Q2 2020 Freeport-McMoRan Inc Earnings Call
[music].
Ladies and gentlemen, thank you for standing by welcome to the Freeport Mcmoran second quarter Conference call. At this time all participate ordering listen only mode. Later, we will conduct they question answer session. If you wish to ask a question during the Q1 day session Press Star one on your Touchtone phone if we require.
Since during the conference. Please press Star Zero I would now like to turn the conference over to Miss Kathleen Quirk Executive Vice President and Chief Financial Officer. Please go ahead ma'am.
Thank you and good morning, everyone welcome to our conference call.
Earlier. This morning, we reported our second quarter 2020, operating and financial results in a copy of the press release and slides are available on our website and FCX Dot 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 todays 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 in 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 until the risk factors described in our 2019.
Form 10-K, and our quarterly report on form 10-Q.
Each filed with the FCC as updated by FCX is subsequent filings with the FCC.
On the call today, its Richard Adkerson, Vice Chairman and Chief Executive Officer, a red Congers on the call as well as Mark Johnson, Steve Higgins, Rick Coleman and like Kendrick.
I'll start by briefly summarizing the financial results and then turn the call over to Richard who will be going through the presentation materials.
As usual after our prepared remarks, well open the call up for questions.
Today FCX reported net income attributable to common stock, a 53 million or three cents per share in the second quarter of 2020. The results included net credits of $9 million or roughly one cents per share primarily associated with favorable metals inventory adjust.
Last month, and an income tax credit and those were mostly offset by cobot 19 related costs, an employee separation programs adjusted net income after these special items.
Totaled 44 million or three cents per share in the second quarter.
Our adjusted earnings before interest taxes, and depreciation for the second quarter totaled 754 million.
That was above our July six assessment of approximately 650 million, primarily reflecting slightly higher sales volumes in the quarter and lower costs than our prior estimates a reconciliation of of our EBITDA is available on on the slide.
38 of our slide deck.
Hopper sales during the second quarter were 759 million pounds that was about 10% higher than our April 2020 estimate that reflected better than anticipated production rates in Indonesia, and North America, and the timing of shipments from Cerro Verde.
Our second quarter gold sales of 184000 ounces were 12% higher than our April 2020 estimate, reflecting a strong performance in Indonesia.
The average realized copper price during the quarter for copper was to $2.55 per pound that was below the year ago quarterly average of 275 per pound and gold realized prices averaged 17 49 per ounce during the second quarter above last year's second quarter of 13.
51 per ounce.
Consolidated average unit net cash costs have averaged $1.47 per pound in the second quarter of 2020 that was lower than the year go quarter and also lower than our April 2020 estimate of $1.63 per pound, reflecting the higher copper and gold sales volumes and stay.
Wrong execution of our cost reduction initiatives.
We generated strong cash flows during the quarter totaling.
491 million in cash flows from operations and funded capital expenditures totaling 527 million during the period.
We ended the quarter with consolidated debt totaling 9.9 billion and consolidated cash totaled 1.5 billion with strong liquidity and no borrowings under our three and a half billion dollar revolving credit facility now like to turn the call over to Richard who'll be referring to our slide presentation.
Materials.
Richard Please go ahead.
Okay. Thank you Kathleen and good morning to eat your view and.
Thank you participating in our call today.
Hope you and your families are staying well, let's say.
Okay.
Are you trying time over the past four months work, it's been intents wife is challenging.
These that our team has shown that there's lots of problems.
But I want to say that this quarterly reports, we previewed earlier, there's really a good news for report team is a great work we've been doing.
I will refer to the slides going to slide three.
It's continuing to prioritize.
Health and safety of our workers.
And we're also working hard to sports community serve our customers with their own going requirements for copper.
In late April we laid out a comprehensive plan.
With that HM.
I want to manage.
The covert 19 health and economic issues.
Keep ARPU.
And how we were.
Going to safeguard our business to protect the value of our assets for what we or better.
Really positive long term future.
Since that time over the past three months I've been extremely proud of our Freeport gene.
For the way they responded.
It's in a very short period.
Making tough decisions during the height this unprecedented crisis.
More importantly, how our team is executing on these plants safely with the spirit of <unk>.
Remember that in cooperation.
We have had a real sense of urgency and implementing these plans, we moved very quickly to reduce cost and capital spending.
And you can see this and our second quarter results in our annual guidance. So we're providing today.
Our manager management of health care at work for Health care today has been effective.
We use that in addition to manage these health issues.
Our team has also achieved strong safety performance during the quarter in.
That's particularly gratifying.
Because of our concerns just.
People might be distracted, but that's not been the case.
We have been able to produce safely our products.
Using strict operating protocol.
Yes.
Distancing enhancing protective equipment for our workers sanitation.
Particularly significant investments in testing and tracing.
The weighted infected people in treating goes that are sick.
We've actually had only a handful of people to be sure Sears, we see and.
Vast majority of the people that have encountered the disease today have recovered.
Meaty have not had no symptoms, but that's not deterred us from going forward. This program to protect their safety.
Our workforce hearing to global health standards.
We're making sure everyone focuses on their own personal safety and well being of.
People around them.
We are continuing and.
Enhancing in responding to these protocols as we go forward.
Our global team of workers of course critical to our company success and we.
Recognize that I'm personally appreciate.
The dedication commitment near cooperation during this challenging time.
Other than government imposed restrictions and sure Verde.
There have only been very limited impacts from the pandemic at our operating.
Our operating sites.
But no one do stuff fastest bars can spread spread.
We remain diligent steadfast and protecting people.
As I said in April we laid out our plans to address our business and and boost liquidity.
And what was then a very weak involved to market environment.
As a reminder, we laid out our plan to reduce cost and capital spending and 2025.
Over $2 billion deduction of about 15%.
Of our plan copper production.
Totaling about 400 million pounds.
An aggressive management of all cost, including Gionee and expiration.
Our execution of these plan has been very effective you see that our second quarter results.
Which are better than the revised forecast.
Our sales volume exceeded our April gone, it's about 10% for copper 12% Bogo.
All achieved very safely in the face of this global crisis.
Our team maintain focus drive and came together.
To meet the challenges as we don't usually in the past Freeport.
Copper prices improved dramatically during the quarter or plan was based.
In April.
Copper price and we had contingencies for a much lower prices.
Even though prices are higher we're staying the course remain disciplined in executing our cost containment plans.
We are convinced this is prudent in light of the uncertainties and dynamic nature of the ongoing pandemic.
Not living down our guard at all or taking any victory laps, we're more focused than ever as an organization to drive long term values that we see in our assets.
If you second so I'll be.
Putting more in detail on the progress our team has made at Grasberg.
The team there continues to shine and its operations and it's really.
He to our long term strategy.
We are on schedule and ramping up to deliver barge low cost sustainable production volume of copper and go for years to calm.
