David Joint:

Thank you, Regina and good morning everyone. Welcome to the Freeport-McMoRan conference call. Earlier this morning, FCX reported its second quarter 2024 operating and financial results. A copy of today's release with supplemental schedules and slides is available on our website, fcx.com. Today's conference call is being broadcast live on the Internet. Anyone may listen to the conference call by accessing our website homepage and clicking on the webcast link. In addition to analysts and investors, the financial press has been invited to listen to today's call. A replay of the webcast will be available on our website later today. Before we begin our comments, we'd like to remind everyone that today's press release and certain of our comments on the call include non-GAAP measures and forward-looking statements, and actual results may differ materially. Please refer to our cautionary language included in our press release and slides and to the risk factors described in our SEC filings, all of which are available on our website. Also on the call with me today are Richard Adkerson, Chairman of the Board; Kathleen Quirk, President and Chief Executive Officer; Maree Robertson, Executive Vice President and CFO; and other senior members of our management team. Richard will make some few opening comments, Kathleen will review our slide materials, and then we'll open up the call for questions. Richard?

Kathleen Quirk:

Okay. Thank you, Richard, and I'm going to start on Slide 3, with the information reflecting the results of our second quarter and first half of 2024. Our team continues to focus on what matters in driving value in our business, focused on executing our plans reliably and responsibly, enhancing efficiencies, managing costs aggressively and building optionality value in our organic growth portfolio. During the second quarter, we generated strong margins and cash flows with $2.7 billion in EBITDA and $2 billion in operating cash flows. Our production volumes were largely in line with our estimates going into the period, but as we reported early July, our shipments of copper and gold were impacted in June as a result of obtaining export license in Indonesia, which has now been secured. I want to highlight two important items of significance and momentum for the future. The first item, Richard talked about it, it's the Indonesian smelter project advancing to the commissioning phase. As Richard discussed, our team has managed this large and complex project in an exemplary manner, and we're now focused on further derisking through a successful startup in the months ahead. Solid project execution is hallmark of our Freeport team who stepped up once again to deliver in a challenging environment for major capital projects. The successful completion of this strategic investment is of significance and positions us to secure a long-term extension of our operating rights in Indonesia. The second value driver I want to highlight is the ongoing momentum in our innovative leach project to build additional scale in low-cost incremental production. Continued scaling of this initiative is a major value driver and a differentiator for Freeport. As you'll see, our second quarter and first half incremental production from this initiative doubled from the comparable period since 2023. As we set our sights on scaling this initiative further, we see the opportunity to lower our unit costs in the U.S. meaningfully. We continue to execute our established shareholder return framework with $0.5 billion in dividends and share purchases year-to-date. We ended the quarter in a strong position financially, with a favorable future outlook as we head into the second half of this year. Turning to copper markets on Slide 4. Richard just talked about this, copper prices traded in a broad range between $3.67 per pound and $4.92 per pound on the LME exchange and a wider range on the U.S. COMEX exchange, that's been -- during 2024. We've discussed on prior calls, the impact of macro sentiment and investor positioning that can drive large moves in pricing. Richard referred to the domestic economic challenges in China, the ongoing weakness in the Chinese property market, destocking and working capital management and increase in copper exchange inventories and delays in actions to stimulate economic growth, which have all weighed on the market. In the U.S., we're seeing -- continuing to see strong demand for copper from a broad range of sectors. And globally, we favorable demand drivers for the future associated with copper's increasingly important role in the global economy. Copper is a foundational essential metal when it comes to electrification, and the world is becoming more and more focused on copper-intensive energy applications. The facts are its physical characteristics and superior conductivity make it the metal of electrification. New massive investment in the power grid, renewable generation, technology infrastructure and transportation are driving increased demand for copper and forecast call for above-trend growth and demand for the foreseeable future. As we review the fundamentals and match the demand side up with supply, we look at the limitations of existing supply growth, the challenges and extended time frames required to build new supplies and projections for peak mine supply over the next couple of years. These factors, combined with secular demand trends point to tight market conditions as we go forward. With Freeport's leading position in the industry, large-scale current operations and future growth pipeline, we're very well positioned to benefit from this fundamental outlook in the future. Now, turning to our operations on slide 5. We summarized the quarterly operating results by geographic region. In the US, we continue to focus our efforts on mitigating the impact of lower ore grade phases currently being mined. You'll see in our operational details provided in our press release that the ore grades processed through our mill and leach facilities in the US had more than a 10% decrease in ore grades compared to the year ago period. All else being equal, this results in higher costs on a per unit basis. We're very focused on mitigating these impacts, and to mitigate it, we're focused on initiatives to improve productivity, equipment reliability, take advantage of automation and new technologies and importantly, add low-cost incremental volumes through our innovative leach initiative, and we think this can have an impact as we go forward. In South America, our team and our large-scale Cerro Verde operation posted a solid second quarter. You can see the mill throughput exceeded 425,000 tons of ore per day. This is a strong recovery from the first quarter with higher throughput and recoveries contributed to higher copper and molybdenum volumes. Our unit net cash costs improved sequentially from the first quarter in South America, even after giving effect to a $0.22 per pound non-recurring charge for the new labor agreement reached during the quarter. In Indonesia, despite delays in shipping during the month of June, the results were strong, and you'll see net unit cash credits of $0.21 per pound. Our quarterly mill rates were lower than what we achieved in the first quarter as we advanced maintenance in June to manage inventory during the shipping delays. We also announced previously a change in mine sequencing that will affect gold volumes for the year. During the second quarter, we modified our mine plans for 2024 to address some disruption from certain wet draw points in the Grasberg Block Cave. We're currently maintaining our mining rates but have shifted to areas with slightly lower gold grades as we implement operating solutions to regain access to the higher-grade material. This is a timing matter and not a significant issue for our long-term plans. I want to talk some more about our innovative leach initiative, and we've got some information on slide 6. We're continuing to build momentum with this initiative. Given the low incremental cost and low capital intensity associated with these activities, which essentially involve recovering incremental copper from material that has already been mined. The returns and value proposition on this opportunity are significant and a major catalyst for us. You can see the significant growth in incremental volumes from these initiatives over the last several quarters. As a refresher, we have achieved our initial targeted run rate of 200 million pounds of copper per annum and now have our sights on scaling this to 400 million pounds per annum in the next couple of years. Ultimately, our goal is to achieve 800 million pounds per annum from this exciting initiative. This is the size of a major new mine with low capital investment required and incremental operating costs, which will greatly enhance the value and competitive position of our Americas production. I want to go over how we're doing this. The results to date have been achieved by enhancing heat retention in the leach stockpiles, by using data from sensors and analytics, which help us identify where the opportunities are located within these massive stockpiles and deploying new operational tactics to bring our catalyst solution to areas that were previously inaccessible. We're now building on these successful initiatives and have a high degree of confidence in boosting the run rate to 300 million pounds to 400 million pounds during 2026. Some examples of new initiatives include, expanding our surface area under leach by using drone technology and helicopters to install irrigations in areas previously inaccessible under conventional techniques and scaling our solution injection wells. With this experience, we're drilling more efficiently, getting more injection wells placed and are testing techniques to expand the impact of injection wells over broader areas. In parallel, we're working on innovation-driven initiatives, which would really move the needle to our ultimate objective of reaching 800 million pounds for annum. These include adding direct heat to the stockpiles from renewable or other sources, taking advantage of pyrite-hosted ore to generate additional heat and testing new additives that we've been developing. At Freeport, we're really well positioned to capture this value with an extensive inventory of substantial residual copper from material already mined, industry-leading technical expertise and leaching technology and a strong multi-disciplined and focused innovation team dedicated to this initiative. Turning to our other areas of growth of project pipeline on Slide 7. We discussed earlier the extended time frames required for the industry to develop new supplies. At Freeport, we have the advantage of leveraging existing infrastructure to develop new supplies and have a series of projects we are advancing. Our leach initiative is our best opportunity to grow in the near term, and we're pursuing this aggressively as we talked about. But beyond that, in the US, we have a brownfield expansion at our Bagdad mine in Arizona where we have an extensive reserve position. We've already reported. We've completed our studies. We're now advancing investments in automation, tailings and energy infrastructure and expanded employee housing in this remote location to position us to execute the project more efficiently when the time is right. This project, unlike other things that you see around the industry, it does not have major permitting hurdles and it represents a straightforward option. We're monitoring conditions and progress with our derisking initiatives and expect to be in a position to make a decision on our investment next year. We've also commenced pre-feasibility studies to define a brownfield expansion in the Lone Star, Safford District. Most of you know, this is our newest operation in the US and we're really just getting started here. We have our sights on more than doubling current production levels in the 300 million pounds per annum range. This is an enormous resource, and we expect this district will become a generational cornerstone asset for Freeport in Arizona in the next decade. At El Abra in Chile, where we are in partnership with CODELCO, we have completed pre-feasibility studies, and we're now preparing an environmental impact statement expected to be completed by the end of next year. The project involves – that we're considering, involves an investment in a new concentrator of scale similar to the size of Cerro Verde concentrator we installed nearly 10 years ago, investments in desalinization and a pipeline system to support our water requirements. The preliminary estimate for incremental capital costs for the new concentrator project and related infrastructure, which continue to be reviewed approximate $7.5 billion and would provide 750 million pounds of annual copper production and 9 million pounds of molybdenum per annum over a very long life. This project would require about seven to eight years of lead time because of permitting requirements, but we're advancing so we have optionality, and we're going to continue to review the economics in the context of market conditions, but believe this is a project that will be required in the future to support long-term copper demand trends. In Indonesia, we're making great progress on our large-scale Kucing Liar development scheduled to commence production prior to 2030. We're also conducting additional exploration below our Deep MLZ ore body and expect an extension of our operating lines beyond 2041 will set up for additional long-term exploration and development options in this highly-attractive district. We're advancing all these initiatives to build optionality for growth, and we'll continue to be disciplined in our approach, targeting opportunities that can be executed efficiently, profitably and value-enhancing. Richard talked about the PT-FI extension beyond 2041, and the key role that the smelter plays in that process. We've reviewed in the past our discussions with Indonesian government to extend our rights, to provide continuity of the significant benefits of this operation to the people of Papua and Republic of Indonesia. During the second quarter, the government enacted a regulation applicable to a broad range of license holders in Indonesia. We've highlighted the applicable provisions for IUPK license holders such as PT-FI, and these are the requirements for the conditions, which need to be met to – for approval for an extension. These conditions are in line with our expectations, and we're in the process of completing an application to be in a position to file the application during 2024. The previous requirement for extensions could only be requested five years before expiry. So these new regulations allow us to apply now, reflecting the government's recognition of the long lead times required for investment. It is a really positive development for PT-FI and its stakeholders. We look forward to making our application and be in a position to extend our rights so that we can continue our long-range planning and maximize the value of this great resource. Slide 9 shows our three-year outlook for sales volumes of copper, gold and molybdenum, made some modest changes to 2024 copper sales, reflecting small revisions in the US and Indonesia. And as previously discussed, our gold volumes for 2024 will now reflect the change in the mine sequencing, which we discussed earlier, and this is really timing in nature. The rest of the guidance is very similar to our previous outlook. For 2024, we currently estimate consolidated unit cash costs to approximate $1.63 per pound, slightly above the April estimate of $1.57 and similar to our guidance of $1.60 per pound at the start of the year. The details of this are presented in the back -- on Slide 20, in reference materials. Slide 10 shows the cash flow generating capacity of this business, putting together our projected volumes and cost projections. We show a modeled result for our EBITDA and cash flow at various copper prices ranging from $4 a pound to $5 per pound copper. With these model results for 2025 and 2026 and current volume and cost estimates, holding gold flat at $2,300 per ounce and molybdenum flat at $20 a pound, EBITDA on an annual basis would range from nearly $11 billion per annum at $4 copper to $15 billion per annum at $5 copper. And our operating cash flows under these price cases would range from $7.5 billion per year to $11 billion at $5 copper. And we show some sensitivities for your reference on the right of this chart. We've got long life reserves, large-scale production. We're really well-positioned to benefit from a better fundamental picture as we go forward. On Slide 11, we show as we have in the past, our current forecast for capital expenditures in 2024 and 2025 -- capital expenditures for 2024, our forecast of approximate $3.7 billion and $4.1 billion in 2025. It's a relatively small increase over two years and principally relates to revisions and estimates for our sustaining capital program and long-term projects in the Grasberg District. We're going to continue to be disciplined in deploying capital, really making sure that the capital we're deploying pays off and build initiatives to enhance value. The discretionary projects over this two-year period totaled $2.5 billion. This is the category that reflects the capital investments we're making in new projects that under our financial policy are funded with 50% of available cash that is not distributed. We've got some details in the back on Slide 23 in our reference materials that provide some more information about these projects, which are value-enhancing and it will help us as we look to build value in the future. On Slide 12, in conclusion, we reiterate the financial policy priorities centered on a strong balance sheet, cash returns to shareholders, and investments in value-enhancing growth projects. Our balance sheet is solid. We've got strong credit metrics and flexibility within our debt targets to execute on our strategy. During the quarter, our credit rating was upgraded by S&P and now we're investment-grade rating by all three major rating agencies. As indicated on the slide, we've distributed $4.3 billion to shareholders year-to-date through dividends and share purchases. We've got an attractive future long-term portfolio that allow us to continue to build value and follow-up policy of investing in projects that build long-term value and returning cash to shareholders. We actively monitor the market conditions and carefully manage the timing of our projects to make sure our financial flexibility remains strong. Our global team is driven by value. We're focused on our clear strategy to execute our plans, invest in our future and return cash to shareholders. And thank you for your attention, and we'll now take your questions.

Alan Spence:

Thank you all. Good morning.

Alan Spence:

Good morning, Kathleen, Maree and Richard. On the North American operations, your grades were lower year-on-year. And the leaching volumes in Q2 annualizing above the 2024 target, yet copper sales guidance was decreased, I appreciate just by 1%. But do we put those together and conclude that North American kind of optimization targets are maybe proving a bit more challenging this year?

Alan Spence:

Thanks for that. And just a quick follow-up question on the leaching. You provided some helpful additional color on it. You mentioned a high probability of getting to the $300 million to $400 million range by 2026. But just to confirm, none of that would be in current 2026 sales volume guidance?

Alan Spence:

Understood. Thanks, Kathleen.

Carlos De Alba:

Yeah. Thank you very much. Good morning, Kathleen and Richard. So Kathleen, just continue with the discussion on the leach projects and initiatives in North America. Can you remind us or give us some color as to how much lower cash cost does those initiatives or those volumes have relative to the North American and overall current cash cost?

Carlos De Alba:

Thanks, Kathleen. And maybe just another one, and I understand this might be difficult to answer precisely. But with the new regulation for IUPK in Indonesia in place, and basically, as you mentioned, PT-FI imposition or having met basically the requirements to apply for an extension. What is the path ahead to get the approval of extension? I don't know if there is anything on timing or milestones that you can point to, and is this something that we have to wait until the new President is sworn in?

Carlos De Alba :

Thank you.

Operator:

Our next question will come from the line of Liam Fitzpatrick with Deutsche Bank. Please go ahead.

Kathleen Quirk:

Liam, in terms of your first question, it is a very large complex project and smelter startups there aren't a lot of them on the scale in the Western world in recent years. And so we've recognized that for some time and have been planning for this over an extensive period of time. We've brought together the expertise that Freeport has around the world in operating smelters. We operate a smelter in the US, in Arizona. We have efficient smelter in Huelva, Spain, that we've operated for some time. We also have an existing smelter in Indonesia that we're in partnership with a Japanese partner there that has been very successful. So we've brought to bear all of the expertise in not only looking at construction, and we've had a team, a dedicated team on the construction side who have just done a great job. But on an operational side, we've been standing up this team for some time to be able to run the smelter and training people, we've had – we've already got the people employed. We've brought in expertise from around the world to lead startup. And so we've planned for it. And your point is well understood by the company. We feel we're well-prepared for it, with any start-up you're going to have issues. We recognize that. But every time we've thrown issues and challenges at this team through the construction period and into the commissioning period, we've been able to overcome them. I hope you have a chance, if you haven't already, to look at the video showing really where this – where the smelter is in terms of operational readiness, and we're showing all the various facilities as part of it. So we've planned for it. We understand it's going to be a different way of marketing our product. In the past, in Indonesia, we've loaded concentrate on a ship and pay the TC/RC and collected our revenue, and that was pretty simple. Now it's got a more a more complex logistics situation, and we've got a number of products we'll be marketing. But the team has been working on this, and we've got expertise in operating smelters and marketing various products. And so we're well situated for it. In terms of the reporting, it will be reported. It's integrated into PT-FI. It will be reported as part of PT-FI's results, you'll be able to see its operating costs through the TC and RC line on our unit cost. But above that line in the revenue line, of course, we're going to be able to generate higher revenues because we're marketing directly. We have the -- essentially the free metal that will come through to our benefit. We don't have to pay a smelter, the payable factors, et cetera. So, it will be a piece of revenues and a piece of operating costs, but we'll provide disclosures to help you through that. We won't have the duties any longer. And so that's a sizable benefit as well. for our results. But just in terms of the operations and readiness, I'm going to ask Cory Stevens make a couple of comments. Cory is -- he Heads up our Engineering Group, our Project Construction Group, our group that deals with operational efficiencies. So, he's got a big portfolio, not only leading the smelter project, but also the leach innovation initiative. But Cory is just back from Indonesia and maybe, Cory, you can just supplement what I was talking about in terms of the readiness for operations.

Kathleen Quirk:

Yes. And I just want to emphasize one thing at Freeport, when we do a major project, we benefit from having a centralized team that supports operating teams. And so unlike some other companies that don't have this kind of infrastructure that can really help manage the construction period and transition to operations, we really can bring together the best of the best when it comes to executing a start-up. And I'm not sugarcoating, we're going to have things that come up, we know that, but we really have the right people that -- in place to have a safe and efficient start-up. We expect in August that we'll get first processing of concentrate through the facility. And as Cory said, the ramp up we expect to move pretty quickly to go through the end of 2025 -- I mean 2024, we're also -- we got a precious metal refinery that will be starting up in the same timeframe. in the revenue line, of course, we're going to be able to generate higher revenues because we're marketing directly. We have the -- essentially the free metal that will come through to our benefit. We don't have to pay a smelter, the payable factors, et cetera. So, it will be a piece of revenues and a piece of operating costs, but we'll provide disclosures to help you through that. We won't have the duties any longer. And so that's a sizable benefit as well. for our results. But just in terms of the operations and readiness, I'm going to ask Cory Stevens make a couple of comments. Cory is -- he Heads up our Engineering Group, our Project Construction Group, our group that deals with operational efficiencies. So, he's got a big portfolio, not only leading the smelter project, but also the leach innovation initiative. But Cory is just back from Indonesia and maybe, Cory, you can just supplement what I was talking about in terms of the readiness for operations.

Kathleen Quirk:

Yes. And I just want to emphasize one thing at Freeport, when we do a major project, we benefit from having a centralized team that supports operating teams. And so unlike some other companies that don't have this kind of infrastructure that can really help manage the construction period and transition to operations, we really can bring together the best of the best when it comes to executing a start-up. And I'm not sugarcoating, we're going to have things that come up, we know that, but we really have the right people that -- in place to have a safe and efficient start-up. We expect in August that we'll get first processing of concentrate through the facility. And as Cory said, the ramp up we expect to move pretty quickly to go through the end of 2025 -- I mean 2024, we're also -- we got a precious metal refinery that will be starting up in the same time frame. So a lot has gone into this project, a lot of planning. And it's been executed well, and we expect that we'll continue to execute it well through the ramp-up.

Kathleen Quirk:

Cory, you have one on your mind?

Liam Fitzpatrick:

Thank you.

Bob Brackett:

Good morning. A question around the gold sales revision. I understand the wet conditions in the Block Cave changed your mine sequencing into maybe a lower gold grade area, but why doesn't those ounces come back in the plan period? So if you lost 0.2 million ounces this year, wouldn't you argue that it should reappear in 2025 or 2026?

Mark Johnson:

No, Kathleen, I think you touched on it. We've been managing wet muck going back to the IOZ, so roughly over 20 years. Some of the things, as you mentioned, we had some spills that traveled a bit further. So that in the GBC, there's some unique material characteristics that we're mitigating. And the primary one, as Kathleen mentioned, is the ability to remotely place pumping equipment and pump out the water that accumulates during some of our time entry criteria. So what we have is a period of time that we wait to get safely back in, what we're seeing is that the water builds up during that period of waiting. By getting the remote pumping in, we'll be able to have it pump before the -- while this time is taking place and then we can start our cleanup much quicker. One of the things that we did in GBC is -- that was a bit unique, we -- because it's the foundation of our operation and the primary source of value, we built in the additional operational flexibility by developing more draw points than theoretically required to meet the production rate. And that's what allowed us to shift to this other area that had very similar copper grades, but incrementally lower gold grades. And as Kathleen mentioned, over the five years, that that goal you had mentioned is back in the plan. And we plan to have this mitigation measure strongly in place, firmly in place in the fourth quarter, and I'm confident we can do that.

Kathleen Quirk:

That's something that would be approved by the by the Minister of Energy & Minerals. We've been talking with the government. We do have plans to conduct exploration and we're doing some of that now. In the future, we'll conduct additional exploration that will allow us to identify additional resources. And so that is -- it's really part of our plan for extension. In terms of the additional refining capacity, there's been discussion with the government. There is an aspiration to have additional capacity in Papua. Our current smelter is located in Gresik, and there's an aspiration to have additional capacity in Papua, and that continues to be discussed with the government. But there's not a -- the regulation doesn't have a specific number or level of investment. It really is a matter of looking at what's needed in country and the desire is to have it located in Papua, and we'll be working to evaluate that along with the government.

Operator:

Our next question comes from the line of Orest Wowkodaw with Scotiabank. Please go ahead.

Kathleen Quirk:

The 10%, offering a 10% interest to a state-owned company, and we're talking with MIND ID about their objective to acquire additional 10%. The discussions we've had to date with the government have involved offering that 10%, and this is coming from FCX's shares, offering that 10% at -- with a reimbursement of our capital costs incurred for the current period through 2041 to the extent that, that benefits the period beyond 2041. So it's essentially a book value concept. And the rationale for offering the 10% and the mechanism for valuing it has been that the government is granting PT-FI with the extension and it's a cost of the deal. And from our perspective, being able to extend beyond 2041, there's a lot of value there that if we don't move forward and make investments that we won't be able to accomplish. So we felt it in the spirit of the partnership we have with the government where it's a one-off alignment and a win-win that this was an appropriate to give us the optionality to have value significant value beyond 2041.

Kathleen Quirk:

The financial policy is basically one where we distribute through dividends and share purchases, available cash, 50% of available cash. The smelter investments were not part of that math. So we're financing the separately. So the available cash definition is really just the flow and less the CapEx that's required for the current operation. It doesn't include the smelter. It doesn't include our future growth that we're investing in the discretionary projects that we've labeled earlier. So that will be a function of what our cash flows are. We certainly want to continue buying back stock, but it will be a function of what ultimate cash flows, and we'll continue to follow that policy.

Kathleen Quirk:

Just as a reminder, we're moving past the hour here, and I know people have been asking more than one question, so please limit to one and we'll get back to you with follow-ups.

Kathleen Quirk:

Hi, Mike.

Richard Adkerson :

Hey, Mike.

Michael Dudas:

Can you hear me now?

Michael Dudas:

Thank you. Your relationship and negotiations with the Indonesian government has been going quite well as you portrayed here today and in past calls. Maybe you can update us on how things are in Peru, Chile, maybe even in North America, how -- relative to the amount of investments that you're going to be looking at, maybe others and your competitors as well, how that's played out given the volatility and the upside in the copper price and any thought from those governments and those ministers to move along with the needed supplies that the market seems to be calling for?

Richard Adkerson:

Years of commitment to doing what Kathleen just said of doing the right thing, building relationships have led us in the US to have uniform support from communities, from native American groups, from state governments and regulators. The same goes true in Peru for our Cerro Verde project in the Arequipa region where Peru can be very challenging. It's got very challenging politics right now, but we benefit from work we've done to support the community and that's very helpful. And then in Chile, we're – our 49% partner at El Abra is CODELCO, and they are very anxious for us to move forward and very supportive. We developed a relationship with [indiscernible] will be on a panel with him at APAC and Peru this fall. And the tone has significantly changed from his initial election period where he's met the realities of the need for Chile to help support the mining sector. This is always such a big important part of our business, as you can see around the world. We learned a lot of lessons early on with the development of Grasberg and the need to have good relationships with indigenous people there as well as with central government. So, I'm proud of what our team has done, and we're just committed to finding common ground and doing things in the right way.

Kathleen Quirk:

Thanks Mike.

Lawson Winder:

Operator, thank you very much and Kathleen and Richard, hello and thank you for making the time for my call -- my question. I'll just keep it brief. I wanted to ask about Kucing Liar, hugely high-return project for you all. Effectively one topic, three questions. I just wanted to get an update on when you were expecting first production and then ask as to the pace of spending? So, I mean it's a $4 billion project, and you're noting that about $400 million have been spent to date over a period of about two years. When do you expect that to start to pick up a little more? Thanks very, very much.

Operator:

Our next question will come from the line of Brian MacArthur with Raymond James. Please go ahead.

Brian MacArthur:

Good morning, Rick. Good morning, Rick and Kathleen. Thank you for taking my question. I just want to go back to this 10% on the IUPK. I just want to confirm, A, until 2041 you maintain your 48.76%. I think that's what I understand is that it's 10% thereafter. But then two, on the capital, do you put it all in for 2041 and then get it back? Or is this going to be more like for a while at Rio, where as you develop reserves and their ownership goes up, that you share the cap in different ratios like we saw that said, with the Rio Tinto stuff historically. I'm just trying to figure out exactly like how the cash flows are going to work on this.

Richard Adkerson:

And Brian, that transaction occurs after 2041. It's not like the Rio deal where the transaction occurred in the mid-90s, and it was just a question of how it was applied. So if for whatever reason it doesn't occur, then our interest will stay the same. It's anticipated the government would act to acquire that 10%, and that would be the agreement on the cost reimbursement, we get triggered when that transaction occurs.

Operator:

Our final question will come from the line of Bill Peterson with JPMorgan. Please go ahead.

Kathleen Quirk:

The current run rate is what's in our numbers. We do see opportunities to build on it through these initiatives that we're pursuing to move up to this 300 million to 400 million pound per annum range. And so it will come over time. It's not going to come in all at once. And so as we go through this year and next year, we'll probably have more than what we've currently got in our plans. But we haven't put forward. We're still deploying these tactics, we feel very confident about them, but we haven't put those into our numbers at this stage, and that will be something that we'll continue to update as we go forward.

Operator:

With that, I'll turn the call back over to management for any closing remarks.

Operator:

Ladies and gentlemen, that concludes our call for today. Thank you for your participation, and you may now disconnect.

David Joint:

Thank you, Regina, and good morning, everyone. Welcome to the Freeport-McMoRan conference call. Earlier this morning, Freeport reported its first quarter 2024 operating and financial results. A copy of our press release with supplemental schedules and slides is available on our website, fcx.com. Today's conference call is being broadcast live on the Internet. Anyone may listen to the conference call by accessing our website home page and clicking on the webcast link. In addition to analysts and investors, the financial press has been invited to listen to today's call. A replay of the webcast will be available on our website later today. Before we begin today's – our comments, we'd like to remind everyone that our press release and certain of our comments on the call include non-GAAP measures and forward-looking statements, and actual results may differ materially. Please refer to our cautionary language included in our press release and slides and to the risk factors described in our SEC filings, all of which are available on our website. Also on the call with me today are Richard Adkerson, Chairman of the Board and Chief Executive Officer; Kathleen Quirk, President; Maree Robertson, Senior Vice President and CFO; and other senior members of our management team. Richard will make some opening comments, Kathleen will review our slide materials and then we'll open up the call for questions. I would now like to call – turn the call over to Richard.

