Item 6. Selected Financial Data.

Freeport-McMoRan Inc.

SELECTED FINANCIAL AND OPERATING DATA

	Years Ended December 31,
	2019				2018				2017				2016				2015
CONSOLIDATED FINANCIAL DATA	(In millions, except per share amounts)
Revenues	$	14,402		a	$	18,628			$	16,403			$	14,830		b	$	14,607		b
Operating income (loss)c	$	1,091			$	4,754		d,e	$	3,690		f	$	(2,729	)	g	$	(13,437	)	h
Net (loss) income from continuing operations	$	(192	)	i,j,k,l,m	$	2,909		k,l,m,n	$	2,029		k,l,m	$	(3,832	)	l,m	$	(12,180	)	n
Net income (loss) from discontinued operationso	$	3			$	(15	)		$	66			$	(193	)		$	91
Net (loss) income attributable to common stock	$	(239	)		$	2,602			$	1,817			$	(4,154	)	p	$	(12,236	)
Diluted net (loss) income per share attributable to common stock:
Continuing operations	$	(0.17	)		$	1.79			$	1.21			$	(2.96	)		$	(11.32	)
Discontinued operations	—				(0.01		)		0.04				(0.20		)		0.01
	$	(0.17	)		$	1.78			$	1.25			$	(3.16	)		$	(11.31	)
Weighted-average common shares outstanding:
Basic	1,451				1,449				1,447				1,318				1,082
Diluted	1,451				1,458				1,454				1,318				1,082
Dividends declared per share of common stock	$	0.20			$	0.20			$	—			$	—			$	0.2605
Operating cash flows	$	1,482			$	3,863			$	4,666			$	3,737			$	3,220
Capital expenditures	$	2,652			$	1,971			$	1,410			$	2,813			$	6,353
At December 31:
Cash and cash equivalents	$	2,020			$	4,217			$	4,526			$	4,262			$	193
Property, plant, equipment and mine development costs, net	$	29,584			$	28,010			$	22,994			$	23,348			$	24,245
Oil and gas properties, net	$	—			$	—			$	—			$	74			$	7,093
Assets held for sale, including current portion	$	—			$	—			$	—			$	5		q	$	4,862		q
Total assets	$	40,809			$	42,216			$	37,302			$	37,317			$	46,577
Total debt, including current portion	$	9,826			$	11,141			$	13,229			$	16,126			$	20,428
Redeemable noncontrolling interest	$	—			$	—			$	—			$	—			$	764
Total stockholders’ equity	$	9,298			$	9,798			$	7,977			$	6,051			$	7,828

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, 2019*. All references to losses or income per share are on a diluted basis, unless otherwise noted.*

a.	Includes charges totaling $166 million ($91 million to net loss attributable to common stock or $0.06 per share) primarily associated with an unfavorable Indonesia Supreme Court ruling related to certain disputed PT Freeport Indonesia (PT-FI) export duties (refer to Note 12).

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

c.

Includes net charges (credits) for adjustments to environmental obligations and related litigation reserves of $68 million ($68 million to net loss attributable to common stock or $0.05 per share) in 2019, $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 and $43 million ($28 million to net loss attributable to common stock or $0.03 per share) in 2015.

d.

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, which was suspended while it was classified as held for sale.

e.	The year 2018 also includes net charges at 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 settlements 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.

f.

The year 2017 includes net charges totaling $68 million ($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.

g.

The year 2016 includes net charges totaling $4.9 billion ($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.

h.

The year 2015 includes net charges totaling $13.8 billion ($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.

i.

The year 2019 includes net gains of $179 million ($169 million to net loss attributable to common stock or $0.12 per share) consisting of gains on sales of assets totaling $417 million and net credits for adjustments to asset retirement obligations totaling $19 million, partly offset by metals inventory adjustments totaling $179 million and other net charges totaling $78 million, mostly associated with weather-related issues at El Abra, asset impairments, adjustments to deferred profit sharing and oil and gas inventory adjustments.

j.

The year 2019 also includes charges at PT-FI of $294 million ($288 million to net loss attributable to common stock or $0.20 per share) consisting of $234 million associated with PT-FI's historical contested tax disputes, $32 million for a currency exchange adjustment to value-added tax receivables and $28 million for an adjustment to the settlement of the historical surface water tax matters with the local regional tax authority in Papua, Indonesia.

k.

Includes charges at Cerro Verde related to disputed royalty matters for prior years totaling $7 million to net loss attributable to common stock (less than $0.01 per share) in 2019, $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. Charges for 2019 represent $6 million to operating income and $10 million to interest expense. Net charges for 2018 consist of $14 million to operating income, $370 million to interest expense and $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.

l.	Includes after-tax net (losses) gains on early extinguishment and exchanges of debt totaling $(26) million ($(0.02) per share) in 2019, $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.

m.

As further discussed in “Consolidated Results - Income Taxes” contained in MD&A, amounts include net tax (charges) credits of $(1) million ($34 million net of noncontrolling interests or $0.02 per share) in 2019, $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.

n.	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.

o.

Discontinued operations reflects the results of TF Holdings Limited (TFHL), through which we held an interest in the Tenke Fungurume (Tenke) mine until it was sold on November 16, 2016, and includes charges for allocated interest expense associated with the portion of the term loan that was required to be repaid as a result of the sale. Net income (loss) from discontinued operations in 2019, 2018 and 2017, primarily reflect adjustments to the fair value of the potential contingent consideration related to the sale and was adjusted through December 31, 2019. The year 2016 also includes a net charge of $198 million for the loss on disposal.

p.	The year 2016 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.

q.	In accordance with accounting guidelines, the assets and liabilities of TFHL were presented as held for sale in the consolidated balance sheets.

Freeport-McMoRan Inc.

SELECTED FINANCIAL AND OPERATING DATA (Continued)

	Years Ended December 31,
	2019				2018				2017				2016				2015
**CONSOLIDATED MINING (CONTINUING OPERATIONS)**a
Copper (millions of recoverable pounds)
Production	3,247				3,813				3,737				4,222				3,568
Sales, excluding purchases	3,292				3,811				3,700				4,227				3,603
Average realized price per pound	$	2.73			$	2.91			$	2.93			$	2.28			$	2.42
Gold (thousands of recoverable ounces)
Production	882				2,439				1,577				1,088				1,257
Sales, excluding purchases	991				2,389				1,562				1,079				1,247
Average realized price per ounce	$	1,415			$	1,254			$	1,268			$	1,238			$	1,129
Molybdenum (millions of recoverable pounds)
Production	90				95				92				80				92
Sales, excluding purchases	90				94				95				74				89
Average realized price per pound	$	12.61			$	12.50			$	9.33			$	8.33			$	8.70
NORTH AMERICA COPPER MINES
Operating Data, Net of Joint Venture Interests****b
Copper (millions of recoverable pounds)
Production	1,457				1,404				1,518				1,831				1,947
Sales, excluding purchases	1,442				1,428				1,484				1,841				1,988
Average realized price per pound	$	2.74			$	2.96			$	2.85			$	2.24			$	2.47
Molybdenum (millions of recoverable pounds)
Production	32				32				33				33				37
100% Operating Data
Leach operations
Leach ore placed in stockpiles (metric tons per day)	750,900				681,400				679,000				737,400				913,000
Average copper ore grade (percent)	0.23				0.24				0.28				0.31				0.26
Copper production (millions of recoverable pounds)	993				951				1,016				1,120				1,086
Mill operations
Ore milled (metric tons per day)	326,100				301,000				299,500				300,500				312,100
Average ore grade (percent):
Copper	0.34				0.35				0.39				0.47				0.49
Molybdenum	0.02				0.02				0.03				0.03				0.03
Copper recovery rate (percent)	87.0				87.8				86.4				85.5				85.4
Copper production (millions of recoverable pounds)	748				719				788				958				1,020
SOUTH AMERICA MINING
Copper (millions of recoverable pounds)
Production	1,183				1,249				1,235				1,328				869
Sales	1,183				1,253				1,235				1,332				871
Average realized price per pound	$	2.71			$	2.87			$	2.97			$	2.31			$	2.38
Molybdenum (millions of recoverable pounds)
Production	29				28				27				21				7
Leach operations
Leach ore placed in stockpiles (metric tons per day)	205,900				195,200				142,800				149,100				208,400
Average copper ore grade (percent)	0.37				0.33				0.37				0.41				0.44
Copper production (millions of recoverable pounds)	268				287				255				328				430
Mill operations
Ore milled (metric tons per day)	393,100				387,600				360,100				353,400				152,100
Average ore grade (percent):
Copper	0.36				0.38				0.44				0.43				0.46
Molybdenum	0.02				0.01				0.02				0.02				0.02
Copper recovery rate (percent)	83.5				84.3				81.2				85.8				81.5
Copper production (millions of recoverable pounds)	916				962				980				1,000				439

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

b.	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.

Freeport-McMoRan Inc.

