Q3 2023 Freeport-McMoRan Inc Earnings Call
Speaker 1: Ladies and gentlemen, thank you for standing by. Welcome to the Freeport-McMoRan third quarter conference call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer.
Ladies and gentlemen, thank you for standing by welcome to the Freeport Mcmoran third quarter Conference 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 the Q&A session Press Star one on your Touchtone phone if you require assistance.
Speaker 1: If you wish to ask a question during the Q&A session, press star 1 on your touch...
Speaker 1: If you require assistance during the conference, please press star zero. I would now like to turn the conference over to Ms. Kathleen Quirk, President. Please go ahead and...
During the conference. Please press Star Zero I would now like to turn the conference over to MS. Kathleen Quirk President. Please go ahead ma'am.
Speaker 2: Thank you and good morning. Welcome to our conference call. Earlier this morning, FCX reported our third quarter 2023 operating and financial results.
Thank you and good morning, welcome to our conference call earlier. This morning F. CX reported our third quarter 2023, operating and financial results and a copy of the press release and slides are available on our website at <unk> Dot com.
Speaker 2: A copy of the press release and slides are available on our website at FCX.com.
Speaker 2: 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 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.
Speaker 2: 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.
In addition to analysts and investors the financial press has been invited to listen to today's call and a replay of the webcast will be available on our website later today.
Before we begin our comments, we'd like to remind everyone that today's press release 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 the presentation materials and so the risk factors described in our.
Speaker 2: Before we begin our comments, we'd like to remind everyone that today's press release, certain of our comments on the call include forward-looking statements, and actual results may differ materially. I'd like to refer everyone to the cautionary language included in our press release and the presentation materials and to the risk factors described in our FCC filing.
S T SEC filings.
Speaker 2: On the call today is Richard Atkinson, our Chairman and CEO , Marie Robertson, our Chief Financial Officer.
On the call today is Richard Akerson, our chairman and CEO .
Robertson, our Chief Financial Officer.
Speaker 2: Mark Johnson, Chief Operating Officer for Indonesia. Josh Olmstead, Chief Operating Officer for the Americas. Mike Kendrick, who has our...
Mark Johnson, our Chief operating officer for Indonesia.
Josh I'll stab the Chief operating officer for the Americas.
Mike Kendrick, who heads our molybdenum business.
Speaker 2: Corey Stevens, who leads our technical services and engineering and construction group, and Steve Higgins, our chief administrative officer. We're going to start with Richard. He'll make some opening comments, and then we'll be reviewing the slide materials, and then we'll open up the call for your questions.
Corey Stevens, who leads our technical services and engineering and construction group.
And Steve Higgins, our chief administrative officer.
We're gonna start with Richard he'll make some opening comments and then.
We will be reviewing a slide materials and then we'll open up the call for your questions.
Go ahead Richard.
Speaker 3: Good morning. Yeah, good morning. Thanks Kathleen. As Kathleen said, she's gonna review our operations and financial results.
Yes. Good morning, Thanks, Kathleen Gaffney said, she is going to review our operations and financial results.
Speaker 3: for the third quarter. Big picture, we had very strong operations performance.
For the third quarter.
Sure we had very strong operations process.
Speaker 3: And this was really notable in the face of a number of challenges we faced at different locations around the world. Once again, Team Freeport answered the bell and rang true.
And this was really notable in face of a number of challenges we faced.
And different locations around the world. Once again teams report answered the Bell rang true.
Uh huh.
Speaker 3: stating the obvious is a complicated geopolitical and macroeconomic world.
Stating the obvious is a complicated geopolitical and macroeconomic world.
<unk>.
Speaker 3: report family around the world is sad for the poor people in Israel, in Gaza, and in the Ukraine, and praying for a resolution to those conflicts. Macroeconomic factors...
Freeport family around the World is sad for the four people in Israel.
In Gaza, and Ukraine, and pray for a resolution to those conflicts.
Macroeconomic factors with higher interest rates.
Speaker 3: negative for the price of copper in Freeport's equity.
Or negative for the price of copper and freeport's equity.
Unknown Attendee: Ladies and gentlemen, thank you for standing by. Welcome to the Freeport-McMoRan third quarter conference call. At this time, all participants are in a listen-only mode.
Speaker 3: that goes without saying, our business by design, by strategy is correlated to the price of copper.
It goes without saying our business by design the best strategy is correlated to the price of copper.
Unknown Attendee: Later, we will conduct a question-and-answer session. If you wish to ask a question during the Q&A session, press star-1 on your touch-tone phone. If you require assistance during the conference, please press star-0.
Speaker 3: in response to the recent lower copper prices.
In response to your recent lower copper prices.
Speaker 3: We are supported by having a strong balance sheet, which we're committed to maintaining.
We are supported by having a strong balance sheet, which we're committed to maintaining.
Kathleen Quirk: I would now like to turn the conference over to Ms. Kathleen Quirk, President. Please go ahead, ma'am. Thank you, and good morning. Welcome to our conference call. Earlier this morning, FCX reported our third quarter, 2023 operating and financial results, and a copy of the press release and slides are available on our website at FCX.com. A 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.
Speaker 3: And by having the ability to manage our capital cost and operations to be responsive to the price.
And by having the ability to manage our capital cost and operations to be responsive to the price environment.
Speaker 3: We remain very confident about the long-term outlook for copper and for our company's equity. The current situation does nothing but bolster the longer-term outlook for copper prices as a commodity and for our future returns to Freeport's share of hope.
We remain very confident about the long term outlook for copper and for our company's equity.
Current situation does nothing but bolster the longer term outlook for copper prices as a commodity and for our future returns to Freeport shareholders.
Speaker 3: We look forward to answering your questions and I'll turn the call over to Kathleen to review our.
We look forward to answering your questions and I'll turn the call over to Kathleen to review our results.
Speaker 2: Thank you, Richard, and I'm going to start on slide three where we summarize our key operating and financial highlights to the third quarter.
Thank you Richard and I'm going to start on slide three where we summarize our.
Kathleen Quirk: In addition to analysts and investors, the financial press has been invited to listen to today's call, and a replay of the webcast will be available on our website later today. Before we begin our comments, we'd like to remind everyone that today's press release, certain of our comments on the call include forward-looking statements and actual results may differ materially. I'd like to refer everyone to the cautionary language included in our press release and the presentation materials, and to the risk factors described in our FC filing.
Key operating and financial highlights for the third quarter.
Speaker 2: We delivered another quarter of strong execution. Production results across the portfolio were solid, totaling 1.1 billion pounds of copper and over 500,000 ounces of gold during the quarter. Our copper sales were 8% above our estimates going into the quarter.
We delivered another quarter of strong execution production results across the portfolio with solid totaling one 1 billion pounds of copper and over 500000 ounces of gold during the quarter.
Copper sales were 8% above our estimates going into the quarter.
Speaker 2: Despite strong gold production, a third quarter gold shipments were slightly below previous estimates.
And despite strong gold production, our third quarter gold shipments were slightly below previous estimates that reflected timing associated with some administrative approvals in Indonesia, but this is expected to turn and set up for higher gold sales in the fourth quarter.
Kathleen Quirk: On the call today, Richard Atterson, our chairman and CEO, Marie Robertson, our Chief Financial Officer, Mark Johnson, Chief Operating Officer for Indonesia, just on-stead the Chief Operating Officer for the Americas.
Speaker 2: That reflected timing associated with some administrative approvals in Indonesia, but this is expected to turn and set up for higher gold sales in the fourth quarter.
Speaker 2: Our unit net cash costs on a consolidated basis average $1.73 per pound in the third quarter. That was similar to the year ago quarter. The increase compared to our guidance of $1.61 per pound largely reflects the impact of export duties in Indonesia, which we continue to review and discuss with the Indonesian government.
Our unit net cash cost on a consolidated basis.
Average of $1 73 per pound in the third quarter that was similar to the year ago quarter, the increase compared to our guidance of $1 61 per pound largely reflects the impact of export duties in Indonesia, which we continue to review and discuss with the Indonesian government.
Kathleen Quirk: Mike Kendrick, who heads our molybdenum business, Corey Stevens, who leads our technical services and engineering and construction group, and Steve Higgins, our Chief Administrative Officer.
Kathleen Quirk: We're going to start with Richard. He'll make some opening comments, and then we'll be reviewing the slide materials, and then we'll open up the call for your questions. Go ahead, Richard.
Speaker 2: With average copper prices of $3.80 per pound in the quarter, we generated EBITDA of $2.2 billion.
With average copper prices of $3 80 per pound in the quarter, we generated EBITDA of $2 2 billion.
Speaker 2: Our operating cash flows, which were net of 500 million in working capital uses, totaled $1.2 billion. And those exceeded our mining capital expenditures, totaling $800 million, which excluded capital associated with our smelter project, totaling $400 million in the quarter. And that's being funded from proceeds that we raised last year in a financing transaction.
Our operating cash flows which were net of.
Richard Adkerson: Good morning. Yeah, good morning. Thanks, Kathleen.
500 million in working capital uses totaled $1 billion.
Richard Adkerson: Kathleen said she's going to review our operations and financial results for the third quarter. Big picture, we had very strong operations performance, and this was really notable in face of a number of challenges we faced at different locations around the world. Once again, Team Freport answered the bell and rang true. Stating to obvious is a complicated geopolitical and macroeconomic world.
It has exceeded our mining capital expenditures.
800 million, which exclude capital associated with our smelter project.
Totaling $400 million in the quarter and that's being funded from the proceeds that we raised last year and a financing transaction.
Speaker 2: We're making steady progress on the smelter projects in Indonesia. The construction project on the new Greenfield smelter is 84% complete and we're on track to begin ramping up during 2024.
We're making steady progress on the smelter projects in Indonesia that construction project on the new Greenfield smelter is 84% complete and we're on track to begin ramping up during 2024.
Richard Adkerson: Freport family around the world is sad for the four people in Israel and Gaza and in Ukraine and praying for a resolution to those conflicts. Macroeconomic factors with our interest rates are negative for the price of copper and Freport's equity that goes without saying our business by design, by strategy is correlated to the price of copper in response to the recent lower copper prices. We are supported by having a strong balance sheet which we're committed to maintaining and by having the ability to manage our capital cost and operations to be responsive to the price environment.
Speaker 2: Richard talked about our balance sheet, liquidity, financial flexibility remain in great shape.
Richard talked about our balance sheet.
Our balance sheet liquidity and financial flexibility remain in great shape.
Speaker 2: saluting the net debt associated with the smelter projects in Indonesia, we ended the quarter with $800 million in net debt.
Excluding the net debt associated with the smelter projects in Indonesia, we ended the quarter with $800 million of net debt.
Speaker 2: As we approach the end of 2023, our team remains focused on continuing strong and safe execution of our operating plans. And we expect to have another quarter of a strong production results. And we're going to continue to advance several important initiatives to drive long-term value in our business.
As we approach the end of 2023, our team remains focused on continuing strong and safe execution of our operating plans and we expect to have another quarter of strong production results.
And we're going to continue to advance several important initiatives to drive long term value in our business.
Speaker 2: Moving to the next slide, slide four, we talk about copper markets, and as Richard mentioned, the long-term fundamental outlook for copper remains compelling, characterized by rising demand associated with global investments in electrification and limited supply.
Moving to the next slide slide four.
Richard Adkerson: We remain very confident about the long-term outlook for copper and for our company's equity. The current situation does nothing but bolster the longer-term outlook for copper prices as a commodity and for future returns to Freeport shareholders.
We talk about copper markets and as Richard mentioned, the long term fundamental outlook for copper remains compelling.
Characterized by rising demand associated with global investments in electrification and limited supplies.
Speaker 2: In the short term, copper prices have been impacted by macro sentiment, Todd Derraz and interest rates, US dollar strength, and sentiment on the global economy.
Kathleen Quirk: We look forward to answering your questions and I'll turn the call over to Kathleen to review our results. Thank you, Richard, and I'm going to start on slide three where we summarize our key operating and financial highlights to the third quarter. We delivered another quarter of strong execution, production results across the portfolio were solid, totally 1.1 billion pounds of copper and over 500,000 ounces of gold during the quarter. Our copper sales were 8% above our estimates going into the quarter and despite strong role production, a third quarter gold shipments were slightly below previous estimates that reflected timing associated with some administrative approvals in Indonesia, but this is expected to turn and set up for higher gold sales in the fourth quarter.
In the short term copper prices have been impacted by macro sentiment tied to rising interest rates U S dollar strength and sentiment on the global economy.
Copper inventories on exchanges have risen in recent weeks and that follows a multi year period of declines when.
Speaker 2: that were inventories on exchanges have risen in recent weeks, and that's how it's a multi-year period of decline.
Speaker 2: When we look at the overall inventory on the exchanges, they remain lower by historical standards and in relation to the growing size of the marks.
When we look at the overall inventories on exchanges they remain low by historical standards and in relation to the growing size of the market.
Speaker 2: The reality on the ground, when we look at the macro sentiment, we also need to look at the reality on the ground. And the new structural demand drivers for copper are mitigating traditional cyclical use.
