Q3 2020 Freeport-McMoRan Inc Earnings Call
At this time all participants are in a listen only mode. Later, we will conduct a question and answer session. If you wish to ask a question during today's session Press Star one on your Touchtone phone. If you require assistance during the conference. Please press Star Zero I would now like to turn the conference over to Ms., Kathleen Quirk Executive Vice President and Chief.
Financial Officer. Please go ahead ma'am.
Thank you and good morning, welcome to the Freeport Mcmoran third quarter Conference call earlier. This morning, we reported our third quarter 2020, operating and financial results and.
And a copy of today's press release and slides are available on our website at FCX dotcom.
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.
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 form 10-K and quarterly.
Reports on form 10-Q.
Each filed with the U.S. Securities and Exchange Commission.
On the call today is Richard Adkerson.
Mark Johnson is also on the call Josh All said Mike.
Mike Hendrick, Steve Higgins and Rick Coleman.
I'll start by briefly summarizing the quarter financial results and then we'll turn the call over to Richard who who will.
Who will review the slide materials and.
And we'll then open up the call for questions.
Today FCX reported net income attributable to common stock of 329 million or 22 cents per share for the third quarter of 2020.
After taking into account debt extinguishing cost associated with our refinancings during the quarter and other nonrecurring net charges totaling 101 million or seven cents per share adjusted net income attributable to common stock totaled 430 million or 29 cents per share.
The special items can be reviewed on a page Roman numeral seven of our press release.
Our adjusted earnings before interest taxes, and depreciation and amortization or EBITDA total.
Totaled $1.4 billion for the third quarter of 2020, and a reconciliation of EBITDA calculation is available on page 32 of our slide deck.
Our third quarter results benefited from improved pricing for both copper and gold.
A strong gold copper and gold sales volumes that were above the prior estimates and solid cost performance. The average realized price during the quarter for copper was $3.01 per pound that was 15% above a year ago average.
And the third quarter realized gold price of just over $1900 per ounce was 28% above the year ago quarterly average.
We generated strong cash flows in the quarter.
Operating cash flows totaled 1.2 billion and exceeded roughly 400 million of capital expenditures during the quarter.
We ended the quarter with a $10 billion of of total debt and our consolidated cash position grew during the quarter from 1.5 billion at the start of the period to total $2.4 billion at the end of the quarter.
I'd now like to turn the call over to Richard who will be referring to a slide materials.
Thanks, Jeff and good morning, everyone. Thank you.
Thank you all for participating in todays call.
I Hope you and your families junior colleagues are all staying well unsafe food is growing.
All of our situation has not ended we did.
We have a pretty poor to not letting up our garden, maybe fashion we were waiting.
Focused on protecting the health and safety of our people in the communities, where we work.
And we're all looking forward to a medical solution, which will come in time in the meantime, though we're staying viljoen villager, which.
With our health protocols and we are also being conservative in the way, we continue to run our business and this.
And this is true served us well over the last six months I'm really proud of our Freeport team for the aggressive response, we developed as an organization how weve executed.
The plans that we announced just six months ago. It seems like a decade ago. When it was at the end of April one.
When we announced plans to.
Oh I see for our company in the market to take steps to.
Reduce cost capital cost operating cost to DNA cost.
So spin some low margin production.
Put those plans in place and we've really going after them in an aggressive way and it served us well.
Turning starting with slide three we present the highlights for the quarter.
And it's notable just how much cash flow we're generating.
Been talking about this for.
For a long time tomorrow as finally arrived for free for it this is the quarter where.
All this work that we've been doing it for years and years. This is beginning to show is beginning to show its presence.
This requires flow generation will actually accelerate as we go forward into the fourth quarter and the 2021 by the end of 2021 will reach.
Really a a relatively steady steady to volumes and that extends for the 20 years beyond that that our current contract rights extend too.
But.
As you see clearly.
Our sales volumes, our cost and capital performance.
Were favorable to the estimates we provided the market three months ago.
Grasberg team achieved its quarterly sales talk targets and continue to make excellent progress with the ramp up of our.
Larger underground mines, the Grasberg block cave and the deeper miles the mining.
In Arizona, we completed the Lone Star project during the quarter. It was completed on time and below budget.
Bottom line, we generated substantial core cash flows in the quarter.
Rich you start that debt in this quarter by $800 million.
This was all achieved operating safely.
In a challenging environment because of the pandemic.
Our team maintained its focus on the health of our workers in our protocols and showed real drive and commitment in executing our plans while.
While managing this health issue.
They should and were all stepping up to meet this challenge we met challenges effectively in the past.
Turning to slide four you know this is Ellie me week strange deal not being in London.
Last night would have been the night of our.
Freeport.
Section as such a fun event answer.
It's disappointing not to be there we were distributed to distributed a video to people and if you didn't get it a contact David and we'll get it to you, but it's a lot of fun.
Looking at the video and thinking about all the good times, which at in London, and looking forward to coming back next year, but.
But you know thinking about LM anyway.
In the times, we're facing right now really makes us all very pleased to be a company that's the leading producer of copper.
Copper is critical to the economy of the World has.
As Ben but even more so as we look to the future.
Copper is absolutely essential and strategic.
To the technologies that the world is moving to transition to global clean energy future and.
And more and more we're seeing the adoption of policies.
Both the community.
Both the community governments, but by companies to reduce carbon emissions.
This initiative. This initiative is no longer being debated as to whether it's needed or not but there's a real commitment now to accelerate and as a result of the steps that will be required to reduce carbon intensity of use of copper in those application is really significant.
Copper copper utilization in electric vehicles in the generation renewable power requires four times more copper per unit than traditional.
Internal combustion vehicles require and traditional power generation requires becoming transition to fiveg technology will be positive from copper with required data centers.
Supporting infrastructure with lots of new quad copper wiring required to support Fiveg. These.
These major trends, which are in place and irreversible will bring significant new sources of demand for copper and that will supplement the already significant requirements for copper to fund global growth in the developing world.
We're committed at Freeport to being a responsible producer of copper which is.
A very favorable metal in terms of of of these positive DSG factors going forward. In addition.
In addition to freeport's commitment to the International Council mining and metals, where I just returned as chairman after serving 10 years ago.
During the third quarter, we committed to the Coppermark.
Which is a new assurance framework.
Developed by the International Copper Association that specific to the copper industry that demo.
That demonstrates responsible production practices and how.
Operations for copper can contribute to the UN sustainable development goals.
We are Uh huh.
We are fully committed to these things.
Current currently in the market conditions.
Thinking back to six months ago.
None of US would have anticipated that we would be today just six months later.
After facing.
The industrial downturn that was that was accelerating at that time.
And all of the uncertainties from a health and economic standpoint to think that here, we would be at the end of our third quarter in such a favorable market conditions.
This vinnolit.
The the really dramatic recover a recovery of the Chinese economy and demand thats generated for copper.
Economic conditions in other parts of the World continue to face uncertainties, and we're certainly sensitive to those uncertainties and as I said, we're not letting our guard down but we're encouraged by these demand trends in China and then we look at global stimulus measures and de carbonization initiatives, which.