SELECTED FINANCIAL AND OPERATING DATA (Continued)

	Years Ended December 31,
	2019				2018				2017				2016				2015
INDONESIA MINING
Operating Data, Net of Rio Tinto Joint Venture Interest****a
Copper (millions of recoverable pounds)
Production	607				1,160				984				1,063				752
Sales	667				1,130				981				1,054				744
Average realized price per pound	$	2.72			$	2.89			$	3.00			$	2.32			$	2.33
Gold (thousands of recoverable ounces)
Production	863				2,416				1,554				1,061				1,232
Sales	973				2,366				1,540				1,054				1,224
Average realized price per ounce	$	1,416			$	1,254			$	1,268			$	1,237			$	1,129
100% Operating Data
Ore milled (metric tons per day)	110,100				178,100				140,400				165,700				162,500
Average ore grade:
Copper (percent)	0.84				0.98				1.01				0.91				0.67
Gold (grams per metric ton)	0.93				1.58				1.15				0.68				0.79
Recovery rates (percent):
Copper	88.4				91.8				91.6				91.0				90.4
Gold	75.0				84.7				85.0				82.2				83.4
Production:
Copper (millions of recoverable pounds)	607				1,227				996				1,063				752
Gold (thousands of recoverable ounces)	863				2,697				1,554				1,061				1,232
MOLYBDENUM MINES
Molybdenum production (millions of recoverable pounds)	29				35				32				26				48
Ore milled (metric tons per day)	30,100				27,900				22,500				18,300				34,800
Average molybdenum ore grade (percent)	0.14				0.18				0.20				0.21				0.2
OIL AND GAS OPERATIONS****b
Sales Volumes:
Oil (million barrels)	0.9				1.4				1.8				34.4				35.3
Natural gas (billion cubic feet)	1.1				10.1				15.8				65.1				89.7
Natural gas liquids (NGLs) (million barrels)	—				0.1				0.2				1.8				2.4
Million barrels of oil equivalents	1.1				3.1				4.6				47.1				52.6
Average Realizations:	—
Oil (per barrel)	$	45.17			$	54.13			$	40.71			$	39.13			$	57.11
Natural gas (per million British thermal units)	$	3.32			$	3.15			$	3.18			$	2.38			$	2.59
NGLs (per barrel)	$	60.93			$	44.11			$	30.65			$	18.11			$	18.90

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

b.	In 2016, we sold the majority of our oil and gas assets.

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. 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.

This section of our Form 10-K generally discusses 2019 and 2018 items and year-to-year comparisons between 2019 and 2018. Discussions of 2017 items and year-to-year comparisons between 2018 and 2017 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures About Market Risk” in Part II, Items 7. and 7A. of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018.

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 one of the world’s largest publicly traded copper producers. 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 North America and South America, including the large-scale Morenci minerals district in Arizona and the Cerro Verde operation in Peru.

We believe that we have a high-quality portfolio of long-lived copper assets positioned to generate long-term value. PT Freeport Indonesia (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, and we are nearing completion of a project to develop the Lone Star leachable ores near the Safford operation in eastern Arizona. 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.

During 2019, we advanced initiatives in our North America and South America mining operations to enhance productivity, expand margins and reduce the capital intensity of the business through the utilization of new technology applications in combination with a more interactive operating structure. The pilot program initiated at the Bagdad mine in northwest Arizona in late 2018 was successful in utilizing data science, machine learning and integrated functional teams to address bottlenecks, provide cost benefits and drive improved overall performance. The program is being implemented across our North America and South America operations.

During fourth-quarter 2019, PT-FI completed mining the final phase of the Grasberg open pit and continues to achieve important milestones in ramping-up production of large-scale quantities of copper and gold from its significant underground ore bodies. In aggregate, the Grasberg open pit produced over 27 billion pounds of copper and 46 million ounces of gold in the 30-year period from 1990 through 2019. As PT-FI continues to ramp-up production from its underground ore bodies, our consolidated metal production is expected to improve significantly by 2021 (refer to “Operations - Indonesia Mining” for further discussion).

Net (loss) income attributable to common stock totaled $(239) million in 2019 and $2.6 billion in 2018. Our results in 2019, compared to 2018, primarily reflect lower copper and gold sales volumes resulting from anticipated lower mill rates and ore grades in Indonesia and lower copper prices. Refer to “Consolidated Results” for discussion of items impacting our consolidated results for the two years ended December 31, 2019.

At December 31, 2019, we had $2.0 billion in consolidated cash and cash equivalents, $9.8 billion in total debt, and no borrowings and approximately $3.5 billion available under our revolving credit facility.

We have significant mineral reserves, resources and future development opportunities within our portfolio of mining assets. At December 31, 2019, our estimated consolidated recoverable proven and probable mineral reserves totaled 116.0 billion pounds of copper, 29.6 million ounces of gold and 3.58 billion pounds of molybdenum. Refer to “Critical Accounting Estimates – Mineral Reserves” for further discussion.

During 2019, production from our mines totaled 3.2 billion pounds of copper, 0.9 million ounces of gold and 90 million pounds of molybdenum. Following is a summary of the geographic locations of our consolidated copper, gold and molybdenum production in 2019:

	Copper			Gold			Molybdenum
North America	45	%		2	%		68	%	a
South America	36			—			32
Indonesia	19			98			—
	100	%		100	%		100	%

a.	Our North America copper mines produced 36 percent of consolidated molybdenum production, and our Henderson and Climax molybdenum mines produced 32 percent.

Copper production from the Morenci mine in North America, Cerro Verde mine in Peru and the Grasberg minerals district in Indonesia together totaled 72 percent of our consolidated copper production in 2019.

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 flows and capital expenditures.

Sales Volumes

Following are our projected consolidated sales volumes for 2020 and actual consolidated sales volumes for 2019:

	2020			2019
	(Projected)			(Actual)
Copper (millions of recoverable pounds):
North America copper mines	1,580			1,442
South America mining	1,150			1,183
Indonesia mining	750			667
Total	3,480			3,292
Gold (thousands of recoverable ounces)	775			991
Molybdenum (millions of recoverable pounds)	88		a	90

a.	Includes 30 million pounds from our Molybdenum mines and 58 million pounds from our North America and South America copper mines.

Consolidated sales for first-quarter 2020 are expected to approximate 725 million pounds of copper, 105 thousand ounces of gold and 22 million pounds of molybdenum. Projected sales volumes for the year 2020 are dependent on operational performance, weather-related conditions, timing of shipments, the Indonesia government’s extension of PT-FI’s export license beyond March 8, 2020, 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, 2019.

Consolidated sales for 2021 are currently expected to approximate 4.3 billion pounds of copper, 1.4 million ounces of gold and 90 million pounds of Molybdenum. The increase from 2019 levels primarily reflects PT-FI’s continued ramp-up of production from its significant underground ore bodies and the incorporation of higher mining and milling rates from our productivity and innovation initiatives (which represent an estimated incremental production of approximately 100 million pounds of copper in 2021 and approximately 200 million pounds in 2022).

Consolidated Unit Net Cash Costs

Assuming average prices of $1,500 per ounce of gold and $10.00 per pound of molybdenum 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 $1.75 per pound of copper in 2020. The impact of price changes on 2020 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.

Consolidated Operating Cash Flows

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 $2.85 per pound of copper, $1,500 per ounce of gold and $10.00 per pound of molybdenum, our consolidated operating cash flows are estimated to approximate $2.4 billion (including of $0.2 billion in working capital and other sources) for the year 2020. Estimated consolidated operating cash flows in 2020 also reflect a projected income tax provision of $0.6 billion (refer to “Consolidated Results - Income Taxes” for further discussion of our projected income tax rate for the year 2020). The impact of price changes during 2020 on operating cash flows would approximate $350 million for each $0.10 per pound change in the average price of copper, $35 million for each $50 per ounce change in the average price of gold and $125 million for each $2 per pound change in the average price of molybdenum.

Consolidated Capital Expenditures

Consolidated capital expenditures are expected to approximate $2.8 billion in 2020, including $1.8 billion for major projects primarily associated with underground development activities in the Grasberg minerals district and completion of the Lone Star copper leach project, and exclude estimates associated with the new smelter in Indonesia. A large portion of projected capital expenditures in 2020 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 expect capital expenditures for the development of the new smelter in Indonesia to approximate $0.5 billion in 2020, of which approximately 49 percent will be attributable to our equity interest. PT-FI expects these amounts to be funded by a new bank loan.

MARKETS

World prices for copper, gold and molybdenum can fluctuate significantly. During the period from January 2010 through December 2019, the London Metal Exchange (LME) copper settlement price varied from a low of $1.96 per pound in 2016 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 $1,049 per ounce in 2015 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, 2019.

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, and the Shanghai Futures Exchange from January 2010 through December 2019. For the year 2019, LME copper settlement prices ranged from a low of $2.51 per pound to a high of $2.98 per pound, averaged $2.72 per pound and closed at $2.79 per pound on December 31, 2019. During 2019, copper prices continued to be negatively impacted primarily by the trade dispute between the United States (U.S.) and China and a slowing global economy. Beginning in late January 2020, copper prices declined as a result of economic uncertainty in China associated with concerns over the coronavirus. The LME copper settlement price was $2.53 per pound on January 31, 2020.

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 2010 through December 2019. An improving economic outlook, stronger U.S. dollar and positive equity performance contributed to lower demand for gold from 2014 through 2018. Gold prices rose in 2019 because of geopolitical concerns in the Middle East, global economic uncertainty and lower U.S. interest rates. During 2019, London PM gold prices ranged from a low of $1,270 per ounce to a high of $1,546 per ounce, averaged $1,393 per ounce and closed at $1,515 per ounce on December 30, 2019 (there was no London PM gold price quote on December 31, 2019). The London PM gold price was $1,584 per ounce on January 31, 2020.

