Freeport-McMoRan Inc
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FREEPORT MCMORAN : Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

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05/05/2017 | 09:43 pm


In Management's Discussion and Analysis of Financial Condition and Results of
Operations, "we," "us" and "our" refer to Freeport-McMoRan Inc. (FCX) and its
consolidated subsidiaries. You should read this discussion in conjunction with
our financial statements, the related Management's Discussion and Analysis of
Financial Condition and Results of Operations and the discussion of our Business
and Properties in our annual report on Form 10-K for the year ended December 31,
2016
, 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. Throughout Management's
Discussion and Analysis of Financial Condition and Results of Operations, all
references to earnings or losses per share are on a diluted basis. Additionally,
in accordance with accounting guidelines, TF Holdings Limited (TFHL), through
which we held an interest in the Tenke Fungurume (Tenke) mine until it was sold
on November 16, 2016, is reported as a discontinued operation for all periods
presented.

OVERVIEW

We are a leading international mining company with headquarters in Phoenix,
Arizona
. We operate large, long-lived, geographically diverse assets with
significant proven and probable reserves of copper, gold and molybdenum. We are
the world's largest publicly traded copper producer. Our portfolio of assets
includes the Grasberg minerals district in Indonesia, one of the world's largest
copper and gold deposits; and significant mining operations in the Americas,
including the large-scale Morenci minerals district in North America and the
Cerro Verde operation in South America.

Net income (loss) attributable to common stock totaled $228 million in
first-quarter 2017 and $(4.2) billion in first-quarter 2016, which included a
charge of $3.8 billion for the impairment of oil and gas properties.
First-quarter 2017, compared with the 2016 period, benefited from higher copper
and molybdenum prices and lower depreciation, depletion and amortization (DD&A)
expense, partly offset by lower copper and gold sales volumes. Refer to
"Consolidated Results" for further discussion.

At March 31, 2017, we had $4.0 billion in consolidated cash and cash equivalents
and $15.4 billion in total debt. We had no borrowings and $3.5 billion available
under our revolving credit facility. Refer to Note 6 for further discussion of
debt.


We continue to manage production, exploration and administrative costs and
capital spending and, subject to commodity prices and operational results,
expect to generate cash flows for further debt reduction during 2017.




We have a high-quality portfolio of long-lived copper assets positioned to
generate long-term value. In addition to debt reduction plans, we are pursuing
opportunities to enhance net present values, and we continue to advance studies
for future development of our copper resources, the timing of which is dependent
on market conditions.

In late March 2017, the Indonesian government amended its regulations to enable
PT Freeport Indonesia (PT-FI) to retain its Contract of Work (COW) until
replaced with a special operating license (known as an IUPK) accompanied by an
investment stability agreement, and to grant PT-FI a temporary IUPK through
October 10, 2017, to enable concentrate exports during this period. On April 21,
2017, PT
-FI resumed concentrate exports, which had been suspended since January
12, 2017
. Refer to "Operations - Indonesia Mining" for further discussion.


OUTLOOK




We 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 historically fluctuated
and are affected by numerous factors beyond our control. Because we cannot
control the price of our products, the key measures that management focuses on
in operating our business are sales volumes, unit net cash costs, operating cash
flow and capital expenditures.


Projections for 2017 and other forward looking statements in this quarterly
report on Form 10-Q assume normal operating rates at PT-FI beginning mid-April
2017
, and the resolution or completion of negotiations with the Indonesian
government on the conversion of PT-FI's COW to an IUPK accompanied by an
investment stability



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agreement by October 10, 2017. Refer to "Operations - Indonesia Mining" for
further discussion of Indonesia regulatory matters, which may have a significant
impact on future results.




Sales Volumes
Following are our projected consolidated sales volumes for the year 2017:
Copper (millions of recoverable pounds):
North America copper mines 1,490
South America mining 1,240
Indonesia mining 1,135
Total 3,865

Gold (thousands of recoverable ounces) 1,917
Molybdenum (millions of recoverable pounds) 93 a



a. Projected molybdenum sales include 35 million pounds produced by our



Molybdenum mines and 58 million pounds produced by our North America and



South America copper mines.






Consolidated sales volumes for second-quarter 2017 are expected to approximate
1.0 billion pounds of copper, 440 thousand ounces of gold and 24 million pounds
of molybdenum.


Projected sales volumes are dependent on operational performance and other
factors. For other important factors that could cause results to differ
materially from projections, refer to "Cautionary Statement."




Unit Net Cash Costs
Assuming average prices of $1,250 per ounce of gold and $9.00 per pound of
molybdenum for the remainder of 2017 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 $1.08 per pound of copper for the year
2017. The impact of price changes for remainder of 2017 on consolidated unit net
cash costs would approximate $0.02 per pound for each $50 per ounce change in
the average price of gold and $0.02 per pound for each $2 per pound change in
the average price of molybdenum. Quarterly unit net cash costs vary with
fluctuations in sales volumes and realized prices primarily for gold and
molybdenum. Refer to "Consolidated Results - Production and Delivery Costs" for
further discussion of consolidated production costs for our mining operations.

Consolidated Operating Cash Flow
Our consolidated operating cash flows vary with sales volumes, prices realized
from copper, gold and molybdenum sales, production costs, income taxes, other
working capital changes and other factors. Based on current sales volume and
cost estimates, a return to normal operating rates in Indonesia and assuming
average prices of $2.50 per pound of copper, $1,250 per ounce of gold and $9.00
per pound of molybdenum for the remainder of 2017, consolidated operating cash
flows are estimated to approximate $4.0 billion for the year 2017 (including
$1.0 billion in working capital sources and changes in other tax payments).
Projected consolidated operating cash flows for the year 2017 also reflect an
estimated income tax provision of $1.2 billion (refer to "Consolidated Results -
Income Taxes" for further discussion of our projected income tax rate for the
year 2017). The impact of price changes during the remainder of 2017 on
operating cash flows would approximate $275 million for each $0.10 per pound
change in the average price of copper, $65 million for each $50 per ounce change
in the average price of gold and $70 million for each $2 per pound change in the
average price of molybdenum.

Consolidated Capital Expenditures
Consolidated capital expenditures are expected to approximate $1.6 billion for
the year 2017, including $0.9 billion for major mining projects primarily
associated with underground development activities at Grasberg. As a result of
regulatory uncertainty, PT-FI slowed investments in its underground development
projects during first-quarter 2017. If PT-FI is unable to reach an agreement
with the Indonesian government on its long-term mining rights, we intend to
significantly reduce or defer investments in underground development projects.

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MARKETS

World prices for copper, gold and molybdenum can fluctuate significantly. During
the period from January 2007 through March 2017, the London Metal Exchange (LME)
spot copper price varied from a low of $1.26 per pound in 2008 to a record high
of $4.60 per pound in 2011; the London Bullion Market Association (London) PM
gold price fluctuated from a low of $608 per ounce in 2007 to a record high of
$1,895 per ounce in 2011; and the Metals Week Molybdenum Dealer Oxide weekly
average price ranged from a low of $4.46 per pound in 2015 to a high of $33.88
per pound in 2008. Copper, gold and molybdenum prices are affected by numerous
factors beyond our control as described further in "Risk Factors" contained in
Part I, Item 1A. of our annual report on Form 10-K for the year ended
December 31, 2016.


[[Image Removed: q117copperprices.jpg]]




This graph presents LME spot copper prices and the combined reported stocks of
copper at the LME, Commodity Exchange Inc. (COMEX), a division of the New York
Mercantile Exchange
(NYMEX), and the Shanghai Futures Exchange from January 2007
through March 2017. Since mid-2014, copper prices have declined because of
concerns about slowing growth rates in China, a stronger U.S. dollar and a
broad-based decline in commodity prices, but began to improve starting in
fourth-quarter 2016. During first-quarter 2017, LME spot copper prices ranged
from a low of $2.49 per pound to a high of $2.79 per pound, averaged $2.65 per
pound, and closed at $2.65 per pound on March 31, 2017. The LME spot copper
price was $2.58 per pound on April 28, 2017.

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 output of existing large mines 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.

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[[Image Removed: q117goldprices.jpg]]
This graph presents London PM gold prices from January 2007 through March 2017.
An improving economic outlook, stronger U.S. dollar and positive equity
performance contributed to lower demand for gold since 2014. During
first-quarter 2017, London PM gold prices ranged from a low of $1,151 per ounce
to a high of $1,258 per ounce, averaged $1,219 per ounce, and closed at $1,245
per ounce on March 31, 2017. The London PM gold price was $1,266 per ounce on
April 28, 2017.

[[Image Removed: q117molyprices.jpg]]
This graph presents the Metals Week Molybdenum Dealer Oxide weekly average
prices from January 2007 through March 2017. Molybdenum prices declined
beginning in mid-2014 because of weaker demand from global steel and stainless
steel producers but have rebounded slightly starting in mid-2016. During
first-quarter 2017, the weekly average price of molybdenum ranged from a low of
$7.03 per pound to a high of $8.86 per pound, averaged $7.84 per pound, and was
$8.86 per pound on March 31, 2017. The Metals Week Molybdenum Dealer Oxide
weekly average price was $8.64 per pound on April 28, 2017.

