DISPOSITIONS AND ACQUISITIONS DISPOSITIONS AND ACQUISITIONS

12 Months Ended

Dec. 31, 2021

Dispositions And Acquisitions [Abstract]

DISPOSITIONS AND ACQUISITIONS

ACQUISITIONS AND DISPOSITIONS

Cobalt Business. In September 2021, FCX’s 56-percent-owned subsidiary, Koboltti Chemicals Holdings Limited (KCHL), completed the sale of its remaining cobalt business based in Kokkola, Finland (Freeport Cobalt) to Jervois Global Limited (Jervois) for $208 million (before post-closing adjustments), consisting of cash consideration of $173 million and 7 percent of Jervois common stock (valued at $35 million at the time of closing). At closing, Freeport Cobalt’s assets included cash of approximately $20 million and other net assets of $125 million. FCX recorded a gain of $60 million ($34 million to net income attributable to common stock) in 2021 associated with this transaction. In addition, KCHL will have the right to receive contingent consideration of up to $40 million based on the future performance of Freeport Cobalt. Any gain related to the contingent consideration will be recognized when received.

In fourth-quarter 2019, FCX completed the sale of its cobalt refinery in Kokkola, Finland, and related cobalt cathode precursor business (consisting of approximately $271 million of assets and $63 million of liabilities at the time of closing) to Umicore for total cash consideration of approximately $200 million, including approximately $50 million of working capital. FCX recorded a gain of $59 million in 2019 ($33 million to net loss attributable to common stock) associated with this transaction.

Following these transactions, FCX no longer has cobalt operations.

PT Smelting. On April 30, 2021, PT-FI acquired 14.5 percent of the outstanding common stock of PT Smelting, a smelter and refinery in Gresik, Indonesia, for $33 million, increasing its ownership interest from 25.0 percent to 39.5 percent. The remaining outstanding shares of PT Smelting continue to be owned by Mitsubishi Materials Corporation. PT-FI has continued to account for its investment in PT Smelting using the equity method since it does not have control over PT Smelting.

On November 30, 2021, PT-FI entered into a convertible loan agreement to fund the expansion of PT Smelting’s current capacity by 30 percent to 1.3 million metric tons of concentrate per year. Upon completion of the expansion project, targeted for year-end 2023, PT-FI’s loan will convert into PT Smelting equity resulting in a majority ownership interest and consolidation of PT Smelting in FCX’s consolidated financial statements.

Kisanfu Transaction. In December 2020, FCX completed the sale of its interests in the Kisanfu undeveloped project to a wholly owned subsidiary of China Molybdenum Co., Ltd. (CMOC) for $550 million, with after-tax net cash proceeds totaling $415 million. The Kisanfu project, located in the Democratic Republic of Congo, is an undeveloped cobalt and copper resource. FCX did not have any proven and probable mineral reserves associated with the Kisanfu project. FCX recorded a gain of $486 million in 2020 associated with this transaction.

Timok Transaction. In 2016, FCX sold an interest in the upper zone of the Timok exploration project in Serbia (the 2016 Transaction).

In December 2019, FCX completed the sale of its interest in the lower zone of the Timok exploration project to an affiliate of the purchaser in the 2016 Transaction, for cash consideration of $240 million at closing plus the right to future contingent payments of up to $150 million. These future contingent payments will be based on the future sale of products (as defined in the agreement) from the Timok lower zone. For a period of 12 months after the third anniversary of the initial sale of products from the Timok lower zone, the purchaser can settle, or FCX can demand payment of, such deferred payment obligation, in each case, for a total of $60 million. As these deferred payments are contingent upon future production (the Timok lower zone project is still pre-operational) and would result in gain recognition, no amounts were recorded upon the closing of the transaction. Subsequent recognition will be based on the gain contingency model, in which the consideration would be recorded in the period in which all contingencies are resolved and the gain is realized. This is expected to be when FCX (i) is provided periodic product sales information by the purchaser or (ii) gives notice to the purchaser or receives notice from the purchaser regarding the settlement of the deferred payments for $60 million.

In addition, in lieu of payment upon achievement of defined development milestones provided for in the 2016 Transaction, the purchaser agreed to pay $107 million in three installment payments of $45 million (collected in 2020), $50 million (collected in 2021), and $12 million by March 31, 2022. As a result of this transaction, FCX recorded a gain of $343 million in 2019, consisting of the cash consideration ($240 million) and the aggregate discounted amount of the three installment payments ($103 million).

TF Holdings Limited - Discontinued Operations. In 2016, FCX completed the sale of its 70 percent interest in TF Holdings Limited (TFHL) to 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 exceeded $3.50 per pound and $60 million if the average cobalt price exceeded $20 per pound, both during the 24-month period ending December 31, 2019.

The contingent consideration was considered a derivative, and the fair value was adjusted through December 31, 2019. FCX realized and collected in January 2020 contingent consideration of $60 million because the average cobalt price exceeded $20 per pound during the 24-month period ending December 31, 2019 (no amount was realized associated with the copper price). Gains resulting from changes in the fair value of the contingent consideration derivative totaling $3 million in 2019 were included in net income from discontinued operations and primarily resulted from fluctuations in cobalt prices. In accordance with accounting guidance, FCX reported the results from TFHL as discontinued operations in the consolidated statements of operations because the disposal represented a strategic shift that had a major effect on operations.