We are also supportive of copper demand.
At a time when supplies of comp or remain limited.
And this supply effect has been.
Really emphasized by we don't own with with with the Covis situation.
Prices have recovered from the lows earlier. This year you may recall that we were preparing for a scenario of $2 copper in here today, we have copper or $3.15.
But that's pretty remarkable.
But the fundamentals of the copper market or.
Increasingly attractive.
We put together a slide on five to give a historical perspective on these copper markets.
And thinking back there a really strong similarities in parallels to what we've seen earlier.
In the early two thousands swing.
World was coming out of global recession, there was policy driven demand, particularly in copper combined with limited new supplies, which was a new factor in the market at that time and that drove a major reprap repricing of copper to kick off the commodity super cycle.
Then again in 2009, following the global financial crisis.
That emerged in 2008.
China again, led a significant and unexpected recovery in copper prices, which pricing when prices increased over three times from the lows over that 24 month period.
In each of these times FCX share price performed strongly.
On the right side of the chart, we show Schwartz what's happened since March copper is notable and this is something that I think is striking and it's different.
Copper inventories have declined even with the major downturn in the global economy.
I would have ever thought that the U.S. GMP would drop by a third in that.
The second quarter in copper inventories.
Would not have arisen.
The global fund pandemic resulted in disruption of supply as well as demand of course, and with low inventories and limited new supply the market is positioned for additional gains.
As we look forward to a medical solution to covert Knight team and for economies to recover with major copper intensive infrastructure spending on the horizon again.
Again.
In the past when the downturn occurred inventories built the inventory said to be run off we don't.
We don't have that this time, we have low inventories and so with recovery.
We were better positioned to see copper performed strongly.
Now turning to our company.
The challenge for Us in 2020.
Like these earlier times, when we face down terms.
It was a.
Along with the lower prices driven by COVID-19, we were at a time of trough production at Grasberg, we compete.
We completed mining the Grasberg open pit at the end of 2019 weeks.
We couldn't even begin to ramp up in any significant way of the Grasberg block cave, who ore body, which is our largest underground ore body until we were complete.
Complete mining in the pit. So all this started and production dropped from the pit. It was at low levels from the underground and then we get hit with low copper prices from Cove. It in operational challenges in the Americas, because the l. situation.
And so that makes whats happening for our company over the last six months really really special our team in the Americas continues to do great work executing our plans.
Plans were aggressive in challenging.
You can see the results of the excavation fusion in our financial results.
We made the decision to complete the initial Lonestar development project, which is located right in the heart of our operations in Eastern Arizona.
This is a.
A relatively small but the very.
Positive returns initial project and it opens the opportunity for a very large future significant project it seems.
The team at Cerro Verde in Peru is done exceptional work in restoring our large scale operations there they really challenged by Cove it our.
Our people at Cerro Verde lived in the town of.
Eric Kibo, which was facing a challenging community situation Cove it.
We had to work with the local community and with the government to restore operations. We've done that largely we've kept a sharp focus on cost and capital management.
We had one mine an older mining in new Mexico that we.
We shut down operations because of covert situation where now.
Taking actions to restart that my next year at a much reduced rate.
A smaller footprint will allow us to achieve cost and capital benefits from as compared with for our operations.
On the call today is Josh Armstead, and I want to recognize them and congratulate him.
On his expanded new role in managing our operations in the Americas, Josh was named Chief operating officer for the Americas.
Algos following Red Congress departure, Red was great friend and longtime employee who.
We decided to move for our family reasons, and we congratulate him and wish him well Josh was rich right hand, Guy for along with the rest of our team for re.
Recent years, he's experienced operator, a really good strong inspirational leader has been with our company 28 years.
He has worked in leadership roles at a number of our operations across.
Across our Americas assets.
Josh is really highly qualified and well prepared for success in this new role he's off.
Officers to a great start he has been a.
He has been a key driver of our innovation initiatives, which all of our team is committed to.
And is committed to having a high performance culture.
The really good thing is Josh has terrific team around him we have really.
Significant significant technical depth World class in every respect and we all look forward to working together with him and his team to accomplish board.
We have before us opportunities going forward.
At Grasberg, our third quarter annual sales volumes on an annualized basis reached 58% of the targeted annual run rate post ramp up I want you to focus on this we generated all these cash flows by being at less than 60% of our time.
Argus of where we're going to and we're making progress on reaching those targets you know.
For so long I've been talking at these.
Calls about looking at this ramp up is not like starting a new operation with a one point in time start up but it was a process a process of increasing volumes were 58% of the target and you saw we regenerated this level of cash flows so.
As we increase that.
That ramp up volumes grow cash flows will grow as well.
It wasn't without its challenges. This this past quarter we had.
Cove it related labor disruption.
But we had to deal with we were we were actually shut down for four or five days this week.
Worked with a group of indigenous.
Workers in our workforce.
Wanted to be able to return.
Return to the low lunch, where many of the their families lived we had restricted travel we had to negotiate a resolution with that we also had some maintenance issues with material handling. So it's notable and we're gonna have situations that are inherent part of mining is we.
Go forward, but here's a quarter, where we had to deal with it.
For a shift down some unscheduled maintenance issues and yet we were able to meet our metals target.
They ended the quarter at the mining rates at the Grasberg block cave in the detail nosy and reach targeted levels.
We continue to talk to.
Targeting metal production that will approach 90%.
The ramp up targets by the middle of next year Middle of 2021.
Unit costs note that the unit cost for Grasberg.
In the third quarter average 30 cents a pound.
Grasberg of courses is really significant go component units or which.
Which.
Full production rates makes the largest gold mining world, even though its a.
Product production, but.
But using current gold prices.
Looking forward.
If prices stay at this level of gold revenues will fall into all of the cost of operations for <unk> for Grasberg and.
And we'll probably be producing over a billion and a half pounds of copper a year.
Yes.
It was full ramp up.
It will reach at the end of 2021.
At a zero or negative unit costs.
In Indonesia, I mentioned that the discussions.
About the new smelter or ongoing they're being led by our partner mined out the inner loop.
Bcf ice requested a 12 month delay in construction.
Of the new smelter that we had committed to the cause a covert issues which effects.
Actual contractors in local workers the guy.
The government is in the process of assessing alternatives to building a new smelter no decision has been reached.
Discussions are going being led by mind D and the Ministry of state owned enterprises.
The alternatives that are under consideration would be mutually beneficial to the government first of all and the Pts our.
We will keep you informed as developments occur going forward I will.
I will note that our partnership that we established with the government of Indonesia and structure for governance and operating.
Management that we established in December 2018 is really going well.
The partnership is strong mutually supportive we.
We and the government through.
Through this state owned enterprise and the Ministry of State owned enterprises, the Ministry of mines, the Ministry of industry Ministry of Finance, where all fully align now on our objectives of creating value for all stakeholders working together and that's a huge positive development for Freeport in.
And for the asset itself.
Slide seven.
We're focused on execution, that's what we've been saying for so long and Thats what the results show that we have been successful in doing that.
We are focused on execution continued success will drive strong and improving results were.
