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Fair Value Measurement (Unaudited) | 6 Months Ended
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Jun. 30, 2014
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. FCX did not have any significant transfers in or out of Level 1, 2 or 3 for second-quarter 2014. 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 (refer to Note 7), follows (in millions):
| At June 30, 2014
| Carrying |  | Fair Value
| Amount |  | Total |  | Level 1 |  | Level 2 |  | Level 3
Assets |  |  |  |  |  |  |  |  |
Investment securities:a,b |  |  |  |  |  |  |  |  |
Money market funds c | $ | 434 |  |  | $ | 434 |  |  | $ | 434 |  |  | $ | — |  |  | $ | — |
U.S. core fixed income fund | 22 |  |  | 22 |  |  | — |  |  | 22 |  |  | — |
Equity securities | 4 |  |  | 4 |  |  | 4 |  |  | — |  |  | — |
Total | 460 |  |  | 460 |  |  | 438 |  |  | 22 |  |  | — |
Legally restricted funds:a,b,d |  |  |  |  |  |  |  |  |
U.S. core fixed income fund | 50 |  |  | 50 |  |  | — |  |  | 50 |  |  | — |
Government bonds and notes | 35 |  |  | 35 |  |  | — |  |  | 35 |  |  | — |
Government mortgage-backed securities | 31 |  |  | 31 |  |  | — |  |  | 31 |  |  | — |
Corporate bonds | 29 |  |  | 29 |  |  | — |  |  | 29 |  |  | — |
Asset-backed securities | 16 |  |  | 16 |  |  | — |  |  | 16 |  |  | — |
Money market funds | 6 |  |  | 6 |  |  | 6 |  |  | — |  |  | — |
Municipal bonds | 1 |  |  | 1 |  |  | — |  |  | 1 |  |  | — |
Total | 168 |  |  | 168 |  |  | 6 |  |  | 162 |  |  | — |
Derivatives:a,e |  |  |  |  |  |  |  |  |
Embedded derivatives in provisional sales/purchase |  |  |  |  |  |  |  |  |
contracts in a gross asset position | 55 |  |  | 55 |  |  | — |  |  | 55 |  |  | — |
Copper futures and swap contracts | 6 |  |  | 6 |  |  | 6 |  |  | — |  |  | — |
Copper forward contracts | 2 |  |  | 2 |  |  | 2 |  |  | — |  |  | — |
Total | 63 |  |  | 63 |  |  | 8 |  |  | 55 |  |  | — |
Total assets |  |  | $ | 691 |  |  | $ | 452 |  |  | $ | 239 |  |  | $ | — |
Liabilities |  |  |  |  |  |  |  |  |
Derivatives:a,e |  |  |  |  |  |  |  |  |
Embedded derivatives in provisional sales/purchase |  |  |  |  |  |  |  |  |
contracts in a gross liability position | $ | 12 |  |  | $ | 12 |  |  | $ | — |  |  | $ | 12 |  |  | $ | — |
Crude oil options | 298 |  |  | 298 |  |  | — |  |  | — |  |  | 298 |
Natural gas swaps | 7 |  |  | 7 |  |  | — |  |  | 7 |  |  | — |
Copper futures and swap contracts | 1 |  |  | 1 |  |  | 1 |  |  | — |  |  | — |
Total | 318 |  |  | 318 |  |  | 1 |  |  | 19 |  |  | 298 |
Long-term debt, including current portion f | 20,296 |  |  | 20,607 |  |  | — |  |  | 20,607 |  |  | — |
Total liabilities |  |  | $ | 20,925 |  |  | $ | 1 |  |  | $ | 20,626 |  |  | $ | 298 |
| At December 31, 2013
| Carrying |  | Fair Value
| Amount |  | Total |  | Level 1 |  | Level 2 |  | Level 3
Assets |  |  |  |  |  |  |  |  |
Investment securities:a,b |  |  |  |  |  |  |  |  |
U.S. core fixed income fund | $ | 21 |  |  | $ | 21 |  |  | $ | — |  |  | $ | 21 |  |  | $ | — |
Money market funds | 18 |  |  | 18 |  |  | 18 |  |  | — |  |  | — |
Equity securities | 5 |  |  | 5 |  |  | 5 |  |  | — |  |  | — |
Total | 44 |  |  | 44 |  |  | 23 |  |  | 21 |  |  | — |
Legally restricted funds:a,b,d |  |  |  |  |  |  |  |  |
U.S. core fixed income fund | 48 |  |  | 48 |  |  | — |  |  | 48 |  |  | — |
Government mortgage-backed securities | 34 |  |  | 34 |  |  | — |  |  | 34 |  |  | — |
Corporate bonds | 28 |  |  | 28 |  |  | — |  |  | 28 |  |  | — |
Government bonds and notes | 28 |  |  | 28 |  |  | — |  |  | 28 |  |  | — |
Money market funds | 28 |  |  | 28 |  |  | 28 |  |  | — |  |  | — |
Asset-backed securities | 15 |  |  | 15 |  |  | — |  |  | 15 |  |  | — |
Municipal bonds | 1 |  |  | 1 |  |  | — |  |  | 1 |  |  | — |
Total | 182 |  |  | 182 |  |  | 28 |  |  | 154 |  |  | — |
Derivatives:a,e |  |  |  |  |  |  |  |  |
Embedded derivatives in provisional sales/purchase |  |  |  |  |  |  |  |  |
contracts in a gross asset position | 63 |  |  | 63 |  |  | — |  |  | 63 |  |  | — |
Copper futures and swap contracts | 6 |  |  | 6 |  |  | 5 |  |  | 1 |  |  | — |
Total | 69 |  |  | 69 |  |  | 5 |  |  | 64 |  |  | — |
Total assets |  |  | $ | 295 |  |  | $ | 56 |  |  | $ | 239 |  |  | $ | — |
Liabilities |  |  |  |  |  |  |  |  |
Derivatives:a |  |  |  |  |  |  |  |  |
Embedded derivatives in provisional sales/purchase |  |  |  |  |  |  |  |  |
contracts in a gross liability position e | $ | 16 |  |  | $ | 16 |  |  | $ | — |  |  | $ | 16 |  |  | $ | — |
