THE POWER OF COPPER” EMPHASIZES THE CRITICAL ROLE OF COPPER IN THE GLOBAL TRANSITION TO CLEANER ENERGY AND ELECTRIFICATION. We are well positioned to support attractive investments in our low-risk brownfield projects in the Americas.
2022 HIGHLIGHTS
BILLION LBS
11% INCREASE
INCREASE 34%
MILLION OZS
DURING 2022, FREEPORT ACHIEVED ANOTHER YEAR OF GROWTH IN PRODUCTION VOLUMES AND ENHANCED OUR POSITION AS A LEADING
PRODUCER OF COPPER. OUR GLOBAL TEAM FOCUSED ON EFFECTIVE EXECUTION AND DROVE RESULTS IN A VOLATILE MACROECONOMIC ENVIRONMENT
Lone Star is increasing its operating rates to achieve targeted production of 300 million pounds of copper per year from oxide ore in 2023 (compared to the initial design capacity of 200 million pounds of copper per year). Consolidated molybdenum sales, including sales of molybdenum produced at FCX's North America and South America copper mines, totaled 75 million pounds in 2022 and 82 million pounds in 2021.
NORTH AMERICA MINING
In North America, FCX operates seven open pit copper mines - Morenci, Bagdad, Safford (including Lone Star), Sierrita and Miami in Arizona and Chino and Tyrone in New Mexico; and two molybdenum mines - Henderson and Climax in Colorado. Molybdenum concentrate, gold and silver are also produced by certain of FCX's North American copper mines.
FUTURE GROWTH OPPORTUNITY
FCX has significant mineral reserves and future opportunities in the United States (US), primarily related to existing mining operations. The oxide project at Lone Star advances the opportunity for large-scale fundamental sulfide resource development.
38 BILLION LBS
200 MILLION LBS
LOWER CARBON AND WATER-INTENSITY
ADVANCING NEW LEACH TECHNOLOGIES
LEACH INNOVATION INITIATIVES PROVIDE POTENTIAL OPPORTUNITIES FOR FREEPORT TO PRODUCE INCREMENTAL COPPER BY INCREASING RECOVERIES
MATERIAL CURRENTLY CLASSIFIED AS WASTE
FCX operates two copper mines in South America - Cerro Verde in Peru and El Abra in Chile. El Abra's large sulphide resource supports a potentially larger mill project similar to the large-scale concentrator built at Cerro Verde in 2015.
SOUTH AMERICA MINING
BILLION LBS
10% INCREASE
BILLION LBS
28% FCX COPPER RESERVES IN
DURING 2022, CERRO VERDE EXCEEDED ITS TARGETED MILL THROUGHPUT RATE OF 400,000 METRIC TONS OF ORE PER DAY, RESULTING IN INCREASED
Similar to the Grasberg development, this is a long-term project that will benefit from PT-FI's substantial shared infrastructure and experience and long-term success in block cave mining, with initial production expected near the end of the decade. Long-term mine development activities are ongoing for PT-FI's Kucing Liar deposit in the Grasberg mineral district, which is expected to produce over 6 billion pounds of copper and 6 million ounces of gold between 2028 and the end of 2041.
INDONESIA MINING
Pursuant to the terms of the divestiture agreement and related documents entered into in 2018, FCX's economic interest in PT-FI was approximately 81% through 2022, and as of January 1, 2023, FCX's economic interest in PT-FI is 48.76%. This arrangement was developed to replicate the economics of PT-FI's former joint venture partner interests, which were acquired by the Indonesian government in 2018.
UNIT NET CASH COST
Through its subsidiary, PT Freeport Indonesia (PT-FI), FCX operates one of the world's largest copper and gold mines in the Grasberg mineral district in central Papua, Indonesia. Higher consolidated sales of 1.6 billion pounds of copper and 1.8 million ounces of gold in 2022 compared to 1.3 billion pounds of copper and 1.3 million ounces of gold in 2021 primarily reflect increased operating rates in the Grasberg mineral district, partially offset by lower copper ore grades.
