underground mine development projects is expected to average $0.7 billion per year over the next four years, net of scheduled contributions from PT Inalum. In accordance with applicable accounting guidance, aggregate costs (before scheduled contributions from PT Inalum), which are expected to average $0.9 billion per year through 2022, will be reflected as an investing activity in FCX's cash flow statement, and contributions from PT Inalum, which are expected to average approximately $0.17 billion per year through 2022, will be reflected as a financing activity. Considering the long-term nature and size of these projects, actual costs could vary from these estimates.

PT-FI has also committed to construct a new smelter in Indonesia by December 21, 2023. PT-FI has reviewed various process technologies and is initiating front-end engineering and design for the selected technology and intends to pursue financing, commercial and potential partner arrangements for this project, which has a preliminary estimated capital cost in the $3 billion range. The economics of PT-FI’s share of the new smelter will be borne by PT-FI’s shareholders according to their respective long-term share ownership percentages.

The following provides additional information on the continued development of the Common Infrastructure project, the GBC underground mine and the Deep Mill Level Zone (DMLZ) ore body that lies below the Deep Ore Zone (DOZ) underground mine.

Common Infrastructure and GBC Underground 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 development of the GBC and DMLZ underground mines is advancing using the Common Infrastructure project tunnels as access.

The GBC underground mine accounts for approximately half of our recoverable proven and probable reserves in Indonesia. Substantial progress has been made to prepare for the transition to mining of the GBC underground mine. First undercut blasting occurred in September 2018, first drawbell blasting occurred in December 2018 and cave production is scheduled for the first half of 2019. All underground mining levels and the ore flow system are being commissioned. Production rates over the next five years are expected to ramp up to 130,000 metric tons per day.

Mine development capital for the GBC underground mine and associated Common Infrastructure is expected to approximate $6.8 billion, including $3.9 billion incurred through December 31, 2018 ($0.6 billion during 2018).

DMLZ. The DMLZ ore body lies below the DOZ mine at the 2,590-meter elevation and represents the downward continuation of mineralization in the Ertsberg East Skarn system and neighboring Ertsberg porphyry. In September 2015, PT-FI initiated pre-commercial production that represented ore extracted during the development phase for the purpose of obtaining access to the ore body. During third-quarter 2018, PT-FI commenced hydraulic fracturing activities to manage rock stresses and pre-condition the DMLZ underground mine for large-scale production following mining induced seismic activity experienced in 2017 and 2018. Results to date have been effective in managing rock stresses and pre-conditioning the cave. PT-FI expects to commence the ramp-up of production in the DMLZ underground mine by mid-2019 and to reach full production rates of 80,000 metric tons per day in 2022. Estimates of timing of future production continue to be reviewed and may be modified as additional information becomes available.

Mine development capital costs for the DMLZ underground mine are expected to approximate $3.3 billion, including $2.5 billion incurred through December 31, 2018 (approximately $0.4 billion during 2018).

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

	2018				2017				2016
Operating Data, Net of Rio Tinto Joint Venture Interesta
Copper (millions of recoverable pounds)
Production	1,160				984				1,063
Sales	1,130				981				1,054
Average realized price per pound	$	2.89			$	3.00			$	2.32
Gold (thousands of recoverable ounces)
Production	2,416				1,554				1,061
Sales	2,366				1,540				1,054
Average realized price per ounce	$	1,254			$	1,268			$	1,237
100% Operating Data
Ore milled (metric tons per day):b
Grasberg open pit	133,300				101,800				119,700
DOZ underground mine	33,800				31,200				38,000
DMLZ underground mine	3,200				3,200				4,400
GBC underground mine	4,000				3,600				2,700
Big Gossan underground mine	3,800				600				900
Total	178,100				140,400				165,700
Average ore grade:
Copper (percent)	0.98				1.01				0.91
Gold (grams per metric ton)	1.58				1.15				0.68
Recovery rates (percent):
Copper	91.8				91.6				91.0
Gold	84.7				85.0				82.2
Production (recoverable):
Copper (millions of pounds)	1,227				996				1,063
Gold (thousands of ounces)	2,697				1,554				1,061

a.	Operating data through December 21, 2018, is net of the former Rio Tinto Joint Venture interest. Refer to Note 2 for further discussion.

b.	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.

Higher copper and gold sales volumes from our Indonesia mining operations of 1.1 billion pounds of copper and 2.4 million ounces of gold in 2018, compared with 1.0 billion pounds of copper and 1.5 million ounces of gold in 2017, primarily reflected higher milling rates and gold ore grades.

Sales volumes from our Indonesia mining operations totaled 1.0 billion 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 volumes in 2017 primarily reflected the impact of regulatory restrictions on PT-FI’s concentrate exports at the beginning of 2017, partly offset by higher copper ore grades. Higher gold sales volumes in 2017 primarily reflected higher gold ore grades.