This graph presents the Metals Week Molybdenum Dealer Oxide weekly average price from January 2010 through December 2019. Molybdenum prices declined from mid-2014 until 2016 because of weaker demand from global steel and stainless steel producers. During 2019, the weekly average price for molybdenum ranged from a low of $8.55 per pound to a high of $12.66 per pound, averaged $11.37 per pound and was $9.23 per pound on

December 31, 2019. The Metals Week Molybdenum Dealer Oxide weekly average price was $10.40 per pound on January 31, 2020.

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, 2019, our consolidated estimated recoverable proven and probable reserves were assessed using long-term prices of $2.50 per pound for copper, $1,200 per ounce of gold and $10 per pound of molybdenum. The following table summarizes changes in our estimated consolidated recoverable proven and probable copper, gold and molybdenum reserves during 2019 and 2018:

		Copper****a (billion pounds)			Gold (million ounces)			Molybdenum (billion pounds)
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
Net revisions		(0.4	)		(0.3	)		(0.11	)
Production		(3.2	)		(0.9	)		(0.09	)
Consolidated reserves at December 31, 2019		116.0			29.6			3.58

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, 2019, 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, 2019, we estimate that our annual depreciation, depletion and amortization (DD&A) expense for 2020 would decrease by $37 million ($20 million to net income attributable to common stock), and a 10 percent decrease in copper reserves would increase DD&A expense by $86 million ($45 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, 2019). 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, 2019, estimated consolidated recoverable copper was 1.7 billion pounds in leach stockpiles (with a carrying value of $2.2 billion) and 0.5 billion pounds in mill stockpiles (with a carrying value of $0.4 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 two years ended December 31, 2019, 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, 2019.

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, 2019, environmental obligations recorded in our consolidated balance sheet totaled $1.6 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, 2019.

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, 2019, AROs recorded in our consolidated balance sheet totaled $2.5 billion, including $0.4 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, 2019.

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 pay a portion of the disputed amount before formally appealing an assessment. Such payment is recorded as a receivable if we believe the amount is collectible.

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

Our valuation allowances totaled $4.6 billion at December 31, 2019, which covered all of our U.S. foreign tax credits, U.S. federal net operating losses, foreign net operating losses, and substantially all of our U.S. state net operating losses. Refer to Note 11 for further discussion.

CONSOLIDATED RESULTS

	Years Ended December 31,
	2019				2018
SUMMARY FINANCIAL DATA	(in millions, except per share amounts)
Revenuesa,b	$	14,402		c	$	18,628
Operating incomea,d,e,f	$	1,091			$	4,754		g,h
Net (loss) income from continuing operationsi,j,k,l	$	(192	)	m,n	$	2,909		o
Net income (loss) from discontinued operations	$	3			$	(15	)
Net (loss) income attributable to common stock	$	(239	)		$	2,602
Diluted net (loss) income per share attributable to common stock:
Continuing operations	$	(0.17	)		$	1.79
Discontinued operations	—				(0.01		)
	$	(0.17	)		$	1.78
Diluted weighted-average common shares outstanding	1,451				1,458
Operating cash flowsp	$	1,482			$	3,863
Capital expenditures	$	2,652			$	1,971
At December 31:
Cash and cash equivalents	$	2,020			$	4,217
Total debt, including current portion	$	9,826			$	11,141

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 charges totaling $166 million ($91 million to net loss attributable to common stock or $0.06 per share) primarily associated with an unfavorable Indonesia Supreme Court ruling related to certain disputed PT-FI export duties (refer to Note 12).

d.	Includes net gains on sales of assets totaling $417 million ($339 million to net loss attributable to common stock or $0.23 per share) in 2019 and $208 million ($208 million to net income attributable to common stock or $0.14 per share) in 2018. Refer to Note 2 and “Net Gain on Sales of Assets” below for further discussion.

e.	Includes net charges for adjustments to environmental obligations and related litigation reserves of $68 million ($68 million to net loss attributable to common stock or $0.05 per share) in 2019 and $57 million ($57 million to net income attributable to common stock or $0.04 per share) in 2018.

f.	Includes metals inventory adjustments totaling $179 million ($144 million to net loss attributable to common stock or $0.10 per share) for the year 2019 and $4 million ($4 million to net income attributable to common stock or less than $0.01 per share) for the year 2018.

g.

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 settlements with the local regional tax authority in Papua, Indonesia, $32 million for assessments for 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 Indonesia smelter, partly offset by inventory adjustments totaling $12 million.

h.	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, which was suspended while it was classified as held for sale.

i.

Includes net charges associated with disputed Cerro Verde royalties for prior years of $7 million to net loss attributable to common stock (less than $0.01 per share) in 2019 and $195 million to net income attributable to common stock ($0.13 per share) in 2018. Net charges for the year 2019 consist of charges to production and delivery costs ($6 million) and interest expense ($10 million). Net charges for the year 2018 primarily reflect 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). Refer to Note 12 for further discussion.

j.	Includes after-tax net (losses) gains on early extinguishment and exchanges of debt totaling $(26) million ($(0.02) per share) in 2019 and $7 million (less than $0.01 per share) in 2018. Refer to Note 8 for further discussion.

k.	Includes net tax (charges) credits of $(1) million ($34 million net of noncontrolling interests or $0.02 per share) in 2019 and $632 million ($574 million net of noncontrolling interests or $0.39 per share) in 2018. 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 charges at PT-FI of $294 million ($288 million to net loss attributable to common stock or $0.20 per share) consisting of $234 million associated with PT-FI's historical contested tax disputes, $32 million for a currency exchange adjustment to value-added tax receivables and $28 million for an adjustment to the settlement of the historical surface water tax matters with the local regional tax authority in Papua, Indonesia.

n.	The year 2019 also includes net charges totaling $59 million ($26 million to net loss attributable to common stock or $0.02 per share) primarily associated with weather-related issues at El Abra, adjustments to Cerro Verde’s deferred profit sharing and mining asset impairments, partly offset by net credits mostly for asset retirement obligation adjustments.

o.	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.

p.	Includes net working capital and other sources (uses) totaling $349 million in 2019 and $(656) million in 2018.

	Years Ended December 31,
	2019				2018
SUMMARY OPERATING DATA
Copper (millions of recoverable pounds)
Production	3,247				3,813
Sales, excluding purchases	3,292				3,811
Average realized price per pound	$	2.73			$	2.91
Site production and delivery costs per pounda	$	2.15			$	1.76
Unit net cash costs per pounda	$	1.74			$	1.07
Gold (thousands of recoverable ounces)
Production	882				2,439
Sales, excluding purchases	991				2,389
Average realized price per ounce	$	1,415			$	1,254
Molybdenum (millions of recoverable pounds)
Production	90				95
Sales, excluding purchases	90				94
Average realized price per pound	$	12.61			$	12.50

a.	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 $14.4 billion in 2019 and $18.6 billion in 2018. 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 from 2018 to 2019 (in millions):

Consolidated revenues - 2018	$	18,628
Mining operations:
Lower sales volumes:
Copper	(1,509		)
Gold	(1,753		)
Molybdenum	(51		)
(Lower) higher averaged realized prices:
Copper	(593		)
Gold	160
Molybdenum	10
Adjustments for prior year provisionally priced copper sales	128
Higher revenues from sales of purchased copper	8
Lower cobalt revenues	(527		)
Lower Atlantic Copper revenues	(234		)
Lower treatment and refining charges	131
Lower royalties and export duties	92
Other, including intercompany eliminations	(88		)
Consolidated revenues - 2019	$	14,402

Sales Volumes. Lower copper and gold sales volumes in 2019, compared to 2018, primarily reflecting anticipated lower mill rates and ore grades as PT-FI continues to ramp-up production from its underground ore bodies.

Lower molybdenum sales volumes in 2019, compared with 2018, primarily reflect lower production from our primary molybdenum mines because of market conditions.

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 2019, our average realized prices were 6 percent lower for copper, 13 percent higher for gold and 1 percent higher for molybdenum, compared with 2018.

Average realized copper prices include net unfavorable adjustments to current year provisionally priced copper sales (i.e., provisionally priced sales for the years 2019 and 2018) totaling $24 million for 2019 and $240 million for 2018. Refer to Note 14 for a summary of total adjustments to prior period and current period provisionally priced sales. 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, 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.

Prior Year Provisionally Priced Copper Sales. Net favorable (unfavorable) adjustments to prior years’ provisionally priced copper sales (i.e., provisionally priced copper sales at December 31, 2018 and 2017) recorded in consolidated revenues totaled $58 million in 2019 and $(70) million in 2018. Refer to “Disclosures About Market Risks-Commodity Price Risk” for further discussion of our provisionally priced copper sales, and to Note 14 for a summary of total adjustments to prior period and current period provisionally priced copper sales.

Cobalt Revenues. Lower cobalt revenues in 2019, compared with 2018, primarily reflect lower cobalt prices.

Purchased Copper. We purchase copper cathode primarily for processing by our Rod & Refining operations. Purchased copper volumes totaled 379 million pounds in 2019 and 356 million pounds in 2018.

Atlantic Copper Revenues. Atlantic Copper revenues totaled $2.1 billion in 2019 and $2.3 billion in 2018. Lower Atlantic Copper revenues in 2019, compared with 2018, primarily reflect lower copper sales volumes and lower copper prices.

Treatment and Refining Charges. Treatment and refining charges represent payments to smelters and refiners and vary with the volume of metals sold. Lower treatment and refining charges in 2019, compared with 2018, primarily reflect lower sales volumes at PT-FI.