We're now on a path to double EBITDA from 2020 levels as we go forward.
Execution of these plans all well underway.
Our biggest risk are behind us there always be risk with the biggest risk are behind this will allow us to grow our copper volumes by 20% and 2021 go volumes by 70% that would.
So in a reduction.
Net interest cost by 20% for the company and completely expand significantly expand margins and cash flows.
You see this in our third quarter results.
Our financial performance will improve throughout 2021.
Our current operating rights as I mentioned earlier extend 2041 with six fiscal terms.
This will allow BT aside to generate massive future cash flows from this said it remarkable copper and gold resources.
Our company is going to stay focused on execution.
As we complete this.
This transition at Grasberg.
We are.
Deferring any decisions about major.
Investments.
And as we go forward with the higher cash flows that will be generated will be able to reduce our debt and further improve our balance sheet you see what we've done this quarter.
I'm confident that in.
In 2021 will be in a position to recommend to our board a reduction of our dividend.
For the board to consider.
And that as we go forward, which will be able to generate increasing.
Returns to shareholders from higher cash flows.
In addition, we will have opportunities to consider significant growth from large scale or Danny low cost low risk high return.
Disciplined brownfield investments in our large portfolio of undeveloped reserves and resources.
Freeport can maintain its production.
Grow its production.
Without having success in.
Greenfield exploration, which we are we do.
All without having without having to do any M&A deals.
Slide eight shows this we have a long life portfolio.
Mineral reserves recoverable reserves extends beyond 30 years with substantial options to expand these reserves in the future.
Considering our large inventory of mineralized material.
With our resources beyond current proved and probable reserves.
For now however, I want to reemphasize again, we're focused on executing our plans efficiently.
Delivering on our targets.
As we go forward will be accessing growth options in a measured and disciplined way.
I'll close with slide nine with what we adopted internally as the Freeport edge.
Our management team has had extensive experience in managing this business responsibly, we've been together a long time now.
Leadership teams across the company are season battle hardened value oriented.
We're all intensely engaged in it that's one thing I keep talking about our award during 2020. It has been really intense but our people are energetic highly motivated.
We have an action oriented management structure, we were.
We work together collaborative collaboratively, we're experienced decisive never cut corners on important issues like worker safety.
The responsibilities environmental obligations.
We keep a long term focus on our license to operate around the world. We work hard to earn this and to keep it.
We know we've got a long history of operating on the premise that our shareholders cannot succeed unless all stakeholders in our business to succeed.
Freeport is clearly on a global basis for most in copper.
Our portfolio of assets are large high quality.
Stab wish industry leader, Great track record operating mines develop mines, among the largest in the world.
Assets are long lived.
Trouble with embedded options for reserve and resource growth strong.
Strong franchises in the U.S. South American Indonesia.
End of <unk> industry, leading technical capabilities with a strong track record of project execution.
Around the world over many years.
Weve earned their trust and respect of our partners our customers our suppliers to financial markets. Most importantly, our workers communities in those countries.
Notably our block caving experience.
Is it.
If not the most one of the most extensive and long standing in the history of the global mining industry and that's so critically important for success both in the ramp up at Grasberg and being able to continue to execute our plans over the next 20 years.
She's not for the faint apart.
Been operating blockade mines in Indonesia since the early 19 eighties, and we have an important molybdenum block caving operation at our Henderson mine in Colorado.
This is critically important as we transfer grasberg from the largest from.
From from this enormous surface mine that we completed at the end of 2018 to the largest block caving operation in the history of the mining industry are.
Our team has demonstrated capabilities in good times and bad and.
And I want to close by thanking our people recognizing their strength and resilience their dedication and now.
Well just this performance as evidenced in today's report on.
I'm personally proud to be part of this team I look forward to the success, we're going to have before us in the future. We're all motivated and committed to press servier and to achieve this success for the benefit of all of our stakeholders.
So thank you for that and now I will return and I will turn the presentation over to Kathleen talk about natural path.
Matters, Okay, great. Thanks, Richard I'm I'll, just make some brief comments on financial matters. So we can take your questions.
As you'll see in the materials out our guidance is very similar to last until our prior guidance. We have incorporated the planned lease tie to obtain out at Rick had mentioned and that's reflected in the guidance, but I just really wanted to make.
Three points. The first one is you know is what you just said we're continuing to focus on execution of this plan.
Which will generate growing cash flows and margins.
Clearly the glass plant underground ramp up is making great progress and we're building.
On that momentum each quarter.
I wanted to mention that the cost benefits that were seeing any ongoing capital management programs.
We now feel that we successfully implemented the plan that we laid out in April I think when you look at.
On the cash cost in the quarter that now at 32 cents per pound and compare that to where we were in the first quarter and this year, he sees and 30% reduction in net unit cash cost.
Also a 30% reduction in capital spending levels.
With with the increased volumes that we have coming in 2021, and very low incremental cost we expect that your cash costs.
The decline below $1.20 per pound next year. So we'll remain focused on.
On sustaining all of these costs and capital management programs. We've also implemented.
Savings in a number of other areas, including in general and administrative costs, let's.
Let's just say in the third quarter were up.
Over 20% below the first quarter 2020 levels.
Second point is you know anyway. She made this point as well into the third quarter really demonstrates the growing cash flow generating capacity every business you know lead 1.4 billion in EBITDA during the quarter and 1.2 billion in operating cash flow.
And our volumes are continuing to grow we expect to continue building volumes during 2021.
And using $3 to 350 copper we would average between 7.4 billion 10 9.4 billion per annum.
In the Catholic 2021 and 2022.
And generate nearly 5 billion to over $6 billion in operating cash flow went with $2 billion of capital and Extendicare. So very focused on on free cash flow generation as we as we look forward.
And the third point is that our balance sheet and financial position a very strong.
You'll see in the slide materials and that data is expected to decline rapidly.
So continued execution and performance will allow our board to consider a resumption of dividends in 2021, increasing shareholder returns over time. It's Rick had mentioned, we're also continuing to assess the sequencing I don't have a future organic growth projects.
We expect to be in a great position related to maintain a strong balance sheet.
Hi returns to shareholders and invest in value enhancing projects that are embedded in our portfolio is as market conditions warrant.
So that concludes our prepared remarks, and operator, we'll now take questions.
Ladies and gentlemen, we will now begin the question and answer session. If he wants to ask a question press star one on your Touchtone phone. If your question has been answered or you wish to remove yourself from the <unk> <unk> profit.
Sounds like you are using a speakerphone. Please pick up your handset I think the numbers, we ask that you limit your questions to one.
But there's no question. Please return to the queue fundamentally your first question.
Our first question comes from the line of Alex Hacking with Citi. Please go ahead.
Yes, good morning, Richard and Kathleen and thanks to the the presentations.
I'll ask two questions. If it's okay. The first question on the dividend Richard you mentioned restarting a the dividend next year any thoughts on how that would be structured.
Percentage payout and net debt target something like that and it's just a second quick one if I may just the copper grade at Grasberg is very very strong during the quarter should we read anything into this operates coming in ahead of your geological models well. This was just some some variance that we shouldnt read much into thank you.