As PT-FI transitions mining from the open pit to underground, production is expected to be significantly lower in 2019 and 2020, compared to 2018. Metal production is expected to improve significantly by 2021 following a ramp-up period. Consolidated sales volumes from Indonesia mining are expected to approximate 615 million pounds of copper and 785 thousand ounces of gold in 2019. Indonesia mining's projected sales volumes and unit net cash costs for the year 2019 are dependent on a number of factors, including operational performance, timing of shipments, workforce productivity and the Indonesian government’s extension of PT-FI’s export license. PT-FI has applied for a one-year extension of its export license, which currently expires on February 16, 2019.

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 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 (credits) costs and gross profit per pound of copper and per ounce of gold at our Indonesia mining operations for the three years ended December 31, 2018. Refer to “Product Revenues and Production Costs” for an explanation of “by-product” and “co-product” methods and a reconciliation of unit net cash (credits) costs per pound to production and delivery costs applicable to sales reported in our consolidated financial statements.

	2018												2017
	By- Product				Co-Product Method								By- Product				Co-Product Method
	Method				Copper				Gold				Method				Copper				Gold
Revenues, excluding adjustments	$	2.89			$	2.89			$	1,254			$	3.00			$	3.00			$	1,268
Site production and delivery, before net noncash
and other costs shown below	1.48				0.77				335				1.57				0.94				396
Gold and silver credits	(2.69		)		—				—				(2.05		)		—				—
Treatment charges	0.26				0.14				59				0.27				0.16				67
Export duties	0.16				0.08				36				0.12				0.07				30
Royalty on metals	0.21				0.11				48				0.17				0.10				47
Unit net cash (credits) costs	(0.58		)		1.10				478				0.08				1.27				540
DD&A	0.54				0.28				121				0.57				0.34				142
Noncash and other costs, net	0.21			a	0.11				48				0.17			b	0.10				42
Total unit costs	0.17				1.49				647				0.82				1.71				724
Revenue adjustments, primarily for pricing on
prior period open sales	(0.03		)		(0.03		)		7				0.04				0.04				6
PT Smelting intercompany profit (loss)	0.04				0.03				12				(0.02		)		(0.01		)		(7		)
Gross profit per pound/ounce	$	2.73			$	1.40			$	626			$	2.20			$	1.32			$	543
Copper sales (millions of recoverable pounds)	1,130				1,130								981				981
Gold sales (thousands of recoverable ounces)									2,366												1,540

a.	Includes $0.20 per pound of copper primarily associated with PT-FI net charges (refer to “Consolidated Results” for a summary of these charges).

b.	Includes $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 and sales volumes, Indonesia had unit net cash (credits) costs (including gold and silver credits) of $(0.58) per pound of copper in 2018, compared with $0.08 per pound in 2017.

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

of metals sold and the prices of copper and gold.

PT-FI’s export duties totaled $180 million in 2018, $115 million in 2017 and $96 million in 2016, and PT-FI’s royalties totaled $238 million in 2018, $173 million in 2017 and $131 million in 2016. Refer to Note 13 for further discussion of PT-FI’s export duties and royalties.

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.

PT Smelting intercompany profit (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.

Because of the fixed nature of a large portion of Indonesia’s costs, unit net cash costs vary from quarter to quarter depending on copper and gold volumes. Assuming an average gold price of $1,300 per ounce for 2019 and achievement of current sales volume and cost estimates, unit net cash costs (net of gold and silver credits) for Indonesia mining are expected to approximate $1.55 per pound of copper in 2019. Unit net cash costs are expected to decline significantly following the ramp-up of production. Indonesia mining’s unit net cash costs for the year 2019 would change by approximately $0.06 per pound for each $50 per ounce change in the average price of gold.

	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	1.57				0.94				396				1.61				1.04				553
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	0.08				1.27				540				0.81				1.35				728
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	0.82				1.71				724				1.22				1.62				870
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	$	2.20			$	1.32			$	543			$	1.08			$	0.68			$	375
Copper sales (millions of recoverable pounds)	981				981								1,054				1,054
Gold sales (thousands of recoverable ounces)									1,540												1,054

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

Unit net cash costs (net of gold and silver credits) for our Indonesia mining operations of $0.08 per pound of copper in 2017 were lower than unit net cash costs of $0.81 per pound in 2016, primarily reflecting higher gold and silver credits.

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.

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. Production from the Molybdenum mines totaled 35 million pounds of molybdenum in 2018, 32 million pounds in 2017 and 26 million pounds in 2016. 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 $8.77 per pound of molybdenum in 2018, $7.71 per pound in 2017 and $8.28 per pound in 2016. The increase in the average unit net cash costs for molybdenum in 2018, compared to 2017, primarily reflected higher operating rates and lower ore grades. The decrease in the average unit net cash costs for molybdenum in 2017, compared to 2016, primarily reflected higher sales volumes. Based on current sales volume and cost estimates, average unit net cash costs for the Molybdenum mines are expected to approximate $8.90 per pound of molybdenum for the year 2019. 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 unaffiliated third parties and our copper mining operations for the three years ended December 31, 2018:

	2018			2017			2016
Third parties	77	%		67	%		77	%
North America copper mines	14			18			13
South America mining	5			15			7
Indonesia mining	4			—			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 90 percent of PT Smelting’s concentrate requirements in 2018, 93 percent in 2017 and 88 percent in 2016. PT Smelting processed 38 percent in 2018, 46 percent in 2017 and 42 percent in 2016 of PT-FI’s concentrate production.