The team has consistently been meeting or beating forecast.
That's been our.
Our situation for several quarters now and I'm pleased to report that we're on track without ramp up plan.
And I also want, especially the knowledge the Cerro Verde team for their exceptional work.
During this quarter to restore operations that are site near Eric people in Peru.
We've worked very closely with the Rubin government.
We developed a safe.
Planful returned to operations.
At Cerro Verde by June we were operating at 80% of our 2019 rates were continuing to increase productivity with protocols that protect workers and the communities around here keep up.
The Lone Star project in Eastern Arizona advance during the quarter on schedule and that is now being commissioned.
We also continue to bill flexibility in our balance sheet extending maturities at attractive rates.
Working with our bank group to provide enhance downside protection.
Maintain liquidity through our bank credit facility.
All of this as effectively safeguard and our business allowed us to navigate this period of uncertainty.
And retain the massive upside we see in or is it that is now increasingly quote.
Being in front of us.
Our company benefits from a major away from having an extraordinary long life and durable reserve base and resource base.
<unk> position in copper, which has a compelling long term outlook.
And significant exposure to go markets.
I'm confident that continued strong execution will make these assets, even more valuable to our shareholders in the future.
Now turning to slide four we talk about our commitment to our communities.
This has been longstanding unwavering.
Communities are home for workers and their families. They are central to our long term success.
Across to go.
We've supported.
Communities. During this time was much needed medical supplies food.
Monitors support.
In many respects doing with Coca Cola, just bringing us closer to communities.
Bringing us closer communities, where we operate.
To fight a common FFO.
Our people are stepping up to help communities to meet growing needs.
And as a company, we're continuing to find ways to fund to to make a difference.
On slide five we talk about.
Our commitment to all stakeholders.
Our focus is on our shareholders of course, but equally on our workers communities and environment.
And this has been embedded in freeport's culture for many years.
We cannot be successful in generating long term value for shareholders.
Unless we have dry address sustainability issues appropriately effective.
We learned that many years ago.
Well this commitment is being highlighted through our actions in response to the covert pandemic.
In our recent support published annual report on sustainability, which you can phone or web site.
Summarizes all of our programs in this important area.
I'm pleased to know we've recently published our first climate report.
<unk> details our efforts to date and our plans to address climate related risks and opportunities will go.
Forward.
And of course copper is going to play a key ROE broadly in dealing with carbon reduction is the world focuses more home.
Oh, Okay climate issues.
Yes, I imagine that's shown on slide six.
Copper prices have recovered sharply from the lows in March.
We're now back to the point, where they were earlier in the year at the height to the crisis.
[noise] speaking candidly this recovery this recovery came sooner and stronger than we and others anticipated.
Similarly to what we saw in 2009 2010.
China economy is recovering strongly and steadily from the first quarter low.
Being led by its industrial sector.
Infrastructure spending and the government's actions to stimulate the Chinese economy.
Round, the world own going monetary and physical stimulus.
It's helping offset.
The negative economic downturn from cold it.
We are beginning to see a restart in the global economies.
We're also seeing some positive signs as businesses reopened in the western World.
Equally with automobile production getting to improve.
The flaws of copper.
During this ur cobot pandemic have been affected.
Both mine supply in scrap availability.
Or lower.
Notably inventories have remained low and if actually moved even lower in recent months.
Yeah. This is very notable.
Because it's not typical of past commodity downturns.
Typically in downturns inventories rise and then have to be worked over worked off when recovery occurs.
'cause currently low inventories are good omen for copper is it positions the metal.
Our material gains was economic activity rebounds.
Now having said this.
With Freeport Cogs in the cognizant of the risk of current uncertainties.
We will continue to operate our business prudently until there's clarity.
As economic.
As economies around the world recover and improve copper will be a major benefits and prices are still well below what is needed.
To incentivize investments in new projects, which result in a tight markets as we go forward.
Bought seven we talk of we show how to become clearly more widely acknowledged.
That koppers importance in the global economy will be key to achieving de carbonization initiatives.
That will require greater intensity for the use of copper.
Proper strongly supported by fundamentals is an essential metal in the overall global economy.
And as the economy recovers in the world grows more copper will be needed.
But momentum is growing in efforts to reduce carbon around the world.
Perfect events I personally convinced it's it's going to be a mandate for all companies and governments.
Bandied about people as we go forward.
From electric vehicle charging stations to five five GE and other technical applications.
All of this was driven by electronics and electronics for far copper.
Koppers essentially not only in times when the economy is growing but also times like these.
When health care water and food supply communication and Tech technology.
Critically important.
Telecommunications digital technologies cloud applications and never been more important than in today's world.
The current pandemic is bringing to life would come with him achieve improving and go what copper can achieve.
In improving global health.
Studies have demonstrated that copper can destroy bars until October 19.
You should help queer equipment facilities public places will undoubtedly grow significantly.
Our company Freeport is foremost in copper.
Copper is widely considered the best position major commodity for supply demand standpoint.
Freeport will be a major benefit beneficiary of these trends.
Now beginning on slide eight I'll give you a brief update on her operations and projects.
At Cerro Verde, its production was impacted during the quarter by the government order, which restrict constricted operating rates for Cerro Verde and other mines in Peru.
There are very team's doing terrific work in working with the government and our workforce in implementing protocols to demonstrate to the government now workers that we can operate safely.
During the quarter, we managed to increase rates for about a third of capacity to about 80%.
2019 levels.
Our current plans assume we operate at about 350000 tons per day through the mill for the balance of the year.
We will continuously monitor conditions in the region.
And work to increase rates over time.
We have demonstrated the past this in modern concentrate or complex at Cerro Verde the largest in the world.
Copper industry and.
And produce at rates over 400000 metric tons per day.
Sure Verde, it's been a large contributor.
For years in that region.
It was a bright long term future.
Sure Verde simply a great long term asset for Freeport.
Now for the good stuff.
The Grasberg I'm very pleased to report of the positive progress on our underground ramp for <unk>.
For several quarters now our team has consistently been meeting or beating expectations.
This quarter's progress is particularly noteworthy in light of doing this.
With having to manage the impact of the pandemic.
The Barbara production from our two major mines, the Grasberg block cave and the deep them out seem on.
Average number 55 average nearly 55000 tonnes of ore per day. This was ahead of our forecasts and almost 50% above the first quarter of this year.
The end of quarter, we were producing 70000 tons of.
The war per day.
Attaining high grades of copper and gold and we expect to exit 2020 at 95000 tonnes per day.
We had at 46, new draw bells during the quarter.
These are for the rock funnels that.
Are you used to collect or simultaneously, which at scale.
We now have 260 draw bell locations and growing the.
Infrastructures in place what we're doing now is basic block cave mining.
The answering the K fronts building draw bells and committing production.