So.
On the dividend.
It's really going to be something that we haven't teed up for the board yet we're really focused on getting through.
This year and going forward.
But we are giving thought to this idea as.
As we make further progress in getting to our target is to how to establish.
A policy the dividend, we won't do as I mentioned, we want to.
Take steps to reduce debt, we're on track to doing that.
You know we will.
Likely take a first step of restoring the dividend, but then we will have the opportunity of doing as you said is establishing a financial policy and looking good.
Further shareholder returns growing shareholder returns in the future that could be in the form of dividends and depending on how the equity market reaction. We would have the option of looking at stock buybacks, but at this point, we're not we have not really.
Engage with the board to established a specific policy.
Mark do you want to comment on the Grace situation.
Sure Alex.
Where we're at right now and the deep emails we were mining some of the highest grade sections of the skarn sections of the ore body.
Estimation of these very high grade zones is always challenge for our modeling.
Concern's always that we take high grade intercepts and smear mobile too broad of an area.
And Paas overestimation, so we've taken a conservative but appropriate modeling approach so.
So the great that you've seen or a bit of day.
A positive variance that we've had really for the last six months.
We believe our overall.
Mobile estimate is appropriate we didnt do anything with our sequel.
Sequencing of the K, we followed our.
Okay management plan and really the grades came to us more or less.
More or less as a bit of a positive surprise.
But if you looked at the great individually deepen nosy is very high grade, it's close to 1.9% and.
And gold grades are about 1.8 and.
And what we saw was a bit higher than expected grades in that very high grade portions of the mining.
Yeah.
The one other thing.
Mark is doing and the team out there is doing is really focused on the long term plan and.
And so as Mark said, we're following the sequencing to maximize the long term values and not try to look for a short term when.
Short term wins and they really doing a good job of staying disciplined on on that program.
Great. Thank you so much and I should say congratulations on the very strong cash flow in the quarter. Thanks.
Thanks, Alex.
Your next question comes from the line of Timna Tanners with Bank of America.
Yeah, Hey, good morning, everyone and thanks for that.
Good morning, Thanks, Dan.
I've got two questions also I suppose.
Really curious about that Gresik smelter alternatives any update there I know you alluded to some ongoing negotiations and just wondering if you could you know if it's more than just a delay if you could give us any color on what that might look like and then.
And I'll I'll stop.
So and alternative would be.
Rather than building a new smelter.
To expanding the existing Gresik smelter and.
And adding a precious metal this refinery to it.
That could not be expanded.
To a size to take all of our.
Future concentrate production so there would have to be an agreement.
Allowing us to export the excess.
And Oh.
We were proposing if that's a laugh when I say if we its BTA five you know this is being led by the.
The state owned ministries, and internal discussions within the government.
That would involve paying in an export fee on that is the benefits would be it would avoid having to undertake this major new construction project and the financial benefits are really positive for the government and so.
And so with the government like all other countries around the world, saying its financial situation being challenged by coded.
This is a this has some fundamental attractions to the government.
As you know when we reached an agreement in 2018.
Feature of that agreement was a commitment about pts side to build a new smelter.
We we had.
We had years of discussions about that because it is it is on economic to everyone.
But to get the deal accomplished in 18, we.
Had to commit to do that and I could that commitments in place. It was really in the government sentence about what they decide to do but this.
This issue the financial benefits to the government is significantly.
Okay. That's super helpful. Thank you and I don't want to take away from other graphic progress and success, but starting to think you actually about the next generation of projects and initiatives for the company I know you've alluded to other other projects can you kind of run through with US where are you prioritize that the different options and alternatives out there. So we can.
Thinking about what's around the corner.
I can I can I can point to them, we havent prioritize them yet we've done some initial.
Pre feasibility feasibility type work we.
We actually spend it.
Some of that as part of our cost reduction efforts in April.
But we have a significant opportunity in in Chile, with our El Abra project, where were centrally 50 50 partners with codelco.
It has a significant sulphide deposit it would be.
A major development project involving a water desalinization plant, but a project on the order of our Cerro Verde expansion, but it has an attractive.
Ore body to consider and then Andy Yes, we have a series of.
Okay.
Brownfield expansions at at mines raging.
Ranging from our Bagdad, Matt mine in northwest Arizona.
There's into future very large.
So five opportunity at Morenci. This this lonestar property as we mine the oxide.
Yeah, we're exposing what looks to be a very significant.
Sulfide resource, which which I believe will be developed.
The U.S. opportunities have some economic advantage.
We own all of our land in the U.S. essentially all of our plants in C.. So there's no royalties the tax situation.
Is very favorable and we have a big in a well Gary.
Carry forward. So when you when you when you have the ability to develop resources with no taxes, no royalties, but that's a big big.
The fundamental economic advantage. So as we go forward, we will be doing a trade off studies in making decisions.
About.
Where and when to invest that's in the future.
We have a long line of.
Potential partners, who are interested in working with us that be something we could consider.
But.
For right now we're going to continue.
To focus and achieve the kind of success for the next few quarters like you saw in this third quarter.
Okay Super Thanks for all the detail. Thank you Ken Okay.
Your next question comes from the line of Chris Terry with Deutsche Bank.
Hi, Richard and Kathleen a couple couple of questions from me first on on growth. We are just on the development rights.
For the quarter I think you said you try to be at 90% by the middle of next year.
I'm just wondering if the third quarter exit right that was just looking at the chart from last call and Slide pack I think that 94000 tons is back on track I just wondered if you could give some details a bit more specifically on during the quarter. Some of those hiccups. It. So you said kind of in 45 days was there anything.
Any else is there and basically what the message you're sending I think is at the end of the quarter.
Are you back onto the chart.
The progress John is that that's my first question I'll start with that that's that that's right. Chris We did have the five day outage for the work stoppage and then we had some some.
Oh, a flow maintenance that was on plan during the period and by the end of the quarter.
We have gotten back to to delayed some and mark and his team do it.
Do an update every quarter and went through the.
Friday or forecasting essentially there was you know very little change in our you know ramp up so we're still well.
We're still on track with the getting to two and 90% as the run rate I am by mid next year.
Okay, and I guess I'd say take on every one of these calls we noted that there will be things, we'll have to deal with from time to time, just inherent in the nature of mining and.
And.
What I see is the fact that we had these and we're still able to to have this kind of quarter. So.
As we go forward and as we open up more access to these ore bodies.
It gives us more flexibility if we do have some issues to deal with Oh.
Offsetting those by adjusting our operations because this greater access that continues to emerge.
Okay. Thanks, Thanks, guys.
And then the follow up question I had is just around the dividend I know you commented before that it's early days, but just wanted to get an update on the target net debt level. I think you previously talked about 5 billion as being around that level that you would think about the dividend is that still is that still the thinking on or.
5 billion more correctly is about the level of net debt that you're targeting. So then you can explore other options you. Obviously at 7.6 now so that's still how we should think about the timing of the dividend when your brakes about that level.
You know, we said Oh.
Back five years ago, we set a.
We set a target of reducing what was then $20 billion of debt to five to five by reducing 25, the $10 billion. So that's.