Kathleen Quirk:

Great, and thank you, Richard. And a special thank you to you for your outstanding and visionary leadership during your long tender as our – tenure as our CEO. As I prepare to become CEO in June, I'm focused on our copper-leading strategy centered on reliable execution of our plans, disciplined cost and capital management and continuing our drive for profitable growth. Our seasoned team knows this business has a proven ability to navigate challenges and a passion for finding value in our assets. I look forward to building on our past success and to leading our company to new highs in the future. Starting on Page 3, Slide 3, we have a new annual report out with this year's theme being the value of copper. The report is available on our website. It highlights our performance, our copper-focused strategy and our strength as a premier copper producer. We'll also be publishing our annual sustainability report, which will be available on our website later this week. This report, which we've been doing for some time now, details our environmental and social performance, which we take very seriously as part of our commitment to responsible production. On Slide 4, we present our key focus areas of – for 2024. These are the same items we discussed in our January call and we thought it would be good to show these again for reference so you can track our progress against these areas as we go through the year. On Slide 5, turning to the first quarter highlights. We're off to a really good start so far in 2024. As summarized, we exceeded our guidance for first quarter copper sales. Gold sales were in line with our estimates and consolidated unit net cash costs were better than forecast. We generated strong margins and cash flows during the quarter with $2.5 billion in adjusted EBITDA and $1.9 billion in operating cash flows, and that was at an average copper price of $3.94 per pound. Capital expenditures, excluding $0.5 billion for the Indonesian smelter project totaled $800 million in the quarter, and we reduced our net debt. We made great progress on several important initiatives, including on the Indonesian smelter, which is scheduled to start up in June, building momentum in our innovative copper leach initiative and continuing to build optionality in our organic growth pipeline. Market conditions are increasingly positive. They are growing recognition of factors, driving favorable fundamentals in copper and we've also seen a rise in gold prices year-to-date. Recall that Grasberg is one of the world's largest mines in terms of both copper and gold production. Moving to copper markets, starting on Slide 6, the growing intensity of use of copper in the global economy is supported by secular trends, particularly in electrification. Copper is a foundational, essential metal when it comes to electrification, and the world is becoming more and more focused on copper-intensive energy applications. New massive investment in the power grid, renewable generation, technology infrastructure and transportation are driving increased demand for copper and forecasts call for above-trend growth and demand for the foreseeable future. This is occurring at a time when there are constraints on existing supplies, an absence of major new copper development projects and extended multiyear lead times for supply development, pointing to tight market conditions for an extended period of time. Copper producers, including us, at Freeport have been citing physical market tightness for some time. And in the last several weeks, the copper price has risen to reflect the reality of the market situation. Based on historical periods of above trend growth in demand, we may be in the early stages of a repricing for long-term copper prices. And we illustrate this on Slide 7, where we show how copper prices responded 20 years ago when China emerged as a major consumer of copper. You can see on this chart that within 12 months, the copper price increased by 40% and was up nearly four times within a three-year period. During 2023, the secular drivers for copper demand provide a growth in demand despite weakness in some of the more cyclical drivers of copper demand. In the fourth quarter of last year, industry announcements of sizable supply disruptions tightened the market significantly. This is clearly evident when you look at the physical concentrate markets where smelters drop TC, treatment charges, sharply as a result of the shortage of concentrate supply. Notably, recent manufacturing data points also indicate that the global economy is recovering. Recently improved macroeconomic sentiment, combined with physical market conditions have driven prices higher, copper prices higher year-to-date, and many analysts are now projecting significantly higher copper prices in the future. At Freeport, our financial performance is highly levered to copper prices, as you'll see from our sensitivities; we'll review later in the presentation. We're not predicting where prices will go from here, and recognize there will be volatility. But clearly, the fundamentals point to an extended period of deficits and significantly higher copper prices over the long term. That's very positive for a company like ours with large-scale, long-life producing assets and organic development opportunities. Now I will cover the operating highlights from the quarter. This is presented on Slide 8. We are summarizing the key operating highlights by geographic region. In the U.S., we continue to work to mitigate the impact of lower ore grades by focusing on initiatives to improve efficiency and reliability of our equipment, the productivity of our workforce and sharpening our focus on cost reduction. We're making progress in these areas, but we still have work to do to regain our goal of being at the top of the industry in terms of efficiency and productivity. Our innovative leach initiative is providing incremental volumes and has helped us mitigate the impact of lower ore grades. As we previously reported, we reached over our 200 million pound per annum run rate, we've got several initiatives in progress to scale this to the 300 million-pound to 400 million-pound per annum range over the next two years. We're also continuing to take advantage of new technologies and automation across the portfolio, which we believe have a lot of potential to move the needle as we go forward. In South America, we – our ore milled was slightly below 400,000 metric tons of ore per day at Cerro Verde. Team worked through several challenges during the quarter associated with material types, which required optimizing mill throughput to address recoveries. And the team was successful in achieving copper volume targets by increasing mine rates and accessing higher than planned grades. Our moly byproduct volumes were impacted, however, by low recoveries associated with the material types and progress is being made to address this. At our El Abra mine in Chile, we had a good quarter, and we met expectations. We are also pleased to report that Cerro Verde recently finalized an agreement for a new four-year labor agreement with its workforce. In Indonesia, we had another exceptional quarter of performance. Both copper and gold production exceeded our forecast with higher mill rates, higher ore grades and recoveries. Our net unit cash costs for the quarter in Indonesia was a net credit of $0.12 per pound. That means our gold byproduct credits more than offset all of the cash production costs. Our underground ore mined, which is the largest block-cave mine district in the world averaged 220,000 tons per day that was above the fourth quarter of 2023 and significantly above last year's first quarter. The Grasberg Block Cave mine is our largest in the district, and it continues to achieve strong performance. We've also increased our rates at the extra high-grade smaller mine at Big Gossan by nearly 30%. Our new SAG mill, which we installed at the end of last year, is performing very well. We're nearing completion of a mill recovery project, and that will enable higher mill recoveries in the future. And our team there is just doing outstanding work in sustaining and optimizing value from this large resource position. Topping it off the PT-FI team recently finalized a new two-year labor agreement with our workforce. Give a report on Slide 9 of where we stand with our smelter project and the completion of this new smelter in Indonesia is a very important catalyst for us, as we work to secure an extension of our long-term operating rights in Indonesia. We made substantial progress in the first quarter and now we're focused on the remaining critical path and transitioning to commissioning and start-up activities. We're on track to begin hitting the furnaces during June, followed by concentrate process in August and first cathode in October. We're working closely with the Indonesian government to continue to export concentrates and anode slimes until the smelter and precious metals are fully operational, and we expect that by year-end when we will become a PT-FI, a fully integrated metals producer. Discussions with the government to-date are positive and that's supported by the project status and the startup plans. In terms of our startup, we have a very talented local team who will be supported by a large team of Freeporters from around the globe, including from our Spanish operations and our U.S. smelting operations to support an efficient startup. We're very focused on our growth and optionality in our growth pipeline, and we've got a summary on Slide 10, where we go through where we stand on the various projects. We have dedicated teams working on advancing opportunities to grow production in the future. And here, you'll see the update for each of the major initiatives underway, starting with the innovative leach initiative where our team has several work streams in progress to take our initial success and build substantial scale. This project has the highest net present value potential of any project we have seen historically because of low capital intensity, low incremental operating costs. And at Freeport, we're uniquely positioned to capture this value with our sizable existing footprint, technical know-how and new technologies available to us. At our Bagdad operation in Northwest Arizona, we talked about it on our last call. And now we're continuing to take steps to derisk the brownfield expansion project by converting the existing haul truck fleet to fully autonomous, expanding housing infrastructure at the site and expanding our tailings facilities. We're also continuing to monitor labor market conditions in Arizona and hope to be in a position to make an investment decision by the end of next year. From there, the project would take about three to four years to construct. At our Lone Star, Safford brownfield project in Eastern Arizona, we're commencing a pre-feasibility study this year to define and frame a major expansion. As we've been talking about over many quarters, we have a sizable resource here and expect this district will become a major cornerstone asset for us in Arizona during the next decade. At El Abra, in Chile, we have a large resource that can support a new concentrator of scale and we're looking at a concentrator similar to the size of the Cerro Verde concentrator expansion we installed nearly 10 years ago. We've done substantial work to define the project, and we're currently in the process of retesting the economics and taking a hard look at capital costs in light of the recent industry experience in Chile. We're working to be in a position to file an environmental impact statement by the end of next year, and this project would require seven to eight years of lead time because of permitting requirements. In Indonesia, we're continuing to advance our large-scale Kucing Liar development to commence production by 2030. We also have several additional exploration targets in the district and expect to have additional long-term development options that would become available with an extension of our operating rights beyond 2041. We're going to continue to be disciplined in our approach, targeting opportunities that can be executed efficiently and profitably and where we think we can create value for our shareholders. We wanted to take you through a little bit of our leach history on Slide 11 that provides history of what we've achieved to-date on this innovative project. We started on this journey two years ago with data analytics and new operating practices to tap into our large stockpiles to recover copper from material that was previously mined. Through a combination of actions to achieve greater heat retention in the stockpiles, gaining access to areas of the stockpiles that had not been optimally leached historically, and through the use of better identification of trap potential, we’ve been successful in adding incremental copper previously thought to be unrecoverable. This initiative has grown now to be a major value driver for our Americas business, particularly for our largest U.S. mine in Morenci. As we mentioned, we achieved our initial target for an annual run rate of 200 million pounds per annum, now focused on doubling this or scaling what we’ve learned to date. To date, the success has largely been operationally driven, complemented by new data and technology. At the same time, in parallel, we’re advancing studies on new additives that could boost recoveries and we’re exploring options for adding heat to existing stockpiles to generate incremental copper. In the aggregate, these initiatives have the potential to reach 800 million pounds per annum and that’s the equivalent of a large-scale copper mine with low capital intensity, low cost and a low carbon footprint. About half of this can be achieved through further scaling, as we mentioned, and the other half relates to technology under development. The value potential is very attractive, particularly for Freeport given our large quantities of suitable materially – material that we previously mined. In terms of our timing of all this on Slide 12, we summarized potential growth and that we frame it in near-term, medium-term and longer-term horizons. We’ve outlined identified projects in the Americas, totaling 1.7 billion pounds and the Kucing Liar project currently in development in Indonesia, and that’s expected to continue to support long-term production profiles in the Grasberg District. In the two to three-year category, we set our focus on incremental production, on scaling our leach initiatives and operational improvement projects. Together, the potential from these opportunities total 400 million pounds and do not require significant investment or long lead times. In three to five-year category, we’ve got the Bagdad expansion opportunity and the additional potential from our leach initiatives. El Abra is reflected in the seven to eight-year category and Lone Star is not on here, but it’s also a major opportunity, which we’re currently defining. It’s likely a bit further out, but we feel it will be a major new opportunity for us as we go forward. The KL development in Indonesia is proceeding on schedule. We expect to commence production before 2030 and ramp up to over 500 million pounds of copper and 500,000 ounces of gold, which is meaningful operation. In Indonesia, an extension of our rights beyond 2041 would open substantial opportunity for reserve and resource expansion and continuation of large-scale mining in one of the world’s largest and highest grade copper and gold mining districts. We’re in a strong position, as you see here, to continue our leadership role in supplying copper to a world with growing requirements. On Slide 13, as we usually do, we show our three-year outlook for sales volume of copper, gold and molybdenum. We’ve increased our 2024 copper sales by about 1.5%, reflecting the first quarter outperformance. The rest of the guidance is similar to our outlook at the start of the year. We’re also estimating consolidated net unit cash costs to approximate $1.57 per pound on a consolidated basis that’s slightly below our previous guidance of $1.60 per pound. We’ve got some details of the makeup of this average presented on Slide 25 in the restaurants materials. With a strong cash flow generator, as you can see on Slide 14, where we show modeled results for our EBITDA and cash flows at various copper prices ranging from $4 per pound to $5 per pound for the average of 2025 and 2026. We’re using our current volume estimates for 2025 and 2026, our cost estimates and we’re holding gold flat here at $2,300 per ounce and molybdenum at $20 an ounce for illustration. Under this scenario, annual EBITDA would range from almost $11 billion per annum at $4 copper to in excess of $15 billion per annum at $5 copper and our operating cash flows would range from over $7.5 billion per year at $4 copper and over $11 billion per year at $5 per pound copper. We’ve got sensitivities to the various commodities on the right with long life reserves, large-scale production; we’re extremely well-positioned to benefit from improved pricing, providing substantial cash flow for investments in our organic growth and cash returns to shareholders on our performance-based payout framework. On Slide 15, we show our current estimates for capital expenditures for 2024 and 2025. Not much has changed since our last update. $3.6 billion is projected for 2024, which is consistent with our prior guidance. And in 2025, we estimate CapEx will total about $3.9 billion. That’s about $100 million higher than the January estimate and reflects timing changes for our Kucing Liar project spend for 2025. During this period – during this two-year period, discretionary projects totaled $2.5 billion. This is – this category reflects the capital investments we're making in new projects that under our financial policy, are funded with the half of available cash that is not distributed. And these projects are all value-enhancing initiatives, and we've got some details in the back – in the reference materials. Finally, getting to financial policy on Slide 16. We reiterate the policy priorities centered on a strong balance sheet, cash returns to shareholders and investments and value-enhancing growth projects. Balance sheet continues to be very strong. We've got great metrics – credit metrics and significant flexibility within our debt targets to execute on our projects. As indicated here, we've distributed about $4 billion to shareholders through dividends and share purchases since starting this new financial policy and we've got a very attractive future long-term portfolio that will enable us to continue to build long-term value for shareholders. A sustained higher price for copper will drive higher cash returns to shareholders while allowing us to invest in future value-oriented growth. We're going to continue to actively monitor the market conditions. We'll carefully manage the timing of our projects and make sure that our financial flexibility remains strong. In closing, our global team is driven by value, and we continue to focus on what matters in our business by executing our plans responsibly, safely and efficiently and maximizing the value of our vast resources. We thank you all for your attention, and we'll now open up the call for questions.

Liam Fitzpatrick:

Good morning, Kathleen.

Liam Fitzpatrick:

Good morning. Liam Fitzpatrick from Deutsche Bank. The first question is just on your U.S. assets. You've been talking about for some time, the productivity improvements that you're targeting. Could you give us a bit more color on when we should expect some of this to be visible in the numbers? And what sort of change are you hoping for? Is this just to do better than inflation? Or could there be more of a step change at some stage? And then the second question, two parts to it really is just on your projects. Firstly, on Bagdad, I think the timing you give in the presentation suggests you could make an investment decision next year. I just wanted to check that's the right timing to think about. And then at El Abra, if you do nothing at that mine, when will it be facing a more material drop off in grades? Thank you.

Liam Fitzpatrick:

Okay. That’s great color. Thank you.

Chris LaFemina:

Hi, Richard and Kathleen. Thanks for taking my question. First, I just wanted to say congratulations on the operating performance in Indonesia. That has been very impressive. And once again, this past quarter, pretty incredible what you’ve done there, so congrats on that. And then secondly, I just wanted to ask a follow-up on the trends in cost in the U.S. So if you did, what, 51 million pounds of leach – production from that new leaching initiatives in the U.S. in the first quarter. And if we assume that’s around $1 a pound, that would imply that the rest of your production in the U.S. is around $3.35, $3.40 a pound for net cash cost. And then if we add to that sustaining CapEx, it’s probably something close to $4 a pound free cash flow breakeven. So my first question is, is that right? Are you at around $4 a pound free cash flow breakeven in the U.S. if you exclude the benefit of the new leaching initiatives?

Chris LaFemina:

Right. So that $1 per pound cash cost for leaching is not what's reflected in the production cost in the first quarter and that was reflected in the 2024 full year guidance, right? You're using something like $3 a pound in the guidance as well?

Chris LaFemina:

Got it. Thank you.

Chris LaFemina:

So if we think about the cash flow, you have the smelter construction is nearly complete. You're going to one way or another, not be paying royalties at the smelters ramped up. Copper price is obviously higher…

Chris LaFemina:

Duty, sorry, the copper price is obviously higher, gold price is higher, balance sheet is clean. You have your performance-based capital return policy, which you haven't really executed on in the last year. You've had a lot going on, but I'm just wondering in terms of timing of when we could see those supplemental capital returns. Is that something the Board will consider imminently? Or is it kind of – do we have to get through certain events before you consider delivering those capital returns? Thanks.

Chris LaFemina:

Great. Thank you very much. Good luck.

Operator:

Our next question will come from the line of Michael Dudas with Vertical Research Partners. Please go ahead.

Michael Dudas:

Good morning, David, Richard and Kathleen.

Michael Dudas:

Hi, I think you mentioned in response to the question about operating costs and cost moderation. So maybe you can touch a little bit more on what you're seeing on the ground more specifically in your North America and South American mines on cost improvement, what your expectations are versus what it might have been a few months ago? And how are you seeing that in some of the feasibility studies that you're working on and completed? And what kind of – have we seen double-digit inflation continuing on the capital cost side that's going to continue to make it a little bit more challenging for Freeport and others to really follow through and provide the material of our market needs?

Michael Dudas:

Excellent, Kathleen. Thank you.

Michael Dudas:

Well said, Richard.

Kathleen Quirk:

Hey, Bill.

Kathleen Quirk:

Hey, Bennett.

Kathleen Quirk:

Well, the transition doesn’t take place until October, and we’re continuing to work with the existing administration. We’ve got some matters that we’re working together on with respect to the concentrate license that we talked about earlier as well as the IUPK extension. And so we’re continuing to work with the current administration on these matters. We have a long history in Indonesia. We just celebrated 57 years of operation there. And we’ve worked with many governments over the years and many administrations. And we feel very confident that we’ll continue to have good relations with the new administration. And what we focus on, we’re not – we don’t get involved in politics. So we focus on what we do there to be a good citizen of Indonesia, to provide benefits to the national government, the local government, all of our workforce, the community and stakeholder work that we do there is very important and that’s – that lasts that survives administrations. And so we really focus on the things that make the asset good for Indonesia and good for all the stakeholders. And that’s what we’ll continue. Richard, I don’t know if you want to add anything to those comments?

Unidentified Analyst:

Thanks. That's helpful. And if I could just squeeze in one more on the topic regarding the future mining rates in Indonesia, we saw a headline last week that these could potentially be granted as soon as this upcoming June. So I'm wondering if there's any updates you can provide there? And what additional ask maybe on the table from the government there?

Kathleen Quirk:

And delivery of the smelter is an important part of that. And the government is very pleased with the progress we've made in getting the smelter to a point where it can be commissioned next quarter – this quarter.

Kathleen Quirk:

Thank you, Bennett.

Operator:

Your next question will come from the line of Lawson Winder with Bank of America Securities. Please go ahead.

Richard Adkerson:

Good morning, Lawson.

Kathleen Quirk:

Absolutely.

Kathleen Quirk:

Lawson, it's not without challenges this team has demonstrated, as Richard said, that they can – they're very resilient team and can deal with a lot of different challenges. But water is something that is always a concern. We did with our expansion almost 10 years ago to put in a water treatment facility, and we provide clean water to the community, and it also supports our own operations. But particularly during this time where we've been through El Nino and droughts and there's always a focus on water, but the ore is there, the resource is there, and the team has got – we've got the assets there and the team has got really good work practices. And as Richard said, the relationship with the community is top-notch.

Richard Adkerson:

Thank you.

John Tumazos:

Thank you very much. In the first quarter, the minority interest was $689, and the income to shareholders was $473. Could we interpret from that that the U.S. mines made about $200 million less profits than the overhead or the U.S. operations are losing money? And what are the short term remedies? For example, how quickly can you convert to autonomous drugs and mitigate wage inflation, et cetera?

Kathleen Quirk:

John, I was just going to point you to the press release. There's some, in the back of the press release, there's some segment analysis, and you can look at the segments we show, how much the U.S. mines contributed, etcetera. And if that doesn't answer your question, just follow up with us afterward.

Operator:

Our last question will come from the line of Martin Malloy with Johnson Rice and Company. Please go ahead.

Martin Malloy:

Good morning. I wanted to ask, with your leaching technology, does that give you a competitive advantage and maybe looking at acquisition opportunities?

Richard Adkerson:

Yes. And a lot is understating it. It is massive, what we have the opportunity to develop from what's already owned by Freeport from our existing stockpiles and Kathleen mentioned our historical stockpiles. So yes, an opportunity came along, but I'm not expecting it. I think that we're going to be able to grow tremendous amounts of value doing with what we have, which now the company really has, others have opportunities. No one else has it in this kind of scale that we do.

Operator:

With that, we'll turn the call over to management for any closing remarks.

Richard Adkerson:

Thank you, all.

Kathleen Quirk:

Thank you, and good morning. Welcome to Freeport-McMoRan conference call. Earlier this morning, we reported our fourth quarter and full year 2023 operating and financial results. And a copy of today's press release and supplemental schedules and slides are available on our Web site at fcx.com. Our conference call today is being broadcast live on the Internet and anyone may listen to the call by accessing our website homepage and clicking on the webcast link for the conference call. In addition to analysts and investors, the financial press has been invited to listen to today's call and a replay of the webcast will be available on our website later today. Before we begin our comments, we’d like to remind everyone that today's press release and certain of our comments on the call include non-GAAP measures and forward-looking statements and that actual results may differ materially. I would like to refer everyone to the cautionary language included in our press release and presentation materials and to the risk factors described in our SEC filings. Also on the call with me today are Richard Adkerson, our Chairman and CEO; Maree Robertson, our Chief Financial Officer; Josh Olmsted, our COO of Americas; Mark Johnson, Operating Officer for Indonesia; Mike Kendrick, who runs our molybdenum business; and Steve Higgins, our Chief Administrative Officer. We'll start the call with some opening comments from Richard and then we will go through the slide presentation materials and then open up the call for your questions. So I'll turn it over to Richard. Richard, go ahead.

Kathleen Quirk:

Okay. Thank you, Richard. And I will be covering the presentation materials starting with Slide 3, our achievements for 2023 are summarized here. Our sharp focus on executing our plans in an effective, safe and responsible manner, managing the controllable drivers and navigating challenges successfully, all translated into solid operating results over the year. A big highlight for the year was the outstanding progress in Indonesia where we grew production levels for the fourth year in a row. We posted several new operating records and we continue to enhance values for this large scale, low cost and long life resource. We were also successful in reaching several milestones during the year, including reaching our target run rate for incremental leach production in the Americas, enhancing optionality in the Americas for our brownfield growth projects and reaching our targeted 90% completion milestone for the Indonesian smelter project by the end of 2023. As a leader in the industry, we were one of the first companies to have all of our operating sites certified under the copper and molybdenum marks, and this demonstrates our performance and commitment to responsible mining practices. We ended the year 2023 in a strong financial position, a positive outlook and as we work together to enhance long term value for shareholders. On Slide 4, we summarize the key results for 2023 compared with historical levels. After growing our volumes from 2020 to 2021 and 2022, we were able to same production of copper in 2023 despite a challenging environment for copper supplies Richard discussed, and we reported another year of growth in gold production. Our unit net cash costs for 2023 were above the 2022 level as expected but they came in very close to our original guidance for the year. We are continuing to actively manage cost and profitability initiatives to address cost inflation, and we will be working on that as we go forward. For the year 2023, we generate strong EBITDA of $8.8 billion and operating cash flows of over $5 billion. We are continuing to carefully manage not only our operating costs but also capital expenditures with a priority on spending on projects to sustain production, improve efficiencies and enhance optionality for future development options with attractive rates of return. During 2023, we returned $860 million to shareholders, bringing the total shareholder returns to $3.8 billion since we implemented our performance based payout framework in 2021. We ended the year with net debt of approximately $800 million and that excludes the smelter related debt, which is being financed separately. I'm going to move to Slide 5 and talk about the fourth quarter. During the fourth quarter, our sales were 3% above our estimates going into the quarter. Our gold production was also very strong. But our shipments of gold in the fourth quarter was slightly below the previous estimates and that reflected timing in these shipments when we made in the first quarter. Unit net cash costs averaged $1.52 per pound in the fourth quarter that was better than our guidance of $1.58 per pound and slightly below the year ago period. Notably, unit net cost, cash costs in Indonesia were zero in the fourth quarter, zero cents per pound, meaning our gold credits completely offset the production cost for copper. Average copper realizations in the fourth quarter were $3.81 per pound and we generated $2.3 billion in EBITDA and operating cash flows of $1.3 billion. We go around the world and talk a little bit about our various operations in the fourth quarter. In the US, we made progress in increasing our mining rates, that's been a big focus during the quarter with a 9% increase over the year ago quarter. We have a continued focus on improving our asset efficiencies and workforce experience levels. These are important initiatives as we seek to increase productivities to combat lower ore grades. Our innovative leach initiatives met expectations and also helped to mitigate the impact of lower ore grades in the US. Labor market conditions in the US continue to be tight. We're taking steps to expand housing options in our remote locations for recruiting and retention, and we're also continuing to pursue technology solutions to enhance productivity. Conversion of the bad debt truck fleet to fully autonomous is advancing and we're targeting to commence the transition in the second half of next year. In South America, our ore milled was sustained above 400,000 metric tons per day and our ore stacking rates increased at El Abra. No recoveries at Cerro Verde in the fourth quarter of 2023 were below the year ago level because of the material types that we're mining in the fourth quarter. This is continuing for mining phases in early 2024 and we're working to optimize performance. As Richard discussed, the fourth quarter performance in Indonesia was exceptional. Underground ore mined averaged over 214,000 tons per day and that was 8% higher than the year ago period. Combined with strong grades and recoveries, our copper and gold production in the fourth quarter was over 20% higher than last year's fourth quarter. We completed the installation of a new SAG mill at PT-FI in December and that'll provide additional opportunities for us going forward. And the team is just doing outstanding work, sustaining and optimizing value from this large resource position. We thought it'd be good to look back in history of how the underground transition has gone, Slide 6 covers this. We show the history of the progression of the transition. As Richard mentioned, we stopped mining from the surface in the Grasberg open pit at the end of 2019 and transitioned to fully underground operations beginning in 2020. We have a long history in Indonesia, spanning over 56 years and a great track record for building value over many years for all stakeholders. We’re extremely proud of the team's execution on this transition. We now have the world's largest underground mining complex and it’s been developed in a modern efficient operation. The Grasberg is the world's second largest copper mine and one of the largest gold mines, even though gold is a byproduct. High grades of both copper and gold make it one of the lowest cost operations in the world as well. This took a lot of planning. We began planning for this underground area over 25 years ago and commenced development activities in 2004. And as you can see from the graph, the project is performing exceptionally well and generating strong margins and cash flows. As we look forward, we are continuing to make investments in this resource to enhance value and sustain long term performance. We are working on the extension of our operating rights beyond 2041 and increasingly confident about securing our long term rights, and that would extend lives of our resources and open a whole new set of opportunities for this district. Richard touched on the smelter progress and this is really important for us in terms of securing long term rights. We reached two important milestones on these initiatives in 2023. The projects include a new greenfield smelter in East Java and expansion of our nearby existing smelter, which was developed in the late 1990s. Richard mentioned we celebrated in December the completion of the expansion project with the Indonesian Government and our Japanese partner. And we also reached a really important milestone on progress of the greenfield project with completion progress achieving a target we set with the government of over 90% by the end of December. We posted a video this morning on our Web site that shows the Greenfield smelter project. You can see all the progress that's been made and you can see the sheer size and scale of this impressive facility, and I hope you will have a chance to look at it. Both projects have been executed very efficiently in the context of a challenging market for major project development. The internal team that we have working on this project together with our contractor have done an outstanding job containing costs and maintaining schedules. We are working to complete the construction by the end of May of 2024 and to start commissioning and to conduct the ramp-up period over the balance of 2024. This is a big deal for us. It's not very frequent that you see new smelters starting up, and we have done a lot of planning going into the start up process. Our teams are well prepared and really highly motivated to achieve a safe, efficient and timely start-up in 2024. Turning to the US and the Americas where we've got an important leach initiative ongoing. We achieved our targeted run rate where we were targeting approximately 200 million pounds of copper per year by the end of 2023. This is an exciting and innovative initiative involving new operating practices being applied to our traditional leach operations and really working to get more out of our massive stockpiles that contain material that has been placed in prior years. Remember as we talked about on prior calls, the cost of this, the incremental cost of production, is low from both an operating and capital perspective, because we're targeting material where the material has already been mined and we're largely using existing infrastructure to extract the new metal. The first phase of this initiative essentially involves four basic categories of actions. One, as we talked about previously, we commenced the process to install covers over the stockpiles to increase heat retention and drive higher recoveries. Two, we gained access to areas in the stockpiles that have not previously had the benefit of leach solution initiative, we call leach everywhere. Three, we started using drilling techniques to specifically target areas within the stockpile where solution was lacking. And importantly, the fourth area is developing more sophisticated models using data analytics to optimize the application of solutions to improve performance, and using this data as a valuable tool in guiding work in all the areas of initiatives in this important program. As we look at where the impacts came from, you can see most of the incremental production was from our Morenci mine. That mine has a very long history of leaching operations. We have a massive set of stockpiles there and a very large opportunity set at Morenci. As we go to Phase 2 of the project where we are working to essentially double the initial target from 200 million pounds to 400 million pounds, we really are looking at just scaling these practices further. And by continuing to scale the operating practices, we think we can double the initial target over the next two to three years. And as we continue to work to sustain the production, we can add to our reserve position, and that's a real focus of ours to capitalize the progress into long term reserve additions. The first and second phase of this initiatives is really operationally driven using existing technologies. The third phase, which is also very exciting, is really the work that we and others are doing to advance the leaching process using different additives and different techniques, and this is more of an R&D effort but it's being advanced. We're commencing a large scale testing activity to evaluate the response to new additives. And we're also evaluating opportunities to get more heat retention in our stockpiles, and heat really is an enabler of more copper production and higher recoveries. In aggregate, these initiatives have the potential to reach 800 million pounds per annum and that's equivalent to a large scale copper mine. And notably, it's got very low capital intensity and you have seen how much new copper mines cost. This is a very low capital intensity, low incremental operating costs and a low carbon footprint. The value potential here is very attractive, particularly for a company like Freeport to take advantage of given our large quantities of suitable materials that we previously mined. Richard touched on copper markets earlier and we have some information on Slide 9. Physical markets have continued to tighten, inventories have declined and demand is growing. Despite the weak sentiment over the last several quarters on the Chinese economy and property sector, the reality is that China's copper consumption was strong throughout 2023 and this reflected the intensity of copper used in energy infrastructure, renewables and electric vehicles. In the US, our customers continue to report solid demand for copper with growth in several sectors. At the same time, supply disruption increased meaningfully in recent months. In total, near term supplies of copper had been reduced by over 700,000 tons in a very short period of time. The market was previously expecting that 2024 would be a small surplus market and turning to deficit beginning in 2025 timeframe and continuing for some time. With the recent supply disruptions and continued demand growth, the deficit market has been advanced into 2024, setting up for tight market conditions in the near term. While the fundamentals have become significantly more positive, macro conditions tied to US dollar strength and sentiment about China have influenced copper price movements. Richard mentioned we believe the fundamentals of the market will lead to significantly higher copper prices in the future and that's supported by anticipated strong growth in demand associated with secular trends and the global economy's requirements for copper. Also, the realities of the cost and time frames required for new supply development is an important factor when we look at the fundamental outlook for copper. Turning to how Freeport is positioning to try to grow production in response to this market demand. On Slide 10, we really look at the sizable reserve position of copper and even larger resource position that Freeport has that supports a pipeline for future growth options. Within the portfolio, we look for opportunities to get more out of what we have through innovation and operating efficiencies. We look for investments and projects so we have large resource positions and where we have established track records and opportunities to leverage the existing infrastructure, our people and capabilities, all with the drive focused on increasing value. We categorized on Slide 10 our near term, medium term and longer term development options. And we have outlined identified projects totaling about 1.7 billion pounds of copper in the Americas. And we have also highlighted on the slide the ongoing development of the Kucing Liar project in Indonesia, which is expected to support long term production profiles in the Grasberg District. The opportunities that are shown on the slide in the two to three year category they center around scaling our leach initiatives and achieving incremental production from our operational improvement projects. Together the potential from these opportunities total 400 million pounds of incremental copper per annum and do not require significant investment or long lead times. We discussed earlier the leach projects but we're also dedicating significant resources to enhancing productivity and asset efficiencies, rebuilding the experience of our workforce given the large number of new hires in recent years and utilizing new technologies and automation to restore and improve on productivity metrics that weakened somewhat during the pandemic. As we indicated, we completed a feasibility study late in the year 2023 to evaluate a project to more than double the size of our Bagdad operation in Northwest Arizona. The reserves at Bagdad are -- span for decades and they support expansion of infrastructure at the site to bring value forward. The incremental capital costs to build a new concentrator and support infrastructure for significantly higher mining and milling rates is on the order of $3.5 billion. And an expanded operation would not only substantially increase copper production but would produce economies of scale and reduce unit costs. The project does not require major permitting and is relatively straightforward. But given the tight labor market conditions and general market factors, we're not making a decision right now on the timing of the project. We'll continue to evaluate the timing of when we would go forward, but we are taking steps now to enhance optionality for the future by making some investments in the autonomous haulage for our mining operations, making some investments in housing and also advancing investments in the tailings infrastructure that will put us in a position and we make the decision we could get the project online within a few years. In Chile, at El Abra, we've talked about this. Our resource is very large. We have a major opportunity to install a new concentrator on the order of magnitude size of the concentrator we added at Cerro Verde in 2015. We'll continue to work to retest the economics and updating our project capital costs in light of recent capital cost experience of other large projects. And in parallel, we're starting work in preparation for environmental impact statement that would give us the ability to advance the project and provide optionality for future development. We mentioned the Kucing Liar development project in the Grasberg District, which we've initiated development on. This is a multiyear development project and it's proceeding on schedule and we expect to commence production by 2030, ramping up to over 500 million pounds of copper and over 500,000 ounces of gold. We're also conducting additional exploration in the Grasberg District where we have identified potential. We've got a big potential below our Deep MLZ orebody, and we expect to have additional opportunities in the future at Grasberg. We have a major opportunity in the US at the Safford Lone Star District. We've identified a significant resource there. This year, we're going to work to complete metallurgical testing and mine planning, and start a pre-feasibility study to assess future development options there. We continue to see this district as one that has big potential and potentially being a cornerstone asset in the US adjacent to the Morenci operations. In Indonesia, we’re focused on this extension of our rights beyond 2041 because that would open up substantial opportunity for reserve and resource expansion and a continuation of the large scale mining in one of the world's largest and highest grade copper and gold mine districts. We are in a really strong position to continue our leadership role in supplying copper to a world with growing requirements. But we are going to continue to be disciplined in our approach and focused on executing projects where we can create value for shareholders. We have a lot of history in developing big projects, we included a slide on Page 11 that you can take a look at. A key strength of our company is the ability to execute projects successfully. This does not come easy. It requires a focused hands-on approach. And we have got a business model of pairing internal resources with trusted contractors and that has served us well. We have listed several projects that we have led over the years and we have developed very complex projects around the world. We are going to continue to approach future projects with the same level of preparedness, rigor and a focus on execution. As we look at 2024, turning to Slide 12, we have got our focus areas listed here. And first and foremost, we remain committed to safe and reliable execution of our operating plans across the global business. It seems like a simple thing but this involves discipline and hard work day in and day out. We discussed our focus on enhancing performance in the US through our Leach initiatives and productivity. This is particularly important to mitigate low grades and to manage costs, which have experienced higher inflation in recent years. We are going to have another big year in Indonesia. A key priority for us is to complete the smelter and ramp-up safely and efficiently and to finalize an agreement for extension of our long term operating rights. We are also very focused on enhancing optionality, definition and the value of our embedded growth options. On Slide 13, as usual, we show a three year outlook for sales volumes of copper, gold and molybdenum. For 2024, the copper sales volumes are slightly reduced less than 2% below our prior estimate and are now expected to be similar to 2023 levels. The gold sales are 10% higher than our prior estimate and higher than they were in 2023, higher sales in Indonesia for the year of 2024 offset by slightly lower sales from the Americas. In 2025, our sales estimates are similar to the prior estimates and we have added 2026 estimates, which you can see are slightly above the 2025 levels. For 2024, we currently estimate our consolidated unit costs to approximate $1.60 per pound. We have got some details in the reference materials, I believe, on Page 30 that you can look at the composition of those costs, but $1.60 very similar to what we had in 2023. On Slide 14, we put together our projected volumes and cost projections and we model the results for our EBITDA and cash flow at various copper prices ranging from $4 to $5 copper. These models use the average of 2025 and 2026 and our current volume estimates and our cost estimates and holding gold flat at roughly current levels of $2,000 per ounce and molybdenum flat at $19 per pound. And you can see here on the charts that annual EBITDA in these periods would range from $10 billion per annum at $4 copper to over $14 billion per year at $5 copper and operating cash flows under these price scenarios would range from $7 billion to over $10 billion. And we've got sensitivities to the various commodities on the right hand side of the chart. We're really well positioned with long line preserves, large scale production. We not only have current exposure to copper but all of our future projects and growth opportunities are well positioned to benefit from future metals intensive growth, and this will give us the ability to generate returns on projects and enhance cash returns under our performance based payout framework. Turning to the capital expenditures, on Slide 15. We show our current forecast for 2024 and 2025, which also show where we ended up for 2023, which total of $3.1 billion and that was slightly lower than what we've guided to in October of $3.2 billion. And capital for 2024 is currently forecast to approximate $3.6 billion compared with the $3.9 billion previously. The 2025 estimates that are new here are currently estimated to total $3.8 billion that includes $1.2 billion in discretionary growth projects, which totaled $2.4 billion over the 2024 and 2025 years. This category reflects the capital investments we're making in new projects to generate returns that under our financial policy are funded with 50% of available cash that's not distributed. They're value enhancing projects that are detailed in the reference materials on Slide 33. We're going to continue to be very disciplined around capital expenditures, carefully managing those. You saw we adjusted the capital expenditures down for 2024. And as we go forward, we'll continue to look at opportunities to do things, to sustain our business and to do things on a low capital intensity basis. And finally, before we take your questions, we -- just on Slide 16, we reiterate our financial policies and those are prioritized, centered on a strong balance sheet, cash returns to shareholders, and investments in value enhancing growth projects. Balance sheet is solid. We've got strong credit metrics and a lot of flexibility within our debt targets to execute on our projects. You may have seen that Moody's upgraded our credit rating in December and that just demonstrates our strong financial profile. Indicated on the slide, we've distributed almost $4 billion to shareholders through dividends and share purchases since the payout framework was implemented in the second half of 2021, and we have an attractive future long term portfolio that will enable us to continue to build value, long term value for shareholders. The global team, as we go forward, is really highly focused on our strategy of being foremost in copper. And we're driven to continue pursuing long term value in the business and executing our plans responsibly, safely and efficiently. And I want to thank everybody for their attention, and we'll now take your questions.