UNDERGROUND ORE TO MILL
COPPER PRODUCTION
GOLD PRODUCTION
PT FREEPORT INDONESIA HAS SUCCESSFULLY AND MATERIALLY GROWN PRODUCTION LEVELS AND IS SUSTAINING LARGE-SCALE, LOW-COST
PRODUCTION AT THE WORLD’S LARGEST UNDERGROUND MINING COMPLEX
ESTIMATED CONSOLIDATED RECOVERABLE PROVEN AND PROBABLE RESERVES
MINING RESERVES AND MINERALIZED MATERIAL
LONG-LIVED ASSET BASE
111 BILLION LBS
PER LB
25+ YEARS
235 BILLION LBS
FREEPORT’S MINING EXPLORATION ACTIVITIES ARE PRIMARILY ASSOCIATED WITH ITS EXISTING MINES, FOCUSING ON OPPORTUNITIES TO EXPAND
RESERVES AND RESOURCES TO SUPPORT DEVELOPMENT OF ADDITIONAL FUTURE PRODUCTION CAPACITY
Capital expenditure is expected to reach approximately US$5.2 billion in 2023, including US$2.3 billion for major mining projects and. Projected capital expenditures for major mining projects include $1.3 billion for planned projects primarily related to underground development activities in the Grasberg Mineral District and.
FINANCIAL PERFORMANCE
In addition, PT-FI and Cerro Verde have $1.3 billion and $350 million, respectively, of availability under their respective revolving credit facilities. Based on current sales volume and cost estimates, and assuming average prices of $4.00 per pound of copper, $1,900 per pound of gold and $20.00 per pound of molybdenum, consolidated operating cash flows are estimated to be approximately 7, $2 billion in 2023.
FREE CASH FLOW
PER SHARE
BILLION
SHAREHOLDER RETURNS
THROUGH THE COMBINATION OF CASH DIVIDENDS AND SHARE REPURCHASES, WE NEARLY TRIPLED OUR YEAR-OVER-YEAR CASH
FCX's strategic community investments seek to promote education and skills building, economic opportunity and capacity building at the community level.
COMMUNITY INVESTMENTS FOCUS ON RESILIENCE
SUSTAINABILITY
177 MILLION
2.3 BILLION
COMMUNITY INVESTMENTS
FCX HAS ACHIEVED
THE COPPER MARK AT ALL 12 COPPER OPERATIONS
FCX HAS ACHIEVED THE
MOLYBDENUM MARK AT THE FOLLOWING OPERATIONS
Building on its 2021 momentum, in 2022 FCX continued to evaluate options to replace PT-FI's coal-fired power plant, advanced studies of sea level rise and other potential physical risks, continued to partner with suppliers to support innovation in equipment and technology, and completed a multi-year Scope 3 GHG emission inventory review. FCX recognizes that climate change poses significant near- and long-term challenges to society and to FCX's operational and financial performance.
CLIMATE STRATEGY
FCX is committed to supplying responsibly produced copper to support the energy transition, which includes managing and mitigating greenhouse gas (GHG) emissions and other climate-related risks and impacts. Learn more about FCX's climate strategy and progress in its latest Climate Report, available at fcx.com/sustainability.
ADVANCING ELECTRIFICATION OF EQUIPMENT
This is why FCX strives to participate in - and positively contribute to - a 2050 net zero economy. FCX continues to advance its climate strategy by collaborating and innovating to take practical, responsible steps toward an eventual net zero mining future.
REDUCTION
RESILIENCE
CONTRIBUTION
CLIMATE STRATEGY PILLARS
AS ONE OF THE WORLD’S LARGEST COPPER PRODUCERS, FCX UNDERSTANDS ITS CRITICAL ROLE IN THE LOW-CARBON ENERGY TRANSITION
BOARD OF DIRECTORS Richard C. Adkerson
EXECUTIVE OFFICERS Richard C. Adkerson
SENIOR LEADERSHIP Operations
Cory Stevens
This section of our Form 10-K discusses the results of operations for the years 2022 and 2021 and comparisons between these years. Management's Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures About Market Risk” contained in Part II of our annual report on Form 10-K for the fiscal year ended December 31, 2021.
