Fair Value Measurement (Unaudited)

9 Months Ended

Sep. 30, 2011

Fair Value Measurement [Abstract]

Fair Value Measurement

FAIR VALUE MEASUREMENT

Fair value accounting guidance includes a fair value 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 did not have any significant transfers in or out of Levels 1, 2, or 3 for the third quarter of 2011.

A summary of FCX’s financial assets and liabilities measured at fair value on a recurring basis follows (in millions):

	Fair Value at September 30, 2011
	Total			Level 1			Level 2		Level 3
Assets
Cash equivalents:
Money market funds	$	4,828		$	4,828		$	—	$	—
Time deposits	201			201			—		—
Total cash equivalents	5,029			5,029			—		—
Trust assets (current and long-term):
U.S. core fixed income funds	46			—			46		—
Government mortgage-backed securities	40			—			40		—
Government bonds and notes	22			—			22		—
Corporate bonds	18			—			18		—
Asset-backed securities	15			—			15		—
Money market funds	11			11			—		—
Municipal bonds	1			—			1		—
Total trust assets	153			11			142		—
Available-for-sale securities:
Time deposits	15			15			—		—
Equity securities	8			8			—		—
Money market funds	2			2			—		—
Total available-for-sale securities	25			25			—		—
Derivatives:
Embedded derivatives in provisional sales/purchases	179			179			—		—
Total assets	$	5,386		$	5,244		$	142	$	—
Liabilities
Derivatives:
Embedded derivatives in provisional sales/purchases	$	(581	)	$	(581	)	$	—	$	—
Copper futures and swap contracts	(54		)	(54		)	—		—
Copper forward contracts	(1		)	(1		)	—		—
Total derivative liabilities	$	(636	)	$	(636	)	$	—	$	—

Valuation Techniques

Money market funds and time deposits are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets.

Fixed income securities (government and agency securities, corporate bonds, asset-backed securities and U.S. core fixed income funds) 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 are valued using quoted market prices based on the forward LME or COMEX prices (copper) and the London Bullion Market Association price (gold) and, as such, are classified within Level 1 of the fair value hierarchy. FCX’s embedded derivatives on provisional molybdenum purchases are valued based on the latest average weekly Metals Week Molybdenum Dealer Oxide prices and, as such, are classified within Level 1 of the fair value hierarchy.

FCX’s derivative financial instruments for copper futures and swap contracts and forward contracts are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets (refer to Note 7 for further discussion).

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 measured at the reporting date. There have been no changes in the techniques used at September 30, 2011.

The carrying value for certain FCX financial instruments (i.e., accounts receivable, accounts payable and accrued liabilities, dividends payable, and Rio Tinto’s share of joint venture cash flows) approximate fair value and, therefore, have been excluded from the table below. A summary of the carrying amount and fair value of FCX’s other financial instruments follows (in millions):

	At September 30, 2011						At December 31, 2010
	Carrying Amount			Fair Value			Carrying Amount			Fair Value
Cash and cash equivalentsa	$	5,128		$	5,128		$	3,738		$	3,738
McMoRan Exploration Co. investmentb	482			445			500			623
Net embedded derivatives included in accounts receivable or payablea	(402		)	(402		)	242			242
Trust assets (current and long-term)a, c	153			153			148			148
Available-for-sale securities (current and long-term)a, c	25			25			34			34
Derivative assetsa, d	—			—			18			18
Derivative liabilities (current and long-term)a, e	(55		)	(55		)	(10		)	(10		)
Long-term debt (including amounts due within one year)f	(3,535		)	(3,830		)	(4,755		)	(5,146		)

a. Recorded at fair value. 

b. Recorded at cost and included in other assets. At December 31, 2010, fair value was based on a bid evaluation, which was an estimated price at which a dealer would pay for a security. At September 30, 2011, these securities were not actively trading; as such, fair value was based on a convertible pricing model using McMoRan Exploration Co.'s publicly traded common stock as the principle variable.

c. Current portion included in other current assets and long-term portion included in other assets. 

d. Included in other current assets. 

e. Current portion included in accounts payable and accrued liabilities and long-term portion included in other liabilities.

f. Recorded at cost except for long-term debt acquired in the Phelps Dodge acquisition, which was recorded at fair value at the acquisition date. Fair value of substantially all of FCX’s long-term debt is estimated based on quoted market prices.