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CONSOLIDATED RESULTS
Three Months Ended March 31,
2017 2016
SUMMARY FINANCIAL DATA (in millions, except per share amounts)
Revenuesa,b $ 3,341 $ 3,242
Operating income (loss)a,c,d $ 580 e,f $ (3,872 ) g
Net income (loss) from continuing operationsh $ 268 $ (4,097 )
Net income (loss) from discontinued operations $ 38 i $ (4 )
Net income (loss) attributable to common stock $ 228 $ (4,184 )
Diluted net income (loss) per share of common stock:
Continuing operations $ 0.13 $ (3.34 )
Discontinued operations 0.03 (0.01 )
$ 0.16 $ (3.35 )
Diluted weighted-average common shares outstanding 1,454 1,251

Operating cash flowsj $ 792 $ 740
Capital expenditures $ 344 $ 982
At March 31:
Cash and cash equivalents $ 4,001 $ 231
Total debt, including current portion $ 15,363


$ 20,675



a.As further detailed in Note 10, following is a summary of revenues and
operating income (loss) by operating division (in millions):



Three Months Ended March 31,
Revenues 2017 2016
North America copper mines $ 1,095 $ 1,136
South America mining 868 671
Indonesia mining 534 556
Molybdenum mines 63 45
Rod & Refining 1,115 979
Atlantic Copper Smelting & Refining 458 423
Corporate, other & eliminations (792 ) (568 )
Total revenues $ 3,341 $ 3,242

Operating income (loss)
North America copper mines $ 304 $ 202
South America mining 260 127
Indonesia mining 148 67
Molybdenum mines (8 ) (26 )
Rod & Refining 3 7
Atlantic Copper Smelting & Refining 10 18
Corporate, other & eliminations (137 ) (4,267 )


Total operating income (loss) $ 580 $ (3,872 )



b. Includes favorable adjustments to provisionally priced concentrate and



cathode copper sales recognized in prior periods totaling $91 million ($39



million to net income attributable to common stock from continuing operations



or $0.03 per share) in first-quarter 2017 and $9 million ($5 million to net



loss attributable to common stock from continuing operations or less than



$0.01 per share) in first-quarter 2016. Refer to "Revenues" for further



discussion.



c. Includes net charges at oil and gas operations totaling $1 million ($1



million to net income attributable to common stock or less than $0.01 per



share) in first-quarter 2017 for contract termination costs, mostly offset by



adjustments to drillship settlements, and $200 million ($200 million to net



loss attributable to common stock or $0.16 per share) in first-quarter 2016,



primarily for idle rig costs, inventory adjustments and asset impairments.



d. Includes net charges to environmental obligations and related litigation



reserves totaling $19 million ($19 million to net income attributable to



common stock or $0.01 per share) in first-quarter 2017 and $1 million ($1



million to net loss attributable to common stock or less than $0.01 per
share) in first-quarter 2016.



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e. Includes charges at mining operations totaling $40 million ($30 million to



net income attributable to common stock or $0.02 per share) in first-quarter



2017 for costs charged directly to cost of sales as a result of the impact of



regulatory restrictions on PT-FI's concentrate exports and for asset
impairments at Morenci.


f. Includes net gains on sales of assets totaling $23 million ($23 million to



net income attributable to common stock or $0.01 per share) in first-quarter



2017 reflecting gains related to the sale of our Madden property interests



and for adjustments to the December 2016 Deepwater Gulf of Mexico (GOM) sale,



partly offset by adjustments to the fair value of potential contingent



consideration related to the December 2016 onshore California sale, which in



accordance with accounting guidelines will continue to be adjusted through



December 31, 2020.


g. Includes charges to reduce the carrying value of oil and gas properties



pursuant to full cost accounting rules totaling $3.8 billion ($3.8 billion to



net loss attributable to common stock or $3.03 per share) in first-quarter



2016.



h. 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.



i. Primarily reflects adjustments to the fair value of the potential contingent



consideration related to the November 2016 sale of our interest in TFHL,



which in accordance with accounting guidelines will continue to be adjusted



through December 31, 2019. Refer to Note 2 for a summary of the components of



net income (loss) from discontinued operations.


j. Includes net working capital sources and changes in other tax payments of
$178 million in first-quarter 2017 and $188 million in first-quarter 2016.


Three Months Ended March 31,
2017
2016
SUMMARY OPERATING DATA
Copper (millions of recoverable pounds)a
Production 851


987



Sales, excluding purchases 809


1,000



Average realized price per pound $ 2.67 $ 2.18
Site production and delivery costs per poundb $ 1.60 $ 1.49
Unit net cash costs per poundb $ 1.39 $ 1.38
Gold (thousands of recoverable ounces)
Production 239


184



Sales, excluding purchases 182


201



Average realized price per ounce $ 1,229 $ 1,227
Molybdenum (millions of recoverable pounds)
Production 23


20



Sales, excluding purchases 24


17



Average realized price per pound $ 8.71 $ 7.61
Oil Equivalents
Sales volumes
Oil (millions of barrels (MMBbls)) 0.5


8.3



Natural gas (billion cubic feet (Bcf)) 6.0


19.6



Natural gas liquids (MMBbls) 0.1


0.6



Million barrels of oil equivalent (MMBOE) 1.6 12.1
Thousand BOE (MBOE) per day 17 133



a. Excludes production and sales volumes from the Tenke mine, which was sold in



November 2016 and is reported as a discontinued operation. Copper sales
volumes from Tenke totaled 123 million pounds in first-quarter 2016.



b. Reflects per pound weighted-average production and delivery costs and unit



net cash costs (net of by-product credits) for all copper mines, before net



noncash and other costs. For reconciliations of 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."







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Revenues



Consolidated revenues totaled $3.3 billion in first-quarter 2017, compared with
$3.2 billion in first-quarter 2016. Revenues from our mining operations
primarily include the sale of copper concentrate, copper cathode, copper rod,
gold and molybdenum. Revenues from our oil and gas operations include the sale
of oil, natural gas and natural gas liquids (NGLs). Following is a summary of
changes in our consolidated revenues between periods (in millions):
Three Months Ended
March 31

Revenues - 2016 period $ 3,242
(Lower) higher sales volumes:
Copper (418 )
Gold (23 )
Molybdenum 53
Oil and gas (262 )
Higher average realized prices:
Copper 396
Gold -
Molybdenum 26



Net adjustments for prior period provisionally priced copper sales



82



Lower treatment charges


33



Higher revenues from purchased copper


98



Higher Atlantic Copper revenues


35



Other, including intercompany eliminations 79
Revenues - 2017 period $ 3,341





Sales Volumes. Consolidated copper sales decreased to 809 million pounds in
first-quarter 2017, compared with 1.0 billion pounds in first-quarter 2016,
primarily reflecting lower volumes from North America mostly related to lower
ore grades and mining rates, and from Indonesia as a result of regulatory
restrictions on PT-FI's concentrate exports.




Consolidated gold sales volumes totaled 182 thousand ounces in first-quarter
2017 and 201 thousand ounces in first-quarter 2016. Lower gold sales volumes in
first-quarter 2017, compared with the 2016 period, primarily reflects lower
volumes from Indonesia as a result of regulatory restrictions on PT-FI's
concentrate exports.


Consolidated molybdenum sales volumes increased to 24 million pounds in
first-quarter 2017, compared with 17 million pounds in first-quarter 2016,
primarily reflecting higher demand.



Oil and gas sales volumes of 1.6 MMBOE in first-quarter 2017 were 87 percent
lower than oil and gas sales volumes of 12.1 MMBOE in first-quarter 2016,
primarily reflecting the sales of significant oil and gas properties in 2016.



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. First-quarter
2017 average realized prices, compared with first-quarter 2016, were 22 percent
higher for copper, less than 1 percent higher for gold and 14 percent higher for
molybdenum. Refer to "Markets" for further discussion.

Provisionally Priced Copper Sales. Impacts of net adjustments for prior period
provisionally priced sales primarily relate to copper sales. Substantially all
of our copper concentrate and cathode sales contracts provide final copper
pricing in a specified future month (generally one to four months from the
shipment date) based primarily on quoted LME monthly average spot copper prices.
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

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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.
Favorable impacts of net adjustments to prior periods' provisionally priced
copper sales from continuing operations totaled $91 million in first-quarter
2017 and $9 million in first-quarter 2016.

At March 31, 2017, we had provisionally priced copper sales at our copper mining
operations totaling 260 million pounds of copper (net of intercompany sales and
noncontrolling interests) recorded at an average of $2.65 per pound, subject to
final pricing over the next several months. We estimate that each $0.05 change
in the price realized from the March 31, 2017, provisional price recorded would
have an approximate $8 million effect on our 2017 net income attributable to
common stock. The LME spot copper price was $2.58 per pound on April 28, 2017.

Treatment Charges. Revenues from our South America and Indonesia concentrate
sales are recorded net of treatment charges. Lower treatment charges in
first-quarter 2017, compared with first-quarter 2016, primarily reflect lower
sales volumes from Indonesia as a result of the regulatory restrictions on
PT-FI's concentrate exports.

Purchased Copper. We purchase copper cathode primarily for processing by our Rod
& Refining operations. In addition to higher copper prices, we had higher
purchased copper volumes of 58 million pounds in first-quarter 2017, compared
with 27 million pounds in first-quarter 2016.


Atlantic Copper Revenues. Atlantic Copper revenues totaled $458 million in
first-quarter 2017 and $423 million in first-quarter 2016. Revenues in
first-quarter 2017, compared with first-quarter 2016, reflect higher copper
prices.




Production and Delivery Costs
Lower consolidated production and delivery costs of $2.2 billion in
first-quarter 2017, compared with $2.5 billion in first-quarter 2016, primarily
reflect lower costs at oil and gas operations (including lower charges for
drillship settlements/idle rig costs, which were a net credit of $20 million in
first-quarter 2017 and a net charge of $165 million in first-quarter 2016) and
lower costs at our North America and Indonesia mining operations.