PT Smelting produced 258,800 metric tons of copper anode from its smelter and 257,600 metric tons of copper cathode from its refinery in 2018; 245,800 metric tons of copper anode from its smelter and 247,800 metric tons of copper cathode from its refinery in 2017; and 255,700 metric tons of copper anode from its smelter and 241,700 metric tons of copper cathode from its refinery in 2016.

In early 2017, the Indonesian government issued new regulations to address exports of unrefined metals, including copper concentrate and anode slimes, and other matters related to the mining sector. These regulations permit the export of anode slimes, which is necessary for PT Smelting to continue operating. As a result of labor disturbances and a delay in the renewal of its export license for anode slimes, PT Smelting’s operations were shut down from mid-January 2017 until early March 2017. PT Smelting has applied for a one-year extension of its anode slimes export license, which currently expires February 26, 2019.

PT Smelting’s maintenance turnarounds (which range from two weeks to a month to complete) typically are expected to occur approximately every two years, with short-term maintenance turnarounds in the interim. PT Smelting completed a 25-day maintenance turnaround during 2016, and a 30-day maintenance turnaround during 2018. In addition to its scheduled annual maintenance in November 2018, PT Smelting also experienced downtime in December 2018 caused by unscheduled maintenance at its sole-source oxygen supplier. This resulted in a

temporary shutdown of PT Smelting’s operations in December 2018. The next major maintenance turnaround is scheduled for 2020.

We defer recognizing profits on sales from our mining operations to Atlantic Copper and on 25 percent of PT-FI’s sales to PT Smelting until final sales to third parties occur. Changes in these deferrals attributable to variability in intercompany volumes resulted in net additions (reductions) to net income attributable to common stock of $42 million ($0.03 per share) in 2018, $(21) million ($(0.01) per share) in 2017 and $(8) million ($(0.01) per share) in 2016. 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 $31 million at December 31, 2018. Net additions to net income attributable to common stock for fourth-quarter 2018 totaled $46 million; based on our current projections, we don’t expect any significant adjustments in first-quarter 2019. Quarterly variations in ore grades, the timing of intercompany shipments and changes in product prices will result in variability in our net deferred profits and quarterly earnings.

CAPITAL RESOURCES AND LIQUIDITY

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

As presented in “Outlook”, our projected capital expenditures for 2019 are approximately $0.6 billion higher than projected operating cash flows. A large portion of the capital expenditures relate to projects that are expected to add significant production and cash flow in future periods, enabling us to generate operating cash flows exceeding capital expenditures in future years. We have cash on hand and the financial flexibility to fund these expenditures and will continue to be disciplined in deploying capital. Subject to future commodity prices for copper, gold and molybdenum, we expect estimated consolidated operating cash flows in 2019, plus available cash and availability under our credit facility, to be sufficient to fund our budgeted capital expenditures, cash dividends, noncontrolling interest distributions and other cash requirements for the year.

Refer to “Outlook” for further discussion of projected operating cash flows for 2019.

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, 2018 (in billions):

Cash at domestic companies	$	3.2
Cash at international operations	1.0
Total consolidated cash and cash equivalents	4.2
Noncontrolling interests’ share	(0.4		)
Cash, net of noncontrolling interests’ share	$	3.8
Withholding taxes and other	—			a
Net cash available	$	3.8

a.	Rounds to less than $0.1 billion.

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. 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

At December 31, 2018, consolidated debt totaled $11.1 billion, with a related weighted-average interest rate of 4.55 percent. We had no borrowings, $13 million in letters of credit issued and approximately $3.5 billion available under our revolving credit facility at December 31, 2018. Refer to “Financing Activities” below and Note 8 for further discussion of debt.

Operating Activities

We generated consolidated operating cash flows of $3.9 billion in 2018 (net of $0.6 billion in working capital uses and timing of other tax payments), $4.7 billion in 2017 (including $0.6 billion in working capital sources and timing of other tax payments) and $3.7 billion in 2016 (including $87 million in working capital sources and timing of other tax payments).

Lower operating cash flows for 2018, compared with 2017, primarily reflected an increase in working capital uses mostly because of timing of international income 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.

Investing Activities

Capital Expenditures. Capital expenditures, including capitalized interest, totaled $2.0 billion in 2018, including $1.2 billion for major mining projects; $1.4 billion in 2017, including $0.9 billion for major mining projects; and $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.

Higher capital expenditures in 2018, compared with 2017, primarily reflected development of Safford’s Lone Star oxide project. 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.

Refer to “Outlook” for further discussion of projected capital expenditures for 2019.

Acquisitions and Dispositions. In December 2018, we completed the transaction with the Indonesian government regarding PT-FI’s long-term mining rights and share ownership. In connection with the transaction, PT-FI acquired Rio Tinto’s Joint Venture interests for $3.5 billion. In addition, we received proceeds of $350 million for the sale of 100 percent of our interests in PTI and $107 million from Rio Tinto for its share of the 2018 joint venture cash flows.