Royalties and Export Duties. Royalties are primarily for sales from PT-FI and vary with the volume of metal sold and the prices of copper and gold, and PT-FI will continue to pay export duties until development progress for the new smelter in Indonesia exceeds 50 percent. Royalties and export duties totaled $334 million in 2019 compared with $426 million in 2018, primarily reflecting lower sales volumes at PT-FI. The year 2019 also included charges totaling $166 million, primarily associated with an unfavorable Indonesia Supreme Court ruling related to certain disputed PT-FI export duties. Refer to Note 13 for a summary of PT-FI’s royalties and export duties.

Production and Delivery Costs

Consolidated production and delivery costs totaled $11.5 billion in 2019, compared with $11.7 billion in 2018. Refer to Note 16 for details of production and delivery costs by operating segment.

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 $2.15 per pound of copper in 2019 and $1.76 per pound in 2018. Higher consolidated unit site production and delivery costs in 2019, compared with 2018, primarily reflected lower volumes associated with PT-FI’s transition from mining the open pit to underground. 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 2019, including purchases of approximately 230 million gallons of diesel fuel; 8,200 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); 675 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 also approximate 20 percent of our copper mine site operating costs for 2020.

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 $1.4 billion in 2019 and $1.8 billion in 2018. Lower DD&A in 2019, compared with 2018, primarily reflects lower sales volumes, and lower UOP rates because of increased proven and probable reserves at our North America and South America mines as a result of a higher copper price assumption at December 31, 2018.

Mining Exploration and Research Expenses

Consolidated exploration and research expenses for our mining operations totaled $104 million in 2019 and $105 million in 2018. 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 $70 million in 2020.

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 $105 million in 2019 and $89 million in 2018. Higher costs in 2019 compared with 2018, primarily reflect increased legal expenses associated with our legacy talc mining subsidiaries. Refer to Note 12 for environmental obligations and litigation matters.

Net Gain on Sales of Assets

Net gain on sales of assets totaled $417 million in 2019, primarily including $343 million associated with the sale of our interest in the lower zone of the Timok exploration project in Serbia and $59 million associated with the sale of our cobalt refinery in Kokkola, Finland, and related cobalt cathode precursor business.

Net gain on sales of assets totaled $208 million in 2018, primarily associated with oil and gas transactions and adjustments to assets held for sale.

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 and PT-FI's historical contested tax disputes) totaled $623 million in 2019 and $671 million in 2018. Lower interest expense in 2019 compared to 2018, reflects a decrease in total debt, primarily reflecting the redemption of our 3.100% Senior Notes due 2020 and a prepayment on the Cerro Verde credit facility. Refer to Note 8 for further discussion of our 2019 debt transactions. Interest expense associated with disputed Cerro Verde royalties totaled $68 million (including $58 million associated with installment payment programs) in 2019 and $370 million in 2018. Refer to Note 12 for further discussion.

Capitalized interest varies with the level of expenditures for our development projects and average interest rates on our borrowings, and totaled $149 million in 2019 and $96 million in 2018. Refer to “Operations” and “Capital Resources and Liquidity – Investing Activities” for further discussion of current development projects.

Other (Expense) Income, Net

Other (expense) income, net, totaled $(138) million in 2019 and $76 million in 2018. The year 2019 includes charges totaling $188 million associated with PT-FI's historical contested tax disputes (refer to Note 11) and a currency exchange adjustment to value-added tax receivables at PT-FI. The year 2018 includes $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):

	2019										2018
	Income (Loss)a				Effective Tax Rate		Income Tax (Provision) Benefit				Income (Loss)a				Effective Tax Rate		Income Tax (Provision) Benefit
U.S.b	$	(277	)		—%		$	—		c,d	$	352			7%		$	(24	)	e
South America	497				48%		(241		)		706				43%		(303		)
Indonesia	340				44%		(149		)	f	3,027				42%		(1,284		)	g
PT-FI historical contested tax disputesh	(201		)		(39)%		(78		)		—				—		—
PT-FI export duty matteri	(155		)		31%		48				—				—		—
Change in PT-FI tax rates	—				N/A		—				—				N/A		504			j
Adjustment to deferred taxes	—				N/A		(49		)	k	—				N/A		—
U.S. tax reform	—				N/A		—				—				N/A		123			l
Cerro Verde royalty dispute	(16		)		N/A		2				(406		)		N/A		35			m
Eliminations and other	118				N/A		(43		)		213				N/A		(42		)
Consolidated	$	306			167%	n	$	(510	)		$	3,892			25%		$	(991	)

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

b.	In addition to our North America mining operations, the U.S. jurisdiction reflects corporate-level expenses, which include interest expense associated with senior notes, general and administrative expenses, and environmental obligations and shutdown costs.

c.	Includes tax credits of $29 million associated with adjustments to the calculation of transition tax related to the 2017 Tax Cuts and Jobs Act (the Act) and $24 million associated with state law changes and the settlement of state income tax examinations.

d.	Includes a tax charge of $53 million associated with the sale of our interest in the lower zone of the Timok exploration project in Serbia.

e.	Includes net tax charges of $20 million, primarily associated with adjustments to the calculation of transition tax related to the Act and a tax credit of $5 million associated with the settlement of a state income tax examination.

f.	Includes a tax charge of $5 million ($4 million net of noncontrolling interests) primarily for non-deductible penalties related to PT-FI’s surface water tax settlement.

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

h.	Refer to Note 11 for further discussion of the development of a framework for resolution of these historical contested tax disputes.

i.	Refer to Note 12 for further discussion of the unfavorable Indonesia Supreme Court ruling related to certain disputed PT-FI export duties.

j.	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 special mining license (IUPK).

k.	Includes net tax charges totaling $49 million ($15 million net of noncontrolling interests) primarily to adjust deferred taxes on historical balance sheet items in accordance with tax accounting principles.

l.	In December 2018, we completed our analysis of the Act and recognized benefits totaling $123 million ($119 million net of noncontrolling interest) associated with alternative minimum tax credit refunds.

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

n.

Our consolidated effective income tax rate is a function of the combined effective tax rates for the jurisdictions in which we operate, excluding the U.S. jurisdiction. Because our U.S. jurisdiction generated net losses during 2019 that will not result in a realized tax benefit, applicable accounting rules require us to adjust our estimated annual effective tax rate to exclude the impact of U.S. net losses.

Assuming achievement of current sales volume and cost estimates and average prices of $2.85 per pound for copper, $1,500 per ounce for gold and $10.00 per pound for molybdenum for 2020, we estimate our consolidated effective tax rate for the year 2020 would approximate 42 percent. Based on an average price of $2.60 per pound for copper and all other assumptions being the same as discussed above, we estimate our consolidated effective tax rate for 2020 would exceed 90 percent. Changes in sales volumes and average prices during 2020 would incur tax impacts at estimated effective rates of 38 percent for Indonesia, 40 percent for Peru and 0 percent for the U.S.

Changes to the relative proportions of jurisdictional income result in fluctuations to our consolidated effective income tax rate. 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.

OPERATIONS

Productivity and Innovation Initiatives

During 2019, we advanced initiatives in our North America and South America mining operations to enhance productivity, expand margins and reduce the capital intensity of the business through the utilization of new technology applications in combination with a more interactive operating structure. The pilot program initiated at the Bagdad mine in northwest Arizona in late 2018 was successful in utilizing data science, machine learning and integrated functional teams to address bottlenecks, provide cost benefits and drive improved overall performance. The program is now being implemented across the North America and South America operations.

A series of action items have been identified, prioritized and are being implemented. Based on the opportunities identified to date, we have incorporated higher mining and milling rates in our future plans, resulting in estimated incremental production of approximately 100 million pounds of copper in 2021 and approximately 200 million pounds in 2022.

Capital expenditures associated with these initiatives are expected to be attractive in relation to developing new copper supply. We currently estimate capital costs of these initiatives, principally for mining equipment and ongoing development of data science and machine learning programs, will approximate $200 million, most of which will be incurred in 2020.

North America Copper Mines

We operate seven open-pit copper mines in North America – Morenci, Bagdad, Safford, Sierrita and Miami in Arizona, and Chino and Tyrone in New Mexico. All of the North America mining operations are wholly owned, except for Morenci. We record our 72 percent undivided joint venture interest in Morenci using the proportionate consolidation method.

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 production is sold as 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 are dependent on market conditions and will be undertaken based on the results of economic and technical feasibility studies, including the incorporation of innovation initiatives to reduce capital intensity.

Through exploration drilling, we have identified a significant resource at our wholly owned Lone Star copper leach project located near the Safford operation in eastern Arizona. An initial project to develop the Lone Star leachable ores commenced in 2018, with first production expected during 2020. Initial production from the Lone Star leachable ores following a ramp-up period is expected to average approximately 200 million pounds of copper per year, with the potential for future expansion options. Total capital costs for the initial project, 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, 2019, approximately $655 million has been incurred for this project, which is on schedule and within budget. The project also advances exposure to a significant sulfide resource. We expect to incorporate 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:

	2019				2018
Operating Data, Net of Joint Venture Interests
Copper (millions of recoverable pounds)
Production	1,457				1,404
Sales, excluding purchases	1,442				1,428
Average realized price per pound	$	2.74			$	2.96
Molybdenum (millions of recoverable pounds)
Productiona	32				32
100% Operating Data
Leach operations
Leach ore placed in stockpiles (metric tons per day)	750,900				681,400
Average copper ore grade (percent)	0.23				0.24
Copper production (millions of recoverable pounds)	993				951
Mill operations
Ore milled (metric tons per day)	326,100				301,000
Average ore grade (percent):
Copper	0.34				0.35
Molybdenum	0.02				0.02
Copper recovery rate (percent)	87.0				87.8
Copper production (millions of recoverable pounds)	748				719

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

Copper sales volumes from our North America copper mines totaled 1.4 billion pounds in 2019 and 2018. North America copper sales are estimated to approximate 1.6 billion pounds of copper in 2020. 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 two years ended December 31, 2019. 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.

