FREEPORT-MCMORAN INC (FCX) FY 2021 MD&A

Items 7. and 7A.  Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures About Market Risk.

In Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures About Market Risk (MD&A), “we,” “us” and “our” refer to Freeport-McMoRan Inc. and its consolidated subsidiaries. The results of operations reported and summarized below are not necessarily indicative of future operating results (refer to “Cautionary Statement” below for further discussion). References to “Notes” are Notes included in our Notes to Consolidated Financial Statements. Throughout MD&A, all references to earnings or losses per share are on a diluted basis.

This section of our Form 10-K discusses the results of operations for the years 2021 and 2020 and comparisons between these years. Discussion of the results of operations for the year 2019 and comparisons between the years 2020 and 2019 are not included in this Form 10-K and can be found in Items 7. and 7A. “Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures About Market Risk” contained in Part II of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

OVERVIEW

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

Our results for 2021 reflect strong operating and financial performance, and cash flow generation. We remained focused on cost and capital management and advanced our sustainability objectives. Despite continued challenges associated with the COVID-19 pandemic, we achieved a 19 percent increase in copper sales volumes and a 59 percent increase in gold sales volumes in 2021, compared with 2020. During 2022, we expect to grow production and sales volumes while continuing to execute our operating plans, which we expect will provide strong cash flows to support advancement of organic growth initiatives and continue cash returns to shareholders under our established financial policy, based on a favorable operational and market outlook.

In February 2021, our Board of Directors (Board) adopted a financial policy for the allocation of cash flows aligned with our strategic objectives of maintaining a strong balance sheet and increasing cash returns to shareholders while advancing opportunities for future growth. Following achievement of our net debt target in the range of $3.0 billion to $4.0 billion (excluding debt for additional smelting capacity in Indonesia), we announced in November 2021 the implementation of a performance-based payout framework, including the commencement of a new $3.0 billion share repurchase program (through February 15, 2022, we acquired 18.2 million shares of our common stock for a

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total cost of $710 million, $39.10 per share) and expected base and variable dividends on common stock totaling $0.60 per share for 2022. Our Board will review the structure and the amount of the performance-based payout framework at least annually. Refer to Note 10 and “Capital Resources and Liquidity” for further discussion of our financial policy.

As further discussed in “Operations,” highlights during 2021 include:

•The successful ramp-up of underground mining at the Grasberg minerals district, achieving quarterly copper and gold volumes in the fourth quarter approximating 100 percent of the projected annualized levels.

•Operations at the Lone Star copper leach project at our Safford mine exceeded initial design capacity of 200 million pounds of copper annually and produced approximately 235 million pounds of copper.

•Cerro Verde's concentrator facilities milling rates averaged 380,300 metric tons of ore per day, compared with 331,600 metric tons of ore per day in 2020. Subject to ongoing monitoring of COVID-19 protocols, Cerro Verde is targeting milling rates to increase to approximately 400,000 metric tons of ore per day during 2022.

•Advancement of several initiatives to recover additional copper from our large existing leach stockpiles across our North America and South America operations, which incorporate new applications, technologies and data analytics currently being developed.

Net income attributable to common stock totaled $4.3 billion in 2021 and $599 million in 2020. Our results in 2021, compared to 2020, primarily reflect increased copper and gold volumes and higher copper and molybdenum prices, partly offset by higher production and delivery costs and provision for income taxes. Refer to “Consolidated Results” for discussion of items impacting our consolidated results for the two years ended December 31, 2021.

At December 31, 2021, we had consolidated debt of $9.5 billion and consolidated cash and cash equivalents of $8.1 billion, resulting in net debt of $1.4 billion. This represents a reduction in net debt of $4.7 billion from December 31, 2020. Refer to “Net Debt” for reconciliations of consolidated debt and consolidated cash and cash equivalents to net debt.

At December 31, 2021, we had no borrowings and $3.5 billion available under our revolving credit facility. In 2021, we redeemed all $524 million of our 3.55% Senior Notes due 2022 at a redemption price equal to 100 percent of the principal amount, plus accrued and unpaid interest. Our next senior note maturity is in March 2023, with redemption rights, at par, beginning in December 2022. During 2021, we also prepaid $200 million of the Cerro Verde Term Loan (the $325 million balance at December 31, 2021, matures in June 2022). Refer to Note 8 and “Capital Resources and Liquidity” for further discussion.

We have significant mineral reserves, mineral resources and future development opportunities within our portfolio of mining assets. At December 31, 2021, our estimated consolidated recoverable proven and probable mineral reserves totaled 107.2 billion pounds of copper, 27.1 million ounces of gold and 3.39 billion pounds of molybdenum. Refer to “Critical Accounting Estimates - Mineral Reserves” and Note 17 for further discussion.

During 2021, production from our mines totaled 3.8 billion pounds of copper, 1.4 million ounces of gold and 85 million pounds of molybdenum. Following is an allocation of our consolidated copper, gold and molybdenum production in 2021 by geographic location:

a.Our North America copper mines produced 40 percent of consolidated molybdenum production, and our Henderson and Climax molybdenum mines produced 36 percent.

Copper production from the Morenci mine in North America, Cerro Verde mine in Peru and the Grasberg minerals district in Indonesia together totaled 74 percent of our consolidated copper production in 2021.

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OUTLOOK

We continue to view the long-term outlook for our business positively, supported by expected rising demand associated with limitations on supplies of copper, the global economic recovery and infrastructure development and new demand associated with clean energy. Our financial results vary as a result of fluctuations in market prices primarily for copper, gold and, to a lesser extent, molybdenum, as well as other factors. World market prices for these commodities have fluctuated historically and are affected by numerous factors beyond our control. Refer to “Markets” for further discussion. Because we cannot control the price of our products, the key measures that management focuses on in operating our business are sales volumes, unit net cash costs, operating cash flows and capital expenditures.

Sales Volumes

Following are our projected consolidated sales volumes for 2022 and actual consolidated sales volumes for 2021:

a.Includes 50 million pounds from our North America and South America copper mines and 30 million pounds from our Molybdenum mines.

Consolidated sales for first-quarter 2022 are expected to approximate 970 million pounds of copper, 380 thousand ounces of gold and 20 million pounds of molybdenum. Projected sales volumes are dependent on operational performance, weather-related conditions, timing of shipments and other factors. For other important factors that could cause results to differ materially from projections, refer to “Cautionary Statement” below and Item 1A. “Risk Factors” contained in Part I of our annual report on Form 10-K for the year ended December 31, 2021.

Consolidated Unit Net Cash Costs

Assuming average prices of $1,800 per ounce of gold and $19.00 per pound of molybdenum and achievement of current sales volume and cost estimates, consolidated unit net cash costs (net of by-product credits) for our copper mines are expected to average $1.35 per pound of copper in 2022. The impact of price changes on 2022 consolidated unit net cash costs would approximate $0.03 per pound for each $100 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.

Consolidated Operating Cash Flows

Our consolidated operating cash flows vary with sales volumes; prices realized from copper, gold and molybdenum sales; production costs; income taxes; other working capital changes; and other factors. Based on current sales volume and cost estimates, and assuming average prices of $4.50 per pound of copper, $1,800 per ounce of gold and $19.00 per pound of molybdenum, our consolidated operating cash flows are estimated to approximate $8.0 billion (net of $1.3 billion of working capital and other uses, mostly for income tax payments) for the year 2022. Estimated consolidated operating cash flows in 2022 also reflect a projected income tax provision of $3.2 billion (refer to “Consolidated Results - Income Taxes” for further discussion of our projected income tax rate for the year 2022). The impact of price changes during 2022 on operating cash flows would approximate $365 million for each $0.10 per pound change in the average price of copper, $100 million for each $100 per ounce change in the average price of gold and $110 million for each $2 per pound change in the average price of molybdenum.

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Consolidated Capital Expenditures

Capital expenditures for the year 2022 are expected to approximate $4.7 billion, $3.3 billion excluding the greenfield smelter and precious metals refinery (PMR) (collectively, the Indonesia smelter projects discussed below), including $2.0 billion for major mining projects ($1.4 billion for planned major projects primarily related to development activities associated with the Grasberg Block Cave and Deep Mill Level Zone (DMLZ) underground mines and $0.6 billion for discretionary growth projects).

Capital expenditures for the Indonesia smelter projects are expected to approximate $1.4 billion for the year 2022. Development of additional smelting capacity in Indonesia will result in the elimination of export duties, providing an offset to the economic cost associated with the Indonesia smelter projects.

MARKETS

World prices for copper, gold and molybdenum can fluctuate significantly. During the period from January 2012 through December 2021, the London Metal Exchange (LME) copper settlement price varied from a low of $1.96 per pound in 2016 to a record high of $4.86 per pound in 2021; the London Bullion Market Association (London) PM gold price fluctuated from a low of $1,049 per ounce in 2015 to a record high of $2,067 per ounce in 2020, 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 $20.01 per pound in 2021. Copper, gold and molybdenum prices are affected by numerous factors beyond our control as described further in Item 1A. “Risk Factors” contained in Part I of our annual report on Form 10-K for the year ended December 31, 2021.

This graph presents LME copper settlement prices and the combined reported stocks of copper at the LME, Commodity Exchange Inc., and the Shanghai Futures Exchange from January 2012 through December 2021. For the year 2021, LME copper settlement prices ranged from a low of $3.52 per pound to a record high of $4.86 per pound, averaged $4.23 per pound and closed at $4.40 per pound on December 31, 2021. Copper prices have been supported by strong demand during the pandemic recovery, rising investor sentiment associated with copper’s prominent role in the global transition to cleaner energy, ongoing supply disruptions and falling inventories. The LME copper settlement price was $4.36 per pound on January 31, 2022.