In 2016, proceeds, net of closing adjustments, from asset sales totaled $6.4 billion, primarily associated with the sales of our interest in TFHL; 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 acquisitions and dispositions.

Financing Activities

Debt Transactions. Net repayments of debt in 2018 totaled $2.1 billion, primarily consisting of $1.4 billion for senior notes due March 2018 and $454 million for senior notes due in 2022 and 2023.

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.

Refer to Note 8 for further discussion of debt transactions.

Equity Transactions. In December 2018, an aggregate 40 percent share ownership in PT-FI was issued to PT Inalum and PTI, for $3.5 billion. See Note 2 for further discussion.

In 2016, net proceeds from the sale of common stock totaled $1.5 billion, reflecting sales of our common stock under registered at-the-market equity offerings. Refer to Note 10 for further discussion of equity transactions.

Dividends. In February 2018, the Board reinstated a cash dividend on our common stock. We paid dividends on our common stock totaling $218 million in 2018. On December 19, 2018, we declared a quarterly cash dividend of $0.05 per share on our common stock, which was paid on February 1, 2019, to shareholders of record as of January 15, 2019. The declaration of dividends is at the discretion of our Board and will depend upon our financial results, cash requirements, future prospects and other factors deemed relevant by our Board.

Dividends paid on our common stock totaling $2 million in 2017 and $6 million in 2016 related to accumulated dividends paid for vested stock-based compensation.

Cash dividends and other distributions paid to noncontrolling interests totaled $278 million in 2018, $174 million in 2017 and $693 million in 2016 (including $582 million for the redemption of a redeemable noncontrolling interest). 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 based on principal amounts, 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, 2018 (in millions):

	Total				2019					2020 to 2021				2022 to 2023				Thereafter
Debt maturities	$	11,152			$	17				$	2,124			$	5,074			$	3,937
Scheduled interest payment obligationsa	4,867				508			—		969				661				2,729
ARO and environmental obligationsb	8,069				449					809				532				6,279
Take-or-pay contractsc	2,920				2,144					381				94				301
Operating lease obligations	365				53					80				61				171
Totald	$	27,373			$	3,171				$	4,363			$	6,422			$	13,417

a.	Scheduled interest payment obligations were calculated using stated coupon rates for fixed-rate debt and interest rates applicable at December 31, 2018, for variable-rate debt.

b.

Represents estimated cash payments, on an undiscounted and unescalated basis, associated with ARO and environmental activities (including $476 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.

c.

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 ($1.5 billion), cobalt ($0.5 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. Obligations for cobalt hydroxide intermediate provide for deliveries of specified volumes to Freeport Cobalt 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.

d.

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 $97 million and unrecognized tax benefits totaling $230 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 of these commitments.

CONTINGENCIES

Environmental

The cost of complying with environmental laws is a fundamental and substantial cost of our business. At December 31, 2018, we had $1.5 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 $0.4 billion in 2018, $0.5 billion in 2017 and $0.4 billion in 2016. For 2019, 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, 2018, 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. For non-operating properties without reserves, changes to the ARO are recorded in earnings. 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, 2018, we had $2.5 billion recorded in our consolidated balance sheet for AROs, including $0.5 billion related to our oil and gas properties. Spending on AROs totaled $160 million in 2018, $71 million in 2017 and $188 million in 2016 (including $83 million in 2018, $30 million in 2017 and $133 million in 2016 for our oil and gas operations). For 2019, we expect to incur approximately $0.3 billion in aggregate ARO payments (including $114 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, 2018, 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, 2018, for further discussion of financial risks associated with fluctuations in the market prices of the commodities we sell.

During 2018, our mined copper was sold 59 percent in concentrate, 21 percent as cathode and 20 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 copper settlement 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 (unfavorable) favorable impacts of net adjustments to the prior years’ provisionally priced copper sales for the years ended December 31 (in millions, except per share amounts):

	2018				2017				2016
Revenues	$	(70	)		$	81			$	5
Net income attributable to common stock	$	(31	)		$	34			$	2
Net income per share attributable to common stock	$	(0.02	)		$	0.02			$	—

At December 31, 2018, we had provisionally priced copper sales at our copper mining operations totaling 308 million pounds of copper (net of intercompany sales and noncontrolling interests) recorded at an average price of $2.71 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, 2018, provisional price recorded would have an approximate $10 million effect on 2019 net income attributable to common stock. The LME copper settlement price closed at $2.79 per pound on January 31, 2019.

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 gains (losses) on balances denominated in foreign currencies totaling $14 million in 2018, $(5) million in 2017 and $32 million in 2016, 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
	2018			2017			2016			(in local currency)		(in millions of U.S. dollars)b				Increase				Decrease
Indonesia
Rupiah	14,409			13,480			13,369			9.6 trillion		$	666			$	(61	)		$	74
Australian dollar	1.41			1.28			1.39			311 million		$	221			$	(20	)		$	25
South America
Peruvian sol	3.38			3.25			3.36			2.3 billion		$	667			$	(61	)		$	74
Chilean peso	695			615			670			179 billion		$	258			$	(23	)		$	29
Atlantic Copper
Euro	0.87			0.83			0.95			137 million		$	157			$	(14	)		$	17

a.	Reflects the estimated impact on annual operating costs assuming a 10 percent increase or decrease in the exchange rate reported at December 31, 2018.

b.	Based on exchange rates at December 31, 2018.

