FAIR VALUE MEASUREMENT

12 Months Ended

Dec. 31, 2011

Fair Value Disclosures [Abstract]

Fair Value Measurements

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).

Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2 Quoted prices in markets that are not active, quoted prices for similar assets or liabilities in active markets, inputs other than quoted prices that are observable for the asset or liability, or inputs that are derived principally from or corroborated by observable market data by correlation or other means; and

Level 3 Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

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

	Fair Value at December 31, 2011
	Total		Level 1		Level 2		Level 3
Assets
Cash equivalents:
Money market funds	$	4,007	$	4,007	$	—	$	—
Trust assets:
Government mortgage-backed securities	47		—		47		—
U.S. core fixed income fund	46		—		46		—
Government bonds and notes	21		—		21		—
Corporate bonds	19		—		19		—
Money market funds	9		9		—		—
Asset-backed securities	9		—		9		—
Municipal bonds	1		—		1		—
Total trust assets	152		9		143		—
Available-for-sale securities:
Equity securities	9		9		—		—
Money market funds	2		2		—		—
Total available-for-sale securities	11		11		—		—

Derivatives:
Embedded derivatives in provisional sales/purchases
contracts	72			—			72			—
Copper futures and swap contracts	3			3			—			—
Copper forward contracts	2			1			1			—
Total derivative assets	77			4			73			—
Total assets	$	4,247		$	4,031		$	216		$	—
Liabilities
Derivatives:
Embedded derivatives in provisional sales/purchases
contracts	$	(82	)	$	—		$	(82	)	$	—
Copper futures and swap contracts	(13		)	(11		)	(2		)	—
Total derivative liabilities	$	(95	)	$	(11	)	$	(84	)	$	—

	Fair Value at December 31, 2010
	Total			Level 1			Level 2			Level 3
Assets
Cash equivalents:
Money market funds	$	3,584		$	3,584		$	—		$	—
Trust assets:
U.S. core fixed income fund	42			—			42			—
Government mortgage-backed securities	35			—			35			—
Corporate bonds	23			—			23			—
Asset-backed securities	22			—			22			—
Money market funds	15			15			—			—
Government bonds and notes	10			—			10			—
Municipal bonds	1			—			1			—
Total trust assets	148			15			133			—
Available-for-sale securities:a
Equity securities	9			9			—			—
Money market funds	6			6			—			—
Total available-for-sale securities	15			15			—			—
Derivatives:
Embedded derivatives in provisional sales/purchases
contractsb	357			—			357			—
Copper futures and swap contracts	18			18			—			—
Total derivative assets	375			18			357			—
Total assets	$	4,122		$	3,632		$	490		$	—
Liabilities
Derivatives:
Embedded derivatives in provisional sales/purchases
contractsb	$	(115	)	$	—		$	(115	)	$	—
Copper forward contracts	(10		)	(1		)	(9		)	—
Total derivative liabilities	$	(125	)	$	(1	)	$	(124	)	$	—

a. Excluded were $19 million of time deposits.

b. At the end of 2011, FCX reevaluated its level determination for its embedded derivatives in provisional sales/purchases contracts, including those reported at December 31, 2010. Although the critical input in these measurements are quoted market prices for copper, gold and molybdenum, the contracts themselves are not traded on an exchange and, therefore, are more appropriately classified within Level 2 of the fair value hierarchy.

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 (government and agency securities, U.S. core fixed income fund, corporate bonds and asset-backed securities) 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 forward prices (copper) and the London Bullion Market Association forward price (gold) at each reporting date based on the month of maturity; however, FCX's contracts themselves are not traded on an exchange, as such, these derivatives are classified within Level 2 of the fair value hierarchy. FCX’s embedded derivatives on provisional molybdenum purchases have critical inputs based on the latest average weekly Metals Week Molybdenum Dealer Oxide prices; however, FCX's contracts themselves are not traded on an exchange, as such, these derivatives are classified within Level 2 of the fair value hierarchy.

FCX’s derivative financial instruments for copper futures and swap contracts and 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 forward prices at each reporting date based on the month of maturity (refer to Note 15 for further discussion). Certain of these contracts are traded on the over-the-counter market and are classified as 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 measured at the reporting date. There have been no changes in the techniques used at December 31, 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 as of December 31 follows:

	2011						2010
	Carrying Amount			Fair Value			Carrying Amount			Fair Value
Cash and cash equivalentsa	$	4,822		$	4,822		$	3,738		$	3,738
MMR cost investmentb	475			507			500			623
Net embedded derivatives included in accounts
receivable or payable	(10		)	(10		)	242			242
Trust assets (current and long-term)a, c	152			152			148			148
Available-for-sale securities (current and
long-term)a, c	11			11			34			34
Derivative assetsa, d	5			5			18			18
Derivative liabilitiesa, e	(13		)	(13		)	(10		)	(10		)
Debt (including amounts due within one year)f	(3,537		)	(3,797		)	(4,755		)	(5,146		)

a. Recorded at fair value.

b. Recorded at cost and included in other assets. At December 31, 2011, these securities were not actively trading; as such, fair value was based on a pricing simulation model using MMR's publicly traded common stock as the most significant observable input. At December 31, 2010, fair value was based on a bid evaluation, which is an estimated price at which a dealer would pay for a security.

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

d. Included in other current assets.

e. Included in accounts payable and accrued liabilities.

f. Recorded at cost except for long-term debt acquired in the FMC 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.