On slide nine we show a new charge this quarter to illustrate the pace of our underground production ramp up.
Daniel annualized run rate the second quarter. This is really notable is now at about 50 close to 50% of the ultimate glow of.
Producing an average of.
1.55 billion pounds of copper and 1.6 million ounces is go from the underground ore bodies.
This is triple what which you achieved a year ago.
As indicated in the graph, we expect the average about 70% of annual targeted run rate by the fourth quarter. This year and by the end of 2021 the.
90% of the targeted run rates.
We expect to continue to add new draw bells to allow us to increase production.
Basically will now continue to do what we now have been doing over the last several cool pool quarters.
Along this all down it is straightforward.
All of this is achievable because of that more than 15 years, we've been investing in this program.
Making the decision to continue this investment.
In order to go situations with Indonesian government contract.
The investments, we made and development infrastructure the technical expertise of our team in managing block cave and.
In a social license, we've earned and Grasberg position Oh.
Oh the over many years, we've been there.
We are now position for achieving this success that we've been pointing to such a long period of time.
But we know better than anybody in the world the risk inherent blockade mining and their issues that we will place.
Joe demonstrates solidity in our confidence we've gone a long way in this.
De risking the long term plan.
We recently achieved a major milestone which was expected the grasberg block cave as now intersected the massive grasberg open pit.
This is a milestone it was also a situation that we had to be prepared to manage because it involves certain unknown.
Ratified to say it more Johnson and his team has are dealing with this and we don't foresee this is being problem.
And now the math for grass massive grasberg open pit literally crumble into the block cave mine were developing.
The value creation from this transfer.
Transformation is truly matches.
Notably the goal benefited grasberg production.
Has been and will be a major benefits with combined rights combined with rights of apoc raise of copper.
At full production Grasberg mine.
Is the largest gold mine, even though the gold as a byproduct of.
Of the copper operations.
The high grades of copper combined with this go component make grasberg one of the mining industries truly most valuable fabulous asset in its history.
As gold prices approximate $1800 an ounce revenues from go.
Our projected to completely offset the total cost of production at Grasberg.
EBITDA from this operation would average four and a half to $5 billion year.
Copper and gold prices.
Really want to say and emphasize that our partnership with the government image if information into new government of Indonesia remains strong and.
I would say grow stronger every day.
We are now fully aligned in our mutual objectives of creating values for all stakeholders.
And what a great.
Much improved situation. It is for all of us to be folks focused on developing an operating this asset.
And not to be a sidetrack side dealing with contract issues as we work for so long.
Can't say enough about how pleased I am with the agreement we reached in December 2018, and how it's being operated.
I want to say as indicated in our April report, we continue to experience delays with the development of the proposed new smelter.
In the Gresik area of eastern job Java.
We're continuing to do run in planning and site work.
Certain degree Ah, but cove it is a real serious problem in the Gresik area and it is delaying progress with this project.
With workers and with contractors.
We are continue our discussions with the government regarding our request for a year's deployed completing the project.
We're also engaged in discussing with partners and represented the government alternative scenarios that would be to a beneficial to the government and the P.T.F. A these matters are currently under consideration, we'll keep you informed us of what happens with this.
You know this.
Nothing easy about this project, we're doing it takes a world class team in terms of competency with years of experience strong track record of success. This is a unique asset in a unique physical <unk> setting a we were meeting this challenge.
Oh.
We met the challenge of dealing with the unexpectedly seismic events at the deep and they'll see mine with a a draw like fracking solution that is now working and is proving to be very effective.
We're confident about our team's ability to meet these challenges.
And and and confidence going forward.
The biggest risks we face are behind us.
Slide nine shows illustrates what I've been talking about in terms of the progress that we're making a towards getting to our long term go which we will certainly a reach by the end of just next year 18 months from now.
Call. Many of you recall that we were talking about dealing with this 15 years ago and now were 18 months away as I said in terms of targeted production. We're at about 50% way there in terms of of throughput from.
Our two major mines, we were a third of the way there and moving forward.
Slide 10 covered the smelter, which I've talked about.
Slide 11, we talk about our.
Our loan Star mine in Eastern Arizona.
This is Mike on the most of you know that's directly adjacent to the Safford mine.
Where we are using available production facilities.
Yes, the Safford mine ages and has availability for capacity, it's just across the mountain reach from Morenci in an area of the world that we're very well familiar with and very well accepted.
Our progress it Lonestar Ah was excellent in the quarter commissioning work is gun.
We're ramping up placement of or on a newly constructed leach pad.
Safford, a pre stripping pre stripping we undertook to explore the or substantially behind us now.
And we're setting up.
Production phase two events.
Again this quarter in third quarter.
And your capital of 825 million is largely behind us like that to be a bit lower than the original budget.
Initial project forecasted at 200 million pounds of copper annually.
There's a tremendous resource with great expansion opportunity.
But for now we're focused on optimizing the news your project.
I'll turn to major expansions of lone star when market conditions warrant.
Over the long terms this asset will be a significant future.
Cornerstone asset for Freeport in the United States in our in our outlook.
I want to point out the United States as major advantages for monitor minor mining investments compared.
The other countries around the world in general.
For our.
Company there are no taxes in the far U.S. investments for many many years.
We pay you know royalties, because we own lands and see.
Energy cost a lower we have a flexible workforce no unions, we have now have an improved regulatory framework.
The board has achieved through hard work community in government support for our businesses and in the United United States benefits from a strong rule of law.
Slide 12, we summarize the work we've been talking about.
Over the past year that our company has been doing with automation.
We continue to leverage the technology tools, we've developed.
Well in lot bottlenecks use machine learning drive to have our best operating performance every hour of every day.
We have reduced the budgets this initiative spending Buddy though do you for this initiative to progress. The work we started in 2018 to 19.
Using internal resources.
We continue to be encouraged by the power. These two and the results to generate results we've generated to date.
And I can say easy enthusiasm for our team for this initiative is very high.
Now putting this all together on slide 13.
You will see that we own a path.
The double our EBITDA from 2020 levels as we go forward.
Execution of these plans.
Now well underway will allow us to grow copper volumes by over 20% 2021.
Oh volumes by 75%.
Reduce our net unit cost by over 20% and significantly expand their margins and cash flows person 70 cents copper or 2020 <unk>.
It just takes into account the first your actual average and to 85 copper for the balance of the year.
EBITDA would approximate 3.4 billion.
This expands to $6 billion to $7 billion per year.
$2 and 75 to $3 copper.
Our goal revenues are expected to approximate 2.7 billion.
Collars per year at 1800 I'll go. So you can see the very positive exposure, we have to go prices.
Through our decisive actions announced in April for 2020, we're protected the downside Wow, we've retained the growth in cash flows for 2021 and beyond.
That was the objective of the whole exercise.
This combination of growing volumes with the potential has the potential.
