Fair Value Measurement (Unaudited)

6 Months Ended

Jun. 30, 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 second 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 June 30, 2012
	Carrying		Fair Value
	Amount		Total		Level 1		Level 2		Level 3
Assets
Cash equivalents:a
Money market funds	$	4,185	$	4,185	$	4,185	$	—	$	—
Investment securities (current and long-term):
MMR investmentb	461		475		—		475		—
Money market fundsa, c	24		24		24		—		—
Equity securitiesa, c	7		7		7		—		—
Total investment securities	492		506		31		475		—
Trust assets (long-term):a, c
U.S. core fixed income fund	48		48		—		48		—
Government mortgage-backed securities	43		43		—		43		—
Corporate bonds	24		24		—		24		—
Government bonds and notes	24		24		—		24		—
Asset-backed securities	10		10		—		10		—
Money market funds	7		7		7		—		—
Municipal bonds	1		1		—		1		—
Total trust assets	157		157		7		150		—
Derivatives:a
Embedded derivatives in provisional sales/purchase
contracts in an asset positiond	53		53		—		53		—
Copper futures and swap contractse	4		4		3		1		—
Copper forward contractse	3		3		1		2		—
Total derivative assets	60		60		4		56		—
Total assets			$	4,908	$	4,227	$	681	$	—
Liabilities
Derivatives:a
Embedded derivatives in provisional sales/purchase
contracts in a liability positiond	$	95	$	95	$	—	$	95	$	—
Copper futures and swap contractsf	8		8		6		2		—
Total derivative liabilities	103		103		6		97		—
Long-term debt, including current portiong	3,523		3,564		—		3,564		—
Total liabilities			$	3,667	$	6	$	3,661	$	—

	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	$	—	$	—
Investment securities (current and long-term):
MMR investmentb	475		507		—		507		—
Equity securitiesa, c	9		9		9		—		—
Money market fundsa, c	2		2		2		—		—
Total investment securities	486		518		11		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		—
Derivatives:a
Embedded derivatives in provisional sales/purchase
contracts in an asset positiond	72		72		—		72		—
Copper futures and swaps contractse	3		3		3		—		—
Copper forward contractse	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 positiond	$	82	$	82	$	—	$	82	$	—
Copper futures and swap contractsf	13		13		11		2		—
Total derivative liabilities	95		95		11		84		—
Long-term debt, including current portiong	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. Embedded derivatives are recorded in accounts receivable and/or accounts payable and accrued liabilities.

e. Included in other current assets.

f. Included in accounts payable and accrued liabilities.

g. Recorded at cost except for long-term debt acquired in the FMC acquisition, which was recorded at fair value at the acquisition date.

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.

MMR's 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 copper forward prices and the London PM gold forward price 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, these derivatives are classified within Level 2 of the fair value hierarchy.

FCX’s derivative financial instruments for copper futures and swap contracts and copper 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 measurement at the reporting date. There have been no changes in the techniques used at June 30, 2012.