	2019												2018
	By-				Co-Product Method								By-				Co-Product Method
	Product Method				Copper				Molyb- denuma				Product Method				Copper				Molyb- denuma
Revenues, excluding adjustments	$	2.74			$	2.74			$	11.51			$	2.96			$	2.96			$	11.64
Site production and delivery, before net noncash
and other costs shown below	2.05				1.88				9.29				1.94				1.77				9.03
By-product credits	(0.24		)		—				—				(0.26		)		—				—
Treatment charges	0.11				0.11				—				0.11				0.10				—
Unit net cash costs	1.92				1.99				9.29				1.79				1.87				9.03
DD&A	0.24				0.21				0.72				0.25				0.23				0.73
Metals inventory adjustments	0.02				0.02				—				—				—				—
Noncash and other costs, net	0.08				0.07				0.29				0.07				0.06				0.17
Total unit costs	2.26				2.29				10.30				2.11				2.16				9.93
Revenue adjustments, primarily for pricing on prior period open sales	—				—				—				—				—				—
Gross profit per pound	$	0.48			$	0.45			$	1.21			$	0.85			$	0.80			$	1.71
Copper sales (millions of recoverable pounds)	1,441				1,441								1,426				1,426
Molybdenum sales (millions of recoverable pounds)a									32												32

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 2019, average unit net cash costs (net of by-product credits) for the North America copper mines ranged from $1.48 per pound to $2.65 per pound at the individual mines and averaged $1.92 per pound. Higher average unit net cash costs (net of by-product credits) of $1.92 in 2019, compared with $1.79 per pound in 2018, primarily reflect higher milling and other site production costs.

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

approximate $1.93 per pound of copper in 2020, based on achievement of current sales volume and cost

estimates and assuming an average molybdenum price of $10.00 per pound for the year 2020. The impact of price changes during 2020 on North America’s average unit net cash costs for the year 2020 would approximate $0.04 per pound for each $2 per pound change in the average price of molybdenum.

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 and have continued to perform well. Debottlenecking projects and additional initiatives to enhance operating rates continue to be advanced. Cerro Verde concentrating operations averaged 393,100 metric tons of ore per day in 2019. Ongoing productivity and innovation initiatives are targeting the opportunity to increase production to 420,000 metric tons of ore per day in 2021.

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 continue to be advanced to determine the optimal scope and timing of the project in parallel with extending the life of the current leaching operation.

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

	2019				2018
Copper (millions of recoverable pounds)
Production	1,183				1,249
Sales	1,183				1,253
Average realized price per pound	$	2.71			$	2.87
Molybdenum (millions of recoverable pounds)
Productiona	29				28
Leach operations
Leach ore placed in stockpiles (metric tons per day)	205,900				195,200
Average copper ore grade (percent)	0.37				0.33
Copper production (millions of recoverable pounds)	268				287
Mill operations
Ore milled (metric tons per day)	393,100				387,600
Average ore grade (percent):
Copper	0.36				0.38
Molybdenum	0.02				0.01
Copper recovery rate (percent)	83.5				84.3
Copper production (millions of recoverable pounds)	916				962

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

Lower consolidated copper sales volumes from South America of 1.18 billion pounds in 2019, compared with 1.25 billion pounds in 2018, primarily reflect lower mill ore grades and recovery rates.

Copper sales from South America mines are expected to approximate 1.15 billion pounds of copper in 2020. 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

The following tables summarize unit net cash costs and gross profit per pound of copper at our South America mining operations for the two years ended December 31, 2019. 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.

	2019								2018
	By-Product Method				Co-Product Method				By-Product Method				Co-Product Method
Revenues, excluding adjustments	$	2.71			$	2.71			$	2.87			$	2.87
Site production and delivery, before net noncash
and other costs shown below	1.85				1.68				1.79			a	1.65
By-product credits	(0.27		)		—				(0.24		)		—
Treatment charges	0.18				0.18				0.19				0.19
Royalty on metals	0.01				0.01				0.01				0.01
Unit net cash costs	1.77				1.87				1.75				1.85
DD&A	0.40				0.36				0.44				0.40
Noncash and other costs, net	0.08				0.07				0.06				0.06
Total unit costs	2.25				2.30				2.25				2.31
Revenue adjustments, primarily for pricing on
prior period open sales	0.03				0.03				(0.03		)		(0.03		)
Gross profit per pound	$	0.49			$	0.44			$	0.59			$	0.53
Copper sales (millions of recoverable pounds)	1,183				1,183				1,253				1,253

a.	Includes charges totaling $0.06 per pound of copper associated with Cerro Verde’s three-year CLA.

Our South America mines have varying cost structures because of differences in ore grades and characteristics, processing costs, by-product credits and other factors. Higher average unit net cash costs (net of by-product credits) of $1.77 per pound of copper in 2019, compared with $1.75 per pound in 2018, primarily reflected lower sales volumes.

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. DD&A per pound of copper under the by-product method was $0.40 in 2019, compared with $0.44 in 2018, primarily reflecting an increase in proven and probable mineral reserves at December 31, 2018.

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 are expected to approximate $1.95 per pound of copper in 2020, based on current sales volume and cost estimates and assuming average prices of $10.00 per pound of molybdenum for the year 2020.

Indonesia Mining

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. We have a 48.76 percent interest in PT-FI and manage its mining operations. As further discussed in Note 1, under the terms of the shareholders agreement, our economic interest in PT-FI approximates 81 percent through 2022. PT-FI’s results are consolidated in our financial statements.

Substantially all of PT-FI’s copper concentrate is sold under long-term contracts. During 2019, 64 percent of PT-FI’s copper concentrate was sold to PT Smelting (PT-FI’s 25-percent-owned smelter and refinery in Gresik, Indonesia).

PT-FI and union officials have commenced discussions for a new two-year labor agreement. The existing agreement, which expired in September 2019, will continue in effect until a new agreement is consummated.

Operating and Development Activities. During fourth-quarter 2019, PT-FI completed mining the final phase of the Grasberg open pit and continues to achieve important milestones in ramping-up production of large-scale quantities of copper and gold from its significant underground ore bodies. In the aggregate, the Grasberg open pit produced over 27 billion pounds of copper and 46 million ounces of gold in the 30-year period from 1990 through 2019.

The following provides additional information on the development of the Grasberg Block Cave underground mine, the Deep Mill Level Zone (DMLZ) underground mine and the new Indonesia smelter. Results to date from the Grasberg Block Cave and DMLZ underground mines are positive and in line with long-term plans to reach full production rates. Estimates of timing of future production from the underground mines continue to be reviewed and may be modified as additional information becomes available.

Grasberg Block Cave*.* PT-FI has commenced extraction of ore from the Grasberg Block Cave underground mine, which is the same ore body historically mined from the surface in the Grasberg open pit. Reserves from the Grasberg Block Cave totaled 17.2 billion pounds of copper and 14.2 million ounces of gold at December 31, 2019, representing approximately half of PT-FI’s total copper and gold reserves. Undercutting, drawbell construction and ore extraction activities in the Grasberg Block Cave underground mine continue to track expectations. Ore extraction from the Grasberg Block Cave underground mine averaged 8,600 metric tons of ore per day in 2019. Following completion of a maintenance program in mid-December, ore extraction from the Grasberg Block Cave averaged 17,000 metric tons of ore per day. Monitoring data on cave propagation in the Grasberg Block Cave underground mine is providing confidence in growing production rates over time. As existing drawpoints mature and additional drawpoints are added, cave development is expected to increase production rates to an average of 30,000 metric tons of ore per day in 2020, over 60,000 metric tons of ore per day in 2021 and 130,000 metric tons of ore per day in 2023 from five production blocks spanning 335,000 square meters.

Mine development capital costs for the Grasberg Block Cave underground mine and associated common infrastructure are expected to approximate $6.7 billion, including $4.6 billion incurred through December 31, 2019 ($0.7 billion during 2019).

DMLZ*.* The DMLZ underground mine, located east of the Grasberg ore body and below the Deep Ore Zone (DOZ) underground mine, has continued its ramp-up of production. Hydraulic fracturing operations have been effective in managing rock stresses and pre-conditioning the cave following mining-induced seismic activity experienced in 2017 and 2018. Ore extraction continues to exceed expectations, averaging 9,800 metric tons of ore per day in 2019 and reached approximately 16,000 metric tons of ore per day at year-end 2019. Ongoing hydraulic fracturing operations combined with continued undercutting and drawbell openings in the two currently active production blocks are expected to expand the cave, supporting higher production rates that are expected to average 29,000 metric tons of ore per day in 2020, approach 60,000 metric tons of ore per day in 2021 and 80,000 metric tons of ore per day in 2022 from three production blocks.