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Long-term fundamentals for copper remain positive. We believe future demand will be supported by copper’s role in the global transition to renewable power, electric vehicles and other carbon-reduction initiatives, and continued urbanization in developing countries. The small number of approved, large-scale projects beyond those expected to commence operations in 2022 and 2023, the long lead times required to permit and build new mines and declining ore grades at existing operations continue to highlight the fundamental supply challenges for copper.

This graph presents London PM gold prices from January 2012 through December 2021. For the year 2021, London PM gold prices ranged from a low of $1,684 per ounce to a high of $1,943 per ounce, averaged $1,799 per ounce and closed at $1,806 per ounce on December 30, 2021 (there was no London PM gold price quote on December 31, 2021). While the global economic recovery has put downward pressure on gold prices, many analysts expect gold prices to remain supported by the effects of elevated debt levels associated with large pandemic-related stimulus efforts and historically low United States (U.S.) interest rates. The London PM gold price was $1,795 per ounce on January 31, 2022.

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This graph presents the Metals Week Molybdenum Dealer Oxide weekly average price from January 2012 through December 2021. For the year 2021, the weekly average price for molybdenum ranged from a low of $10.09 per pound to a high of $20.01 per pound, averaged $15.92 per pound and was $18.70 per pound on December 31, 2021. Molybdenum prices have risen in reaction to supply constraints and increased demand, as mines in both Chile and Peru reported lower production, and logistics challenges continued globally. The Metals Week Molybdenum Dealer Oxide weekly average price was $19.12 per pound on January 31, 2022.

CRITICAL ACCOUNTING ESTIMATES

MD&A is based on our consolidated financial statements, which have been prepared in conformity with generally accepted accounting principles (GAAP) in the U.S. The preparation of these statements requires that we make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. We base these estimates on historical experience and on assumptions that we consider reasonable under the circumstances; however, reported results could differ from those based on the current estimates under different assumptions or conditions. The areas requiring the use of management’s estimates are also discussed in Note 1 under the subheading “Use of Estimates.” Management has reviewed the following discussion of its development and selection of critical accounting estimates with the Audit Committee of our Board.

Taxes

In preparing our consolidated financial statements, we estimate the actual amount of income taxes currently payable or receivable as well as deferred income tax assets and liabilities attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which these temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in tax rates or laws is recognized in income in the period in which such changes are enacted.

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Our operations are in multiple jurisdictions where uncertainties arise in the application of complex tax regulations. Some of these tax regimes are defined by contractual agreements with the local government, while others are defined by general tax laws and regulations. We and our subsidiaries are subject to reviews of our income tax filings and other tax payments, and disputes can arise with the taxing authorities over the interpretation of our contracts or laws. During 2021, PT-FI recorded charges to provision for income taxes totaling $186 million associated with historical contested tax matters in Indonesia. Refer to Note 11 for further discussion.

As discussed in Note 11, we operate in the U.S. and multiple international tax jurisdictions, and our income tax returns are subject to examination by tax authorities in those jurisdictions who may challenge any tax position on these returns. Uncertainty in a tax position may arise because tax laws are subject to interpretation. We use significant judgment to (1) determine whether, based on the technical merits, a tax position is more likely than not to be sustained and (2) measure the amount of tax benefit that qualifies for recognition.

We have uncertain tax positions related to income tax assessments in Indonesia and Peru, including penalties and interest, which have not been recorded at December 31, 2021. Final taxes paid may be dependent upon many factors, including negotiations with taxing authorities. In certain jurisdictions, we pay a portion of the disputed amount before formally appealing an assessment. Such payment is recorded as a receivable if we believe the amount is collectible. Refer to Note 12 for further discussion.

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

Our valuation allowances totaled $4.1 billion at December 31, 2021, which covered all of our U.S. foreign tax credits and U.S. federal net operating losses (NOLs), substantially all of our U.S. state NOLs, and a portion of our foreign NOLs. During 2021, valuation allowances decreased by $645 million. Refer to Note 11 for further discussion.

Environmental Obligations

Our current and historical operating activities are subject to various national, state and local environmental laws and regulations that govern the protection of the environment, and compliance with those laws requires significant expenditures. Environmental expenditures are charged to expense or capitalized, depending upon their future economic benefits. The guidance provided by U.S. GAAP requires that liabilities for contingencies be recorded when it is probable that obligations have been incurred, and the cost can be reasonably estimated. At December 31, 2021, environmental obligations recorded in our consolidated balance sheet totaled $1.7 billion, which reflect obligations for environmental liabilities attributed to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) or analogous state programs and for estimated future costs associated with environmental matters. Refer to Item 1A. “Risk Factors” contained in Part I of our annual report on Form 10-K for the year ended December 31, 2021, and Notes 1 and 12 for further discussion of environmental obligations, including a summary of changes in our estimated environmental obligations for the three years ended December 31, 2021.

Accounting for environmental obligations represents a critical accounting estimate because (i) changes to environmental laws and regulations and/or circumstances affecting our operations could result in significant changes to our estimates, which could have a significant impact on our results of operations, (ii) we will not incur most of these costs for a number of years, requiring us to make estimates over a long period, (iii) calculating the discounted cash flows for certain of our environmental obligations requires management to estimate the amounts and timing of projected cash flows and make long-term assumptions about inflation rates and (iv) changes in estimates used in determining our environmental obligations could have a significant impact on our results of operations.

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We perform a comprehensive annual review of our environmental obligations and also review changes in facts and circumstances associated with these obligations at least quarterly. Judgments and estimates are based upon currently available facts, existing technology, presently enacted laws and regulations, remediation experience, whether or not we are a potentially responsible party (PRP), the ability of other PRPs to pay their allocated portions and take into consideration reasonably possible outcomes. Our cost estimates can change substantially as additional information becomes available regarding the nature or extent of site contamination, updated cost assumptions (including increases and decreases to cost estimates), changes in the anticipated scope and timing of remediation activities, the settlement of environmental matters, required remediation methods and actions by or against governmental agencies or private parties.

Asset Retirement Obligations

We record the fair value of our estimated asset retirement obligations (AROs) associated with tangible long-lived assets in the period incurred. Fair value is measured as the present value of cash flow estimates after considering inflation and a market risk premium. Our cost estimates are reflected on a third-party cost basis and comply with our legal obligation to retire tangible long-lived assets in the period incurred. These cost estimates may differ from financial assurance cost estimates for reclamation activities because of a variety of factors, including obtaining updated cost estimates for reclamation activities, the timing of reclamation activities, changes in scope and the exclusion of certain costs not considered reclamation and closure costs. At December 31, 2021, AROs recorded in our consolidated balance sheet totaled $2.7 billion, including $0.3 billion associated with our remaining oil and gas operations. In 2021, primarily because of safety constraints and other concerns regarding our reclamation activities associated with an overburden stockpile at our Indonesia operations, we recorded a $397 million adjustment to our Indonesia AROs. Refer to Item 1A. “Risk Factors” contained in Part I of our annual report on Form 10-K for the year ended December 31, 2021, and to Notes 1 and 12 for further discussion of reclamation and closure costs, including a summary of changes in our AROs for the three years ended December 31, 2021.

Generally, ARO activities are specified by regulations or in permits issued by the relevant governing authority, and management’s judgment is required to estimate the extent and timing of expenditures. Accounting for AROs represents a critical accounting estimate because (i) we will not incur most of these costs for a number of years, requiring us to make estimates over a long period, (ii) reclamation and closure laws and regulations could change in the future and/or circumstances affecting our operations could change, either of which could result in significant changes to our current plans, (iii) the methods used or required to plug and abandon non-producing oil and gas wellbores, remove platforms, tanks, production equipment and flow lines, and restore the wellsite could change, (iv) calculating the fair value of our AROs requires management to estimate projected cash flows, make long-term assumptions about inflation rates, determine our credit-adjusted, risk-free interest rates and determine market risk premiums that are appropriate for our operations and (v) given the magnitude of our estimated reclamation, mine closure and wellsite abandonment and restoration costs, changes in any or all of these estimates could have a significant impact on our results of operations.

Mineral Reserves

Recoverable proven and probable mineral reserves were determined from the application of relevant modifying factors to geological data, in order to establish an operational, economically viable mine plan and have been prepared in accordance with the disclosure requirements of subpart 1300 of Securities and Exchange Commission Regulation S-K. The determination of mineral reserves involves numerous uncertainties with respect to the ultimate geology of the ore bodies, including quantities, grades and recoveries. Estimating the quantity and grade of mineral reserves requires us to determine the size, shape and depth of our ore bodies by analyzing geological data, such as samplings of drill holes, tunnels and other underground workings. In addition to the geology of our mines, assumptions are required to determine the economic feasibility of mining these reserves, including estimates of future commodity prices and demand, the mining methods we use and the related costs incurred to develop and mine our mineral reserves. Our estimates of recoverable proven and probable mineral reserves are prepared by and are the responsibility of our employees. These estimates are reviewed and verified regularly by independent experts in mining, geology and reserve determination.

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Our consolidated estimated recoverable proven and probable mineral reserves shown below were assessed using long-term price assumptions of $2.50 per pound for copper, $1,200 per ounce of gold and $10 per pound of molybdenum. The following table summarizes changes in our estimated consolidated recoverable proven and probable copper, gold and molybdenum mineral reserves during 2020 and 2021:

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

Refer to Note 17, and Items 1. and 2. “Business and Properties” and Item 1A. “Risk Factors” contained in Part I of our annual report on Form 10-K for the year ended December 31, 2021, for further information regarding, and risks associated with, our estimated recoverable proven and probable mineral reserves.