<unk> coincide with the right thing copper prices <unk>.
<unk>.
And then returned to the day when we can provide significant cash returns.
We have free board of all work so hard to position our company for this opportunity.
And is particularly gratifying.
Now to see this firmly within our line of sight.
Slide 14.
I'm, so proud of our organization and what we.
We refer to internally as a freeport edge.
Our management energy tough market environments.
The company are seasoned and battle hard.
They have been effective and successfully passed down terms.
Each crisis is different but in each of our past experiences Freeport as a company it's come out stronger.
We have a management structure and a team that is collaborative.
Variants indecisive.
Issues involving worker safety.
Environmental obligations, these and commitments to governments.
So in our license to operate around the world that we have worked so hard to earn.
We've shown that we can adjust to market conditions quickly.
We've done this on multiple occasions and were.
So contingency plans for further actions required to take.
Bases.
Value orientation is real hallmark of this report organization.
Oh for in the industry in copper is a great place to be.
Reports portfolio of assets are large.
And high quality industry leader by developing an op Brady mines.
That are among the largest in the world.
Our assets are long lives Endurable was embedded options for reserve and resource growth.
We have strong franchises in the U.S.A., South America and Indonesia.
We have industry, leading technical capabilities through a strong track record of project <unk> shooshan demonstrated over many years.
We've earned the trust in respect of our partners your customers our suppliers financial markets.
Just move.
Importantly, our workers communities and Whos companies, where we operate.
Really important that our block caving experience in our company is one of the most extensive and longstanding into history as a global mining industry.
We've been successfully operating blockade mines in Indonesia since the early 19 eighties.
And we have an impression.
In Colorado.
These this experience.
Some capabilities and competency.
Is critically important.
With the largest block caving operation the world.
I can tell you it's highly valued by our Indonesian Paul.
Partners.
Our experience in Battle tested management has demonstrated capabilities.
Yes, we are confident.
In our ability to live with these.
Before turning the presentation back to Kathleen.
I want to close by sincerely.
Thanking all of our Freeport people. They inspire me every day.
I want to recognize them for their strength and resilience see their dedication performance I'm personally proud to.
The part of this team over all these years.
I can tell you, we're all motivated and committed to mitigate it first to varying and achieving success for all of our stakeholders.
Definitely.
Right. Thanks, Rick.
Basically review our financial out.
Well I began on slide 17, and then we'll take your questions just summarizing our sales.
The outlook for 2020 to 2022.
Well, it's performing at a high level, we've increased our.
2020 sales outlook by about 60 million pounds of copper and 50000 ounces of gold.
Performance.
Oh that's.
Volumes estimates are expected to go out.
2021, and 30% and 2022 compared to 2020 levels.
Notably volumes in 2022 are expected to increase by nearly 1 billion pounds of copper from 2020 levels.
This reflects that.
Don't forget that additional volumes from Glassberg actually move toward gets on capacity any increase Cerro Verde volumes as we continue to restore full production levels.
Our gold volumes as a sand 2020 or slightly above our prior estimates and similar to the guidance that we provided for 2021 and 2022.
Oh from Ali we the gas into sales outlook slightly to better match supply with current market conditions.
We show on the next slide Slide 18, our volumes by quarter and as you'll see we're expecting a strong second half with sales increasing throughout the year and ill note by the fourth quarter, well very close to our 2021 run rate for for annual volumes I changed.
Remain very focus on executing the plan safely and finishing the year strong.
I'm trying to close a cost on the next slide Slide 19, you can see we moved very quickly in March and April to adjust our cost structure.
We modified our mine plans to reduce mining rates and to reduce our cost production and we successfully implemented a series of cost savings initiatives to drive long term benefits.
As Richard mentioned in addition to the operating cost reductions. We also took steps to reduce overhead and exploration costs and those initiatives were also successfully implemented during the second quarter.
Oh, we reduced our north American mining rates for the second quarter by about 25% to pair actually a year ago quarter.
We also reduced our contract labor significantly and our team stepped up internal team stepped up to filling the gaps I.
We continue to effectively implement the cost containment programs that have been underway in Indonesia.
And as a result of these combined initiative is our unit cash cost decline from a dollar nani.
They cost basis in the first quarter seven per pound in the second cool <unk>.
This was over 10% sent that are then how April forecast.
We're continuing to manage all costs very carefully to try and lower in the second half and.
Yeah and into 20 times at a very low incremental.
Our current forecast incorporates.
This.
Currency rates and other input costs.
These input costs have increased somewhat from our April forecast, but this has been offset by improved gold prices. So we're continuing to expect on a net unit cash cost for the year. It should be roughly dollar 53, that's similar to a the average cost we estimate of $1.55.
In April and and 2021, the average is expected to.
$1.20 per pound.
With the rising volumes and declining cash cost, we expect our margins and cash flow here.
As you look at slide 20.
This provides the.
EBITDA and cash flow.
Sensitivity.
And shows the no significant Ghana cash flow generation that we expect from the business, bringing in a any additional volumes into 2021 and 2022 and beyond.
As as you'll see if we sell gold prices flat at $1800 per ounce and molybdenum flat.
We would generate.
Because of annual EBITDA.
Going to 75 per pound and $3 and 25 operating cash flows what's your rough bucket at the bottom of the chart what range.
Huh.
The $24 billion and $5 billion at these price levels.
This provides a significant amount of cash flow to fund our capital expenditures and provides excess cash flows for further balance sheet improvement and returns to shareholders.
We're all very focused on on this where we're very close to getting married you'll see from from the results. We expect in the fourth quarter and this year and much of the capital that was required to generate this result has already been spent to achieve achieved that same will continue to maintain our focus under.
Delivering these results.
I'm on slide 21, we present the capital spending plans well continue to manage the capital plans inline with the revised estimates we laid out in April.
As a reminder, we reduced our 2020 capital spending by about 800 million.
And we're tracking very well against those plans.
Bulk of the 2 billion dollar capital budget or 2020 is relates to the Glassberg underground development, which will pay back quickly as we reach capacity rates.
But you'd indicated they spending for lonestar in 2020.
He is is largely behind us and we'll begin to generate.
Cash flow from that operation.
We have adjusted slightly to 2021 capital budget down from 2.3 billion to 2.2 billion.
That was originally estimated at the beginning the year to totaled 2.4 billion and what presenting our 2022 estimates and as you'll see the spending at grasberg well begin to decline and decline.
After 2022 as well.
I was going to continue to to manage our cat our capital spending levels very carefully well remain very disappointing carrying out our revised operating plans.
Turning to our financial and liquidity position, you'll see we had strong liquidity at the end of end of June totaling $5 billion and our financial position is strong.
We've taken steps to protect the balance sheet and liquidity it took a series of capital markets.
12 months to a two to extend out.
Flexibility.
We are.
