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Dispositions DIspositions (Notes)
 3 Months Ended
Mar. 31, 2017
Dispositions [Abstract]  
Dispositions
DISPOSITIONS

TF Holdings Limited - Discontinued Operations. FCX had a 70 percent interest in TFHL, which owns 80 percent of Tenke Fungurume Mining S.A. (TFM or Tenke) located in the Democratic Republic of Congo (DRC). On November 16, 2016, FCX completed the sale of its interest in TFHL to China Molybdenum Co., Ltd. (CMOC) for $2.65 billion in cash (before closing adjustments) and contingent consideration of up to $120 million in cash, consisting of $60 million if the average copper price exceeds $3.50 per pound and $60 million if the average cobalt price exceeds $20 per pound, both during calendar years 2018 and 2019. The contingent consideration is considered a derivative, and at March 31, 2017, the related fair value of $49 million was recorded in other assets on the consolidated balance sheets. During first-quarter 2017, the fair value of the contingent consideration derivative increased by $36 million, primarily resulting from higher cobalt prices, and was recorded in net income (loss) from discontinued operations.

In accordance with accounting guidance, FCX has reported the results of operations of TFHL as discontinued operations in the consolidated statements of operations. The consolidated statements of cash flows are reported on a combined basis without separately presenting discontinued operations.

Net income (loss) from discontinued operations in the consolidated statements of operations consists of the following (in millions):
 
Three Months Ended
 
 
March 31,
 
 
2017
 
2016
 
Revenuesa
$
9

 
$
285

 
Costs and expenses:
 
 
 
 
Production and delivery costs
—

 
226

 
Depreciation, depletion and amortization
—


60

 
Interest expense allocated from parent
—

 
10

b 
Income (loss) before income taxes and estimated loss on disposal
9

 
(11
)
 
Net gain on disposal
32

c 
—

 
Net income (loss) before income taxes
41

 
(11
)
 
(Provision for) benefit from income taxes
(3
)
 
7

 
Net income (loss) from discontinued operations
$
38

 
$
(4
)
 

a.
In accordance with accounting guidance, amounts are net of recognition (eliminations) of intercompany sales totaling $9 million in first-quarter 2017 and $(32) million in first-quarter 2016.
b.
In accordance with accounting guidance, interest associated with FCX’s term loan that was required to be repaid as a result of the sale of TFHL has been allocated to discontinued operations.
c.
Includes a $36 million gain associated with the change in the fair value of contingent consideration.

Cash flows from discontinued operations included in the consolidated statements of cash flows for the three months ended March 31, 2016, follow (in millions):
Net cash provided by operating activities
 
$
89

Net cash used in investing activities
 
(36
)
Net cash used in financing activities
 
(3
)
Increase in cash and cash equivalents in assets held for sale
 
$
50



Assets Held for Sale. FCX intends to sell its interest in Freeport Cobalt and the Kisanfu exploration project in the DRC. Freeport Cobalt includes the large-scale cobalt refinery in Kokkola, Finland, and the related sales and marketing business, in which FCX owns an effective 56 percent interest. Kisanfu is a copper and cobalt exploration project, located near Tenke, in which FCX holds a 100 percent interest. The assets and liabilities of Freeport Cobalt and Kisanfu are classified as held for sale in the consolidated balances sheets.

Oil and Gas Operations. On March 17, 2017, FM O&G sold property interests in the Madden area in central Wyoming for cash consideration of $17.5 million, before closing adjustments. Under the full cost accounting rules, the sale resulted in recognition of a $17 million gain in first-quarter 2017 because the reserves associated with the Madden properties were significant to the full cost pool.