As discussed in Note 1, we depreciate our life-of-mine mining and milling assets and values assigned to proven and probable mineral reserves using the unit-of-production (UOP) method based on our estimated recoverable proven and probable mineral reserves. Because the economic assumptions used to estimate mineral reserves may change from period to period and additional geological data is generated during the course of operations, estimates of mineral reserves may change, which could have a significant impact on our results of operations, including changes to prospective depreciation rates and impairments of long-lived asset carrying values. Based on projected copper sales volumes, if estimated copper reserves at our mines were 10 percent higher at December 31, 2021, we estimate that our annual depreciation, depletion and amortization (DD&A) expense for 2022 would decrease by approximately $50 million (approximately $30 million to net income attributable to common stock), and a 10 percent decrease in copper reserves would increase DD&A expense by approximately $165 million (approximately $85 million to net income attributable to common stock). We perform annual assessments of our existing assets in connection with the review of mine operating and development plans. If it is determined that assigned asset lives do not reflect the expected remaining period of benefit, any change could affect prospective DD&A rates.

As discussed below and in Note 1, we review and evaluate our long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amount of such assets may not be recoverable, and changes to our estimates of recoverable proven and probable mineral reserves could have an impact on our assessment of asset recoverability.

Recoverable Copper in Stockpiles

We record, as inventory, applicable costs for copper contained in mill and leach stockpiles that are expected to be processed in the future based on proven processing technologies. Mill and leach stockpiles are evaluated periodically to ensure that they are stated at the lower of weighted-average cost or net realizable value (refer to Note 4 and “Consolidated Results” for further discussion of inventory adjustments recorded for the three years ended December 31, 2021). Accounting for recoverable copper from mill and leach stockpiles represents a critical accounting estimate because (i) it is impracticable to determine copper contained in mill and leach stockpiles by physical count, thus requiring management to employ reasonable estimation methods and (ii) recoveries from leach stockpiles can vary significantly. Refer to Note 1 for further discussion of our accounting policy for recoverable copper in stockpiles.

At December 31, 2021, estimated consolidated recoverable copper was 1.8 billion pounds in leach stockpiles (with a carrying value of $2.1 billion) and 0.3 billion pounds in mill stockpiles (with a carrying value of $0.4 billion).

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Impairment of Long-Lived Assets

As discussed in Note 1, we assess the carrying values of our long-lived mining assets when events or changes in circumstances indicate that the related carrying amounts of such assets may not be recoverable. In evaluating our long-lived mining assets for recoverability, we use estimates of pre-tax undiscounted future cash flows of our mines.

Estimates of future cash flows are derived from current business plans, which are developed using near-term metal price forecasts reflective of the current price environment and management’s projections for long-term average metal prices. In addition to near- and long-term metal price assumptions, other key assumptions include estimates of commodity-based and other input costs; proven and probable mineral reserves estimates, including the timing and cost to develop and produce the mineral reserves; value beyond proven and probable mineral reserve estimates (refer to Note 1); and the use of appropriate discount rates in the measurement of fair value. We believe our estimates and models used to determine fair value are similar to what a market participant would use. As quoted market prices are unavailable for our individual mining operations, fair value is determined through the use of after-tax discounted estimated future cash flows.

During the two-year period ended December 31, 2021, no material impairments of our long-lived mining assets were recorded.

In addition to decreases in future metal price assumptions, other events that could result in future impairment of our long-lived mining assets include, but are not limited to, decreases in estimated recoverable proven and probable mineral reserves and any event that might otherwise have a material adverse effect on mine site production levels or costs. Refer to Item 1A. “Risk Factors” contained in Part I of our annual report on Form 10-K for the year ended December 31, 2021.

CONSOLIDATED RESULTS

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

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

c.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.

d.Includes net charges in 2021 totaling $331 million ($0.22 per share), primarily associated with net adjustments to AROs mostly at PT Freeport Indonesia (PT-FI), historical contested tax matters at PT-FI (including historical tax audits and an administrative fine levied by the Indonesia government) and nonrecurring labor-related charges for labor agreements at Cerro Verde, partly offset by the release of a valuation allowance on NOLs at PT-FI’s subsidiary, a gain on the sale of Freeport Cobalt, refunds of Arizona transaction privilege taxes related to purchased electricity and favorable adjustments to prior-years’ profit sharing at Cerro Verde.

e.Includes net charges in 2020 totaling $191 million ($0.13 per share), primarily associated with the COVID-19 pandemic and revised operating plans (including employee separation costs), a framework for the resolution of all current and future potential talc-related litigation, net losses on early extinguishment of debt, metals inventory adjustments and historical contested tax audits at PT-FI. These charges were partly offset primarily by a gain on the sale of our interests in the Kisanfu exploration project.

f.Working capital and other sources totaled $755 million in 2021 and $665 million in 2020.

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a.Reflects per pound weighted-average production and delivery costs and unit net cash costs (net of by-product credits) for all copper mines, before net noncash and other costs. For reconciliations of the per pound unit costs by operating division to production and delivery costs applicable to sales reported in our consolidated financial statements, refer to “Product Revenues and Production Costs.”

Revenues

Consolidated revenues totaled $22.8 billion in 2021 and $14.2 billion in 2020. Our revenues primarily include the sale of copper concentrate, copper cathode, copper rod, gold in concentrate and molybdenum. Following is a summary of changes in our consolidated revenues from 2020 to 2021 (in millions):

Sales Volumes. Copper and gold sales volumes were higher in 2021, compared to 2020, primarily reflecting the ramp-up of underground mining at the Grasberg minerals district.

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

Realized Prices. Our consolidated revenues can vary significantly as a result of fluctuations in the market prices of copper, gold and molybdenum. In 2021, our average realized prices were 47 percent higher for copper, 2 percent lower for gold and 53 percent higher for molybdenum, compared with 2020.

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Average realized copper prices include net favorable adjustments to current year provisionally priced copper sales (i.e., provisionally priced sales during the years 2021 and 2020) totaling $256 million for 2021 and $361 million for 2020. Refer to Note 14 for a summary of total adjustments to prior period and current period provisionally priced sales. As discussed below and in “Disclosures About Market Risks - Commodity Price Risk,” substantially all of our copper concentrate and cathode sales contracts provide final copper pricing in a specified future month (generally one to four months from the shipment date). We record revenues and invoice customers at the time of shipment based on then-current LME prices, which results in an embedded derivative on provisionally priced concentrate and cathode sales that is adjusted to fair value through earnings each period, using the period-end forward prices, until final pricing on the date of settlement. To the extent final prices are higher or lower than what was recorded on a provisional basis, an increase or decrease to revenues is recorded each reporting period until the date of final pricing. Accordingly, in times of rising copper prices, our revenues benefit from adjustments to the final pricing of provisionally priced sales pursuant to contracts entered into in prior periods; in times of falling copper prices, the opposite occurs.

Prior Year Provisionally Priced Copper Sales. Net favorable (unfavorable) adjustments to prior years’ provisionally priced copper sales (i.e., provisionally priced copper sales at December 31, 2020 and 2019) recorded in consolidated revenues totaled $169 million in 2021 and $(102) million in 2020. Refer to “Disclosures About Market Risks - Commodity Price Risk” for further discussion of our provisionally priced copper sales, and to Note 14 for a summary of total adjustments to prior period and current period provisionally priced copper sales.

Purchased Copper. Lower revenues associated with purchased copper in 2021, compared to 2020, primarily reflects lower volumes, partly offset by higher copper prices. We purchased copper cathode primarily for processing by our Rod & Refining operations, totaling 173 million pounds in 2021 and 290 million pounds in 2020.

Atlantic Copper Revenues. Higher Atlantic Copper revenues in 2021, compared with 2020, primarily reflect higher copper prices.

Treatment Charges. Revenues from our concentrate sales are recorded net of treatment charges (i.e., fees paid to smelters that are generally negotiated annually), which will vary with the sales volumes and the price of copper.

Royalties and Export Duties. Royalties are primarily for sales from PT-FI and vary with the volume of metal sold and the prices of copper and gold. PT-FI will continue to pay export duties until development progress for additional smelting capacity in Indonesia exceeds 50 percent. Refer to “Operations - Indonesia Mining” for further discussion of the current progress on additional smelting capacity in Indonesia and to Note 13 for a summary of PT-FI’s royalties and export duties.

Production and Delivery Costs

Consolidated production and delivery costs totaled $12.0 billion in 2021, compared with $10.0 billion in 2020. Higher consolidated production and delivery costs in 2021 primarily reflect higher sales volumes, the ramp-up of underground mining at the Grasberg minerals district, higher milling rates at Cerro Verde associated with the return to pre-COVID-19 operating rates and higher maintenance and input costs. The year 2021 includes net charges totaling $415 million primarily associated with an unfavorable ARO adjustment (refer to Note 12) and other net charges at PT-FI and nonrecurring labor-related charges at Cerro Verde for collective labor agreements, partly offset by refunds of Arizona transaction privilege taxes related to purchased electricity and favorable adjustments to prior-years’ profit sharing at Cerro Verde. The year 2020 includes net charges totaling $252 million, primarily associated with the COVID-19 pandemic and revised operating plans (including employee separation costs). Refer to Note 16 for details of production and delivery costs by operating segment.

Mining Unit Site Production and Delivery Costs. Site production and delivery costs for our copper mining operations primarily include labor, energy and commodity-based inputs, such as sulfuric acid, reagents, liners, tires and explosives. Consolidated unit site production and delivery costs (before net noncash and other costs) for our copper mines averaged $1.93 per pound of copper in 2021 and $1.88 per pound in 2020. Higher consolidated unit site production and delivery costs in 2021, compared with 2020, primarily reflect higher mining and milling costs associated with ramped-up operations and higher maintenance and input costs, partly offset by higher sales volumes. Consolidated site production and delivery costs per pound for the year 2021 included nonrecurring labor-related charges at Cerro Verde for collective labor agreements. 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.