Alex Hacking:

Richard, I guess my question is around Bagdad and the technical study. Now I was a little surprised by how high the CapEx was $3.5 billion or incremental 100,000 tons, that’s about $35,000 a ton. I mean, in your view, is that the new normal for a concentrate project or are there particular factors the fact that are raising the CapEx above historical levels?

Richard Adkerson:

Alex, let me just add very briefly that Kathleen makes a really good point about these relative economics. No royalties in the US. US tax rate is much lower -- federal tax rates much lower than outside the US. We have a net operating loss carryforward. Community support is strong in the US and we have no minority interest there. So looking at global benchmarks needs to be adjusted for the site specific factors that we have in the US, and they're very positive.

Carlos De Alba:

Question is on cost. I just want to see if you can provide a little bit more color. The guidance for the first quarter of net unit cash cost of $1.55 per pound, looked very, very good relative to consensus stations and our own estimate. However, for the full year, the guidance came at $1.60 and that is a little bit higher than the market -- than again, consensus and our model suggests. So what are you expecting, what the viability in this, were you surprised at the beginning of the year but then maybe throughout the rest of the quarters is increasing, what is driving that? And to what extent this number for the year is conservative?

Carlos De Alba:

And just to clarify then Kathleen. The cash cost guidance for the year of $1.60 includes the duties in Indonesia, concentrate exports remain throughout the entire of the year, right, the full year?

Operator:

Your next question comes from the line of Christopher LaFemina with Jefferies.

Kathleen Quirk:

Well, we hope it's not the new normal, Chris. We're working hard. I mean one of the things that you've got to take into account here is we are in a low grade period in the US. I think the grades that we had in 2023 were the lowest that they had been in probably 10 years or so or more. So we are in a period and that's continued in '24 where we do have some low grades that we're going through. But that is why it's so important for us to bring on units with a lower incremental cost and the leach opportunity will help us there. And as we are able to get those pounds put into reserves longer term, not just what you're mining that year or getting that year but multiyear reserve additions for the leach that spreads the cost -- all the costs over more reserves. And so it does help us with driving the economies of scale and why it's so important. We're not in a position now to say where costs could go. There's been a number of other factors that have -- inflation factors and things like the cost of basic parts and materials and supplies has gone up from where it was just two or three years ago, but we are very focused on it. And all of these self help things for us have very high rates of return. There's not a lot of capital involved. It's focused resources. It's not an easy thing because it would have been done already, but it is an area we think we can make improvements. We can also focus, which we're doing now on the last couple of years, we've had to rely more on contractors because of the staffing issues. But as we get staffing set up and get more experience in the workforce, we can reduce our reliance on contractors, as you probably know, have gotten expensive, and Arizona is a very competitive market. So we're working on all those things within the things that we have within our control and are really going to be focused on trying to drive the cost down. We're also looking at Morenci specifically at different configurations. We're looking at whether it makes sense for us to be operating all of our equipment like we are today and looking at if we cut back some things would that be the cost and benefits to that because that could have volume impacts as well. But is that a better setup, a more efficient setup that will allow us to drive costs lower. So we've got some of those initiatives that are being reviewed right now on what the right setup is given how costs have risen.

Orest Wowkodaw:

Given the capital costs involved and the timing of building new projects and the strength of your balance sheet. I'm just wondering whether M&A of producing assets is something that's on the radar, because it certainly seems like there could be some assets available out there, especially in jurisdictions you’re not currently in?

Operator:

Your next question comes from the line of Edward Goldsmith from Deutsche Bank.

Kathleen Quirk:

On the first part of the question, our current export license in Indonesia goes to May of 2024. And we are continually having discussions with the government of Indonesia about the fact that while we will be substantially complete on construction activities by the end of May, which is -- was really important target for us and for them that just the ordinary course of a smelter start-up, it takes five or six months to get through. And so we're having those discussions, they understand the situation. And they're encouraging us to continue to meet our targets and that those discussions will continue [Technical Difficulty] that the alignment that we have with the 51% ownership of the state-owned company mined ID in PT-FI's operations is really important here. That, combined with tax revenues, et cetera, that the government gets from having consistent operations at PT-FI is we're both aligned in that to have exports continue. So the conversations have been constructive to date but we've got to continue to progress it. And have those -- continuing to have the discussions with the government and we're doing that on a regular basis.

Kathleen Quirk:

On the second question with respect to capital expenditures. We always go through a process of looking for opportunities to push out capital if it's not required in the current year. And we went through a process between the last update on this one to really look hard at what we could efficiently spend this year and cut back on some things. Some of that’s showing up in 2025. We'll do the same thing again because really what we want to do is deploy the capital as efficiently as we can and make sure we're sustaining the reliability of our operations, but also looking at -- we don't want to be doing too many things at one time. And so we always take a hard look at it. So we'll continue to do that as we go forward and manage the capital very carefully. But there wasn't really one big thing, there was a number of things that we did in looking at the prior estimate for 2024.

Michael Dudas:

With regard to your proposed investments in the US, maybe even looking in Latin America, maybe if you can remind us on an internal rate of return, risk-adjusted rate return basis, what Freeport is looking for? Certainly, you mentioned US investments, you get benefits from royalty and tax issues. But just on a general basis, even when you're thinking about your assets in Indonesia. And then the follow-up on that, is the industry relative to a year ago today, is the industry ahead of the curve or behind the curve on meeting what the expected demand opportunities are in the market?

Richard Adkerson:

Well, I'll add a brief comment to the first part too, Kathleen. My early experience in my career was in the oil and gas industry. And early on, Dan [indiscernible] and I wrote a paper on oil price forecasting, which basically evidenced how wrong forecasts can be. And so we approach, as Kathleen described, all of our investment and business planning on a scenario basis, not trying to predict a particular price or range of price but to look at what impact investment decisions and operating decisions have on our overall portfolio. And we look to protect ourselves on a portfolio basis from downside risk and then structure investments to take advantage of what we have is confidence in the long term price. So it's not any kind of formal rate of return kind of criteria that you see in a lot of industries, which work elsewhere, and have the saying that figures don't lie but liars figure. And so we just really base these things, as I said, on scenario planning and portfolio impacts. The basic thesis, I believe, for the demand for copper is unchanged and continues to be supported. From the very start my work with ICMM where I was Chairman, two occasions, but more recently when all the issues about aspirational goals for carbon reductions were being considered in such promise. I've always said that there are a lot of unanswered questions and the movement towards these aspirational goals will not be consistent, but they'll have issues, complications and so forth and that's certainly what we're seeing. The future of copper is really influenced significantly by investments in carbon reduction and I think it's something the world absolutely has to do. And there are other factors related to global growth, connectivity, these data centers, some of that's being driven by artificial intelligence. Just everywhere you turn, the world is getting more electrified. And that's why I think the fundamental long term demand thesis for copper is just getting stronger and stronger.

Brian MacArthur:

It goes back to what Alex was asking in Bagdad. So I just want to make sure as I look at these numbers, so the project capital is $3.5 billion. And I would have to think you get some in structure benefit there, so it's not a true greenfield. And then you talk about a $3.50 to $4 incentive copper prices, and I understand the benefits of new royalties and taxes. Does that sort of say that if you didn't have infrastructure, the capital costs would have been higher. And if you didn't have all these tax benefits, the incentive price would be an awful lot higher, i.e., if anybody else had to do a greenfield there, you'd probably need a incentive price well over $4 to make it work, i.e., those numbers include all the tax benefits and everything that you were talking about before, if I can ask the question that way.

Richard Adkerson:

A lot more. And your $4 is absolutely right. I mean you just look at recent projects and look at how costs escalate and then what would have taken from an incentive price to justify that project from the outset if the cost numbers have been known. So this is not that complicated. So it's not a greenfield project. We've operated there for 80 years or so. And it's about a straightforward project as you could have, but it's telling for the industry even with this kind of straightforward project the challenge you face. It's cost, it's tailings and we do benefit from infrastructure. This is just a mill expansion. It's not building a new mine. But then there's a challenge of getting workers and housing for workers. So all of this is real telling on the supply side -- I just talked about the demand side support for copper. So this is a great example of a simple project in terms of the relative complexities of projects in our industry, this is relatively simple. And yet, it faces these challenges of being economically justified in today's price. At the outset, I said today's copper price is not a price that’s adequate to stimulate the kind of investments that are going to be needed for this industry. And that's why we're optimistic about future prices.

Kathleen Quirk:

We're prioritizing the leach initiative. I mean that is one that's a no-brainer for us. It's very, very little capital that we're investing in it and very low increment -- it's our lowest incremental operating cost of anything in the US. And so that's a no-brainer. We're pursuing that regardless, that makes a ton of sense and we're pursuing that regardless. We think the world is going to need something beyond that, obviously. And so on the Bagdad thing, we just want to get it, get it to where -- continue to enhance the optionality in it, and we need to do some things anyway. We're doing some infrastructure on tailings that we would need to do anyway in the future, maybe not as quickly as what we would need with the new project, but we need to do those anyway. So we're going to do those to the extent we can do that efficiently. We want this autonomous thing that we're pursuing. Years ago, people thought you didn't really need autonomous in the US. But now, particularly in these remote locations, you really, really do when you consider the cost of the workforce and the housing limitations and that sort of thing and the opportunities to upscale our employees, we think it checks all of those boxes. So autonomous, we want that to see how that unfolds. So we don't have to pull the trigger on Bagdad now but we want to put it in a position where it can go forward. It makes sense if the world needs more copper to get copper from where we already have it. And so it does -- it's a good project, it's not a barn burner from an economic standpoint, right now. But it will have its day and I think it will get time at some point, it just we aren't predicting exactly when.

Operator:

Your next question comes from the line of Alan Spence with BNP Paribas.

Richard Adkerson:

Alan, you're breaking up on us.

Kathleen Quirk:

Yes, that's better.

Kathleen Quirk:

With respect to [Multiple Speakers] I was going to say Mark Johnson is on the line, he can add to it if you want. But with respect to December, it highlights, we got that SAG mill completed, the new SAG mill completed in December So really, that gave us the ability to put more ore throughput through the concentrators. And with the combination of higher grades and strong recoveries, we had a great month. Now we have the ability to continue to have strong performance. We achieved a lot of records in December but we do have the ability and some upside to continue that. That SAG mill was originally put in the plan because over time, we'll need the additional grinding capacity, et cetera, to take the ore that will be coming. But right now while we're in these higher grade sections, the more we can put through the mills the better the copper production will be. In terms of the $240 million, right now, we don't have $240 million in our plans. But over time, with the addition of Kucing Liar we'll have that capacity to do it. But having SAG 3 does give us some more opportunities in the near term to -- if we continue to have high rates of ore produced from the underground will give us some upside. A mine, we don't talk a lot about but one that we're going to try to keep improving on is the [Gossan] mine, it's a relatively small mine, but very, very high grade. And we've got some plans to bring in some additional, and that's reflected in the five year guidance, but some additional throughput from [Gossan] that will add copper production and gold production. And Mark, I don't know if you want to add into any of those comments.

Operator:

Your next question comes from the line of Bill Peterson with JPMorgan.

Kathleen Quirk:

On the time frame for the incremental 200 million, we have not given a specific time frame. We do feel we can get it done within a couple of years and we'll add whatever we can in the interim. This leach everywhere initiative that we have where we are accessing parts of stockpiles that hadn't been accessed before, getting access to some of the side slopes and some of the areas around the stockpile that we just didn't leach before, that's been a big driver of success and will continue to be. The other one that we're excited about is the targeted drilling. And through our data, we can see where you have situations where the solution that needs to get to the ore has been blocked for some reason over history, and this targeted drilling allows us to get access to it. We are testing this year some abilities to do that more at scale. And that is something that we're really interested to see how that develops and whether that will give us some additional incremental production. We haven't factored that into our plans at this point but we're going to continue to use these covers. We still don't have everything -- the stockpiles are so massive, covering -- spanning particularly Morenci, just miles of area. And so we're still doing the covers. We're still looking for other opportunities to get heat into the stockpiles. We're targeting some pyrite ores in some of our operations that have pyrite in the ores, that is a source of heat as well. But there are a number of things that we're working on that are not the big R&D effort, but things that we can do from an operational standpoint. But well stay tuned, we will -- this is a big initiative and stay tuned will, as we go forward, love to give you a little bit more as we go through 2024 in terms of the time frame. We haven't spent much capital on this initiative. We've already got the infrastructure -- basic infrastructure, the tank house capacity, this is copper that goes to a tank house, not a smelter. And we have already excess latent tank house capacity. We've spent some money but it doesn't round to anything really big. The operating cost, the incremental operating costs of this have been very low on the order of $1 per pound. And so it's just a really, really exciting opportunity for us to generate value. And so as we go forward, we don't see huge amounts of capital either that will come into play. When you get to this piece that's R&D, that's where we need to make sure that all these things can be applied and deployed at scale and can be economic but that thing is ongoing. But the first 400 million pounds we think that we can do that without spending a lot of capital.

Operator:

Our final question will come from the line of Lawson Winder with Bank of America Securities.

Kathleen Quirk:

On the dividend question, our Board reviews the financial policy on a regular basis. And we put in place the base dividend, the variable dividend and we've been paying at that level for some time now. We'll continue to review that with the Board. You can see from our results the financial results that we're projecting for 2024 look very good. But we always going to look at what's going on in the market and don't want to put ourselves in a position of running up debt, but we have a good balance sheet. So I don't want to front run anything. The Board will look at this on a regular basis but our financial position is in really excellent shape. The second question on TCRCs, we reach agreement, as you know, on long term TCRCs that are done on fixed contracts once a year. And since then, spot rates have come a lot, lot lower given the tightness in supply. We do sell some things on a spot basis but most of it is sold under these fixed contracts where we have the TCRCs fixed. The other thing is once we get the smelter in Indonesia up and running, we don't have -- we still have with Cerro Verde concentrate that we sell. But everything from Indonesia will be really just processed through our own smelters.

Operator:

I'll turn the call back to management for any closing remarks.

Richard Adkerson:

Yes. Thank you for joining us today, and everyone, have a great day.

Kathleen Quirk:

Thank you and good morning. Welcome to our conference call. Earlier this morning, FCX reported our third quarter 2023 operating and financial results. And a copy of the press release and slides are available on our website at fcx.com. Our call today is being broadcast live on the Internet, and anyone may listen to the call by accessing our website homepage and clicking on the webcast link for the conference call. In addition to analysts and investors, the financial press has been invited to listen to today's call, and a replay of the webcast will be available on our website later today. Before we begin our comments, we'd like to remind everyone that today's press release and certain of our comments on the call include forward-looking statements, and actual results may differ materially. I'd like to refer everyone to the cautionary language included in our press release and presentation materials and to the risk factors described in our SEC filings. On the call with me today are Richard Adkerson, our Chairman of the Board and CEO; Maree Robertson, our Chief Financial Officer; Mark Johnson, Chief Operating Officer for Indonesia operations; Josh Olmsted, Chief Operating Officer for the Americas, Mike Kendrick, who heads our molybdenum business; Cory Stevens, who leads our technical services and engineering and construction group; and Steve Higgins, our Chief Administrative Officer. We are going to start with Richard. He’ll make some opening comments, and then we’ll be reviewing the slide materials, and then we'll open the call for your questions. Go ahead, Richard.

Kathleen Quirk:

Thank you, Richard, and I'm going to start on slide three where we summarize our key operating and financial highlights for the third quarter. We delivered another quarter of strong execution, production results across the portfolio were solid, totaling £1.1 billion of copper and over 500,000 ounces of gold during the quarter. Our copper sales were 8% above our estimates going into the quarter, and despite strong gold production, our third quarter gold shipments were slightly below previous estimates. That reflected timing associated with some administrative approvals in Indonesia, but this is expected to turn and set up for higher gold sales in the fourth quarter. Our unit net cash costs on a consolidated basis averaged $1.73 per pound in the third quarter that was similar to the year ago quarter. The increase compared to our guidance of $1.61 per pound largely reflects the impact of export duties in Indonesia, which we continue to review and discuss with the Indonesian government. With average copper prices of $3.80 per pound in the quarter, we generated EBITDA of $2.2 billion. Our operating cash flows, which were net of $500 million in working capital uses, totaled $1.2 billion, and those exceeded our mining capital expenditures, totaling $800 million, which exclude capital associated with our smelter project, totaling $400 million in the quarter, and that's being funded from proceeds that we raised last year in a financing transaction. We're making steady progress on the smelter projects in Indonesia. The construction project on the new greenfield smelter is 84% complete, and we're on track to begin ramping up during 2024. Richard talked about our balance sheet, our balance sheet, liquidity, financial flexibility remain in great shape, excluding the net debt associated with the smelter projects in Indonesia. We ended the quarter with $800 million in net debt. As we approach the end of 2023, our team remains focused on continuing strong and safe execution of our operating plans. And we expect to have another quarter of strong production results. And we're going to continue to advance several important initiatives to drive long-term value in our business. Moving to the next slide, slide four, we talk about copper markets. And as Richard mentioned, the long-term fundamental outlook for copper remains compelling, characterized by rising demand associated with global investments in electrification and limited supplies. In the short term, copper prices have been impacted by macro sentiment tied to rising interest rates, U.S. dollar strength, and sentiment on the global economy. Copper inventories on exchanges have risen in recent weeks, and that follows a multi-year period of declines. When we look at the overall inventories on the exchanges, they remain low by historical standards and in relation to the growing size of the market. The reality on the ground, when we look at the macro sentiment, we also need to look at the reality on the ground. And the new structural demand drivers for copper are mitigating traditional cyclical uses. In the U.S., several of our customers are reporting growth in power cable and building wire for utilities and data centers and rising demand from the automotive sector. There are pockets of weakness tied to residential housing, but this is being offset in other sectors. China's consumption continues to grow despite the country's weak property sector, supported by massive investments in wind and solar and growth in electric vehicle production. And there are recent signs we're seeing that economic activity is picking up in China. We're also seeing growth in copper consumption in India, which has historically used less copper per capita than other countries. We can't predict short-term macro forces that have heavily influenced the market, but our conviction for the long-term fundamental outlook remains strong. Copper is the metal when it comes to electrification and Freeport's well-positioned as a leader in the global copper industry. When we look at the long-term, we're looking at the next several years where demand is expected to accelerate with third-party projections for demand to double by 2035. At the same time, the ability of the copper industry to meet this rising demand is a major challenge. The recent weakness in price combined with higher capital costs to develop new mines are making it more difficult to justify new project development, which is essential to the future. With this backdrop, we believe the current price is not sustainable and prices will need to rise to incentivize new supplies. At Freeport, we benefit from a large reserve position and an even larger resource position to grow our business in the future. We're going to take a long-term view and also be mindful of the short-term pressures on the market. Moving to the next slide, on slide five, we want to highlight some of the key operational drivers for our business during the quarter. In the U.S., our leach innovation initiative where we're deploying new operating practices to traditional leaching is showing tangible progress. Incremental copper from these incentives totaled 46 million pounds in the third quarter. This is 90% of our initial targeted run rate of 200 million pounds of copper per annum. We see ongoing opportunities for additional scale as we aggressively advance this highly valuable initiative. Additionally, we're continuing to focus on enhancing productivity in our U.S. mining and milling operations. We know there's opportunity here to improve and it's a key focus area for us. At Cerro Verde in Peru, where we operate one of the largest concentrate sites in the world, the mill averaged over 430,000 tons per day during the quarter. That was a new quarterly record. You will recall this is a site that was designed at 360,000 tons per day. Overtime, our team has found ways to improve efficiencies there. We are really proud of the Cerro Verde team. At Grasberg, our mill rates averaged 207,000 tons per day for the quarter, processing high grades of copper and gold ore. The production for the quarter exceeded 400 million pounds of copper and over 500,000 ounces of gold that was in a single quarter, demonstrating the size and scale of this operation. We had several days of the mill throughput in excess of 220,000 tons per day. And a highlight of the quarter was the performance of Grasberg Block Cave. We mined from that ore body over 130,000 tons per day, on average. We installed a new gyratory crusher at the Grasberg Block Cave, which gives us the ability to process more material from that large ore body. And we recently reached new records of over 160,000 tons a day. We're working to complete the new SAG mill at Grasberg. We're expected to complete construction by the end of the year. And that'll give us more opportunities in the future to ramp up our mill rate even further. Turning to slide six, we talk about our growth initiatives. And as we look at this situation where we have growing demand for copper over the next several years, and the limitations and the high capital intensity and risk for greenfield projects, our strategy is really focused on development of extensions of our existing operations and our portfolio of brownfield opportunity. We characterize our growth in near-term, medium-term, and longer-term development options. On the near-term side, the initial target of 200 million pounds per year of copper from our leach initiative has essentially been met. And now we're focusing on sustaining it and scaling it further. On prior calls, we discussed our initiatives to retain more heat in the stockpiles. And those activities are continuing. A big driver of the success in the last several months has been on our Leach Everywhere work, where we're applying solution to areas of the stockpile which have not previously been leached. We're also conducting targeted drilling to inject solution to areas within the stockpile where solution may have been blocked over time. And our data and modeling can now provide information that targets specific areas of opportunity. And we're gearing up to do this more at scale. We now believe we can scale these activities and double the incremental copper to 400 million pounds per annum over time. This is just from applying our operating practices at a larger scale without relying on new technologies. We're also continuing our work on the new technologies front. And that's going to give us the opportunity with success to reach our ultimate goal of 800 million pounds per annum from this initiative over the next three to five years. Remind everybody we have 40 billion pounds of copper in our stockpiles that's already been mined. This is not in our reserves. And it's an opportunity for us to get recovery from this copper that previously was thought to be waste material. This initiative has the best economics of anything in our portfolio given its low capital intensity and low incremental operating costs. And we're pursuing it very aggressively. Our productivities in the U.S., which I mentioned earlier, are focused on rebuilding the experience of our workforce. We've had a large number of new hires in recent years. And we need to rebuild our skills and experience, enhancing our practices to achieve better equipment performance and reliability, and taking advantage of new technologies and automation to restore and improve on productivity metrics that weakened during the pandemic. By increasing our productivity in the U.S., we have the opportunity to add an additional 200 million pounds per year from our existing assets with limited capital investment. We're also continuing our work on a potential expansion of the Baghdad mine in Northwest Arizona. We're completing a feasibility study. And we're taking some steps now to enhance optionality for the future, including making some investments in autonomous haulage in our mining operations at Baghdad. And we're advancing investments in our tailing infrastructure for the future. We are setting up Baghdad expansion project as an option for the future. The timing of it will depend on market conditions. We're looking at the increased capital cost requirements for projects and consider that. We're also looking at the availability of labor. And we'll make all those reviews before finalizing our decision on the timing of this project. But it's a very large resource for us. We've got significant reserves spanning over 80 years there and a good opportunity for expansion in the future at the right time. We also have a major opportunity for expansion at El Abra mine in Chile. This is a very large resource that could support a concentrator on the size of the concentrator we added at Cerro Verde several years ago. We're retesting the economics to update project capital costs in light of the recent capital cost experience of other large projects. And in parallel, we're planning investments in water infrastructure to support the current operation and provide optionality for the future. Again, this is about options for expansion at the right time. And we've got the portfolio with a lot of option value within the Freeport portfolio. Our Kucing Liar development in Grasberg is proceeding on schedule. We expect to commence production by 2030. The huge ore body ramping up to 550 million pounds of copper and 560,000 ounces of gold in the next decade. We're also conducting some additional exploration in the Grasberg district where we have identified some potential below our deep MLZ [Ph] ore body. We're continuing to advance discussions in Indonesia for extension beyond 2041. That would open the door for continuation of large scale mining and potential additional development options in one of the world's largest and highest grade copper and gold mining districts. Longer-term, we're focused on a major opportunity that we have in the U.S. at the Safford Lone Star District. We've identified a significant resource there. And we continue to see the Safford District with the potential to add another cornerstone asset of scale in the U.S. We're in an outstanding position as we look at our large resource and reserve position and the experience of our team to continue our leadership role in supplying copper to a world with growing requirements. We're going to continue to be disciplined in our approach. And we're going to be focused on executing projects so we can create value for shareholders. Slide seven provides our three year outlook for sales volumes. You'll see this is largely unchanged from our prior forecast. We've increased our 2023 copper sales volumes by about 40 million pounds. And that reflects the updated shipping schedules expected in Indonesia. There's no material changes in guidance for 2024 or 2025. We do believe we have some upside to these numbers with continued success in our leach efforts and our work on productivity enhancements in the U.S. We're turning to our regional data on slide eight. We show our projected 2023 volumes and unit net cash costs by region. The Americas, including North America and South America, comprise about 63% of our 2023 copper sales and all of our molybdenum sales. Indonesia represents 37% of our copper sales and all of our gold sales. The Americas volumes are similar to a prior forecast. And our sales estimates from Indonesia have been increased to reflect the shipping schedules that I mentioned earlier. On a consolidated basis, our unit net cash costs for the year are forecast at $1.63 per pound. It's slightly above the prior forecast of $1.55, $0.07 of that relates to export duties, which remain under discussion with the Indonesian government. We've also incorporated some higher costs for energy compared with the prior forecast. And after moderating in the first half of the year, we're seeing energy costs, particularly for diesel fuel, rising. We're continuing to work to enhance productivity to mitigate the cost increases we've experienced since 2022, really across the board for labor, our contract maintenance services, equipment component costs, and a series of input costs that have risen. And we're working hard to try to mitigate those through effective cost management and productivity enhancements. Turning to cash flows on slide nine, we model our results for EBITDA and cash flow for 2024 and 2025 showing a price range of four to five dollar copper. We've got sensitivities on the page so you can use for looking at the changes based on changes in input costs or copper prices. The annual EBITDA would range under these scenarios from nearly ten billion dollars per annum at four dollar copper to fourteen billion dollars at five dollar copper and operating cash flows would range from seven to ten billion dollars under these assumptions. With long live reserves and large scale production, we're well positioned to benefit from future metals intensive growth and that will provide opportunities for organic investments and cash returns under our performance based payout framework. On slide 10, we show our current forecast for capital expenditures for 2023 and 2024. 3.2 billion total for 2023 is similar to our prior estimate and our capital for 2024 is 3.9 billion compared with the prior estimate of 3.8 billion. For 2024, we've added some discretionary capital to commence a new project in Indonesia to transition our energy source from coal to clean air LNG over the next three to four years and we expect to start that project next year. The discretionary projects total a little less than $2 billion over 2023 and 2024. This category reflects the capital investments we're making in new projects that under our financial policy are funded with the 50% of available cash that's not distributed. We've got some details on those projects in the reference materials. Slide 11, we've included some updated pictures of the smelter project in Indonesia. This is a major undertaking. It's being executed very efficiently. We're making steady progress toward completion. For the Greenfield smelter, we're now 84% complete on construction and we expect to begin commissioning the project by the middle of next year and ramping up to full production by the end of the year. We're also nearing completion of an expansion project that we're doing with our partner to expand the existing smelter in Indonesia. We expect construction to be completed by the end of this year in 2023. We're really pleased with the strong execution of our internal project team and our outside contractor to contain costs and meet schedules in a very complex environment for major project development. On slide 12, I just wanted to update you on some climate initiatives. We published an updated climate report during the third quarter, which is available on our website. But I mentioned in Indonesia we're advancing plans to develop, to transition our coal to LNG. We have plans to develop a 265 megawatt gas-fired combined cycle facility and that would replace the coal units that were developed there over 25 years ago. The project has a cost of roughly $1 billion and the economics, as we looked at it, would eliminate the cost to refurbish and expand the existing coal units over time. The incremental economic cost of this project is roughly $400 million. Importantly, the transition would reduce significantly PT-FI's greenhouse gas emissions. And together with other initiatives PT-FI has undertaken, the total reduction would be on the order of 60% compared to the 2018 baseline. It's a very exciting project for us looking forward. We're also very pleased to report that we have a new power purchase agreement in Peru at Cerro Verde that will allow Cerro Verde the benefit of 100% of its power from renewable sources in 2026. And finally, on slide 13, we wanted to reiterate the financial policy priorities centered on a strong balance sheet, cash returns to shareholders, and investments in value-enhancing growth projects. The balance sheet is strong. We've got strong credit metrics, significant flexibility within our debt targets to execute on our projects. At the same time, we've distributed over $3.5 billion to shareholders through dividends and share purchases, and we have an attractive future long-term portfolio that will enable us to continue to build long-term value for shareholders. We've got to continue to focus on the current situation, though, and we're going to continue to monitor current market conditions. We'll carefully manage the timing of our projects to ensure our financial flexibility remains strong. Our team is really experienced in navigating challenging conditions while maintaining a focus on pursuing long-term value in the business and executing our plans responsibly, safely, and efficiently. That concludes our prepared remarks, and we appreciate all your attention and interest, and we'll now take your questions.