The reality on the ground when we look at the macro sentiment. We also need to look at the reality on the ground.
And the new structural demand drivers for copper are mitigating traditional cyclical uses.
Speaker 2: In the U.S., several of our customers are reporting roads and power cable and building wire for utilities and data centers and rising demand from the automotive sector.
In the U S. Several of our customers are reporting growth in power cable and building wire for utilities and data centers.
Kathleen Quirk: Our unit net cash cost on a consolidated basis averaged $1.73 per pound in the third quarter that was similar to the year ago quarter. The increase compared to our guidance of $1.61 per pound largely reflects the impact of export duties in Indonesia which we continue to review and discuss with the Indonesian government. With average copper prices of $3.80 per pound in the quarter we generated EBITDA of $2.2 billion. Our operating cash flows which were net of 500 million in working capital uses totaled $1.2 billion and those exceeded our mining capital expenditures, totaling 800 million which excluded capital associated with our smelter project, totaling 400 million in the quarter and that's being funded from proceeds that we raised last year in a financing transaction.
Rising demand from the automotive sector.
Speaker 2: There are pockets of weakness tied to residential housing, but this is being offset in other sectors.
There are pockets of weakness tied to residential housing, but this is being offset in other sectors.
Speaker 2: China's consumption continues to grow despite the country's weak property sector supported by massive investments in wind and solar and growth in electric vehicle production.
China's consumption continues to grow despite the country's week property sector supported by massive investments in wind and solar and growth in electric vehicle production.
Speaker 2: And the recent signs we're seeing that economic activity is taking up and BEY.
And their recent signs we're seeing that economic activity is picking up in China. We're also seeing growth in copper consumption in India, which has historically used less copper per capita than other countries.
Speaker 2: We're also seeing growth in copper consumption in India, which is historically E-plus copper for capital than other countries.
Speaker 2: We can't predict short-term macro forces that have heavily influenced the market, but our convictions in the long-term fundamental outlook remain strong. Copper is the metal when it comes to electrification and free-ports well-positioned as a leader in the global copper industry.
We can't predict short term macro forces that have heavily influenced the market, but our conviction for the long term fundamental outlook remained strong copper is the metal when it comes to electrification and Freeport as well positioned as a leader in the global copper industry.
Speaker 2: When we look at the long term, we're looking at the next several years where demand is expected to accelerate with third-party projections for demand to double by 2035.
When we look at the long term, we're looking at the next several years, where demand is expected to accelerate with third party projections for demand to double by 2035.
Kathleen Quirk: We're making steady progress on the smelter projects in Indonesia. The construction project on the new greenfield smelter is 84% complete and we're on track to begin ramping up during 2024. What you talked about our balance sheet, our balance sheet, liquidity, financial flexibility remain in great shape. Excluding the net debt associated with the smelter projects in Indonesia we ended the quarter with 800 million in net debt. As we approach the end of 2023 our team remains focused on continuing strong and safe execution of our operating plans and we expect to have another quarter of strong production results and we're going to continue to advance several important initiatives to drive long term value in our business.
Speaker 2: At the same time, the ability of the copper industry to meet this rising demand is a major challenge.
At the same time, the ability of the copper industry to meet this rising demand is a major challenge.
Speaker 2: The recent weakness and price combined with higher capital costs to develop new minds are making it more difficult to justify new project development, which is essential to the future.
The recent weakness in price combined with higher capital cost to develop new mines or making it more difficult to justify new project development, which is essential to the future with this backdrop backdrop. We believe the current price is not sustainable and prices will need to rise to incentivize new supplies.
Speaker 2: With this backdrop, we believe the current price is not sustainable and prices will need to rise to incentivize new supplies.
Speaker 2: At Freeport, we benefit from a large reserve position and even larger resource position to grow our business in the future. We're gonna take a long-term view and also be mindful of the short-term pressures on the market.
At Freeport, we benefit from a large reserve position.
Even larger was resource position to grow our business in the future.
Take a long term view and also be mindful of the short term.
Pressures on the market.
Speaker 2: Moving to the next slide on slide five, we want to highlight some of the key operational drivers for our business.
Moving to the next slide on slide five we want to highlight some of the key operational drivers for our business during.
Kathleen Quirk: Moving to the next slide, slide four, we talk about copper markets, and as Richard mentioned, the long-term fundamental outlook for copper remains compelling, characterized by rising demand associated with global investments in electrification and limited supplies. In the short term, copper prices have been impacted by macro sentiment, tied to rising interest rates, US dollar strength, and sentiment on the global economy. Topper inventories on exchanges have risen in recent weeks, and that's how it's a multi-year period of declines.
Speaker 2: during the quarter. In the US, our LEACH Innovation Initiative, where we're deploying new operating practices to traditional leaching, is showing tangible project progress.
During the quarter.
In the U S. Our Leach innovation initiative, where we're deploying new operating practices to traditional leaching is showing tangible projects progress.
Speaker 2: incremental copper from these incentives totaled 46 million pounds in the third quarter. 90% of our initial target run rate of 200 million pounds of copper per annum.
Incremental copper from these incentives totaled 46 million pounds in the third quarter.
This is 90% of our initial targeted run rate of 200 million pounds of copper per annum.
Speaker 2: We see ongoing opportunities for additional scale as we aggressively advance this highly valuable initiative.
We see ongoing opportunities for additional scale as we aggressively advance is highly valuable initiative.
Speaker 2: Additionally, we're continuing to focus on enhancing productivity in our U.S. mining and knowing operations. We know there's opportunity here to improve and it's a key focus area for us.
Additionally, we're continuing to focus on enhancing productivity in our U S mining and milling operations, we know there's opportunity here to improve and it's a key focus area for us.
Kathleen Quirk: When we look at the overall inventories on the exchanges, they remain low by historical standards and in relation to the growing size of the market. The reality on the ground, when we look at the macro sentiment, we also need to look at the reality on the ground, and the new structural demand drivers for copper are mitigating traditional cyclical uses. In the US, several of our customers are reporting growth and power cable and building wire for utilities and data centers, and rising demand from the automotive sector.
Speaker 2: It's Sara Verde in Peru where we operate one of the largest concentrate sites in the world. The mill average over 430,000 tons per dead during the quarter, that was a new quarterly record.
At Cerro Verde in Peru, where we operate one of the largest concentrate.
It's in the World the mill averaged over 430000 tonnes per day during the quarter that was a new quarterly record.
Speaker 2: You recall this is a site that was designed at 360,000 times per day. Over time, our team has families to improve efficiencies there. I'm really proud of the Sarah Verde team.
You recall this is a site that was designed at 360000 tonnes per day over time, our team has found ways to improve efficiencies there I'm really proud of the Cerro Verde team.
Speaker 2: At Grassburg, our mill rates average 207,000 tons per day for the quarter, processing high grades of copper and gold or war.
At Grasberg, our mill rates averaged 207000 tonnes per day for the quarter processing high grades of copper and gold of war.
Kathleen Quirk: There are pockets of weakness tied to residential housing, but this is being offset in other sectors. China's consumption continues to grow, despite the country's weak property sector, supported by massive investments in wind and solar and growth and electric vehicle production. In their recent signs, we're seeing that economic activity is picking up in China. We're also seeing growth and copper consumption in India, which is historically U-plus copper per capita than other countries.
Speaker 2: The production for the quarter exceeded 400 million pounds of copper and it will 500,000 ounces of gold. That was in a single quarter.
The production for the quarter exceeded 400 million pounds of copper and over 500000 ounces of gold that was in a single quarter demonstrating.
Speaker 2: demonstrating the size and scale of this operation. It's several days of the meal throughput and excess of 220,000 tons per day.
Demonstrating the size and scale of this operation with several days of the mill throughput in excess of 220000 tonnes per day.
Speaker 2: And a highlight of the quarter was the performance of Glassberg Blockade.
A highlight of the quarter was the performance of Grasberg block cave.
Speaker 2: We we mine from that from that over 130,000 times per day on average
Kathleen Quirk: We can't predict short-term macro forces that have heavily influenced the market, but our convictions in the long-term fundamental outlook remain strong. Topper is the metal when it comes to electrification and free-ports well-positioned as a leader in the global copper industry. When we look at the long-term, we're looking at the next several years where demand is expected to accelerate with third-party projections for demand to double by 2035. At the same time, the ability of the copper industry to meet this rising demand is a major challenge.
We mined from that from that ore body over 130000 tons per day on average we installed a new gyratory crusher.
Speaker 2: We installed a new gyro-tory crusher at the Grassberg Lock Cave, which gives us the ability to process more material from that large order body. And we recently reached new records of over 160,000 tons a day.
At the Grasberg block cave, which gives us the ability to do the process more material from that large ore body and we recently reached new records of over 160000 tons, a day, where we're working to complete the new Sag mill at Grasberg.
Speaker 2: We're working to complete the new Sagu mill at Grassburg. We're expected to complete construction by the end of the year, and that'll give us more opportunities in the future to ramp up our mill rate even further. Turning to slide six.
We're expected to complete construction by the end of the year and that'll give us more opportunities in the future to ramp up our mill rate even further.
Kathleen Quirk: The recent weakness in price combined with higher capital costs to develop new minds are making it more difficult to justify new project development, which is essential to the future. With this backdrop, we believe the current price is not sustainable and prices will need to rise to incentivize new supplies. At free-port, we benefit from a large reserve position and an even larger resource position to grow our business in the future.
Turning to slide six.
We talk about our growth initiatives.
Speaker 2: And as we look at this situation where we have growing demand for copper over the next several years, and the limitations and the high capital intensity and risk for Greenfield projects, our strategy is really focused on development of extensions of our existing operations and our portfolio of Brownfield opportunities.
And as we look at at the situation, where we have growing demand for copper over the next several years.
And the limitations in the high capital intensity and risk for Greenfield projects.
Our strategy is really focused on development of.
Of extensions of our existing operations and our portfolio of brownfield opportunity.
Kathleen Quirk: We're going to take a long-term view and also be mindful of the short-term pressures on the market.
Speaker 2: We characterize our growth in near term, medium term, and longer term development options.
We characterize our growth and in near term medium term and longer term development options on the near term side. The initial target of 200 million pounds per year of copper from our Leach initiative has essentially been met.
Kathleen Quirk: Moving to the next slide on slide five, we want to highlight some of the key operational drivers for our business during the quarter. In the U.S., our leach innovation initiative where we're deploying new operating practices to traditional leaching is showing tangible projects, progress. Incremental Copper from these incentives total 46 million pounds in the third quarter. This is 90% of our initial target run rate of 200 million pounds of copper per annum.
Speaker 2: On the near term side, the initial target of 200 million pounds per year of copper from our leachion issue has essentially been met. And now we're focusing on sustaining it and scaling it further.
And now we're focusing on sustaining it and scaling it further.
Speaker 2: On prior calls, we discussed our initiatives to retain more heat in the stockpiles and those activities are continuing.
On prior calls we discussed our initiatives to retain more heat in the stockpiles and those activities are continuing.
Speaker 2: A big driver of the success in the last several months has been on our leach everywhere work, where we're applying solution to areas of the stockpile, which have not previously been leached.
A big driver of our success in the last several months has been on our Leach everywhere work, where we're applying solution to areas of the stockpile, which has not previously been leached.
Kathleen Quirk: We see ongoing opportunities for additional scale as we aggressively advance this highly valuable initiative. Additionally, we're continuing to focus on enhancing productivity in our U.S, mining and milling operations. We know there's opportunity here to improve and it's a key focus area for us.
Speaker 2: We're also conducting targeted drilling to inject solution areas within the stock pile where solution may have been blocked over time.
We're also conducting targeted drilling to inject solution areas within the stockpile where solution may have been blocked over time.
Speaker 2: And our data and modeling can now provide information that targets specific areas of opportunity, and we're gearing out to do this more at scale. We now believe we can scale these activities and double the incremental copper to 400 million pounds per annum over time. This is just from applying our operating practices at a larger scale without relying on new technology.
And our data and modeling and can now provide information that target specific areas of opportunity and we're gearing up to do this more at scale. We now believe we can scale these activities and double the incremental copper to 400 million pounds per annum over time. This is just from our apply.
Kathleen Quirk: It's Sara Verde in Peru, where we operate one of the largest concentrate sites in the world. The mill average over 430,000 tons per day during the quarter, that was a new quarterly record. You recall this is a site that was designed at 360,000 tons per day. Over time, our team has families to improve efficiencies there. I'm really proud of the Sara Verde team. At Grassburg, our mill rates averaged 207,000 tons per day for the quarter, processing high grades of copper and gold to war.
Our operating practices at a larger scale without relying on new technologies. We're also continuing our work on the new technologies front, and that's going to give us the opportunity with success to reach our ultimate goal of 800 million pounds per annum from this initiative over the next.
Speaker 2: We're also continuing our work on the new technology front and that's going to give us the opportunity with success to reach our ultimate goal of 800 million pounds for anum from this initiative over the next three to five years.
Three to five years.