Interest Rate Risk

At December 31, 2018, we had total debt maturities based on principal amounts of $11.2 billion, of which approximately 10 percent was variable-rate debt with interest rates based on the London Interbank Offered Rate. Refer to “Risk Factors” contained in Part I, Item 1A. of our annual report on Form 10-K for the year ended December 31, 2018. The table below presents average interest rates for our scheduled maturities of principal for

our outstanding debt (excluding fair value adjustments) and the related fair values at December 31, 2018 (in millions, except percentages):

	2019				2020				2021				2022				2023				Thereafter				Fair Value
Fixed-rate debt	$	5			$	1,004			$	614			$	1,897			$	2,653			$	3,812			$	9,076
Average interest rate	0.8		%		3.1		%		3.9		%		3.5		%		4.7		%		5.4		%		4.5		%
Variable-rate debt	$	12			—				$	505			$	525			—				$	125			$	1,163
Average interest rate	1.7		%		—				4.4		%		4.4		%		—				6.3		%		4.6		%

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, 2018
(In millions)		By-Product				Co-Product Method
		Method				Copper				Molybdenuma				Otherb				Total
Revenues, excluding adjustments		$	4,217			$	4,217			$	376			$	90			$	4,683
Site production and delivery, before net noncash
and other costs shown below		2,766				2,522				291				52				2,865
By-product credits		(367		)		—				—				—				—
Treatment charges		150				144				—				6				150
Net cash costs		2,549				2,666				291				58				3,015
DD&A		359				327				24				8				359
Noncash and other costs, net		94				87				6				1				94
Total costs		3,002				3,080				321				67				3,468
Other revenue adjustments, primarily for pricing on prior period open sales		(5		)		(5		)		—				—				(5		)
Gross profit		$	1,210			$	1,132			$	55			$	23			$	1,210
Copper sales (millions of recoverable pounds)		1,426				1,426
Molybdenum sales (millions of recoverable pounds)a										32
Gross profit per pound of copper/molybdenum:
Revenues, excluding adjustments		$	2.96			$	2.96			$	11.64
Site production and delivery, before net noncash
and other costs shown below		1.94				1.77				9.03
By-product credits		(0.26		)		—				—
Treatment charges		0.11				0.10				—
Unit net cash costs		1.79				1.87				9.03
DD&A		0.25				0.23				0.73
Noncash and other costs, net		0.07				0.06				0.17
Total unit costs		2.11				2.16				9.93
Other revenue adjustments, primarily for pricing
on prior period open sales		—				—				—
Gross profit per pound		$	0.85			$	0.80			$	1.71
Reconciliation to Amounts Reported
(In millions)
						Production
		Revenues				and Delivery				DD&A
Totals presented above		$	4,683			$	2,865			$	359
Treatment charges		(30		)		120				—
Noncash and other costs, net		—				94				—
Other revenue adjustments, primarily for pricing on prior period open sales		(5		)		—				—
Eliminations and other		46				49				1
North America copper mines		4,694				3,128				360
Other miningc		17,060				11,853				1,269
Corporate, other & eliminations		(3,126		)		(3,290		)		125
As reported in FCX’s consolidated financial statements		$	18,628			$	11,691			$	1,754

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

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

c.	Represents the combined total for our other mining operations as presented in Note 16.

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		2,406				2,256				187				51				2,494
By-product credits		(256		)		—				—				—				—
Treatment charges		157				150				—				7				157
Net cash costs		2,307				2,406				187				58				2,651
DD&A		423				397				18				8				423
Noncash and other costs, net		89				86				2				1				89
Total costs		2,819				2,889				207				67				3,163
Other revenue adjustments, primarily for pricing on prior period open sales		4				4				—				—				4
Gross profit		$	1,400			$	1,330			$	47			$	23			$	1,400
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		1.63				1.52				5.75
By-product credits		(0.17		)		—				—
Treatment charges		0.10				0.10				—
Unit net cash costs		1.56				1.62				5.75
DD&A		0.29				0.27				0.54
Noncash and other costs, net		0.06				0.06				0.07
Total unit costs		1.91				1.95				6.36
Other revenue adjustments, primarily for pricing
on prior period open sales		—				—				—
Gross profit per pound		$	0.94			$	0.90			$	1.44
Reconciliation to Amounts Reported
(In millions)
						Production
		Revenues				and Delivery				DD&A
Totals presented above		$	4,559			$	2,494			$	423
Treatment charges		(52		)		105				—
Noncash and other costs, net		—				89				—
Other revenue adjustments, primarily for pricing on prior period open sales		4				—				—
Eliminations and other		54				57				2
North America copper mines		4,565				2,745				425
Other miningc		14,921				10,639				1,195
Corporate, other & eliminations		(3,083		)		(3,118		)		94
As reported in FCX’s consolidated financial statements		$	16,403			$	10,266			$	1,714