Alex Hacking:

Yes, morning, Richard and Kathleen. I wanted to ask a couple of questions on U.S. operations. Could you maybe discuss the cost performance there? That seems like it's a little bit higher than guidance and how you see that going forward. And then secondly, just on production, just so I understand, production this is about 340 million pounds. Does that include the incremental 46 million pounds from the new leaching? Is that all in the U.S.? And I guess if so, that sort of implies that production without those pounds would be below 300 versus like 370 million last year. So, maybe just some comments around that and how you see the leaching, impacting the production profile there going forward. Thanks.

Alex Hacking:

Yes, that was a great answer, Kathleen. I really appreciate all the color. Thanks so much and good luck with everything.

Operator:

Your next question comes from the line of Chris LaFemina with Jefferies. Please go ahead.

Kathleen Quirk:

Thanks, Chris. Both of those items that you mentioned, the recent clarity around taxation in Chile and the issue between the treaty between the U.S. and Chile are both helpful. Quite frankly, if that hadn't been resolved, the latter had not been resolved, that would have posed a big challenge for us in developing the project. But that's been resolved. And so now we're really turning to the economic side of the equation. And we've been watching what's been going on in Chile with other major projects. We did a lot of work on this project, on the El Abra project, and it has good economics, but we want to retest those economics with current capital costs. And that'll be something that we've already started working on, but that's something we really want to get our heads around is, does it make sense? What's the timing given rising capital costs? I mean, you've seen really significant cost blowouts in Chile in recent time. And we want to make sure that we can deploy capital effectively, efficiently in this market. And as Richard was talking about, the copper price today doesn't really support new investment. And so, of significance. And so our focus really has been in this kind of environment on what we can do to be less capital intensive while continuing to advance our options and create optionality in the portfolio. Our plans in Chile currently are to invest in some water infrastructure, desalinization project that would allow us to extend the life of the current operation, and then that would give us optionality for the bigger expansion. And so what we're really doing now is trying to advance these things so we have optionality, but we're not wanting to commit to major, major, multi-billion dollar projects in the current environment. We all see this looming deficit coming, but the current price is just don't support big new investments like this at the current time. We know that will change over time and we want to be prepared at the right time to bring this project on. Permitting takes quite a while and Chile is on trying to streamline permitting. We're encouraged by that. In terms of the Codelco question on financing, they're very positive about the project and they've indicated to us support for it at the right time and we'll figure out financing this at the right time when we go forward. But right now we don't have to make that decision.

Operator:

Your next question will come from the line of Michael Dudas with Vertical Research. Please go ahead.

Kathleen Quirk:

Good morning, Mike.

Kathleen Quirk:

Richard, do you want to take that one?

Michael Dudas:

It sounds like discretion is the better part of valor. Thank you, Richard.

Operator:

Your next question comes from the line of Oris Waukadal [Ph] with Scotia Bank. Please go ahead.

Kathleen Quirk:

Good morning.

Kathleen Quirk:

Well, the issue on the duty, you're talking about the duty, the situation there is that, as you're aware, our IUPK says that we're not subject to duties once the smelter gets over 50%. And the government issued some new regulations earlier this year, and this not just applies to Freeport, but all exporters for copper that are required to have smelters that are required to pay a 7.5% duty. And it's a sliding scale depending on how much progress you've made. We have raised the issue with the government, and they are reviewing the issue. They're also reviewing our progress of the smelter, and we're going to continue to work cooperatively with them. I want to just remind everyone that there's alignment of interest to a large degree there because the Indonesian government state-owned company owns 51% of PT-FI, and also PT-FI pays taxes. So the impact to the government of these export duties is also a significant item. So we've got support from our partner there to help us work through this issue with the government, and we're going to continue to -- I don't have a definitive timeline, but we're continuing to engage in discussions to address this. The extension discussions are also continuing. Our partner, MIND ID, is also very supportive of extending the operation. One of the really significant benefits that we've had in the new structure since 2018 where the government owns 51% is there is a better understanding of the time it takes to develop new resources or extend the resources. And so I think all the parties are aligned in that it makes sense to continue this operation beyond 2041. We made a lot of progress in developing a framework with the government on what the terms of that extension would be. A big catalyst for us is getting the smelter advanced and completed, and that, I think, would be a good catalyst for us to be able to continue to extend those operations out for the life of this resource. But conversations are ongoing. Indonesia is in an election cycle now, and so there are other things going on in the government. The government has a lot of priorities that they're balancing. But in terms of the want to and will of getting this extended to be able to continue the benefits that are very significant to the government of Indonesia and the people of Papua, there is good support for doing this. And we're working very hard to try to get it done as soon as possible, but the timeline is not under our control.

Operator:

Your next question comes from the line of Carlos de Alba with Morgan Stanley. Please go ahead.

Kathleen Quirk:

With respect to your question on the first topic, the Smelter project is being debt financed. And so we raised $3 billion in financing last year in long-term bond financing at the PT-FI level. So the economics of that, even though it's consolidated on FCX's financial statements, the economics essentially are borne by PT-FI shareholders. And we have a revolving credit facility as well to supplement that. So the Smelter, and that's why we look at it separately, it doesn't impact the cash flow we have at the FCX level that's available for distribution because it's being funded through these proceeds. With respect to other capital projects at PT-FI, those are funded internally at the PT-FI level. So when we look at the projects we're doing to complete the new SAG mill, when we look at the copper cleaner project, all of the capital projects at PT-FI, those are funded with that subsidiary's internally generated cash flows, which is very significant. And so, yes, as you increase capital there, it does reduce the dividends that come out of PT-FI. But these are really good projects that PT-FI has the ability to fund with its cash flows and distribute substantial amounts to its shareholders. In terms of the dividends there, that's really a function of what the performance of the business is. We have a policy, a dividend policy at the PT-FI level where all of the available cash flow is distributed to shareholders and FCX gets 49% of that and MIND ID gets 51%. But that's the policy that we're following and expect to continue to follow.

Operator:

Your next question will come from the line of Bill Peterson with JPMorgan. Please go ahead.

Kathleen Quirk:

Well, we're updating our capital costs now for El-Abra. Previously when we ran the economics several years ago, it's been a few years ago before the pandemic when we outlined the potential for the project, today's price would have worked fine. It would have been a good return. But there were other factors that led us to put the project on hold. In today's world, we need to retest those economics. I mean, just look at the recent project in Chile of how much that cost increased and it's a huge, multi-billion dollar impact. And that impacts our thinking and that impacts economics. So, we don’t think we know the economics we ran previously don't apply currently. And so, we've been doing some work, we've been doing some additional work on the resource and we've got some positive things that have developed since then that will help the economics, but this capital cost inflation is a real issue and it's something that we need to keep in mind. On the Baghdad project, this is a project that with El-Abra, these are new reserves. So with El-Abra, it would allow us to produce reserves currently in the ground where we don't currently have infrastructure that can produce those reserves. At El-Abra, I mean at Baghdad, it's a different analysis. At Baghdad, we can produce those reserves over 80 years or we can double our processing capacity and produce those reserves over a shorter period of time. And so you have to look at the capital cost and how that interplays with it being an acceleration of production rather than new production. So we're looking, we're completing the feasibility study. The costs we believe are going to come in higher than what we expected them to and so that will have an impact on us. The other thing that will have an impact on our decision will be the availability of labor and whether we can execute that project efficiently. We're doing some things now to create options. We got the autonomous plans to put in autonomous haulage at Baghdad. It's our first mine in the U.S. that will do that and that's exciting for us and that creates options for us in the future. And we're doing some work, some early works to give us options there. But the numbers don't work. I think if you ask people in the industry, what it takes, people are going to tell you it's over $4 to develop new projects. But every project is different and that's why when we look at this leach opportunity, the potential to add 800 million pounds of copper with very low capital costs is very compelling and so we're going to be looking for opportunities in the near term during this uncertainty to expand our production but it's going to be through innovation, automation rather than high capital intensity. And we'll continue to test that and that will continue to evolve but that's the current thinking is that right now the copper price is not enough to support a major investment in a big expansion or a greenfield project.

Kathleen Quirk:

Yes, it's a use but we expect some of that will turn in the fourth quarter. Some of what we had in terms of the inventories and receivables will turn but we are expecting a use for the year.

Richard Adkerson:

Let me just add one quick. Hang on, let me just add one quick comment to support what Kathleen is saying. People, and I understand it if you're doing overall industry analysis, you're looking for what is the incentive price that triggers new production but Kathleen made the point that each project is different and then each company's situation is different. One of the strong things about our business is that because of our production levels, our resource base, our ability to add to production with things like leaching but beyond that more with being more efficient with technology working our assets harder and so forth. We don't face the same pressures from reinvestment risk that some other companies face but also other commodities face because of shorter reserve lives. And that's one thing I like so much about our business is that it gives us that flexibility to not have to take risks, not have to press things during uncertain economic times but as I mentioned earlier, to be just more prudent about how we run our business. It's a great strength of our industry to a certain degree, but of Freeport as a company, because of our strong production base and long-lived [Ph] properties and the ability to maximize production out of our existing properties by doing things smarter and using technology and working assets harder.

Operator:

Our next question will come from the line of Alex Terentiew with Stifel. Please go ahead.

Kathleen Quirk:

Yes. On the duty issue, the duties are paid on concentrate exports. So, once we get the smelter done and ramped up, we will have no more exports of concentrates. We'll be, we'll be producing copper cathode and gold, the actual metals. So the export duty only applies to this intermediate, step of concentrates. So, there hasn't been anything in terms of we're still working with the government. Right now, the export license is through May. And so, we've still got to work with the government to work through this issue beyond May of having a ramp up period. We'll still be shipping some concentrates, exporting some concentrates during the ramp up. But we're going to work cooperatively with the government to make sure that those that continuity continues. With respect to the leach pounds, not every application is the same. But on average, we expect these leach pounds to come in at roughly a dollar per pound. And so, that is, that's why we're so excited. Most of this is in our U.S. business. And so, it'll bring down, if we're successful, and we're able to put this into our reserves, it'll bring down our average cost in the U.S. over time. And I'll just ask, Corey Stevens on the line, and he and his team are leading this initiative. And just wanted to ask Corey if there's anything that we didn't cover on leaching that you want to make points of that hasn't been discussed so far.

Kathleen Quirk:

Yes. And so there's a lot of value in this opportunity. And we see it, we can feel it. And we're pressing forward. But as we talked about earlier, we've got to get that going, at the same time we get our productivity, our key performance indicators improved in the U.S. And that's a big focus as well. So those two things we believe will generate a lot of value in our U.S. business and it's not capital intensive. So that's really our primary focus right now is on getting those two things going at the same time. And we've made great progress on the leach front. We're making progress on the productivity initiative front, but we've got more work to do there.

Kathleen Quirk:

Thanks Alex.

Brian MacArthur:

Good morning, Richard and Kathleen. My question just goes back to the export duty. The 147 million you incurred this quarter, two things, I assume that going retroactive back to March 29th when it technically was scaled down. So you're sort of paying two quarters. And the second thing is the text talks about incurring it. Have you actually paid it on a cash basis or is it just a payable as you kind of sign work through all this?

Brian MacArthur:

Great, thanks. Just to be clear, because last quarter, yes, I'll follow up with David. Because just last quarter, the export duties were zero on the cost per pound. So that's why I was just trying to figure out exactly how this is working. Yes. I can follow up with David.

Kathleen Quirk:

Yes, the new regulation didn't come out to June, July time frame. And so the second quarter, we didn't have duties. It was this June 10th date that triggered some new regulations. So you're right that we didn't have duties in the second quarter. So the duties that you're seeing in the third quarter relate to the third quarter shipments.

Richard Adkerson:

Thank you.

Kathleen Quirk:

Well, thanks everyone for your participation. And we're available if anybody has any questions or comments. And just talk to David. And we'll look forward to continuing to report to you on our progress.

Kathleen Quirk:

Thank you and good morning everyone. Welcome to our conference call. Earlier this morning, we reported our second quarter 2023 operating and financial results. And a copy of the press release and slides are available on our website at fcx.com. Our call today is being broadcast live on the Internet, and anyone may listen to the call by accessing our website homepage and clicking on the webcast link for the conference call. In addition to analysts and investors, the financial press has been invited to listen to today's call, and a replay of the webcast will be available on our website later today. Before we begin our comments, we'd like to remind everyone that today's press release and certain of our comments on the call include forward-looking statements, and actual results may differ materially. I'd like to refer everyone to the cautionary language included in our press release and presentation materials and to the risk factors described in our SEC filings. On the call with me today are Richard Adkerson, our Chairman of the Board and CEO; Maree Robertson, our Chief Financial Officer; Josh Olmsted, who leads our Americas operations; Mark Johnson, who leads our Indonesian operations; Cory Stevens, who heads up our engineering, construction and technical services group; Mike Kendrick, who leads our molybdenum business; and Steve Higgins, our Chief Administrative Officer. We'll start the call. Richard will make some opening comments, and then I'll go through the prepared materials, our slide materials, and then we'll open the call to take your questions. So I'd like to turn the call over to Richard.

Kathleen Quirk:

Thank you, Richard, and I'll start on Slide 3, where we summarize our key operating and financial highlights for the second quarter. Production results across the portfolio were strong in the second quarter approaching 1.1 billion pounds of copper and nearly 500,000 ounces of gold. Our copper sales were about 3% below our guidance as a result of administrative delays in obtaining PT-FI's export license approval. We expect that PT-FI will receive approval to resume concentrate exports over the next several days. Our unit net cash costs during the quarter averaged $1.47 per pound, and that was a little better than our guidance of $1.51 per pound. With average copper prices realized of $3.84 per pound in the quarter, we generated strong margins and EBITDA of $2.14 billion. Our operating cash flows totaled $1.7 billion, and that was substantially above our mining capital expenditures, which totaled $700 million roughly, and that excludes the smelter capital of approximately $500 million in the quarter, which is being funded from proceeds that we raised last year. The balance sheet liquidity, financial flexibility remain in great shape. Excluding net debt associated with the smelter, we ended the quarter with under $1 billion of net debt. You'll see that we completed and we conducted some additional open market purchases of our public debt in the quarter at prices below par. As we look forward, we're well positioned for strong results in the second half of the year of – as second half copper volumes are projected to be over 15% higher than the first half and second half gold sales are projected to be over 25% other than what we sold in the first half of the year. I'm going to move to Slide 4 where we showcase a few of the operational highlights that we are particularly proud of in the second quarter. At Cerro Verde, where we operate one of the largest concentrate sites in the world, the mill averaged 425,000 tons of ore throughput per day during the quarter. This was a site that was designed several years ago at 360,000 tons per day. And over time our team has found ways to improve efficiencies and will continue to do that in the future. At Grasberg mill rates averaged over 200,000 tons per day, it was 207,000 tons per day in the quarter, and that was processing very high grades of both copper and gold ore. That was significantly above the first quarter level and actually the highest average quarterly throughput in over a decade. All this ore is coming from our large scale, modern and efficient underground mines now. Notably, the large scale operation at Grasberg produced copper during the quarter at a net cash credit of $0.09 per pound, and it was just extraordinary performance. We are making steady progress on the smelter in Indonesia. This is an important initiative and we're now at 75% compared with 60% progress three months ago. Our project execution is going well, and our team is very focused on completing the project efficiently. Over the next several months, we expect to complete construction by the second quarter of 2024 and begin commissioning and ramp up over the balance of 2024. We are also happy to report ongoing progress with our leach initiative and that's particularly helping our sites in the U.S. During the second quarter, this effort yielded incremental copper of 29 million pounds, and that was over two times the level in last year's second quarter. We're about 60% of our targeted annual run rate at this level, and we are well on our way to getting to our target of roughly 200 million pounds of copper per year incremental from this initiative. We're going to talk later – about it later in the presentation, but our confidence is increasing in meeting the initial target and on the significant upside for this highly valuable initiative. Turning to Slide 5, and you've seen a lot of press reports over the last several weeks about the regulatory situation in Indonesia, and we're providing an update on recent regulatory changes in the country. As many of you know, Indonesia is highly focused on downstream resource development that's been evolving over many years, and that reflects the country's national strategic priorities. The evolution of this ultimately led to our agreement in 2018 to expand our domestic smelting and refining capacity in the country. In 2020, Indonesia passed the law restricting exports of certain minerals weren't all defined, but that was beginning in June of 2023. Given our IUPK license and rights, and progress on the smelter, we continue to work with the government to allow time for us to complete our projects, which were delayed by the pandemic. As we mentioned, the projects are well advanced and nearing completion, and we were really honored to host Indonesia's President, Joko Widodo, at our smelter site in June. Beginning in June and July of this year various ministries completed regulatory process to enable ongoing exports of copper concentrates through May of 2024 for exporters with more than 50% smelter progress, and we were over 70%. Last week, the trade ministry enacted legislation to allow the exports and now the administrative process we expect to receive formal approval to resume exports over the next several days. We are going to continue to work with the government to enable exports to continue in 2024 until the new smelter is fully ramped up and operational. The Ministry of Finance also passed regulations last week to increase the duties on exports for various products, including copper concentrates for companies with progress of more than 70% of the duty. The new duty rate is 7.5% for the second half of this year. Under our IUPK, which provides stabilized terms for taxes, royalties, and duties, duties are phased out after 50% progress. And so we're currently reviewing the IUPK provisions with the ministry and our engaged in discussions on this matter. To date, the production impacts on our operations from the shipping delays have been limited, and this has been more of a timing consideration between production and sales. We currently have a sizeable volume of copper concentrate at our port site ready for shipment, and we expect to work down inventories over the next several months. Moving to the copper markets on Slide 6 and Richard touched on this in his comments. Copper is the metal when it comes to electrification. And Freeport is really well positioned as a leader in the global copper industry. The short-term market situation is characterized by, on the one hand, favorable demand drivers from growing intensity in autos, renewables and data centers, and that's partly offset by slowing manufacturing growth. China remains the world's largest consumer of copper and even with the country's current economic challenges and the weakness in the property sector, copper consumption continues to grow and that's been bolstered by large investments in copper-intensive electrical grid and strong growth in electric vehicle production. Richard referenced the inventories, which are very low levels by historical standards, they're now lower than they were at the start of this year, and we see this as evidence of a tightly balanced market. As we look forward over the next several years, demand is expected to accelerate with third-party projections for demand to double by 2035. Investments in low carbon renewable power, electrification will lead to massive growth in demand. And in addition to that, the initiatives by many countries for major infrastructure programs and the uses of copper for connectivity, data, AI, those are also growing demand drivers. At the same time, the ability of the copper industry to meet this rising demand is a major challenge, and we are working very hard to increase our supplies as we look forward. We believe prices will need to rise to incentivize new supplies of copper. At Freeport, we benefit from a large reserve position and even greater resource position to be able to grow our business in the future. As I mentioned, we're really focused on continuing to support the growing demand, producing responsibly and we're pursuing several initiatives to enhance our production going forward. Moving to Slide 7. We provide an update of our three-year outlook for sales volumes. This is largely unchanged from our prior forecast. We've reduced our 2023 copper sales volumes by about 40 million pounds, that's about 1%, to take into account the shipping schedules in the balance of the year. The guidance for 2024 and 2025 is unchanged. And we do – we are focused on continued success in our leach efforts, which we believe have the potential to provide some upside to these estimates. Moving to the regional information on Slide 8. We show our projected 2023 volumes and unit net cash costs by region. Our business in the Americas, including the U.S. and in South America, comprise about two-thirds of our 2023 copper sales and all of our molybdenum sales, and Indonesia represents about one-third of the copper sales and all of our gold sales. On a consolidated basis from a cost standpoint, our unit net cash cost forecast of $1.55 per pound for the year 2023 is consistent with our prior estimate. We've had some small offsetting changes between the regions. But in total, we're continuing to project cash cost of $1.55 for the year. As we move through the year, we're continuing to experience improving cost trends for several of our commodity-based input costs, and we're seeing more stability in labor, services and equipment component costs. We remain focused on cost management and all of our ongoing initiatives to improve productivity to offset the cost increases that we've experienced in recent years. The estimates that were provided on Slide 8 assume that the export duties in Indonesia are unchanged from our existing duties. As I mentioned previously, the new regulations imposed higher duties than our stabilized rates under the IUPK and we're engaged in the discussions with the government to review this. We provided some sensitivities on potential impacts of the higher duty rates on this page, which you can see at the bottom would have a $0.07 per pound impact on consolidated unit net cash cost for the year, take into account the impact in Indonesia of $0.19 per pound for the year with the duty starting in the second half. On Slide 9, we updated our outlook for our margins and cash flows. And if we put together our projected volumes and cost projections, we show the modeled results for our EBITDA and cash flow at various copper prices ranging from $4 to $5 copper. These results on the slide are modeled using the average of our 2024 and 2025 volume and cost estimates, and we hold gold flat in these scenarios at $1,950 per ounce and molybdenum flat at $20 per pound, both of those commodities are slightly above that today. Annual EBITDA under these assumptions would range from about $11 billion per annum to $15 billion per annum at $5. The $11 billion was at $4, and our operating cash flows before working capital would range from nearly $8 billion per year at $4 copper and $11 billion per year at $5 copper. We’ve got some sensitivities to the various commodities both the sales commodities as well as our input costs. On the right of the chart, we’re well-positioned with our long-lived reserves, large scale production to benefit from future metals intensive growth trends. And we’ve got prospects as we look forward for increasing cash returns under our performance based financial policy payout framework. Return to capital expenditures next, on Slide 10 where we show our current forecast for capital expenditures in 2023 and 2024, these include the capital that we’re investing in the Indonesian smelter project, and those amounts are being funded from a debt offering we did last year, we’ve got cash on the balance sheet and availability to support those investments and the detail of those expenditures are on Page 25 of the slide deck. But all in all on the non-smelter related investments, the – we’ve had some timing adjustments moving some spending from 2023 to 2024, but the current forecast for the two years is pretty similar to what we had before. It’s about 3% higher for the two-year period, and that that reflects some updated estimates principally for projects at Grasberg. We’ve highlighted here on the slide discretionary projects, and these are the projects that are being funded with the 50% of available cash that’s not distributed. Those totaled $2 billion over 2023 and 2024. And these are value enhancing initiatives that we’ve got some details on 24 – on Slide 24 in our reference material, but value enhancing initiatives to improve our position as we look forward. We’ll talk on development options and our growth on Slide 11. We’re really focused as we said, on looking at the outlook for growing copper demand and looking at our brownfield strategy given the risk and actionability of greenfield projects, our strategy of developing our resources within our portfolio, we’re focused on expansions of our existing operations and our broad portfolio of brownfield opportunities. We’ve categorized the growth on Slide 11 and in near-term, medium-term and longer-term development operations options, and you can see in the near-term the best options for us, for growth are achieving our initial leach targets and the actions that we have particularly in our U.S. operations to enhance productivity and reliability. By increasing our mining rates in the U.S. through workforce additions, automation, and achieving higher targets for asset efficiency and reliability in our equipment and processing facilities, we believe we have the opportunity to add 200 million pounds of copper a year with very limited capital investment. We’re very focused on the details of the reliability and asset efficiency that we’re pursuing and see that potential as we look forward. We also outlined the potential of our leach opportunity beyond the initial target of 200 million pounds per annum. We talk extensively about this on our last call. We’ve got very large areas under leach. We’ve got new approaches and operating practices that we are deploying on this effort, and the more we work on it, the more optimistic we are about this opportunity is much larger than the initial 200 million pounds. We continue to see the clear opportunity of expanding the initial 200 million pounds of copper per annum to 800 million pounds of – per annum over the next three years to five years. We’re continuing initiatives to increase heat to our stockpiles. We’re continuing to enhance our ability to identify and deploy solution to areas of the stockpiles, which aren’t getting adequate solution. And we’re continuing our work on additives through internal testing, as well as looking at technology that others have with respect to additives. This is a major value opportunity, a major catalyst for us, and Freeport is one of the best place companies in the industry to capture value from it, and that’s because of our large existing stockpiles with billions of pounds of copper still in them, our technical know-how and the ability of our team to deploy learnings quickly across the portfolio through our operational control of all the mines we have interest in. In addition to the leach opportunity, we’ve got more traditional sources of growth that we are pursuing. We’re continuing to evaluate the expansion of our Bagdad mine in Arizona. We’re completing the feasibility studies on that expansion. We’ve got the major El Abra opportunity in Chile, where we have an existing operation and very large reserves – resources that support future expansion. And of course, we’re developing making progress with the 90,000 ton per day Kucing Liar block-cave in Indonesia, and that’s expected to commence production by the end of the decade. At Bagdad, we’re making some investments to advance tailings and other infrastructure to enhance our optionality for the project. And we’re doing the same at El Abra looking at some investments and water infrastructure, not only that would support the current operation, but provide optionality for the large mill project in the future. After those two projects, we’ve got an – big opportunity in our Safford/Lone Star district in eastern Arizona. We’ve got current production there and have identified a significant resource that would allow us to make that district another cornerstone asset for Freeport as we look into the 2030 timeframe. We’ve got a series of U.S. Brownfield projects that were also looking at a big opportunity for us as in Indonesia, where an extension of our operating rights beyond 2041, which were continuing to advance would open the door for long-term large scale mining beyond 2041 and potential reserve expansion and additional development options in one of the world’s largest and highest grade copper and gold mining districts. We’re – with these projects, we’re in a position to continue our leadership role, supplying copper to a worldwith growing requirements, we’re going to continue to be disciplined in our approach, but focused on executing the projects where we can create value for shareholders. On the last slide, we – on Slide 12, we reiterate the financial policy priorities. Those are really centered on our strong balance sheet, which we have our cash returns to shareholders and investments in our value enhancing growth projects. The balance sheet is solid. We’ve got very strong credit metrics and flexibility within our debt targets to execute on projects. At the same time, we’ve distributed over $3 billion to shareholders through dividends and share purchases since commencing this performance based policy and have an attractive future long-term portfolio that will allow us to use a portion of our cash flow to build long-term value for shareholders. Richard mentioned the team is energized, motivated, and we’re focused on continuing to drive value in our business in executing these plans responsibly, safely and efficiently. Thanks for your attention, your participation and operator we’ll now open the call for questions.

Alex Hacking:

Yes. Good morning, Kathleen and Richard.

Alex Hacking:

Yes, morning. So I guess, I only have one question. I saw a press release this morning about a strike at Cerro Verde, 72 hours. Could you maybe give us some context on that? Thanks.

Josh Olmsted:

Yes. Good morning. One other thing – we really pride ourselves on our open and ongoing conversations with all of our employees and the union. There’s we have two unions at Cerro Verde. And this is one of the original unions, which accounts for roughly 28% of our total workforce. And it’s just been some ongoing conversation that we’ve generated dialogue for – we have some – a meeting with the labor department tomorrow to try and continue to foster the conversation and avoid the potential strike there. But we’re in – we’ll continue to have those dialogues and we’re working through and being as open and transparent as we can with the union to work through and address any of the issues.