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Our copper mining operations require significant amounts of energy, principally diesel, electricity, coal and natural gas, most of which is obtained from third parties under long-term contracts. Our take-or-pay contractual obligations for electricity totaled approximately $0.3 billion at December 31, 2021. We do not have take-or-pay contractual obligations for other energy commodities. Energy represented approximately 21 percent of our copper mine site operating costs in 2021, including purchases of approximately 220 million gallons of diesel fuel; approximately 8,000 gigawatt hours of electricity at our North America and South America copper mining operations (we generate all of our power at our Indonesia mining operation); approximately 750 thousand metric tons of coal for our coal power plant in Indonesia; and approximately 1 million MMBtu (million British thermal units) of natural gas at certain of our North America mines. Based on current cost estimates, energy will approximate 25 percent of our copper mine site operating costs for 2022.

Depreciation, Depletion and Amortization

Depreciation will vary under the UOP method as a result of changes in sales volumes and the related UOP rates at our mining operations. Consolidated DD&A totaled $2.0 billion in 2021 and $1.5 billion in 2020. Higher DD&A in 2021, compared with 2020, primarily relates to significant assets placed in service associated with the ramp-up of underground mining at the Grasberg minerals district.

Metals Inventory Adjustments

Unfavorable net realizable value metals inventory adjustments totaled $16 million in 2021 and $96 million in 2020. Metals inventory adjustments in 2021 were primarily related to a leach stockpile adjustment. Metals inventory adjustments in 2020 were related to volatility in copper and molybdenum prices associated with the COVID-19 pandemic. Refer to Note 4 for further details on our inventory adjustments.

Environmental Obligations and Shutdown Costs

Environmental obligation costs reflect net revisions to our long-term environmental obligations, which vary from period to period because of changes to environmental laws and regulations, the settlement of environmental matters and/or circumstances affecting our operations that could result in significant changes in our estimates (refer to “Critical Accounting Estimates - Environmental Obligations” for further discussion). Shutdown costs include care-and-maintenance costs and any litigation, remediation or related expenditures associated with closed facilities or operations.

Net charges for environmental obligations and shutdown costs totaled $91 million in 2021, including unfavorable adjustments to environmental obligations totaling $41 million. Net charges for the year 2020 totaled $159 million, including talc-related litigation charges of $132 million, primarily associated with a framework for the resolution of all current and future potential talc-related litigation, partly offset by $19 million of net favorable adjustments to environmental obligations. Refer to Note 12 for environmental obligations and litigation matters.

Net Gain on Sales of Assets

Net gain on sales of assets totaled $80 million in 2021 and $473 million in 2020. Gains on sales of assets in 2021 were primarily associated with the sale of our remaining Freeport Cobalt assets and the sale of carbon dioxide emissions credits at Atlantic Copper. Gains on sales of assets in 2020 were primarily associated with the sale of our interests in the Kisanfu undeveloped exploration project. Refer to Note 2 for further discussion of dispositions.

Interest Expense, Net

Consolidated interest costs (before capitalization and excluding interest expense associated with international tax matters) totaled $634 million in 2021 and $649 million in 2020. Interest expense associated with international tax matters totaled $40 million in 2021 and $96 million in 2020 (refer to Note 11).

Capitalized interest varies with the level of expenditures for our development projects and average interest rates on our borrowings, and totaled $72 million in 2021 and $147 million in 2020. The decrease in capitalized interest in 2021, compared with 2020, is primarily related to significant assets at PT-FI’s underground mines being placed in service. Refer to “Operations” and “Capital Resources and Liquidity - Investing Activities” for further discussion of current development projects.

Other (Expense) Income, Net

Other (expense) income, net, totaled $(105) million in 2021 and $59 million in 2020. The year 2021 includes charges totaling $208 million associated with historical contested tax matters at PT-FI (refer to Note 11), partly offset by gains on currency exchange rate movements and other net credits. The year 2020 includes a gain of $30 million for the sale of royalty interests.

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Income Taxes

Following is a summary of the approximate amounts used in the calculation of our consolidated income tax provision for the years ended December 31 (in millions, except percentages):

a.Represents income (loss) before income taxes and equity in affiliated companies' net earnings.

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

c.Includes valuation allowance release on prior year unbenefited NOLs.

d.Includes tax benefits of $53 million associated with the reversal of a year-end 2019 tax charge related to the sale of our interest in the lower zone of the Timok exploration project and $6 million associated with the removal of a valuation allowance on deferred tax assets.

e.Includes a tax benefit at Cerro Verde of $18 million primarily associated with completion of tax audits for the years 2014 and 2015.

f.Includes tax charges at Cerro Verde of $15 million primarily associated with adjustments to profit sharing for prior years.

g.Includes net tax benefits associated with the release of valuation allowances recorded against PT Rio Tinto Indonesia NOLs totaling $189 million. The year 2021 also includes a tax benefit of $24 million, primarily associated with the reversal of a tax reserve related to the treatment of prior-year contractor support costs; partly offset by a tax charge of $10 million associated with the audit of PT-FI's 2019 tax returns.

h.Includes tax charges of $21 million associated with establishing a tax reserve related to the treatment of prior-year contractor support costs and $8 million associated with an unfavorable 2012 Indonesia Supreme Court ruling.

i.Refer to Note 11 for further discussion of these historical contested tax disputes.

j.Our consolidated effective income tax rate is a function of the combined effective tax rates for the jurisdictions in which we operate, excluding the U.S. jurisdiction.

Assuming achievement of current sales volume and cost estimates and average prices of $4.50 per pound for copper, $1,800 per ounce for gold and $19.00 per pound for molybdenum for 2022, we estimate our consolidated effective tax rate for the year 2022 would approximate 30 percent. Changes in projected sales volumes and average prices during 2022 would incur tax impacts at estimated effective rates of 39 percent for Peru, 38 percent for Indonesia and 0 percent for the U.S.

Variations in the relative proportions of jurisdictional income result in fluctuations to our consolidated effective income tax rate. Because of our U.S. tax position, we do not record a financial statement impact for income or losses generated in the U.S.

Refer to Note 11 for further discussion of income taxes.

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OPERATIONS

Responsible Production

The Copper Mark. We are committed to validating all of our copper producing sites with the Copper Mark, a comprehensive assurance framework designed to demonstrate the copper industry's responsible production practices. To achieve the Copper Mark, each site is required to complete an external assurance process to assess conformance with 32 environmental, social and governance (ESG) requirements. We have a total of seven sites that have been validated (Bagdad, Morenci, Miami, El Paso, Cerro Verde, El Abra and Atlantic Copper) and we have commenced the Copper Mark assessment process at four additional sites in North America, including Chino, Tyrone, Safford and Sierrita.

International Council of Mining and Metals (ICMM). We are a founding and active member of the ICMM, an international organization dedicated to safe, fair and sustainable mining. We are committed to implementing ICMM's Mining Principles which serve as a best practice framework on sustainable development for the global mining and metals industry. Our Chairman of the Board and Chief Executive Officer serves as the current Chair of ICMM.

2020 Annual Report on Sustainability. We published our 2020 Annual Report on Sustainability in April 2021, which is available on our website. We have a long history of ESG programs and are continuously striving to improve and embrace evolving stakeholder expectations. This report marked our 20th year of reporting on our sustainability progress and our first year reporting in alignment with the Sustainability Accounting Standards Board Metals & Mining industry framework. We are committed to building upon our achievements in sustainability and seek to contribute positively to society by supplying the world with responsibly produced copper. Refer to Item 1A. “Risk Factors” contained in Part I of our annual report on Form 10-K for the year ended December 31, 2021, for further discussion of ESG-related risks.

2020 Climate Report. We published our updated climate report in September 2021, which is available on our website. The climate report details the work underway across our global business to reduce greenhouse gas (GHG) emissions, improve energy efficiency, advance the use of renewable energy and enhance our resilience to future climate-related risks. The updated climate report includes our GHG emissions reduction targets and aspirations and reflects our continued progress towards alignment with the current recommendations of the Task Force on Climate-related Financial Disclosures. Refer to Item 1A. “Risk Factors” contained in Part I of our annual report on Form 10-K for the year ended December 31, 2021, for further discussion of climate-related risks.

Innovation Initiatives

During 2021, we continued to advance innovation initiatives designed to enhance productivity, expand margins and reduce the capital intensity of our business through the utilization of new technology applications in combination with a more interactive operating structure. These initiatives are expected to allow us to recover additional copper from our large existing leach stockpiles. There are several projects ongoing across our North America and South America operations, which incorporate new applications, technologies and data analytics. Initial results are encouraging and support additional work on these emerging opportunities.

North America Copper Mines

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

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

Operating and Development Activities. We have substantial mineral reserves and future opportunities in the U.S., primarily associated with existing mining operations. Current operations at the Lone Star copper leach project at our Safford mine, which was completed in the second half of 2020, are exceeding the initial design capacity of 200 million pounds annually and produced approximately 235 million pounds of copper in 2021. We continue to advance opportunities to increase Lone Star operating rates and are advancing plans to increase volumes to achieve 300 million pounds of copper per year from oxide ores. The oxide project advances the opportunity for development of

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the large-scale sulfide resources at Lone Star. We are increasing exploration in the area to support metallurgical testing and mine development planning for a potential long-term investment in a concentrator.

We are also evaluating an expansion to potentially double concentrator capacity at our Bagdad operation in northwest Arizona, and are engaging stakeholders. Feasibility studies to double Bagdad's operating rates are expected to commence in 2022.