Mine development capital costs for the DMLZ underground mine are expected to approximate $3.4 billion, including $2.8 billion incurred through December 31, 2019 ($0.3 billion during 2019).

Indonesia Smelter. In connection with the extension of PT-FI’s mining rights from 2031 to 2041, PT-FI committed to construct a new smelter in Indonesia by December 21, 2023. A site for the new smelter has been selected, and ground preparation is advancing. Engineering and front-end engineering and design for the selected process technology are advancing and expected to be completed in 2020. The preliminary capital cost estimate for the project approximates $3 billion, pending completion of final engineering. Estimated related capital expenditures for 2020 approximate $0.5 billion. PT-FI has advanced financing discussions with a syndicate of banks and expects the project will be funded by a bank loan to PT-FI. The debt service for the new smelter will be shared by PT-FI’s shareholders according to their respective equity ownership percentages. As a result, our future distributions from PT-FI will incorporate approximately 49 percent of the smelter debt service.

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

	2019				2018
Operating Data****a
Copper (millions of recoverable pounds)
Production	607				1,160
Sales	667				1,130
Average realized price per pound	$	2.72			$	2.89
Gold (thousands of recoverable ounces)
Production	863				2,416
Sales	973				2,366
Average realized price per ounce	$	1,416			$	1,254
100% Operating Data
Ore milled (metric tons per day):
Grasberg open pitb	60,100				133,300
DOZ underground minec	25,500				33,800
DMLZ underground minec	9,800				3,200
Grasberg Block Cave underground minec	8,600				4,000
Big Gossan underground minec	6,100				3,800
Total	110,100				178,100
Average ore grade:
Copper (percent)	0.84				0.98
Gold (grams per metric ton)	0.93				1.58
Recovery rates (percent):
Copper	88.4				91.8
Gold	75.0				84.7
Production (recoverable):
Copper (millions of pounds)	607				1,227
Gold (thousands of ounces)	863				2,697

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.	Includes ore from related stockpiles.

c.	Reflects ore extracted, including ore from development activities that result in metal production.

Lower consolidated sales of 0.7 billion pounds of copper and 1.0 million ounces of gold in 2019, compared with 1.1 billion pounds of copper and 2.4 million ounces of gold in 2018, primarily reflected anticipated lower mill rates and ore grades associated with PT-FI transitioning mining from the open pit to underground.

Consolidated sales volumes from PT-FI are expected to approximate 750 million pounds of copper and 0.8 million ounces of gold in 2020. As PT-FI continues to ramp-up production from its underground ore bodies, metal production is expected to improve significantly by 2021.

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 costs (credits) and gross profit per pound of copper and per ounce of gold at our Indonesia mining operations for the two years ended December 31, 2019. Refer to “Product Revenues and Production Costs” for an explanation of “by-product” and “co-product” methods and a reconciliation of unit net cash costs (credits) per pound to production and delivery costs applicable to sales reported in our consolidated financial statements.

	2019												2018
	By- Product				Co-Product Method								By- Product				Co-Product Method
	Method				Copper				Gold				Method				Copper				Gold
Revenues, excluding adjustments	$	2.72			$	2.72			$	1,416			$	2.89			$	2.89			$	1,254
Site production and delivery, before net noncash
and other costs shown below	2.91				1.63				849				1.48				0.77				335
Gold and silver credits	(2.13		)		—				—				(2.69		)		—				—
Treatment charges	0.26				0.14				75				0.26				0.14				59
Export duties	0.08				0.05				25				0.16				0.08				36
Royalty on metals	0.16				0.09				49				0.21				0.11				48
Unit net cash costs (credits)	1.28				1.91				998				(0.58		)		1.10				478
DD&A	0.61				0.34				178				0.54				0.28				121
Metals inventory adjustments	0.01				0.01				—				—				—				—
Noncash and other costs, net	0.37			a	0.20				110				0.21			b	0.11				48
Total unit costs	2.27				2.46				1,286				0.17				1.49				647
Revenue adjustments, primarily for pricing on
prior period open sales	0.03				0.03				2				(0.03		)		(0.03		)		7
PT Smelting intercompany (loss) profit	(0.02		)		(0.02		)		(8		)		0.04				0.03				12
Gross profit per pound/ounce	$	0.46			$	0.27			$	124			$	2.73			$	1.40			$	626
Copper sales (millions of recoverable pounds)	667				667								1,130				1,130
Gold sales (thousands of recoverable ounces)									973												2,366

a.

Includes charges in revenues totaling $0.25 per pound of copper primarily associated with an unfavorable Indonesia Supreme Court ruling related to certain disputed PT-FI export duties, partly offset by adjustments to prior year treatment charges totaling $0.03 per pound of copper. Also includes charges of $0.04 per pound of copper associated with adjustments to the settlement of the historical surface water tax disputes with the local regional tax authority in Papua, Indonesia.

b.	Includes net charges of $0.20 per pound of copper (refer to “Consolidated Results” for a summary of these charges).

A significant portion of PT-FI’s costs are fixed and unit costs vary depending volumes and other factors. PT-FI’s unit net cash costs (including gold and silver credits) of $1.28 per pound of copper in 2019, were higher than unit net cash credits of $0.58 per pound in 2018, primarily reflecting lower copper production and gold credits.

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 will continue to pay export duties until development progress for the new smelter in Indonesia exceeds 50 percent.

PT-FI’s export duties totaled $56 million in 2019 and $180 million in 2018, and PT-FI’s royalties totaled $107 million in 2019 and $238 million in 2018. Refer to Note 13 for further discussion of PT-FI’s export duties and royalties.

Because certain assets are depreciated on a straight-line basis, PT-FI’s unit depreciation rate may vary with asset additions and the level of copper production and sales. DD&A per pound of copper under they by-product method was $0.61 in 2019, compared with $0.54 in 2018, primarily reflecting lower copper sales volumes in 2019.

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

Assuming an average gold price of $1,500 per ounce for 2020 and achievement of current sales volume and cost estimates, unit net cash costs (including gold and silver credits) for PT-FI are expected to approximate $1.04 per pound of copper for the year 2020. The impact of price changes during 2020 on PT-FI’s average unit net cash costs would approximate $0.05 per pound for each $50 per ounce change in the average price of gold.

PT-FI’s projected sales volumes and unit net cash costs for the year 2020 are dependent on a number of factors, including operational performance, timing of shipments and the Indonesia government’s extension of PT-FI’s export license beyond March 8, 2020.

PT-FI’s estimated annual capital spending on underground mine development projects is expected to average $0.8 billion per year for the three-year period 2020 through 2022, net of scheduled contributions from PT Indonesia Asahan Aluminum (Persero) (PT Inalum). In accordance with applicable accounting guidance, aggregate costs (before scheduled contributions from PT Inalum), which are expected to average $1.0 billion per year for the three-year period 2020 through 2022, will be reflected as an investing activity in our cash flow statement, and contributions from PT Inalum will be reflected as a financing activity.

Molybdenum Mines

We have two wholly owned molybdenum mines in Colorado – the Henderson underground mine and the Climax open-pit mine. 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 29 million pounds of molybdenum in 2019 and 35 million pounds in 2018. The decrease in 2019, compared with 2018, primarily reflects the impact of market conditions. 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.

Unit net cash costs for our Molybdenum mines of $10.80 per pound of molybdenum in 2019 were higher than $8.77 per pound in 2018, primarily reflecting lower sales volumes. Based on current sales volume and cost estimates, average unit net cash costs for the Molybdenum mines are expected to approximate $10.50 per pound of molybdenum for the year 2020. 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.

During 2019, we incurred charges totaling $38 million for a maintenance turnaround at the Miami smelter. The next major maintenance turnaround at the Miami smelter is scheduled for 2021.

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 two years ended December 31, 2019:

	2019			2018
Third parties	73	%		77	%
North America copper mines	22			14
South America mining	2			5
Indonesia mining	3			4
	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 both 2019 and 2018. PT Smelting processed 64 percent of PT-FI’s concentrate production in 2019 and 38 percent of such production in 2018 .

PT Smelting produced 246,100 metric tons of copper anode from its smelter and 241,200 metric tons of copper cathode from its refinery in 2019; and 258,800 metric tons of copper anode from its smelter and 257,600 metric tons of copper cathode from its refinery in 2018.

In March 2019, PT Smelting received a one-year extension of its anode slimes export license, which currently expires March 11, 2020.

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 30-day maintenance turnaround during 2018, and the next major turnaround is scheduled to start in November 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 (reductions) additions to operating income totaling $(22) million ($(18) million to net income attributable to common stock) in 2019 and $69 million ($42 million to net income attributable to common stock) in 2018. 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 $38 million at December 31, 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 sales; 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. 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 of mining from the open pit to underground) and we are in the process of completing a project to develop the Lone Star leachable ores near the Safford operation in eastern Arizona. 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.

As presented in “Outlook”, our projected capital expenditures for 2020 (excluding estimates associated with the new smelter in Indonesia) are approximately $0.4 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 2020, 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.

We have no significant scheduled debt maturities until fourth-quarter 2021.

Refer to “Outlook” for further discussion of projected operating cash flows for 2020.

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, 2019 (in billions):

Cash at domestic companies	$	1.3
Cash at international operations	0.7
Total consolidated cash and cash equivalents	2.0
Noncontrolling interests’ share	(0.3		)
Cash, net of noncontrolling interests’ share	$	1.7
Withholding taxes	—			a
Net cash available	$	1.7

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, 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, 2019, consolidated debt totaled $9.8 billion, with a related weighted-average interest rate of 4.5 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, 2019. Refer to “Financing Activities” below and Note 8 for further discussion of debt.