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

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

c.	Represents the combined total for our other mining operations 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		2,596				2,458				165				58				2,681
By-product credits		(222		)		—				—				—				—
Treatment charges		193				185				—				8				193
Net cash costs		2,567				2,643				165				66				2,874
DD&A		527				496				20				11				527
Noncash and other costs, net		85				83				2				—				85
Total costs		3,179				3,222				187				77				3,486
Other revenue adjustments, primarily for pricing on prior period open sales		(1		)		(1		)		—				—				(1		)
Gross profit		$	933			$	890			$	26			$	17			$	933
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		1.41				1.34				4.91
By-product credits		(0.12		)		—				—
Treatment charges		0.11				0.10				—
Unit net cash costs		1.40				1.44				4.91
DD&A		0.29				0.27				0.60
Noncash and other costs, net		0.04				0.04				0.06
Total unit costs		1.73				1.75				5.57
Other revenue adjustments, primarily for pricing
on prior period open sales		—				—				—
Gross profit per pound		$	0.51			$	0.49			$	0.77
Reconciliation to Amounts Reported
(In millions)
						Production
		Revenues				and Delivery				DD&A
Totals presented above		$	4,420			$	2,681			$	527
Treatment charges		(90		)		103				—
Noncash and other costs, net		—				85				—
Other revenue adjustments, primarily for pricing on prior period open sales		(1		)		—				—
Eliminations and other		45				45				3
North America copper mines		4,374				2,914				530
Other miningc		12,111				9,290				1,044
Corporate, other & eliminations		(1,655		)		(1,517		)		956
As reported in FCX’s consolidated financial statements		$	14,830			$	10,687			$	2,530

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

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

c.	Represents the combined total for our other mining operations as presented in Note 16.

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

Year Ended December 31, 2018
(In millions)	By-Product				Co-Product Method
	Method				Copper				Othera				Total
Revenues, excluding adjustments	$	3,593			$	3,593			$	352			$	3,945
Site production and delivery, before net noncash
and other costs shown below	2,244			b	2,065				226				2,291
By-product credits	(305		)		—				—				—
Treatment charges	243				243				—				243
Royalty on metals	8				7				1				8
Net cash costs	2,190				2,315				227				2,542
DD&A	546				499				47				546
Noncash and other costs, net	79			c	75				4				79
Total costs	2,815				2,889				278				3,167
Other revenue adjustments, primarily for pricing on prior period open sales	(37		)		(37		)		—				(37		)
Gross profit	$	741			$	667			$	74			$	741
Copper sales (millions of recoverable pounds)	1,253				1,253
Gross profit per pound of copper:
Revenues, excluding adjustments	$	2.87			$	2.87
Site production and delivery, before net noncash
and other costs shown below	1.79			b	1.65
By-product credits	(0.24		)		—
Treatment charges	0.19				0.19
Royalty on metals	0.01				0.01
Unit net cash costs	1.75				1.85
DD&A	0.44				0.40
Noncash and other costs, net	0.06			c	0.06
Total unit costs	2.25				2.31
Other revenue adjustments, primarily for pricing
on prior period open sales	(0.03		)		(0.03		)
Gross profit per pound	$	0.59			$	0.53
Reconciliation to Amounts Reported
(In millions)
					Production
	Revenues				and Delivery				DD&A
Totals presented above	$	3,945			$	2,291			$	546
Treatment charges	(243		)		—				—
Royalty on metals	(8		)		—				—
Noncash and other costs, net	—				79				—
Other revenue adjustments, primarily for pricing on prior period open sales	(37		)		—				—
Eliminations and other	(2		)		(5		)		—
South America mining	3,655				2,365				546
Other miningd	18,099				12,616				1,083
Corporate, other & eliminations	(3,126		)		(3,290		)		125
As reported in FCX’s consolidated financial statements	$	18,628			$	11,691			$	1,754

a.	Includes silver sales of 4.5 million ounces ($15.20 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 $69 million ($0.06 per pound of copper) for Cerro Verde’s three-year CLA.

c.	Includes charges totaling $14 million ($0.01 per pound of copper) at Cerro Verde associated with disputed royalties for prior years.

d.	Represents the combined total for our other mining operations 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
Other 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
Other 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				—
Other 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				11,140				1,095
Corporate, other & eliminations	(3,083		)		(3,118		)		94
As reported in FCX’s consolidated financial statements	$	16,403			$	10,266			$	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) at Cerro Verde associated with disputed royalties for prior years.

c.	Represents the combined total for our other mining operations 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				10,446				1,021
Corporate, other & eliminations	(1,655		)		(1,517		)		956
As reported in FCX’s consolidated financial statements	$	14,830			$	10,687			$	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 as presented in Note 16.