And achieved a.
During the second quarter.
Which provides a substantial flexibility and gives us under the bank credit facility.
At at the end of June of 8.4 billion. That's data of just under 10 billion, none of our cash cash position kind of 1.5 billion and that equates to about two and a half time.
And.
The estimated 2020 EBITDA.
Notably that relates if you look at 2021 EBITDA.
Well it will apply the 2021 projected excess cash <unk> Oh, two net debt reduction we have 5.3 billion of net debt at the end of.
And one time that 2021 EBITDA.
[music].
Well be.
Considered by the board, there's a strong commit.
You drive shareholder returns.
What we will consider financial policy as we go forward well we show at the at the bottom of the chart, but the average duration of our debt.
[noise], which is currently just under 11 years and as you can see we've built significant flexibility with the maturity schedule a that is a very attractive profile over the next few years.
Regarding financial policy is as Weve covered throughout this call Ah we remain focused on safeguarding our people and I business and maintaining a strong we manage through uncertainty during the pandemic.
As previously reported I Boy has indicated it does not unexpected declared dividends and 20 Twond me, but this will evaluate it off.
We successfully execute these plans and our 2021, we expect to be in a much stronger position mission with increased cash flows to enhance flexible flexibility to consider shareholder returns.
Well, that's just a summary of of of our water and outlook and now operator, I would like to take questions.
Ladies and gentlemen, we will now begin to question and answer session. If you wish to asking question Press Star one on your Touchtone phone. If your question has been answered or you wish to remove yourself on the Q. Please press the pound ski if you are using a speakerphone. Please pick up your hands that before passing the numbers, we ask that you limit your questions to one.
You have additional question Keith returned to the Q1 moment. Please for our first question.
Our first question will come from the line at the David Gagliano with BMO capital markets.
For taking my questions covered a lot of it in favour marks but I did just want to.
Try and probably a little bit more on the on the capital return.
Ah policy, obviously, you know strong free cash flow generation expected over the next six quarters.
Net debt.
You know metrics below one time.
Good of.
You know.
Average, a levered and and from a timing perspective when Ah.
You know when when should should investors are thinking about getting some of that.
You know cashback.
So Dave we've always approach those questions not from the standpoint of developing any particular financial metrics, but assessing commodity markets cash flows.
And.
Where we stand.
We will want to.
Reduce our debt or from current levels. A we were doing that on track I want to track to do that before cobot.
Good and so as these cash flows recover and you know Kathleen talks about capital spending going down we will have.
Much higher volumes and the prospects for higher copper prices will have a.
Opportunities and and and the relative <unk>.
In in 20, Oh by the end of 2021.
Who achieved that goal reducing debt and going forward now.
Let me a kathleen and her team for the actions that have been taken over the past 10 months or so you know we've had three bond offerings now.
That had been very successful you know it at rates that Oh are really attractive considering the fact that we were just.
Beyond being investment grade still.
We expect someday to get back to investment grade, but now we spread out our our maturities we work for flexibility the bank group. So I can't give you any.
Anything other than.
Ah if this world unfolds like.
We hope to very near future, we're going to be able to return paying dividends.
And looking at the possibility of buying stock back depending on how the equity market reacts to our improved situation.
Uh huh.
Quite frankly expect equity market to react positively in a significant way.
Okay, Thanks for that in and.
And somewhat related on the Indonesian smelter I'm I'm first I'm, assuming that they castle numbers that are.
You know those projected I'm not that numbers do not include anything for the for the smelter any kinda back last smokers. Okay. That's clear, Okay, and then im in a press release, but.
Let me just say.
You I know you understand there's Dave Cote you fall to so closely over the years, but to be clear to everyone else the smelter.
If we go forward with the current plan and as I said, that's under discussion will be finance, Bob P.T.F., five where we have a 49% equity interest, but because of our shareholders' agreement.
With the government of Indonesia, and the state owned company mind I D. We consolidate so we have a 49% interest we financed by that entity.
And but it will show up as consolidated debt.
Because we consolidate P.T., a five which is really good for the way we present our financial statements.
Okay. That's helpful. Then just really quickly the related question there on the Indonesian smelter at <unk>.
He is a press release does like other alternatives you know in terms of different schedule for the project as well to other alternatives you know what can you touch a little bit more on what what those other alternatives might be.
One of the positive things about this is these considerations within an Asian government are being led.
By the Minister and the Ministry of State owned enterprises, whereas in the past we had to.
The deal with that on her own we have aligned interest with the.
State owned enterprises and.
So a number of alternatives are being considered.
Which would.
The alternatives to building the smelter is calling for a personally contemplated.
It's a complicated political situation it goes without saying, but the economic benefits to the government or a really strong if if we were to pursue other alternatives that would require significantly less capital from ccfive.
Okay. That's helpful. Thanks very much.
Thanks, Dave.
Your next question comes on a line of Carlos de Alba with Morgan Stanley.
Thank you very much a good morning, everyone. So my question that you saw on on the they ramp up in a of Indonesian underground operations I appreciate that congratulations on achieving the targets and being there on the right track to the LIBOR results. There I just kind of question on exceeded.
Slide 25, the open draw belt.
Accumulated blasted basis.
<unk> decline and then a beach and that is no problem from the last the last quarter presentations and she said little bit less in 2000 2021.
And 22 in the D N O C. And then four day GB see it is no way in 2020, and 2021 slightly higher than 2022. So I. Appreciate that leaves me maybe just if you pick up a question, but given that this is probably the most important.
Aspect, Oh people going Paula I, just wanted to get that some clarification, that's what drove that that by say in their forecast. Thank you. Yeah. Its just Kathleen that there were just minor revisions to the to the deep M.L.D. and GBC.
Draw Dallas and you can see was you know at the end of 2021, we had to 13 for four or deep M.L.C.N. and 322 and those have been reduced by three each it's not been anything.
Significant and just.
Slide timing differences.
By the end of 2022 and de panels anywhere where were you know just slightly slightly below but it doesn't change that.
The ore extraction levels in its its pretty much the same plan that we've been on.
Understood. Thank you very much good luck.
All right I'll just say this is a as I mentioned earlier. This is a complicated our operation Mark Johnson is on the call it.
Nobody knows that better than him so they're going to be they are going to be ups and downs and adjustments and so forth. That's part of our everyday life out there but.
Just step back and look at the Big picture.
What we set out to doing what we're doing and we have confidence that overtime.
We'll do it but having said that.
There will be there'll there'll be things that we will have to deal with as we had in the past so you'll see adjustments like this occur from time to time.
Right understood return. Thank you very much for the color.
Okay.
Your next question will come from the line of Alex hacking with Citi.
Yeah. Good morning, Thanks, Richard and Kathleen I, just wanted to ask around they the production guidance you know in in the last quarter in that keep up the co but crisis and copper prices extremely low you know you caught your production guidance for this year.