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

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

Copper sales volumes from our North America copper mines totaled 1.4 billion pounds in 2021 and 2020. North America copper sales are estimated to approximate 1.55 billion pounds in 2022. Refer to “Outlook” for projected molybdenum sales volumes.

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

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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 of copper at our North America copper mines for the two years ended December 31, 2021. 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.

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 credits totaling $0.02 per pound of copper associated with refunds of Arizona transaction privilege taxes related to purchased electricity.

c.Includes charges totaling $0.02 per pound of copper, primarily associated with our April 2020 revised operating plans (including employee separation costs) and the COVID-19 pandemic (including health and safety costs).

Our North America copper mines have varying cost structures because of differences in ore grades and characteristics, processing costs, by-product credits and other factors. During 2021, average unit net cash costs (net of by-product credits) for the North America copper mines ranged from $1.47 per pound to $2.86 per pound at the individual mines and averaged $1.89 per pound. Higher average unit net cash costs (net of by-product credits) of $1.89 in 2021, compared with $1.81 per pound in 2020, primarily reflect higher mining and milling costs associated with higher operating rates at Lone Star and higher maintenance and input costs, partly offset by higher by-product credits because of higher molybdenum prices.

Average unit net cash costs (net of by-product credits) for our North America copper mines are expected to approximate $2.00 per pound of copper in 2022, based on achievement of current sales volume and cost estimates and assuming an average molybdenum price of $19.00 per pound. The impact of price changes during 2022 on North America’s average unit net cash costs for the year 2022 would approximate $0.04 per pound for each $2 per pound change in the average price of molybdenum.

South America Mining

We operate two copper mines in South America - Cerro Verde in Peru (in which we own a 53.56 percent interest) and El Abra in Chile (in which we own a 51.0 percent interest), which are consolidated in our financial statements.

South America mining includes open-pit mining, sulfide-ore concentrating, leaching and SX/EW operations. Production from our South America mines is sold as copper concentrate or cathode under long-term contracts. Our South America mines also sell a portion of their copper concentrate production to Atlantic Copper. In addition to copper, the Cerro Verde mine produces molybdenum concentrate and silver.

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Operating and Development Activities. Milling rates at Cerro Verde's concentrator facilities averaged 380,300 metric tons of ore per day for the year 2021, compared with 331,600 metric tons of ore per day for the year 2020 when COVID-19 restrictions resulted in reduced rates. Subject to ongoing monitoring of COVID-19 protocols, Cerro Verde is targeting milling rates to increase to approximately 400,000 metric tons of ore per day during 2022.

El Abra increased operating rates to pre-COVID-19 pandemic levels during 2021. Increased mining and stacking activities are expected to result in a 30 percent increase in El Abra copper production for the year 2022, compared with the year 2021.

We continue to evaluate a large-scale expansion at El Abra to process additional sulfide material and to achieve higher copper recoveries. El Abra's large sulfide resource could potentially support a major mill project similar to the facilities constructed at Cerro Verde in 2015. Technical and economic studies continue to be evaluated to determine the optimal scope and timing for the sulfide project, and we are engaging stakeholders and preparing data required for submission of a robust permit application. We are continuing to monitor potential changes in regulatory and fiscal matters in Chile and will defer major investment decisions pending clarity on these matters.

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

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

b.Cerro Verde mill operations were impacted by COVID-19 restrictions.

Higher consolidated copper sales volumes from South America of 1.1 billion pounds in 2021, compared with 1.0 billion pounds in 2020, primarily reflect higher mining and milling rates at Cerro Verde.

Copper sales from South America mines are expected to approximate 1.2 billion pounds in 2022. Refer to “Outlook” for projected molybdenum sales volumes.

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

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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 our South America mining operations for the two years ended December 31, 2021. 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.

a.Includes charges totaling $0.09 per pound of copper associated with nonrecurring labor-related charges at Cerro Verde for collective labor agreements reached with its hourly employees.

b.Includes credits totaling $0.03 per pound of copper associated with favorable adjustments to prior-years’ profit sharing at Cerro Verde.

c.Includes charges totaling $0.09 per pound of copper, primarily associated with idle facility (Cerro Verde) and contract cancellation costs related to the COVID-19 pandemic, and employee separation costs associated with our April 2020 revised operating plans.

Our South America mines have varying cost structures because of differences in ore grades and characteristics, processing costs, by-product credits and other factors. Higher average unit net cash costs (net of by-product credits) of $2.05 per pound of copper in 2021, compared with $1.85 per pound in 2020, primarily reflect increased profit-sharing costs and nonrecurring labor-related charges at Cerro Verde for collective labor agreements and higher maintenance and input costs, partly offset by higher sales volumes and by-product credits.

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

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

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 mines are expected to approximate $2.06 per pound of copper in 2022, based on current sales volume and cost estimates and assuming an average price of $19.00 per pound of molybdenum.

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Indonesia Mining

PT-FI’s assets include one of the world’s largest copper and gold deposits at the Grasberg minerals district in Papua, Indonesia. PT-FI produces copper concentrate that contains significant quantities of gold and silver. We have a 48.76 percent interest in PT-FI and manage its mining operations. As further discussed in Note 3, under the terms of the shareholders agreement, our economic interest in PT-FI approximates 81 percent through 2022 and 48.76 percent thereafter. PT-FI’s results are consolidated in our financial statements.

Substantially all of PT-FI’s copper concentrate is sold under long-term contracts. During 2021, 41 percent of PT-FI’s copper concentrate was sold to PT Smelting (PT-FI owned 25.0 percent of PT Smelting prior to April 30, 2021, and 39.5 percent thereafter - See Note 2).

Operating and Development Activities. PT-FI currently has three underground operating mines in the Grasberg minerals district: Grasberg Block Cave, DMLZ and Big Gossan. The ramp-up of underground production at the Grasberg minerals district continues to advance on schedule. For the year 2021, highlights include:

•Achieved quarterly copper and gold volumes in fourth-quarter 2021 approximating 100 percent of the projected annualized levels discussed below.

•139 new drawbells were constructed at the Grasberg Block Cave and DMLZ underground mines, bringing cumulative open drawbells to 510.

•Combined average production from the Grasberg Block Cave and DMLZ underground mines approximated 128,600 metric tons of ore per day (more than double the year 2020 rates) and PT-FI's total milling rates averaged 151,600 metric tons of ore per day.

PT-FI expects milling rates to average approximately 180,000 metric tons of ore per day in 2022. The installation of additional milling facilities are in progress and are currently expected to be completed in 2023, which will increase milling capacity to approximately 240,000 metric tons of ore per day.

PT-FI expects to generate average annual production of approximately 1.6 billion pounds of copper and 1.6 million ounces of gold for the next five years at an attractive unit net cash cost, providing significant margins and cash flows.

PT-FI's estimated capital spending on the Grasberg Block Cave and DMLZ underground projects for the year 2022 is expected to approximate $1.0 billion, net of scheduled contributions from PT Indonesia Asahan Aluminium (Persero) (PT Inalum, also known as MIND ID). PT-FI is also advancing construction of a dual-fuel power plant and upgrades to the mill circuit to improve recoveries. In accordance with applicable accounting guidance, the aggregate costs (before scheduled contributions from PT Inalum), expected to approximate $1.2 billion for the year 2022, will be reflected as an investing activity in our cash flow statement, and contributions from PT Inalum will be reflected as a financing activity.

Kucing Liar. In October 2021, PT-FI commenced long-term mine development activities for its Kucing Liar deposit, which is expected to produce over 6 billion pounds of copper and 5 million ounces of gold between 2028 and the end of 2041. Similar to PT-FI's experience with large-scale, block-cave mines, pre-production development activities will occur over an approximate 10-year timeframe. At full operating rates, annual production from Kucing Liar is expected to approximate 600 million pounds of copper and 500 thousand ounces of gold, providing PT-FI with sustained long-term, large-scale and low-cost production. Capital investments for Kucing Liar over the next 10 years are expected to average approximately $400 million per year. Kucing Liar will benefit from substantial shared infrastructure and PT-FI's experience and long-term success in block-cave mining.

Indonesia Smelter Capacity. In connection with PT-FI’s 2018 agreement with the Indonesia government to secure the extension of its long-term mining rights, PT-FI committed to construct additional domestic smelting capacity totaling 2 million metric tons of concentrate per year by the end of 2023.

During 2020, PT-FI notified the Indonesia government of schedule delays resulting from the COVID-19 pandemic and continues to review with the government a revised schedule for satisfying its commitment.

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On January 7, 2021, the Indonesia government levied an administrative fine of $149 million on PT-FI for failing to achieve physical development progress on the greenfield smelter as of July 31, 2020. During 2021, PT-FI recorded charges totaling $16 million for a potential settlement of the administrative fine. On January 25, 2022, the Indonesia government submitted a new estimate of the administrative fine totaling $57 million. On February 15, 2022, PT-FI responded to the Indonesia government with a revised calculation of $37 million. PT-FI expects to record a charge in first-quarter 2022 for an amount in excess of the previously recorded $16 million. Refer to Note 12 and Item 1A. “Risk Factors” contained in Part I of our annual report on Form 10-K for the year ended December 31, 2021, for further discussion.

PT-FI is actively engaging in the following projects for additional domestic smelting capacity:

•Construction of a greenfield smelter with a capacity to process approximately 1.7 million metric tons of concentrate per year. In July 2021, PT-FI awarded a construction contract with an estimated cost of $2.8 billion. During 2021, PT-FI progressed site preparation activities and expects engineering procurement and construction activities to advance during 2022 and 2023. The smelter construction is expected to be completed as soon as feasible in 2024, which is subject to potential pandemic-related disruptions and other factors.

