Fair Value Measurement (Unaudited)

3 Months Ended

Mar. 31, 2012

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 did not have any significant transfers in or out of Levels 1, 2 or 3 for the first quarter of 2012.

The carrying value for certain FCX financial instruments (i.e., cash, accounts receivable, accounts payable and accrued liabilities, and dividends payable) approximate fair value because of their short-term nature and generally negligible credit losses. A summary of the carrying amount and fair value of FCX’s other financial instruments follows (in millions):

	At March 31, 2012
	Carrying			Fair Value
	Amount			Total			Level 1			Level 2			Level 3
Assets
Cash equivalents:a
Money market funds	$	4,221		$	4,221		$	4,221		$	—		$	—
McMoRan Exploration Co. investmentb	468			379			—			379			—
Trust assets (long-term):a, c
U.S. core fixed income fund	47			47			—			47			—
Government mortgage-backed securities	39			39			—			39			—
Corporate bonds	24			24			—			24			—
Government bonds and notes	21			21			—			21			—
Asset-backed securities	10			10			—			10			—
Money market funds	8			8			8			—			—
Municipal bonds	1			1			—			1			—
Total trust assets	150			150			8			142			—
Available-for-sale securities (current and long-term):a, c, d
Equity securities	8			8			8			—			—
Derivatives:a
Embedded derivatives in provisional sales/purchase
contracts in an asset positione	46			46			—			46			—
Copper futures and swap contractsf	10			10			9			1			—
Copper forward contractsf	1			1			—			1			—
Total derivative assets	57			57			9			48			—
Total assets				$	4,815		$	4,246		$	569		$	—
Liabilities
Derivatives:a
Embedded derivatives in provisional sales/purchase
contracts in a liability positione	$	(29	)	$	(29	)	$	—		$	(29	)	$	—
Copper futures and swap contractsg	(3		)	(3		)	(2		)	(1		)	—
Total derivative liabilities	(32		)	(32		)	(2		)	(30		)	—
Long-term debt, including current portionh	(3,521		)	(3,502		)	—			(3,502		)	—
Total liabilities				$	(3,534	)	$	(2	)	$	(3,532	)	$	—

	At December 31, 2011
	Carrying			Fair Value
	Amount			Total			Level 1			Level 2			Level 3
Assets
Cash equivalents:a
Money market funds	$	4,007		$	4,007		$	4,007		$	—		$	—
McMoRan Exploration Co. investmentb	475			507			—			507			—
Trust assets (long-term):a, c
Government mortgage-backed securities	47			47			—			47			—
U.S. core fixed income fund	46			46			—			46			—
Government bonds and notes	21			21			—			21			—
Corporate bonds	19			19			—			19			—
Money market funds	9			9			9			—			—
Asset-backed securities	9			9			—			9			—
Municipal bonds	1			1			—			1			—
Total trust assets	152			152			9			143			—
Available-for-sale securities (current and long-term):a, c
Equity securities	9			9			9			—			—
Money market funds	2			2			2			—			—
Total available-for-sale securities	11			11			11			—			—
Derivatives:a
Embedded derivatives in provisional sales/purchase
contracts in an asset positione	72			72			—			72			—
Copper futures and swaps contractsf	3			3			3			—			—
Copper forward contractsf	2			2			1			1			—
Total derivative assets	77			77			4			73			—
Total assets				$	4,754		$	4,031		$	723		$	—
Liabilities
Derivatives:a
Embedded derivatives in provisional sales/purchase
contracts in a liability positione	$	(82	)	$	(82	)	$	—		$	(82	)	$	—
Copper futures and swap contractsg	(13		)	(13		)	(11		)	(2		)	—
Total derivative liabilities	(95		)	(95		)	(11		)	(84		)	—
Long-term debt, including current portionh	(3,537		)	(3,797		)	—			(3,797		)	—
Total liabilities				$	(3,892	)	$	(11	)	$	(3,881	)	$	—

a. Recorded at fair value. 

b. Recorded at cost and included in other assets.

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

d. Excluded were$17 million of time deposits at March 31, 2012.

e. Embedded derivatives are recorded in accounts receivable and/or accounts payable and accrued liabilities.

f. Included in other current assets.

g. Included in accounts payable and accrued liabilities.

h. Recorded at cost.

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.

McMoRan Exploration Co.'s (MMR) 5¾% Convertible Perpetual Preferred Stock is not actively traded; therefore, FCX's investment in the MMR 5¾% Convertible Perpetual Preferred Stock is valued based on a pricing simulation model that uses MMR's publicly traded common stock as the most significant observable input. Therefore, this investment is classified within Level 2 of the fair value hierarchy.

Fixed income securities (government and agency securities, U.S. core fixed income funds, 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 PM forward price (gold) at each reporting date based on the month of maturity; however, FCX's contracts themselves are not traded on an exchange. Likewise, 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 a result, both of 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 6 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.

Long-term debt, including 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 measured at the reporting date. There have been no changes in the techniques used at March 31, 2012.