Speaker 2: Remind everybody we have 40 billion pounds of copper in our stockpiles that's already been mined. This is not in our reserves and it's an opportunity for us to get recovery from this copper that previously was thought to be waste material.
Remind everybody we have 40 billion pounds of copper in our stockpiles. So that's already been mined this is not in our reserves.
Kathleen Quirk: The production for the quarter exceeded 400 million pounds of copper and it will 500,000 ounces of gold. That was in a single quarter, demonstrating the size and scale of this operation. It's several days of the mill throughput and excess of 220,000 tons per day.
And it's an opportunity for us to to get recoveries. Some of this copper that previously was thought to be waste material.
Speaker 2: This initiative has the best economics of anything in our portfolio, given its low capital intensity and low incremental operating costs, and we're pursuing it very quickly.
This initiative has the best economics of anything in our portfolio given its low capital intensity and low incremental operating costs and we're pursuing it very aggressively.
Kathleen Quirk: Highlight of the quarter was the performance of Grassburg block cave. We mined from that over 130,000 tons per day on average. We installed a new territory crusher at the Grassburg block cave, which gives us the ability to process more material from that large order body and we recently reached new records of over 160,000 tons per day. We're working to complete the new sag mill at Grassburg. We're expected to complete construction by the end of the year and that will give us more opportunities in the future to ramp up our mill rate even further.
Speaker 2: Our productivity in the US, which I mentioned earlier, are focused on rebuilding the experience of our workforce. We've had a large number of new hires in recent years.
Our productivity is in the U S, which I mentioned earlier.
Focus on rebuilding the experience of our workforce, we've had a large number of new hires in recent years.
Speaker 2: and we need to rebuild our skills and experience, enhancing our practices to achieve better equipment, performance and reliability, and taking advantage of new technologies and automation to restore and improve on productivity metrics that we can during the pandemic.
And we need to rebuild our skills and experience of enhancing our practices to achieve better equipment performance and reliability and taking advantage of new technologies and automation to restore and improve on productivity metrics that weakened during the pandemic.
Speaker 2: By increasing our productivity in the US, we have the opportunity to add an additional 200 million pounds per year from our existing assets with limited capital and assets.
By increasing our productivity in the U S. We have the opportunity to add an additional 200 million pounds per year from our existing assets with limited capital investment.
Kathleen Quirk: Turning to slide six, we talk about our growth initiatives and as we look at the situation where we have growing demand for copper over the next several years and the limitations and the high capital intensity and risk for green field projects, our strategy is really focused on development of extensions of our existing operations and our portfolio of ground field opportunities. We characterize our growth in near term, medium term and longer term development options.
Speaker 2: We're also continuing our work on a potential expansion of the Baghdad mine in Northwest Arizona. We're completing a feasibility study and we're taking some steps now to enhance optionality for the future, including making some investments in autonomous college and our mining operations at Baghdad, and we're advancing investments in our tailing infrastructure for the future. We are setting up the future.
We're also continuing our work on a potential expansion of the Bagdad mine in northwest, Arizona, We're completing a feasibility study and we're taking some steps now to enhance optionality for the future, including making some investments in autonomous haulage.
In our mining operations at Bagdad, and we're advancing investments in our tailing infrastructure for the future.
We are setting up Baghdad.
Speaker 2: expansion project as an option for the future. The timing of it will depend on market conditions. We're looking at the increased capital cost requirements for projects and consider that. We're also looking at the availability of labor and we'll make all those reviews before finalized in our decision on the timing of this project. But it's a very-
Kathleen Quirk: On the near term side, the initial target of 200 million pounds per year of copper from our leach initiative has essentially been met and now we're focusing on sustaining it and scaling it further. On prior calls, we discussed our initiatives to retain more heat in the stockpiles and those activities are continuing. A big driver of the success in the last several months has been on our leach everywhere work where we're applying solution to areas of the stockpile which have not previously been leaked.
Our expansion project as an option for the future.
<unk> of it will depend on market conditions, we're looking at the increased capital cost requirements for projects and we'll consider that we're also looking at the availability of labor and we will make all of those those reviews before finalizing our decision on the timing of this project.
Kathleen Quirk: We're also conducting targeted drilling to inject solution to areas within the stockpile where solution may have been blocked over time. And our data and modeling can now provide information that targets specific areas of opportunity, and we're gearing out to do this more at scale. We now believe we can scale these activities and double the incremental copper to 400 million pounds per annum over time. This is just from applying our operating practices at a larger scale without relying on new technologies.
But it's a very large.
Speaker 2: very large resource for us. We've got significant reserves standing over 80 years there and a good opportunity for expansion in the future at the right time.
Very large resource force who've got significant reserve spanning over 80 years, there and a good opportunity for expansion in the future at the right time.
Speaker 2: We also have a major opportunity for expansion at
We also have a major opportunity for expansion at.
Speaker 2: Our lab remain in Chile. This is a very large resource that could support a concentrator on the size of the concentrator we added at Cerro Verde several years ago.
Our <unk> mine in Chile.
This is a very large resource that could support a concentrate or on the size of the concentrator, we added at Cerro Verde several years ago.
Speaker 2: When we're testing the economics to update project capital costs and why are the recent capital costs experienced of other large projects, and in parallel we're planning investments in water infrastructure to support the current operation and provide optionality for the future. Yeah, and this is about options for expansion at the right time and we've got the portfolio with a lot of options valued within the free portfolio.
Re testing the economics to update project capital costs in light of the recent capital cost experience of other large projects and in parallel we're planning divestments and water infrastructure to support the current operation and provide optionality for the future Yeah and this is about options for.
Kathleen Quirk: We're also continuing our work on the new technology front, and that's going to give us the opportunity with success to reach our ultimate goal of 800 million pounds per annum from this initiative over the next three to five years. To remind everybody we have 40 billion pounds of copper in our stockpiles that's already been mined. This is not in our reserves, and it's an opportunity for us to get recovery from this copper that previously was thought to be waste material.
Our expansion at the right time, and we've got the portfolio with a lot of option value within the Freeport portfolio.
Speaker 2: Our Cooching Lear development in Grasberg is proceeding on schedule.
Our cuccinelli our development in Grasberg is proceeding on schedule.
Speaker 2: We expect a commence production by 2030. A huge, huge ore body ramping up to 550 million pounds of copper and 560,000 ounces of gold in next decade. We're also conducting some additional exploration in the grass bird district. Will we have identified some potential below our deep MLZ ore bodies?
We expect to commence production by 2030, the huge huge of ore body ramping up to 550 million pounds of copper and 560000 ounces of gold.
Kathleen Quirk: This initiative has the best economics of anything in our portfolio given its low capital intensity and low incremental operating costs, and we're pursuing it very aggressively. Our productivity in the U.S., which I mentioned earlier, are focused on rebuilding the experience of our workforce. We've had a large number of new hires in recent years, and we need to rebuild our skills and experience. Enhancing our practices to achieve better equipment performance and reliability, and taking advantage of new technologies and automation to restore and improve on productivity metrics that weaken during the pandemic. By increasing our productivity in the U.S., we have the opportunity to add an additional 200 million pounds per year from our existing assets with limited capital investment.
In the next decade.
We're also conducting some additional exploration in the Grasberg district, where we have identified some potential below our deep ml zinc ore body, where.
Speaker 2: We're continuing to advance discussions in Indonesia for extension beyond 2041. That would open the door for continuation of large scale mining and potential additional development option in one of the world's largest and highest grade cavern gold mining districts.
We're continuing to advance discussions in Indonesia for extension beyond 2041.
That would open the door for continuation of large scale mining and potential additional development options and one of the world's largest and highest grade copper and gold mining districts.
Speaker 2: Longer term, we're focused on a major opportunity that we have in the US at the Safroud Loan Star District. We've identified a significant resource there, and we continue to see the Safroud District with the potential to add another cornerstone asset of scale in the US.
Longer term, where we're focused on a major opportunity that we have in the U S. At the Safford Lone Star District, we've identified a significant resource there and we continue to see the Safford district with a potential to add another cornerstone asset of scale in the U S.
Speaker 2: We're in an outstanding position as we look at our large resource and reserve position and the experience of our team to continue our leadership role in supplying copper to the world with growing requirements. We're going to continue to be disciplined in our approach. We're going to be focused on executing projects so we can create value for Sheet of Hope.
We're in an outstanding position as we look at our large resource and reserve position.
Kathleen Quirk: We're also continuing our work on a potential expansion of the Baghdad mine in Northwest Arizona. We're completing a feasibility study, and we're taking some steps now to enhance optionality for the future, including making some investments in autonomous college and our mining operations at Baghdad, and we're advancing investments in our tailing infrastructure for the future.
And experience of our team to continue our leadership role in supplying copper to a world where growing requirements, we're going to continue to be disciplined in our approach.
We're gonna be focused on executing projects, where we can create value for shareholders.
Speaker 2: Slide seven provides our three year outlook for sales volume.
Slide seven provides our three year outlook for sales volumes.
Speaker 2: You'll see this is largely unchanged from our prior forecast. We've increased our 2023 copper sales volumes by about 40 million pounds, and that reflects the updated shipping schedules expected in Indonesia. There's no material changes in guidance for 24 or 25.
You'll see this is largely unchanged from our prior forecast.
Kathleen Quirk: We are setting up Baghdad expansion project as an option for the future. The timing of it will depend on market conditions. We're looking at the increased capital cross requirements for projects and consider that. We're also looking at the availability of labor, and we'll make all those reviews before finalize in our decision on the timing of this project. But it's a very large, very large resource for us. We've got significant reserve standing over 80 years there, and a good opportunity for expansion in the future at the right time.
We've increased our 2023 copper sales volumes by about 40 million pounds.
And that reflects the updated shipping schedules expected in Indonesia.
There's no material changes in guidance for 'twenty, four or 'twenty five.
Speaker 2: We do believe we have some upside to these numbers with continued success in our leach efforts and our work on productivity enhancements in the US.
We do believe we have some some upside to these numbers with continued success in our leach efforts and our work on productivity enhancements in the U S.
Speaker 2: We're turning to our regional data on slide eight. We show our projected 2023 volumes and unit net cash cost by region.
Turning to our regional data on slide eight.
We show our projected 2023 volumes and unit net cash costs by region.
Kathleen Quirk: We also have a major opportunity for expansion at our lava mine in Chile. This is a very large resource that could support a concentrator on the size of the concentrator. We added at Cerro Verde several years ago.
Speaker 2: The Americas, including North American South America, comprised about 53% of our 2023 copper sales and all of our malibutum sales.
The Americas, including North America, and South America comprise about 63% of our 2023 type of sales and all of our molybdenum sales.
Speaker 2: Indonesia represents 37% of our copposeals and all of our gold sales.
Indonesia represents 37% of our copper sales and all of our gold sales.
Kathleen Quirk: We're retesting the economics to update project capital costs and allow the recent capital cost experience of other large projects. And in parallel, we're planning investments in water infrastructure to support the current operation and provide optionality for the future. This is about options for expansion at the right time, and we've got the portfolio with a lot of options value within the free portfolio.
Speaker 2: The Americans' volumes are similar to prior forecasts and are sales estimates from Indian Asians that increase to reflective shipping schedules, as I mentioned earlier.
Americas volumes are similar to prior forecasts and our sales estimates from Indonesia and increase to reflect the shipping schedules that I mentioned earlier.
Speaker 2: On a consolidated basis, our unit net cash costs for the year are forecast for the $1.63 per pound. It's slightly above the forecast, prior forecast of 155.
On a consolidated basis, our unit net cash cost for the year are forecast at $1 63 per pound.
Slightly above the forecast a prior forecast of $1 55.
Speaker 2: Devon sense of that relates to export duties, which remain under discussion with the Indonesian government. We've also incorporated some higher costs for energy compared with the power forecast.
Seven cents of that relates to export duties.
Kathleen Quirk: Our Coaching Liar Development and Grasper is proceeding on schedule. We expect a commence production by 2030, a huge, huge ore body ramping up to 550 million pounds of copper and 560,000 ounces of gold in next decade. We're also conducting some additional exploration in the Grassford District where we have identified some potential below our deep MLZ ore body.
<unk> remain under discussion with the Indonesian government. We've also incorporated some higher costs for energy compared with the prior forecast.
Speaker 2: And after moderating the first half of the year, we're seeing an energy cost, particularly for diesel fuel rising.
And after moderating in the first half of the year, where we're seeing in energy costs, particularly for diesel fuel rising.
Speaker 2: We're continuing to work to enhance productivity, to mitigate the cost increases with experience since 2022, really across the Bullwood for labor.
We're continuing to work to enhance productivity to mitigate the cost increases we've experienced since two.
2022 really across the board for labor.
Kathleen Quirk: We're continuing to advance discussions in Indonesia for extension beyond 2041. That would open the door for continuation of large scale mining and potential additional development option in one of the world's largest and highest grade copper and gold mining districts.
Speaker 2: Our contract maintenance services, equipment, component costs, and in a series of input costs that have risen. And we're working hard to try to mitigate those through effective cost management and productivity enhanced.