OVERVIEW
In management's discussion and analysis of financial conditions and results of operations and quantitative and qualitative information on market risk (MD&A), "we", "us" and "our" refer to Freeport-McMoRan Inc. Discussion of the results of operations for the year 2020 and comparisons between the years 2021 and 2020 are not included in this Form 10-K and can be found in Item 7.
OUTLOOK
MARKETS
This graph shows the weekly average price of Platts Metals Daily Molybdenum Dealer Oxide from January 2013 to December 2022. The weekly average price of Platts Metals Daily Molybdenum Dealer Oxide was $36.75 per pounds on 31 January 2023.
CRITICAL ACCOUNTING ESTIMATES
Risk Factors” in Part I of our Annual Report on Form 10-K for the year ended December 31, 2022 for additional information and risks related to our estimated proved and probable recoverable mineral reserves. Our estimates of proved and probable recoverable mineral resources are prepared by and are the responsibility of our employees.
CONSOLIDATED RESULTS
Lower copper acquisition-related revenue in 2022 compared to 2021 primarily reflects lower volumes and prices. The increase in capitalized interest in 2022, compared to 2021, is primarily related to development activities related to the Indonesia smelter projects.
OPERATIONS
Risk Factors” in Part I of our Annual Report on Form 10-K for the year ended December 31, 2022, for further discussion of the risks associated with PT-FI's IUPK. PT-FI's expected average net cash cost per unit for the year 2023 would change by approximately $0.10 per pound of copper for every $100 per ounce change in the average gold price.
CAPITAL RESOURCES AND LIQUIDITY
As of December 31, 2022, our net debt, excluding net debt for the smelter projects in Indonesia, was $1.3 billion. Cash dividends and distributions paid to minority interests in our international operations totaled $0.8 billion in 2022 and $0.6 billion in 2021.
CONTINGENCIES
As of December 31, 2022, we had $3.0 billion in ARO on our consolidated balance sheet, including $0.3 billion related to our oil and gas properties. In July 2022, the Board of Directors approved an increase in the share repurchase program to $5.0 billion.
DISCLOSURES ABOUT MARKET RISKS
Reflects the estimated impact on annual operating costs assuming a 10% increase or decrease in the exchange rate reported as of December 31, 2022. As of December 31, 2022, we had total principal-based debt maturities of $10.7 billion, substantially all of which was fixed rate debt.
NEW ACCOUNTING STANDARDS
NET DEBT
Non-cash and other costs, which are subtracted from field production and delivery costs in the calculation of net cash costs per unit, consist of items such as stock-based compensation costs, impairments of long-lived assets, costs of idle facility, feasibility and optimization study costs, restructuring and/or unusual charges. As discussed above, gold, molybdenum and other metals revenues at copper mines are reflected as credits against production and field delivery costs under the by-product method.
PRODUCT REVENUES AND PRODUCTION COSTS
Also includes credits totaling $27 million ($0.02 per pound of copper) related to refunds of Arizona transaction privilege taxes related to purchased electricity. Includes one-time costs totaling $92 million ($0.09 per pound of copper) associated with work-related costs at Cerro Verde.
CAUTIONARY STATEMENT
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposal of the company's assets that could have a material effect on the financial statements. Our management, including our chief executive officer and chief financial officer, has assessed the effectiveness of our internal control over financial reporting as of the end of the fiscal year covered by this Annual Report on Form 10-K.
To the Board of Directors and
Stockholders of Freeport-McMoRan Inc
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Atlantic Copper's current inventories are valued at the weighted average cost of the material fed into the smelting and refining process, plus ongoing conversion costs. Legal costs associated with environmental remediation (such as fees to outside law firms for work related to determining the extent and type of remediation actions and the allocation of costs to prerequisite programs) are included as part of the estimated liability.
ACQUISITIONS AND DISPOSITIONS
In connection with the 2018 transaction, PT-FI acquired all the common shares of PT Rio Tinto Indonesia, which held the former Rio Tinto Joint Venture interest. The arrangements allow FCX and the other pre-transaction PT-FI shareholders (ie, MIND ID) to retain the economics of the revenue and cost sharing arrangements under the former Rio Tinto Joint Venture.
