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Fair Value Measurement (Unaudited) | 6 Months Ended
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Jun. 30, 2013
Fair Value Measurement [Abstract] |
Fair Value Measurement | FAIR VALUE MEASUREMENT Fair value accounting guidance includes a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 inputs) and the lowest priority to unobservable inputs (Level 3 inputs). FCX recognizes transfers between levels at the end of the reporting period. Other than with respect to oil and gas derivatives assumed in the acquisition of PXP, FCX did not have any significant transfers in or out of Level 1, 2, or 3 for second-quarter 2013. A summary of the carrying amount and fair value of FCX’s financial instruments other than cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, and dividends payable follows (in millions):
| At June 30, 2013
| Carrying |  | Fair Value
| Amount |  | Total |  | Level 1 |  | Level 2 |  | Level 3
Assets |  |  |  |  |  |  |  |  |
Investment securities (current and long-term):a, b, c |  |  |  |  |  |  |  |  |
Money market funds | $ | 80 |  |  | $ | 80 |  |  | $ | 80 |  |  | $ | — |  |  | $ | — |
U.S. core fixed income fund | 21 |  |  | 21 |  |  | — |  |  | 21 |  |  | — |
Equity securities | 6 |  |  | 6 |  |  | 6 |  |  | — |  |  | — |
Total investment securities | 107 |  |  | 107 |  |  | 86 |  |  | 21 |  |  | — |
Trust assets (long-term):a, c |  |  |  |  |  |  |  |  |
U.S. core fixed income fund | 48 |  |  | 48 |  |  | — |  |  | 48 |  |  | — |
Government mortgage-backed securities | 37 |  |  | 37 |  |  | — |  |  | 37 |  |  | — |
Corporate bonds | 26 |  |  | 26 |  |  | — |  |  | 26 |  |  | — |
Government bonds and notes | 21 |  |  | 21 |  |  | — |  |  | 21 |  |  | — |
Asset-backed securities | 16 |  |  | 16 |  |  | — |  |  | 16 |  |  | — |
Money market funds | 8 |  |  | 8 |  |  | 8 |  |  | — |  |  | — |
Municipal bonds | 1 |  |  | 1 |  |  | — |  |  | 1 |  |  | — |
Total trust assets | 157 |  |  | 157 |  |  | 8 |  |  | 149 |  |  | — |
Derivatives:a, d |  |  |  |  |  |  |  |  |
Embedded derivatives in provisional sales/purchase |  |  |  |  |  |  |  |  |
contracts in a gross asset position | 11 |  |  | 11 |  |  | — |  |  | 11 |  |  | — |
Crude oil and natural gas swaps | 81 |  |  | 81 |  |  | — |  |  | 81 |  |  | — |
Total derivative assets | 92 |  |  | 92 |  |  | — |  |  | 92 |  |  | — |
Total assets |  |  | $ | 356 |  |  | $ | 94 |  |  | $ | 262 |  |  | $ | — |
Liabilities |  |  |  |  |  |  |  |  |
Derivatives:a |  |  |  |  |  |  |  |  |
Embedded derivatives in provisional sales/purchase |  |  |  |  |  |  |  |  |
contracts in a gross liability position d | $ | 121 |  |  | $ | 121 |  |  | $ | — |  |  | $ | 121 |  |  | $ | — |
Crude oil options d | 116 |  |  | 116 |  |  | — |  |  | — |  |  | 116 |
Copper futures and swap contracts d | 14 |  |  | 14 |  |  | 13 |  |  | 1 |  |  | — |
Copper forward contracts d | 3 |  |  | 3 |  |  | 2 |  |  | 1 |  |  | — |
Plains Offshore warrants e | $ | 79 |  |  | $ | 79 |  |  | $ | — |  |  | $ | — |  |  | $ | 79 |
Total derivative liabilities | 333 |  |  | 333 |  |  | 15 |  |  | 123 |  |  | 195 |