Our contract maintenance services equipment component cost in a in a series of input costs that have risen.
We're working hard to to to try to mitigate those through.
Effective cost management and productivity enhancements.
Speaker 2: Turning to cash flows on slide nine, we model our results for EBITDA and cash flow for 2024 or 2025, showing a price range of $4 to $5 copper.
Kathleen Quirk: Longer term, we're focused on a major opportunity that we have in the US at the Stafford Lone Star District. We've identified a significant resource there and we continue to see the Stafford District as with the potential to add another cornerstone asset of scale in the US.
Turning to cash flows on slide nine.
We model our results for EBITDA and cash flow.
For 2024 and 2025.
Knowing a price range of four to $5 copper.
Speaker 2: We've got sensitivities on the page so you can use for looking at the changes based on changes in input costs or copper prices.
We've got sensitivities on the page. So you can use for for looking at the changes based on changes in input cost or for copper prices.
Kathleen Quirk: We're in an outstanding position as we look at our large resource and reserve position and the experience of our team to continue our leadership role in supplying copper to the world with growing requirements. We're going to continue to be disciplined in our approach and we're going to be focused on executing projects so we can create value for sheater holders.
Speaker 2: The annual EBITDA would range under these scenarios from nearly $10 billion per annum, a $4 copper to $14 billion at $5 copper, and operating cash flows would range from $7 to $10 billion under these assumptions.
The annual EBITDA would range under these scenarios from nearly $10 billion per.
And I'm at $4 copper to $14 billion at $5 copper and operating cash flows would range from $7 billion to $10 billion under these assumptions.
Kathleen Quirk: Slide 7 provides our three-year outlook for sales volumes. You'll see this is largely unchanged from our prior forecast. We've increased our 2023 copper sales volumes by about 40 million pounds and that reflects the updated shipping schedules expected in Indonesia.
Speaker 2: with long-lived reserves and large-scale production, well-position, the benefit from future metals-intensive growth, and that'll provide opportunities for organic investments and cash returns under a performance-based payout framework.
With long life reserves in large scale production well position, so that the benefit from future metals intensive growth and that will provide opportunities for organic investments and cash returns under our performance based pay out framework.
Kathleen Quirk: There's no material changes in guidance for 24 or 25. We do believe we have some some upside to these numbers with continued success in our leach efforts and our work on productivity enhancements in the US.
Speaker 2: On slide 10, we show our current forecast for capital expenditures for 23 and 24. 3.2 billion total for 2023 is similar to our prior estimate. And our capital for 2024 is 3.9 billion compared with the prior estimate of 3.8 billion.
On Slide 10, we show our current forecast for capital expenditures for 'twenty, three and 'twenty four.
A $3 2 billion total for 2023 is similar to our prior estimate.
Kathleen Quirk: We're turning to our regional data on slide 8. We show our projected 2023 volumes and unit net cash costs by region. The Americas including North America and South America comprise about 53% of our 2023 copper sales and all of our legitimate sales. Indonesia represents 37% of our copper sales and all of our gold sales. The Americas volumes are similar to prior forecast and our sales estimates from Indonesia have been increased to reflective shipping schedules I mentioned earlier.
And our capital for 2020 for US is $3 9 billion compared with the prior estimate of $3 8 billion.
Speaker 2: We're 2024. We've added some discretionary capital to commence a new project in Indonesia to transition our energy source from coal to clean our LNG over the next three to four years. And we expect to start that project next year.
For 2024, we've added some discretionary capital to commence a new project in Indonesia.
<unk>, our energy source from coal to cleaner LNG over the next three years to four years and we expect to start that project next year.
Speaker 2: The discretionary project totaled less than $2 billion over $23 and $24. This category reflects the capital investments we're making.
The discretionary projects total a little less than $2 billion over 23 and 'twenty four this category reflects the capital investments we're making.
Speaker 2: new projects that under our financial policy are funded with a 50% of available cash that's not distributed. We've got some details on those projects and the reference materials.
The new projects that under our financial policy are funded with a 50% of available cash that's not distributed we've got some details on those projects and the reference materials.
Kathleen Quirk: On a consolidated basis our unit net cash costs for the year of forecast at $1.63 per pound. It's slightly above the forecast, prior forecast of 155. Seven cents of that relates to export duties which remain under discussion with the Indonesian government. We've also incorporated some higher costs for energy compared with the prior forecast and after moderating the first half of the year we're seeing an energy cost particularly for diesel fuel rising. We're continuing to work to enhance productivity to mitigate the cost increases with experience since 2022 really across the board for labor.
Speaker 2: Slide 7, excuse me, slide 11, we've included some updated pictures of the Smelter Project in Indonesia. This is a major undertaking. It's being executed very efficiently or making steady progress toward completion.
Slide seven I mean excuse me it's on slide 11, we've included some updated pictures of the smelter project in Indonesia. This is a major undertaking.
And are undertaking it's being executed very efficiently, we're making steady progress toward completion.
Speaker 2: For the Greenfields Delta, we're now 84 percent complete on construction, and we expect to begin commissioning the project by the middle of next year and ramping up to full production by the end of the year.
For the Greenfield smelter, we're now 84% complete on construction and we expect to begin commissioning the project by the middle of next year and ramping up to full production by the end of the year.
Speaker 2: We're also nearing completion of an expansion project that we're doing with our partner to expand the existing smelter in Indonesia. We expect construction to be completed by the end of this year in 2023. We're really pleased with the strong execution of our internal project team and our outside contractor to contain costs and meet schedules in a very complex environment for major project development.
We're also nearing completion of an expansion project that we're doing with our partner <unk> to to expand the existing smelter in Indonesia, we expect construction to be completed by the end of this year in 2023.
Kathleen Quirk: Our contract maintenance services equipment component costs in a series of input costs that have risen and we're working hard to try to mitigate those through effective cost management and productivity enhancements.
Really pleased with the strong execution of our internal project team and our outside contractor to contain costs and lease schedules and a very complex environment for major project development.
Kathleen Quirk: Turing to cash flows on slide 9, we model our results for EBITDA and cash flow for 2024 or in 2025, showing a price range of $4 to $5 copper. We've got sensitivities on the page so you can use for looking at the changes based on changes in input costs or or copper prices. The annual EBITDA would range under these scenarios from nearly $10 billion per annum at $4 copper to $14 billion at $5 copper and operating cash flows would range from $7 to $10 billion under these assumptions.
Speaker 2: On slide 12, this wanted to update you on some climate initiatives.
On slide 12, I'm just wanted to update you on some climate initiatives.
Speaker 2: We published an updated climate report during the third quarter, which is available on our website.
We published an updated climate report during the third quarter, which is available on our website.
Speaker 2: But I mentioned in Indonesia we're advancing plans to develop the transition, our coal to LNG. We have plans to develop a 265 megawatt gas fire combined cycle facility and that would replace the coal units that were developed there over 25 years ago.
But I mentioned in Indonesia, we're advancing plans to develop.
The transition of our coal to to LNG, we have plans to develop a 265 megawatt gas fired combined cycle facility and that would replace the coal units that were developed there over 25 years ago.
Speaker 2: The project has a cost of roughly a billion dollars.
The project has a cost of roughly $1 billion.
Speaker 2: And the economics, as we looked at it, would eliminate the cost to refurbish and expand the existing coal units over time. So the incremental economic cost of this project is roughly 400 million. Importantly, the transition would reduce significantly CTFI's greenhouse gas emissions.
And the economics as we looked at it would eliminate the cost to refurbish and expand the existing coal units over time.
Kathleen Quirk: With long live reserves and large-scale production, well-position, the benefit from future metals intensive growth, and that will provide opportunities for organic investments and cash returns under a performance-based payout framework.
The incremental economic cost of this project is is roughly $400 million.
Importantly, the transition would reduce significantly ETF is a greenhouse gas emissions and together with other initiatives <unk> undertaken undertaken the.
Kathleen Quirk: On slide 10, we show our current forecast for capital expenditures for 2023 and 24, $3.2 billion total for 2023 is similar to our prior estimate and our capital for 2024 is $3.9 billion compared with the prior estimate of $3.8 billion.
Speaker 2: And together with other initiatives, PTA5s undertaken the...
Speaker 2: Total reduction would be on the order of 60% compared to the 2018 baseline. So it's a very exciting project for us looking forward.
Total reduction would be on the order of 60% compared to the 2018 baseline. So it's a very exciting project for US looking forward. We're also very pleased to report that we have a new power purchase agreement in Peru at Cerro Verde that will allow Cerro Verde the benefit of.
Speaker 2: We're also very pleased to report that we have a new power purchase agreement in Peru at Saravirati. That will allow Saravirati the benefit of 100% of its power from renewable sources in The new power purchase agreement will allow Saravirati the benefit of 100% of its power from renewable sources in Peru.
Kathleen Quirk: For 2024, we've added some discretionary capital to commence a new project in Indonesia to transition our energy source from coal to clean our LNG over the next three to four years and we expect to start that project next year. The discretionary project totaled less than $2 billion over 23 and 24.
100% of its power from renewable sources in 2026.
Speaker 2: And finally, on slide 13, we wanted to reiterate the financial policy priorities centered on a strong balance. She cash returns to shareholders and investments in value and hand-in-thing growth projects.
And finally on slide 13, we wanted to reiterate the financial policy priorities centered on our strong balance sheet cash returns to shareholders and investments and value enhancing growth projects.
Kathleen Quirk: This category reflects the capital investments we're making in new projects that under our financial policy are funded with a 50% of available cash that's not distributed. We've got some details on those projects and the reference materials.
Speaker 2: The balance sheet is strong. We've got strong credit metrics, significant flexibility within our debt targets to execute on our project.
Balance sheet is strong we've got strong credit metrics significant flexibility within our debt targets to execute on our projects.
Speaker 2: same time we've distributed over 3.5 billion to shareholders through dividends and share purchases.
Same time, we distributed.
Kathleen Quirk: Slide 7, I mean, excuse me, slide 11, we've included some updated pictures of the Smelter Project in Indonesia. This is a major undertaking, it's being executed very efficiently or making steady progress toward completion.
Over $3 5 billion to shareholders through dividends and share purchases.
Speaker 2: And we have an attractive future long-term portfolio that will enable us to continue to build long-term value for shareholders.
And we have an attractive future long term portfolio that will enable us to continue to build long term value for shareholders.
Speaker 2: We've got to continue to focus on the current situation now and we're going to continue to monitor current market conditions. We'll carefully manage the timing of our projects to ensure our financial flexibility remains strong.
We've got to continue to focus on the current situation, though and we're going to continue to monitor current market conditions, we will carefully manage the timing of our projects to ensure our financial flexibility remains strong.
Kathleen Quirk: For the Greenfield Smelter, we're now 84% complete on construction and we expect to begin commissioning the project by the middle of next year and ramping up to full production by the end of the year. We're also nearing completion of an expansion project that we're doing with our partner to expand the existing Smelter in Indonesia. We expect construction to be completed by the end of this year in 2023. We're really pleased with the strong execution of our internal project team and our outside contractor to contain costs and lease schedules in a very complex environment for major project development.
Speaker 2: Our team has really experienced in navigating challenging conditions while maintaining a focus on pursuing long-term value in the business and executing our plans responsibly safely and efficient.
Our team is really experienced in navigating challenging conditions, while maintaining a focus on pursuing long term value in the business and executing our plans responsibly safely and efficiently.
Speaker 2: That concludes our prepared remarks and appreciate all your attention and interest and will now take your question.
That concludes our prepared remarks, and we appreciate all your attention and interest and we'll now take your questions.
Speaker 1: Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, press star one on your touch.
Ladies and gentlemen, we will now begin the question and answer session. If you wish 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 queue. Please press star one again, if you are using a speakerphone. Please pick up your handset before pressing the numbers.
Speaker 1: If your question has been answered or you wish to remove yourself from the queue, please press star 1 again. If you are using a speaker phone, please pick up your handset before pressing the
Kathleen Quirk: On slide 12, just wanted to update you on some climate initiatives. We've published an updated climate report during the third quarter which is available on our website. I mentioned in Indonesia we're advancing plans to develop the transition, our coal to LNG. We have plans to develop a 265 megawatt gas fire combined cycle facility and that would replace the coal units that were developed there over 25 years ago. The project has a cost of roughly $1 billion and the economics, as we looked at it would eliminate the cost to refurbish and expand the existing coal units over time.
Speaker 1: We ask that you limit your questions to one. If you have additional questions, please return to the queue. One moment please for the first question.
Ask that you limit your questions to one did you have additional questions. Please return to the Q1 moment. Please for the first question.
Speaker 1: The first question will come from the line of Alex Hacking with City. Please go ahead.
The first question will come from the line of Alex hacking with Citi. Please go ahead.
Speaker 4: Yeah, morning, Richard and Kathleen. I wanted to ask you a couple of questions on US Operation.
Yes, good morning, Richard and Kathleen.
Wanted to ask you a couple of questions on U S operations could.
Speaker 4: Could you maybe discuss the cost performance there? That seems like it's a little bit higher than guidance. And how?