That's the $5 billion nothing magic about it in fact.
In fact, you know in those earlier years that I referred to.
When we started generating so much cash in both of those cases, we totally paid off our debt we were.
We were debt free.
2005, I believe we were debt free in 2010, 2011, Thats just because.
Yeah.
These cash flows when the market is really good really come at you really strong and so in both those cases, we were able to pay big dividends.
And so we were serving we're comfortable with the debt level, we have now Jeff.
Ethylene or teams done a great job of structuring our maturity schedule. So we got really strong liquidity and you know certainly $5 billion would be a level of debt that we'd be comfortable with living with in the long run.
So we'll manage our business on the basis of the cash that comes to us in our expectations by cash flows but.
And then if you could be comfortable in saying that the $5 billion target.
Is it something that would be acceptable to us.
Cash may come to us that we pay down more than that but as we did that would clearly be returning cash to shareholders and looking at these opportunities for future investments.
Thanks, Frank this is thanks, Catherine and well done on a great quarter. Thanks Lance good appreciate it.
Your next question comes from the line of David Gagliano with BMO capital markets.
All right great. Thanks for taking my questions and as always thank you for the detailed update you covered a lot of the things that I was hoping to ask about already but I do have a bit of a follow up on the capital allocation.
Capital allocation question.
On the Brown brownfield opportunities I was wondering can you just talk about the timing.
Investing in those opportunities relative to this you know the 2021 dividend recommendation to the board.
Well the and this is a feature of the industry.
David.
Even with all of these projects in their brownfield expansions.
Execution of those will take a long period of time.
Even if we were to start today and we're not starting today. So you know each of these projects that would be significant projects now we're going to we're going to do things to make incremental improvements through the efficiency programs and so forth.
And so you know we have a we have an initiative to actually increase volumes without making a capital investment we call it the Americas concentrate or project.
But for a major brownfield investment project.
From the time, we make the decision to start and that's not likely to occur.
Until 22 23, yeah.
Sure look still looking to six or seven years.
At a minimum the execution on it.
So.
With.
Positive cash flows will.
Will suppose phone.
Stand in the way of really having significant increases in return for shareholders.
And Dave will have some incremental projects that we can look at that would be quick.
Quicker than that but we were just talking about a major you know a major investment that will have some incremental opportunities.
Is that we can then we can evaluate as well during that period.
Okay, great. Thank you.
Dave I think the way to think about it is.
We have a fully developed set of assets essentially now.
And we're in though we will be with with with the kind of positive markets that we have now that we appear to be moving more towards in the future, we're really going to be at a harvesting set of years for.
For <unk>.
For the near term.
And and I know you guys great to be a natural resource company and being able to look at the benefit of the decisions you made over many years and see that you made the right ones and you generate cash return to shareholders.
Perfect. Thank you.
By the way, Dave we thought about your Monday at lunch So [laughter].
We miss being in London.
You know comments and thanks, and I have met with Jefferies.
Now with Jefferies.
Hey, good morning, Richard Kathleen Thanks for taking my question.
It's really a strategic question about Grasberg and Richard is something I know you've addressed at times in the past, but obviously the world is changing and things at Grasberg changing pretty quickly. So the question relates to the.
The potential rationale as selling a portion of the gold production from Gray.
From Grasberg as a gold stream, presumably you would get a premium multiple.
Ability to do so I would think has increased at grasberg is ramping up and being the rest this would accelerate your ability to return capital.
Actually even via buybacks, which would be pretty compelling I think right now probably the very significant positive for your shares the greeley.
I would not really reduce the competitiveness of the mining.
And would probably reduce the perceived risk around freeport as would reduce your exposure to Indonesia little bit in the market. So I just had a task grass there was such a critically important asset to Freeport, you, obviously owned more than 90% of the mining for a long time.
But now that you've done this transition ownership, just transitioning as well, but the operational transition to the underground and again, the fact that arguably the value of the gold from the asset is not being affected your shares what is the argument to not sell a portion of that goal does a stream. Thank you.
All right well, Chris one one bit of correction there about the ownership.
Since the mid Ninetys Rio Tinto had a joint venture ownership in this interest.
And so one of the government's interest was.
Roughly 10%.
FCX is interest was net of the Rio Tinto joint venture interest so what we own in Grasberg today.
He is essentially the same that we've owned since then.
Since the mid 19 nineties, it's just that the Rio Tinto interest was transferred.
From a joint venture interest of Rio Tinto to shares owned by the government. So.
So our fundamental interest has not changed.
You follow that Chris.
Chris Yes, that's right. So so basically my point is that Indonesia will be the majority owner of the mine, where historically they own less than 10%. So the b decide they own 51% of the shares.
And in the past, but that ownership interest is there 10% they acquired.
About five from us, but they acquired the Rio Tinto is that when you look at FCX its ownership interest it really hasn't changed.
Well, we've had for over the years and that was one of the really good things about the deal that we cut in 2018 is we were able to hold on to the interest that we had even though the government had these ownership objectives, which they reached by acquiring a Rio tinto and interest so that's for sure but I reckon.
Now Mike interested not just for our economic interest has not changed.
That's just a clarification, but yes, you're right we are fully aware of.
Of the opportunity that we have to look at a gold streaming.
Opportunity, we as you know we've assessed those over the years in various forms.
And with the Spike in gold prices currently it makes that.
New.
Opportunity for us.
We need to get ramped up you don't want to sell a stream before you have the stream in place, but we are we're studying various alternatives for doing that and we recognize the opportunity to generate cash and restructure our.
Our balance sheet and our ability to.
The deal with.
Returns to shareholders and so forth so that's on our plate.
You can rest assured that.
Bankers or or visiting us regularly and talking about that opportunity and it's something we will be considering.
Our first order of business so.
Just to get it ramped up.
Im sorry.
Second quick second question, along those lines in terms of the operational performance at Grasberg can you just give us an update and I'm sorry, if you mentioned it certainly I might have missed it on the call before but can you give us an update in terms of number of coal the cases at grasberg between your employees and between contractors, if things are getting better or worse run. According to the mine or just an update there. Thank you.
Yes, I mean I'm just.
When koby broke out you know grasberg was a huge concern we have.
Most of you know we have an enormous workforce there it was.
On the order approaching 30000 people.
Roughly 20000 at any point in time, we're living in close proximity to each other in the Highlands area.
New Guinea, where it's damp in Ku and <unk>.
When people live and work together, so we really recognize that as a problem and made them.
Major investments in medical facilities.
In.
In in protocols for <unk>.
For managing it testing equipment.
PCR labs, both in the Highlands in the low loans.
We did all the things that the health standards say that you should do in terms of.
Finding infected people tracing isolating treating.
And so over time, we've had and Indonesia is a.
As a country is the country This challenge Recoded.
So we've had we've had a number of cases.
Fortunately.
The huge majority of those recovered or or non symptomatic.
Our.
Our process of isolation and restricting travel and testing has worked.
Serious cases, we have had again few in.
The most serious ones were ones where people had.