Crude oil options e | 309 |  |  | 309 |  |  | — |  |  | — |  |  | 309 |
Natural gas swaps e | 4 |  |  | 4 |  |  | — |  |  | 4 |  |  | — |
Copper forward contracts e | 1 |  |  | 1 |  |  | 1 |  |  | — |  |  | — |
Plains Offshore warrants g | 2 |  |  | 2 |  |  | — |  |  | — |  |  | 2 |
Total | 332 |  |  | 332 |  |  | 1 |  |  | 20 |  |  | 311 |
Long-term debt, including current portion f | 20,706 |  |  | 20,487 |  |  | — |  |  | 20,487 |  |  | — |
Total liabilities |  |  | $ | 20,819 |  |  | $ | 1 |  |  | $ | 20,507 |  |  | $ | 311 |
a. | Recorded at fair value.
b. | Current portion included in other current assets and long-term portion included in other assets.
c. | Included $414 million held in an escrow account for future oil and gas property acquisitions (refer to Note 2 for further discussion).
d. | Excluded $225 million of time deposits (which approximated fair value) at June 30, 2014 (included in other current assets), and at December 31, 2013 ($15 million included in other current assets and $210 million in other assets), associated with the Cerro Verde royalty dispute.
e. | Refer to Note 7 for further discussion and balance sheet classifications. Crude oil options are net of $329 million at June 30, 2014, and $444 million at December 31, 2013, for deferred premiums and accrued interest.
f. | Recorded at cost except for debt assumed in acquisitions, which were recorded at fair value at the respective acquisition dates.
g. | Included in other liabilities.
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 price or a mid-evaluation price. A bid evaluation price is an estimated price at which a dealer would pay for a security. A mid-evaluation price 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 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. crude oil prices, volatilities, interest rates and contract terms. FCX's derivative financial instruments for natural gas swaps are valued using a pricing model that has various inputs including NYMEX 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 (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). 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. The 2014 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 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 14 percent to 55 percent, with a weighted average of 21 percent. The deferred premiums ranged from $5.15 per barrel to $7.22 per barrel, with a weighted average of $6.49 per barrel. Refer to Note 7 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 7 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 fair value of warrants associated with the Plains Offshore Preferred Stock was determined with an option pricing model that used unobservable inputs. The inputs used in the valuation model are the estimated fair value of the underlying Plains Offshore common stock, expected exercise price, expected term, expected volatility and risk-free interest rate. The assumptions used in the valuation model are highly subjective because the common stock of Plains Offshore is not publicly traded. As a result, these warrants are classified within Level 3 of the fair value hierarchy. Long-term debt, including the current portion, is not actively traded and is valued using prices obtained from a readily available pricing source and, as such, is classified within Level 2 of the fair value hierarchy. 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, 2014. A summary of the changes in the fair value of FCX's Level 3 instruments follows (in millions):
| Crude Oil |  | Plains Offshore |
| Options |  | Warrants |
Fair value at December 31, 2013 | $ | (309 | ) |  | $ | (2 | ) |
Net realized losses | (6 | ) | a | — |  |
Net unrealized (losses) gains included in earnings related to assets and liabilities still held at the end of the period | (100 | ) | b | 2 |  | c
Settlement payments | 117 |  |  | — |  |
Fair value at June 30, 2014 | $ | (298 | ) |  | $ | — |  |
a. | Recorded in revenues.
b. | Included net unrealized losses of $98 million recorded in revenues and $2 million of interest expense associated with the deferred premiums.
c. | Recorded in other (expense) income, net.

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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=35750535&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=35750535&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=36462937&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=35750535&loc=d3e13504-108611 + Details
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