Could you maybe discuss the cost performance that seems like it's a little bit higher than guidance.
How you see that going forward.
Speaker 4: And then secondly, just on production, just so I understand, you know, production, this course is.
And then secondly, just on production just so I understand <unk>.
Production. This quarter was about 340 million pounds does that include.
Speaker 4: about 340 million pounds. Does that include
Speaker 4: The incremental 46 million pounds from the new leaching. Is that all in the US?
The incremental 46 million pounds for many leaching is that all in the U S.
Speaker 4: And I guess if so, that sort of implies that production without those pounds would be below 300 versus like 370 million last year. So, you know, maybe just some comments around that and how you see the leaching, you know, impacting the
And I guess if so.
Kathleen Quirk: So the incremental economic cost of this project is roughly $400 million. Importantly, the transition would reduce significantly PTFI's greenhouse gas emissions. And together with other initiatives, PTFI has undertaken the total reduction would be on the order of 60% compared to the 2018 baseline.
Sort of implies a production without those pounds would be below 300 versus like $317 million last year. So maybe.
Maybe just some comments around that and how you see the leaching.
Impacting the production profile that going forward. Thanks.
Thanks out.
Speaker 2: I mean your question is right in terms of...
I mean your question is is it right in terms of.
Speaker 2: The performance in the U.S. of the base business. We're continuing to experience some challenges on photos.
Kathleen Quirk: So it's a very exciting project for us looking forward.
The performance in the U S of the base business, where we're continuing to experience some challenges on productivity and we've got you know we've been hiring people. We've got a lot of new people in our workforce and so we're very focused on improving.
Kathleen Quirk: We're also very pleased to report that we have a new Power Purchase Agreement in Peru at Sara Verde that will allow Sara Verde the benefit of 100% of its power from renewable sources in 2026.
Speaker 2: We've got, you know, we've been hiring people. We've got a lot of new people in our workforce.
Speaker 2: And so we're very focused on improving the productivity in the US. We're focused on maintenance. We've had some challenges with premature failures.
The productivity in the in the U S.
Kathleen Quirk: And finally on slide 13, we wanted to reiterate the financial policy priorities centered on a strong balance sheet, cash returns to shear holders, and investments in value enhancing growth projects. The balance sheet is strong, we've got strong credit metrics, significant flexibility within our debt targets to execute on our projects. Same time, we've distributed over 3.5 billion to shear holders through dividends and shear purchases. And we have an attractive future long-term portfolio that will enable us to continue to build long-term value for shareholders.
Focused on on maintenance, we've had some challenges with was with premature failures and some maintenance challenges that where we're getting caught up on them. We've also had a lot of.
Speaker 2: and some maintenance challenges that we're getting caught up on. We've also had a lot of increased costs related to component parts.
Increased costs related to component parts.
Speaker 2: We've had some increases in the cost of labor, particularly contract labor.
We've had some increases in <unk> and the cost of labor, particularly contract labor, you've probably seen all the activity and in Arizona with outside of copper with a lot of investment and in various industries. That's a it's a very competitive market. So the cost.
Speaker 2: You've probably seen all the activity in Arizona with outside of copper with a lot of investment and various industries. It's a very competitive market. So the cost rises.
Kathleen Quirk: We've got to continue to focus on the current situation, though, and we're going to continue to monitor current market conditions. We'll carefully manage the timing of our projects to ensure our financial flexibility remains strong. Our team has really experienced in navigating challenging conditions while maintaining a focus on pursuing long-term value in the business and executing our plans responsibly, safely and efficiently.
The cost rises in in North America has been higher than what we've experienced elsewhere of course, we've also had the benefit in international locations of the stronger dollar, which offset some of the labor cost.
Speaker 2: in North America have been higher than what we've experienced elsewhere of course.
Speaker 2: We've also had the benefit in international locations of the stronger dollar.
Speaker 2: which offset some of the labor costs.
Speaker 2: Impacts you see that more in the US
Impacts so you see that more in the in the U S, but youre right that without the leach pounds, the incremental leach pounds that we.
Speaker 2: But you write that without the leach pounds, the incremental leach pounds that we accomplished either day, we would have had lower production.
Unknown Attendee: That concludes our prepared remarks and appreciate all your attention and interest and will now take your questions. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, press star one on your touch phone. If your question has been answered or you wish to remove yourself from the queue, please press star one again. If you are using a speaker phone, please pick up your handset before pressing the numbers. We ask that you limit your questions to one. If you have additional questions, please return to the queue. One moment please for the first question.
Accomplished year to date.
We would've had lower production.
Speaker 2: And what we need to do is really get both of those fly wheels going at the same time because the more we place and we've been missing some of our placements in terms of the mind rates and the placements on the leach piles, the more opportunity we have to get more out of it through these leach initiatives.
And what we need to do is really get both of those flywheels going at the same time, because the more we place and we've been missing some of our our placements in terms of the mine rates and the placements on the Leach piles.
The more opportunity we have to get more out of it through these leach initiatives.
Speaker 2: So it's a big focus of gosh and a whole team to really work on getting productivity up. If you look at grades.
So it's a big focus of Josh and our whole team.
Kathleen Quirk: The first question will come from the line of Alex Hackingwood City. Please go ahead. Yeah, morning, Richard and Kathleen. I wanted to ask a couple of questions on US operations. Could you maybe discuss the cost performance there? That seems like it's a little bit higher than guidance and how you see that going forward. And then so I understand production cost is about 340 million pounds. Does that include the incremental 46 million pounds from the new leaching?
To really work on on getting productivity up if you look at grades.
Speaker 2: you know we're in a period right now at morancy where we've got uh... low grades and hallmark of report has been to
We're in a period right now at Morency, where we've got low.
Low grades and a hallmark of Freeport has been too.
Speaker 2: managed cost very well given the low grades we have.
Manage cost very well.
Given the low rates, we have them, but we've got to work our way through that and get a flywheel moving again to get productivity up in terms of the the leach pounds and the impact on cost.
Speaker 2: But we've got to work our way through that and get our flywheel moving again to get productivity up. In terms of the leach pounds and the impact on costs.
Speaker 2: What really needs to happen with the Leech project.
What really needs to happen with with the Leach project.
Kathleen Quirk: Is that all in the US? and I guess if so, that sort of implies that production without those pounds would be below 300 versus like 370 million last year, so maybe just some comments around that and how you see the leaching, you know, impacting the production profile that going forward. Thanks. Thanks, Alex.
Speaker 2: To really start seeing the impact on unit cost is...
Two two to really start seeing the impact on on unit cost is.
Speaker 2: enough confidence to be able to increase our reserves. And that will allow us to essentially, in the financial results, see lower unit costs. As we add reserves and we're spreading costs over larger number of pounds, that economy of scale will start to come through. So the more confidence we get in this, the more we're able to.
Enough confidence to be able to increase our reserves and that will allow us to essentially in our in the financial results see lower unit costs as we add reserves and were spreading cost over a larger number of pounds that economy of scale.
Kathleen Quirk: I mean, your question is right in terms of the performance in the U.S, of the based business. We're continuing to experience some challenges on productivity. We've got, you know, we've been hiring people, we've got a lot of new people in our workforce and so we're very focused on improving the productivity in the U.S. We're focused on maintenance, we've had some challenges with premature failures and some maintenance challenges that we're getting caught up on.
And we'll start to come through so the more confidence we get in this the more we're able to act.
Speaker 2: actually put these opportunities into reserves and have enough confidence to do that. That's when you start to see the impact on the net unit cash cost. But I don't know if that was a long answer, but did that answer your question?
Actually put these these opportunities into reserves and have enough confidence to do that and that's when you'll start to see the impact on the on the net unit cash costs, but.
I don't know if that that was a long answer but did that answer your question.
Speaker 4: Yeah, that was a great answer, Kathleen. I really appreciate all the color. Thanks so much and good luck with everything.
Yes that was a great answer Catherine I really appreciate all the color. Thanks, so much and good luck with everything.
Thanks, Alex.
Your next question comes from the line of Christopher <unk> with Jefferies. Please go ahead.
Speaker 1: Your next question comes from a line at Chris LeFimina with Jeffries. Please go ahead.
Kathleen Quirk: We've also had a lot of increased costs related to component parts. We've had some increases in the cost of labor, particularly contract labor. You've probably seen all the activity in Arizona with outside of copper, with a lot of investment in various industries. It's a very competitive market. So the cost rises in North America have been higher than what we've experienced elsewhere. Of course, we've also had the benefit in international locations of the stronger dollar which offset some of the labor costs impact.
Speaker 5: Hi, I'm Richard, I'm Kathleen, thanks for taking my question. I just wanted to ask about Elabra, which has tremendous potential. You've talked about it for a long time. You could build a big, no project there.
Hi, Hi, Richard Hi, Chad. Thank you. Thanks for taking my question I just wanted to ask about Libra.
<unk> has tremendous potential you've talked about it for a long time to build the big Mill project there.
Speaker 5: with the clarity net around Chile and mining taxes, I would assume that's helpful. And also, I'm not sure if you've looked into the recent double taxation treaty, which I think for US companies makes Chile potentially a more attractive and death.
With the clarity around.
Mining taxes, I would assume thats helpful and also.
Not sure if you've looked into the recent double taxation treaty, which I think for U S companies makes Chile potentially more attractive investment. So I'm wondering first just kind of how you're thinking about that now and we can sort of expect if you do progression. This project in terms of timing or capital cost scale, and then maybe as importantly.
Speaker 5: So, wondering first, kind of how you're thinking about that now, and what we can sort of expect if you do progress in this project in terms of timing, capital cost scale, and then maybe as importantly, your partner's ability to help fund whatever you develop there. So, as soon as it's going to be a capital intensive project, an extra caduco has the capital to contribute alongside you with this. So, you have to think about that, and again, there's a double taxation treaty between Chile and the US to affect the economic of this project to potentially drive an investment decision.
Your partner's ability to help fund whatever you did opex I assume it's going to be a.
Kathleen Quirk: So you see that more in the U.S. But you're right that without the leach pounds, the incremental leach pounds that we accomplished here today, we would have had lower production. And what we need to do is really get both of those flywheels going at the same time. Because the more we place and we've been missing some of our placements in terms of the mining rates and the placements on the leach piles, the more opportunity we have to get more out of it through these leach initiatives.
Capital intensive project I'm not sure if <unk> has the capital to contribute alongside with this so how should we think about that and again does that double taxation treaty between Chile, and the U S affect the economics of this project to potentially driving investment decisions. Thank you.
Speaker 2: Thanks, Chris. Both of those items that you mentioned, the recent clarity around taxation in Chile and the issue between the treaty between the US and Chile are both helpful. Quite frankly, if that hadn't been resolved, the latter had not been resolved, that would have posed a big challenge for us in developing the project. But...
Thanks, Chris both of those items that you mentioned that the recent clarity around taxation in Chile, and the issue between the treaty between the U S and Chile are both powerful quite.
Quite frankly, if that hadn't been resolved the ladder had not been resolved that would've poses a big challenge for us in developing the project, but yeah. That's been resolved and so now we're really turning to.
Speaker 2: Yeah, that's been resolved. And so now we're really turning to the economic side of the equation. And we've been watching what's been going on in Chile with other major projects.
Kathleen Quirk: So it's a big focus of gosh and our whole team to really work on getting productivity up. If you look at grades, you know, we're in a period right now at Morency where we've got low grades and the hallmark of Freeport has been to manage costs very well, given the low grades we have. But we've got to work our way through that and get our flywheel moving again to get productivity up.
The economic side of the equation.
And we've been watching what's been going on in Chile with other major projects.
Speaker 2: You know, we get a lot of work on this project, on the Alopper project, and it has good economics, but we want to retest those economics with current.
We did a lot of work on this project on our end and on the El Abra project and it has.
Good economics, but we want to retest those economics with.
Current capital cost.
Speaker 2: And that'll be something that we're going to be, we've already started working on, but that's something we really want to get our heads around is, does it make sense? What's the timing?
And that'll be something that we're gonna be.
Kathleen Quirk: In terms of the leach pounds and the impact on cost, what really needs to happen with the leach project to really start seeing the impact on unit cost is enough confidence to be able to increase our reserves. And that will allow us to essentially, in the financial results, see lower unit costs. As we add reserves and we're spreading costs over larger number of pounds, that economy of scale will start to come through.
Already started working on but that's something we really want to get our heads around is does it make sense, what's the timing.
Speaker 2: given rising capital cost means seeing really the significant cost blowouts in Chile in recent time. And we want to make sure that we can deploy capital effectively, efficiently in this market. And as Richard was talking about the copper price today, it doesn't really support.
Given given.
Rising capital cost me, we've seen you know really the significant cost blowouts in Chile.
In recent time, and we want to make sure that.
We can deploy capital effectively efficiently in this market.
And as Richard was talking about the copper price today doesn't really support.
Speaker 2: new investment, you know, and so of significance.
New investment.
And so are of significance.