Richard Adkerson:

We have a long history in Peru and Cerro Verde of being able to deal. Sometimes we get affected by strikes, not related to our operations and so forth, but our team is prepared for it. And we’re hopeful that this thing gets resolved is not really a major substance issue in my observation on it. And our team will be able to manage our way through it if in fact we have to deal with it.

Operator:

Your next question will come from the line is Christopher LaFemina with Jefferies. Please go ahead.

Richard Adkerson:

Let’s answer your first question. Yeah, let’s go ahead and answer that. One of the complications we had with this is that the domestic smelter at Gresik that PT Smelting owns, which is not affected by any sort of export issues. It was undergoing a maintenance – a plant maintenance turnaround. So there was limited concentrates we could ship domestically. That has been completed and now we’ve begun returning to shipping to Gresik. We haven’t shut down at all. We’ve – our team is adjusted to the situation by advancing some plant maintenance activities that we had for the second half of the year. And while the storage facilities were approaching their limits or meeting their limits, we have not had a significant – we’ve had some impact, but not a significant impact on operations. We anticipate resuming exports very shortly and we have a lot of concentrate that’s been produced that’s on site that’s ready to sell and we’ll be moving that to market.

Kathleen Quirk:

Well, in order to export…

Christopher LaFemina:

Great. Thank you for that.

Kathleen Quirk:

No. That’s great. Thank you, Richard.

Carlos de Alba:

Yes. Good morning, Kathleen and Richard. So my first question is on Cerro Verde. You are operating quite well there and the company, if I understand correctly it doesn’t really have a significant debt anymore. So with the cash regeneration there, what are your plans? Do you expect to continue to pay dividends? You already announced I think twice payments in the second quarter. You pay more in the third quarter. You typically in the past did pay in the second and fourth quarters. Should we expect another payment in the fourth quarter? So in 2023. Just overall, what can you tell on Cerro Verde? And I’ll come back with the second question.

Carlos de Alba:

Thanks, Kathleen. And then the second question is regarding CapEx. Your overall CapEx is not changing much as you already mentioned. But when I looked at the individual projects, I did notice that the PMR in Indonesia as well as the Grasberg mill recovery project increased CapEx 10% – 10% to 20% higher than in the last update. So I wonder if you can provide some comments as to what is driving that.

Carlos de Alba:

Thank you.

Carlos de Alba:

Yeah, definitely. Thank you, Richard. Thank you, Kathleen.

Richard Adkerson:

Thanks, Carlos.

Timna Tanners:

Hey, good morning everyone.

Richard Adkerson:

Good morning.

Richard Adkerson:

So, Timna, let me correct one thing you said, there’s no renegotiation of the IUPK. Our current IUPK runs to 2041 and we have no rights beyond that. And that was negotiated after a lengthy period and settled in 2018. And the settlement in 2018 has proved to be extraordinary positive for all stakeholders. The government of Indonesia, which acquired Rio Tinto’s interest during that process achieved its goals of getting a 51% equity ownership interest, and together with taxes, royalties, and other fees has essentially a 70% interest in the economics of the project. Through that FCX retained its interest, because it was already burdened by the Rio Tinto joint venture interest. And then since that date, we’ve successfully completed the conversion from the open pit to this underground mine and you can just see the track record that our team’s achieving with that. And over that period of time, copper prices have been good, all stakeholders have benefitted. Now, when the President and when you talk about the relationships, a key factor in that was when President Joko Widodo visited our job site in Papua the end of August, early September, the first Indonesian President to do that since Suharto did in the early 70s. He was very positive about what he saw there, about the progress we’re making, about the extent of progress we made in increasing Indonesian management, Indonesian employees of Papuans that are working in our operations. It’s – that was a key point in helping to build on the 2018 deal and making relationships so much more positive. Now, we all -- we have a mutual understanding that this operation needs to be run in a way that maximizes the resources that are available there. And having a drop dead date for an operation like this of 2041 is not beneficial to anyone because the exploration, delineation long-term capital planning needs to be factored, taking into account the resources that are available there. So, we had no rights to provide a basis for going forward beyond 2041. We’ve had items for discussion, including an additional ownership interest for Indonesian government to deal with, and we’ve agreed to support Papuan businesses to do things of that nature. So it is much different than the nature of the discussions we had going into 2018 where there was really contentious views and opposing views on various subjects that were all settled. Now we're in a mode of where there's a mutual recognition of the benefit for all stakeholders for us to plan this operation beyond 2041. And I have a lot of confidence we'll be able to achieve it. Is that you have any follow-up on that, Timna?

Kathleen Quirk:

I just want to add…

Kathleen Quirk:

Timna, I was just going to add that a big change from maybe historically when you were thinking about it is the alignment we have – better alignment we have with the government, the state-owned enterprise, there we owns 51% of the shares, and of course we pay taxes and royalties. So the economic interest of the government in this operation is much greater than it was. And so the alignment is very positive as we look forward to create this value that Richard is talking about beyond 2041. And when we talk about beyond 2041 and the opportunity, this allows us really to think about the asset and opens the door for development much greater than what we were planning before because as Richard said, the reserves don't end in 2041. We see a lot of opportunity in using the infrastructure that we already have to further development. And the 10% – the share thing that you read about, what we were engaged in is looking at preserving what we have through 2041, but compensating the government in some way for that extension beyond 2041. So again, like we did in 2018, this would be only done if we could find the right win-win for both Freeport and the government, which we think we can.

Richard Adkerson:

Yes. That's a good point, Kathleen.

Richard Adkerson:

The 10% would only come into play after 2041. And a key factor is under the 2018 agreement, Freeport-McMoRan manages, controls the management of the operations and everybody's happy with that. There's widespread recognition in the government of just how complicated this business is, and they're very complementary and pleased with our – the way we're running the business. So it's really a good partnership.

Operator:

Your next question comes from the line of Michael Dudas with Vertical Research Partners. Please go ahead.

Kathleen Quirk:

Good morning, Mike.

Michael Dudas:

Kathleen, you mentioned, you want some debt back at a discount I guess during the quarter and certainly the dividend plan is in place. But as you look into the second half of the year and the CapEx and with the anticipated cash flows might be, how do you – how's the Board thinking about share repurchases since it appears you refrain from that during the first half? It's evaluation opportunistic, just balance maybe you guys shed a little bit more light on that as we move the second half of year, especially if copper prices into sharply recover?

Michael Dudas:

I appreciate that. Thanks, Kathleen.

Richard Adkerson:

Mike, we believe the shares – I just want to say, Mike, we believe the shares are a good value at today's levels.

Brian MacArthur:

Hi, good morning. I just want to follow up and thank you for your answer on Timna’s question. But when you convert it from underground or from open pit underground, I mean we started building that I think in 2005 and it took 15 years. So under this long-term planning for 2041, when do you actually to efficiently develop the ore body post-KL? Are we talking you need to have this all figured out 15 years in advance like before, so you have to start in 2026? So what sort of time horizon are you looking at to be efficient going forward?

Richard Adkerson:

And Brian just let me say because of the IUPK term, we only report reserves through 2041. But with our work to develop our mine plans to 2041, we've already identified production that would extend production of significance that would extend beyond that. And Mark Johnson our PT-FI team are already started the process of looking at delineating these ore bodies to see what opportunities are there. And so we would as we did, as you said in the early 2000s for – for this underground conversion, we would get immediately in developing the plans long-term for extending production. Kucing Liar, we know goes far beyond that and we haven't defined the limits of the Grasberg Block Cave or the – or the other ore body Kathleen have alluded.

Richard Adkerson:

Deep MLZ, that's – that's the same ore system that Freeport began mining in the early 1980s and it's just continued to go further and further at depth. So we're really excited about it and I've been involved in this ore body for so many years and one continual thing is been, it's always gotten bigger than anybody anticipated that would and so it's – it's really an exciting opportunity for us and for the government.

Kathleen Quirk:

Well, initially it's that...

Kathleen Quirk:

And Brian, if you look at our – our resource statement and the 10-K, you'll see there's a lot of resource there that's not in reserves and some of that's material that, that comes after 2041, some of it would require some additional processing type handling because some of it has high pyrite content and that – that could be a challenge and an opportunity for us. But initially the opportunity really is a Deep MLZ we're already starting to conduct some – some exploration below Deep MLZ. So really from what we know about, we think there's a lot of opportunity. And then with a lack of mine extension we'll have – we'll have incentive to go do more exploration because we haven’t done exploration for – 20 plus years, given we already had enough reserves to get us through 2041. So it’s a great opportunity for, as Richard said, both the government and for Freeport. And this is an asset that, that’s really needed, in the global copper industry really, really important.

Richard Adkerson:

Brian. And you’ll remember this – you’ll remember this Brian, because you were around then. The – when we first started developing this underground operations that 20 years ago we were shooting for 120,000 tons a day through our mill. Look what we did in this quarter, 240,000 tons a day. So that’s just the nature of this great ore body.

Richard Adkerson:

That’s the nature of our business.

Operator:

Your next question comes from the line of Cleve Rueckert with UBS. Please go ahead.

Kathleen Quirk:

The regulation – the regulation that’s just been adjusted goes through May of 2024. And we have export quotas that the government approves in connection with their review of our annual work plans. So our current quota that we’ll be shipping under goes through the year end this year of 2023, we’ll have to update that work plan, which we is just an ordinary course thing, which we do in the fall and that will allow us to increase the, what we the quota to get us through May. And then in connection with that, and we’ve already been discussing this with the government while the smelter we expect will be, mechanically complete in the second quarter of next year, you still have a multi-month period throughout 2024 and it’ll be reducing over time, but a period of time where the smelter needs to be ramped up. And so that part we will continue to review with the government. The big thing is to get mechanical completion done and we believe the government will continue to work with us to allow for some exports beyond that. But we’ll have to – we’ll have to work that through with the government. But really by the end of next year we are – we’re expecting that the essentially we’ll have enough capacity to deal with our production out of PT-FI. And that’s what we’re focused on doing. We talked about this earlier. The project team is doing a really good job. We’re very pleased with our EPC contractor there. We’ve got thousands of people on the ground and if you see the pictures, it’s really, really developing. We know and recognize that smelter operations can be complex and we’re doing a lot of work and planning around operational readiness. But our target is to get, the full ramp up done as we, by the end of next year.

Operator:

And I’ll now hand the conference back over to management for any closing remarks.

Richard Adkerson:

Thank you all.

Kathleen Quirk:

Thank you, Regina, and good morning. Welcome to the Freeport-McMoRan conference call. Earlier this morning, we reported our first quarter 2023 operating and financial results and a copy of today's press release and slides are available on our website at fcx.com. Our conference call today is being broadcast live on the internet, and anyone may listen to the call by accessing our website homepage and clicking on the webcast link for the conference call. In addition to analysts and investors, the financial press has been invited to listen to today's call and a replay of the webcast will be available on our website later today. Before we begin our comments, we'd like to remind everyone that today's press release and certain of our comments on the call include forward-looking statements, and actual results may differ materially. Like to refer everyone to the cautionary language included in our press release and presentation materials and to the risk factors described in our SEC filings. Also on the call today is Richard Adkerson, Chairman of the Board and Chief Executive Officer; Maree Robertson, our CFO; Mark Johnson, our Chief Operating Officer for Indonesia; Josh Olmsted, Chief Operating Officer for the Americas; Mike Kendrick, who leads our Molybdenum Business; Cory Stevens, who leads our Engineering and our Project Development Activities. I'll turn the call over to Richard who will make some opening comments and then we'll come back and review the prepared slide materials and then take your questions. Richard?

Kathleen Quirk:

Thank you, Richard, and I'll start on slide three. You've probably seen, we published our Annual Report and our Sustainability Report today and the reports are available on our website. The theme of this year's Annual Report is The Power of Copper. It highlights the critical role that Freeport and our principal product, copper, play in powering the global economy and the growing uses of copper as the world decarbonize and re-imagines modern infrastructure to support a highly connected world. We're also proud to publish our annual Sustainability Report. We've been reporting on our comprehensive sustainability initiatives for 22 years now and transparency continues to be enhanced. The report summarizes our initiatives, our achievements, and the challenges that we face in managing the safety, social, and environmental aspects of our business, which are critical to our long-term success. We use international standards, best practices, and third-parties, such as The Copper Mark, to measure our performance and responsibility to our stakeholders. We hope you'll have the chance to review this information and engage with us on these topics. We'll turn to slide four, which summarizes our key operating and financial highlights in the first quarter. As previously disclosed, our Grasberg operations were temporarily disrupted in February, following a significant weather impact in our mill area. As Richard said, the team did a great job to safely restore production to normal levels in March. Despite the lower volumes compared with our estimates going into the quarter, our consolidated unit net cash costs were essentially in line with our guidance. Consolidated cost per unit averaged $1.76 per pound in the quarter as higher byproduct credits more than offset the volume impact. As Richard mentioned, notably, even with the disruption, Grasberg unit net cash costs averaged a net credit of $0.08 per pound, meaning, the gold revenues more than offset the cash costs of production. With the return to normal operations in March and a great start in April, we expect our volumes to be strong in the balance of the year. Our margins in the quarter were strong, our EBITDA totaled $2.2 billion in the quarter, operating cash flows, which were net of $500 million use of cash for working capital totaled $1.1 billion. We funded investments during the quarter of $1.1 billion. That included about $400 million for major mining projects and $300 million for the Indonesian smelter, which is being funded from proceeds from financing we raised last year. Excluding net debt associated with the smelter, we ended the quarter with $1.3 billion in net debt. Our balance sheet, liquidity, financial flexibility are in terrific shape. The outlook is positive for free cash flow generation in the balance of the year. The next slide, Richard talked about the challenges we faced in the first quarter and we faced these across our global operations. Our teams executed well in the circumstances. And you can see on the left, the production impact of the weather event at Grasberg in February and the strong recovery in March. In Peru, we and other companies experienced a challenging environment earlier in the year associated with widespread protests, which impacted supply chains and transportation routes. Our team at Cerro Verde did a great job managing the situation efficiently and safely. Situation in Peru has improved in recent weeks and we're now operating at normal rates. In the US, we were challenged with ongoing labor shortages, extreme weather events earlier in the quarter and unplanned maintenance issues. We're working to improve productivity and reliability, working on skills development and pursuing technology and automation initiatives as we aggressively seek to recruit workers with ongoing tight labor market conditions in the US. The leach recovery efforts, which we'll talk more about, really helped to offset some of the shortfalls in mining rates and we're going to continue to build on this. Turning to the markets on slide six. Freeport is well positioned as a leader in the global copper industry. Demand for copper is expected to accelerate going forward with projections for demand to double by 2035. Copper is essential in electrification. Low carbon investments in renewable power and electrification are driving massive growth in demand. In addition, the initiatives by many countries from major infrastructure programs and the uses of copper for connectivity, data, and artificial intelligence are also growing demand drivers. At the same time, the ability of the industry to meet this rising demand is a real challenge. All of us can look back at this time last year when many were projecting the market to move to a surplus in 2023, pointing to the new projects that were coming online. As we look at the situation today, most analysts now project the market to be balanced this year even with the new projects, and longer-term, the projections are for very large deficits. Under this backdrop, we believe prices will need to rise to incentivize new supplies. And at Freeport, we benefit from a large reserve position, as you see on the slide, and an even larger resource position to grow our business in the future. We're strongly positioned to continue to support growing demand and are pursuing several of these initiatives to enhance production going forward. On slide seven, we talk about the molybdenum markets, and as we've discussed, in addition to being a leading copper producer, Freeport is the world's largest molybdenum producer. Last quarter, we spoke about the significant rise in molybdenum from $18 per pound in late 2022 to a high of over $38 per pound in the first quarter of this year. We realized $30 per pound for our molybdenum sales in the first quarter. The price rose sharply beginning in late 2022 in response of supply issues and favorable demand drivers in energy and aerospace sectors. The prices began to drop from the highs in recent weeks, partly related to improved supply. As we look forward, the demand drivers from moly are positive, and since moly is principally produced as a byproduct from copper mines, it's also subject to some of the same supply issues as we have in copper. Current price of moly approximates just over $21 per pound. We're really excited, moving to slide eight, really excited to talk today to give you an update on our leach initiatives, which Richard referred to earlier. Our efforts to increase copper production through enhanced recoveries from our massive leach stockpiles is continuing to gain momentum. Based on our results today, we're gaining increasing confidence in achieving our initial target of 200 million pounds per annum and have begun to model what the next phase could look like. On the left side of the chart, we summarize the various categories that make up the initial 200 million pound target, basically in three buckets. The first is, relates to heat, increasing temperatures within the stockpiles. The second is an initiative we call Leach Everywhere, which is focused on making sure the entire stockpile has the benefit of the liquid solution we use to leach copper. And the third category, which is really important, it involves data analytics using new data available through sensors used in a variety of ways, including optimizing the amount of solution use and the rate of application we use to achieve the best results. It's been proven that increasing heat in the stockpiles enhances recoveries. We've advanced the installation of covers on our stockpiles for heat retention and we've mechanized the process and that's allowed us to execute more efficiently. We now have over 30% of our massive stockpiles covered. These initiatives provide 30% of the targeted increase. The Leach Everywhere initiative makes up 50% of the uplift and uses targeted drilling to improve flow of the solution that may not be getting through the stockpile. We're also drilling injection wells to add the liquid solution to lower stockpile sections. The sensors we've installed and access to other technology used in oil and gas formations are providing new information on where additional leach solution would stimulate the process and support higher production. The data analytics works is providing new insights. We really haven't had the benefit of this in the past, and we're now able to get the benefit to determine the optimal operating protocols under various conditions of the stockpiles. The initial success of these initiatives adds production at low incremental cost and a low carbon footprint. In parallel with our initial activities, we've been doing substantial work on the drivers to stimulate leach production and have modeled results on what the next phase of initiatives could yield. We see an opportunity to add an additional 600 million pounds per annum from these initiatives, which would provide a total of 800 million pounds per year. That's the size of a major new mine without the capital intensity and a very low incremental operating cost. The three areas of focus are highlighted in the center of the slide and we're in various stages of development on each of these initiatives. We've got a lot of work to do to advance these initiatives and some of this requires further innovation, but we have a clear path to success in this program. We're evaluating opportunities to increase the temperature further by heating the liquid solution before application on the stockpile. We're evaluating options to do this using solar generated power, geothermal or other renewable sources at our mine sites to accomplish the additional heat requirement. We're also testing various additives that we're developing both internally as well as from third-party initiatives. And we're using artificial intelligence in our journey and in our evaluations to help expedite the process. We're also evaluating options to inject air into the stockpiles in areas that are not getting enough oxygen. Again, we have much more knowledge of what is going on within the stockpiles and are working to design solutions to restimulate copper production. Freeport is in an exceptionally strong position to lead the industry in this area with massive stockpiles currently under leach, ongoing mine leach, mine for leach activities and the latent tank house capacity that we have. This will be part of our growth plans as we go forward in addition to the organic growth that we have to develop new copper in traditional ways. And slide nine highlights the growth and development outlook. And as we look at growing copper demand and the limitations and risks and actionable greenfield project development, our strategy and development priorities are focused on extensions of our existing operations and our portfolio of brownfield opportunities. On slide nine, we show our near-term, medium-term and longer-term development options. Following the significant growth in recent years achieved through the successful Grasberg development, we're focused on advancing to next phases. In the near-term, we see the best options for growth and achieving our initial leach targets and actions to enhance productivity and reliability in our US operations. If we can get our mining rates up in the US, which we're working on, and hit our targets for asset efficiency and reliability, we have the opportunity to add an additional 200 million pounds per year with limited capital investment. In the medium-term, we've outlined a series of initiatives. The first includes the second phase of our leach project. We're also looking to expand our Bagdad mine in Arizona and expect to complete feasibility studies this year. We have a major opportunity in Chile at our El Abra project and we already have an existing operation and looking to expand it significantly. And we're in the process of developing a new 90,000 ton per day block cave mine in Indonesia called Kucing Liar, which is currently in progress and expected to commence initial production by the end of the decade. At Bagdad, we're making some investments, which are included in our new capital expenditure guidance to conduct early works in the tailings area to enhance optionality to move more quickly with the mill expansion project, following completion of the feasibility study. Longer-term and we're already working on these projects, as they require long lead times, we expect we'll have the opportunity for further major expansion in the Safford/Lone Star district where we have identified significant resource and we have a series of US brownfield projects that can be pursued. In Indonesia, Richard talked about the extension discussions we're having and the extension of our operating rights beyond 2041 would open the door for continuation of large scale mining and potential additional development options in one of the world's largest and highest grade copper and gold mining districts. We're in an outstanding position to continue our leadership role in supplying copper to a world with growing requirements. We're going to continue to be disciplined in our approach and focused on executing projects where we can create value for shareholders. On slide 10, we provide an update of our three-year outlook for sales volumes. We've updated the 2023 sales guidance to take into account the first quarter disruption and the impact of lower mining rates in the US. Despite the disruption at Grasberg in February, our gold volumes for 2023 are about 3% higher than prior estimates. We've incorporated the estimates for stronger gold recoveries than in our January forecast, and we're doing really well in that regard. The guidance for 2024 and 2025 is unchanged. But with continued success in our leach efforts, we have some upside to these estimates. On slide 11, we show, moving to cost, we show a comparison of our prior unit net cash cost guidance for 2023 compared to our current estimate. We currently estimate unit cash cost to average $1.55 per pound for 2023, that's slightly lower than our January estimate of $1.60 per pound. The impact of the lower -- copper volumes is offset by higher byproduct credits and a reduction in export duties in Indonesia associated with our smelter construction progress. Our assumptions for the key commodity based input costs are similar to the January estimates. We're starting to experience less inflationary pressures in certain areas than in 2022, particularly for energy, while labor cost, services and equipment components have increased. In the reference slides on page 23, you'll note an approximate 7% increase in site production and delivery costs for our US mines compared with prior estimates. This largely reflects a reduction in volumes in the US associated with the challenges we discussed earlier. And we've got ongoing initiatives to improve productivity there. Moving to our cash flows. On slide 12, we show modeled results for EBITDA and cash flow at various copper prices ranging from $4 per pound of copper to $5 per pound of copper. These are modeled results for 2024 and 2025 with our current volume estimates and our cost estimates and we hold gold flat at $2,000 and molybdenum flat at $18 per pound in these models. Our annual EBITDA under these scenarios would range from over $10.5 billion per annum at $4 copper to $15 billion per annum at $5 copper. And operating cash flows would range from $7.5 billion per year at $4 copper to $11 billion per year at $5 copper. We show some sensitivities to the various commodities on the right. And with our long-term long-life reserves and large-scale production, we're really in a position to benefit from future metals intensive growth trends and the prospects for increasing cash flows and cash returns under our performance-based pay-out framework. On slide 13, we provide an update to our capital expenditures. Current forecast and these exclude the Indonesian smelter project, which is being funded with cash that we released last year in a bond offering. But our current forecast for 2023 totals $3.5 billion. That's up from the prior estimate of $3.4 billion and capital expenditures for 2024 are currently forecast to approximately $3.3 billion. The change from our prior guidance principally reflects investments we're planning at Bagdad to jump start early works to support optionality for future expansion. The bad debt investments or projects that we categorize as discretionary and do not reduce the cash available for distribution under our pay-out policy as they will be funded with the remaining 50% of free cash flow retained for growth projects. On slide 14, we got some great pictures showing the construction of our new smelter in Indonesia. This is a major undertaking for us. It's impressive and it will be on a world-class scale. The project will become the world's largest single-line flash copper smelting facility and it's advancing rapidly. We expect to commission the project in 2024. The project will include a precious metals processing facility and an expansion of the existing nearby smelter and it will align with Indonesia's downstream policy and enable PT-FI to process all of its concentrates domestically. In closing, on slide 15, we summarize our financial policy, which is centered around three priorities with the cornerstone being a strong balance sheet and we've achieved that. Our balance sheet and liquidity are strong and provide significant financial flexibility for the future. We're executing the performance-based pay-out policy, which provides for 50% of our free cash flow to be allocated to shareholder returns in the form of dividends and share purchases and the balance available to invest in our projects. We'll continue to pay a base dividend and a variable dividend at a combined annual rate of $0.60 per share. And since commencing the performance-based pay-out policy in 2021, we've returned about 60% of our free cash flow to shareholders and it further strengthened our balance sheet along the way, providing capacity for funding new projects over time. We did not purchase shares in the first quarter, but have availability under our share purchase authorization to conduct purchases, pursuant to the policy and we have a positive outlook for substantial free cash flow generation in the future depending on prices and other factors. The three priorities of balance sheet strength, allocating cash flow to a mix of shareholder returns and organic growth, we believe will enhance long-term value for the benefit of our shareholders. Our global team is energized. We're motivated to continue building value in our business and we're executing our plans responsibly, safely and efficiently. Thanks for your attention and we'll now take your questions.

Christopher LaFemina:

Hi. Thanks, Operator. Kathleen, Richard, thank you for taking my question. I actually have a bunch of questions, but I'll just ask one and then I'll get back in the queue. There's a lot of M&A activity happening in mining, obviously, at the moment, and copper seems to be a major focus. And I know -- I think Richard has talked a little bit about looking at M&A opportunities in the past, but you obviously haven't done much in recent years. And I'm just wondering with your overall philosophy is around M&A? Are there jurisdictions that you'd be focused on? Is it important to have operational synergies? Are there any kind of key criteria that you would consider or is it just really about being opportunistic? And then secondly, is M&A something that is increasingly on your radar screen just as a result of consolidation in the industry in general? Thank you.

Christopher LaFemina:

Okay. Thanks.

Emily Chieng:

Good morning, Richard and Kathleen. My question is just around the leaching technology that you've talked a little bit more about today. And I wanted to dig through the 600 million pounds of step change in leaching volumes there. I think as we talk about the third-party catalytical leaching technology, I think that's been deployed at El Abra and Bagdad currently. What percentage of that 600 million pounds does that account for? And perhaps could you talk to the time line to getting there? And whether or not this could mean the El Abra expansion mill expansion could be delayed further if there's a strong success there?

Cory Stevens:

Yes, Kathleen, no, you said it well. So our R&D efforts, we've been chasing some internal leads that look very promising. And then in the first quarter, what we've been able to do couple our work with artificial intelligence and machine learning much like how big pharma uses to develop their new products in a way that's driving us to increase the breadth and scope of the candidates that we're looking for implementation. And then in parallel we're actually bringing in more capabilities to do quick tests and medium scale tests and in the field at scale tests, but that's where we're most excited and then coupling that with some of the temperature activities we see that our confidence is growing on that front.

Operator:

Your next question will come from the line of Carlos De Alba with Morgan Stanley. Please go ahead.

Richard Adkerson:

Yes. Thanks, Carlos. It's all of these things are happening in parallel with each other. To get the contract extension approved and there's widespread support for it within the government, requires some procedural actions to deal with existing government regulations and then also to amend the IUPK that we were granted in December of 2018, that would be a fairly simple process. So we are really encouraged by it. The June date, it has to do with this broader issue the country is pursuing with downstreaming for minerals broadly. And so that's why that was there. We don't anticipate that will be something that would limit our ability to continue operations beyond June. Anything more, Carlos, to be specific on it.

Richard Adkerson:

And Kathleen is right that we have these legal rights that are documented, but I want to emphasize, we're working cooperatively with the government and not just pushing our legal rights and we're getting a good response from it.

Richard Adkerson:

The government will decide really how to document it. There is a path forward for it to be done without formally going through new legislation. We do benefit now by having strong support within the parliament of Indonesia, who visited our operations, the parliamentary group overseeing mining came to the US and visited us here. So I just want to emphasize the whole tone has changed. The President visited our operations in late August, early September and it was a very positive. One of the highlights of my career there in Indonesia was his visits and we're building off of this to find the right way forward and do it in a way that everybody wins from it. The government would win, the local community, the workforce, suppliers to our business. So that's how we're working together to see how can we go forward and makes nobody benefits from us having any kind of drop dead date on operations there. It would really be hard to envision. And this 2041 date was in our original 1991 contract of work was carried forward in the 2018 IUPK and we actually have not done significant delineation drilling to see the extent of the resource beyond what's been necessary to fill up the production profile through 2041. And yet, in doing that, we have a very substantial resource beyond that already identified. But I'm really excited about the opportunity to go in and drill to see -- in the 30-plus year history of Grasberg, it always has gotten bigger over time. And I'm confident as we do more drilling, it will continue to be, to grow and be bigger just because of the nature of the ore system there and the grades that are available to us, it's really exciting. And so that's what we want to achieve with the government is to get the extension granted then undertake an active program of delineation. We only report reserves through 2041 and this would give us a chance to develop reserves beyond that date and to develop -- and to come up with plans for developing those reserves for future growth. It's just a great long-term asset as a base for our company for its future.

Richard Adkerson:

Okay. Thank you for your question.

Brian MacArthur:

Good morning. I just want to follow up a little bit on the leaching situation and I appreciate all the detail. I just want to clarify, I think, you said most of this was internal, so it's not Jetti. But then you made a comment about the bulk of its Morenci. Morenci is sort of 50% of the stockpiles, but there's a whole bunch of other North American stuff. Is there a tank house issue? Or is that 800 million constrained going forward by anything else? Or could it just be bigger if you can do stuff at Bagdad and Sierrita and everywhere else?

Richard Adkerson:

Yes. Morenci is the world's largest leaching operation today, and it was where much of the modern leaching technology was originally developed decades ago. So I just wish I could have a good way of conveying the excitement of our team working on this. It's really fun to see. We're leaching everywhere and we're going to leach to the last drop. So it's -- and the benefits are just -- no permitting to do this kind of stuff. There's very little capital -- tank house capital, if it's necessary, is not significant in the bigger picture of things. And the climate -- the carbon emissions are -- so it's a winner on every respect, and that's why we're working cooperatively with other companies and with Jetti and focusing on what we can do on our own because we do it on our own, we capture all the economics for our shareholders. So it's a multifaceted deal and like I said it's really a lot of fun. It's injected a level of enthusiasm into our whole organization that's really fun to see.

Richard Adkerson:

Well, it's not limited to the mining industry. Certainly, it's not restraining us with our efforts to advance leaching. But it's an issue that -- as I talk with other CEOs in the business roundtable, everywhere people are experiencing it. Some of it grew out of COVID in the way people are approaching life work styles as they go forward, but it's a real issue for us, and we're attacking it by aggressively recruiting for people, but also its spurring our efforts to see what can we do with technology to make our business less labor intensive. But it is a real issue in the US, not in Peru, Chile, Indonesia, but it's just a significant matter in the US.