Indonesia Mining Product Revenues, Production Costs and Unit Net Cash (Credits) Costs

Year Ended December 31, 2018
(In millions)	By-Product				Co-Product Method
	Method				Copper				Gold				Silvera				Total
Revenues, excluding adjustments	$	3,264			$	3,264			$	2,967			$	57			$	6,288
Site production and delivery, before net noncash
and other costs shown below	1,678				871				792				15				1,678
Gold and silver credits	(3,041		)		—				—				—				—
Treatment charges	294				153				139				2				294
Export duties	180				93				85				2				180
Royalty on metals	238				122				114				2				238
Net cash (credits) costs	(651		)		1,239				1,130				21				2,390
DD&A	606				314				286				6				606
Noncash and other costs, net	242			b	126				114				2				242
Total costs	197				1,679				1,530				29				3,238
Other revenue adjustments, primarily for pricing on prior period open sales	(34		)		(34		)		17				—				(17		)
PT Smelting intercompany profit	56				29				27				—				56
Gross profit	$	3,089			$	1,580			$	1,481			$	28			$	3,089
Copper sales (millions of recoverable pounds)	1,130				1,130
Gold sales (thousands of recoverable ounces)									2,366
Gross profit per pound of copper/per ounce of gold:
Revenues, excluding adjustments	$	2.89			$	2.89			$	1,254
Site production and delivery, before net noncash
and other costs shown below	1.48				0.77				335
Gold and silver credits	(2.69		)		—				—
Treatment charges	0.26				0.14				59
Export duties	0.16				0.08				36
Royalty on metals	0.21				0.11				48
Unit net cash (credits) costs	(0.58		)		1.10				478
DD&A	0.54				0.28				121
Noncash and other costs, net	0.21			b	0.11				48
Total unit costs	0.17				1.49				647
Other revenue adjustments, primarily for pricing
on prior period open sales	(0.03		)		(0.03		)		7
PT Smelting intercompany profit	0.04				0.03				12
Gross profit per pound/ounce	$	2.73			$	1.40			$	626
Reconciliation to Amounts Reported
(In millions)
					Production
	Revenues				and Delivery				DD&A
Totals presented above	$	6,288			$	1,678			$	606
Treatment charges	(294		)		—				—
Export duties	(180		)		—				—
Royalty on metals	(238		)		—				—
Noncash and other costs, net	—				242				—
Other revenue adjustments, primarily for pricing on prior period open sales	(17		)		—				—
PT Smelting intercompany profit	—				(56		)		—
Indonesia mining	5,559				1,864				606
Other miningc	16,195				13,117				1,023
Corporate, other & eliminations	(3,126		)		(3,290		)		125
As reported in FCX’s consolidated financial statements	$	18,628			$	11,691			$	1,754

a.	Includes silver sales of 3.8 million ounces ($15.24 per ounce average realized price).

b.	Includes net charges of $223 million ($0.20 per pound of copper). Refer to “Consolidated Results-Summary Financial Data” for a summary of these charges.

c.	Represents the combined total for our other mining operations 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	1,544				919				609				16				1,544
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	83				1,241				831				21				2,093
DD&A	556				331				220				5				556
Noncash and other costs, net	163			b	97				64				2				163
Total costs	802				1,669				1,115				28				2,812
Other revenue adjustments, primarily for pricing on prior period open sales	39				39				9				—				48
PT Smelting intercompany loss	(28		)		(17		)		(11		)		—				(28		)
Gross profit	$	2,154			$	1,298			$	835			$	21			$	2,154
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	1.57				0.94				396
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	0.08				1.27				540
DD&A	0.57				0.34				142
Noncash and other costs, net	0.17			b	0.10				42
Total unit costs	0.82				1.71				724
Other 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	$	2.20			$	1.32			$	543
Reconciliation to Amounts Reported
(In millions)
					Production
	Revenues				and Delivery				DD&A
Totals presented above	$	4,946			$	1,544			$	556
Treatment charges	(261		)		—				—
Export duties	(115		)		—				—
Royalty on metals	(173		)		—				—
Noncash and other costs, net	—				163				—
Other revenue adjustments, primarily for pricing on prior period open sales	48				—				—
PT Smelting intercompany loss	—				28				—
Indonesia mining	4,445				1,735				556
Other miningc	15,041				11,649				1,064
Corporate, other & eliminations	(3,083		)		(3,118		)		94
As reported in FCX’s consolidated financial statements	$	16,403			$	10,266			$	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 our other mining operations 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	1,698				1,094				582				22				1,698
Gold and silver credits	(1,371		)		—				—				—				—
Treatment charges	297				191				102				4				297
Export duties	96				62				33				1				96
Royalty on metals	131				79				50				2				131
Net cash costs	851				1,426				767				29				2,222
DD&A	384				247				132				5				384
Noncash and other costs, net	51				33				17				1				51
Total costs	1,286				1,706				916				35				2,657
Other revenue adjustments, primarily for pricing on prior period open sales	—				—				17				—				17
PT Smelting intercompany loss	(26		)		(17		)		(9		)		—				(26		)
Gross profit	$	1,136			$	725			$	396			$	15			$	1,136
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	1.61				1.04				553
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	0.81				1.35				728
DD&A	0.36				0.24				125
Noncash and other costs, net	0.05				0.03				17
Total unit costs	1.22				1.62				870
Other 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	$	1.08			$	0.68			$	375
Reconciliation to Amounts Reported
(In millions)
					Production
	Revenues				and Delivery				DD&A
Totals presented above	$	3,802			$	1,698			$	384
Treatment charges	(297		)		—				—
Export duties	(96		)		—				—
Royalty on metals	(131		)		—				—
Noncash and other costs, net	—				51				—
Other revenue adjustments, primarily for pricing on prior period open sales	17				—				—
PT Smelting intercompany loss	—				26				—
Indonesia mining	3,295				1,775				384
Other miningb	13,190				10,429				1,190
Corporate, other & eliminations	(1,655		)		(1,517		)		956
As reported in FCX’s consolidated financial statements	$	14,830			$	10,687			$	2,530