Kathleen Quirk: So the more confidence we get in this, the more we're able to actually put these opportunities into reserves and have enough confidence to do that. That's when you start to see the impact on the net unit cash cost. But I don't know if that was a long answer but did that answer your question? Yeah, that was a great answer, Kathleen. I really appreciate all the color. Thanks so much and good luck with everything. Thanks, Charles.
Speaker 2: And so our focus really has been in this kind of environment on what we can do to be less capital intensive while continuing to advance our options and create optionality in the portfolio. We're plans and Chile currently are to invest in some water infrastructure, desalination.
And so our focus really has been in this kind of environment on what we can do to be less capital intensive.
While continuing to advance our options and create optionality in the portfolio.
Where where our plans in Chile currently are too.
Invest in some water infrastructure desalinization.
Speaker 2: project that would allow us to extend the life of the current operation and then that would give us optionality for the bigger expansion. And so what we're really doing now is trying to advance these things so we have optionality, but we're not wanting to commit to major, major multi-billion dollar projects in the current environment. We all see this
Project that would allow us to extend the life of the current operation and then that would give us optionality for the bigger expansion.
Chris LaFemina: Your next question comes from the line at Chris LaFemina with Jeffries. Please go ahead. Hi, hi, Richard. Hi, Kathleen. Thanks for taking my question. I just wanted to ask about Elabra, which has, you know, tremendous potentially you've talked about it for a long time. You could build a big, no project there. With the clarity now around Chile and mining taxes, I would assume that's helpful. And also, I'm not sure if you've looked into the recent double taxation treaty, which I think for US companies makes Chile potentially a more attractive investment.
So what we're really doing now is trying to advance. These things. So we have optionality, but we're not wanting to commit to.
Major major multibillion dollar projects in the current environment, we all serious.
Speaker 2: It's a looming deficit coming, but the current practice just don't support big new investments like this at the current time.
It's looming deficit coming but but current practices just don't support don't support big Big New investments like this at the current time, we know that will change over time, and we want to be prepared at the right time to bring this project on the.
Speaker 2: We know that'll change over time and we want to be prepared at the right time to bring this project on. The permitting takes quite a while and and chillies.
Kathleen Quirk: So, wondering first kind of how you're thinking about that now, and what we can sort of expect if you do progress in this project in terms of timing, capital cost scale, and then maybe as importantly, your partner's ability to help fund whatever you develop there, because I assume it's going to be a capital intensive project. And I'm not sure if Adelco has the capital to contribute alongside you with this. So, you have to think about that.
The permitting takes quite a while and chili's.
Speaker 2: on trying to streamline permitting, we're encouraged by that. In terms of the cadalco question on financing.
On entre.
I'm trying to streamline permitting we're encouraged by that.
In terms of the Codelco a question on financing.
Speaker 2: They're very positive about the project and they've indicated to us support for it, at the right time, and we'll figure out financing this at the right time when we go forward, but right now we don't have to make that decision.
They're very positive about the project.
Kathleen Quirk: And again, there's a double taxation treaty between Chile and the US. In fact, the economics of this project can potentially drive an investment decision. Thank you. Thanks, Chris. Both of those items that you mentioned, the recent clarity around taxation in Chile and the issue between the treaty between the US and Chile are both helpful. Quite frankly, if that hadn't been resolved, the latter had not been resolved. That would have posed a big challenge for us in developing the project.
And they have indicated to us support for it at the right time.
And we'll figure out financing as you know at the right time, when we when we go forward, but right now we don't have to make that decision.
That is very helpful. Thank you.
Yeah.
Speaker 6: Your next question will come from the line of Michael Dutus with vertical research. Please go ahead. Good morning, Richard and Kathleen. Good night. Good morning, my name is Colin, I'm following up on somebody other.
Your next question will come from the line of Michael Dudas with vertical research. Please go ahead.
Good morning, Richard and Kathleen.
Hey, Mike.
Kathleen Quirk: But that's been resolved. And so, now we're really turning to the economic side of the equation. And we've been watching what's been going on in Chile with other major projects. We get a lot of work on this project, on the Alaba project, and it has good economics, but we want to retest those economics with current capital costs. And that'll be something that we're going to have already started working on. But that's something we really want to get our heads around is, does it make sense?
Following up on the following up on some of the other questions.
I guess a sense Scott.
Access to labor contracting.
Rising interest rates raising the.
Total capital investment.
You see that.
This has pushed out whatever expectations.
Maybe reports.
Speaker 7: maybe free ports, longer term or median term investments or the industry's investments given these dynamics, especially the copper price, which is you indicate that everybody agrees wouldn't support this pet investment.
Longer term or medium term investments, where the industry's investments given.
These dynamics, especially in the copper price, which as you indicated with the support perspective.
Richard you want to take that one.
Kathleen Quirk: What's the timing given rising capital cost means seeing really the significant cost blowouts in Chile in recent time. And we want to make sure that we can deploy capital effectively, efficiently in this market. And as Richard was talking about the copper price today, doesn't really support new investment. And so, of significance. And so our focus really has been in this kind of environment on what we can do to be less capital intensive while continuing to advance our options and create optionality in the portfolio.
Sure. Thanks, No question about it.
You know.
Yes.
As I said.
Speaker 3: As I said, our revenues and those of other coffee producers are correlated to the prices.
Revenues and those of other producers are correlated to.
Got it.
Oh.
Speaker 3: is that talk with a lot of people and i was just that i mean last week i was with a group of senators and congressman wash tonight before last
As I talk with a lot of people.
Yes.
Last week.
Senators and congressmen in Washington.
Speaker 3: With the new cost structure, people's historical views of copper prices need to be adjusted. I mean...
With the new cost structure People's historical views of copper prices.
Need to be adjusted.
At one point.
Speaker 3: $350 or $4 copper price was considered to be a very strong price, but with the effects of inflation.
$3 50, or $4 copper price was considered to be a very strong price but.
Kathleen Quirk: Our plans in Chile currently are to invest in some water infrastructure, desalination, a project that would allow us to extend the life of the current operation. And then that would give us optionality for the bigger expansion. And so what we're really doing now is trying to advance these things, so we have optionality, but we're not wanting to commit to major, major multi-billion dollar projects in the current environment. We all see this moving deficit coming, but the current practice just don't support big new investments like this at the current time.
With the effects of inflation.
Speaker 3: It's not the same. And so you have to look at both of those together.
And so.
You have to look at both of those together.
Speaker 3: And then the thing that's really striking to us, and you can see this in a number of other projects by companies around the world, is that capital...
And then the thing that's really striking to us and you can see this in a number of other projects bought companies around the world.
Is the capital cost.
Speaker 3: inflation is significant and persistent.
Yes.
Inflation is significant and persistent.
Speaker 3: You can see from our own numbers, particularly when diesel costs dropped earlier, they've ticked up again, so I'm...
You can see from our own numbers.
Particularly when diesel costs dropped earlier, they've ticked up again soon.
Speaker 3: But I thought we had good performance with our operating cost measures. But then when you get into this issue of...
So we.
We had good performance with our operating cost measures.
But then when you get into this issue.
Kathleen Quirk: We know that'll change over time, and we want to be prepared at the right time to bring this project on. The permitting takes quite a while, and Chile's on trying to streamline permitting, we're encouraged by that. In terms of the Kedalco question on financing, they're very positive about the project, and they've indicated us support for it at the right time, and we'll figure out financing this at the right time when we go forward, but right now we don't have to make that decision. That is very helpful. Thank you.
Our major projects.
Speaker 3: the capital cost are really significant.
Capital costs are really significant.
Speaker 3: We really are motivated.
We really motivated.
Speaker 3: to invest because we have struck strong conviction about the future of copper prices.
To invest because we have stretch.
Conviction.
<unk>.
Future copper prices.
Speaker 3: But at the same time, you know, history has taught us that it's best to be
At the same time history has taught us that it's best to be.
Speaker 3: to be prudent in the way we commit capital, you might could think.
To be prudent.
Hey, we commit capital.
Uh huh.
Yeah.
Incrementally improve.
Speaker 3: returns if you are more aggressive in their term. But we retain all these projects. We don't lose the opportunity. But we and I believe others are going to be prudent until they see how this current situation around the world with China.
Returns if you were more aggressive near term.
But we retain all of these projects.
Michael Dudas: Your next question will come from the line of Michael Dudas with vertical research. Please go ahead.
We don't lose the opportunity.
Right.
Richard Adkerson: Good morning, Richard and Kathleen. Good morning, Mike.
And I believe others.
Be prudent until they see how this correct.
Richard Adkerson: Following up on some of the other questions, get the sense that access to labor, contracting, rising, interest rates, raising the hurdle rates for capital investment, you think that this is pushed out whatever expectations of maybe Freeport's longer term or median term investments or the industry's investments given these dynamics, especially the copper price, which is you indicated that everybody agrees with the support that's investment.
Situations around the world.
John .
Speaker 3: inflation and central banks activities and now we've got the increasingly complication of geopolitical events.
Inflation and central bank's activities and now we got it.
Increasingly complication.
Political events.
Speaker 3: going on and that's why I made my comment at the outset that this does nothing but bolster the future supply deficit that the industry is facing.
Going on.
When I made my comment at the outset that this does nothing but booster.
The future.
Future supply deficit.
The industry is facing.
Speaker 3: So it's a two-edged sword. We'd like to go forward, but we've concluded as best to be prudent.
So it's a two edged sword.
We'd like to go forward.
Included is best to be prudent.
Speaker 3: and with the industry I believe others will as well. And that just means that supplies are going to be limited for the future of the time when copper demand will be growing.
And with the industry I believe others will as well.
No.
Richard Adkerson: Richard, you want to take that one? Sure, I think there's no question about it. As I said, our revenues and those of other copper producers are correlated to the prices.
That just means.
Supplies are going to be limited for the future.
Copper demand will be growing.
It sounds like discretion.
Thank you Richard.
Thank you thanks, Mike.
Speaker 1: Your next question comes from the line of Oris Walgadal with Scotia Bank. Please go ahead. Hi, good morning.
Your next question comes from the line of or a small codell with Scotiabank. Please go ahead.
Richard Adkerson: As I talk with a lot of people, and I was just at LME last week, I was with a group of senators and congressmen who launched a night before last, with the new cost structure, people's historical views of copper prices need to be adjusted. I mean, at 1.354 dollar copper price was considered to be a very strong price, but with the effects of inflation, it's not the same. And so you have to look at both of those together.
Hi, good morning.
Good morning, Gary.
Speaker 8: any feedback to timeline for reaching any kind of conclusion in Indonesia with respect to the new export royalty rates and potentially the life extension there beyond 40%.
Any expected timeline for reaching any kind of conclusion with respect to the new export royalty rates and potentially the life extension there beyond 41.
Well the issue on the on the on the Duke you talked about the duty.
Speaker 2: Well, the issue on the, you talk about the duty situation there is that, as you are aware, our IUPK says that we're not subject to duties once the smelter gets over 50%.
Situation there is that as you.
Where our country our IU PK.
<unk> says that we're.
We're not subject to duties once the smelter gets over 50% and the government issued some new regulations.
Richard Adkerson: And then the thing that's really striking to us, and you can see that's in a number of other projects by companies around the world, is that capital cost inflation is significant and persistent. You can see from our own numbers, particularly when diesel cost dropped earlier, they've ticked up against some. But I thought we had good performance with our operating cost measures, but then when you get into this issue of major projects, the capital cost are really significant.
Speaker 2: and the government issued some new regulations.
Speaker 2: earlier this year and this not just applies to free-port but but but all exporters for copper that required to have smelters that required to pay a seven and a half percent duty and it's a slight scale depending on how much progress you've made
Earlier, this year and it's not just applies to freeport, but but but all ex borders for copper that.
They're required to have smelters.
We were required to pay a seven 5% duty a minutes and it's a sliding scale depending on how much progress you've made.
Speaker 2: We have raised the issue with the government and when they are reviewing the issue, they're also reviewing a progress of a smelter and we're gonna continue to work cooperatively with them. I wanna just remind everyone that there's alignment of interest to a large degree there because
We have raised the issue with the government and when they are reviewing the issue. There also reviewing our progress of a smelter and we're going to continue to work cooperatively with them I want to just remind everyone that there is alignment.
Richard Adkerson: We really are motivated to invest because we have struck strong conviction about the future of copper prices, but at the same time, you know, history has taught us that it's best to be, to be prudent in the way we commit capital. You might could incrementally improve returns if you were more aggressive in their term, but we retain all these projects. We don't lose the opportunity, but we, and I believe others are going to be prudent until they see how this current situation around us.
Of interest to a to a large degree there because Indonesian government state owned company owns 51% of P. T F. I and also P. J F I pay taxes, so the impact.
Speaker 2: Indonesian governments state on company on 51% of PTFI and also PTFI pays taxes. So the impact.
Speaker 2: to the government of these export duties is also a significant item. So we've got support from our partner there to help us work through this issue with the government. And we're gonna continue to, I don't have a definitive timeline, but we're continuing to engage in discussions to address this. The extension,
To the government of these export duties as it is also a significant items. So we've got support for our from our partner there to help US work through this issue with the government and we're going to continue to I don't have a definitive timeline, but we're continuing to do.