Mining Unit Site Production and Delivery Costs. Site production and delivery
costs for our copper mining operations primarily include labor, energy and
commodity-based inputs, such as sulphuric acid, reagents, liners, tires and
explosives. Consolidated unit site production and delivery costs (before net
noncash and other costs) for our copper mines averaged $1.60 per pound of copper
in first-quarter 2017, compared with $1.49 per pound in first quarter of 2016.
Higher consolidated unit site production and delivery costs for first-quarter
2017, compared with the 2016 period, primarily reflect lower sales volumes.
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.

Depreciation, Depletion and Amortization
Depreciation will vary under the unit-of-production (UOP) method as a result of
changes in sales volumes and the related UOP rates at our individual mines.
Consolidated DD&A totaled $389 million in first-quarter 2017 and $662 million in
first quarter of 2016. Lower DD&A in first-quarter 2017, compared with the 2016
period, primarily reflects lower DD&A from oil and gas operations resulting from
the sales of significant oil and gas properties in 2016.

Impairment of Oil and Gas Properties
Under full cost accounting rules, a "ceiling test" is conducted each quarter to
review the carrying value of our oil and gas properties for impairment, which
resulted in the recognition of impairment charges totaling $3.8 billion for
first-quarter 2016.

Selling, General and Administrative Expenses
Consolidated selling, general and administrative expenses totaled $153 million
in first-quarter 2017 and $138 million in first-quarter 2016. Selling, general
and administrative expenses include net charges of $21 million for first-quarter
2017 for contract termination costs at our oil and gas operations.


Consolidated selling, general and administrative expenses were net of
capitalized general and administrative expenses at our oil and gas operations
totaling $28 million in first-quarter 2016.



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Mining Exploration and Research Expenses
Consolidated exploration and research expenses for our mining operations totaled
$15 million in first-quarter 2017 and $18 million in first-quarter 2016. Our
mining exploration activities are generally associated with our existing mines
and focus on opportunities to expand reserves and resources to support
development of additional future production capacity. Exploration results
continue to indicate opportunities for significant future potential reserve
additions in North America and South America. Exploration spending is expected
to approximate $70 million for the year 2017.

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. 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 $27 million in first-quarter 2017 and $10 million in first-quarter
2016.

Net Gain on Sales of Assets
Net gain on sales of assets associated with oil and gas transactions totaled $23
million
in first-quarter 2017, including gains of $17 million related to the
sale of Madden property interests and $16 million of adjustments related to the
December 2016 Deepwater GOM sale, partly offset by adjustments of $10 million to
the fair value of the potential $150 million in contingent consideration related
to the December 2016 onshore California sale, which in accordance with
accounting guidelines will continue to be adjusted through December 31, 2020.


Interest Expense, Net
Consolidated interest expense (excluding capitalized interest and interest
expense allocated to discontinued operations) totaled $195 million in
first-quarter 2017 and $218 million in first-quarter 2016.




Capitalized interest varies with the level of expenditures for our development
projects and average interest rates on our borrowings and totaled $28 million in
first-quarter 2017 and $27 million in first-quarter 2016.

Income Taxes
Following is a summary of the approximate amounts used in the calculation of our
consolidated income tax provision from continuing operations for the
first-quarters of 2017 and 2016 (in millions, except percentages):
Three Months Ended March 31,
2017 2016
Effective Income Tax Benefit Effective Income Tax Benefit
Incomea Tax Rate (Provision) Income (Loss)a Tax Rate (Provision)
U.S. $ 10 70% $ (7 ) $ (454 ) 4% $ 16
South America 260 39% (101 ) 113 35% (39 )
Indonesia 152 44% (67 ) 91 40% (36 )
Impairment of oil and
gas properties - N/A - (3,787 ) 38% 1,435
Valuation allowance, net - N/A - - N/A (1,435 ) b
Eliminations and other 16 N/A (1 ) 10 N/A (3 )
Rate adjustmentc - N/A 2 - N/A (15 )
Consolidated FCX $ 438 40% d $ (174 ) $ (4,027 ) (2)% $ (77 )



a. Represents income (loss) from continuing operations by geographic location



before income taxes and equity in affiliated companies' net earnings.



b. As a result of the impairment to U.S. oil and gas properties, we recorded tax



charges to establish valuation allowances against U.S. federal and state



deferred tax assets that will not generate a future benefit.


c. We adjust our interim provision for income taxes in accordance with
applicable accounting rules.



d. The consolidated effective income tax rate is a function of the combined



effective tax rates for the jurisdictions in which we operate. Accordingly,



variations in the relative proportions of jurisdictional income result in



fluctuations to our consolidated effective income tax rate. Assuming



achievement of current sales volume and cost estimates and average prices of



$2.50 per pound for copper, $1,250 per ounce for gold and $9 per pound for



molybdenum for the remainder of 2017, we estimate our consolidated effective



tax rate related to continuing operations for the year 2017 will approximate



45 percent and would decrease with higher prices.




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Net Income (Loss) from Discontinued Operations
In November 2016, we completed the sale of our interest in TFHL, through which
we had an effective 56 percent interest in the Tenke copper and cobalt
concessions in the Democratic Republic of Congo (DRC). In accordance with
accounting guidelines, the results of TFHL have been reported as discontinued
operations for all periods presented. Net income (loss) from discontinued
operations totaled $38 million in first-quarter 2017, which primarily reflected
adjustments to the fair value of potential contingent consideration related to
the sale, and $(4) million in first-quarter 2016. Refer to Note 2 for a summary
of the components of income (loss) from discontinued operations.


OPERATIONS




North America Copper Mines
We operate seven open-pit copper mines in North America - Morenci, Bagdad,
Safford, Sierrita and Miami in Arizona, and Chino and Tyrone in New Mexico. All
of the North America mining operations are wholly owned, except for Morenci.

We record our undivided joint venture interest in Morenci using the
proportionate consolidation method. On May 31, 2016, we completed the sale of an
additional 13 percent undivided interest in Morenci. As a result of the
transaction, our undivided interest in Morenci was prospectively reduced from 85
percent to 72 percent.

The North America copper mines include open-pit mining, sulfide ore
concentrating, leaching and solution extraction/electrowinning (SX/EW)
operations. A majority of the copper produced at our North America copper mines
is cast into copper rod by our Rod & Refining segment. The remainder of our
North America copper sales is in the form of copper cathode or copper
concentrate, a portion of which is shipped to Atlantic Copper (our wholly owned
smelter). Molybdenum concentrate, gold and silver are also produced by certain
of our North America copper mines.

Operating and Development Activities. We have significant undeveloped reserves
and resources in North America and a portfolio of potential long-term
development projects. Future investments will be undertaken based on the results
of economic and technical feasibility studies, and market conditions.

Through exploration drilling, we have identified a significant resource at the
Lone Star project located near the Safford operation in eastern Arizona. Initial
production from Lone Star is being planned from the oxide ores beginning in
2021, which can be processed through existing infrastructure to replace oxide
production from Safford. We continue to evaluate longer term opportunities
available from the significant sulfide potential in the Lone Star/Safford
minerals district.



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Operating Data. Following is a summary of consolidated operating data for the
North America copper mines for the three months ended March 31, 2017 and 2016:
Three Months Ended March 31,
2017 2016
Operating Data, Net of Joint Venture Interests
Copper
Production (millions of recoverable pounds) 392 487
Sales (millions of recoverable pounds) 375 503
Average realized price per pound $ 2.68


$ 2.16



Molybdenum



Production (millions of recoverable pounds)a 9 8

100% Operating Data
SX/EW operations
Leach ore placed in stockpiles (metric tons per day) 700,600


833,400



Average copper ore grade (percent) 0.28 0.31
Copper production (millions of recoverable pounds) 277 302

Mill operations
Ore milled (metric tons per day) 303,800 298,600
Average ore grade (percent):
Copper 0.41 0.50
Molybdenum 0.03 0.03
Copper recovery rate (percent) 86.4 84.7
Copper production (millions of recoverable pounds) 186 226


a. Refer to "Consolidated Results" for our consolidated molybdenum sales



volumes, which include sales of molybdenum produced at the North America



copper mines.



North America's consolidated copper sales volumes of 375 million pounds in
first-quarter 2017 were lower than first-quarter 2016 sales of 503 million
pounds, primarily reflecting lower ore grades and mining rates, timing of
shipments, and the impact of the May 2016 sale of an additional 13 percent
interest in Morenci.
North America copper sales are estimated to approximate 1.5 billion pounds for
the year 2017, compared with 1.8 billion pounds in 2016.

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.


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Gross Profit per Pound of Copper and Molybdenum
The following table summarizes unit net cash costs and gross profit per pound at
our North America copper mines for the first quarters of 2017 and 2016. 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.




Three Months Ended March 31,
2017 2016
Co-Product Method Co-Product Method
By- Product Molyb- By- Product Molyb-
Method Copper



denuma Method Copper denuma
Revenues, excluding adjustments $ 2.68 $ 2.68 $ 7.00 $ 2.16 $ 2.16 $ 5.27




Site production and delivery,
before net noncash and other costs
shown below 1.52 1.43 5.19 1.40 1.35 4.29
By-product credits (0.15 ) - - (0.08 ) - -
Treatment charges 0.11 0.11 - 0.10 0.10 -
Unit net cash costs 1.48 1.54 5.19 1.42 1.45 4.29
DD&A 0.31 0.29 0.52 0.28 0.27 0.54
Noncash and other costs, net 0.09 b 0.09 0.07 0.05 0.05 (0.05 )
Total unit costs 1.88 1.92 5.78 1.75 1.77 4.78
Revenue adjustments, primarily for
pricing on prior period open sales 0.02 0.02 - - - -
Gross profit per pound $ 0.82 $ 0.78 $


1.22 $ 0.41 $ 0.39 $ 0.49




Copper sales (millions of
recoverable pounds) 374 374 502 502
Molybdenum sales (millions of
recoverable pounds)a 9 8



a. Reflects sales of molybdenum produced by certain of the North America copper



mines to our molybdenum sales company at market-based pricing.



b. Includes $19 million ($0.05 per pound of copper) for other asset impairment



charges at Morenci.