And in particular next year. What are you took a couple of hundred million pounds out of South America.
Is that something that gets revisited if copper prices our sustained at these levels.
Or are those kind of revised mine plans locked in now thank you.
Well there they are a revised mine plans that were following and we're not we're we're tweaking, but we're not make any major adjustments to those until we have clarity in this market situation, but as clarity occurs the plans the plans will be adjusted.
Resources are there are some of this.
Well the cut production was a lower margin production and if prices increase it becomes profitable again. So are there will be timing impacts as to how it ramps up and so forth. So it'll be part of our future but.
Alex as you know all too well this is not at Terronera speak it turned off of speaking. Thank you you ratcheted back it has impacted the ramp it back up and take some time.
Thank you.
Our next question will come from the line of course with eminent with Jefferies.
Hey, good morning, Richard Kathleen Thank you for taking my question.
For me the most impressive data point and this earnings release was the unit cost performance in the Americas, especially on a site production delivery cost basis, where you had very substantial reductions from the first quarter second quarter I suppose that's a function of the changes to your operating plans. My question relates to the guidance. So if you look at the unit.
Cost guidance for 2020 in particular for South America. It implies that type reduction delivery costs will rise in the second half a year and I'm wondering why that might be and I suppose.
Related to that is Cerro Verde production I think in and last quarter, you had guided to second half 2020 middle rate of 400000 tonnes per day in and the press release to that you weren't in the presentation. Today you got into 315 20000 tons per day [laughter]. So I'm wondering if there if there was some kinda cost increase that we should expect for Cerro Verde in the second half a year I would've thought.
With that with the middle rate going up.
From there from the run rate in the second quarter to the second after the are you going across might actually fall further rather than that appear to be the case or just even get some give us some clarity as to what exactly is going on it that cross sell off in the second half the year in South American particular, yeah. The main the main change in the second half compared to the second quarter in South America It relates to a.
Increasing the Cerro Verde mining rate.
And yeah during the second quarter, they're mining rate Oh. It was was lower than what we expect in order to get the mail rate up on a sustained basis, we'll have to begin increasing in mining rates. So that's what that reflects in the in the second half, but to your point about the cost reductions.
Yes.
You know the team is just on a bringing down costs I mentioned, you know the east of the reduction in contract cost contract.
We've had some headwinds on.
Only currency exchange rates and and as in energy cost from the low levels that we had in the second quarter, they still have reversed a little bit.
But the guess it plans driving the cost performance and balancing that with production is something that our team is very focused on so that's not the to the prior question about you know increasing copper volumes you know, we're being very careful to make sure that we have sustainable cost.
Savings and the cost structure before you know before starting to two to ramp up but specifically on south from there.
From from the second quarter levels.
Okay. That's when I say one one other question unrelated you apparel should get Chris Yeah, Let me come in here because.
I really appreciate the comments you.
You made about performance in Americas, you know.
And this goes back to the rationale for together, but the Americas operations or.
Lower grade.
Well, we're deposits, which is kind of the world forward and there is a copper industry.
And Red conquering Josh arms to have just that's what you experienced with this but are doing such a great job and it's it's it's it's the operations in the feel the way there manage gene and the team we operate all of them onto we.
We have interesting and so we're able to achieve.
Synergies across the board our of our global supply chain group has done just a great job and working with our suppliers in coming in with caused a week.
We we've had a playbook for this I mean, we've done this before and we're doing again very effectively but these guys really need be recognized for dealing with is hardly different data management challenges and you have with this high grade mine, we haven't grasberg.
And I want to also recognize Kathleen Steve Higgins or.
Chief administration off sort of what we've done.
With DNA.
This is really significant you know it our company changed dramatically is the into 2016, when we exited the oil and gas business restructured our management team.
But it's that you are we really we had $700 million to unite.
Now we are current expectations are that we go down to $355 million.
You know that it's it's been in steps over these years, but that's almost a 50%.
Over the past now 40 years and this is being done.
You know as a process you know we.
Makes a major steps we have to for Ocean people. Unfortunately, we had to incentivize early retirements severance plan, we reduced our head cut off and their centralized groups by something over 30%, but you know this is all part of the things that have come out from this cobot initiative and they all have.
Long lasting benefits.
As a company will never work in the same way that we did before this koby thinking.
There's going to be less office space last meetings last travel a we proved to ourselves that we can work effectively we did not go back to work in Phoenix when the Governor opened this data you know are the halls, there and officers are empty in our headquarters and yet you can see the results from this quarter about how effectively.
We can operate and just kind of environment and we're learning lessons from that that will carry forward to the way we do business in the future.
[noise] Badger.
Your next question comes from the line of just didn't our goal with Exane BNP paradigm.
[laughter] money or just a quick question thinking more long term.
Richard you alluded that when market conditions alone you can do better you don't start expansion and you also indicated about 5 million ton gap or emerging in the market, but couldn't do 30 to me that he had constraints are you appear to be balance you didn't potentially management capacity since you asked movies delivered so.
From an bumped them perspective, or you're going to do you think are probably on your appeared known started and I'll draw and watching the odd or would you can look after grasberg is delivered and balance sheet is are the more normally capacity how quickly you can move.
To develop I do it or.
Ah Onez boost project and what would be the order that older D.. So just trying to get some sense when you need to possible timeline and order of priority. Thank you.
The timeline for long.
One of the one of the issues there so supportive of copper supply you simply how long it takes.
From a identifying a resource to doing the feasibility studies for.
Oh, how it's to be developed Oh, it's to be permitted.
In processing and so forth. So all of these things will take longtime long term.
In and that is.
Oh key reason why the outlook for copper as a commodity so strong.
Your current projects that are being pursued today.
Or not in the aggregate significant to the market.
But.
Our city of companies, but they're being delayed so you ask about our situation you know the gugino year fits into our long term mine plan for Grasberg and that's.
Something that we're assessing and we will consider and I'm looking at going forward.
Lonestar has the opportunity for oxide or expansion, which is growing that ah that could be done with a limited amount of investment in new facilities, but longer term, there's a large sulfide resource and this will be long term, but is it.
Very very large and that would car very very large concentrate or expansion.
We have great opportunities at El Abra with our partner Codelco and in Chile, we have great opportunities in the U.S. It other properties, including Baghdad, Morenci, so read or properties in new Mexico, and so all of these things are being studied Oh, we are going to be.
Very disciplined about it.
First steps for cash flow will be using debt.
Increasing shareholder returns to shareholders and then we will Oh, we we have restrained spending.
In the project evaluation area as we have across the board in our country for the current time.
As a situation improves we will return to investing in the evaluation process and from that will come the timing schedule that you have we don't have one right now.
But we will keep you informed as this unfolds and and and we start.
Oh spending again and getting in the process for evaluation, but.