OWNERSHIP IN SUBSIDIARIES AND JOINT VENTURES
PT-FI's maximum exposure to loss is its investment in PT Smelting and its loan to finance the expansion (refer to Note 6). Also refer to Note 6 for the carrying values of PT-FI's trade receivables balances from PT Smelting for sales of concentrate.
INVENTORIES, INCLUDING LONG-TERM MILL AND LEACH STOCKPILES
Under the scheme, PT-FI pays PT Smelting a toll fee to smelt and refine its concentrate and retains title to all products for sale to third parties (ie no further sales from PT-FI to PT Smelting).
OTHER ASSETS
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
PROPERTY, PLANT, EQUIPMENT AND MINE DEVELOPMENT COSTS, NET
As of December 31, 2022, PT-FI had no borrowings under its revolving credit facility and was in compliance with its covenants. As of December 31, 2022, Cerro Verde had no outstanding borrowings under its revolving credit facility and was in compliance with its covenants.
DEBT
In April 2022, PT-FI amended and restated its five-year, unsecured revolving credit facility to, among other things, increase availability to $1.3 billion. In May 2022, Cerro Verde entered into a $350 million, five-year, unsecured revolving credit facility that matures in May 2027.
OTHER LIABILITIES, INCLUDING EMPLOYEE BENEFITS
Following is a description of the pension plan asset categories included in the above tables and the valuation techniques used to measure fair value. The following is a description of the valuation techniques used for pension plan assets measured at fair value associated with the PT-FI plan.
STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION
Since 2014, FCX's executive officers have received annual grants of PSUs that vest after a three-year performance period. The fair value of PSU awards for FCX's non-pensionable executive officers is expensed over the performance period.
For pension-eligible directors, the fair value of the RSUs is recognized in earnings on the date of grant. Accordingly, on the date of grant, FCX accelerates one year of amortization for pension-eligible employees.
INCOME TAXES
During the fourth quarter of 2019, PT-FI met with the Indonesian Tax Office and developed a framework for resolving the disputed cases. A summary of the activities related to FCX's reserve for unrecognized tax benefits for the years ended December 31 follows.
CONTINGENCIES
The total environmental liability for approximately 60% of active remediation projects was less than $20 million as of December 31, 2022. These transactions included (1) the transfer of the assets of the talc business by Cyprus Mines to a newly formed subsidiary that assumed all pre-sale and post-sale obligations of the talc, subject to limited reservations, and (2) the sale of the shares of this subsidiary to a third party.
COMMITMENTS AND GUARANTEES
After receiving verification and approval from the Indonesian government that the construction progress has exceeded 50%, PT-FI expects that export taxes can be removed. In December 2018, FCX completed the 2018 transaction with the Indonesian government regarding PT-FI's long-term mining rights and share ownership.
FINANCIAL INSTRUMENTS
Certain FCX concentrate, copper cathode and gold sales contracts provide provisional prices based primarily on the LME copper price or the COMEX copper price and the London gold price at the time of shipment, as specified in the contract. The basic contract is the sale of the metals in the concentrate or cathode at the then current LME or COMEX copper price and the London gold price.
FAIR VALUE MEASUREMENT
As significant inputs are not observable in the market, the contingent consideration is classified in level 3 in the fair value hierarchy. Money market funds are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets.
BUSINESS SEGMENT INFORMATION
In addition to copper, some of FCX's North American copper mines also produce molybdenum concentrate, gold and silver. During 2022, the Morenci mine produced 43% of FCX's North American copper and 15% of FCX's consolidated copper production.
FINANCIAL INFORMATION BY BUSINESS SEGMENT
SUPPLEMENTARY MINERAL RESERVE INFORMATION (UNAUDITED)
FCX revises its mine plans and estimates of proved and probable mineral reserves as necessary in accordance with the latest available studies. Estimated recoverable proven and probable mineral reserves of Indonesia reflect estimates of recoverable minerals through 2041.
INVESTOR INQUIRIES
TRANSFER AGENT
FCX COMMON STOCK
COMMON STOCK DIVIDENDS