Previous sales condition. So it's consistent with what people are 50 suicide around the world. We we've really done well in the Highlands, we had a.
Outbreak of cases in the low ends where where our profit.
Our our ship terminal is in where people there have more of an interaction with.
With the community.
To make.
Yeah, which is less of a control situation.
But we.
It's too new protocols, there and they've made a great progress. So we've had to deal with it we've had a number of cases almost all have have now.
We have now recovered and we continue to have very strict protocols zone.
Travel interactions and people there so.
The government and in large part the local community support is we're supporting local community with helping them with.
Health health issues, new equipment going in and testing procedure. So it's it's been an issue, but it's been managed.
Thank you.
Your next question comes.
Hi, good morning, I'm kinda income turning or good morning.
Turning our attention back to Grasberg, obviously, there was a I guess.
I guess a bit of a step back there in the third quarter, but you recover.
Really well with that exit rate of 90000 tonnes. A day can you give us a sense of how that's continued through October and if I'm not mistaken looking at your slides wasn't your plan to exit rate for the year at 95000. So I mean doesn't that mean are essentially already there at the end.
September.
Yeah, you're right I mean it.
It's going well and and what not.
You got to you got to look at.
Where I am I'm real sense about where I wouldn't call. It what we faced was a setback it was just a.
Situation, we had to face and we managed it I mean.
And you look back over the years, that's always the case is always the case with complicated mine. So it certainly wouldn't be.
I wouldn't characterize this setback, but yeah. We're on track where we were on track in October.
You know if we had had any significant issues to report today, we would have reported them. So.
You know we we just we just we just feel great about what's going on this is a critically important time for us at Grasberg and 2020.
Completing mining the pit and really.
Taking the ramp up over the hump to the point of where it was ramping up.
Generating cash flows this was a quarter that we always knew it was going to be the quarter, where cash flows were going to start coming and they did.
We had to do that.
Can marry you seem to covert situation, we just talked about so what's remarkable accomplishment that we've been able to do that in there and we feel we feel very good we feel like we've we've avoided the Mike did you risk of coated we've now avoided the major risk of the ramp ups.
[music].
Mark and his team will.
Face issues everyday you know where we are.
We were communicating about how things are going with Oh with the various aspects of our operations, our how we're doing with our maintenance programs.
How were doing in.
Hello.
We've had lots of excess capacity in the middle, but that's where we're going to start filling the mill up so we've got to be prepared for that.
But you know we're on track to 200000 tons, a day plus of ore from the at least the underground ore bodies to the mill and everything's on track.
Hence the geological or geotechnical type things that the kind of things that we ran into the third quarter other than me I lay.
A labor issue was just more.
Mechanical type thing.
Maintenance type items, and or getting hung up in passes and that sort of thing and that's going to be.
It's going to happen from time to time, but those things are.
More easily dealt with them and geologic okay technical issues and we're pleased to report we just feel like it's been.
Been going very well on the on the geologic and geotechnical front.
Yeah. This is distracting approach this fracking approach than mortgage team came up with.
You know this the deepen those the mine was delayed.
The order of two years as we dealt with the size and assist the issues, but which is which is.
Which is not a factor in the Grasberg block cave because of the.
Geological setting those soon.
Physical setting I should say, but the but but that was an issue in the deep ammo. They came up with solution is working we still have seismic events from time to time, but.
If the fracking is helping us manage those and were being able to keep the results that you see.
And it is obviously and it's the straightforward fracking is not as complicated as.
As to what's going on in the oil and gas industry in Permian Basin. This is this is a.
Really straightforward type of operation.
Is it possible that you may actually exit this year ahead of plan and given your.
You're already at 94000 tons a day.
It's certainly possible and our guys are going to be the best they can do.
No Oh.
We.
We set our plans is being Oh.
Aspirational plans, but achievable and the guys work every day to try to do better than planned and they take a it's a great I mean, the smiles on our faces when we have these days. We can go over plan. This is felt all the way from [laughter].
From from from popular to where we are here in the United States.
Everybody everybody's orange try to beat plans and in the Americas too I mean.
Josh Josh Josh These guys have done a great job our safety statistics are great. We we.
[noise], we did have an unfortunate fatality grasberg, where walker took him really I'm, having a little action.
So we work hard but our safety statistics are good our people are focused on any one thing about one thing.
One thing I think of this cold thing is doing for all of us.
It's really made us focus on our work even more intently than we ever had and you want to keep talking about work is intense and.
And so now with having a restricted travel.
You know, making sacrifices in your personal life, everybody is really focused on work and we can see the results of that.
Globally.
Thank you.
Your next question comes on the line of Carlos de Alba with Morgan Stanley.
Hey, good morning, everyone. Thank you for taking the question. So first is that maybe we can if you could elaborate on maybe early owned to provide a deal this number but what sort of estimate and Capex do you would you envision for the answer and active to the Banyu copper smelter in Indonesia indicative expanding.
The current expansion of the Clinton is not there and they are adding then especially went on refinery how much would that cause when added to the 2 billion I think that got me had mentioned for potentially tapping of venue is not there.
Hey, Rick Coleman Zone online and he manages our.
Capital projects globally and is in bomb the smelter Rick.
Is there any way we can give an order of magnitude number on the gresik smelter gresik smelter, he and I will jump in here Richard the prior estimate set of new Greenfield smelter was $3 billion.
And that estimate for that expansion.
Of classic for 30% expansion is roughly 250 million.
And similar amount for them for the TMR.
So we're going to do a PMA anyway in in that in the any original you know any original configuration.
You know.
Hi, Thanks, Thanks got it and it's an economic project is that correct.
Current CCRC race.
Which the new smelter would not be.
Perfect. Thank you very much good luck.
Your next question comes from the line of Lucas pipes with B. Riley. Please go ahead.
Hey, Lucas hang on just one second I just want to say.
Just to emphasize we've got financing.
They are available to us ready to go if we do have to build a new smelter would be debt financed no capital required by shareholders in Pts our FCX would not have to put capital into this if we would be the the losses.
Is that the smelter generate would be tax deductible.
And when you look at.
The current situation out there with the government owning 50% of the equity with having taxes and royalties.
Governments share of the economics of the project, including the smelter is in excess of 70%.
So.
Yes, we do consolidate this and I'm glad we do even though we own 49% we at FCX control operations.
Yes.
So it would be consolidated debt, but it would not require.
Capital to be put.
And to Pts off of the smelter from Fcs.
Good morning, Kurt Encino Lucas.
Okay sure.
Hey, great job on the quarter and.
My first question.
First question I just wanted to explore another angle if this well let's now the.
That's been a part of this all hearing.
Would there be any interest to supplement your development pipeline acquisition preproduction profit goal to be a couple of candidates in North America and curious how you think about that.
Thank you.
Yeah, we we look at all of those we were approached with opportunities.
And we have our.
You know we have a long term history in the marketplace. So we are as a company familiar with all of these.
These projects and you know.
Mineral opportunities in North America, and so forth.
<unk>.
The challenge that we have found today and we'll continue to do that but the challenge we found today is.
He is.
We have these internal resources that have.