He positive feature about Freeport is this opportunity to grow our business internally developed resources, which we get no value forkardt.
Currently today in our stock price.
If we develop those ourselves all that value goes to our shareholders as opposed to making an acquisition were substantial value goes to the owners of the asset being acquired.
No that's not.
A clear answer your question, but as a truthful answer to where we are.
Oh, that's very helpful. Thank you so much further clarification.
Your next question, what kind of on the line up Lucas pipes with B. Riley FBR.
Hey, good morning, everyone.
Congrats on another very strong quarter, Richard in light of current gold prices I wondered if you consider changing your slow than two assets foremost in copper second in gold there or something along those lines [laughter] well good Lucas years, you know.
Go like copper has its ups and downs and often goes up when copper is down koppers out when goes now I remember years ago.
Oh, It was really high I started to change the name to Freeport gold and copper.
That was before Phelps touch.
[laughter] and you you already touched on my question that is that gold equities tend to trade at a substantially lower discount rates and I wondered how you're thinking about that but besides that you know changing names that change okay. Thank you very much richer.
Well you know we have over the years looked at a number of strategic alternatives involving our go to asset.
Back in the days before.
Phelps Dodge report was a company that was two thirds copper one third go.
Yeah, we really struggled to attract investors because there's a different objectives would go to investors and copper objectives into really we found the only way. We can track investors is paying extraordinarily high dividend if for those of you you're all too young to remember that but that was where we were we made the commitment to the copper business or the goal component.
It of Grasberg is as I talked about earlier, a key reason why that asset is so fabulously attractive.
So were priced taker would go up.
We continually review options about dealing with it but today, we we've concluded that its greatest value to US is funding cost at Grasberg. You know just think about this having a billion and a half pounds of copper with no costs.
Or negative cost and so that's the role we see a point in our company.
That's a that's very good to hear that Richard Kathleen really appreciate it then continued best of luck I.
Thank goodness.
Your next question comes from the line of John Tumazos, with John Tumazos, very independent research [laughter].
Thank you very much.
Congratulations on the great production.
Thank you for the update on a.
Next smelter.
Some of the other companies.
I have cut back on exploration waste stripping underground development or maintenance and struggled to keep up production.
Are there any of those functions that have been delayed.
At some of your sites.
Such the 2020 234 output targets.
I'd be a little uphill are tougher to meet.
Oh, John of kind of playing out.
Definitely let me start okay.
So so John that's a great point and I mean, you can look back in our history and with the.
You know in 2008, when the price of copper just cratered from $4 a pound at mid year two.
Know who are approaching $2 a pound by.
Good way in the third fourth quarter, we did have to make some of those changes I mean, we we parked or hundred trucks at Morenci right read it was something on that order that production in half.
And that resulted in a <unk>.
In in a in a multi year ramp up.
So breaking our business apart you know from exploration. We have finished we terminated all greenfield exploration, which is pretty limited for us anyway.
Tutoring or brownfield opportunities.
You know we continue to do work at key operations, that's not going to be a a constraint for us going forward Grasberg, we really have.
Have <unk> have looked at cost hard made some reductions, but nothing to slow down to the ramp up our future.
So we did differ a mill improvement, but which which could have some impact but it was only a short term and now with prices being where they are that's that's not going to be an issue.
With the Americas.
As I said, we've been very.
Serious disease. So we're doing this in a way that preserves as much as the futures we can.
Well, just Kathleen illustrated with Cerro Verde, when you cut back the mill and you cut back mind right. There is a timing issues and getting them on rates back up to rights to seize the mill. So there there will be some impact.
But we are so mindful of that that I I think we we've been very effective in minimizing that impact in any of that we're going to update this every quarter.
And so we give a lot of detail so you'll be able to see that as we go forward.
Yeah, I was just gonna say the mining rate reduction that we took in a in the U.S. was deliberate.
You know in terms of getting the like <unk> cost structure as low as possible and so that no metal production rates that we show in our forecast, Arkansas rates that we are oh deliberately working towards it's not it's not like a situation where.
We haven't updated the metal Oh forecast to coincide with it with a mining rate so I might have money weight and metal forecasted are aligned.
In second the second quarter, we did have some lower mining weight Cerro Verde because of the pandemic that was the only one.
Where you know, we we've mined less and you know kept them I get the mail as far as possible and we'll have to you know ramp up my name in the second half.
But the rest of the their money operations and in the U.S. really where where were cut back deliberately and we've reflected that in our metal forecast if we were too.
Ramp back up what's your current plans assume that will start ramping back nine rates in 2022 time frame.
He would start to see you know metal metal improve over time.
But we haven't short cut it anything.
And and so all of our mining rates and that'll forecasts are in line.
If I could ask one more and thank you for the two replies.
Do you have the footnote on the Lone Star Slide.
But the potential mineralization is over 50 billion pounds.
That I guess would be at least 3 billion tons of mineralized material.
In your got or do you see exit the Lone Star is.
More or like 3 billion times, or five or 10 or even bigger.
Hey, Red Red you're on the call right.
Yes, John or it's a huge district or were you know we're very excited about it as we.
Reported in the past lots of drilling to be.
Conducted a we're I think we're going to find the.
Well district has mineral mineralization in other words, if you look at the some maps Lone star is miles away from those programs where we.
First started mining so lots of drilling yet to do but you know the the lone star to pause it is.
Well, we know about it is a mineralized material that you decided and you know will continue to.
Drilling explore there and the update those as we get more information.
Yeah, and I think John as you know the oxide project that we're doing plus potential expansion of oxide.
There's really not only economic you know in terms of the initial investments, but it exposes the sulfide ore is and makes that.
Opportunity a it's a long term opportunity that makes that opportunity more economic as we continue to Tim on the outside so we're we're very excited about about the district and it's it's a long time play, but one that that we see it will be a big part of Freeport teach.
Going forward.
Thank you.
Your next question will come from the line, it's Chris Perry with Deutsche Bank.
[noise] Richardson definitely I hope you have to both well just a quick one from me I noticed the I'm 2021, 2022 volumes were just down a touch versus the last quarter just comparing the two presentations I think it's 100 million pounds. I'm also is that just the bring forward effect, what or is there some.
Yes to that it's very minor, but there's still a chair yeah. No. The main difference was HM the mining and milling and in South America.
We have some.
Filmed a lower a rate in Cerro Verde, we were previously at 400.
And our then what's in our current plans and.
So a lot process.
HM It they will minor revisions, but but did you know ends up impacting.
2021 in 2022 Glassberg is unchanged.
Okay. Thanks, Thanks actually one one follow up just to complete one of the questions from a bit really just on the cost Oh. You mean, you commented on sort of some of the ups and downs you had the tailwind from I think in Indonesia on the currency last quarter, and then oil down you know drastically.