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. Average unit net cash costs (net of by-product
credits) for the North America copper mines of $1.48 per pound of copper in
first-quarter 2017 were higher than unit net cash costs of $1.42 per pound in
first-quarter 2016, primarily reflecting lower copper sales volumes, partly
offset by higher molybdenum credits.




Because certain assets are depreciated on a straight-line basis, North America's
average unit depreciation rate may vary with asset additions and the level of
copper production and sales.

Average unit net cash costs (net of by-product credits) for our North America
copper mines are expected to approximate $1.53 per pound of copper for the year
2017, based on achievement of current sales volume and cost estimates and
assuming an average molybdenum price of $9.00 per pound for the remainder of
2017. North America's average unit net cash costs for the year 2017 would change
by approximately $0.03 per pound for each $2 per pound change in the average
price of molybdenum for the remainder of 2017.

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). These operations 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 ship a portion of their copper concentrate inventories to Atlantic
Copper. In addition to copper, the Cerro Verde mine produces molybdenum
concentrate and silver.



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

In the second half of 2015, we adjusted operations at our El Abra mine to reduce
mining and stacking rates by approximately 50 percent to achieve lower operating
and labor costs, defer capital expenditures and extend the life of the existing
operations. El Abra continues to operate at reduced rates.

We continue to evaluate a potential large-scale milling operation at El Abra to
process additional sulfide material and to achieve higher recoveries.
Exploration results in recent years at El Abra indicate a significant sulfide
resource, which could potentially support a major mill project. Future
investments will depend on technical studies, economic factors and market
conditions.

Operating Data. Following is a summary of consolidated operating data for our
South America mining operations for the three months ended March 31, 2017 and
2016:
Three Months Ended March 31,
2017 2016
Copper
Production (millions of recoverable pounds) 304 335
Sales (millions of recoverable pounds) 309 323
Average realized price per pound $ 2.66


$ 2.19



Molybdenum



Production (millions of recoverable pounds)a 6 5

SX/EW operations
Leach ore placed in stockpiles (metric tons per day) 125,900


140,700



Average copper ore grade (percent) 0.42 0.41
Copper production (millions of recoverable pounds) 66 90

Mill operations
Ore milled (metric tons per day) 338,900 339,400
Average ore grade (percent):
Copper 0.44 0.43
Molybdenum 0.02 0.02
Copper recovery rate (percent) 84.5 86.2
Copper production (millions of recoverable pounds) 238 245


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



South America's consolidated copper sales volumes of 309 million pounds in
first-quarter 2017 were lower than first-quarter 2016 sales of 323 million
pounds. During first-quarter 2017, Cerro Verde's operations were unfavorably
impacted by unusually heavy rainfall and a 21-day labor strike. These issues
resulted in lower than planned mining rates and a reduction of approximately 80
million pounds of copper in Cerro Verde's estimated 2017 sales volumes.

Copper sales from South America mines are expected to approximate 1.2 billion
pounds of copper for the year 2017, compared with 1.3 billion pounds of copper
in 2016.

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.


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Gross Profit per Pound of Copper
The following table summarizes unit net cash costs and gross profit per pound of
copper at the South America mining operations for the first quarters of 2017 and
2016. 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.



Three Months Ended March 31,
2017 2016
By-Product Co-Product By-Product Co-Product
Method Method Method Method
Revenues, excluding adjustments $ 2.66 $ 2.66 $


2.19 $ 2.19




Site production and delivery, before
net noncash and other costs shown
below 1.48 1.38 1.23 1.19
By-product credits (0.18 ) - (0.07 ) -
Treatment charges 0.22 0.22 0.23 0.23
Royalty on metals 0.01 0.01 0.01 0.01
Unit net cash costs 1.53 1.61 1.40 1.43
DD&A 0.43 0.40 0.40 0.39
Noncash and other costs, net 0.01 0.01 0.02 0.02
Total unit costs 1.97 2.02 1.82 1.84
Revenue adjustments, primarily for
pricing on prior period open sales 0.16 0.16 0.03 0.03
Gross profit per pound $ 0.85 $ 0.80 $ 0.40 $ 0.38

Copper sales (millions of
recoverable pounds) 309 309 323 323



Our South America mines have varying cost structures because of differences in
ore grades and characteristics, processing costs, by-product credits and other
factors. Average unit net cash costs (net of by-product credits) of $1.53 per
pound of copper in first-quarter 2017 were higher than unit net cash costs of
$1.40 per pound in first-quarter 2016, primarily reflecting higher milling and
mining costs at Cerro Verde and lower volumes, partly offset by higher
by-product credits.


Revenues from Cerro Verde's concentrate sales are recorded net of treatment
charges. Accordingly, treatment charges will vary with Cerro Verde's sales
volumes and the price of copper.




Because certain assets are depreciated on a straight-line basis, South America's
unit depreciation rate may vary with asset additions and the level of copper
production and sales.

Revenue adjustments primarily result from changes in prices on provisionally
priced copper sales recognized in prior periods. Refer to "Consolidated Results
- Revenues" for further discussion of adjustments to prior period provisionally
priced copper sales.

Average unit net cash costs (net of by-product credits) for our South America
mining operations are expected to approximate $1.63 per pound of copper for the
year 2017, based on current sales volume and cost estimates and assuming an
average price of $9.00 per pound of molybdenum for the remainder of 2017.

Indonesia Mining
Indonesia mining includes PT-FI's Grasberg minerals district, one of the world's
largest copper and gold deposits, in Papua, Indonesia. We own 90.64 percent of
PT-FI, including 9.36 percent owned through our wholly owned subsidiary, PT
Indocopper Investama.

PT-FI proportionately consolidates an unincorporated joint venture with Rio
Tinto plc (Rio Tinto), under which Rio Tinto has a 40 percent interest in
certain assets and a 40 percent interest through 2022 in production exceeding
specified annual amounts of copper, gold and silver. Refer to Note 3 in our
annual report on Form 10-K for the year ended December 31, 2016, for discussion
of our joint venture with Rio Tinto.


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PT-FI produces copper concentrate that contains significant quantities of gold
and silver. Substantially all of PT-FI's copper concentrate is sold under
long-term contracts, and during first-quarter 2017, approximately half of
PT-FI's concentrate production was sold to PT Smelting, its 25-percent-owned
smelter and refinery in Gresik, Indonesia.

Regulatory Matters. In January and February 2017, the Indonesian government
issued new regulations to address exports of unrefined metals, including copper
concentrate and anode slimes, and other matters related to the mining sector.
The new regulations permit the continuation of copper concentrate exports for a
five-year period through January 2022, subject to various conditions, including
conversion from a contract of work to a special operating license (known as an
IUPK, which does not provide the same level of protections of a contract of
work), commitment to completion of smelter construction in five years and
payment of export duties to be determined by the Ministry of Finance. In
addition, the new regulations enable application for extension of operating
rights five years before expiration of the IUPK and require foreign IUPK holders
to divest 51 percent to Indonesian interests no later than the tenth year of
production. Export licenses would be valid for one-year periods, subject to
review every six months, depending on smelter construction progress.

Following the issuance of the January and February 2017 regulations and
discussions with the government, PT-FI advised the Indonesian government that it
was prepared to convert its COW to an IUPK, subject to obtaining an investment
stability agreement providing equivalent rights with the same level of legal and
fiscal certainty enumerated under its COW, and provided that the COW would
remain in effect until it is replaced by a mutually satisfactory alternative.
PT-FI also committed to commence construction of a new smelter during a
five-year timeframe after approval of the extension of its long-term operating
rights.


In mid-February 2017, pursuant to the COW's dispute resolution process, PT-FI
provided formal notice to the Indonesian government of an impending dispute
listing the government's breaches and violations of the COW.




In late March 2017, the Indonesian government amended the regulations to enable
PT-FI to retain its COW until replaced with an IUPK accompanied by an investment
stability agreement, and to grant PT-FI a temporary IUPK through October 10,
2017
, to enable concentrate exports during this period. In April 2017, PT-FI
entered into a Memorandum of Understanding with the Indonesian government
confirming that the COW would continue to be valid and honored until replaced by
a mutually agreed IUPK and investment stability agreement. PT-FI will continue
to pay a 5.0 percent export duty during this period.


On April 21, 2017, the Indonesian government issued a permit to PT-FI to enable
exports to resume for a six-month period, and PT-FI began loading export
shipments. PT-FI plans to ramp up its production to full rates during
second-quarter 2017.




As a result of the first-quarter 2017 regulatory restrictions and uncertainties
regarding long-term investment
stability, PT-FI has taken actions to adjust its cost structure, reduce its
workforce and slow investments in its
underground development projects and new smelter.


PT-FI and the Indonesian government have commenced negotiations on the
conversion of PT-FI's COW to an IUPK accompanied by an investment stability
agreement with the objective of providing a mutually acceptable long-term
investment framework. In addition to negotiating a stability agreement, the
parties are also discussing requirements for the construction of a new smelter
and the government's request for divestment.