•Expansion of PT Smelting's capacity by 30 percent to 1.3 million metric tons of concentrate per year, which is expected to be completed by the end of 2023. PT-FI completed agreements in November 2021 with the majority owner of PT Smelting to implement the expansion plans. PT-FI is funding the cost of the expansion, estimated to approximate $250 million, with a loan that will convert to equity and increase ownership in PT Smelting to a majority ownership interest once the expansion is complete.

•Construction of a PMR to process gold and silver from the greenfield smelter and PT Smelting at an estimated cost of $250 million.

In July 2021, PT-FI entered into a $1.0 billion, five-year, unsecured bank credit facility to advance these projects. As of December 31, 2021, $443 million ($432 million net of debt issuance costs) was drawn under this facility. PT-FI is currently arranging incremental financing for these projects, with the cost of debt shared 48.76 percent by us and 51.24 percent by PT Inalum. Refer to Note 8 for further discussion.

Capital expenditures for the Indonesia smelter projects totaled $0.2 billion for 2021, and are expected to approximate $1.4 billion for 2022, $1.1 billion for 2023 and $0.4 billion for 2024, excluding capitalized interest, owner’s costs and commissioning. Development of additional smelting capacity in Indonesia will result in the elimination of export duties, providing an offset to the economic cost associated with the Indonesia smelter projects.

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

a.Ore body depleted in 2021.

Higher consolidated sales of 1.3 billion pounds of copper and 1.3 million ounces of gold in 2021, compared with 0.8 billion pounds of copper and 0.8 million ounces of gold in 2020, primarily reflect the ramp-up of underground mining at the Grasberg minerals district.

Consolidated sales volumes from PT-FI are expected to approximate 1.6 billion pounds of copper and 1.6 million ounces of gold in 2022.

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

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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 two years ended December 31, 2021. 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.

a.Includes charges totaling $0.26 per pound of copper associated with an ARO adjustment.

b.Includes COVID-19 related costs (including one-time incremental employee benefits and health and safety costs) totaling $0.02 per pound of copper.

A significant portion of PT-FI’s costs are fixed and unit costs vary depending on volumes and other factors. PT-FI’s unit net cash costs (including gold and silver credits) of $0.19 per pound of copper in 2021, were lower than unit net cash costs of $0.43 per pound in 2020, primarily reflecting higher copper and gold sales volumes.

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

PT-FI’s export duties totaled $218 million in 2021 and $93 million in 2020, and PT-FI’s royalties totaled $319 million in 2021 and $153 million in 2020. PT-FI will continue to pay export duties until development progress for additional smelting capacity in Indonesia exceeds 50 percent. Refer to Note 13 for further discussion of PT-FI’s export duties and royalties.

Because certain assets are depreciated on a straight-line basis, PT-FI’s unit depreciation rate may vary with asset additions and the level of copper production and sales. DD&A per pound of copper under they by-product method was $0.80 in 2021, compared with $0.72 in 2020, primarily reflecting significant underground development assets placed in service.

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

PT Smelting intercompany loss represents the change in the deferral of PT-FI’s profit on sales to PT Smelting (25.0 percent prior to April 30, 2021, and 39.5 percent thereafter). Refer to “Operations - Smelting & Refining” below for further discussion.

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Assuming an average gold price of $1,800 per ounce for 2022 and achievement of current sales volume and cost estimates, unit net cash costs (including gold and silver credits) for PT-FI are expected to approximate $0.18 per pound of copper in 2022. The impact of price changes during 2022 on PT-FI’s average unit net cash costs would approximate $0.09 per pound of copper for each $100 per ounce change in the average price of gold.

PT-FI’s projected sales volumes and unit net cash costs for the year 2022 are dependent on a number of factors, including operational performance, timing of shipments and the Indonesia government’s extension of PT-FI’s export permit. In March 2021, PT-FI received a one-year extension of its export license through March 15, 2022. Refer to Note 12 and Item 1A. “Risk Factors” contained in Part I of our annual report on Form 10-K for the year ended December 31, 2021, for a discussion of the administrative fine levied by the Indonesia government on PT-FI for failing to achieve physical development progress on the greenfield smelter and ongoing discussions with the Indonesia government regarding a deferred schedule for the completion of the greenfield smelter.

Molybdenum Mines

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

Operating and Development Activities. Production from the Molybdenum mines totaled 30 million pounds of molybdenum in 2021 and 24 million pounds in 2020. The increase in 2021, compared with 2020, primarily reflects higher ore grades. We plan to increase mining rates at the Climax mine in 2022 to provide options to increase volumes in response to market demand for molybdenum.

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

Unit net cash costs for our Molybdenum mines of $8.87 per pound of molybdenum in 2021 were lower than $9.50 per pound in 2020, primarily reflecting higher volumes. Based on current sales volume and cost estimates, average unit net cash costs for the Molybdenum mines are expected to approximate $12.50 per pound of molybdenum in 2022. The increase in expected unit net cash costs for 2022, compared with 2021, primarily reflects higher mining and input costs. Refer to “Product Revenues and Production Costs” for a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in our consolidated financial statements.

Smelting & Refining

We wholly own and operate the Miami smelter in Arizona, the El Paso refinery in Texas and a smelter and refinery in Spain (Atlantic Copper). Additionally, PT-FI has a 39.5 percent ownership interest in PT Smelting and expects its ownership to increase to a majority interest upon completion of the project to expand PT Smelting’s smelting capacity. See “Indonesia Smelter Capacity” above for additional information regarding the PT Smelting expansion and Note 13 for information regarding the tolling agreement effective in 2023. Treatment charges for smelting and refining copper concentrate consist of a base rate per pound of copper and per ounce of gold and are generally fixed. Treatment charges represent a cost to our mining operations and income to Atlantic Copper and PT Smelting. Thus, higher treatment charges benefit our smelter operations and adversely affect our mining operations. Our North America copper mines are less significantly affected by changes in treatment charges because these operations are largely integrated with our Miami smelter and El Paso refinery. Through this form of downstream integration, we are assured placement of a significant portion of our concentrate production.

Our Miami smelter processes concentrate produced by our U.S. mines and also provides acid for copper leaching

operations. During 2021, we incurred charges totaling $87 million associated with a major maintenance turnaround at our Miami smelter, which were higher than original estimates as a result of extended downtime to address additional required maintenance work, the COVID-19 pandemic and weather events. The next major maintenance turnaround is scheduled for the first half of 2024.

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Atlantic Copper smelts and refines copper concentrate and markets refined copper and precious metals in slimes. Following is an allocation of Atlantic Copper’s concentrate purchases from unaffiliated third parties and our copper mining operations for the two years ended December 31, 2021:

Atlantic Copper’s major maintenance turnarounds typically occur approximately every eight years, with shorter-term maintenance turnarounds in the interim. Atlantic Copper last completed a major maintenance turnaround in 2013 and most recently completed a 16-day maintenance turnaround in 2019. The next major maintenance turnaround is scheduled for the first half of 2022.

Atlantic Copper has take-or-pay contractual obligations for the procurement of copper concentrate totaling $3.1 billion at December 31, 2021, that provide for deliveries of specified volumes at market-based prices.

PT-FI’s contract with PT Smelting provides for PT-FI to supply 100 percent of the copper concentrate requirements (subject to a minimum or maximum treatment charge rate) necessary for PT Smelting to produce 205,000 metric tons of copper annually on a priority basis. PT-FI may also sell copper concentrate to PT Smelting at market rates for quantities in excess of 205,000 metric tons of copper annually. PT-FI supplied 100 percent of PT Smelting’s concentrate requirements in 2021 and 74 percent in 2020. PT Smelting processed 41 percent of PT-FI’s concentrate production in 2021 and 50 percent of such production in 2020.

In December 2021, PT Smelting received a 12-month extension of its anodes slimes export license, which currently expires December 9, 2022, subject to review and approval by the Indonesia government every 6 months.

PT Smelting’s maintenance turnarounds (which range from two weeks to a month to complete) typically are expected to occur approximately every two years, with shorter-term maintenance turnarounds in the interim. PT Smelting completed a 30-day maintenance turnaround during December 2020, and the next major turnaround is scheduled for the second half of 2022. In addition, PT Smelting has a planned 75-day shutdown scheduled for the first half of 2023 associated with its expansion project.

We defer recognizing profits on sales from our mining operations to Atlantic Copper and on PT-FI’s sales to PT Smelting (on 25.0 percent prior to April 30, 2021, and 39.5 percent thereafter) until final sales to third parties occur. Changes in these deferrals attributable to variability in intercompany volumes resulted in net (reductions) additions to operating income totaling $(188) million ($(106) million to net income attributable to common stock) in 2021 and $(7) million ($1 million to net income attributable to common stock) in 2020. Our net deferred profits on our inventories at Atlantic Copper and PT Smelting to be recognized in future periods’ net income attributable to common stock totaled $175 million at December 31, 2021. 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. No significant changes in deferred profits are expected in the first quarter of 2022.

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. A large component of our production costs are related to energy. See “Consolidated Results” and Item 1A. “Risk Factors” contained in Part I of our annual report on Form 10-K for the year ended December 31, 2021, for further discussion of our energy requirements and related costs.

Our operating cash flows during 2021 primarily reflected strong operating and financial performance and favorable copper prices. During 2022, we expect to grow production and sales volumes while continuing to execute our operating plans, which we expect will provide strong cash flows to support advancement of organic growth initiatives and continue cash returns to shareholders under our established financial policy, based on a favorable operational and market outlook.

