Freeport-McMoRan 10-Q 2022-09-30

United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

For the quarterly period ended September 30, 2022

OR

For the transition period from to

Commission file number: 001-11307-01

Freeport-McMoRan Inc.

(Exact name of registrant as specified in its charter)

(602) 366-8100

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☑ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑ No

On October 31, 2022, there were issued and outstanding 1,429,327,191 shares of the registrant’s common stock, par value $0.10 per share.

Freeport-McMoRan Inc.

TABLE OF CONTENTS

Part I.FINANCIAL INFORMATION

Freeport-McMoRan Inc.

CONSOLIDATED BALANCE SHEETS (Unaudited)

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

Freeport-McMoRan Inc.

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

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In Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A), “we,” “us” and “our” refer to Freeport-McMoRan Inc. (FCX) and its consolidated subsidiaries. You should read this discussion in conjunction with our consolidated financial statements, the related MD&A and the discussion of our Business and Properties in our annual report on Form 10-K for the year ended December 31, 2021 (2021 Form 10-K), filed with the United States (U.S.) Securities and Exchange Commission (SEC). The results of operations reported and summarized below are not necessarily indicative of future operating results (refer to “Cautionary Statement” for further discussion). References to “Notes” are Notes included in our Notes to Consolidated Financial Statements (Unaudited). Throughout MD&A, all references to income or losses per share are on a diluted basis.

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 mineral 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.

Our results for the third-quarter and first nine months of 2022 reflect strong production performance, with increased consolidated copper and gold production and sales volumes when compared to the prior year periods. Despite the decline in copper prices and current economic uncertainty, we continue to generate positive operating income and operating cash flows, although the decline in copper prices over the first nine months of 2022 and ongoing cost pressures have had a negative impact on our operating results. We believe the actions we have taken in recent years to build a solid balance sheet, successfully expand low-cost operations, and maintain flexible growth options while maintaining liquidity will allow us to continue to execute our business plans in a prudent manner, while preserving substantial future asset values.

The London Metal Exchange (LME) copper settlement price reached a high of $4.87 per pound in March 2022, supported by copper's increasingly important role in decarbonization technologies and limited mine supply. Beginning in June 2022, a series of macro-economic factors (including concerns about the global economy, Chinese economic data, European energy crisis, rising U.S. interest rates and currency exchange rates related to the strength of the U.S. dollar) led to a decline in copper prices. The LME copper settlement price declined to $3.74 per pound at June 30, 2022, and further declined during third-quarter 2022 to $3.47 per pound at September 30, 2022, and was $3.41 per pound on October 31, 2022. However, physical market fundamentals remain tight as evidenced by low levels of global exchange stocks. Our global customer base reports healthy demand for copper. Despite uncertain market conditions in the near-term, we believe the outlook for copper fundamentals in the medium- and long-term remains favorable, with studies indicating that demand for copper may double in 15 years based on the global movement towards decarbonization. We also believe substantial new mine supply development will be required to meet the goals of the global energy transition, and current prices for copper are insufficient to support new mine supply development, which is expected to add to future supply deficits.

Historically, copper prices have been correlated to various input costs, including energy and other commodity-related consumables. However, during 2022, prices for a number of commodity-related consumables have increased at a time when copper prices have declined. We believe a return to historical long-term correlation and improved supply chain conditions and labor markets, which have experienced limitations on available labor, would reduce costs and improve operational efficiencies. We plan to continue focusing on executing our operating plans to drive efficiencies that may help mitigate cost increases should they continue.

Our management team and global organization have substantial experience and success in executing under volatile market conditions and a challenging operating environment. We benefit from a diversified portfolio of operations with an attractive cost structure, long-lived reserves, optionality in our project pipeline and a solid balance sheet and strong liquidity position.

Net income attributable to common stockholders totaled $404 million in third-quarter 2022 and $2.8 billion for the first nine months of 2022, which were lower compared with $1.4 billion in third-quarter 2021 and $3.2 billion for the first nine months of 2021, primarily reflecting lower average realized copper prices and increased energy, supplies

and other input costs, partly offset by higher copper and gold sales volumes. Refer to “Consolidated Results” for further discussion.

At September 30, 2022, we had consolidated debt of $10.7 billion and consolidated cash and cash equivalents of $8.6 billion, resulting in net debt of $2.1 billion ($1.3 billion excluding net debt for the greenfield smelter and precious metals refinery (PMR) in Indonesia - collectively, the Indonesia smelter projects). Refer to “Net Debt” for reconciliations of consolidated debt and consolidated cash and cash equivalents to net debt.