We cannot predict whether PT-FI will be successful in reaching a satisfactory
agreement on the terms of its long-term mining rights. Refer to "Risk Factors"
contained in Part I, Item 1A. of our annual report on Form 10-K for the year
ended December 31, 2016, for further discussion of risks associated with our
operations in Indonesia.

Operating and Development Activities. PT-FI is currently mining the final phase
of the Grasberg open pit, which contains high copper and gold ore grades. PT-FI
expects to mine high-grade ore over the next several quarters prior to
transitioning to the Grasberg Block Cave underground mine in late 2018.

PT
-FI has several projects in the Grasberg minerals district related to the
development of its large-scale, long-lived, high-grade underground ore bodies.
In aggregate, these underground ore bodies are expected to produce large-scale
quantities of copper and gold following the transition from the Grasberg open
pit. As a result of regulatory uncertainty, PT-FI has slowed investments in its
underground development projects during first-quarter 2017. Assuming an
agreement is reached to support PT-FI's long-term investment plans, estimated
annual capital spending on these projects would average $1.0 billion per year
($0.8 billion per year net to PT-FI) over the next five

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years. Considering the long-term nature and size of these projects, actual costs
could vary from these estimates. In response to market conditions and Indonesian
regulatory uncertainty, the timing of these expenditures continues to be
reviewed. If PT-FI is unable to reach agreement with the Indonesian government
on its long-term mining rights, we intend to significantly reduce or defer
investments in underground development projects.

The following provides additional information on the continued development of
the Common Infrastructure project, the Grasberg Block Cave underground mine and
the Deep Mill Level Zone (DMLZ) ore body that lies below the Deep Ore Zone (DOZ)
underground mine. Our current plans and mineral reserves in Indonesia assume
that PT-FI's long-term mining rights will be extended through 2041, as stated in
the COW.

Common Infrastructure and Grasberg Block Cave Mine. In 2004, PT-FI commenced its
Common Infrastructure project to provide access to its large undeveloped
underground ore bodies located in the Grasberg minerals district through a
tunnel system located approximately 400 meters deeper than its existing
underground tunnel system. In addition to providing access to our underground
ore bodies, the tunnel system will enable PT-FI to conduct future exploration in
prospective areas associated with currently identified ore bodies. The tunnel
system was completed to the Big Gossan terminal, and the Big Gossan mine was
brought into production in 2010. The Big Gossan underground mine is currently in
care-and-maintenance. Development of the DMLZ and Grasberg Block Cave
underground mines is advancing using the Common Infrastructure project tunnels
as access.

The Grasberg Block Cave underground mine accounts for approximately half of our
recoverable proven and probable reserves in Indonesia. Production from the
Grasberg Block Cave mine is expected to commence in late 2018, following the end
of mining of the Grasberg open pit. Targeted production rates once the Grasberg
Block Cave mining operation reaches full capacity are expected to approximate
160,000 metric tons of ore per day. PT-FI is reviewing its operating plans to
determine the optimum mine plan for the Grasberg Block Cave.

Aggregate mine development capital for the Grasberg Block Cave mine and
associated Common Infrastructure is expected to approximate $6.3 billion
(incurred between 2008 and 2022), with PT-FI's share totaling approximately $5.8
billion
. Aggregate project costs totaling $3.0 billion have been incurred
through March 31, 2017, including $149 million during first-quarter 2017. As a
result of regulatory uncertainty, PT-FI has slowed investments in its
underground development projects during first-quarter 2017. If PT-FI is unable
to reach agreement with the Indonesian government on its long-term mining
rights, we intend to significantly reduce or defer investments in underground
development projects.

DMLZ. The DMLZ ore body lies below the DOZ mine at the 2,590-meter elevation and
represents the downward continuation of mineralization in the Ertsberg East
Skarn system and neighboring Ertsberg porphyry. In September 2015, PT-FI
initiated pre-commercial production that represents ore extracted during the
development phase for the purpose of obtaining access to the ore body. Targeted
production rates once the DMLZ underground mine reaches full capacity are
expected to approximate 80,000 metric tons of ore per day in 2022.

Drilling efforts continue to determine the extent of the ore body. Aggregate
mine development capital costs for the DMLZ underground mine are expected to
approximate $3.2 billion (incurred between 2009 and 2021), with PT-FI's share
totaling approximately $1.9 billion. Aggregate project costs totaling $1.9
billion
have been incurred through March 31, 2017, including $85 million during
first-quarter 2017. As a result of regulatory uncertainty, PT-FI has slowed
investments in its underground development projects during first-quarter 2017.
If PT-FI is unable to reach agreement with the Indonesian government on its
long-term mining rights, we intend to significantly reduce or defer investments
in underground development projects.

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Operating Data. Following is a summary of consolidated operating data for our
Indonesia mining operations for the three months ended March 31, 2017 and 2016:
Three Months Ended March 31,
2017 2016
Operating Data, Net of Joint Venture Interest
Copper
Production (millions of recoverable pounds) 155 165
Sales (millions of recoverable pounds) 125 174
Average realized price per pound $ 2.63


$ 2.20



Gold



Production (thousands of recoverable ounces) 232 178
Sales (thousands of recoverable ounces) 177 195
Average realized price per ounce $ 1,229


$ 1,228




100% Operating Data
Ore milled (metric tons per day):a
Grasberg open pit 53,600 105,800
DOZ underground mineb 26,100 44,200
DMLZ underground mine 3,200 4,100
Grasberg Block Cave 2,600 2,300
Big Gossan underground mine 1,700 200
Total 87,200 156,600
Average ore grades:
Copper (percent) 1.15 0.69
Gold (grams per metric ton) 1.17 0.53
Recovery rates (percent):
Copper 92.2 89.3
Gold 84.8 80.6
Production:
Copper (millions of recoverable pounds) 172 183
Gold (thousands of recoverable ounces) 241 190


a. Amounts represent the approximate average daily throughput processed at
PT-FI's mill facilities from each producing mine and from development
activities that result in metal production.



b. Ore milled from the DOZ underground mine is expected to ramp up to 60,000



metric tons of ore per day in 2017.






Indonesia mining's consolidated sales volumes of 125 million pounds of copper
and 177 thousand ounces of gold in first-quarter 2017 were lower than
first-quarter 2016 sales of 174 million pounds of copper and 195 thousand ounces
of gold, primarily reflecting the impact of regulatory restrictions on PT-FI's
concentrate exports beginning on January 12, 2017, and a six-week temporary
shutdown at PT Smelting, which began on January 19, 2017.

On April 21, 2017, the Indonesian government issued a permit to PT-FI to enable
exports to resume through October 10, 2017, and PT-FI began loading export
shipments. PT-FI plans to ramp up its production to full rates during
second-quarter 2017. Assuming normal operating rates for the remainder of the
year, consolidated sales volumes from Indonesia mining operations are expected
to approximate 1.1 billion pounds of copper and 1.9 million ounces of gold for
the year 2017, compared with 1.1 billion pounds of copper and 1.1 million ounces
of gold for the year 2016. At the Grasberg mine, the sequencing of mining areas
with varying ore grades causes fluctuations in quarterly and annual production
of copper and gold.

Since mid-April 2017, PT-FI has experienced a high level of worker absenteeism,
which has unfavorably impacted mining and milling rates. Union leaders have
notified PT-FI of a potential strike during the month of May. PT-FI is working
with union leaders, with the support of Indonesian government officials, to
encourage a safe and efficient return to normal operations for the benefit of
all stakeholders.


Indonesia mining's projected sales volumes are dependent on a number of factors,
including operational performance, workforce productivity, the timing of
shipments and its ability to export copper concentrate.



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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 per Ounce of Gold
The following table summarizes the unit net cash costs and gross profit per
pound of copper and per ounce of gold at our Indonesia mining operations for the
first quarters of 2017 and 2016. Refer to "Product Revenues and Production
Costs" for an explanation of "by-product" and "co-product" methods and a
reconciliation of unit net cash costs per pound to production and delivery costs
applicable to sales reported in our consolidated financial statements.



Three Months Ended March 31,
2017
2016
Co-Product Method Co-Product Method
By-Product Method Copper



Gold By-Product Method Copper Gold
Revenues, excluding adjustments $


2.63 $ 2.63 $ 1,229 $ 2.20 $ 2.20 $ 1,228

Site production and delivery, before
net noncash and other costs shown
below 2.15 1.28 596 2.24 1.36 760
Gold and silver credits (1.88 ) - - (1.52 ) - -
Treatment charges 0.28 0.17 77 0.31 0.19 106
Export duties 0.11 0.07 31 0.08 0.05 26
Royalty on metals 0.16 0.09 45 0.13 0.07 49
Unit net cash costs 0.82 1.61 749 1.24 1.67 941
DD&A 0.66 0.39 184 0.47 0.28 158
Noncash and other costs, net 0.26 a 0.15 72 0.06 0.04 23
Total unit costs 1.74 2.15 1,005 1.77 1.99 1,122
Revenue adjustments, primarily for
pricing on prior period open sales 0.33 0.33 51 (0.01 ) (0.01 ) 87
PT Smelting intercompany profit 0.21 0.13 59 0.05 0.03 16
Gross profit per pound/ounce $ 1.43 $ 0.94 $ 334 $ 0.47 $ 0.23 $ 209

Copper sales (millions of recoverable
pounds) 125 125 174 174
Gold sales (thousands of recoverable
ounces) 177 195



a. Includes $21 million ($0.17 per pound of copper) of costs charged directly to



cost of sales as a result of the impact of regulatory restrictions on PT-FI's



concentrate exports.