Currently no value in our share price and if we're successful in creating value 100% of that value comes to our shareholders. If we were to acquire.
Properties from someone else would have to pay to their shareholders. The that the current value of that so it's it's hard to make the numbers work quite frankly.
Very helpful. I appreciate that and then I guess as a follow up.
As a follow up question I wanted to follow up on your Capex guidance, you maintain prior guidance and.
Any risk to that number any any sort of catch up capex that we should be thinking about given that the plan to put in place earlier this year and obviously that's been there.
Very successful, but would appreciate your thoughts on that and how we think about capex in long term capex.
Yes. Thank you.
Well, we're looking at we're in a.
The next couple of years I really we had the peak in 2021 at Grasberg.
And it will be declining after that so as we look out absent other projects are.
Capital expenditures will decline.
Significantly from 2022 levels.
So you know we're talking about something on the order of.
Billion 2 billion, two and sustaining capital.
And we've got some ongoing development at Grasberg, tying it won't be you know anything like what we've got in there.
In this next next year, so we do have.
Yeah, a lot in cash flows declining capex and we'll be evaluating you whether there's.
Opportunities to have some incremental expansions that as Richard said, we're really looking forward to talk to see cash flows appear.
For a period of time.
Very helpful. I appreciate that then continue thanks.
Thank you.
Your next question comes from the line of James now can you say, what do you do that.
Thank you very much.
Just a quick production question from your two part one.
Can you just give us a quick update in terms of what the current situation, especially in South America, where you operate are you able to fully return to kind of pre cobot levels kind of production wise at this point in time or you still see any kind of lingering pressure from those communities local governments in terms of workers returning to the site this sort of thing.
And I'm not just talking about your mind.
What about what your kind of hearing and seeing in the industry and related to that question. Let me kind of think about 2021.
I assume would be able to think that a lot of the growth that you're going to see our production and sales 2021, some of that would kind of weighted on the back half. The year is that is that a fair way to look at it the back half, it's up a little bit stronger than the first half of the year production wise. Those are my two questions. Thank you very much.
At Cerro Verde, and in Peru, where we've done really well. It seems like you said the team has done a really great job I'm getting back to where we were roughly 350000 tons a day prior to the call that we were close to 400 and looking to.
Well, we still face.
We still think that we can do that over time, but for the foreseeable future until there's a complete you know returned to normal in terms of you know.
Going back and forth to them to work and it's normal we're going to operate this lower rate. So we you know thats all reflected in our plans, but no. We do expect Cerro Verde at some point and next year.
Into 21 to begin ramping up again.
And I think the situation in Peru.
And Josh on for this year can comment that the.
You know what continues to be they're vigilant with our protocols have been effective.
Same in Chile until they did have some escalating cases earlier that that seems to have abated Sam.
With the actions that the industry has taken back down still very much like it is around the world. You know no. One has really went up there colliding we're continuing to see.
To to.
To be very careful about how we're operating in.
Anytime.
Yeah, and one thing I would have.
I would say and this is true for us in managing the coated situation.
And it would apply to.
Different operations.
It is site specific challenges so.
So you can't really generalize about what has.
What happens with us versus what would happen with other other companies.
We have it had a totally different situation at Cerro Verde than we did in marine see here Grasberg and so.
Yeah.
I just caution you about trying to generalize when you hear something about one company situation.
Applying it to other sites of other companies.
Yeah, what I would do that I mean, I think there was a problem Bloomberg headlines out suggesting that you know Peruvian mine workers were little bit still returning to bind side. So kind of figure that that was industry wide just Peru alone. It wasn't something we're trying to extrapolate Rosberg on board and see for that matter.
But just right we believe that even within grew I mean.
In the second quarter the government in Peru.
Very sudden basis.
Down mining.
And well.
We had a different situation goes most of our workers lived in air Uquifa and so we had.
To then go to.
Go to work with the local community and the government and we had to construction.
Temporary living facilities on site for people to live in and demonstrate to people that we could.
Managed to house situation that would be a different situation than other operations, where they have.
Their workforce living already living on their side. So anyway, we've had to manage it and we are guys down there just done a tremendous job there.
You know, we're we're not at full production, but where original nameplate production and and.
We're making a lot and we're making a lot of money out Cerro Verde now on where.
The opportunity to increase it.
And to your second question. The volumes, we expect will will increase quarter by quarter through 21, and that's mainly because of the glass plant ramp up in it.
And as we said, we expect to get to about 90% of the run rate by by Middle of next year, So, but does that back half will be bigger than the front half that the fact that will still be a significant and growing from from where we were in the third quarter.
That's very clear thank you very much for answering my questions.
Thank you for your question.
Your next question comes from the line of John Tumazos, with John Tumazos very independent research.
Thank you very much and congratulations on so much progress.
First let me say on all five concentrate or is that you've talked about for a couple of years.
Are any of them.
Even.
10% engineered.
And what's the six to seven year time horizon, you're talking about.
You're saying that none of them would arrive.
Earlier than 2027.
Rick I think that's a fair statement right.
Yes, that's right Richard would revealing in doing.
Uh huh.
The balance of the year engineering is definitely not more than 10% of them on the merger interior design.
<unk>.
And and again, John that's really is referring to is is a major new projects like you know the Alpha project would be like another Cerro Verde.
Is as we said we also have incremental type expansions within the portfolio that don't require permitting I don't require you know may.
And your multiyear.
Planning so we've got a combination of both but that the major projects.
Like the one airline Bryce its you know multi years because it is permanent.
Permitting it has to be done and all that the interest.
The infrastructure, but we do have other options within the portfolio that wouldn't be Islam longly at Lone star the oxide so fast.
Sulfides wouldn't be exposed or you wouldn't need to sulfides, even till 2020 so.
Right and so lonestar, which made it so attractive initially is it.
It dovetails in with the.
Depletion of the Safford.
Reserves, which.
Was.
Part of the mine plan there so we had existing.
Processing facilities among star so close to Safford that we're able to do.
The truck the.
The the or to the safford facilities not to build new facilities the.
The.
Oxide resource is growing and we may have an opportunity to invest in incremental processing facilities take advantage of that so.
So.
This this lonestar sulfide is.
He is longer term even than the opportunities that we have at the other projects because we can make so much money off the oxides.
Before.
Well, we develop it.
And we've done a a lot of work on drilling over the past several years on Lone Star and.
We'll be incorporating that drilling is.
Drilling results into our into our longer range plans.
And lot of our exploration budget over the last few years has been on stock. So we were really prioritizing that opportunity.
If I could ask one more if we just take for example than El Abra sulfide mill.
If you're largely copying.
The 240000 metric ton today, most recent module at Cerro Verde Cerro Verde.
And the de Sal.
Flat comp in pipeline as sort of an off the shelf.
Third party design.
Why would in the pits pre stripped why would the engineering and planning take a long time at El Abra.
There, there's it's not just the engineering and planning is the permitting and expect the same.
As Mike was saying that we've got to we have to do it.
Do any I asked and you've got to have.
A baseline that you have to provide in terms of <unk> data going back.
On it and Sal its in and it's a you know it's a new new male news de Sal, we don't have a male there now.