At September 30, 2022, we had $3.5 billion of availability under our revolving credit facility, and PT Freeport Indonesia (PT-FI) and Cerro Verde had $1.3 billion and $350 million, respectively, of availability under their revolving credit facilities. In October 2022, we entered into a new $3.0 billion, five-year, unsecured revolving credit facility that replaced our prior $3.5 billion revolving credit facility.

Refer to Note 5 and “Capital Resources and Liquidity” for further discussion.

OUTLOOK

As further discussed in "Risk Factors" in Part I, Item 1A. of our 2021 Form 10-K, our financial results vary as a result of fluctuations in market prices primarily for copper, gold and, to a lesser extent, molybdenum, as well as other factors. World market prices for these commodities have fluctuated historically and are affected by numerous factors beyond our control. Copper prices, in particular, experienced a significant drop beginning in second-quarter 2022, which continued into third-quarter 2022. Refer to “Markets” below for further discussion. Despite uncertain market conditions in the near-term, we continue to believe the outlook for copper fundamentals in the medium- and long-term remains favorable. Because we cannot control the prices 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.

Consolidated Sales Volumes

Following are our projected consolidated sales volumes for the year 2022:

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Cash Dividends and Distributions Paid to Noncontrolling Interests. Cash dividends and distributions paid to noncontrolling interests at our international operations totaled $625 million for the first nine months of 2022 and $187 million for the first nine months of 2021. Based on the estimates discussed in “Outlook,” we currently expect cash dividends and distributions paid to noncontrolling interests to approximate $0.8 billion for the year 2022. Cash dividends and distributions to noncontrolling interests vary based on the operating results and cash requirements of our consolidated subsidiaries.

Treasury Stock Purchases. In July 2022, the Board authorized an increase in the share repurchase program to up to $5.0 billion. No shares have been purchased since July 11, 2022. We have acquired 47.9 million shares of our common stock for a total cost of $1.8 billion ($38.35 average cost per share), including 35.1 million million shares for a total cost of $1.3 billion ($38.36 average cost per share) during the first nine month of 2022. As of November 4, 2022, $3.2 billion remains available under the share repurchase program. The timing and amount of share repurchases is at the discretion of management and will depend on a variety of factors. The share repurchase program may be modified, increased, suspended or terminated at any time at the Board’s discretion. Refer to Item 1A. “Risk Factors” contained in Part I of our 2021 Form 10-K, “Cautionary Statement” below and discussion of our financial policy above.

Contributions from Noncontrolling Interests. We received equity contributions totaling $142 million for the first nine months of 2022 and $135 million for the first nine months of 2021 from PT Inalum for their share of capital spending on underground mine development projects in the Grasberg minerals district.

Stock-based awards. Proceeds from exercised stock options totaled $106 million for the first nine months of 2022 and $189 million for the first nine months of 2021, and payments for related employee taxes totaled $55 million for the first nine months of 2022 and $19 million for the first nine months of 2021. See Note 10 in our 2021 Form 10-K for a discussion of stock-based awards.

CONTRACTUAL OBLIGATIONS

Other than the debt transactions discussed above and in Note 5, there have been no other material changes in our contractual obligations since December 31, 2021. Refer to Note 13 and Part II, Items 7. and 7A. in our 2021 Form 10-K for information regarding our contractual obligations.

CONTINGENCIES

Environmental Liabilities and AROs

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

Refer to Note 8 for further discussion of increases in our AROs at the Morenci and Bagdad mines. There have been no other significant changes to our environmental liabilities and AROs since December 31, 2021. Updated cost assumptions, including increases and decreases to cost estimates, changes in the anticipated scope and timing of remediation activities, and settlement of environmental matters may result in additional revisions to certain of our environmental liabilities and AROs. Refer to Note 12 in our 2021 Form 10-K, for further information regarding our environmental liabilities and AROs.

Litigation and Other Contingencies

There have been no material changes to our contingencies associated with legal proceedings, environmental and other matters since December 31, 2021. Refer to Note 12 and “Legal Proceedings” contained in Part I, Item 3. of our 2021 Form 10-K, as updated by Note 8, for further information regarding AROs, legal proceedings, environmental and other matters.

NEW ACCOUNTING STANDARDS

There were no significant updates to previously reported accounting standards included in Note 1 of our 2021 Form 10-K.