A significant portion of PT-FI's costs are fixed and unit costs vary depending
on production volumes and other factors. Indonesia's unit net cash costs
(including gold and silver credits) of $0.82 per pound of copper in
first-quarter 2017 were lower than unit net cash costs of $1.24 per pound in
first-quarter 2016, primarily reflecting higher gold and silver credits and
lower production costs.

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.

As further discussed above in "Regulatory Matters," PT-FI is continuing to pay a
5.0 percent export duty. Export duties totaled $14 million in first-quarter 2017
and $13 million in first-quarter 2016.


Because certain assets are depreciated on a straight-line basis, PT-FI's unit
depreciation rate varies with the level of copper production and sales.




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.


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PT Smelting intercompany 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" for further discussion.




Assuming an average gold price of $1,250 per ounce for the remainder of 2017 and
achievement of current sales volume and cost estimates, unit net cash credits
(net of gold and silver credits) for Indonesia mining are expected to
approximate $0.10 per pound of copper for the year 2017. Indonesia mining's unit
net cash credits for the year 2017 would change by approximately $0.07 per pound
for each $50 per ounce change in the average price of gold for the remainder of
2017. Because of the fixed nature of a large portion of Indonesia's costs, unit
costs vary from quarter to quarter depending on copper and gold volumes.

Molybdenum Mines
We have two wholly owned molybdenum mines in North America - the Henderson
underground mine and the Climax open-pit mine, both in Colorado. The Henderson
and Climax mines produce high-purity, chemical-grade molybdenum concentrate,
which is typically further processed into value-added molybdenum chemical
products. The majority of the molybdenum concentrate produced at the Henderson
and Climax mines, as well as from our North America and South America copper
mines, is processed at our own conversion facilities.

Operating and Development Activities. In response to market conditions, the
Henderson molybdenum mine continues to operate at reduced rates. Production from
the Molybdenum mines totaled 8 million pounds of molybdenum in first-quarter
2017 and 7 million pounds in first-quarter 2016. Refer to "Consolidated Results"
for our consolidated molybdenum operating data, which includes sales of
molybdenum produced at our Molybdenum mines, and from our North America and
South America copper mines, and refer to "Outlook" for projected consolidated
molybdenum sales volumes.

Unit Net Cash Costs Per Pound of Molybdenum. Unit net cash costs per pound of
molybdenum is a measure intended to provide investors with information about the
cash-generating capacity of our mining operations expressed on a basis relating
to the primary metal product for our respective operations. We use this measure
for the same purpose and for monitoring operating performance by our mining
operations. This information differs from measures of performance determined in
accordance with U.S. GAAP and should not be considered in isolation or as a
substitute for measures of performance determined in accordance with U.S. GAAP.
This measure is presented by other metals mining companies, although our measure
may not be comparable to similarly titled measures reported by other companies.

Average unit net cash costs for our Molybdenum mines of $7.10 per pound of
molybdenum in first-quarter 2017 were lower than $7.43 per pound in
first-quarter 2016, primarily reflecting higher volumes. Assuming achievement of
current sales volume and cost estimates, we estimate unit net cash costs for the
Molybdenum mines are expected to average $7.85 per pound of molybdenum for the
year 2017. 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 and Refining
We wholly own and operate a smelter in Arizona (Miami smelter) 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. Through this form of downstream
integration, we are assured placement of a significant portion of our
concentrate production.

Atlantic Copper smelts and refines copper concentrate and markets refined copper
and precious metals in slimes. During first-quarter 2017, Atlantic Copper's
concentrate purchases from our copper mining operations included 21 percent from
South America mining and less than 1 percent from our North America copper
mines, with the remainder purchased from third parties.

In March 2017, PT Smelting's anode slimes export license was renewed through
March 1, 2018. 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 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

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205,000 metric tons of copper annually. During first-quarter 2017, PT-FI
supplied approximately 80 percent of PT Smelting's concentrate requirements. An
extension of the minimum and maximum treatment charge rates was finalized in
April 2017, and is pending approval by the Indonesian government.

We defer recognizing profits on sales from our mining operations to Atlantic
Copper and on 25 percent of PT-FI's sales to PT Smelting until final sales to
third parties occur. Changes in these deferrals attributable to variability in
intercompany volumes resulted in net additions to net income attributable to
common stock of $27 million for first-quarter 2017 and $2 million for
first-quarter 2016. Our net deferred profits on our inventories at Atlantic
Copper and PT Smelting to be recognized in future periods' net income
attributable to common stock from continuing operations totaled $16 million at
March 31, 2017. Quarterly variations in ore grades, the timing of intercompany
shipments and changes in product prices will result in variability in our net
deferred profits and quarterly earnings. In second-quarter 2017, we expect
increased sales volumes to Atlantic Copper and PT Smelting, resulting in the
deferral of approximately $50 million of profit on intercompany sales until
final sales to third parties occur.


CAPITAL RESOURCES AND LIQUIDITY




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. During 2016, we took actions to
restore our balance sheet strength through a combination of asset sale
transactions, cash flow from operations and capital market transactions. We
believe that we have a high-quality portfolio of long-lived copper assets
positioned to generate long-term value. In addition to debt reduction plans, we
are pursuing 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.


Cash



Following is a summary of the U.S. and international components of consolidated
cash and cash equivalents available to the parent company at March 31, 2017, net
of noncontrolling interests' share, taxes and other costs (in billions):
Cash at domestic companies $ 3.4
Cash at international operations 0.6


Total consolidated cash and cash equivalents 4.0
Noncontrolling interests' share


(0.2 )
Cash, net of noncontrolling interests' share 3.8
Withholding taxes and other (0.1 )
Net cash available $ 3.7



Cash held at our international operations is generally used to support our
foreign operations' capital expenditures, operating expenses, working capital
and other tax payments, or other cash needs. Management believes that
sufficient liquidity is available in the U.S. from cash balances and
availability from our revolving credit facility and uncommitted lines of credit.
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



Following is a summary of our total debt and the related weighted-average
interest rates at March 31, 2017 (in billions, except percentages):



Weighted-
Average
Interest Rate
Senior Notes $ 13.9 4.4%
Cerro Verde Credit Facility 1.3 2.9%
Other FCX debt 0.2 2.9%
Total debt $ 15.4 4.3%





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At March 31, 2017, we had no borrowings, $39 million in letters of credit issued
and availability of $3.5 billion under our revolving credit facility.




Operating Activities
We generated consolidated operating cash flows of $792 million (including $178
million
in working capital sources and changes in other tax payments) in
first-quarter 2017 and $740 million (including $188 million for working capital
sources and changes in other tax payments) in first-quarter 2016.

Subject to future commodity prices for copper, gold and molybdenum, we expect
estimated consolidated operating cash flows for the year 2017, plus available
cash and availability under our credit facility and uncommitted lines of credit,
to be sufficient to fund our budgeted capital expenditures, scheduled debt
maturities, noncontrolling interest distributions and other cash requirements
for the year. Refer to "Outlook" for further discussion of projected operating
cash flows for the year 2017, and to "Risk Factors," contained in Part I, Item
1A. of our annual report on Form 10-K for the year ended December 31, 2016, for
discussion of regulatory matters in Indonesia, which could have a significant
impact on future results.

Investing Activities
Capital Expenditures. Capital expenditures, including capitalized interest,
totaled $344 million in first-quarter 2017, including $210 million for major
mining projects. Capital expenditures, including capitalized interest, totaled
$1.0 billion in first-quarter 2016, consisting of $459 million for mining
operations (including $350 million for major projects) and $523 million for oil
and gas operations.

Lower capital expenditures in first-quarter 2017, compared with first-quarter
2016, primarily reflect a decrease in oil and gas activities as a result of the
disposal of significant oil and gas assets in 2016 and a decrease in major
mining projects associated with the completion of the Cerro Verde expansion.
Refer to "Outlook" for further discussion of projected capital expenditures for
the year 2017.

Financing Activities
Debt Transactions. Net repayments of debt in first-quarter 2017 totaled $658
million
primarily for the repayment of our 2.15% Senior Notes and payments on
the Cerro Verde credit facility.


During first-quarter 2016, net proceeds from debt totaled $354 million primarily
reflecting borrowings under our revolving credit facility.




Dividends. The Board suspended our annual common stock dividend in December
2015
. 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. Common stock dividends of $1 million in
first-quarter 2017 and $4 million in first-quarter 2016 related to accumulated
dividends paid for vested stock-based compensation.

Cash dividends paid to noncontrolling interests totaled $15 million in
first-quarter 2017 and $18 million in first-quarter 2016. These payments will
vary based on the operating results and cash requirements of our consolidated
subsidiaries.

CONTRACTUAL OBLIGATIONS

There have been no material changes in our contractual obligations since
December 31, 2016. Refer to Part II, Items 7. and 7A. in our annual report on
Form 10-K for the year ended December 31, 2016, for information regarding our
contractual obligations.

CONTINGENCIES

Environmental and Asset Retirement Obligations
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 and asset retirement
obligations and also review changes in facts and circumstances associated with
these obligations at least quarterly. There have been no material changes to our
environmental and asset retirement obligations since December 31, 2016. 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

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revisions to certain of our environmental obligations. Refer to Note 12 in our
annual report on Form 10-K for the year ended December 31, 2016, for further
information regarding our environmental and asset retirement obligations.

Litigation and Other Contingencies
Other than as discussed in Note 9, there have been no material changes to our
contingencies associated with legal proceedings and other matters since
December 31, 2016. Refer to Note 12 and "Legal Proceedings" contained in Part I,
Item 3. of our annual report on Form 10-K for the year ended December 31, 2016,
for further information regarding legal proceedings and other matters.