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We believe that we have a high-quality portfolio of long-lived copper assets positioned to generate long-term value. During fourth-quarter 2021, PT-FI successfully ramped-up production from its underground mining operations and achieved quarterly copper and volumes approximating 100 percent of the projected annualized level, as well as commenced long-term mine development activities for its Kucing Liar deposit at the Grasberg minerals district. Production from the Lone Star copper leach project at our Safford operation is exceeding initial design capacity with production totaling approximately 235 million pounds in 2021. We are also evaluating organic growth opportunities for expansion of certain of our operations in North America and South America, including at Bagdad, Lone Star and El Abra, the timing of which will be dependent on, among other things, market conditions.

Based on current sales volume, cost and metal price estimates discussed in “Outlook”, our available cash and cash equivalents plus our projected consolidated operating cash flows of $8.0 billion for the year 2022 exceed our expected consolidated capital expenditures of $4.7 billion (which includes $2.0 billion for major projects and $1.4 billion for the Indonesia smelter projects) and other expected cash requirements for the year, including share repurchases, noncontrolling interest distributions, income tax payments, common stock dividends (base and variable) and debt repayments.

We believe that our cash generating capability and financial condition, which includes $8.1 billion of consolidated cash and cash equivalents at December 31, 2021, together with $3.5 billion available under our FCX revolving credit facility, will be adequate to meet our operating, investing and financing needs over the next several years. Expenditures for the Indonesia smelter projects are currently being funded by PT-FI’s new $1.0 billion unsecured bank credit facility and additional debt financing is being evaluated. Refer to “Outlook” for further discussion of projected operating cash flows and capital expenditures for 2022 and to “Debt” below and Note 8 for further discussion of PT-FI’s credit facility.

Financial Policy. In February 2021, our Board adopted a financial policy for the allocation of cash flows aligned with our strategic objectives of maintaining a strong balance sheet and increasing cash returns to shareholders while advancing opportunities for future growth.

In February 2021, the Board reinstated a cash dividend on our common stock (base dividend) at an annual rate of $0.30 per share, and following achievement of our net debt target in the range of $3.0 billion to $4.0 billion (excluding debt for additional smelting capacity in Indonesia), in November 2021 the Board approved the implementation of a performance-based payout framework, including (i) a new $3.0 billion share repurchase program and (ii) a variable cash dividend on common stock for 2022 at an expected annual rate of $0.30 per share. The combined annual rate of the base dividend and the variable dividend is expected to total $0.60 per share for 2022. Based on current shares outstanding totaling 1.5 billion, the total common stock dividends (base and variable) for 2022 are expected to approximate $0.9 billion. Refer to “Financing Activities” below for further discussion.

In December 2021, our Board declared dividends totaling $0.15 per share on our common stock (including a $0.075 per share quarterly base cash dividend and a $0.075 per share quarterly variable cash dividend), which was paid on February 1, 2022, to shareholders of record as of January 14, 2022. Refer to Item 1A. “Risk Factors” contained in Part I of our annual report on Form 10-K for the year ended December 31, 2021, and “Cautionary Statement” below for further discussion.

Cash

Following is a summary of the U.S. and international components of consolidated cash and cash equivalents available to the parent company, net of noncontrolling interests’ share, taxes and other costs at December 31, 2021 (in billions):

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Cash held at our international operations is generally used to support our foreign operations’ capital expenditures, operating expenses, debt repayments, working capital or other cash needs. Management believes that sufficient liquidity is available in the U.S. from cash balances and availability from our revolving credit facility. We have not elected to permanently reinvest earnings from our foreign subsidiaries, and we have recorded deferred tax liabilities for foreign earnings that are available to be repatriated to the U.S. From time to time, our foreign subsidiaries distribute earnings to the U.S. through dividends that are subject to applicable withholding taxes and noncontrolling interests’ share. See Item 1A. “Risk Factors” contained in Part I of our annual report on Form 10-K for the year ended December 31, 2021, for further discussion of our holding company structure.

Debt

At December 31, 2021, consolidated debt totaled $9.5 billion, with a related weighted-average interest rate of 4.6 percent. We had no borrowings, $8 million in letters of credit issued and approximately $3.5 billion available under our FCX revolving credit facility at December 31, 2021.

On December 1, 2021, we redeemed all of our outstanding $524 million aggregate principal amount of 3.55% Senior Notes due 2022 at a redemption price equal to 100 percent of the principal amount of the notes outstanding, plus accrued and unpaid interest. Our next senior note maturity is March 2023, with redemption rights at par beginning in December 2022.

In September 2021, Cerro Verde elected to prepay $200 million on its term loan, reducing the outstanding balance to $325 million, which matures in June 2022.

In July 2021, PT-FI entered into a $1.0 billion, five-year, unsecured bank credit facility (consisting of a $667 million term loan and a $333 million revolving credit facility) to fund projects associated with its commitment to construct additional smelting capacity in Indonesia. As of December 31, 2021, $443 million ($432 million net of debt issuance costs) was drawn under the PT-FI term loan and no amounts were drawn under the revolving credit facility.

Refer to Note 8 for further discussion of the above items and for information regarding our debt arrangements.

Operating Activities

We generated consolidated operating cash flows of $7.7 billion in 2021 (including $0.8 billion from working capital and other sources) and $3.0 billion in 2020 (including $0.7 billion from working capital and other sources).

Higher operating cash flows for 2021, compared with 2020, primarily reflect increased copper and gold volumes, higher copper and molybdenum prices and the timing of tax payments. We have estimated 2021 final income tax payments primarily in Indonesia and Peru due in the first half of 2022 totaling approximately $1.3 billion.

Investing Activities

Capital Expenditures. Capital expenditures, including capitalized interest, totaled $2.1 billion for the year 2021, including $1.25 billion for major projects, and $2.0 billion for the year 2020, including $1.2 billion for major projects. Major projects were primarily associated with underground development activities in the Grasberg minerals district.

A large portion of the capital expenditures relate to projects that are expected to add significant production and cash flow in future periods, enabling us to continue to generate operating cash flows exceeding capital expenditures in future years. Refer to “Outlook” for further discussion of projected capital expenditures for 2022.

Proceeds from Sales of Assets. In September 2021, we completed the sale of our remaining Freeport Cobalt assets to Jervois Global Limited (Jervois) for $208 million, including net cash proceeds of $150 million and shares of Jervois, and in December 2021, we collected $50 million in consideration associated with the 2019 sale of the Timok exploration project. Proceeds from sales of other assets totaled $47 million in 2021.

In 2020, we sold the Kisanfu undeveloped exploration project for $550 million and collected proceeds of $45 million related to the 2019 sale of the Timok exploration project. Proceeds from sales of other assets totaled $109 million in 2020 primarily related to contingent consideration associated with the 2016 sale of the Tenke Fungurume Mining assets and the sale of royalty assets.

Refer to Note 2 for further discussion.

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Loans to PT Smelting for Expansion. PT-FI made loans to PT Smelting totaling $36 million in 2021 to fund PT Smelting’s expansion project. Refer to “Operations - Indonesia Mining” for further discussion.

Acquisition of Minority Interest in PT Smelting. On April 30, 2021, PT-FI acquired 14.5 percent of the outstanding common stock of PT Smelting for $33 million, increasing its ownership interest from 25.0 percent to 39.5 percent.

Financing Activities

Debt Transactions. Net repayments of debt in 2021 totaled $260 million, primarily associated with the $524 billion redemption of our 3.55% Senior Notes due 2022 and the repayment of $200 million under Cerro Verde’s term loan, partly offset by borrowings of $432 million under the PT-FI term loan.

Net repayments of debt in 2020 totaled $193 million, primarily reflecting the repayment of $305 million under Cerro Verde’s term loan. During 2020, we also completed the sale of $2.8 billion of senior notes and used most of the net proceeds to purchase and redeem senior notes maturing in 2021, 2022, 2023 and 2024. The remaining net proceeds were used for general corporate purposes.

Refer to Note 8 for further discussion of debt transactions.

Cash Dividends and Distributions Paid. We paid cash dividends on our common stock totaling $331 million in 2021 and $73 million in 2020. The declaration and payment of dividends (base or variable) is at the discretion of the Board and will depend on our financial results, cash requirements, business prospects, global economic conditions and other factors deemed relevant by the Board. Refer to Item 1A. “Risk Factors” contained in Part I of our annual report on Form 10-K for the year ended December 31, 2021, “Cautionary Statement” below and discussion of our financial policy above.

Cash dividends and distributions paid to noncontrolling interests at PT-FI and Cerro Verde totaled $583 million in 2021. Based on the estimates discussed in “Outlook,” we currently expect cash dividends and distributions paid to noncontrolling interests to exceed $1.4 billion in 2022. There were no cash dividends or distributions to noncontrolling interests paid in 2020. Cash dividends and distributions to noncontrolling interests vary based on the operating results and cash requirements of our consolidated subsidiaries.

Treasury Stock Purchases. In fourth-quarter 2021, we acquired 12.7 million shares under our share repurchase program for a total cost of $488 million, $38.32 per share. Through February 15, 2022, we have acquired 18.2 million shares under our share repurchase program for a total cost of $710 million, $39.10 per share, and $2.3 billion remains available. The timing and amount of share repurchases is at the discretion of management and will depend on a variety of factors. The share repurchase program may be modified, increased, suspended or terminated at any time at the Board’s discretion. Refer to Item 1A. “Risk Factors” contained in Part I of our annual report on Form 10-K for the year ended December 31, 2021, “Cautionary Statement” below and discussion of our financial policy above.

Contributions from Noncontrolling Interests. PT-FI received equity contributions from PT Inalum for their share of capital spending on the underground mine development projects in the Grasberg minerals district totaling $182 million in 2021 and $156 million in 2020.

Stock-based awards. Following an increase in our stock price during 2021, proceeds from exercised stock options totaled $210 million and payments for related employee taxes totaled $29 million. See Note 10 for a discussion of stock-based awards.