Long-term debt, including current portion f | 21,215 |  |  | 20,335 |  |  | — |  |  | 20,335 |  |  | — |
Total liabilities |  |  | $ | 20,668 |  |  | $ | 15 |  |  | $ | 20,458 |  |  | $ | 195 |
| At December 31, 2012
| Carrying |  | Fair Value
| Amount |  | Total |  | Level 1 |  | Level 2 |  | Level 3
Assets |  |  |  |  |  |  |  |  |
Investment securities (current and long-term): |  |  |  |  |  |  |  |  |
MMR investment g | $ | 446 |  |  | $ | 539 |  |  | $ | — |  |  | $ | 539 |  |  | $ | — |
U.S. core fixed income fund a, c | 22 |  |  | 22 |  |  | — |  |  | 22 |  |  | — |
Money market funds a, c | 16 |  |  | 16 |  |  | 16 |  |  | — |  |  | — |
Equity securities a, c | 8 |  |  | 8 |  |  | 8 |  |  | — |  |  | — |
Total investment securities | 492 |  |  | 585 |  |  | 24 |  |  | 561 |  |  | — |
Trust assets (long-term):a, c |  |  |  |  |  |  |  |  |
U.S. core fixed income fund | 50 |  |  | 50 |  |  | — |  |  | 50 |  |  | — |
Government mortgage-backed securities | 36 |  |  | 36 |  |  | — |  |  | 36 |  |  | — |
Corporate bonds | 30 |  |  | 30 |  |  | — |  |  | 30 |  |  | — |
Government bonds and notes | 24 |  |  | 24 |  |  | — |  |  | 24 |  |  | — |
Asset-backed securities | 15 |  |  | 15 |  |  | — |  |  | 15 |  |  | — |
Money market funds | 7 |  |  | 7 |  |  | 7 |  |  | — |  |  | — |
Municipal bonds | 1 |  |  | 1 |  |  | — |  |  | 1 |  |  | — |
Total trust assets | 163 |  |  | 163 |  |  | 7 |  |  | 156 |  |  | — |
Derivatives:a, d |  |  |  |  |  |  |  |  |
Embedded derivatives in provisional sales/purchase |  |  |  |  |  |  |  |  |
contracts in a gross asset position | 36 |  |  | 36 |  |  | — |  |  | 36 |  |  | — |
Copper futures and swaps contracts | 5 |  |  | 5 |  |  | 5 |  |  | — |  |  | — |
Total derivative assets | 41 |  |  | 41 |  |  | 5 |  |  | 36 |  |  | — |
Total assets |  |  | $ | 789 |  |  | $ | 36 |  |  | $ | 753 |  |  | $ | — |
Liabilities |  |  |  |  |  |  |  |  |
Derivatives:a, d |  |  |  |  |  |  |  |  |
Embedded derivatives in provisional sales/purchase |  |  |  |  |  |  |  |  |
contracts in a gross liability position | $ | 27 |  |  | $ | 27 |  |  | $ | — |  |  | $ | 27 |  |  | $ | — |
Copper futures and swap contracts | 1 |  |  | 1 |  |  | 1 |  |  | — |  |  | — |
Total derivative liabilities | 28 |  |  | 28 |  |  | 1 |  |  | 27 |  |  | — |
Long-term debt, including current portion f | 3,527 |  |  | 3,589 |  |  | — |  |  | 3,589 |  |  | — |
Total liabilities |  |  | $ | 3,617 |  |  | $ | 1 |  |  | $ | 3,616 |  |  | $ | — |
a. | Recorded at fair value.
b. | Investment securities excluded $238 million of time deposits at June 30, 2013.
c. | Current portion included in other current assets and long-term portion included in other assets.
d. | Crude oil options are net of $478 million for deferred premiums and accrued interest at June 30, 2013. Refer to Note 9 for further discussion and balance sheet classifications.
e. | Included in other liabilities. Refer to Note 2 for further discussion.
f. | Recorded at cost except for debt acquired in the PXP, MMR and FMC acquisitions, which were recorded at fair value at the acquisition dates.
g. | Recorded at cost and included in other assets.
