Letter to Stakeholders

“Proving our Mettle”, this year’s report theme, reflects our resolve to position Freeport-McMoRan for long-term success. Doing so requires fulfilling our commitment to sustainable development, even during periods of difficult market conditions like we faced during 2015. Our sector is experiencing economic turbulence and stakeholder expectations are rising. From securing community trust and acceptance to increasing attention to human rights impacts in various metal supply chains, there are many risks and opportunities to navigate. At Freeport-McMoRan we have long known the importance of proactively working with stakeholders, from community leaders to customers, to implement smart solutions for challenging problems. This is what we do every day and is the basis for delivering significant benefits from our long-lived assets well into the future. We are pleased to report the progress we are making along this journey.

The safety of the men and women in our workforce continues to be our highest priority. In 2015, our incident rate tied the company’s historical best the year prior. Regrettably, three fatal injuries occurred, including two at our Grasberg operations and one at our Cerro Verde operation. Fatality prevention continues to be a focus of our management team and the leadership at all operations. Ensuring understanding of the critical controls necessary to eliminate or reduce fatal risks is of greatest importance.

Our sector was reminded again in 2015 about the need to eliminate tailings impoundment failures; the loss of life and environmental consequences are not acceptable. We have studied the lessons learned from recent failures experienced by others in the sector and implemented improvements to our already sound tailings management controls and programs. We are contributing to an ICMM-commissioned global review of tailings storage facility standards and critical controls, to learn from experts and implement recommendations for continuous improvement of our programs.

Energy and water management efforts gathered significant international attention in 2015, with COP 21 in Paris focused on steps to address climate change and international drought conditions impacting water supplies. During 2015, we continued to invest in projects that provide the efficient use of energy and adaptation measures to establish more efficient water utilization where sources of water are limited. TFM is completing the refurbishment of four turbines at the N’seke hydropower station, which will provide 260 megawatts of zero emission capacity to a power-constrained region. The new milling circuits at Cerro Verde and Morenci are now delivering significant energy efficiency gains versus traditional technologies. Our operations in arid regions continue to maintain water models and utilize specialized instrumentation to reduce water losses while improving recycling rates. We are engaged with local farmers around Arequipa, Peru, on adaptation measures in response to drought conditions in the Andes.

Our policy commitment to respect human rights is demonstrated by our implementation of the UN Guiding Principles on Business and Human Rights and the Voluntary Principles on Security and Human Rights. We engaged Verisk Maplecroft to complete a human rights impact assessment at our TFM operation in the DRC that included over 70 independent interviews, followed by international-level feedback meetings with nongovernmental organizations, investors and businesses. The most serious potential and actual impacts identified were associated with illegal mining and often related violent criminal acts – issues well known to us. Our operating teams and corporate support personnel continue to explore strategies to maintain the safety and security of our workforce, as well as to discourage illegal mining and associated activities.

The expected long-term operational lifespan of our mining portfolio makes local investment core to our business. Freeport-McMoRan employees are ambassadors for sustainable development within our communities and provide a nexus to informed community acceptance of our operations. The successful completion of the Cerro Verde expansion in Peru, now the largest concentrating facility in the world, is a testament to how consistent and open two-way engagement with local stakeholders, along with targeted community investments, can result in trust and acceptance at the local level. We again congratulate the Cerro Verde operations and project management teams on this tremendous accomplishment.

While we are cognizant of the substantial societal contributions we deliver today, thinking forward, we are contemplating how our business can advance the United Nations Sustainable Development Goals adopted last September. Coupled with the importance of our products for technological advancement and economic growth in the face of an increasing focus on the circular economy, our portfolio of assets and associated sustainability programs position us well to make a positive difference in our local communities for decades to come.

Finally, we want to acknowledge our employees who continue to demonstrate unwavering resilience as we execute our business plans in this volatile market. We appreciate their hard work and commitment to our success. We would also like to thank the Corporate Responsibility Committee and our entire Board of Directors for their continued support and counsel as we work toward sustainable development.

Respectfully yours,

Non-Executive Chairman of the Board
Vice Chairman of the Board, President and Chief Executive Officer
June 8, 2016