As discussed in Note 8, on August 15, 2019, we completed the sale of $1.2 billion of senior notes and used the net proceeds to fund the make-whole redemption of all of our outstanding 6.875% Senior Notes due 2023, and the concurrent tender offers to purchase a portion of our 4.00% Senior Notes due 2021 and 3.55% Senior Notes due 2022. As a result of the redemption and tender offers, we recorded a loss on early extinguishment of debt totaling $26 million in 2019.

Operating Activities

We generated consolidated operating cash flows of $1.5 billion in 2019 (including $0.3 billion in working capital and other sources) and $3.9 billion in 2018 (net of $0.7 billion in working capital and other uses).

Lower operating cash flows for 2019, compared with 2018, primarily reflected lower copper and gold sales volumes and lower copper prices, partly offset by changes in working capital associated with decreases in inventory and timing of international tax payments.

Investing Activities

Capital Expenditures. Capital expenditures, including capitalized interest, totaled $2.65 billion (including $1.5 billion for major projects) in 2019 and $2.0 billion (including $1.2 billion for major projects) in 2018.

Higher capital expenditures in 2019, compared with 2018, primarily reflected underground development activities in the Grasberg minerals district and development of the Lone Star copper leach project in Arizona.

Refer to “Outlook” for further discussion of projected capital expenditures for 2020.

Acquisitions and Dispositions. During fourth-quarter 2019, we generated $452 million in proceeds from sales of (i) our interest in the lower zone of the Timok exploration project in Serbia and (ii) our cobalt refinery in Kokkola, Finland, and related cobalt cathode precursor business.

In December 2018, we completed the transaction with the Indonesia 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 PT Indonesia Papua Metal Dan Mineral (PTI - formerly known as PT Indocopper Investama) and $107 million from Rio Tinto for its share of the 2018 joint venture cash flows.

Refer to Note 2 for further discussion of acquisitions and dispositions.

Financing Activities

Debt Transactions. Net repayments of debt in 2019 totaled $1.3 billion, primarily consisting of the redemption of $1.0 billion aggregate principal amount of our 3.100% Senior Notes due 2020 and the repayment of $200 million under the Cerro Verde credit facility. Additionally, during 2019, we issued $1.2 billion in new senior notes and used the net proceeds to redeem and purchase other senior notes.

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.

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.

Cash Dividends and Distributions Paid. In February 2018, the Board reinstated a cash dividend on our common stock. We paid dividends on our common stock totaling $291 million in 2019 and $218 million in 2018. On December 18, 2019, we declared a quarterly cash dividend of $0.05 per share on our common stock, which was paid on February 3, 2020, to shareholders of record as of January 15, 2020. 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.

Cash dividends and other distributions paid to noncontrolling interests totaled $82 million in 2019 and $278 million in 2018. These payments will vary based on the operating results and cash requirements of our consolidated subsidiaries.

Contributions from Noncontrolling Interests. During 2019, we received equity contributions totaling $165 million from PT Inalum for their share of capital spending on PT-FI underground mine development projects and costs for the new smelter in Indonesia.

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, 2019 (in millions):

	Total				2020					2021 to 2022				2023 to 2024				Thereafter
Debt maturities	$	9,881			$	12				$	2,916			$	2,773			$	4,180
Scheduled interest payment obligationsa	4,564				452			—		832				576				2,704
ARO and environmental obligationsb	7,862				440					696				436				6,290
Take-or-pay contractsc	3,608				1,646					1,031				544				387
Operating lease obligations	317				57					79				60				121
Totald	$	26,232			$	2,607				$	5,554			$	4,389			$	13,682

a.	Scheduled interest payment obligations were calculated using stated coupon rates for fixed-rate debt and interest rates applicable at December 31, 2019, for variable-rate debt.

b.

Represents estimated cash payments, on an undiscounted and unescalated basis, associated with ARO and environmental activities (including $478 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 ($2.3 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 $122 million and unrecognized tax benefits totaling $255 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, which expired on December 31, 2019, but negotiations for an extension are currently underway, (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 9, 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, 2019, we had $1.6 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 both 2019 and 2018. For 2020, 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, 2019, 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, 2019, we had $2.5 billion recorded in our consolidated balance sheet for AROs, including $0.4 billion related to our oil and gas properties. Spending on AROs totaled $170 million in 2019 and $160 million in 2018 (including $77 million in 2019 and $83 million in 2018 for our oil and gas operations). For 2020, we expect to incur approximately $0.3 billion in aggregate ARO payments (including $96 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, 2019, 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, 2019, for further discussion of financial risks associated with fluctuations in the market prices of the commodities we sell.

During 2019, our mined copper was sold 56 percent in concentrate, 22 percent as cathode and 22 percent as rod from North America operations. Substantially all of our copper concentrate and cathode sales contracts provide final copper pricing in a specified future month (generally one to four months from the shipment date) based primarily on quoted LME monthly average 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 favorable (unfavorable) impacts of net adjustments to the prior years’ provisionally priced copper sales for the years ended December 31 (in millions, except per share amounts):

	2019				2018
Revenues	$	58			$	(70	)
Net income attributable to common stock	$	24			$	(31	)
Net income per share attributable to common stock	$	0.02			$	(0.02	)

At December 31, 2019, we had provisionally priced copper sales at our copper mining operations totaling 269 million pounds of copper (net of intercompany sales and noncontrolling interests) recorded at an average price of $2.80 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, 2019, provisional price recorded would have an approximate $9 million effect on 2020 net income attributable to common stock. The LME copper settlement price closed at $2.53 per pound on January 31, 2020.

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 on balances denominated in foreign currencies totaling $24 million in 2019 and $14 million in 2018, 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
	2019			2018			(in local currency)		(in millions of U.S. dollars)b				Increase				Decrease
Indonesia
Rupiah	13,832			14,409			10.2 trillion		$	737			$	(67	)		$	82
Australian dollar	1.43			1.41			199 million		$	139			$	(13	)		$	15
South America
Peruvian sol	3.32			3.38			2.2 billion		$	675			$	(61	)		$	75
Chilean peso	749			695			174 billion		$	232			$	(21	)		$	26
Atlantic Copper
Euro	0.89			0.87			136 million		$	153			$	(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, 2019.

b.	Based on exchange rates at December 31, 2019.

Interest Rate Risk

At December 31, 2019, we had total debt maturities based on principal amounts of $9.9 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, 2019. 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, 2019 (in millions, except percentages):

	2020				2021				2022				2023				2024				Thereafter				Fair Value
Fixed-rate debt	$	5			$	195			$	1,880			$	1,923			$	850			$	4,163			$	9,378
Average interest rate	—				4.0		%		3.6		%		3.9		%		4.6		%		5.5		%		4.7		%
Variable-rate debt	$	7			$	312			$	529			—				—				$	17			$	861
Average interest rate	0.8		%		3.6		%		3.7		%		—				—				5.4		%		3.7		%

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, 2019
(In millions)		By-Product				Co-Product Method
		Method				Copper				Molybdenuma				Otherb				Total
Revenues, excluding adjustments		$	3,950			$	3,950			$	370			$	84			$	4,404
Site production and delivery, before net noncash and other costs shown below		2,957				2,711				299				53				3,063
By-product credits		(348		)		—				—				—				—
Treatment charges		161				155				—				6				161
Net cash costs		2,770				2,866				299				59				3,224
DD&A		348				318				23				7				348
Metals inventory adjustments		30				30				—				—				30
Noncash and other costs, net		110				98				9				3				110
Total costs		3,258				3,312				331				69				3,712
Other revenue adjustments, primarily for pricing on prior period open sales		4				4				—				—				4
Gross profit		$	696			$	642			$	39			$	15			$	696
Copper sales (millions of recoverable pounds)		1,441				1,441
Molybdenum sales (millions of recoverable pounds)a										32
Gross profit per pound of copper/molybdenum:
Revenues, excluding adjustments		$	2.74			$	2.74			$	11.51
Site production and delivery, before net noncash and other costs shown below		2.05				1.88				9.29
By-product credits		(0.24		)		—				—
Treatment charges		0.11				0.11				—
Unit net cash costs		1.92				1.99				9.29
DD&A		0.24				0.21				0.72
Metals inventory adjustments		0.02				0.02				—
Noncash and other costs, net		0.08				0.07				0.29
Total unit costs		2.26				2.29				10.30
Other revenue adjustments, primarily for pricing on prior period open sales		—				—				—
Gross profit per pound		$	0.48			$	0.45			$	1.21
Reconciliation to Amounts Reported
														Metals
						Production								Inventory
		Revenues				and Delivery				DD&A				Adjustments
Totals presented above		$	4,404			$	3,063			$	348			$	30
Treatment charges		(60		)		101				—				—
Noncash and other costs, net		—				110				—				—
Other revenue adjustments, primarily for pricing on prior period open sales		4				—				—				—
Eliminations and other		38				45				1				—
North America copper mines		4,386				3,319				349				30
Other miningc		13,054				11,126				979				57
Corporate, other & eliminations		(3,038		)		(2,931		)		84				92
As reported in our consolidated financial statements		$	14,402			$	11,514			$	1,412			$	179