NEW ACCOUNTING STANDARDS



Refer to Note 12 for a summary of recently adopted accounting standards.



PRODUCT REVENUES AND PRODUCTION COSTS




Mining Product Revenues and Unit Net Cash Cost
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. This measure is 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 our Board to
monitor our mining operations and to compare mining operations in certain
industry publications. In the co-product method presentations below, 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, 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.








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

Three Months Ended March 31,
2017

(In millions) By-Product Co-Product Method
Method Copper Molybdenuma Otherb Total
Revenues, excluding adjustments $ 1,005 $ 1,005 $ 59 $ 20 $ 1,084
Site production and delivery,
before net noncash
and other costs shown below 568 536 44 10 590
By-product credits (57 ) - - - -
Treatment charges 42 41 - 1 42
Net cash costs 553 577 44 11 632
DD&A 116 110 4 2 116
Noncash and other costs, net 34 c 33 1 - 34
Total costs 703 720 49 13 782
Revenue adjustments, primarily
for pricing
on prior period open sales 5 5 - - 5
Gross profit $ 307 $ 290 $ 10 $ 7 $ 307

Copper sales (millions of
recoverable pounds) 374 374
Molybdenum sales (millions of
recoverable pounds)a 9


Gross profit per pound of copper/molybdenum:



Revenues, excluding adjustments $ 2.68 $ 2.68 $



7.00



Site production and delivery,
before net noncash
and other costs shown below 1.52 1.43 5.19
By-product credits (0.15 ) - -
Treatment charges 0.11 0.11 -
Unit net cash costs 1.48 1.54 5.19
DD&A 0.31 0.29 0.52
Noncash and other costs, net 0.09 c 0.09


0.07



Total unit costs 1.88 1.92


5.78



Revenue adjustments, primarily
for pricing
on prior period open sales 0.02 0.02 -
Gross profit per pound $ 0.82 $ 0.78 $ 1.22

Reconciliation to Amounts
Reported
(In millions)
Production
Revenues and Delivery DD&A
Totals presented above $ 1,084 $ 590 $ 116
Treatment charges - 42 -
Noncash and other costs, net - 34 -
Revenue adjustments, primarily
for pricing
on prior period open sales 5 - -
Eliminations and other 6 7 -
North America copper mines 1,095 673 116
Other miningd 3,038 2,344 244
Corporate, other & eliminations (792 ) (817 ) 29
As reported in FCX's
consolidated financial
statements $ 3,341 $ 2,200 $ 389




a. Reflects sales of molybdenum produced by certain of the North America copper



mines to our molybdenum sales company at market-based pricing.



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



c. Includes $19 million ($0.05 per pound of copper) for other asset impairment



charges at Morenci.



d. Represents the combined total for our other mining operations, including



South America mining, Indonesia mining, Molybdenum mines, Rod & Refining and



Atlantic Copper Smelting & Refining, as presented in Note 10.



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




Three Months Ended March 31, 2016
(In millions) By-Product


Co-Product Method



Method Copper Molybdenuma Otherb Total
Revenues, excluding adjustments $ 1,086 $ 1,086 $ 41 $ 20 $ 1,147
Site production and delivery,
before net noncash
and other costs shown below 702 678 33 10 721
By-product credits (42 ) - - - -
Treatment charges 54 52 - 2 54
Net cash costs 714 730 33 12 775
DD&A 143 137 4 2 143
Noncash and other costs, net 26 26 - - 26
Total costs 883 893 37 14 944
Revenue adjustments, primarily
for pricing
on prior period open sales 2 2 - - 2
Gross profit $ 205 $ 195 $


4 $ 6 $ 205




Copper sales (millions of
recoverable pounds) 502 502
Molybdenum sales (millions of
recoverable pounds)a 8



Gross profit per pound of copper/molybdenum:




Revenues, excluding adjustments $ 2.16 $ 2.16 $ 5.27
Site production and delivery,
before net noncash
and other costs shown below 1.40 1.35 4.29
By-product credits (0.08 ) - -
Treatment charges 0.10 0.10 -
Unit net cash costs 1.42 1.45 4.29
DD&A 0.28 0.27 0.54
Noncash and other costs, net 0.05 0.05 (0.05 )
Total unit costs 1.75 1.77


4.78



Revenue adjustments, primarily
for pricing
on prior period open sales - - -
Gross profit per pound $ 0.41 $ 0.39 $ 0.49

Reconciliation to Amounts
Reported
(In millions) Production
Revenues and Delivery DD&A
Totals presented above $ 1,147 $ 721 $ 143
Treatment charges - 54 -
Noncash and other costs, net - 26 -
Revenue adjustments, primarily
for pricing
on prior period open sales 2 - -
Eliminations and other (13 ) (13 ) 1
North America copper mines 1,136 788 144
Other miningc 2,674 2,219 242
Corporate, other & eliminations (568 ) (508 )


276



As reported in FCX's consolidated
financial statements $ 3,242 $ 2,499 $ 662




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 FCX's other mining operations, including



South America mining, Indonesia mining, Molybdenum mines, Rod & Refining and



Atlantic Copper Smelting & Refining, as presented in Note 10.




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




Three Months Ended March 31, 2017
(In millions) By-Product


Co-Product Method



Method Copper Othera Total
Revenues, excluding adjustments $ 821 $ 821 $ 68 $ 889
Site production and delivery, before
net noncash
and other costs shown below 457 426 43 469
By-product credits (56 ) - - -
Treatment charges 68 68 - 68
Royalty on metals 2 2 - 2
Net cash costs 471 496 43 539
DD&A 133 123 10 133
Noncash and other costs, net 5 5 - 5
Total costs 609 624 53 677
Revenue adjustments, primarily for
pricing
on prior period open sales 49 49 - 49
Gross profit $ 261 $ 246 $ 15 $ 261

Copper sales (millions of recoverable
pounds) 309 309


Gross profit per pound of copper:




Revenues, excluding adjustments $ 2.66 $ 2.66
Site production and delivery, before
net noncash
and other costs shown below 1.48 1.38
By-product credits (0.18 ) -
Treatment charges 0.22 0.22
Royalty on metals 0.01 0.01
Unit net cash costs 1.53 1.61
DD&A 0.43 0.40
Noncash and other costs, net 0.01 0.01
Total unit costs 1.97 2.02
Revenue adjustments, primarily for
pricing
on prior period open sales 0.16 0.16
Gross profit per pound $ 0.85 $ 0.80

Reconciliation to Amounts Reported
(In millions) Production
Revenues and Delivery DD&A
Totals presented above $ 889 $ 469 $ 133
Treatment charges (68 ) - -
Royalty on metals (2 ) - -
Noncash and other costs, net - 5 -
Revenue adjustments, primarily for
pricing
on prior period open sales 49 - -
Eliminations and other - (1 ) -
South America mining 868 473 133
Other miningb - 3,265 2,544 227
Corporate, other & eliminations - (792 ) (817 )


29



As reported in FCX's consolidated
financial statements $ 3,341 $ 2,200 $ 389



a. Includes silver sales of 964 thousand ounces ($16.06 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 FCX's other mining operations, including



North America copper mines, Indonesia mining, Molybdenum mines, Rod &



Refining and Atlantic Copper Smelting & Refining, as presented in Note 10.







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




Three Months Ended March 31, 2016
(In millions) By-Product


Co-Product Method



Method Copper Othera Total
Revenues, excluding adjustments $ 709 $ 709 $ 29 $ 738
Site production and delivery, before
net noncash
and other costs shown below 398 385 20 405
By-product credits (22 ) - - -
Treatment charges 75 75 - 75
Royalty on metals 1 1 - 1
Net cash costs 452 461 20 481
DD&A 131 126 5 131
Noncash and other costs, net 7 7 - 7
Total costs 590 594 25 619
Revenue adjustments, primarily for
pricing
on prior period open sales 9 9 - 9
Gross profit $ 128 $ 124 $ 4 $ 128

Copper sales (millions of recoverable
pounds) 323 323


Gross profit per pound of copper:




Revenues, excluding adjustments $ 2.19 $ 2.19
Site production and delivery, before
net noncash
and other costs shown below 1.23 1.19
By-product credits (0.07 ) -
Treatment charges 0.23 0.23
Royalty on metals 0.01 0.01
Unit net cash costs 1.40 1.43
DD&A 0.40 0.39
Noncash and other costs, net 0.02 0.02
Total unit costs 1.82 1.84
Revenue adjustments, primarily for
pricing
on prior period open sales 0.03 0.03
Gross profit per pound $ 0.40 $ 0.38

Reconciliation to Amounts Reported
(In millions) Production
Revenues and Delivery DD&A
Totals presented above $ 738 $ 405 $ 131
Treatment charges (75 ) - -
Royalty on metals (1 ) - -
Noncash and other costs, net - 7 -
Revenue adjustments, primarily for
pricing
on prior period open sales 9 - -
Eliminations and other - (2 ) 1
South America mining 671 410 132
Other miningb 3,139 2,597 254
Corporate, other & eliminations (568 ) (508 )


276



As reported in FCX's consolidated
financial statements $ 3,242 $ 2,499 $ 662



a. Includes silver sales of 899 thousand ounces ($14.54 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 FCX's other mining operations, including



North America copper mines, Indonesia mining, Molybdenum mines, Rod &



Refining and Atlantic Copper Smelting & Refining, as presented in Note 10.

