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

b.	Represents the combined total for our other mining operations as presented in Note 16.

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

					Years Ended December 31,
(In millions)					2018				2017				2016
Revenues, excluding adjustmentsa					$	440			$	295			$	208
Site production and delivery, before net noncash
and other costs shown below					282				220				193
Treatment charges and other					30				27				22
Net cash costs					312				247				215
DD&A					79				76				68
Noncash and other costs, net					7				7				19
Total costs					398				330				302
Gross profit (loss)					$	42			$	(35	)		$	(94	)
Molybdenum sales (millions of recoverable pounds)a					35				32				26
Gross profit (loss) per pound of molybdenum:
Revenues, excluding adjustmentsa					$	12.36			$	9.22			$	8.02
Site production and delivery, before net noncash
and other costs shown below					7.92				6.86				7.42
Treatment charges and other					0.85				0.85				0.86
Unit net cash costs					8.77				7.71				8.28
DD&A					2.21				2.39				2.62
Noncash and other costs, net					0.19				0.23				0.73
Total unit costs					11.17				10.33				11.63
Gross profit (loss) per pound					$	1.19			$	(1.11	)		$	(3.61	)
Reconciliation to Amounts Reported
(In millions)
					Production
Year Ended December 31, 2018	Revenues				and Delivery				DD&A
Totals presented above	$	440			$	282			$	79
Treatment charges and other	(30		)		—				—
Noncash and other costs, net	—				7				—
Molybdenum mines	410				289				79
Other miningb	21,344				14,692				1,550
Corporate, other & eliminations	(3,126		)		(3,290		)		125
As reported in FCX’s consolidated financial statements	$	18,628			$	11,691			$	1,754
Year Ended December 31, 2017
Totals presented above	$	295			$	220			$	76
Treatment charges and other	(27		)		—				—
Noncash and other costs, net	—				7				—
Molybdenum mines	268				227				76
Other miningb	19,218				13,157				1,544
Corporate, other & eliminations	(3,083		)		(3,118		)		94
As reported in FCX’s consolidated financial statements	$	16,403			$	10,266			$	1,714
Year Ended December 31, 2016
Totals presented above	$	208			$	193			$	68
Treatment charges and other	(22		)		—				—
Noncash and other costs, net	—				19				—
Molybdenum mines	186				212				68
Other miningb	16,299				11,992				1,506
Corporate, other & eliminations	(1,655		)		(1,517		)		956
As reported in FCX’s consolidated financial statements	$	14,830			$	10,687			$	2,530

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, our consolidated average realized price per pound of molybdenum will differ from the amounts reported in this table.

b.	Represents the combined total for our other mining operations 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, capital expenditures, our expectations regarding our share of PT-FI’s future cash flows through 2022, PT-FI’s development, financing, construction and completion of a new smelter in Indonesia, PT-FI’s compliance with environmental standards under the new framework established by the MOEF, exploration efforts and results, development and production activities, rates and costs, liquidity, tax rates, export duties, the impact of copper, gold and molybdenum price changes, the impact of deferred intercompany profits on earnings, reserve estimates, and future dividend payments, share purchases and sales. The words “anticipates,” “may,” “can,” “plans,” “believes,” “estimates,” “expects,” “projects,” “targets,” “intends,” “likely,” “will,” “should,” “to be,” “potential” and any similar expressions are intended to identify those assertions as forward-looking statements. The declaration of dividends is at the discretion of the Board and will depend on our financial results, cash requirements, future prospects, and other factors deemed relevant by the Board.

We caution readers that forward-looking statements are not guarantees of future performance and actual results may differ materially from those anticipated, expected, 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, but are not limited to, supply of and demand for, and prices of, copper, gold and molybdenum; mine sequencing; production rates; timing of shipments; results of feasibility studies; potential inventory adjustments; potential impairment of long-lived mining assets; the potential effects of violence in Indonesia generally and in the province of Papua; the Indonesian government’s extension of PT-FI’s export license after February 16, 2019; risks associated with underground mining; satisfaction of requirements in accordance with PT-FI’s IUPK to extend mining rights from 2031 through 2041; industry risks; regulatory changes; political risks; labor relations; weather- and climate-related risks; environmental risks; litigation results; cybersecurity incidents; 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, 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.