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, 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
Metals inventory adjustments		4				4				—				—				4
Noncash and other costs, net		90				83				6				1				90
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
Metals inventory adjustments		—				—				—
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
														Metals
						Production								Inventory
		Revenues				and Delivery				DD&A				Adjustments
Totals presented above		$	4,683			$	2,865			$	359			$	4
Treatment charges		(30		)		120				—				—
Noncash and other costs, net		—				90				—				—
Other revenue adjustments, primarily for pricing on prior period open sales		(5		)		—				—				—
Eliminations and other		46				49				1				—
North America copper mines		4,694				3,124				360				4
Other miningc		17,060				11,853				1,269				—
Corporate, other & eliminations		(3,126		)		(3,290		)		125				—
As reported in our consolidated financial statements		$	18,628			$	11,687			$	1,754			$	4

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, 2019
(In millions)	By-Product				Co-Product Method
	Method				Copper				Othera				Total
Revenues, excluding adjustments	$	3,213			$	3,213			$	358			$	3,571
Site production and delivery, before net noncash and other costs shown below	2,185				1,991				245				2,236
By-product credits	(307		)		—				—				—
Treatment charges	212				212				—				212
Royalty on metals	7				6				1				7
Net cash costs	2,097				2,209				246				2,455
DD&A	474				427				47				474
Metals inventory adjustments	2				2				—				2
Noncash and other costs, net	94				90				4				94
Total costs	2,667				2,728				297				3,025
Other revenue adjustments, primarily for pricing on prior period open sales	37				37				—				37
Gross profit	$	583			$	522			$	61			$	583
Copper sales (millions of recoverable pounds)	1,183				1,183
Gross profit per pound of copper:
Revenues, excluding adjustments	$	2.71			$	2.71
Site production and delivery, before net noncash and other costs shown below	1.85				1.68
By-product credits	(0.27		)		—
Treatment charges	0.18				0.18
Royalty on metals	0.01				0.01
Unit net cash costs	1.77				1.87
DD&A	0.40				0.36
Metals inventory adjustments	—				—
Noncash and other costs, net	0.08				0.07
Total unit costs	2.25				2.30
Other revenue adjustments, primarily for pricing on prior period open sales	0.03				0.03
Gross profit per pound	$	0.49			$	0.44
Reconciliation to Amounts Reported
													Metals
					Production								Inventory
	Revenues				and Delivery				DD&A				Adjustments
Totals presented above	$	3,571			$	2,236			$	474			$	2
Treatment charges	(212		)		—				—				—
Royalty on metals	(7		)		—				—				—
Noncash and other costs, net	—				94				—				—
Other revenue adjustments, primarily for pricing on prior period open sales	37				—				—				—
Eliminations and other	(1		)		(4		)		—				—
South America mining	3,388				2,326				474				2
Other miningb	14,052				12,119				854				85
Corporate, other & eliminations	(3,038		)		(2,931		)		84				92
As reported in our consolidated financial statements	$	14,402			$	11,514			$	1,412			$	179

a.	Includes silver sales of 4.7 million ounces ($16.57 per ounce average realized price). Also reflects sales of molybdenum produced by Cerro Verde to our molybdenum sales company at market-based pricing.

b.	Represents the combined total for our other mining operations 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				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				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
					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 miningc	18,099				12,612				1,083
Corporate, other & eliminations	(3,126		)		(3,290		)		125
As reported in our consolidated financial statements	$	18,628			$	11,687			$	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.	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, 2019
(In millions)	By-Product				Co-Product Method
	Method				Copper				Gold				Silvera				Total
Revenues, excluding adjustments	$	1,814			$	1,814			$	1,378			$	40			$	3,232
Site production and delivery, before net noncash and other costs shown below	1,938				1,088				826				24				1,938
Gold and silver credits	(1,419		)		—				—				—				—
Treatment charges	171				96				73				2				171
Export duties	56				31				24				1				56
Royalty on metals	107				58				48				1				107
Net cash costs	853				1,273				971				28				2,272
DD&A	406				228				173				5				406
Metals inventory adjustments	5				5				—				—				5
Noncash and other costs, net	246			b	136				107				3				246
Total costs	1,510				1,642				1,251				36				2,929
Other revenue adjustments, primarily for pricing on prior period open sales	18				18				1				—				19
PT Smelting intercompany loss	(17		)		(10		)		(7		)		—				(17		)
Gross profit	$	305			$	180			$	121			$	4			$	305
Copper sales (millions of recoverable pounds)	667				667
Gold sales (thousands of recoverable ounces)									973
Gross profit per pound of copper/per ounce of gold:
Revenues, excluding adjustments	$	2.72			$	2.72			$	1,416
Site production and delivery, before net noncash and other costs shown below	2.91				1.63				849
Gold and silver credits	(2.13		)		—				—
Treatment charges	0.26				0.14				75
Export duties	0.08				0.05				25
Royalty on metals	0.16				0.09				49
Unit net cash costs	1.28				1.91				998
DD&A	0.61				0.34				178
Metals inventory adjustments	0.01				0.01				—
Noncash and other costs, net	0.37			b	0.20				110
Total unit costs	2.27				2.46				1,286
Other revenue adjustments, primarily for pricing on prior period open sales	0.03				0.03				2
PT Smelting intercompany loss	(0.02		)		(0.02		)		(8		)
Gross profit per pound/ounce	$	0.46			$	0.27			$	124
Reconciliation to Amounts Reported
													Metals
					Production								Inventory
	Revenues				and Delivery				DD&A				Adjustments
Totals presented above	$	3,232			$	1,938			$	406			$	5
Treatment charges	(171		)		—				—				—
Export duties	(56		)		—				—				—
Royalty on metals	(107		)		—				—				—
Noncash and other costs, net	(146		)		100				—				—
Other revenue adjustments, primarily for pricing on prior period open sales	19				—				—				—
PT Smelting intercompany loss	—				17				—				—
Indonesia mining	2,771				2,055				406				5
Other miningc	14,669				12,390				922				82
Corporate, other & eliminations	(3,038		)		(2,931		)		84				92
As reported in our consolidated financial statements	$	14,402			$	11,514			$	1,412			$	179

a.	Includes silver sales of 2.5 million ounces ($16.15 per ounce average realized price).

b.

Includes charges in revenues totaling $166 million ($0.25 per pound of copper) primarily associated with an unfavorable Indonesia Supreme Court ruling related to certain disputed PT-FI export duties, partly offset by adjustments to prior year treatment charges totaling $20 million ($0.03 per pound of copper). Also includes charges of $28 million ($0.04 per pound of copper) associated with adjustments to the settlement of the historical surface water tax disputes with the local regional tax authority in Papua, Indonesia.

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 (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
					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				13,113				1,023
Corporate, other & eliminations	(3,126		)		(3,290		)		125
As reported in our consolidated financial statements	$	18,628			$	11,687			$	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.

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

					Years Ended December 31,
(In millions)					2019				2018
Revenues, excluding adjustmentsa					$	369			$	440
Site production and delivery, before net noncash and other costs shown below					293				282
Treatment charges and other					25				30
Net cash costs					318				312
DD&A					62				79
Metals inventory adjustments					50				—
Noncash and other costs, net					6				7
Total costs					436				398
Gross (loss) profit					$	(67	)		$	42
Molybdenum sales (millions of recoverable pounds)a					29				35
Gross (loss) profit per pound of molybdenum:
Revenues, excluding adjustmentsa					$	12.51			$	12.36
Site production and delivery, before net noncash and other costs shown below					9.95				7.92
Treatment charges and other					0.85				0.85
Unit net cash costs					10.80				8.77
DD&A					2.11				2.21
Metals inventory adjustments					1.69				—
Noncash and other costs, net					0.20				0.19
Total unit costs					14.80				11.17
Gross (loss) profit per pound					$	(2.29	)		$	1.19
Reconciliation to Amounts Reported
													Metals
					Production								Inventory
Year Ended December 31, 2019	Revenues				and Delivery				DD&A				Adjustments
Totals presented above	$	369			$	293			$	62			$	50
Treatment charges and other	(25		)		—				—				—
Noncash and other costs, net	—				6				—				—
Molybdenum mines	344				299				62				50
Other miningb	17,096				14,146				1,266				37
Corporate, other & eliminations	(3,038		)		(2,931		)		84				92
As reported in our consolidated financial statements	$	14,402			$	11,514			$	1,412			$	179
Year Ended December 31, 2018
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				14,688				1,550				4
Corporate, other & eliminations	(3,126		)		(3,290		)		125				—
As reported in our consolidated financial statements	$	18,628			$	11,687			$	1,754			$	4

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 plans, 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 net (loss) income and future cash flows through 2022; PT-FI’s development, financing, construction and completion of a new smelter in Indonesia; our expectations regarding results associated with productivity and innovation initiatives; exploration efforts and results; development and production activities, rates and costs; liquidity; tax rates; export quotas and duties; the impact of copper, gold and molybdenum price changes; the impact of deferred intercompany profits on earnings; reserve estimates; execution of the settlement agreement associated with the Louisiana coastal erosion cases; 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; changes in mine plans; 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 Indonesia government’s extension of PT-FI’s export license after March 8, 2020; risks associated with underground mining; satisfaction of requirements in accordance with PT-FI’s IUPK to extend mining rights from 2031 through 2041; our ability to achieve the expected results of our

productivity and innovation initiatives; industry risks; regulatory changes; political and social 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 this annual report on Form 10-K.

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.