<unk> engaged in discussions to two to address this.
The extension discussions.
Richard Adkerson: In the world with China and inflation and central banks activities, and now we've got the increasingly complication of geopolitical events going on, and that's why I made my comment at the outset that this does nothing but bolster the future supply deficit that the industry is facing. So it's a two-edged sword. We'd like to go forward, but we've concluded as best to be prudent. And with the industry, I believe others will as well, and that just means that supplies are going to be limited for the future of the time when copper demand will be growing. It sounds like discretion is at a part of ours.
Speaker 2: or also continuing our partner. Mind ID is also very supportive of extending the operation and one of the really significant benefits that we've had.
We are also continuing our partner our mind I D. Is is also very supportive of extending the operation and one of the really significant benefits that we've had.
Speaker 2: in the new structure since 2018, where the government owns 51% is.
In the new structure since 2018, where the government owns 51% is there is a a better understanding of the time it takes to develop new resources or extend the resources and so.
Speaker 2: There is a better understanding of the time it takes to develop.
Speaker 2: new resources or extend the resources and so i think all the parties
Think of all the parties.
Speaker 2: are aligned in that it makes sense to continue this operation beyond 2041.
Our are aligned in that it makes sense to continue this operation beyond 2041.
Speaker 2: We made a lot of progress in developing a framework with the government on what the terms of that extension would be. A big catalyst for us is getting a smelter.
We made a lot of progress in developing a framework with the government.
Richard Adkerson: Thank you, Richard. Thank you.
Unknown Attendee: Excellent.
Unknown Attendee: Your next question comes from the line of Oris Waukudal with Scotia Bank. Please go ahead. Hi, good morning.
On what the terms of that extension would be a big catalyst for us is getting the smelter.
Unknown Attendee: What are you doing here? I'm going to be back to the timeline for reaching any kind of conclusion in Indonesia with respect to the new export royalty rates, and potentially the life extension there beyond 41. Well, the issue on the, you talk about the duty situation there is that, as you are aware, our IUPK says that we're not subject to duties once the smelter gets over 50%. And the government issued some new regulations earlier this year, and this not just applies to free port, but all exporters for copper that are required to have smelters that require to pay a seven and a half percent duty, and it's a slot in scale depending on how much progress she's made.
Speaker 2: getting the smelter advanced and completed. And that would, I think, would be a good catalyst for us to be able to continue to extend those operations out for the life of this resource.
Getting the smelter advanced and completed them and that would I think would be a good a good catalyst for us to be able to.
We continue to to extend those operations out for the life of this resource.
Speaker 2: But conversations are ongoing. Indonesia is in an election cycle now. And so there are other things going on in the government. The government has a lot of priorities that they're balancing. But in terms of the one, two, and will of gain is extended to be able to continue the benefits.
Conversations are ongoing Indonesia is in an election cycle now and so there are other other things going on in the government and the government has a lot of priorities that they're balancing but but in terms of the.
They want to and will of getting this extended to be able to continue the benefits are that.
Speaker 2: uh... that are very significant to the government of indonesia and the people of poppa uh... there is good support for uh... for doing this and we're working very hard to try to get it done as soon as possible but the timeline is not under our uh... under our control
That is very significant to the government of Indonesia, and the people of Papua.
There is.
Good support for for doing this and we're working very hard to try to get it done as soon as possible, but the timeline is not under our under our control.
Thank you for the color.
Your next question comes from the line of Carlos de Alba with Morgan Stanley . Please go ahead.
Speaker 1: Your next question comes from the line of Carlos Galba with Morgan Stanley . Please go ahead.
Unknown Attendee: We have raised the issue with the government, and when they are reviewing the issue, they're also reviewing a progress of the smelter, and we're going to continue to work cooperatively with them. I want to just remind everyone that there's alignment of interest to look to a large degree there, because Indonesian government stayed on company on 51% of PTFI, and also, you know, PTFI pays taxes. So the impact to the government of these export duties is also a significant item.
Speaker 9: yeah, we've already got a little richer so the question i have is uh... really on the discussion is on the indonesian funding uh... the indonesia projects funding uh... just to revisit uh... you did not uh... is now being paid by proceed from the ptf i think your notes and uh... uh... the derivolving credit line
Yes, good morning, Kathleen and Richard.
I have is.
Really the question is on the Indonesian funding <unk>.
Funding.
Revisit.
Mouth.
Unknown Attendee: So we've got support from our partner there to help us work through this issue with the government, and we're going to continue to, I don't have a definitive timeline, but we're continuing to engage in discussions to address this. The extension discussions are also continuing our partner. Mind ID is also very supportive of extending the operation, and one of the really significant benefits that we've had in the new structure since 2018, where the government owns 51% is.
He has now been paid by proceeds from the <unk> senior notes.
The revolving credit line.
Speaker 9: I just wanted to check if that is something that will continue as it is right now. And what about the funding for the other CAPEX projects, KL, another expansion of the like the crusher and the new sag meal there? Is that going to also be paid by this senior nodes and the internal casual generation?
I just wanted to check if that is something that will continue.
He is right now.
What about the funding for the other capex projects.
Yes.
Another expansion of the crusher and the new Sag mill, there is that going to also be paid by biodiesel senior nodes and the internal cash generation.
Speaker 9: 5. Or do you expect you're not controlling partners to contribute cash for those projects?
Five or do you expect Youll Noncontrolling partners to contribute cash for those for those projects and then maybe associated with these.
Speaker 9: And then maybe associated with this is how should we think about the dividends pay to non-controlling interest going forward?
How should we think about the.
Dividends paid to Noncontrolling interest going forward.
Speaker 2: With respect to your question on the first topic, the Smelter Project is being debt financed. And so we raised $3 billion in financing last year and long-term bond financing at the PTFI level.
With respect to your question on the first topic. The smelter project is being debt financed and so we raised a.
$3 billion in financing.
Last year in long term bond financing at the PT Fi level.
Unknown Attendee: There is a better understanding of the time it takes to develop new resources, or extend the resources, and so I think all the parties are aligned in that it makes sense to continue this operation beyond 2041. We made a lot of progress in developing a framework with the government on what the terms of that extension would be. A big catalyst for us is getting a smelter, getting a smelter advanced and completed.
Speaker 2: So the economics of that, even though it's consolidated on FCX's financial statements, the economics essentially are borne by CTFI shareholders.
So the economics of that even though it is consolidated on F. Cx's financial statements. The economics essentially are borne by <unk> shareholders.
Speaker 2: And we have a revolving credit facility as well to supplement that. So the smelter, and that's why we look at it separately. It doesn't impact the cash flow. We have that at the FCX level that's available for distribution because it's being funded through these...
And and we have a revolving credit facility as well to supplement that so that the smelter and that's why when we look at it separately it doesn't impact the cash flow we have that it's at the FC X level, that's available for distribution because.
It's it's being funded through these proceeds with respect to other capital projects at P. T F I.
Speaker 2: with respect to other capital projects at PTFI.
Speaker 2: Those are funded internally at the PTFI level. So when we look at the...
Those are funded internally.
At the P. T F I level, so when we look at them when we look at the.
Unknown Attendee: And that I think would be a good catalyst for us to be able to continue to extend those operations out for the life of this resource. The operations are ongoing. Indonesia is in an election cycle now. And so there are other things going on in the government. The government has a lot of priorities that they're balancing, but in terms of the want to and will of gain is extended to be able to continue the benefits that are very significant to the government of Indonesia and the people of Papua. There is good support for doing this and we're working very hard to try to get it done as soon as possible, but the timeline is not under our control.
Speaker 2: projects we're doing to complete the new SAGMIL when we look at the copper cleaner project, all of the capital projects at PTFI. Those are funded with...
The projects, we're doing to complete the new Sag mill when we look at the copper cleaner project all of the capital projects at P. T. F. I those are funded with that subsidiaries internally generated cash flows which is very significant.
Speaker 2: That subsidiary is internally generated cash flows, which is very significant.
Speaker 2: And so, as you increase capital there, it does reduce the dividends that come out of PTFI, but these are really good.
And so yeah as you increase capital there it does.
It does reduce the dividend.
Dividends that come out of PT Fi.
But these are really good.
Speaker 2: good projects that PTFI has the ability to to fund with its cash flows and distribute substantial amounts to
Good projects that that PT Fi has the ability to define with its cash flows and distribute substantial amounts to.
Speaker 2: to a shareholders in terms of the dividends there. So that's really a function of what the performance of the business is. We have a policy, a dividend policy at the PTFI level where all of the available cash flow is distributed to shareholders and FCS gets 49% of that.
Two to its shareholders in terms of the dividends. There. So that's really a function of of of what the performance of the businesses we have a policy.
Unknown Attendee: Thank you for the call.
Carlos Alba: Your next question comes from the line of Carlos DiAlba with Morgan Stanley. Please go ahead. Good morning, Kathleen and Richard. So the question I have is really on the discussion is on the Indonesian funding, the Indonesia project funding. Just to revisit you, the smelter is now being paid by proceeds from the PTFI in your notes and the deriving credit line. I just wanted to check if that is something that will continue as it is right now.
My dividend policy at the PT Fi level, where all of the available cash flow is distributed to.
Two two to shareholders in an F CX gets 49% of that in.
Speaker 2: Mind I did get 51% but that's the policy that we're following and expect to continue to follow
<unk> mined idea gets gets 51%, but that's the policy that that we're following and expect to continue to follow.
Alright, Thank you Kathleen.
Your next question will come from the line of Bill Peterson with Jpmorgan. Please go ahead.
Speaker 1: Your next question will come from the line of Bill Peterson with J.P. Morgan. Please go ahead.
Carlos Alba: And what about the funding for the other CAPEX projects, KL and another expansion of the crusher and the new SAC meal there. Is that going to also be paid by this senior notes and the international generation five or do you expect your non-controlling partners to contribute cash for those projects.
Speaker 5: Yeah, hi, good morning and thanks for taking the question and a nice job and execution given all the challenges out there. My first question is actually a bigger picture question tying to an earlier question. So if you take into account this broader inflationary environment increased project financing costs.
Yes, hi, good morning, and thanks for taking the question and nice job in execution given all the challenges out there. My first question is actually a bigger picture question tie tie to an earlier question. So if you take into account this broader inflationary environment increased project financing costs, I guess wheres pricing.
Speaker 5: I guess where does pricing need to be in-house sustained? Is that need to be for free-port? And maybe even the industry, if you want to come on on that. But specifically for free-port to support projects such as bagged that expansion or Alabra, that's exactly.
And how sustained does that need to be for for Freeport and maybe even the industry. If you want to comment on that but.
Kathleen Quirk: And then maybe associated with this is how should we think about the dividends paid to non-controlling interest going forward? With respect to your question on the first topic, the smelter project is being debt financed. And so we raised $3 billion in financing last year and long term bond financing at the PTFI level. So the economics of that even though it's consolidated on FCX's financial statements, the economics essentially are borne by PTFI shareholders.
But specifically for Freeport.
Support projects, such as Baghdad expansion or El Abra as examples.
Speaker 2: Well, we're updating our capital cost now for Elabra. Previously, when we ran the economics several years ago, it's been a few years ago before the pandemic, when we outlined the potential for the project.
Well, we're updating our capital costs now for El Abra previously when we ran the economics.
Several years ago, it's been a few years ago before the pandemic when we when we outlined the potential for the project.
Speaker 2: Today's price would have worked fine. It would have been a good, good, good return. But there were other factors that led us to put the project on hold. In today's world, we need to retest those economics.
Todays price would have worked fine.
It would've been a good good good return.
But there were other factors that that led us to put the project on hold.
Kathleen Quirk: And we have a revolving credit facility as well to supplement that. So the smelter and that's why we look at it separately. It doesn't impact the cash flow. We have that at the FCX level that's available for distribution because it's being funded through these proceeds. With respect to other capital projects at PTFI, those are funded internally at the PTFI level. So when we look at the projects we're doing to complete the new sag mill, when we look at the copper cleaner project, all of the capital projects at PTFI, those are funded with that subsidiaries internally generated cash flows which is very significant.
In today's world, we need to retest those economics.
Speaker 2: I mean, you just look at the recent project in Chile of how much that cost increased and it's a huge multi-billion dollar impact. And that impacts our thinking and that impacts economics. So we don't think, we know the economics we ran previously don't apply current.
I mean, just look at the recent project in Chile.
Of of how much that that cost increase.
Increased and it says it's a huge.
The billion dollar impact and that you know that impacts our thinking and that impacts economics. So.
We don't think we know the economics, we ran previously don't apply currently and so we've.
Speaker 2: And so we've been doing some work, we've been doing some additional work on the resource and we've got some positive things that have developed since then that'll help the economics, but this capital cost inflation is a real issue and it's something that we need to keep in mind. On the Baghdad project,
We've you know we've been doing some work we've been doing some some additional work on the on the resource and and we've got some positive things that have developed since then that'll help the economics, but this capital cost inflation is a real issue and it's something that we need to keep in mind.