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




Three Months Ended March 31, 2017
(In millions) By-Product


Co-Product Method



Method Copper Gold Silvera Total
Revenues, excluding adjustments $ 327 $ 327 $ 218 $ 7 $ 552
Site production and delivery,
before net noncash
and other costs shown below 268 159 106 3 268
Gold and silver credits (234 ) - - - -
Treatment charges 35 21 14 - 35
Export duties 14 8 6 - 14
Royalty on metals 19 11 8 - 19
Net cash costs 102 199 134 3 336
DD&A 83 49 33 1 83
Noncash and other costs, net 32 b 19 13 - 32
Total costs 217 267 180 4 451
Revenue adjustments, primarily for
pricing on
prior period open sales 41 41 9 - 50
PT Smelting intercompany profit 27 16 11 - 27
Gross profit $ 178 $ 117 $ 58 $ 3 $ 178

Copper sales (millions of
recoverable pounds) 125 125
Gold sales (thousands of
recoverable ounces) 177



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




Revenues, excluding adjustments $ 2.63 $ 2.63 $ 1,229
Site production and delivery,
before net noncash
and other costs shown below 2.15 1.28 596
Gold and silver credits (1.88 ) - -
Treatment charges 0.28 0.17 77
Export duties 0.11 0.07 31
Royalty on metals 0.16 0.09 45
Unit net cash costs 0.82 1.61 749
DD&A 0.66 0.39 184
Noncash and other costs, net 0.26 b 0.15


72



Total unit costs 1.74 2.15


1,005



Revenue adjustments, primarily for
pricing on
prior period open sales 0.33 0.33


51



PT Smelting intercompany profit 0.21 0.13


59



Gross profit per pound/ounce $ 1.43 $ 0.94 $



334




Reconciliation to Amounts Reported
(In millions) Production
Revenues and Delivery DD&A
Totals presented above $ 552 $ 268 $ 83
Treatment charges (35 ) - -
Export duties (14 ) - -
Royalty on metals (19 ) - -
Noncash and other costs, net - 32 -
Revenue adjustments, primarily for
pricing on
prior period open sales 50 -


-



PT Smelting intercompany profit - (27 ) -
Indonesia mining 534 273 83
Other miningc 3,599 2,744 277
Corporate, other & eliminations (792 ) (817 )


29



As reported in FCX's consolidated
financial statements $ 3,341 $ 2,200 $ 389




a.Includes silver sales of 404 thousand ounces ($17.37 per ounce average
realized price).
b. Includes $21 million ($0.17 per pound of copper) of costs charged directly to



cost of sales as a result of the impact of regulatory restrictions on PT-FI's



concentrate exports.



c. Represents the combined total for FCX's other mining operations, including



North America copper mines, South America mining, Molybdenum mines, Rod &



Refining and Atlantic Copper Smelting & Refining, as presented in Note 10.











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




Three Months Ended March 31, 2016
(In millions) By-Product


Co-Product Method



Method Copper Gold Silvera Total
Revenues, excluding adjustments $ 384 $ 384 $ 239 $ 8 $ 631
Site production and delivery,
before net noncash
and other costs shown below 390 238 148 4 390
Gold and silver credits (264 ) - - - -
Treatment charges 55 33 21 1 55
Export duties 13 8 5 - 13
Royalty on metals 23 13 9 1 23
Net cash costs 217 292 183 6 481
DD&A 81 49 31 1 81
Noncash and other costs, net 12 7 5 - 12
Total costs 310 348 219 7 574
Revenue adjustments, primarily for
pricing on
prior period open sales (1 ) (1 ) 17 - 16
PT Smelting intercompany profit 8 5 3 - 8
Gross profit $ 81 $ 40 $ 40 $ 1 $ 81

Copper sales (millions of
recoverable pounds) 174 174
Gold sales (thousands of
recoverable ounces) 195



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




Revenues, excluding adjustments $ 2.20 $ 2.20 $ 1,228
Site production and delivery,
before net noncash
and other costs shown below 2.24 1.36 760
Gold and silver credits (1.52 ) - -
Treatment charges 0.31 0.19 106
Export duties 0.08 0.05 26
Royalty on metals 0.13 0.07 49
Unit net cash costs 1.24 1.67 941
DD&A 0.47 0.28 158
Noncash and other costs, net 0.06 0.04


23



Total unit costs 1.77 1.99


1,122



Revenue adjustments, primarily for
pricing on
prior period open sales (0.01 ) (0.01 )


87



PT Smelting intercompany profit 0.05 0.03


16



Gross profit per pound/ounce $ 0.47 $ 0.23 $



209




Reconciliation to Amounts Reported
(In millions) Production
Revenues and Delivery DD&A
Totals presented above $ 631 $ 390 $ 81
Treatment charges (55 ) - -
Export duties (13 ) - -
Royalty on metals (23 ) - -
Noncash and other costs, net - 12 -
Revenue adjustments, primarily for
pricing on
prior period open sales 16 -


-



PT Smelting intercompany profit - (8 ) -
Indonesia mining 556 394 81
Other miningb 3,254 2,613 305
Corporate, other & eliminations (568 ) (508 )


276



As reported in FCX's consolidated
financial statements $ 3,242 $ 2,499 $ 662



a. Includes silver sales of 510 thousand ounces ($15.00 per ounce average
realized price).



b. Represents the combined total for FCX's other mining operations, including



North America copper mines, South America mining, Molybdenum mines, Rod &



Refining and Atlantic Copper Smelting & Refining, as presented in Note 10.












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






Three Months Ended March 31,
(In millions) 2017 2016

Revenues, excluding adjustmentsa $ 70 $ 51
Site production and delivery, before net noncash
and other costs shown below 51 48
Treatment charges and other 7 6
Net cash costs 58 54
DD&A 19 19
Noncash and other costs, net 1 4
Total costs 78 77
Gross loss $ (8 ) $ (26 )

Molybdenum sales (millions of
recoverable pounds)a 8 7


Gross loss per pound of molybdenum:




Revenues, excluding adjustmentsa $ 8.57 $ 7.11
Site production and delivery, before net noncash
and other costs shown below 6.25 6.57
Treatment charges and other 0.85 0.86
Unit net cash costs 7.10 7.43
DD&A 2.37 2.61
Noncash and other costs, net 0.15 0.58
Total unit costs 9.62 10.62
Gross loss per pound $


(1.05 ) $ (3.51 )




Reconciliation to Amounts
Reported
(In millions)

Production
Three Months Ended March 31,
2017 Revenues and Delivery


DD&A



Totals presented above $ 70 $ 51 $


19



Treatment charges and other (7 ) -


-



Noncash and other costs, net - 1 -
Molybdenum mines 63 52 19
Other miningb 4,070 2,965 341
Corporate, other & eliminations (792 ) (817 ) 29
As reported in FCX's
consolidated financial
statements $ 3,341 $ 2,200 $ 389

Three Months Ended March 31,
2016
Totals presented above $ 51 $ 48 $ 19
Treatment charges and other (6 ) - -
Noncash and other costs, net - 4 -
Molybdenum mines 45 52 19
Other miningb 3,765 2,955 367
Corporate, other & eliminations (568 ) (508 ) 276
As reported in FCX's
consolidated financial
statements $ 3,242 $ 2,499 $ 662




a. Reflects sales of the Molybdenum mines' production to our 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 FCX's other mining operations, including



North America copper mines, South America mining, Indonesia mining, Rod &



Refining and Atlantic Copper Smelting & Refining, as presented in Note 10.



Also includes amounts associated with our 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.



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CAUTIONARY STATEMENT




Our discussion and analysis contains forward-looking statements in which we
discuss our potential future performance. Forward-looking statements are all
statements other than statements of historical facts, such as projections or
expectations relating to ore grades and milling rates, production and sales
volumes, unit net cash costs, operating cash flows, capital expenditures,
exploration efforts and results, development and production activities and
costs, liquidity, tax rates, the impact of copper, gold and molybdenum price
changes, the impact of deferred intercompany profits on earnings, reserve
estimates, future dividend payments, and share purchases and sales. The words
"anticipates," "may," "can," "plans," "believes," "estimates," "expects,"
"projects," "targets," "intends," "likely," "will," "should," "to be,"
"potential" and any similar expressions are intended to identify those
assertions as forward-looking statements.

We caution readers that forward-looking statements are not guarantees of future
performance and actual results may differ materially from those anticipated,
projected or assumed in the forward-looking statements. Important factors that
can cause our actual results to differ materially from those anticipated in the
forward-looking statements include supply of and demand for, and prices of,
copper, gold and molybdenum; mine sequencing; production rates; potential
effects of cost and capital expenditure reductions, and production curtailments
on financial results and cash flow; potential inventory adjustments; potential
impairment of long-lived mining assets; the outcome of negotiations with the
Indonesian government regarding PT-FI's COW; the potential effects of violence
in Indonesia generally and in the province of Papua; industry risks; regulatory
changes; political risks; labor relations; weather- and climate-related risks;
environmental risks; litigation results (including the final disposition of the
recent unfavorable Indonesian Tax Court ruling relating to surface water taxes);
and other factors described in more detail in Part I, Item 1A. "Risk Factors" of
our annual report on Form 10-K for the year ended December 31, 2016, filed with
the SEC. With respect to our operations in Indonesia, such factors include
whether PT-FI will be able to resolve complex regulatory matters in Indonesia.

Investors are cautioned that many of the assumptions upon which our
forward-looking statements are based are likely to change after the
forward-looking statements are made, including for example commodity prices,
which we cannot control, and production volumes and costs, some aspects of which
we may not be able to control. Further, we may make changes to our business
plans that could affect our results. We caution investors that we do not intend
to update forward-looking statements more frequently than quarterly
notwithstanding any changes in our assumptions, changes in business plans,
actual experience or other changes, and we undertake no obligation to update any
forward-looking statements.


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