NET DEBT

Net debt, which we define as consolidated debt less consolidated cash and cash equivalents, is intended to provide investors with information related to the performance-based payout framework in our financial policy, which requires achievement of a net debt target in the range of $3 billion to $4 billion (excluding project debt for additional smelting capacity in Indonesia). This information differs from consolidated debt determined in accordance with U.S. GAAP and should not be considered in isolation or as a substitute for consolidated debt determined in accordance with U.S. GAAP. Our net debt follows, which may not be comparable to similarly titled measures reported by other companies (in billions):

a.Includes consolidated debt of $3.0 billion and consolidated cash and cash equivalents of $2.2 billion as of September 30, 2022, and consolidated debt of $0.4 billion and consolidated cash and cash equivalents of $0.2 billion as of December 31, 2021.

PRODUCT REVENUES AND PRODUCTION 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 and (iv) it is the method used by our management and Board to monitor our mining operations and to compare mining operations in certain industry publications. In the co-product method presentations, shared costs are allocated to the different products based on their relative revenue values, which will vary to the extent our metals sales volumes and realized prices change.

We show revenue adjustments for prior period open sales as a separate line item. Because these adjustments do not result from current period sales, these amounts have been reflected separately from revenues on current period sales. Noncash and other costs (credits), net, which are removed from site production and delivery costs in the calculation of unit net cash costs, consist of items such a

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There have been no material changes in our market risks during the nine-month period ended September 30, 2022.

For additional information on market risks, refer to “Disclosures About Market Risks” included in Part II, Items 7. and 7A. of our 2021 Form 10-K. For projected sensitivities of our operating cash flow to changes in commodity prices, refer to “Outlook” in Part I, Item 2. of this quarterly report on Form 10-Q; for projected sensitivities of our provisionally priced copper sales to changes in commodity prices refer to “Consolidated Results – Revenues” in Part I, Item 2. of this quarterly report on Form 10-Q.

(a)Evaluation of disclosure controls and procedures. Our chief executive officer and chief financial officer, with the participation of management, have evaluated the effectiveness of our “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this quarterly report on Form 10-Q. Based on their evaluation, they have concluded that our disclosure controls and procedures were effective as of September 30, 2022.

(b)Changes in internal control over financial reporting. There has been no change in our internal control over financial reporting that occurred during the quarter ended September 30, 2022, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II.OTHER INFORMATION

Item 1.Legal Proceedings.

We are involved in numerous legal proceedings that arise in the ordinary course of our business or are associated with environmental issues. We are also involved periodically in reviews, inquiries, investigations and other proceedings initiated by or involving government agencies, some of which may result in adverse judgments, settlements, fines, penalties, injunctions or other relief.

Management does not believe, based on currently available information, that the outcome of any legal proceeding reported in Part I, Item 3. “Legal Proceedings” and Note 12 of our 2021 Form 10-K, and Note 8 herein, will have a material adverse effect on our financial condition; although individual or cumulative outcomes could be material to our operating results for a particular period, depending on the nature and magnitude of the outcome and the operating results for the period.

There have been no material changes to legal proceedings previously disclosed in Part I, Item 3. “Legal Proceedings” and Note 12 of our 2021 Form 10-K, except as described in Note 8 herein.

Item 1A. Risk Factors.

There have been no material changes to our risk factors previously disclosed in Part I, Item 1A. “Risk Factors” of our 2021 Form 10-K.

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

There were no unregistered sales of equity securities during the three months ended September 30, 2022.

The following table sets forth information with respect to shares of FCX common stock purchased by us during the three months ended September 30, 2022, and the approximate dollar value of shares that may yet be purchased pursuant to our share repurchase program:

a.On November 1, 2021, our Board approved a share repurchase program authorizing repurchases of up to $3.0 billion of our common stock. On July 19, 2022, our Board authorized an increase in the share repurchase program to up to $5.0 billion. The share repurchase program does not obligate us to acquire any specific amount of shares and does not have an expiration date.

Item 4.Mine Safety Disclosures.

The safety and health of all employees is our highest priority. Management believes that safety and health considerations are integral to, and compatible with, all other functions in the organization and that proper safety and health management will enhance production and reduce costs. Our approach towards the safety and health of our workforce is to continuously improve performance through implementing robust management systems and providing adequate training, safety incentive and occupational health programs. The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95.1 to this quarterly report on Form 10-Q.

• The registrant agrees to furnish supplementally to the Securities and Exchange Commission (SEC) a copy of any omitted schedule or exhibit upon the request of the SEC in accordance with Item 601(a)(5) of Regulation S-K.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: November 4, 2022

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