Brian MacArthur:

Right. And while 1 billion pounds, I guess, it's equivalent to being one of the biggest -- one of the top five copper mines in the world?

Brian MacArthur:

Great. Thank you very much.

Timna Tanners:

Hey, good morning. I want to look at --

Timna Tanners:

Thanks. I wanted to look at slide five and kind of the cadence as you described and kind of understand what the trajectory is going forward? So is the -- it sounds like the Peruvian situation has really improved from what we hear. So is that fully behind and we can expect this run rate going forward? I know you talked about labor issues continuing, but I assume the weather, we are not going to forecast interruptions there. So I just wanted to get a little bit more about the cadence you'd expect in the regions and any impact on costs that might be lingering? Thanks.

Kathleen Quirk:

And Timna, you can look at slide 26, and that has our quarterly sales volumes for the balance of the year. The first quarter was impacted by these disruptions, but also we had the conversion to tolling in Indonesia, which we had projected going into the quarter. But you can see where we expected to be -- where we expect to be on a run rate for the balance of this year. And you can see very, very strong recovery from first quarter in the balance of 2023.

Kathleen Quirk:

Well, the first quarter, we had $1.76, and we're projecting for the year to average $1.55. So our cost -- unit cost in the balance of the year will be less than they were in the first quarter. We talked about some of the inflationary items easing from last year and that's principally energy. We saw the big spike in energy starting around this time last year. And some of the other input costs that were exacerbated by the Russia-Ukraine situation. Some of those things have declined in East and so that's that is helpful. But we still have labor or services costs that were contracted for some of our components, equipment components, all those things are still with us in 2023. So we've got some elements of relief and some elements of costs that are higher. They're no higher than what we estimated at the beginning of this year, but still higher than they were last year.

Operator:

Your next question comes from the line of John Tumazos with John Tumazos Very Independent Research LLC. Please go ahead.

Kathleen Quirk:

John, I'll comment and Mike Kendrick can add to it. But partially, what happened in the first quarter was some of the same supply issues from moly that impacted copper. And the situation in South America, particularly in Peru, did have an impact on supplies. And at the same time, we were seeing some strong growth in demand. So there's extreme tightness in the first quarter and some of that got relieved in Peru when things started to return to more normal operations. We continue to see, as we look forward, demand drivers for moly being positive in the supply side, which will fall a lot like copper is it's just a challenge to bring on new supplies. And many times, as you know, in a copper mine that has byproduct moly when people get into trouble with operating constraints. Copper is the one that people try to maximize and sometimes may moly isn't maximized in those scenarios. But that was, I think, the main thing that occurred from a moly perspective on supply. And Mike, I don't know if you want to add. There's other things that we should add to that.

John Tumazos:

Thank you.

Operator:

Your next question comes from the line of Michael Dudas with Vertical Research. Please go ahead.

Kathleen Quirk:

Good morning.

Richard Adkerson:

You were breaking up a bit, but you were asking about the supply side risk assessment, right?

Richard Adkerson:

So if you go back several years when the projects that are now coming on stream were first announced there were to be massive. There was projected massive surpluses in this calendar year and calendar year '24-'25 and those projects got delayed for different reasons, COVID hit, and they're not having the major surplus situation this year as markets basically balance and looking '24 there's potential services. But there's not new projects of significance coming on stream after that. So I would say that the supply side risk is more -- much more on the downside. We've seen issues related to meeting production, projections being higher for various reasons. The Peru situation and operational issues like we had in Indonesia occurred in other places. So I think for -- if you look back for a long-term history, supplies projections tend to be -- the projections tend to be higher than reality when experience actually happens. And I think that's where we are now. It's -- we have this leaching project, which gives us some upside. But overall, the risk, I think, are more on the downside.

Richard Adkerson:

Thank you, Michael. Appreciate it.

Matthew Murphy:

Hi. Just a question on the cash flow statement. Non-controlling interest distributions were zero this quarter, which I guess it's happened a few times in the past, but what drives that? And in this case, is it -- should we assume that there's going to be a bit of catch up later in the year?

Matthew Murphy:

Okay, That's great. Thanks.

Lawson Winder:

Thank you, operator. Good morning, Kathleen and Richard. Very nice to hear from you. Thank you for fitting in my question. I just wanted to touch on Chile where there's been some positive developments. Is the environment there now improving in the correct direction such that El Abra might look more promising for an expansion? And then could you just also please share your views on the outlook for the regulatory environment there for mining? Thanks so much.

Kathleen Quirk:

We're doing some things now to maintain optionality. We're planning some investments in desalinization which will not only benefit the opportunity for us to extend existing operations, but also give us some ability for the potential mill project. As we talked about earlier, we're doing some work on leaching, and that could continue to evolve our expectations about the design of the new expansion project. So we're keeping options open. We're making some advances to enhance that optionality. But the project at El Abra is very strong. We are in the process of updating our capital cost numbers to reflect what the current environment is. But El Abra has a huge resource. We're talking about potentially increasing production there and you saw the numbers in the press release I mean in our slide presentation. And that project is likely a project that will get done. It's a question of -- it's not if, it's when. And we're working to keep the analysis updated so that -- and move forward with some of these initiatives to put us in a position to move more quickly when we make the decision.

Operator:

Your next question comes from the line of Bendik Folden Nyttingnes with Clarksons Platou Securities AS. Please go ahead.

Kathleen Quirk:

Richard, I'll take that one. We're really focused on our organic opportunities, then you see the portfolio we have, we're really fortunate to have organic growth that some others not everyone has within our industry. And as we've looked at greenfield opportunities over many years, you haven't seen huge greenfield success. It's rare. It's not -- we're not saying it can't be done, we keep our finger on the pulse of what the availability of greenfield is. But our focus is on our brownfield opportunities, the leach opportunities we had, someone noted earlier that it's a major top line if we can get this leach opportunity to reality. And so our focus is more on the lower risk more certainty around our brownfield opportunities while continuing to monitor what's available in greenfield. We spent a little bit of money on greenfield exploration. But our focus, because of our pipeline and asset profile, is focused more on brownfield.

Christopher LaFemina:

Hi. Thanks, operator again. So, Kathleen, you mentioned the increases in CapEx guidance relate primarily to early investments in Bagdad for future expansions. I think back in October, Richard had said that investment in growth was on hold because, obviously, the macro environment was not very good. So I'm just wondering, has anything changed in Freeport's view of the world over the last six months? Is it just that China has reopened? Is it because supply issues are getting worse or is there just no change and this was kind of the natural progression for these projects? Thanks.

Christopher LaFemina:

Has your view about copper changed?

Christopher LaFemina:

Great. Thank you. That's very helpful.

John Tumazos:

Thank you. Looking at slide 14, that includes the desalination plant, could you give us a little bit of background on that? It rains a lot, obviously, in Indonesia. Why were freshwater supplies not adequate? Could you have used saltwater for cooling? I'm assuming that most of the water is for cooling and the big smelter? Or is this sort of a community relations thing to not draw upon local water supplies?

Cory Stevens:

Yes. We looked hard at freshwater options. And when we make a decision around water, we're looking decades out in the future and what the social -- potential social impacts are going to be and what future demands are going to be and the renewability of those sources and came to the conclusion that desalinization was the best route and then you look at the capital cost differences to use saltwater versus desal and this became the most prudent route for us.

Operator:

I'll now turn the call back over to management for any closing remarks.

Operator:

Ladies and gentlemen that concludes our call for today. Thank you for your participation. You may now disconnect.

Kathleen Quirk:

Thank you, and good morning. Welcome to the Freeport-McMoRan conference call, and happy 2023 to everyone. Earlier this morning, we reported fourth quarter 2022 operating and financial results, and a copy of our press release and slides are available on our website at fcx.com. Our conference call today is being broadcast live on the internet, and anyone may listen to the call by accessing our website homepage and clicking on the webcast link for the conference call. In addition to analysts and investors, the financial press has been invited to listen to today’s call, and a replay of the webcast will be available on our website later today. Before we begin our comments, we’d like to remind everyone that today’s press release and certain of our comments on the call include forward-looking statements, and actual results may differ materially. Like to refer everyone to the cautionary language included in our press release and presentation materials and to the risk factors described in our SEC filings. On the call today with me are Richard Adkerson, our Chairman of the Board and Chief Executive Officer; Maree Robertson, our CFO; Mark Johnson, our Chief Operating Officer of Indonesia; Josh Olmsted, who is our Chief Operating Officer for the Americas; Mike Kendrick, who leads our molybdenum business; Cory Stevens, who heads our Engineering and Construction and overall Global Technical Services Group; Rick Coleman, who is actively involved in all of our construction projects; as well as Steve Higgins, our Chief Administrative Officer. So, we have a full complement of management team here today. And we’ll start -- Richard will make some opening remarks, and then he’ll turn it back to me and we’ll cover the slide materials, and then we’ll open up the call for your questions. Turn it to you, Richard.

Kathleen Quirk:

Thanks, Richard. We’ll start on Slide 3, which summarizes our performance for the full year 2022. And just a couple of notes on the fourth quarter from our press release. We finished the year with a strong fourth quarter. Copper and gold sales exceeded our October guidance. And our consolidated unit net cash costs of $1.53 per pound in the quarter were better than our estimates going into the quarter. With average copper realizations in the fourth quarter of $3.77 per pound, we generated strong margins with fourth quarter adjusted EBITDA at approximately $2.25 billion. Looking at the year, we are proud of the performance of our team stayed focused on effective execution and on driving results in a volatile macroeconomic environment. After successfully growing our volumes in 2021 by 19% for copper and 59% for gold compared with 2020, we achieved another year of growth in 2022, with 11% higher copper sales volumes and a 34% increase in gold volumes. Our team in Indonesia has successfully and materially grown production levels in a sustaining large-scale, low-cost production at the world’s largest underground mining complex. In the Americas, our teams in Peru and Chile proved resilient in restoring production during 2022 that had been impacted by the pandemic. And our teams in the U.S. maintain production at 2021 levels despite ongoing labor shortages and we also made significant advances on new technologies to enhance value. For the year, we generated $9.5 billion in adjusted EBITDA, and that was a year of dramatic swings in commodity prices and cost drivers. Our operating cash flows for the year, which were net of $1.5 billion in working capital requirements was in excess of our capital investments in our operations, and we nearly tripled our cash return to shareholders, pursuant to our performance-based payout policy. We ended the year with net debt, excluding the debt associated with our smelter of $1.3 billion, and that’s substantially below the level of mid-2021 when we initiated our performance-based payout policy. On Slide 4, you’ll see we’ve listed notable accomplishments during the year. In addition to driving value in our operating and financial areas of achievement, we’re very proud of our work with third parties to validate all of our operations under the Copper Mark standards, the measurable progress we’re making on our climate initiatives and the expanded disclosures we’ve developed to enhance transparency and accountability. We’ll talk about markets next, and we’ve got a slide on Page 5. We experienced significant volatility as many of you have seen during 2022, with copper prices trading from a high of $4.87 per pound earlier in the year, falling to $3.18 per pound midyear and partially recovering to $3.80 per pound by year-end. Prices continued to move higher in early 2023 to a level currently approximating $4.25 per pound as several of the macroeconomic clouds began to lift. We discussed on prior calls that the dramatic moves in 2022 have been largely -- been based on sentiment rather than fundamentals. The facts are that the physical markets for copper have remained tight even during a period of weaker economic data coming out of China, and that’s evidenced by the low levels of available copper inventories throughout the year. At the same time, copper’s importance in the economy continues to grow as a result of the intensity of use in clean energy applications and the global acceleration of electrification. We believe we’re still in the early innings of a broad-based secular driver of long-term demand. The ability of the industry to meet this multiyear period of growing demand continues to be challenged, leading to large market deficits in the future. You read about these challenges every day, and it’s getting harder, not easier, higher long-term prices are needed to incentivize new supplies. We’ve lived through the ups and downs in the copper market. We’ve effectively managed our operations and balance sheet during periods of volatility, and we’re prepared for this, but we believe the long-term fundamentals point to a real step change in how copper is valued in the economy. Turning to our reserve position on Slide 6. We benefit from a geographically diverse high-quality portfolio of copper mines with significant exposure to gold and molybdenum. Our strategy, as Richard discussed, is centered around being foremost in copper. And we benefit from a portfolio of assets with characteristics that are very difficult to replicate. We show our reserve position at the end of 2022 with over 100 billion pounds of proved and probable reserves. We have an average reserve life of over 25 years. We added twice the amount of reserves we produced in 2022, principally at our U.S. mines in the Morenci and Safford Lone Star districts where we’re focused on future growth. In addition to proved and probable reserves, we have enormous mineral resources of 235 billion pounds of copper. Over half of this is located in the U.S. where we have established operations, a great track record and a valuable franchise. We’ll continue to work as we go forward to convert these resources into viable mine plans and future production. It’s an extraordinarily valuable resource position in a world that’s going to need more copper in the future. We wanted to focus a little bit on molybdenum on this call. And on Slide 7, we’ve got some information about our molybdenum business. We’re a leader in that industry. We’re the world’s largest producer by a significant margin. And with the price move over the last couple of months of over 50% in molybdenum, we thought you’d be interested in learning more about our business. We produced 85 million pounds of molybdenum in 2022, and that’s comprised about 60% from copper mines as a byproduct and the balance from two primary molybdenum mines that we operate in Colorado. And these are the only primary molybdenum mines that are currently operated in the United States. We also operate downstream processing facilities to produce products that are used in a broad range of metallurgical specialty steel and chemical applications. The price moved from $18 per pound at the start of the fourth quarter to over $30 per pound currently has been driven by some of the same supply issues that have impacted copper. And in addition, demand drivers continue to be supported from the oil and gas, aerospace and power generation sectors. So, we note on this slide, the impact of a $5 change in molybdenum prices, it’s material at $400 million in annual EBITDA and $375 million in cash flow. And the recent move of over $10 per pound, if sustained at a higher price, adds additional leverage to our results. Looking at our operating stats for 2022 on Slide 8, you’ll see our sales for the year were about 35% from the U.S., 28% from South America and 37% from Indonesia. In the U.S., our sales were similar to 2021 levels, and we grew sales volumes by 10% in South America and by 20% in Indonesia. In the U.S., we’re continuing our focus on productivity, given the current limitations on adding to our workforce, we’re taking advantage of technology advancements and opportunities to expand production from leaching at low incremental cost, and we’re planning our next phase of growth, as we’ll talk about in a few minutes. As discussed, the biggest resource position and source of long-term growth we have is a real opportunity in the United States. In South America, both Cerro Verde and El Abra grew production in 2022 in a complex social and political environment. After successfully recovering from the pandemic-related interruptions in 2022, our team in Peru is now dealing with challenges associated with civil unrest that you’ve all read about. We’re prioritizing the safety and security of our workforce. We’re navigating disruptions to transportation routes and supply chains. To date, the impacts have not been significant but the situation is dynamic day by day, and we’re watching it very carefully. The bottom of the chart shows the 2022 cost performance. As we’ve talked about on prior calls, we experienced significant inflation pressures across the business during 2022, particularly for energy and other commodity-related consumables, and in the second half of the year, started to see inflation from a rising cost of materials, supplies and services. The situation started to improve in 2022 with a number of the commodity-related consumables, but we’re still dealing with costs in excess of historical levels. If you look at the average cost for the year at Grasberg of $0.09 per pound is remarkable, particularly in the context of this cost environment. Richard talked about the significant success story of the Grasberg transition, and we’ve got some details on Slide 9, significant success for not only Freeport but also something for the global mining industry to be proud of in the country of Indonesia. We started planning for this transition over 25 years ago, and the team has just done an outstanding job. We benefit from the fact that several from the team who were involved in the planning of this project, including Mark Johnson, who’s on this call, stayed with it over this period. And over the years, we’ve added great talent to our team with experts from around the world. The success of this project, the mutual respect built over the years between Freeport, the government of Indonesia and local communities has established a really strong foundation for the future. We’ve got the opportunity with this resource to plan a new phase of development longer term and are continuing to discuss with the government the opportunity to extend our long-term partnership beyond 2041. If you go to Slide 10, we’ve got an update on our smelter project. And this is our key feature of our commitment to the Indonesian government, was to expand domestic copper smelting and refining capacity in Indonesia. We’re making really good progress on constructing the new smelter in Eastern Java, it’s near our existing smelter, PT smelting at Gresik. You can see from the pictures that construction is advancing. We’ve got thousands of workers now on site. We’re working very closely with our EPC contractor to try as much as possible to make up delays that were caused by the pandemic. We reached a milestone of over 50% completion recently and we are expecting to begin commissioning the smelter during 2024. As you recall, the capital investments for this project are being funded from a successful bond offering that PT-FI completed during 2022. And so, we have the funding between the bond offering and a revolver at PT-FI to fund this project. Moving to our growth outlook. This is exciting opportunities for the company, and we continue to plan our next phase of growth. We’ve got benefit from having multiple organic projects to develop within the portfolio over time. We operate all the mines we have interest in. We’re able to share experiences, new technologies, operating synergies and best practices across the portfolio as we develop projects, and we can direct capital across the portfolio to the highest value opportunities. Our proven technical capacity capabilities and management is a notable strength. And importantly, we’ve earned a track record and a reputation for operating sustainably and responsibly. The world, we believe, is going to need all of our projects and more. The project with the shortest lead time is our Americas leach initiative. We’ve talked a lot about it in recent calls. The economics are compelling, low capital intensity, low incremental operating costs and a low carbon footprint. The new data analytics capabilities, we are continuing, to be applied to prioritize our work streams on the highest value. We’re continuing our work to apply covers to the leach stockpiles because of the benefits that you get from heat retention in enhancing recoveries, and we’ve identified new areas that were not pursued historically. We’re also continuing to test various additives that can further enhance recoveries. This is a really significant opportunity for us. We’re continuing to target a run rate of 200 million pounds per annum by the end of this year and success of this level -- at this level would provide opportunities to scale larger. We’re in a great position to lead this innovation with our long history in leaching and large inventory to work with. At our Bagdad mine in Northwest Arizona, we’re progressing a feasibility study to double production at that site. We expect to complete the feasibility this year, and we’ll be in a position to assess options on how we time the future development. We started advanced planning to commence construction of a new tailings site that would support the existing operation, but would also provide flexibility for the expanded production. And as a brownfield expansion, this project could be developed more quickly than a greenfield development. Our Lone Star opportunity is really something special. We’ve been successful in increasing production levels substantially above the original project. And we’re really in the early stages in the development of this mine, as we mine the oxide ores more quickly, we’re opening up the opportunity for a major sulfide development long term. The resource is massive. You’ve seen the numbers, 50 billion pounds of potential resource here. We’re doing a lot of drilling. And importantly, it’s located in an established mining district in the U.S. In Chile, we’ve defined the opportunity for a major expansion at our El Abra mine. As we continue to monitor regulatory and fiscal matters in Chile, we’re planning a project to invest in infrastructure, water infrastructure to provide flexibility to extend existing operations and optionality to support a new concentrator. We’re also planning at El Abra to test new leaching technologies in the near term, to evaluate the potential for expanded leach production and possibly competing technologies to a concentrator. We’re continuing our development of the Kucing Liar deposit in Indonesia. We’re really gaining a lot of efficiencies from the work we did at Grasberg Block Cave. And similar to that development, this is a long-term project. We expect to have initial production from Kucing Liar deposit towards the end of this decade. Moving to Slide 12. We provide a three-year outlook for our sales volumes. And as we talked about, we achieved two years of growth in copper sales. And currently, our forecast reflects sales in the ‘23 to ‘25 period that are similar to 2022 levels. Our mine production is actually going to be higher than our sales by about 100 million pounds in 2023 and 2024. And that is a result of our domestic processing arrangements in Indonesia where the point of sale has changed from selling concentrate to selling cathodes. And so, a portion of our production will be inventoried until it’s processed and sold through our smelters. Previously, this inventory would have been held by third-party smelters. We’ve got small revisions otherwise to 2023 guidance that reflects assumption of a continuation of tight labor markets in the U.S. That’s impacted our ability to increase mining rates. And success also in our leach recovery initiative could provide some upside in the U.S. as we look over the next three-year period. In the reference materials on Slide 30, we provide information on our 2023 sales by quarter. The reason for the drop in the first quarter reflects the impact of the tolling arrangement in Indonesia. But, you can see the balance of the year is fairly stable at over 1 billion pounds of copper sales per quarter. Moving to the cost outlook for 2023, we’re providing guidance of average cost of $1.60 per pound for the year. That compares with $1.50 per pound in 2022. We show a comparison to the two years, and you’ll see the site production cost line item is about 4.5% higher than the 2022 average. And that’s a result of assumptions that we’ve made in our forecast for higher average electricity and coal costs compared with the 2022 average and also higher power requirements, principally in Indonesia, and the impact of higher cost of equipment components, supply costs and labor cost increases. The other line items are offsetting. You’ll note a decline in royalties and duties. That really is reflective of a recent reduction in our export duty in Indonesia as a result of the smelter progress. I’ll also note that this assumes a molybdenum price of $20 per pound in 2023. The current price is $30 a pound and each $2 per pound change in molybdenum is $0.02 a pound. So, if current prices hold, would have roughly $0.10 a pound less cash -- unit net cash costs and this reflects. In recent months, inflationary pressures have been less severe than we experienced during 2022. We’re encouraged by that. And we’re going to continue to focus on managing costs that we can control. We’re continuing to pursue technology-driven enhancements to mitigate the impacts, particularly in the U.S. Getting to our cash flows, significant leverage to copper prices. We’ve got on Slide 14, we show modeled results for EBITDA and cash flow at various copper prices ranging from $3.50 per pound to $5 per pound copper. These are modeled results and we use the average of 24 and 25 with current volume and cost estimates and holding gold flat at $1,900 per ounce and molybdenum flat at $20 per pound. And you’ll see here that annual EBITDA would range from nearly $9 billion per annum at $3.50 copper, to $15 billion per annum at $5 copper. And our operating cash flows would range over these prices from $6 billion at $350 copper to $11 billion at $5 copper. And we show sensitivities to various commodities on the right and input costs. With our long-life reserves and large-scale production, we’re well positioned from future -- to benefit from future metals intensive growth trends with prospects for increasing cash returns under our performance-based payout framework. Our capital expenditure plans are summarized on Slide 15. The capital expenditures totaled $2.7 billion, excluding the smelter in 2022. We’ll note that this was lower than the $3.3 billion estimate we provided going into 2022, and that reflects lead times and our focus during the year to prioritize critical projects. The current forecast for 2023 totals $3.4 billion, and that’s a slight change from our previous estimate of $3.3 billion for 2023. And capital expenditures for 2024 are currently forecast to approximate $3 billion as spending on the Grasberg projects reach completion. We always are very careful in managing our capital cost to maintain flexibility in response to market condition, while ensuring that our investments are sufficient to support a reliable long-term production profile. Returning to the financial policy that we began to implement in the second half of 2021, it’s really centered on three priorities. The cornerstone of the financial policy is maintaining a strong balance sheet and liquidity. And that provides significant flexibility for the future. We’ve been executing on this performance-based payout. It provides for 50% of our free cash flow to be allocated to shareholder returns in the form of dividends and share purchases and the balance available to invest in our projects. Since commencing the performance-based payout policy in the second half of 2021, we’ve returned about 60% of our free cash flow to shareholders through dividends and share purchases. And at the same time, we also further strengthened our balance sheet, providing capacity for funding new projects over time. We did not purchase shares in the second half of 2022 because of the significant change in market conditions and the resulting impact on cash flows in the second half of the year. The improved market conditions will drive increased free cash flow, which will boost shareholder returns, and our future discretionary share purchases will be dependent on our cash flow and overall market conditions. We believe the three priorities of balance sheet strength, allocating cash flows to a mix of shareholder returns, and organic growth will enhance long-term value of our business. In closing, I just want to reiterate our view about the positioning for the Company, a bright long-term future supported by our attractive portfolio of assets, supported by the fundamentals of the copper business and the positive outlook for the markets we serve. Our team is energized. We’re motivated to continue building long-term value in our business and on executing our plans responsibly, safely and efficiently. And I want to thank you for your attention, and operator, we’ll now open the call for questions.

Emily Chieng:

Good morning, Richard and Kathleen. And thank you for taking my questions. I would like to sort of ask around Freeport’s growth appetite. And as you think about the copper price environment and how the market is trending, has anything in your mind changed around how you view Freeport’s need to pursue or accelerate growth plans? There’s clearly been a lot that has changed in the broader macro environment as well. And I wouldn’t mind hearing about how maybe some of the leaching opportunity can play into that and what the potential annual run rate basis could look like when fully developed? Thank you.

Kathleen Quirk:

Emily, on the leaching run rate, the 200 million pound target that we’ve laid out, those -- we believe that that can be attained just from these operational changes that we’re making. The heat retention, leaching in places that we weren’t leaching previously, directing the solutions to places where we can enhance recoveries really from data analytics that we’re getting that are helping us -- helping guide our operations every day. Those things we think we can get just operationally. The -- on top of that, this research and development that’s going on with respect to additives, that could scale it larger. So, this 200 million pounds that we’re talking about, we think that is really just bringing more of a light on our leach stockpiles and moving aggressively to -- over the last several years, the focus on the industry has been more on concentrating. And now we’re putting focus back on these leach initiatives, and we’ve identified some things. I wouldn’t say low-hanging fruit, but it’s achievable things that we’re doing, and we’re already starting to see results.

Orest Wowkodaw:

Just given the uncertainty out there with respect to both Chinese and ex China markets, can you give us an updated outlook on what you’re seeing from your customers? Like are you seeing any indications of slowing demand?

Richard Adkerson:

Even looking back to 2022, you’ll recall, I mentioned I think on more than one conference call that there was a disconnect between even then the physical world we were dealing with, with our customers and what the market was doing. So, it has been striking as to the strength of demand that we’ve had, we had no problem selling our production. We’ve actually -- there was a shortage of wire rod in the United States that was -- where we couldn’t meet everything that was being produced. And then, with our copper concentrate customers, including China, people were buying all that we produced and actually wanting more. So, market sentiment is better now. And but our customers continue to be very positive.

Chris LaFemina:

You have $1.3 billion of net debt as of the end of 2022. Your net debt target range is $3 billion to $4 billion. So, I guess, the first question is, is that the range that we should think about, or are you comfortable maintaining net debt below that range? In other words, if you really want to get to $3 billion to $4 billion, how do you get that from here, generating positive cash flow? You can step up the buybacks, maybe accelerate returns. But do we get to a $3 billion to $4 billion range this year, or is that not going to happen?

Kathleen Quirk:

The $1.3 billion -- go ahead.

Chris LaFemina:

Okay. So, should we think of it more as a net debt target of below $4 billion rather than $3 billion to $4 billion?

Kathleen Quirk:

$3 billion to $4 billion is the limit. Yes, $3 billion to $4 billion is what we -- yes.

Richard Adkerson:

Well, while the numbers look simple, the mine planning is complicated. And we report the results of our mine planning quarterly. And what you’re seeing there is some revisions in mine planning to optimize resource recovery. It wasn’t any target. It’s just the way that -- the way that the mineralization of these ore bodies fall out as we change future mine plans. And...

Richard Adkerson:

And it’s not a targeting it -- it’s not a targeting exercise, Chris. I mean, we didn’t do something to try to get more gold. It was just -- if we look at the orebody, we maximize the value. It’s a dynamic process and report to you the results of that process, and that’s what it is.

Lawson Winder:

Good morning, Richard. Good morning, Kathleen. Very nice to hear from you both, and thank you for your time and the update today. I wanted to hopefully ask you two questions. Just one on the C1 cash cost guidance for 2023. To what extent might some of these higher costs year-over-year continue into 2024? Like what is the percentage of those that are more structural as opposed to potentially more cyclical?

Richard Adkerson:

Okay. And one thing that’s -- one thing that’s a real benefit of Freeport that we say a lot. I’m not sure if this is recognized as much as it ought to be. But, we operate every mine that we have an interest in. We have joint venture partners. But unlike other operations where those joint ventures are run as a standalone business, we operate globally through our operatorship rights. And that makes us really important customers of our suppliers. We’re generally one of the very largest customers of people who provide our major supplies. And so, as those suppliers globally have been working to pass along their input cost, our global supply team working with our operations have been affected in mitigating certain of those costs. We’ve had some impact. But again, it’s a real dynamic situation and -- you saw we came in below our quarter-ago estimate. Some costs are moderating, some are carrying over, but it’s just an ongoing thing. And we give you the best outlook we have, and then we work hard to try to operate with as low a cost as we can.

Kathleen Quirk:

Yes.

Lawson Winder:

Okay. And then what would the time line be on that?

Kathleen Quirk:

Yes. And so, we’ve got to go through a permitting process on that as well. So, it’s unlikely we’ll have any material spending on it until a few years out.

Operator:

Your next question will come from the line of John Tumazos with John Tumazos Very Independent Research. Please go ahead.

Richard Adkerson:

Well, no. And you know it’s a good new story to have this large pipeline of future projects, and I personally believe the world is going to need that copper. Going to your last question first, there is no relationship between Kucing Liar and projects in the U.S. It doesn’t bump out projects. It doesn’t prioritize anything. It’s something that fits right in. It will be financed by PT-FI out of cash flows from PT-FI. And it will support our volumes there through our current operating rights to 2041. We’re talking with the government about extending those. There’s opportunities for Kucing Liar beyond that. And we believe, although we haven’t been engaged in drilling exercises in the Grasberg Block Cave and Deep MLZ and who knows what else is down there because we really haven’t fully drilled to explore future opportunities. Now, John, you know the thing about Grasberg, ever since we discovered it, it keeps getting bigger and bigger and bigger. But that’s on its own, there is no effect on what we’re doing at Kucing Liar with what we do in the United States. So, we have the financial resources to do -- in the Americas, the United States and South America. So, the ones we’ve listed are the ones we believe are the largest, most significant executable projects initially. The Bagdad expansion is a straightforward doubling of mill capacity, and we’ve dealt with water issues and so forth and...