And then you know there's ups and downs on mining rights, but from a macro sense just given that we've now seen copper sought to rebound.
Entering environment, where do you start to get inflation general alone on some of the some of the costs for the business as well just just more from the macro variables.
Yeah. The main thing that we've seen really is on is on the currency rate.
We've had you know the energy prices from my forecasts are up about 18%.
From from the April forecasts, but.
We've also had you know one in somebody since then offset with with gold, but the way that the the dollar has trains against some of these these currencies as head of any impact on our on our cost and Indonesia.
Went to repeat rate and into a lesser extent in Chile, and Peru, but that's really the only thing we have seen.
It's really these macro you know currency exchange rates and and and the energy prices we haven't seen.
We continue to work with our suppliers we haven't seen.
Inflation in other areas and of course, you know.
The level of unemployment et cetera, there so.
Labor wage pressure, it's not let it.
Yes, sometimes when you see copper prices rallied so.
We're going to continue to focus on.
Driving out as much cost as we can using this this time period to execute the plan. So there were lies plans and.
And drive costs as well as we can any in the U.S. and in South America other costs really have a big impact on value.
He has a lower the cost I think other resource and so we're all focused on that as we as we go through 2020.
Great. Thanks, Thanks, that's fine and congrats on a on a on a great turnaround in the quarter.
Thanks makes a lot.
Your next question about kind of in the liner Brian Macarthur with Raymond James.
Hi, Brian.
Do you hear me.
Yep, Yeah, Oh, sorry, I know sorry, sorry, I just two quick questions first of all I just want to confirm our the forecast through 2022 in all your production your cash flow is chino in there or is it not.
Oh It is not it's currently I'm right idled and we're still evaluating.
Next next steps with respect to.
Two too.
Ah we start.
Perfect. Thank you and my second question, then I know I'm, maybe getting a little ahead of myself here, but obviously you're going to generate an awful lot of cat as Richard said, you've been working for 15 years to get everything.
Underground set up the Grasberg, which is a lot of work and you sort of had ongoing no no major project costs and a billion dollars.
2022, and I understand totaling 2022 of the ownership changes in a little bit, but what does the ongoing capital look at look like sort of post 2022, once again TBC developed everything's up and running how long can you do it like just keep generating without major capital and go.
In the K L or something because I would think you know.
Stanphyl capital to build this thing for 15 years some of that on a run rate should become offers or is that right.
Yeah, and we've got you know one in terms of our current plans a ways, we project that capital lift.
In 2022 from 2021 is really a beginning in 2023.
We are.
There were looking at.
And.
We looking at me and.
Running scenarios and trade off analysis.
Look at the cap.
Now up in town, which involves.
Potentially having.
Processing equipment that to handle a pie right away, but looking at if there is a higher.
NPV option and involve slow a capital.
That wouldn't mind.
The areas that are a they have less pie right and so actually far value standpoint, it could be something that's more valuable and I guess, you know full out development of the whole resource where we're currently in those in progress what those analyses.
But for that for the foreseeable future you know as we get a grasberg ramped up to the capital will decline and we don't have we know we don't have a major decision to make you know on a set along with the KL plan is right in terms of capital outlays. We don't have you know major increases in capital.
Forecast and our plans for <unk>.
The Glassberg and deepen I'll say first.
Which makes great sense, but would capital go down like a lot at Grasberg and 20 like when I say go down a lot I mean, you're you've been spending of $1 billion and development a year.
Plus you know sustaining give or take but will not go down like two or $300 million for a few years or I think I. That's I guess all dependent on whether you yeah I know yeah. Aside from Okay. Yeah, you know you could see capex and at that Glassburn going down.
So we've just three or 400 million dollar level.
And ultimately we'll have to make decision on on what that yeah. That's the plan is for K, yeah, but it'll go down significantly.
Beginning in in 2023 and beyond so though.
Just as the cash flow from GB Westra Black Haven de panels, even kind of any massive.
And we'll look at reinvesting that into Kal.
Over time.
Okay Fine you did say two three to four to $3 million to $400 million right.
Wait for it to it'll go down to three to 400 million, how that's right from over 1 billion.
Right.
Great. Thanks, very much and again congratulations on the great progress being made.
Our final question will come from the line if Michael do they supposed to be RP.
Oh.
Thanks, Richard and Kathleen.
What a difference a quarter makes huh.
[laughter], where they were just second the same thing [laughter].
My question [laughter] My question is.
The Richard do you think.
How your company in the industry has.
Evolved and manage through Cobiz, the past four months and what will happen in the future.
Do you think that the industry or maybe people, particularly in general will be looked upon as a perceived as a better partner from a LIBOR at a government standpoint, so as we move forward in the next several years a higher prices in development and maybe some issues with regard to royalties and so you think that it's come out that will be help.
So to the industry and that could also baby be helpful. On yes to your any other [laughter]. Thank you.
Yes, I do in fact, a ya.
Early this morning I.
Added time I note that I was going to say that.
That earlier actually well.
Cove it.
In many respects.
Closer to communities and governments.
Okay.
I recall.
You know going into February.
Going into March.
When we when we started working remotely Kathleen and we're looking at each other and say okay. Now what are we gonna do.
But by April we had a plan well that's that's that that's the situation for all these communities and all these governments and people are still struggling with that and so by by our.
Being aggressive in investing in health care protocols testing equipment.
And doing things to help these communities in Indonesia, I mean, we have to PCR labs.
You know here in the United States was it take off and you know.
A week two weeks to get PCR results, we have to PCR labs, one alone was one of the holiday, which we're working with community you use and that's much appreciated.
Building oxygen facility for air Uquifa. So.
By showing that we are confident in managing these by showing we have sensitivities workers families and communities by working with governments to do that we're showing both comps, but see sensitivity and the fact that we we are committed to being good partner. So I think all.
So that's going to go to be beneficial [noise], we've achieved that and steps you know we moved our headquarters to Arizona several years ago, we made a big commitment to show.
Uh-huh people of Arizona that we could be good partners and now we are.
Oh.
Widely regarded as being great partner. So that's that's an excellent point and E.S.G. matters or.
Growing importance to significance to investors, we know that we.
We believe that's a good good trend and we we we will measure up well by that because that's just what our commitment is.
[noise], it's quite encouraging thank you Richard.
Well first of all conifer to management.
All right. Thank you Regina. Thanks, all of you for joining US. We appreciate your interest appreciate the good questions Oh boy it.
It is a quarter's made a heck of a difference but it is so great now to be focused totally on what we're doing operationally with our business Oh, we look forward to reporting continued progress.
As always if any of you have questions or needs for more information.
Contact David Joyce and will be responses. Good luck, everybody take care. This things not no no no not controlled yet so all of you be careful and watch out for your watch out for your families and friends.
Ladies and gentleman that concludes our call point today. Thank you for your participation you may now disconnect.