CONTINGENCIES

Environmental

The cost of complying with environmental laws is a fundamental and substantial cost of our business. At December 31, 2021, we had $1.7 billion recorded in our consolidated balance sheet for environmental obligations attributed to CERCLA or analogous state programs and for estimated future costs associated with environmental obligations that are considered probable based on specific facts and circumstances.

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We incurred environmental capital expenditures and other environmental costs (including our joint venture partners’ shares) to comply with applicable environmental laws and regulations that affect our operations totaling $0.3 billion in both 2021 and 2020. For 2022, we expect to incur approximately $0.5 billion of aggregate environmental capital expenditures and other environmental costs. The timing and amount of estimated payments could change as a result of changes in regulatory requirements, changes in scope and timing of reclamation and plug and abandonment activities, the settlement of environmental matters and the rate at which actual spending occurs on continuing matters.

Refer to Items 1. and 2. “Business and Properties,” and Item 1A. “Risk Factors” contained in Part I of our annual report on Form 10-K for the year ended December 31, 2021, Note 12 and “Critical Accounting Estimates - Environmental Obligations” above for further information about environmental regulation, including significant environmental matters.

Asset Retirement Obligations

We recognize AROs as liabilities when incurred, with the initial measurement at fair value. These obligations, which are initially estimated based on discounted cash flow estimates, are accreted to full value over time through charges to cost of sales. Mine reclamation costs for disturbances are recorded as an ARO and as a related asset retirement cost (included in property, plant, equipment and mine development costs) in the period of disturbance. For non-operating properties without mineral reserves, changes to the ARO are recorded in earnings. Our cost estimates are reflected on a third-party cost basis and comply with our legal obligation to retire tangible, long-lived assets. At December 31, 2021, we had $2.7 billion recorded in our consolidated balance sheet for AROs, including $0.3 billion related to our oil and gas properties. Spending on AROs totaled $201 million in 2021 and $156 million in 2020 (including $77 million in 2021 and $38 million in 2020 for our oil and gas operations). At our former Grasberg open-pit operations in Indonesia, we recorded an ARO adjustment of $397 million in 2021, with $340 million charged to production and delivery costs, as it relates to the depleted Grasberg open pit. For 2022, we expect to incur approximately $0.2 billion in aggregate ARO payments (including $0.1 billion for our oil and gas operations). Refer to Note 12 and “Critical Accounting Estimates - Asset Retirement Obligations” above for further discussion.

Litigation and Other Contingencies

Refer to Notes 2 and 12, and Item 1A. “Risk Factors” and Item 3. “Legal Proceedings” contained in Part I of our annual report on Form 10-K for the year ended December 31, 2021, for further discussion of contingencies associated with legal proceedings and other matters.

DISCLOSURES ABOUT MARKET RISKS

Commodity Price Risk

Our consolidated revenues from our mining operations include the sale of copper concentrate, copper cathode, copper rod, gold, molybdenum and other metals by our North America and South America mines, the sale of copper concentrate (which also contains significant quantities of gold and silver) by our Indonesia mining operations, the sale of molybdenum in various forms by our molybdenum operations, and the sale of copper cathode, copper anode and gold in anode and slimes by Atlantic Copper. Our financial results will vary with fluctuations in the market prices of the commodities we produce, primarily copper and gold, and to a lesser extent molybdenum. For projected sensitivities of our operating cash flow to changes in commodity prices, refer to “Outlook.” World market prices for these commodities have fluctuated historically and are affected by numerous factors beyond our control. Refer to Item 1A. “Risk Factors” contained in Part I of our annual report on Form 10-K for the year ended December 31, 2021, for further discussion of financial risks associated with fluctuations in the market prices of the commodities we sell.

During 2021, our mined copper was sold 59 percent in concentrate, 21 percent as cathode and 20 percent as rod from North America operations. Substantially all of our copper concentrate and cathode sales contracts provide final copper pricing in a specified future month (generally one to four months from the shipment date) based primarily on quoted LME monthly average copper settlement prices. We receive market prices based on prices in the specified future period, which results in price fluctuations recorded through revenues until the date of settlement. We record revenues and invoice customers at the time of shipment based on then-current LME prices, which results in an embedded derivative on our provisionally priced concentrate and cathode sales that is adjusted to fair value through earnings each period, using the period-end forward prices, until final pricing on the date of settlement. To the extent final prices are higher or lower than what was recorded on a provisional basis, an increase or decrease to revenues is recorded each reporting period until the date of final pricing. Accordingly, in times of rising copper prices, our

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revenues benefit from adjustments to the final pricing of provisionally priced sales pursuant to contracts entered into in prior periods; in times of falling copper prices, the opposite occurs.

Following are the favorable (unfavorable) impacts of net adjustments to the prior years’ provisionally priced copper sales for the years ended December 31 (in millions, except per share amounts):

At December 31, 2021, we had provisionally priced copper sales at our copper mining operations totaling 397 million pounds of copper (net of intercompany sales and noncontrolling interests) recorded at an average price of $4.42 per pound, subject to final pricing over the next several months. We estimate that each $0.05 change in the price realized from the December 31, 2021, provisional price recorded would have an approximate $12 million effect on 2022 net income attributable to common stock. The LME copper settlement price closed at $4.36 per pound on January 31, 2022.

Foreign Currency Exchange Risk

The functional currency for most of our operations is the U.S. dollar. Substantially all of our revenues and a significant portion of our costs are denominated in U.S. dollars; however, some costs and certain asset and liability accounts are denominated in local currencies, including the Indonesia rupiah, Australian dollar, Peruvian sol, Chilean peso and euro. We recognized foreign currency translation gains on balances denominated in foreign currencies totaling $66 million in 2021 and $34 million in 2020. Generally, our operating results are positively affected when the U.S. dollar strengthens in relation to those foreign currencies and are adversely affected when the U.S. dollar weakens in relation to those foreign currencies.

Following is a summary of estimated annual payments and the impact of changes in foreign currency rates on our annual operating costs:

a.Reflects the estimated impact on annual operating costs assuming a 10 percent increase or decrease in the exchange rate reported at December 31, 2021.

b.Based on exchange rates at December 31, 2021.

Interest Rate Risk

At December 31, 2021, we had total debt maturities based on principal amounts of $9.5 billion, of which approximately 9 percent was variable-rate debt with interest rates primarily based on the London Interbank Offered Rate. The table below presents average interest rates for our scheduled maturities of principal for our outstanding debt and the related fair values at December 31, 2021 (in millions, except percentages):

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NEW ACCOUNTING STANDARDS

We did not adopt any new accounting standards in 2021.

NET DEBT

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

a.Includes $432 million, net of debt issuance costs, for the PT-FI term loan (refer to Note 8).

PRODUCT REVENUES AND PRODUCTION COSTS

Mining Product Revenues and Unit Net Cash Costs

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

We present gross profit per pound of copper in the following tables using both a “by-product” method and a “co-product” method. We use the by-product method in our presentation of gross profit per pound of copper because (i) the majority of our revenues are copper revenues, (ii) we mine ore, which contains copper, gold, molybdenum and other metals, (iii) it is not possible to specifically assign all of our costs to revenues from the copper, gold, molybdenum and other metals we produce, (iv) it is the method used to compare mining operations in certain industry publications and (v) it is the method used by our management and the Board to monitor operations and to compare mining operations in certain industry publications. In the co-product method presentations, shared costs are allocated to the different products based on their relative revenue values, which will vary to the extent our metals sales volumes and realized prices change.

We show revenue adjustments for prior period open sales as separate line items. Because these adjustments do not result from current period sales, these amounts have been reflected separately from revenues on current period sales. Noncash and other costs, which are removed from site production and delivery costs in the calculation of unit net cash costs, consist of items such as stock-based compensation costs, long-lived asset impairments, idle facility costs, 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

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 credits totaling $27 million ($0.02 per pound of copper) associated with refunds of Arizona transaction privilege taxes related to purchased electricity.

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

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

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 reductions to revenues and average realized prices totaling $24 million ($0.02 per pound of copper) related to forward sales contracts covering 150 million pounds of copper sales for May and June 2020 at a fixed price of $2.34 per pound.

d.Includes charges totaling $32 million ($0.02 per pound of copper) primarily associated with the April 2020 revised operating plans (including employee separation costs) and the COVID-19 pandemic (including health and safety costs).

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

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

a.Includes silver sales of 3.7 million ounces ($24.73 per ounce average realized price). Also reflects sales of molybdenum produced by Cerro Verde to our molybdenum sales company at market-based pricing.

b.Includes nonrecurring charges totaling $92 million ($0.09 per pound of copper) associated with labor-related charges at Cerro Verde for collective labor agreements reached with its hourly employees.

c.Includes credits totaling $26 million ($0.03 per pound) associated with favorable adjustments to prior-years’ profit sharing at Cerro Verde.

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

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

a.Includes silver sales of 3.4 million ounces ($21.86 per ounce average realized price). Also reflects sales of molybdenum produced by Cerro Verde to our molybdenum sales company at market-based pricing.

b.Includes charges totaling $91 million ($0.09 per pound of copper) primarily associated with idle facility (Cerro Verde) and contract cancellation costs related to the COVID-19 pandemic, and employee separation costs associated with the April 2020 revised operating plans.

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

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

a.Includes silver sales of 5.9 million ounces ($24.30 per ounce average realized price).

b.Includes charges totaling $340 million ($0.26 per pound of copper) associated with an ARO adjustment. Also, includes credits of $31 million ($0.02 per pound of copper) associated with adjustments to prior-year treatment charges and charges of $16 million ($0.01 per pound of copper) associated with a potential settlement of an administrative fine levied by the Indonesia government.

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

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