John Tumazos:

It has moly, Bagdad. And the biggest problem, quite frankly, at Bagdad is getting workers. It’s just a challenge getting mine workers in today’s world who live in these remote communities where our mines are. But that’s a very executable project, it’s not that complicated. But -- and as we deal with the workers’ situation in housing, as markets clear up, that’s one that would be ready to go. As I said, El Abra is depending on the direction of the government there. Lone Star, which really looks like it can be another base level high-profile operation for Freeport in the future, we’re going to maximize it through the oxide, ore and continue to understand how we attack the big sulfide resource that we’ve identified in. Then beyond that, you mentioned Morenci, Sierrita, and there’s other older mines that we have. Chino has a growth opportunity. All those are in stages of evaluation and understanding what we have. Obviously, when you sit down on top and look at this organization, you want to be focused. You don’t want to just have a scattergun approach. But all of those things provide us growth opportunities from inside our company, which makes it very unlikely that we’ll be acquiring smaller operations to pursue externally. You can just see what’s going in the world when you have to pay a big price, you get a resource and then you put the capital on top of it. And that ends up with a very large investment to try to recover. It’s much better because we get no value today from these future resources that we have within our own portfolio. And with success in developing those, all of the incremental value goes to our shareholders and not somebody else’s shareholders.

Richard Adkerson:

Go ahead. No, go ahead.

John Tumazos:

If I could follow with one more. A few years ago, Freeport bought a drinking water system and a sewage system for Arequipa, the third largest city as you were tripling the El Abra mill and mine -- excuse me, the Cerro Verde mill and mine. And I think you might have some rail -- short-line rails, so that you don’t have as many trucks on the road. Could you just confirm that your tons per day are 350,000 to 400,000 tons a day and no mishaps at Cerro Verde? I think, there’s a lot of confusion in the press about conditions...

Richard Adkerson:

Yes. And I’m glad you asked the question because I wanted to elaborate on what I said about Peru in my opening comments. I think all of you know that the Cerro Verde milling complex is the largest in the industry, 400,000-plus per day capacity. The tailings dam will be one of the largest earthen dams ever constructed in the history of mankind, if not the largest. And what John is referring to is a number of years ago, we did as a community project invested in a freshwater system for Arequipa, the second largest city in Peru. And then, as we were developing the expansion of the concentrator and tailings dam, we shifted away from building a new dam on the river that runs just outside of the sea of Arequipa. We come in and we built a wastewater collection and treatment system. And with doing that, we got water for our concentrator and we markedly improved the ecology of the river, and that has been very positively received by downstream farmers and community itself. And that’s really helped foster our positive relationship there. And our team there does overall good. Now, having said that, the situation in Peru is very complicated and nobody at this point can predict how it’s going to unfold. The motions are very high. The government is reluctant to use extreme steps to deal with roadblocks and disruptions and this thing in the day-to-day evolution. And so we are faced with the problems that caused us to cut back on our production rates to conserve line and other inputs so that we could continue to operate. We have the ability to house workers on a temporary basis on site. Most of our workers live in the region of the city of Arequipa, and sometimes those roads have been blocked. So, we’re prepared for it. Our team does a great job in managing things like this over time like COVID and -- but I just wanted to make the point that these concerns that people are raising are directed towards the issues with the government and not directed against us at Cerro Verde and our operations. And so far, we’ve been able to continue to operate.

Michael Dudas:

I was intrigued by your comment about labor and availability and such. I guess, you’re talking a bit more like in the U.S. But -- how much is that situation limiting -- limited your volume plans for 2023 is probably a small percentage. But is it more secular pressure of getting the qualified productive miners and operators for all your mines? Is that also going to be a limiting factor on how the industry reacts to try to move forward with the market signaling in the future, they’re going to need more supply?

Richard Adkerson:

Yes. So, it’s broader than mining. I mean, when I talk with people to business council, business around the table, it’s a common theme you hear across many industries. And when all the COVID relief funds went out, that was a factor. I mean, face it, our work is hard work. And it’s harder to drive a big haul truck than it is to drive an Amazon or UPS or FedEx truck. So, we compete with those. We pay our people strong living wages. We’re giving people substantial increases this year. We invest in recreational facilities, try to deal with housing. It’s an issue in Colorado with our molybdenum mines. You can imagine what it’s like there. So, it’s a big issue for us. And as a result, our mine rates aren't meeting what we would like for them to meet, and that affects not only current but future production, and it’s a strategic challenge for us. But, it’s not just us and it’s not just the mining industry, but the mining industry because the nature of the work presents special problems.

Richard Adkerson:

And if we -- what it opens up to us is unbelievable. I mean, we have -- Morenci the largest leaching operation in the world. It has been for years. And by enhancing the existing leaching operations using all these tools, data analytics and heat covers and supplements, it’s really amazing. But then it opens up historical leach stacks and potentially places like Lone Star using leaching to replace or minimize concentrator investments. So, it’s really exciting. It’s beyond just this 200 pounds that we’re targeting now. But with success, it’s a great opportunity for us. And it’s not a fracking deal like it was in oil and gas industry. It’s not going to turn the dynamics of the supply situation upside down. But for a company like Freeport with the leaching operations that we have and the application with success to historical leach sites and future mine development, it’s something that’s really exciting. And the great thing about it is to see the excitement of our own guys and own team that’s working on it. It’s really gratifying.

Bendik Folden Nyttingnes:

With the revision in the mining [ore billing] (ph) in Chile at least sort of moving in the right direction, it would be interesting to get some color on what you’d realistically like to see to be comfortable with moving forward with El Abra expansion?

Kathleen Quirk:

We’ll also be looking at the -- how the constitutional process advances this year. And it appears the financial package is moving forward and they’re reaching some determination, looks as if that’s progressing. But we also want to look at how this constitutional process unfolds as well. And in the meantime, we’re maintaining our options by planning to move forward with the water infrastructure investments.

Operator:

With that, I will turn the call over to management for any closing remarks.

Operator:

Ladies and gentlemen, that concludes our call for today. Thank you for joining. You may now disconnect.

Kathleen Quirk:

Thank you and good morning everyone. Welcome to the Freeport-McMoRan conference call. Earlier this morning, we reported third quarter 2022 operating and financial results, and a copy of today’s press release and slides are available on our website at fcx.com. Our call today is being broadcast live on the Internet and anyone may listen to the call by accessing our website homepage and clicking on the webcast link for the conference call. In addition to analysts and investors, the financial press has also been invited to listen to today’s call and a replay of the webcast will be available on our website later today. Before we begin our comments, I’d like to remind everyone that today’s press release and certain of our comments on the call include forward-looking statements and actual results may differ materially. I’d like to refer everyone to the cautionary language included in our press release and presentation materials and to the risk factors described in our annual report on Form 10-K filed with the SEC. On the call today with me are Richard Adkerson, our Chairman and Chief Executive Officer; Maree Robertson, our CFO, is on the line; Josh Olmsted, who heads our Americas operations is on the line; Mark Johnson, who heads our Indonesian business is on the line; Rick Coleman is on the line, who have helped us with the projects and construction; Cory Stevens is on the line, who is spearheading our engineering and technical services groups, including the leaching initiatives; and Mike Kendrick is on who runs our molybdenum business; we also have Steve Higgins, our Chief Administrative Officer. Richard is going to make a few opening remarks and then we will turn to our presentation, slide materials and go through that and then open up the call for questions. And so now I’d like to turn the call over to Richard for his opening comments.

Kathleen Quirk:

Thank you, Richard and we will start on Slide 3 with a summary of the quarter’s highlights. As you have seen, we achieved strong production and sales performance in the quarter. And as Richard mentioned, we are continuing our focus on effective execution of our plans in a challenging environment. Sales volumes for copper were 3% higher than last year’s third quarter and 4% higher than our guidance going into the quarter. Our gold sales were above the year ago quarter by 19% and 20% above our July guidance and that reflects very strong performance at Grasberg during the quarter. From a cash cost standpoint, our consolidated average unit net cash cost were $1.75 in the quarter, they averaged $1.75 and that was about 5% above our estimates going into the quarter. As Richard referenced, cost pressures continue to be a significant issue for our operations and really across the global mining industry. In the current market, many of our input costs are above historical correlations to the copper price. We can’t predict how long this dislocation will occur, but based on history, we typically see a high correlation of many of our input costs with the price of copper. As Richard mentioned, we are going to continue to focus in those areas of cost and efficiencies that we can control to help mitigate these cost increases. Adjusted EBITDA in the quarter was $1.5 billion. This was net of $228 million reduction associated with copper sales that were provisionally priced at the end of June at $3.75 per pound, which remains subject to final settlement. The decline in copper prices during the quarter resulted in this negative adjustment. We have got a reconciliation of the EBITDA calculations on Page 31 of the slide deck. Adjusted net income for the quarter was $375 million. That excludes $0.02 in non-recurring gains that are detailed on Roman numeral Page 7 of our earnings release, so $375 million or $0.26 per share in the third quarter of adjusted net income. Operating cash flows of roughly $800 million in the quarter approximated our capital expenditures. Our capital spending during the quarter included $400 million for major projects, principally associated with our Grasberg underground projects and $200 million to advance construction on the Indonesian smelter. During the quarter, we continued opportunistic purchases of our public debt securities in open market. So far, in 2022, we have purchased approximately $1.1 billion of our notes at a discount to par, including $400 million in principal amount in the third quarter. The market conditions in recent months have provided a great opportunity for us to reduce our absolute debt levels at attractive prices and these purchases generate approximately $50 million per annum and interest cost savings. We continue to maintain a strong balance sheet. We have got a large cash balance and significant liquidity. We ended the quarter with $1.3 billion in net debt, excluding the $800 million in net debt associated with the Indonesian smelter. That’s well below our targeted net debt range of $3 billion to $4 billion. The authorization under our share purchase program remains at $3.2 billion. Since reaching our net debt target in the range of $3 billion to $4 billion in the middle of last year, we have used over 50% of our free cash flow for shareholder returns. That totaled $2.7 billion in share purchases and dividends over that period. We did not purchase shares since mid-July and that reflects our priorities on our balance sheet and our policy of using excess cash flows for shareholder returns and the timing of our future purchases will be dependent on our cash flows and overall market conditions. I want to point out that we recently published our updated Annual Climate Report that’s available on our website. The report includes an update on our progress to improve our energy efficiency and integrate lower carbon alternatives into our operations and we are making great strides in that area. As Richard talked about and we talked about on our July call, we commented on the magnitude of the sharp decline in copper prices that we experienced in recent months. We benefit from having the balance sheet, the asset quality and experience to successfully manage the volume in uncertain market environment. And despite the recent weakness, we remain confident in our strategy centered on being foremost in copper. We are positive about the strong future fundamentals for copper and the strength of our assets and team to increase value for stakeholders. I will move to Slide 4, which is a graph of the year-to-date copper prices. We discussed on our last earnings call that the price move appeared to be anticipatory and financially driven by global macroeconomic conditions. This backdrop continues to be challenged by rising interest rates to tame inflation, concerns about Chinese economic growth and pressures in Europe associated with energy and geopolitical turmoil. We also indicated on our last call that markets remain strong, physical markets remain strong for copper. Our customers are reporting solid orders. Physical market was tight as evidenced by low levels of inventories. The situation is much the same today. Copper demand remains healthy. The industry continues to struggle to meet production targets and inventories remain low by historical levels. And as we look forward, we see copper demand that will benefit from the substantial requirements for metals required for electrification and the energy transition. This new demand is emerging and is driven by secular trends rather than economic cycles. The industry does not have a current pipeline to meet this demand and the recent weakness in copper prices will only make this development more difficult. Richard talked about we are realistic about the current macro conditions creating uncertainties, but we do have strong conviction about the long-term fundamentals for the copper markets and we expect to start seeing as we go through this period of increased demand from decarbonization, large gas supply-demand gaps emerging in the copper market. On Slide 5, we will turn to operations and you will see we present here a summary of our sales by region for the third quarter. And I’ll just go through around the globe how our teams are doing. Starting with the U.S., our teams are focused on meeting our production targets safely and efficiently in overcoming challenges with limitations on available labor. We are ramping up the Safford mine, we are ramping up mining rates in the U.S. and we are aggressively pursuing leach production and continuing to study the possible expansion of the Bagdad mine in Northwest Arizona. Moving to South America. Our team at Cerro Verde in Peru continues to execute very effectively and produced at an average of over 400,000 tons of ore per day through the concentrator during the quarter. We faced some challenges during the quarter with byproduct molybdenum productions, and that impacted net unit cash cost. The team is doing great work to overcome this challenge as we look forward into the fourth quarter and beyond. And we’re particularly proud of the exceptional work Cerro Verde does in the community, and that provides a sustainable model for the operations. At El Abra, we’re continuing to optimize the existing operation, while we consider the larger expansion options in the future. Richard talked about Grasberg. We benefited from continued outstanding execution of the plans that allowed us to exceed our third quarter sales guidance with strong production results in the quarter, higher than forecast grades and an exceptional loading and shipping performance. The team loaded and shipped all of its third quarter production and available concentrate inventories during the period. We’re also continuing to advance several projects at the site related to our mill work to add a new mill circuit, working on power infrastructure, we’re continuing to advance the development of Kucing Liar and we’re progressing with construction of the new smelter in Eastern Java, with a targeted completion of that project in 2024. We show unit costs at the bottom of the slide on a consolidated basis. As I mentioned, the costs in the third quarter were about 5% above our guidance. That mainly, on a consolidated basis, was associated with higher maintenance and the increased cost of supplies. Breaking it down by region, the U.S. was challenged with higher maintenance, supplies and labor. In South America, the variance to our expectations related to lower molybdenum by-product credits, and Grasberg was in line with our prior estimate, but they were offsetting variances, higher maintenance costs and supply costs were offset by stronger gold byproduct credits in the quarter. We have adjusted our annual cost guidance for 2022 to average $1.55 per pound. That compares with the previous estimate of $1.50 per pound and we’ve got a reconciliation provided in the reference materials on Slide 22. On Slide 6, we wanted to highlight the progress at Grasberg that Richard referred to. Since reaching the targeted run rate in the second half of last year, the team at Grasberg has just done a great job demonstrating sustained large-scale production for several quarters now. We benefit from our industry-leading expertise in block caving and we’re effectively managing the largest underground mining complex in the world. This is a major accomplishment, not only for our company, but in the history of the global mining industry. The resource at this site where we’ve been operating for over 5 decades is significant. And with the success of this project, we’re engaged in discussions regarding an extension of our operating rights beyond our current 2041 time frame. Richard talked about earlier we have got some pictures from the visit on the slide. We were honored in late August to host Indonesia’s President at the Grasberg site. He toured the site extensively. He visited the former surface mine, had an in-depth tour of the underground and actively engaged with our team. He expressed great pride over what has been achieved technically and for the people of Papua in the country. It was really a happy time, special time for our entire team who’s worked so hard over the years to make this project such a success. Another exciting area that we wanted to talk more about today on Slide 7 is our reach innovation initiatives. This is really focused in the Americas and our drive – we’re capturing higher recoveries from leach stockpiles is gaining a lot of momentum. The economics of this opportunity are extremely attractive, very low capital intensity, low incremental operating costs, low carbon footprint, the lowest cost copper units in our Americas portfolio and the carbon intensity is low because the mining costs have already been incurred. And so essentially, we’re doing here is extracting more copper from what historically would be considered waste. We are using new data analytics capabilities, and those are providing valuable information to guide us and prioritize our work on the highest value. We’re continuing efforts to retain heat in the stockpile. We are moving forward to apply covers to our leach stockpiles because the retention of heat within the stockpiles is proving to enhance recoveries. We’re also applying solutions to new areas that were not pursued historically. And we continue to test various additives that can further enhance recoveries. The progress to-date and early results are leading us to a target run rate of 200 million pounds by the end of next year, and that is at the top end of what we were prior thinking was 100 million to 200 million pounds. Success at this level would give us a road map to scale larger, and that’s what we’re focused on. And we’re really taking advantage of the long history we have in leaching significant stockpile material, the availability of new technologies that weren’t available in the past and we’re in a really strong position to lead the innovation in this area. We are managing this project and this initiative as we would a major project. And when we think about it, it’s similar to a – has a similar production to what we would look at, at a project within the U.S. to add concentrator, but we don’t have the capital associated with it and the operating costs are very low. So we’re allocating a meaningful amount of significant expertise and technical resources and are aggressively pursuing this opportunity. I am going to move to Slide 8, which provides a 3-year outlook for our sales volumes. As you’ll see, the 2022 volumes are very similar for copper, 4.2 billion pounds of copper for 2022. Gold sales are about 5% higher than our prior estimate for the year and that reflects the [indiscernible]. The sales mix for 2022 is roughly 35% coming from the U.S., 28% from South America and 37% from Grasberg. You’ll note that our 2023 copper sales guidance have been adjusted. They are lower by about 150 million pounds from our prior estimate. That’s roughly 3%. About half of this is a timing matter and does not represent a production shortfall. And this goes to a change in the commercial agreement of our arrangement with PT Smelting, the existing smelter in Indonesia, which we own a 40% interest in currently. That commercial arrangement is converting in 2023 from a purchase and sale agreement to a tolling agreement. And so PT-FI’s production a portion will be deferred in inventory until final sale, but it does not represent a production shortfall. And in fact, PT-FI’s production is going very well in line with expectations. The balance of this change is associated with updated mine plans in the Americas, and that includes the impact of anticipated lower grades than we were previously forecasting for 2023 at Cerro Verde. The rest of the guidance is pretty similar to what we were guiding to last quarter. And we are going to move to cash flows on Slide 9, and you’ve seen these charts before. As a leading producer of copper, our earnings and cash flows have significant leverage to the price of copper. And we show modeled results for our EBITDA and cash flow at various prices and with the current cost structure of the business, which, as we’ve talked about, has increased in recent quarters. We have shown a broad range of prices ranging from $3 per pound to $5 per pound. Just to recall – remind everyone in the first half of this year, prices averaged nearly $4.50 a pound, and we’re approaching $5 a pound earlier in the year. We don’t believe the current copper price is sustainable long-term given the cost structure of the industry, the need for new supply development in the future. Modeled results using the average of ‘23 and ‘24 with the current volume and cost estimates, holding gold flat at $1,700 per ounce and molybdenum flat at $18 per pound, our annual EBITDA would range from roughly $6 billion per year at $3 copper to over $14 billion per year at $5 copper. And our operating cash flows net of all of our taxes would range from $4 billion per year, $3 copper, to $11 billion at $5 copper. So a lot of leverage to the price of copper. We show sensitivities to the various commodities on the right. As Richard talked about, we’re prepared to manage in a low-price environment, while retaining optionality for what we believe will be a much more positive situation as we go forward. And we’ve got this long-lived asset base that will prove to be valuable given the compelling fundamental outlook. Looking at our capital expenditures on Slide 10. You can see that we’ve reduced the 2022 capital forecast by $400 million, drawn from $3.1 billion in our prior forecast to the $2.7 billion in the current forecast. About half of that has shifted into 2023. As we’ve talked about all year, we’ve been spending capital at a slower pace than our original plans. This has something to do with just the supply chain and labor and other things that have deferred the projects. But we’re continuing to prioritize the critical projects. We’re going to continue to evaluate opportunities as we look at our capital spending plans in the context of the market environment to defer spending where and when it makes sense. We have a lot of flexibility with our plans, and we benefit from the fact that the major investments required for the Grasberg transition are largely behind us. These amounts exclude capital for the Indonesian smelter project. That project is being funded with cash from a bond offering that we raised earlier in the year. There is some details on this project and its progress in the reference materials on Slides 27 and 28. Construction is moving forward. We’re working to complete the project as early as we can. We currently expect it to complete it in 2024. And to date, we’ve invested about $800 million in this project. We will talk for a minute about the financial policy and our strong balance sheet. Going to the balance sheet, it’s really the cornerstone of our financial policy. The steps we’ve taken in the past placed us in an exceptionally strong position, particularly in the context of the current market weakness. We don’t have a need to raise new capital for the foreseeable future. And essentially, all of our debt is fixed rate. We continued, as I mentioned, our opportunistic purchases of debt during the quarter and have repurchased over $1 billion in senior notes at attractive prices. The slide here shows our net debt at $2.1 billion at the end of the third quarter. That includes $800 million for the smelter. So when we look at our net debt compared to our target, it’s $1.3 billion, which is below our net debt target of $3 billion to $4 billion. And so that gives us some cushion. We’ve also got a very much cash balance of $8.6 billion, and that continues to provide significant liquidity for us. As you’ll see here, we have a very attractive debt maturity profile. We’ve got easily manageable maturities. We’ve taken steps to improve financial flexibility. We did some transactions to increase PT-FI’s revolver. We did the same thing at Cerro Verde. And just this week, we completed the extension of our corporate revolver, which was previously planned to mature in ‘24. We’ve extended that to 2027. In closing, we’re showing a scorecard on Slide 12 of the shareholder returns, which has been substantial since reaching our net debt targets last year. Just as a reminder, the financial policy provides for the distribution of 50% of our free cash flow and shareholder returns with a net debt target in the range of $3 billion to $4 billion, excluding the smelter debt. We pay a base dividend and a variable dividend totaling $0.60 per share, and $0.30 per share of that is variable. We’ve used $1.8 billion of our $5 billion in share purchase authorization. Our variable dividend is continuing through 2022, and our Board will have the opportunity to review future dividends depending on performance. As I mentioned, we’ve returned $2.7 billion to shareholders. This represents over 50% of our free cash flow over this period, and we’re well below our net debt targets. As I mentioned, we did not purchase shares since July ‘22, and that reflects just the priorities on the balance sheet, the impact of the sharp decline in copper prices on our cash flows. We’re going to continue to prioritize our balance sheet. We believe that maintaining the balance sheet strength in various market conditions is really important in our ability as we look forward to drive long-term returns for our shareholders. We’re focused on long-term value, focused on execution, doing this responsibly, safely, efficiently. In the near-term, with respect to growth projects, we’re going to continue to define our future options, but expect to defer new major investment decisions in the current market environment. We’re convinced the world is going to need our projects in the future, and prices will need to move higher to incentivize the new project development. Richard talked about the pipeline of options we have. We’ve got a lot of flexibility in terms of the timing of development of these options, particularly the expansive options we have for development of new supply in the U.S. In closing, we’re optimistic about the value of our assets, the strength of our team, the fundamentals of the copper business and the future prospects for the markets we serve. I will stop there and we will – operator, we will open up the call for questions. Thanks, everyone, for your attention, and we look forward to your questions.

Emily Chieng:

Good morning, Richard and Kathleen. And thanks for taking the time this morning. My question is just around the leaching technology. And understandably, it’s a low CapEx opportunity there to continue to bring production growth. So I wanted to understand the guidance that you have of 200 million pounds per annum by year-end 2023. That’s the run rate that you’ve targeted. Could you perhaps share what volumes you are seeing from leaching activities today? And how should we be thinking about ramp profile to get there? Thank you.

Emily Chieng:

Great. Thanks, Kathleen. If I could squeeze one more just on the Bagdad expansion. It sounds like that’s been at least pushed into 2024?

Emily Chieng:

Great. Thank you.

Chris LaFemina:

Hi, thanks, operator. Hi, Kathleen. Hi, Richard. Thank you for taking my question. So my question relates to some of the operational and financial flexibility that you have. So if you think back to early 2016, you had $20 billion of debt, very little cash out to issue equity, sold assets, not in a great position at that time to weather the storm of difficult markets. Whereas today, you have low net debt, you have high cash, your net debt is well below your target range and you have multiple levers that you can pull in the event that macro conditions reconvert this. So obviously, the first lever, which looks like you’re pulling already, is kind of suspending the buyback until things improve. But you still have a couple of billion dollars of kind of leeway on the balance sheet before you get into your net debt target range. Let’s assume that commodity markets get worse, and we’re kind of stress testing the business and you’re burning cash for the next kind of 12 months based on your current operational and spending plans. When you get into that targeted net debt range, what are the levers that you can pull next? Are there kind of CapEx reductions that you can make? Are there mines that you’ll take offline? I mean, the cost inflation is kind of prominent in the industry, and copper price isn’t really doing much. So eventually, I would assume that some of these mines become loss-making. So what are the levers that you can pull over time in the event that market conditions weaken further? And again, you probably have 12 months of leeway before you need to consider that. But where do you look next to kind of protect the balance sheet in the business?

Richard Adkerson:

No. No, Kathleen, go ahead.

Richard Adkerson:

Thanks. No question about that. I mean, 2016 was a crisis for our company. We’re not anywhere near crisis now. And since then, we’ve had 2 major accomplishments that’s de-risked our business significantly. One was the 2018 agreement that we reached with the government to stabilize the situation we had in years about the structure of our taxes, royalties and operating rights. And now we’ve had 4 years of operating under that and it’s going very well as you can see by presence visit, etcetera. And then as Kathleen mentioned, de-risking Grasberg by ramping up the underground and being so effective in sustaining the rates there. We’re going to be able to do that by continuing to operate effectively. We’ve got this Kucing Liar ore body that we’re developing that’s an add-on to give us stability. And so we’re back to the strategy that we’ve always had, Grasberg generates cash in any environment, it can fund our G&A and then we challenge each of our other mines to manage their business to be at least breakeven on a cash basis.

Operator:

Your next question will come from the line of Alex Hacking with Citi. Please go ahead.

Kathleen Quirk:

Yes.

Alex Hacking:

Okay, thanks.

Alex Hacking:

Okay, thanks. That’s clear. But one-third of it is already in the guidance. And then just on the cost side, I mean, your tone sounds like you’re not really seeing any cost alleviation yet. We have seen FX sort of moving in the right direction for you. Maybe headline energy prices come off a little bit, freight come off a little bit. How are you thinking about the cost environment as you head into 2023? Thank you very much.

Alex Hacking:

Okay, thank you. Best of luck.

Matthew Murphy:

Hi. I am wondering if you have any thoughts you can offer on what might lay ahead on the legislative agenda in the U.S. for the mining sector. There has been lots of talk on critical minerals and just a few mummers on permitting changes or debate around the Mining Act. So, I am just wondering if there is any sort of big opportunities or threats out there in what may lay ahead.

Matthew Murphy:

Okay. Thanks Richard.

Orest Wowkodaw:

Hi. Good morning and thanks for taking my question. Obviously, we are hearing a lot out there about slowing demand, particularly in regions like Europe. Are you seeing any evidence of that from your customers? Like are any customers scaling back orders at all?

Orest Wowkodaw:

That’s great to hear. Thank you, Richard.

Operator:

Your next question will come from the line of Carlos De Alba with Morgan Stanley. Please go ahead.

Richard Adkerson:

Well, let’s just go ahead and answer that. We have the issue. Taxes we pay are based on our foreign operations, and particularly like in Indonesia, taxes we pay in any given year is based on the taxes we paid in the preceding year. So, when you have a situation like we have had this year where the preceding year was a lot stronger financially, we are paying higher cash taxes this year. Next year, it could well reverse. But our tax situation is stabilized. We are watching carefully what’s going on in Chile, but that’s more of an impact on our future development plans. But we have stabilized taxes in Indonesia and no question about the continuation of that. And just in doing financial analysis, you got to take into account this timing difference when taxes are incurred and when they are actually paid. And if you want details on that, call David Joint, and he can help you walk through those.

Richard Adkerson:

So, we have had early discussions. And my sense is there is a recognition that it’s in all parties mutual interest to find a resolution for this. It would make no sense for any stakeholder for us to run this operation with a drop dead date of 2041. There is resources already identified beyond that. And for a number of years, because of all the protracted discussions we had about our contract of work in [indiscernible]. We really haven’t done delineation drilling to really understand what happens to these ore bodies at depth. And so the discussions are early on. There are some complications that we and the government will have to deal with, with the existing regulations and so forth. So, it’s not something we can say that there is anything other than early conversations. But I have been pleased with the tone of those conversations. And now we are starting the hard work of saying, how do you get this done in a mutually acceptable way.

Carlos De Alba:

Alright. Great. Thank you very much Kathleen and Richard.

Operator:

Our next question will come from the line of Michael Dudas with Vertical Research Partners. Please go ahead.

Kathleen Quirk:

Hi Michael.

Richard Adkerson:

Michael, these projects are so different. You can’t set them in, and I know a lot of people who follow the industry at a high level are always trying to come up with some things like incentive prices and other things that fit. But every one of these projects are just so different. And there are different factors. We will factor in the – as we conduct this feasibility study at Bagdad and begin – and the continued discussions with our Board, we will factor in whatever the current price outlook is for capital and operating costs, even though we don’t focus in on a particular copper price, but what does scenario copper prices look like and how does it fit into our overall portfolio. One thing that’s come out of this – Kathleen made references to it a couple of times. But one thing that’s come out of the pandemic is labor issues. And that’s – as I talk with people, the business roundtable, business counsel, it cuts across industries, but it certainly affects our industry. And Bagdad is a very remote location. And we have got to make some investments to attract people to come in and develop a sustainable labor force there. But it’s true in our other operations, not so much overseas. But in the U.S., it’s a real issue, and that’s a factor to consider in terms of committing capital. And we have got a whole long future of potential capital projects in the U.S. And there are a lot of, in our view, advantages for Freeport in having that. There is – I mentioned the royalty situation, the great community support we have, the support from the travel groups in the long history that we have worked, invested so hard to have those positive relationships. And so we just have to pull them in. I guess my point is it’s not something you can really generalize about, but you have to dig into each of these projects and thoroughly understand how costs, other factors figure into it. So, we got Bagdad. We have got this Lone Star project, it lies ahead in our future. That’s great. El Abra is going to be a great project eventually. So, I wish I could give you some simplified answers for that. But…

Michael Dudas:

You just certainly highlighted the fact that the hurdle for the industry is much higher and certainly it’s going to exacerbate whatever supply/demand gap you anticipate going forward because of what you just enumerated. So, I appreciate those thoughts. Thank you.

Michael Dudas:

Thank you, Richard. Thank you, Kathleen.

Martin Malloy:

Good morning. Thank you for taking my question. Assuming that the current copper pricing environment and financing environment continues here, from an industry standpoint, when do you think it will start to impact in terms of the deferment of projects, etcetera, the industry supply?

Martin Malloy:

Thank you.

Richard Adkerson:

I just see some real similarities to what we have seen in the crude oil business for years of underinvestment, and then all of a sudden, something happens and now the world had a crisis for – in the oil industry.

Brian MacArthur:

Hi. Good morning.

Brian MacArthur:

Good morning. Most of my question has been answered. But can I just ask, El Abra had a very good quarter, 60 million pounds, that’s probably the best in like years. Is that sustainable now, or was something different happening this quarter there?

Brian MacArthur:

So, we are back. We are now on that new steady run rate of 240 million pounds, 250 million pounds a year?

Richard Adkerson:

Yes. You touched on an important point. And we certainly saw this with crisis steps we took years ago in 2016, and this sort of ties into the question about what are you going to do with some of these lower-grade deposits if you make decisions about mine rates, they have long-term consequences. It takes a while if you cut back stacking rates on some of these mines and that’s not a production impact just for this year, but extends for years in the future. So, as we take steps to build it back up, then that’s going to be incremental over a period of time. And so I just keep harping the people who try – talking about our business, it’s a long, long-term business. And that just comes to play in almost everything we do.