But it's an attractive project very attractive project, but we may have more attractive projects that are less capital intensive.
Thank you.
Your next question comes from the line of might be different vertical research partners.
Hi, Good morning, everybody Richard I am not going to ask you. What you think is going to happen in the us elections next month.
That's okay I want to.
Where do you want to have more pine go right ahead, but wanted to see what your thoughts are on the this months you know.
Chile with the constitutional vote and looking into next year presidential elections in Peru, and Chile.
Any sense of how that could impact positively or negatively and tenor or support.
Support for mining in the overall, maybe some of the immune system to lever the situations that could pop up.
Well. Thank you are not putting so much on spot you know it's not just next month, it's almost next week now that.
We've got the election here in the U.S. and this goes beyond the presidential election, you know yet comps.
Complicated political situations everywhere and.
Latin America is always.
A complicated area.
The thing, though that underlies is is that with.
With with with the Covis challenges its economies around the world are facing but particularly in Chile and Peru.
I think that however, the political situation unravels, whose there's going to be a a need for those countries.
Jack do those countries to provide a favorable environment for mining investments.
You know in Chile, which is which has had such long term success from from that there's a growing recognition of the.
The need for.
[music].
Chile to not lose its competitive edge that he said in some of that's been eroded.
With some recent.
Some recent.
Legislative or regulatory actions, so I'm I'm confident that those countries will see the benefits of mining investment.
In Peru is a bigger challenges.
Uh huh.
Which we Fortunately found a way to manage effectively is how to how to mining investments.
Interact with local communities because that's what's really been the barrier there as opposed to central government barriers.
I appreciate that thanks.
Your next question comes from the line that they tend to go like Dang BMP paradigm.
Hi, Good morning, just a quick one on the I think you can do on a unit cost guidance you've left it on T. that the mill dollar one thinking about the funds in order to be able to begin the call I see lots of human to indicate that he used spot good Molly problems. He he didn't production outlook.
What would net unit cost look like for next year.
We will update our our guidance for 2021 next quarter and you know I plan right now is.
You know below $1.20, and we haven't gotten more specific than that back down.
Well, we'll certainly update that when we when we come out with her update.
Our updated guidance.
We're trending level at $1.20 at this point on a current plant $1900 gold and eight down the Lebanon.
And just to confirm you using 1800 index. The one thing deal or is it lower than that.
Hi back our current plan that we use and then we get you know we run scenarios, but our current plan.
With the guidance in the in the in the deck is saturate, our copper $1900 gold and $8, we'll let you know.
Okay. Thank you.
Thank you.
Our next question comes from the line of Chris mean, Feeney with Gabelli Your line.
Hi, everybody. Thanks, a lot and congratulations on Grasberg. It really is as you've been saying that you're all alone having followed the company for a long time.
Just the amount of tons that you're moving there every day along with building a mine along with dealing with them Covidien everything it's it's really fantastic what you've done what you've done there you have a you have a ways to go but congratulations really is a great job.
Yes, we've been talking about it for a long long time heavily yeah. Yeah. You had in years like you say, you're starting to inflect here in it and.
And its and its impressive what you've been able to do so just wanted to say that quickly.
And just another quick.
Another quick question, you don't want to put too much on the spot, but relative to lucas's question about acquisitions, and you're saying that you're not really getting seeing lot of value in potentially buying something.
How do you feel how would you feel about conceptually a merger of equals.
With with another with another mining company and just given what we've seen in the space about you know like you say kind of value destruction in your in the natural resources space in terms of deals that have been.
Deals that have been kind of premiums what do you. What do you think conceptually about about merger of equal you know potential merger of equals or just conceptually in the space or alcohol sales certainly could conceptually you you can identify.
Circumstances, where mergers of equals makes sense, you know because of the.
The.
You know the ability to reduce cost and and operate more efficiently through asset management and so forth.
But in our case we.
Where we're on the verge of.
This Oh, you know when we made great progress now.
We're less than 60%.
There in terms of the volumes that we will achieve at Grasberg.
I also believe we have the potential even though copper markets are strong now one of the reasons. We showed the chart with the earlier years is I believe there is there are factors working today.
That.
Well like copper much.
Much more valuable as we go forward.
They are having all these polls in connection with the virtual meetings, who fail in the week going on and then when you look at all the polls that people are taking koppers.
Far outstripping other other metals so actually.
I don't believe.
I'm a shareholder as you know.
I don't believe as a shareholder that.
That that there is any way that we wouldn't want to consider a merger of equals right now where we would do loot.
The opportunity that we have as a standalone company, that's so attractive.
We worked hard for a long time in that.
Thank you, yeah, I wouldn't ones and the reason I'm working to get everything else is I believe we're on the verge of really good things happening Freeport.
Just made a brief reference to what happened.
Happened to us in earlier years, you know, we've had ups and downs with the company for various reasons. Since then but this time we are.
We're committed to sticking to our guns. Our board is is made a firm commitment five years ago to focus on what the real value opportunity Freeport is and that's in the copper business with this set of assets.
We've shown in the past what we could do with essentially this set of assets and how we could build real value.
Right.
You know.
Hi, guys.
Getting to the age where a tail to the war stories. According to my friends, including our CFO, but but you know there was 2011, we had a company with a 60 billion dollar market cap and no debt.
And ER and I think we're on the verge of rebuilding that we've taken the steps, but this is not this.
This is not.
What this company.
Can be in what we're on the track should be and firmly believe and as I talk to our shareholders.
You get nothing but from sport about it that the best opportunity for our shareholders with this set of assets is to stick with the strategy that we're in right now and it's not a short term strategy as we've talked about we got.
Short term positives going for us, but there is a longer term set of opportunities its really attractive.
Okay, Yes that makes sense I mean, given given where you are now and I mean, so what do you think that once grasberg is fully ramped you would have a different you potentially.
You know, we always will always views opportunities as they as they come about.
You know Chris raised earlier the opportunities. This goes streaming deal and that's certainly something we'll consider but yeah. We will we will lose.
Opportunities emerge on Oh on an opportunistic basis thats using the same or twice, but but you know.
Phelps Dodge emerge forest without having a long term strategy of doing it but it was an opportunity that came up because of circumstances and we took advantage of it if opportunities come to us in the future.
That makes sense for our shareholders and we will act on it but but.
But for right now is not the time to do that okay.
Okay. Okay. Thanks, a lot and again congrats to the team for doing a great job of Grasberg, So far and the rest of the operation. Thanks, and lastly, Richard Thanks.
Well, we appreciate your kind comments and your support for all these years.
Now I will turn the call over to management for any closing remarks.
Well thanks, everyone.
Appreciate your interest a obviously a great quarter for us when we look forward to reporting.
Continued progress so it's been.
It's been a tough world, we live in lots and lots of personal sacrifices.
It's gratifying, though to see.
Within our company to see the success that we're all sharing together.
I think we've made clear today, our commitment to continue to move forward with.
Progress and success in the future, but thanks for being on our call today.
Ladies and gentlemen that concludes our conference today. Thank you for your participation you may now disconnect.
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