Valuation Techniques Money market funds are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets. Fixed income securities (U.S. core fixed income funds, government securities, corporate bonds, asset-backed securities and municipal bonds) are valued using a bid evaluation or a mid evaluation. A bid evaluation is an estimated price at which a dealer would pay for a security. A mid evaluation is the average of the estimated price at which a dealer would sell a security and the estimated price at which a dealer would pay for a security. These evaluations are based on quoted prices, if available, or models that use observable inputs and, as such, are classified within Level 2 of the fair value hierarchy. Equity securities are valued at the closing price reported on the active market on which the individual securities are traded and, as such, are classified within Level 1 of the fair value hierarchy. FCX’s embedded derivatives on provisional copper concentrate, copper cathode and gold purchases and sales have critical inputs of quoted monthly LME or COMEX copper forward prices and the London PM gold forward price at each reporting date based on the month of maturity; however, FCX's contracts themselves are not traded on an exchange. As a result, these derivatives are classified within Level 2 of the fair value hierarchy. FCX's derivative financial instruments for crude oil options are valued using an option pricing model, which uses various inputs including IntercontinentalExchange Inc. (ICE) crude oil prices, volatilities, interest rates and contract terms. FCX's derivative financial instruments for crude oil and natural gas swaps are valued using a pricing model that has various inputs including NYMEX and ICE price quotations, interest rates and contract terms. Valuations are adjusted for credit quality, using the counterparties' credit quality for asset balances and FCX's credit quality for liability balances. For asset balances, FCX uses the credit default swap value for counterparties when available or the spread between the risk-free interest rate and the yield rate on the counterparties' publicly traded debt for similar instruments (which considers the impact of netting agreements on counterparty credit risk, including whether the position with the counterparty is a net asset or net liability). The 2013 and 2014 crude oil and natural gas swaps are classified within Level 2 of the fair value hierarchy because the inputs used in the valuation models are directly or indirectly observable for substantially the full term of the instruments. The 2013, 2014 and 2015 crude oil options are classified within Level 3 of the fair value hierarchy because the inputs used in the valuation models are not observable for substantially the full term of the instruments. The significant unobservable inputs used in the fair value measurement of the crude oil options are implied volatilities and deferred premiums. Significant increases (decreases) in implied volatilities in isolation would result in a significantly higher (lower) fair value measurement. The implied volatilities ranged from 18 percent to 62 percent, with a weighted average of 23 percent. The deferred premiums ranged from $5.15 per Bbl to $7.22 per Bbl, with a weighted average of $6.35 per Bbl. Refer to Note 9 for further discussion of these derivative financial instruments. FCX’s derivative financial instruments for copper futures and swap contracts and copper forward contracts that are traded on the respective exchanges are classified within Level 1 of the fair value hierarchy because they are valued using quoted monthly COMEX or LME prices at each reporting date based on the month of maturity (refer to Note 9 for further discussion). Certain of these contracts are traded on the over-the-counter market and are classified within Level 2 of the fair value hierarchy based on COMEX and LME forward prices. The preliminary fair value of FCX's warrants associated with the Plains Offshore Preferred Stock was estimated using a valuation model based on the estimated fair value of the underlying Plains Offshore common stock, risk-free interest rates and probability-weighted cash flows. The assumptions used in the valuation model are highly subjective because the common stock is not publicly traded. Refer to Note 2 for further discussion of the Plains Offshore warrants. Long-term debt, including the current portion, is valued using prices obtained from a readily available pricing source and, as such, is classified within Level 2 of the fair value hierarchy. At December 31, 2012, FCX's investment in MMR's 5.75% Convertible Perpetual Preferred Stock (MMR investment) was not actively traded; therefore, FCX valued its MMR investment based on a pricing simulation model that used the quoted market prices of MMR's publicly traded common stock as the most significant observable input and other inputs, such as expected volatility, expected settlement date and risk-free interest rate. Therefore, this investment was classified within Level 2 of the fair value hierarchy. MMR's 5.75% Convertible Perpetual Preferred Stock was canceled in connection with the acquisition of MMR. A summary of the changes in the fair value of FCX's Level 3 derivative financial instruments for the six months ended June 30, 2013, follows (in millions):
| Crude Oil |  | Plains Offshore
| Options |  | Warrants
Fair value at December 31, 2012 | $ | — |  |  | $ | — |
Derivative financial instruments assumed in the PXP acquisition | (83 | ) |  | (79 | )
Net unrealized losses included in earnings related to |  |  |
assets and liabilities still held at the end of the period a | (33 | ) |  | — |
Fair value at June 30, 2013 | $ | (116 | ) |  | $ | (79 | )
a. | Realized and unrealized (losses) gains are recorded in revenue. There were no realized gains for the six months ended June 30, 2013.
The techniques described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while FCX believes its valuation techniques are appropriate and consistent with other market participants, the use of different techniques or assumptions to determine fair value of certain financial instruments could result in a different fair value measurement at the reporting date. There have been no changes in the techniques used at June 30, 2013, except as otherwise described above. Refer to Note 2 for the levels within the fair value hierarchy associated with other assets acquired, liabilities assumed and noncontrolling interest related to second-quarter 2013 acquisitions.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=28364263&loc=d3e13537-108611 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=28364263&loc=d3e13433-108611 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=25499696&loc=d3e19207-110258 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=28364263&loc=d3e13504-108611 + Details
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