Kathleen Quirk:

Yes.

Richard Adkerson:

Okay. Thanks Brian. Thanks everybody. We really appreciate you being on the call and encourage you to follow-up if you have further questions. And we look forward to reporting on our company and our industry in the future. So, thanks for joining us.

Kathleen Quirk:

Thank you, and good morning. Welcome to the Freeport-McMoRan second quarter conference call. Earlier this morning, FCX reported second quarter 2022 operating and financial results, and a copy of today's press release and slides are available on our website at fcx.com. Our call today is being broadcast live on the Internet, and anyone may listen to the call by accessing our website home page and clicking on the webcast link for the conference call. In addition to analysts and investors, the financial press has been invited to listen to today's call, and a replay of the webcast will be available on our website later today. Before we begin our comments, we'd like to remind everyone that today's press release and certain of our comments on this call include forward-looking statements, and actual results may differ materially. I'd like to refer everyone to the cautionary language included in our press release and presentation materials and to the risk factors described in our SEC filings. On the call today with me are, Richard Adkerson, our Chairman of the Board and Chief Executive Officer; Maree Robertson, our Chief Financial Officer; Mark Johnson, Chief Operating Officer of Indonesia; Josh Olmsted, Chief Operating Officer for the Americas; Mike Kendrick, who runs our molybdenum business; Cory Stevens, who leads our centralized technical services, engineering and construction; Rick Coleman, who's leading a number of our projects, including the smelter project in Indonesia; and Steve Higgins, our Chief Administrative Officer. Richard is going to make some opening comments to start us off, and then I'll come back and cover the materials in the slide presentation. So now I'll turn the call over to Richard for his comments.

Kathleen Quirk:

Okay. Great. Thank you, Richard, and I'll cover the presentation that's on our website, and then we'll come back and take your questions. Starting on Slide 3, we summarized the highlights of the second quarter. We achieved solid operating performance in the quarter and continued our momentum and executing our operating plans, growing our production year-over-year and managing costs in a challenging environment. Our sales volumes for copper were 17% higher than last year's second quarter and 5% above our recent guidance. We benefited from strong operating performance across the portfolio. Gold sales were 56% above the year ago quarter and 18% above our April guidance, reflecting the exceptional performance at Grasberg. Our consolidated average unit net cash cost for the quarter of $1.41 per pound were in line with our guidance. And notably, Grasberg's costs were a net credit of $0.02 per pound in the quarter, meaning that the gold revenues more than offset all of our cash production cost at the site. We're actively engaged in cost management and efficiencies across the portfolio to mitigate cost increases. We generated adjusted EBITDA of $2.3 billion in the quarter. This was net of a $355 million reduction associated with copper sales recorded in the first quarter, provisionally priced at the end of March at $4.71 per pound, which remains subject to final settlement. The decline in copper prices during the second quarter resulted in a negative adjustment for these provisionally priced sales. Our adjusted net income totaled $854 million in the second quarter, $0.58 per share. That excluded net charges detailed on Roman numeral Page 7 of our earnings release, totaling $0.01 per share. Operating cash flows of $1.6 billion in the quarter exceeded our capital expenditures of roughly $900 million. Capital spending during the quarter included $400 million of major projects, principally associated with the Grasberg underground and roughly $200 million to advance the construction of the Indonesian smelter. We took advantage of weakness in credit markets during the quarter and opportunistically repurchased debt in the open market. To date, we have purchased $754 million of FCX's notes in open market transactions at a cost of $718 million, including $582 million in principal amount in the second quarter. The current market situation provides a great opportunity for us to reduce absolute debt levels at attractive prices. We also continue to execute our share repurchase program since starting the program last November, we have purchased 48 million shares at a total cost of $1.8 billion, an average approximating $38 per share. Since the end of the first quarter, we purchased nearly 800 million in stock, including 110 million in July, which were executed at an average share price of $28 per share. Since reaching our net debt target in the middle of last year in the range of $3 billion to $4 billion, we have used approximately 50% of our free cash flow for shareholder returns. Today, we announced that our Board increased our share purchase authorization by $2 billion to refresh availability on the program to the $3 billion range. The timing of our future purchases will be dependent on our cash flows and general market conditions. We'll continue our priority of maintaining a strong balance sheet and use excess cash to return to shareholders. As Richard discussed, the magnitude of the decline in copper in recent weeks was sudden and unexpected. We have the balance sheet, asset quality and experience to successfully manage a volatile and uncertain market environment. Our net debt at the end of June was $1.6 billion. That included $600 million in net debt associated with the Indonesian smelter. Consolidated debt was $11.1 billion, and consolidated cash was $9.5 billion. We don't have requirements to raise capital in the current environment. We've been opportunistic and taking advantage of recent market weakness to repurchase our debt and equity securities. As we look forward, we will manage through the near term effectively and are positive about our strategy centered on being foremost in copper, the strength of our assets and our team focused on increasing value for all stakeholders. Moving to markets on Slide 4, we show a graph of year-to-date copper prices. The price 4 months ago hit a high of $4.87 per pound, with market analysts predicting multiyear periods of price increases based on fundamentals of rising demand required to support the energy transition, limited supplies and sizable deficits on the horizon. You've all read about the macro factors, which have manifested over the last several weeks, triggering recessionary concerns. In addition, concerns about the impact of COVID shutdowns in China and a strong U.S. dollar have weighed on copper, which is viewed as a close proxy for sentiment on the health of the global economy. The reality is that this has been a financially driven anticipatory move in copper prices. Physical markets remain healthy as evidenced by the global exchange inventories illustrated on this chart, which remain at historically low levels. Our customers report solid orders, and the industry continues to struggle to meet production targets. The current decline in price is below Wood Mackenzie's estimate of $4.25 per pound necessary to incentivize new supply under an accelerated energy transition. It will also provide less cash flow to the industry to develop new supplies, making the projected deficits in copper more significant in the future. The long-term secular demand trends for copper demand associated with electrification, decarbonization will be important demand drivers for copper. We see these trends being less economically sensitive than traditional uses of copper in the economy. We fully recognize the short-term uncertainties but have conviction about long-term fundamentals for the copper markets. Richard mentioned the S&P Global report. Many of you have seen it was published last week, prepared by analysts at S&P Global and led by Dan Yergin, a well-known energy industry expert, author and historian. The independent study, which is available on S&P Global's website, forecast above-trend copper demand through 2035 associated with electrification and the energy transition. The report projects long-term structural deficits in copper and highlights copper's prominent role in the global aspirations of a net zero economy. It confirms the work of other reputable analysts on the future of copper and will serve as an educational tool for governments and other policymakers on the importance of future new copper supply development. We recognize the short-term macro was a different picture. And as we move to Slide 6, Richard highlighted this, it summarizes our experience in managing challenging environments. For those of you who have followed our company and industry for a long time, you know that our team is proficient and successfully navigating challenging circumstances. This slide on Slide 6 summarizes our actions in prior periods when we took decisive steps to adjust our operating plans, reduce costs, defer spending, protect liquidity and preserve our asset values for improved market conditions. Notably, we operate all of our mines and manage major capital and operating decisions centrally. Each one of these periods had its own unique challenges, and our team proved its agility each time. We're prepared to respond to a weakening market environment, if necessary. We're in a much stronger position than in past downturns with a significantly improved balance sheet and our successful expansion of a low-cost production at Grasberg. Our team is resilient, experienced, professional and value-driven in our approach. We can't predict the extent or timeframe of the current situation. But as a responsible producer of scale and a strategy focused on copper with long life reserves, the prospects are bright for our portfolio to become more scarce and highly valued in the future. On Slide 7, we provide some additional details on our operating activities in the quarter. In the U.S., the Lone Star mine continues to perform above design capacity. We're expanding further to take us to 300 million pounds per annum by 2023 with an investment of approximately $250 million. As we accelerate the mining of oxide awards, this will expose a much larger sulfide opportunity at this site. We're also advancing and we're very excited about our leach recovery initiatives at Morenci; and across the Americas portfolio, using data analytics and new technologies to enhance our leach production. This is a significant value-enhancing opportunity for us, and we continue to gain momentum and expect to have success on this priority initiative. At our Bagdad mine in Northwest Arizona, we are advancing plans for the Bagdad 2X project to double production. Studies are advancing, and we're planning to advance early initiatives in parallel with the studies. We're focusing on developing this opportunity. It's a future growth option, but we'll be flexible on timing subject to market conditions. In South America, the teams have done exceptional work navigating the pandemic. We've had a great highlight a significant milestone for the Cerro Verde team during the quarter, setting a quarterly record for concentrating of averaging 427,000 tonnes of concentrating per day. At Cerro Verde, we also had some recent positive results on exploration, which has the potential to expand reserves and increase grades at this large-scale operation. At El Abra, we have increased stacking rates and commencing leaching on a new leach pad. We continue to evaluate alternatives for the long term at El Abra, including options for a new concentrator or an extension of existing operations, subject to ongoing monitoring of the investment climate in Chile. At Grasberg, we sustained our large-scale metal production after reaching our target metal run rate in the fourth quarter of last year. The cost position at Grasberg is exceptional. And the team there is doing outstanding work in managing and sustaining the largest and most profitable underground operation in the world. During the quarter, we again achieved higher gold recoveries compared with forecasts, which contributed to a favorable variance for the quarter. And we've now increased our outlook for full year gold production. At PT-FI, we are advancing mill projects to provide additional capacity in the second half of 2023. We're diversifying our power sources and advancing the long-term development for Kucing Liar. The construction of the new smelter in Indonesia is advancing. We reached an important construction milestone during the quarter, which will enable us to begin to reduce export duties later this year. Turning to Slide 8, we provide a 3-year outlook for our volumes, which are largely in line with our prior forecast. We've made small changes to our 2022 copper volumes totaling about 40 million pounds or about 1% and have increased our forecast for gold volumes in 2022 by about 5%. The execution of our long-term plans is on track after delivering 19% increase in copper sales in 2021. We are projecting growth in volumes in 2022 and further growth in 2023. For 2022, we estimate 36% of our sales volumes will come from the U.S., 27% from South America and 37% from Grasberg. Moving to our cost outlook on Slide 9. As I mentioned, we're actively engaged in cost management and efficiency initiatives to mitigate the impacts of the challenging cost environment. We've updated our plans to incorporate recent commodity pricing, exchange rates and our latest operating plans. We're now estimating unit net cash costs for the year approximating $1.50 per pound for 2022. That compares with our prior estimate of $1.44 per pound. As you'll see from the reconciliation on Slide 9, the majority of this increase reflects the decline in by-product credits associated with a reduction in assumed gold and molybdenum prices for the balance of the year. Our projected $0.03 per pound increase in site production and delivery costs reflects the assumption of higher energy prices in our second half -- in the second half compared with our prior forecast, higher consumable costs, together with the impact of a change in estimate for copper in the maturing leach pad at El Abra. And this was partly offset by the favorable impact we have on labor costs internationally associated with weakening exchange rates compared to the U.S. dollar. Historically, copper prices have been correlated with a number of our input costs. Should recessionary pressures continue, historical correlations would indicate that we may begin to see a reversal of some of the cost experiences we've seen over the last 2 years. Moving to Slide 10. As one of the world's leading copper producers, our earnings and cash flows have significant leverage to the price of copper, up and down. On Slide 10, we show modeled results for our EBITDA and cash flow at various prices and have shown a broad range of prices this quarter, given the volatility ranging from $3 per pound of copper to $5 per pound of copper, which is close to where the prices were earlier in the year. We've updated our gold and molybdenum prices to reflect current prices. As Richard talked about, the current price is not sustainable long term given the cost structure of the industry and the need for new supply development in the future. We show modeled results on this slide using the average of 2023 and 2024 with current volume and cost estimates and holding gold flat at $1,700 per ounce and molybdenum at $16 per pound. Our annual EBITDA under these scenarios would range from over $6 billion per annum at $3 copper to $15 billion per year at $5 copper, with operating cash flows ranging from $4.5 billion per year at $3 copper to over $11 billion per year at $5 of copper. We show sensitivities on the right to various commodities and input costs. We can't predict prices and are prepared to manage in a low price environment. The long-term fundamentals of our business indicate that low copper prices are not sustainable longer term, providing increased cash flow as market conditions improve. We show the consolidated capital expenditures on Slide 11. These are largely unchanged from our prior guidance. We've reduced the 2022 capital forecast by $100 million, which is a timing variance for 2023. And as you probably noted, we've been spending capital during 2022 at a slower pace than our original plans. And in the current weak environment, we'll review opportunities to defer spending as we've done in the past. We have flexibility with our plans and benefit from the fact that the major investments required for the Grasberg transition are largely behind us and will begin to decline as we go into 2023. On Slide 12, we show our future growth options embedded in our asset base. We have multiple options for brownfield low-risk growth across our portfolio. Recall, we have 191 billion pounds of copper mineral resources in our portfolio in addition to our proved and probable reserves of 107 billion pounds of copper. The leaching opportunity is a major value driver opportunity for us, and it's not included in our reserves and resources. Success in this area will enable us to create the equivalent of a new mine with extremely low capital intensity, low incremental operating costs and, importantly, a low carbon footprint. We're continuing to apply covers to our leach stockpiles as the retention of heat is proven to enhance recoveries. We're using data analytics and evaluating various additives that can further enhance recoveries. We're initially targeting the addition of 100 million to 200 million pounds of new copper per annum within a relatively short time frame and believe we can build on this target with initial success. We currently estimate 38 billion pounds of copper in our stockpiles, which has already been mined but not in our reserves or production plans. A significant portion of this opportunity is at our flagship Morenci mine, the largest mine in North America. A cross-functional team of technical experts, metallurgists, mine planners, data scientists, geologists and business analysts are working together to make -- take full advantage of this exciting opportunity. We review the ongoing oxide expansion at Lone Star, which is progressing on schedule. Longer term, we have the massive Lone Star sulfide opportunity, a 50 billion-pound copper resource in our established mining area in Eastern Arizona. This project is right in our wheelhouse and is a valuable development option for the future. In the medium term, we're planning to double the size of Bagdad. We have a very large reserve position at the site. We expect to complete the feasibility study for this project in the first half of next year and would be positioned to start construction activities as market conditions warrant. The El Abra project has a resource approaching 30 billion pounds of copper, and we've done a lot of work in identifying an operation that could produce over 700 million pounds of copper per year. In parallel with our evaluation of a major expansion, we're also considering investments in water, which would extend the life of the existing operation while maintaining the longer-term growth option. We continue to closely monitor developments in Chile and are deferring decisions for the time being. In Indonesia, Kucing Liar project is a natural extension of our operations there and will allow us to continue large-scale, low-cost mining there for decades to come. The learnings and shared infrastructure from our successful development of Grasberg underground and the Deep MLZ really enhanced the value of this project at Kucing Liar. We benefit from having a large pipeline of options and have flexibility on the timing of development of our projects, particularly the extensive options we have for development of new supply in the U.S., where we own most of our land and feed. We believe the world is going to need our projects in the future. We have a long track record of success in qualifying and developing projects in an efficient and responsible manner, enhanced by our industry-leading technical capabilities, established licenses to operate in our strong franchises in the areas of focus. I want to turn to our balance sheet on Slide 13, which our financial policy is centered around or center around a strong balance sheet. The actions we've taken in the past have placed us in an exceptionally strong position, particularly in the context of current market weakness. We don't have a need to raise new capital for the foreseeable future. During the quarter, we took a number of steps which further derisked our balance sheet. We raised long-term financing for the smelter. We repaid our term loans at PT-FI and Cerro Verde, and expanded our bank credit facilities for these subsidiaries, and we opportunistically purchased over 750 in senior notes at attractive prices. As we talked about, our net debt including $11 billion in total debt and $9.5 billion of cash. Net debt, excluding the smelter net debt was $1 billion and below our targeted net debt of $3 billion to $4 billion, providing cushion in a weak market environment. We have an attractive debt maturity profile, as you'll see, with easily manageable maturities. We can continue to be opportunistic on value opportunities to repurchase debt in the open market. Slide 14, in closing, we show a scorecard of our shareholder returns, which have increased with our strong financial performance in recent quarters. We were active in the market in the second quarter and into July and have allocated approximately 50% of excess cash flows to shareholder returns since the third quarter of last year. And that consisted of $1.8 billion in share repurchases and common stocks of over -- common stock dividends totaling over $650 million during this period. Our Board authorized a $2 billion increase in our share repurchase program to restore $3 billion in availability under the program. We'll continue to prioritize our balance sheet as the cornerstone of our financial policy, and that will allow us to operate well in varying market conditions and drive long-term returns for shareholders. The discretionary purchases of our shares will be dependent on market conditions and cash flow generation in the future, and our Board will continue to review our financial policy on a regular basis. In summary, we're all focused on long-term value and executing our plans responsibly, safely and efficiently. Despite the recent market conditions, we're optimistic about the value of our assets, the strength of our global team, the fundamentals of the copper business and the future prospects for the markets we serve. We appreciate your attention, and we look forward to your questions. Operator, we'll now open the call for Q&A.

Emily Chieng :

Good morning, Richard and Kathleen, and thank you for the update this morning. My first question is just around the 3Q copper shipment guidance. It looks like that's a little bit lower on a sequential basis than 2Q before it moves back up again. But could you perhaps point to what region may be driving that? And is that timing of shipments or perhaps something to do with the mine plan for the third quarter?

Richard Adkerson :

And anyway, we do have challenges with timing in Indonesia from time to time with the shallow water port that we have there. Rough seas can just delay loading and we, of course, record sales at the time of loading. And so that's just something we've had to deal with over the years.

Chris LaFemina :

Hi, Richard and Kathleen. Thank you for taking my question. Kathleen, you mentioned historically, you mentioned your ability to kind of manage through the downturn, deferring spending as one option. Historically, Freeport in declining price environment has taking high-cost capacity offline. And like we had a lot of cost inflation in mining, the cost curve appears to be steepening pretty dramatically. I'm wondering how much further the price would have to fall before you would consider taking some capacity off-line. That's my first question.

Chris LaFemina :

And you talked about the market being physically tight. You can see that in the inventory data. It's a little bit perplexing though, because the Chinese macro got so bad in the second quarter due to the lockdowns. And presumably, Chinese demand materially weakened. The underlying demand must have materially weakened there. There's been year-over-year in the second quarter fairly substantial supply growth on the 2 biggest mines in the world, including your own, had pretty big production growth year-over-year. A lot of companies are lowering their production guidance. But second quarter looks like a quarter where you had an increase in supply and potentially a collapse in Chinese demand, yet inventories didn't really change. So I'm just trying to reconcile what might have happened. Do you think the Chinese may be buying copper for strategic reserves? Or is there something else going on in the market that would explain why it's staying relatively tight despite the biggest end market potentially seemingly imploding in the last quarter?

Kathleen Quirk :

Western world has been strong as well, Chris. So that's been different than in past years.

Operator:

Your next question will come from the line of David Gagliano with BMO Capital Markets.

Richard Adkerson :

Well, in response to your question earlier and we had about that, I think everyone understands that we at Freeport have a broad range of operations with different cost structures. I mean that was really the whole basis for putting together Grasberg with the Phelps Dodge assets. It allows us to manage those assets more efficiently when you've got a asset like Grasberg to support it. When times get tough, historically, what we've done has been able to use Grasberg support all of our corporate G&A and our debt financing cost. And then we challenge each one of mines to operate as they minimum cash flow breakeven. And we review this mine by mine, and every mine makes that decision, our decisions to support achieving that objective. But then within the larger mines -- and I'll just use Morenci as an example, the largest mine in North America. They are individual mines, but what goes on in to reflect the current economics. It's a balancing act because decisions you make to do that have consequence -- manage all these operations ourselves, and we run our business in the Americas essentially as a single business unit. So we all get together, we find out what's working, what's not, what can be done, what -- and we balance the longer-term consequences with the need to meet current realities. And it is -- and as I said, we have the same basic team we've had that we've done this before. so we have a game plan for us doing it. And now our operators are ahead of us in occasions. Everybody knows what to do. Everybody is pitching in and acting as a team to deal with our corporate objectives. So it's not an easy question to say, is there a price where this happens with this mine, because it's an interactive process that cuts across all of our mines in the Americas. Of course, in Indonesia, we're going to produce as aggressively as we can safely and consistent with our long-term plans. And it's so great now to be ramped up to the extent we obviously got a couple of steps to do. But just 2 years ago, it was really scary when we were having volumes down there and the world was facing COVID. And we're so much better positioned now.

David Gagliano :

Okay. That's helpful. And then just a quick follow-up. Obviously, the authorization increased the buyback from $3 billion to $5 billion at a time when copper is dropping. If copper kind of holds where it is, we don't see a lot of free cash flow, which, by the way, is no different from a company that reported last night that also raised their buyback. My question is just really, can you just speak to the thought process and the approach to the buyback moving forward, considering everything else that's going on in the market right now. Is there any -- and also, is there any kind of duration to the $5 billion buyback timeline-wise?

Kathleen Quirk :

Yes. I think another factor out there is, as you look at the copper price needed to support new mine development and compare that to where our share is trading and what's implied in our shares, it's attractive versus new supply development. And on the flip side, we are looking at this steering the situation in the face where new supply development is required. So there's some bunch of disconnects in the market right now. And we wanted to signal positive we're going to use excess cash flows to buy stock back. We've -- the lower copper prices gives us less cash flows to use, but we're going to continue to look at our plans and see how we might modify that with this disconnect in where our share price is trading and what's needed long term to develop new supplies.

Operator:

Your next question will come from the line of Lawson Winder with Bank of America Securities.

Kathleen Quirk :

Yes. Sure. On Slide 9, we show a roll forward. And you can see there where we've gone from $1.44 to $1.50 in the by-product credit because we're using lower gold prices and moly from what we used in our prior forecast is down by $0.05. So we had a $0.06 increase and $0.05 of that is from reduced by-product credits. The site production, the top line number, the site production delivery being up $0.03. The major factors there that are impacting our cost guidance is energy we used -- just for reference in our last forecast, we used $3.50 per gallon for diesel prices just for one reference in our outlook, which was the price -- around the price at the time. The price in the fourth -- in the second quarter ended up being above $4 per gallon, and that's declined somewhat to $3.70. So we're using current or at least prices as of last week for oil prices or diesel prices roughly $3.70 a pound or a gallon in our outlook. Coal prices are also up from our prior forecast. Purchase power costs are up slightly. We had some offsets in currencies. The stronger dollar results in lower operating costs in our international locations. And so we've reflected that. We've had some contractual consumable price increases, which are rolling in, which we've brought into the forecast. We had also -- and this is more of an accounting deal, but we also had, as we are transitioning in a lab from a former leach pad to a new leach pad, we had some changes in estimates in our estimates of what copper is remaining in that leach pad. And so what that does is basically, if we reduce the amount of copper available in leach pad, it increases our costs for the remaining pound. So that is not a cash item. It's essentially we've already spent the cash. But it will roll through our unit net cash costs and that was a factor as well. So -- but the headlines, energy materials and supplies, this deal at El Abra, which is more noise offset by a stronger dollar. And profit sharing and other costs that are driven by copper prices. So net of all that, we were $0.03 on site production and delivery, and our export duties and royalties went down by $0.02. So the biggest factor you can look at this and say it's by-product credits, which we were using $1,950 for gold in the prior forecast and now we're using $1,700, $19 for moly in the prior forecast, which is what it was. And that price has declined to $16.

Lawson Winder :

Maybe as a follow-up, I find it remarkable that you did not mention labor among all of that. Are you just not seeing signs of any meaningful labor inflation? And I guess, you're obviously confident that you don't expect to see any going forward?

Richard Adkerson :

I want to get a shout out to our supply chain team that's just done a remarkable job in working with our suppliers in a difficult environment, not only from a cost standpoint, but from a delivery standpoint. And they've just done a great job in working directly hand-in-hand with our operations to do what we can to offset these challenges that are broadly across all businesses.

Carlos De Alba :

Yes, good morning, Richard and Kathleen. A couple of questions, if I may. First one, it seems that the leaching technology could be a very attractive return on investment for you. So I wonder if you can give maybe a little bit more color as to what is the current status there? What are some of the work that is still pending to do? And if you have any sense of potential timing for that investment to materialize? And then the other is, clearly a lot of volatility, as you mentioned, and copper prices have suffered. But since you are quite constructive on the market, this might be an opportunity. So this is maybe a sensitive topic, but what is the rationale of keeping Cerro Verde as a policy traded company? I mean wouldn't it potentially be that also a good investment for Freeport shareholders?

Cory Stevens:

No. Thanks, Kathleen. Yes. So reaching really does offer a number of compelling advantages on a number of fronts. The analytics capabilities is really unlocking a more granular look at all the different aspects that we see in terms of recovery, and it's enabling us to decouple static recipes that we had in the past to more dynamic recipes that maximize value as we go forward. But that's just one bucket and it's very organic. We're -- at Morenci, there's a lot of a center of our attention right now. We're executing to the moderate volumes that we've put in to this year's forecast, building confidence into a sustainable -- what that looks like going forward and then have a number of activities going to add even more with a whole -- with a very large backlog of a number of alternatives that we're pursuing.

Richard Adkerson :

Well, let me just add. The real focus is what Kathleen and Cory talked about is taking advantage of our existing leach operations. But with success, the future beyond that is really exciting about what we might do in terms of mining sulfide ores and processing them with this technology or looking at historical lead stacks. It is really exciting. Our whole team is really pumped up about it, very good to see. Our project is called leach to the last drop.

Operator:

Your next question will come from the line of Michael Dudas with VRP.

Richard Adkerson :

Unquestionably, I mean you just think about the impact on corporate strategy, the amount of financing that's available for smaller projects. All -- this is just another element of the series of barriers to supply development that the industry had already faced. And unquestionably, I mean it was pointed out earlier in the discussion that for a company like ours is we got this really great project in Chile that's being delayed by the politic -- political situation there and the uncertainties about taxation. When you balance that out with a company like ours and potentially being able to buy your stock back so cheaply, that's going to happen. That's going to have an impact. The investment in this industry is just so long term, so long term, even for a project as straightforward as doubling our concentrator at Bagdad. That's a multiyear effort to go through the permitting, the planning process, the procurement process. So it's the long-term nature of this business and a head spinning move in prices like this is going to have an impact on those investment decisions. I don't know of any company that's just going to close their eyes and say that the market is so good in the future, we're just going to ignore this. You can't ignore it. I mean it's been such a dramatic decline, and there's still such uncertainties as to what's going to happen, that all of that is going to delay production investments and there was such a limited number of investments available out there anyway, it's just building towards this coming huge deficit in the copper markets.

Timna Tanners :

I guess I'm just trying to kind of square that what we've been discussing in terms of Freeport Slide 12 in terms of all those projects. What does it take that you need to see to -- from the Chilean politics to get more confident in El Abra? And what does it take in terms of copper prices just generally to proceed? Or are many of these still very attractive at recent prices?

Operator:

Your next question comes from the line of Abhi Agarwal with Deutsche Bank.

Kathleen Quirk :

The first answer is yes to that. We're using spot prices for our energy inputs.

Kathleen Quirk :

And to your question about where we see the most risk or opportunity either way, I'd say energy is the 1 that's the most uncertain. As Richard talked about the correlation, what we're spending on energy, if we did historical correlations going back over a long period of time, our energy costs correlated to a $3.25 copper price, would be 40% lower or greater. And so -- but yet people are talking about potentially energy prices spiking again because of what's going on in the world. But if we really do get this recession really comes through, maybe it's a scenario where historical correlations start to fold in more than they are today. But our current plans are not based on historical correlations. They're based on the current market conditions.

Operator:

Your next question will come from the line of John Tumazos with John Tumazos Very Independent Research LLC.

Richard Adkerson :

Well, let's see, you mentioned people. We made substantial cuts in personnel just over 2 years ago with the COVID issue. We did that. We always treat people fairly. It was mostly between incentivized retirements or incentivized terminations and so forth, and we were very attractive with doing that. By the way, we have carried over some really efficient benefits in our G&A cost. And what we learned during that period of time about not needing to travel as much and working efficiently with our people. I encourage all of you to go back and look at the history of Freeport's G&A and just see what progress we made with it. John, we're actively looking for technical people. I mean we're not talking about cutting back technical people at all because this opportunity with leaching with data analytics, which is used in leaching, but in the rest of our business. And my experience has shown you find good technical people, you can -- they'll create value for you. So steady state, maybe that's one way of saying it now that with Grasberg being where it is with its ramp-up, we're still working on a mill enhancement there, power issues. We're dealing with our power plant there. And we have some other investments made, but we're at our run rate. And clearly, the expansions are being affected by today's copper price. So yes, we're just focused on staying in a strong financial position, keeping all of our options open and being prepared to act when time makes sense.

Richard Adkerson :

And the timing of that PT-FI $3 billion financing was very fortuitous. Now I was just looking at this this morning and what we issued it with and what today's interest rates are for those bonds that are trading. It was great that Kathleen and our team have done when they got it done.

Jatinder Goel :

Just a question on inflation, but from a different perspective. A number of other companies in the sector are highlighting CapEx inflation being higher than OpEx inflation. Interestingly, encouragingly, your CapEx guidance is almost unchanged for this year and next year, barring some $100 million shift. What's driving that? Are you seeing any CapEx inflation? Or is there any deferral of activity keeping that absolute $3.1 billion average CapEx slide unchanged, but it's at the cost of some lower activity level?

Richard Adkerson :

Yes. It's the nature of what we're spending money on. And like Kathleen said, where we are in the cycle. And supply chain issues are still real too, and that would be a very daunting thing to think about as you were undertaking a $6 billion, $7 billion new project in this industry. Just coming back -- it just keep coming back that the supply chain -- I mean, the supply barriers to develop copper to meet this demand are really significant. You just -- you think about we've had high copper prices now for 20 years. And just look at what the industry has tried to spend and develop and what's been developed. And now you've got these new things that are coming in, you can't wipe away community environmental concerns just because the world needs copper. You have all the social issues that are competing for the populations in Latin America and problems -- we in the U.S. benefit because we have greenfield expansions, but you see the problems of trying to build -- I mean, brownfield expansions. You see the problems in trying to build a greenfield expansions here in the U.S., they're just daunting. I've just never seen anything like it and it's just so clear to me after looking at our commodities businesses and actual resource business is now for all these decades about where the copper business is and what the future lies ahead for us. And just why I'm so excited about what our companies will benefit from the assets, people experience, how we do things. So it's going to be a great future.

Kathleen Quirk :

No, it's not.