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Dispositions (Notes)
 6 Months Ended
Jun. 30, 2017
Discontinued Operations and Disposal Groups [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 June 30, 2017, the related fair value of $55 million was recorded in other assets on the consolidated balance sheets. During the first six months of 2017, the fair value of the contingent consideration derivative increased by $42 million ($6 million in second-quarter 2017), 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
 
Six Months Ended
 
 
June 30,
 
June 30,
 
 
2017
 
2016
 
2017
 
2016
 
Revenuesa
$
4

 
$
272

 
$
13

 
$
558

 
Costs and expenses:
 
 
 
 
 
 
 
 
Production and delivery costs
—

 
256

 
—

 
482

 
Depreciation, depletion and amortization
—


20

 
—

 
80

 
Interest expense allocated from parent
—

 
11

b 
—

 
21

b 
Other costs and expenses, net
—

 
5

 
—

 
6

 
Income (loss) before income taxes and net gain (loss) on disposal
4

 
(20
)
 
13

 
(31
)
 
Net gain (loss) on disposal
6

c 
(177
)
d 
38

c 
(177
)
d 
Net income (loss) before income taxes
10

 
(197
)
 
51

 
(208
)
 
(Provision for) benefit from income taxes
(1
)
 
16

 
(4
)
 
23

 
Net income (loss) from discontinued operations
$
9

 
$
(181
)
 
$
47

 
$
(185
)
 

a.
In accordance with accounting guidance, amounts are net of recognition (eliminations) of intercompany sales totaling $4 million in second-quarter 2017, $(41) million in second-quarter 2016, $13 million for the first six months of 2017 and $(73) million for the first six months of 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 gain of $6 million in second-quarter 2017 and $42 million for the first six months of 2017 associated with the change in the fair value of contingent consideration.
d.
In accordance with accounting guidance, an estimated loss on disposal was recorded in second-quarter 2016 and was adjusted through closing of the transaction in November 2016.

Cash flows from discontinued operations included in the consolidated statements of cash flows for the six months ended June 30, 2016, follow (in millions):
Net cash provided by operating activities
 
$
157

Net cash used in investing activities
 
(57
)
Net cash used in financing activities
 
(51
)
Increase in cash and cash equivalents in assets held for sale
 
$
49




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 for the first six months of 2017 because the reserves associated with the Madden properties were significant to the full cost pool.

On June 17, 2016, FM O&G sold certain oil and gas royalty interests for cash consideration of $102 million, before closing adjustments. Under the full cost accounting rules, the proceeds from this transaction were recorded as a reduction to capitalized oil and gas properties, with no gain or loss recognition in second-quarter 2016 because the reserves were not significant to the full cost pool.

Morenci. On May 31, 2016, FCX sold a 13 percent undivided interest in its Morenci unincorporated joint venture to SMM Morenci, Inc. for $1.0 billion in cash. FCX recorded a $577 million gain in second-quarter 2016 on the transaction and used losses to offset cash taxes on the transaction. A portion of the proceeds from the transaction was used to repay borrowings under FCX's unsecured bank term loan and revolving credit facility. As a result of the transaction, the unincorporated joint venture is owned 72 percent by FCX, 15 percent by Sumitomo Metal Mining Arizona, Inc. and 13 percent by SMM Morenci, Inc.

Timok. On May 2, 2016, Freeport Minerals Corporation (FMC), a wholly owned subsidiary of FCX, sold an interest in the Timok exploration project in Serbia to Global Reservoir Minerals Inc. (now known as Nevsun Resources, Ltd.) for consideration of $135 million in cash and contingent consideration of up to $107 million payable to FCX in stages upon achievement of defined development milestones. As a result of this transaction, FCX recorded a gain of $133 million in second-quarter 2016, and no amounts were recorded for contingent consideration under the loss recovery approach. A portion of the proceeds from the transaction was used to repay borrowings under FCX's unsecured bank term loan.

Assets Held for Sale. 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. As a result of the sale of TFHL, FCX expects to sell its interest in Freeport Cobalt and Kisanfu, and the assets and liabilities of Freeport Cobalt and Kisanfu are classified as held for sale in the consolidated balance sheets. During second-quarter 2017, a favorable adjustment of $13 million was recorded in net gain on sales of assets in the consolidated statements of operations associated with the estimated fair value less costs to sell of the Kisanfu exploration project. The adjustment was limited to the reduction in the carrying value when the Kisanfu exploration project was initially classified as held for sale in November 2016.