Kathleen Quirk: Lincoln. And so, yeah, as you increase capital there, it does reduce the dividends that come out of PTFI, but these are really good projects that PTFI has the ability to fund with its cash flows and distribute substantial amounts to a shareholder. In terms of the dividends there, so that's really a function of what the performance of the businesses, we have a policy, a dividend policy at the PTFI level, where all of the available cash flow is distributed to shareholders and FCS gets 49% of that and mind I think it gets 51%, but that's the policy that we're following and expect to continue to follow.
The Baghdad project.
This is a project that.
Speaker 2: With Elabra, these are new reserves. So with Elabra, he would allow us to produce reserves currently in the ground where we don't currently have infrastructure that can produce those reserves. At Elabra, I mean at Baghdad, it's a different analysis. At Baghdad, we can produce those reserves over eight years.
With El Abra. These are new reserves, so with a libra it would allow us to.
Produce reserves currently in the ground, where we don't currently have an infrastructure that can produce those reserves at a libra I mean, a diet Baghdad, it's a different analysis at Bagdad we.
We can produce those reserves over 80 years or we can double our processing capacity and produce those reserves over a shorter period of time and so you have to look at the capital costs and how that plays with it being an acceleration of Av.
Speaker 2: or we can double our processing capacity and produce those reserves over a shorter period of time. So you need to look at the capital cost and how that interplays with it being an acceleration of production rather than new products.
Of production rather than the new production.
Speaker 2: So we're looking, we're completing the feasibility study, the cost we believe we're gonna come in higher than what we expected them to. And so that'll have an impact on us. The other thing that'll have an impact on our decision will be the availability of labor and whether we can execute that project efficiently.
Unknown Attendee: All right, thank you, good, please.
No.
We're looking at with completing the feasibility study the cost we believe we're going to come in.
Bill Peterson: Your next question will come from the line of Bill Peterson with JP Morgan, please go ahead. Yeah, hi, good morning and thanks for taking the question and a nice job and execution given all the challenges out there.
Higher than what we expected them to and so that'll have an impact on us. The other thing that'll have an impact on our decision will be the the availability of labor and whether we can execute that project efficiently. We're doing some things now to create options where we are.
Richard Adkerson: My first question is actually a bigger picture question, tie into an earlier question. So, if you take into account this broader inflationary environment, increased project financing cost, I guess where does pricing need to be and how sustained does that need to be for freeport and maybe even the industry if you want to come on on that, but specifically for freeport to support projects such as Baghdad expansion or Al-Abrah as examples. Well, we're updating our capital cost now for Al-Abrah, previously when we ran the economics several years ago, it's been a few years ago before the pandemic when we when we outlined the potential for the project.
Speaker 2: We're doing some things now to create options. We've got the autonomous plans to put in autonomous haulage at Baghdad. It's our first mine in the US that'll do that. And that's exciting for us. And that creates options for us in the future. And we're doing some work, some early work.
Got the autonomous.
<unk> plans to put in autonomous haulage at Bagdad, It's our first mine in the U S. That'll do that and that's exciting for us and that creates options for us in the future and we're doing some work some early works.
Speaker 2: to give us options there, but the numbers don't work. I think if you ask people in the industry You know what it would it takes people are gonna tell you it's over four dollars
To give us options there but.
The numbers don't work I think if you ask people in the industry you know what it what it takes people are going to tell you it's over $4.
Speaker 2: to develop new projects, but every project is different. And that's why when we look at this leach opportunity, the potential to add 800 million pounds of copper with very low capital cost.
To develop new projects, but every project is different.
And that's why when we look at this leach opportunity.
Potential to add 800 million pounds of copper.
Richard Adkerson: Today's price would have worked fine. It would have been a good good good return, but there were other factors that that led us to put the project on hold. In today's world, we need to retest those economics. I mean, you just look at the recent project and Chile of how much that cost increased, and it's a huge multi-billion dollar impact, and that impacts our thinking and that impacts economics. So, we don't think, we know the economics we ran previously don't apply currently.
With <unk>.
Very low capital cost.
Speaker 2: is very compelling. And so we're going to be looking for opportunities in the near term during this uncertainty to expand our production, but it's going to be through innovation, automation rather than high capital.
<unk> is very compelling and so we're going to be looking for opportunities in the near term during this uncertainty to expand our production, but it's going to be through innovation automation.
Rather than high capital intensity, and and we'll continue to test that and that'll continue to evolve, but that's the current thinking is that right now.
Speaker 2: and we'll continue to test that and that'll continue to evolve, but that's the current thinking is that right now, the
The.
Speaker 2: The copper price is not enough to support a major investment in a big expansion or greenfield product.
The copper price is not support it's not enough to support a major investment in a in a big expansion or.
Or or Greenfield project.
Speaker 5: well understood and thanks for that color. I guess just on the second question I'm working capital. So how should we think about the cadence?
No well understood and thanks for that color I guess just on the second question on working capital. So how should we think about the cadence of working capital through the balance of the year given exports of towers in Indonesia.
Richard Adkerson: And so, we've been doing some work, we've gone on the resource and we've got some positive things that have developed since then that will help the economics, but this capital cost inflation is a real issue and it's something that we need to keep in mind. On the Baghdad project, this is a project that with Elabra, these are new reserves. So with Elabra, he would allow us to produce reserves currently in the ground where we don't currently have infrastructure that can produce those reserves.
Speaker 5: working capital through the year, given exports and now resumed in Indonesia. Are you still expecting a slight use for the year?
Are you still expecting a slight use for the year.
Speaker 2: Yeah, it's a use, but we expect some of that will turn in the fourth quarter, some of what we had in terms of the inventories and receivables will turn, but we are expecting a use for the year.
Yeah, it's a it's a yes, but but we expect some of that will turn in the fourth quarter. Some of what we had in terms of the.
The inventories and receivables will turn but we are expecting a use for the year.
Okay terrific. Thank you.
Our final plan, let me just add one quick.
Speaker 3: Hang on, Regina, let me just have one quick comment to support what Kathleen's saying. You know, people, and I understand it if you're doing overall industry analysis, you're looking for what is the incentive price that triggers new production, but Kathleen made the point
Okay.
Would you let me just add one quick comment to.
Support with Jefferies.
Richard Adkerson: At Elabra, I mean at Baghdad, it's a different analysis. At Baghdad, we can produce those reserves over 80 years or we can double our processing capacity and produce those reserves over a shorter period of time. And so you have to look at the capital cost and how that interplays with it being an acceleration of production rather than new production. So we're looking with completing the feasibility study. The cost we believe we're going to come in higher than what we expected them to.
You know people.
Standard if youre doing overall industry analysis Youre looking for what is the incentive price triggers new production, but.
Yes, we made the points each project is different.
Speaker 3: and then each company's situation is different. One of the strong...
And then each company's situation's different.
One of the strong things about our business.
Speaker 3: is that because of our production levels, our resource base, our ability to add...
Is that because of our production levels our resource base.
Ability to add to production.
Speaker 3: with things like leaching but beyond that more, you know, with being more efficient, with technology working, I asked that's harder and so forth.
Thanks, Mike leaching, but beyond that.
With being more efficient with technology, working our assets harder and so forth.
Speaker 3: We don't face the same pressures from reinvestment risk. That's...
We don't face the same pressures from reinvestment risk.
Richard Adkerson: And so that'll have an impact on us. The other thing that'll have an impact on our decision will be the availability of labor and whether we can execute that project efficiently. We're doing some things now to create options. We've got the autonomous plans to put in autonomous haulage at Baghdad. It's our first mine in the US that'll do that. And that's exciting for us. And that creates options for us in the future. And we're doing some work, some early works to give us options there.
Some other companies face.
Speaker 3: but also other commodities face because of short reserve lives. And that's one thing I like so much about our business is that it gives us that flex-
But also other commodity space because of shorter reserve lives.
And that's one thing I like so much about our business.
Is that it gives us.
No one has to take.
Speaker 3: risk not have to press things during uncertain economic times
Not have to press things during uncertain economic times.
Speaker 3: But as I mentioned earlier, to be just more prudent about how we run our business.
And as I mentioned earlier to be just being prudent about how we run our business.
Speaker 3: It's a great strength of...
Yes.
Great streak.
Speaker 3: of our industry to a certain degree, but a free point is a company because of our strong
Richard Adkerson: But the numbers don't work. I think if you ask people in the industry what it takes, people are going to tell you it's over four dollars to develop new projects. But every project is different. And that's why when we look at this leach opportunity the potential to add 800 million pounds of copper with very low capital cost is very compelling. And so we're going to be looking for opportunities in the near term during this uncertainty to expand our production but it's going to be through innovation automation rather than high capital intensity. And we'll continue to test that and that'll continue to evolve.
Our industry to a certain degree, but if freeport as a company because of our strong production base.
Speaker 3: and long-lived properties and the ability to maximize production out of our existing properties by doing things.
Yes.
Lam of properties and the ability to maximize production out of our existing properties by doing things.
Speaker 3: smarter and using technology and working assets harder.
Marter and using technology at work.
It's harder.
Okay.
Thank you Richard.
Speaker 1: Our next question will come from the line of Alex to rent you with Steeple. Please go ahead.
Our next question will come from the line of Alex <unk> with Stifel. Please go ahead.
Speaker 10: Hey, get up in the morning everybody. There's two quick questions for me. First, I just want to follow up.
Hey, good afternoon or morning, everybody just two quick questions for me first I just wanted to follow up.
Some of the comments, you're on Indonesia smelter export duty.
Speaker 10: here on Indonesia with the Smeltor Export Duty. Any changes, latest changes in the regulations that would change your view on whether you expect the export duty to go to zero once the Smeltor is built.
Any changes latest changes in the regulations that would change your view on whether you expect the export duty to go to zero once the smelter is built.
Richard Adkerson: But that's the current thinking is that right now the copper price is not enough to support a major investment in a big expansion or a greenfield project. Well understood and thanks for that color.
Speaker 10: And then the second question, just circling back on the on the electric expansion in 800 million pounds or you know, if you can get there in three to five years, I mean that's a pretty impressive number. I just wanted to get some more details from you if I could just just on the cost for that. I mean, the US operations have been running around color 270 pounder. So is that a fair cost?
And then the second question.
Just circling back on <unk>.
<unk> expansion.
800 million pounds or you can get there in three to five years.
Pretty impressive number I just wanted to get some more details from you if I could just on the cost for that.
Kathleen Quirk: I guess just the second question on working capital. So how should we think about the cadence of working capital through the balance of the year given exports and now resumed in Indonesia? Are you still expecting a slight use for the year? Yeah it's a it's a use but we expect some of that will turn in the fourth quarter. Some of what we had in terms of the the the inventories and receivables will turn but we are expecting a use for the year.
S operations with them running around 270 pounder so is that a fair cost for us hurt us as well or I mean, what the operating cost to be higher but lower lower much lower capital cost I'm, just trying to get a sense of what the upside was so that sort of a potential.
Speaker 10: well or I mean would the operating cost be higher but lower much lower capital cost I'm just trying to get a sense.
Speaker 2: Yeah. On the duty issue, the duties are paid on concentrate exports.
Yeah.
On the on the duty issue.
The the duties are paid on concentrate exports.
Richard Adkerson: Okay terrific thank you. Let me just add one quick you know let me just add one quick comment to support what Kathleen's saying you know people and I understand it if you're doing overall industry analysis you're looking for what is and the incentive price that triggers new production. Kathleen made the point to each project different and then each company's situation is different. One of the strong things about our business is that because of our production levels, our resource base, our ability to add production with things like leaching but beyond that more, you know, with being more efficient with technology, working our assets harder and so forth, we don't face the same pressures from reinvestment risk that some other companies face but also other commodities face because of short reserve lives.
So.
Speaker 2: once we get the snelted done and ramped up.
Once we get the smelter done and ramped up.
Speaker 2: We will have no more exports of concentrates. We'll be producing copper cathode and gold. You know, there's actual metal.
We'll have no more exports of of of concentrates will be we'll be producing copper cathode and and and.
And do you know the actual metals. So the export duty only applies to this intermediate step of concentrates.
Speaker 2: So the export to the only applies to this intermediate step of concentrate.
Speaker 2: So there hasn't been anything in terms of...
So there hasn't been anything in terms of.
Speaker 2: You know, we're still working with the government right now. The export license is through May. And so we've still got to work with the government to work through this issue beyond May of having a ramp up period. There will still be shipping some concentrates, exporting some concentrates during the ramp up. But we're going to work cooperatively with the government to make sure that those that continuity continues with respect to the leech.
We're still working with the government right now the export licenses is through May and so we've still got to work with the government to.
Work through this issue beyond may have of having a ramp up period.
Well it will still be shipping some concentrates exports some concentrates during during the ramp up but we're going to work cooperatively with the government to make sure that those those that continuity continues.
With respect to the leach pounds.
Richard Adkerson: And that's one thing I like so much about our business is that it gives us that flexibility to not have to take risk, not have to press things during uncertain economic times but as I mentioned earlier to be just more prudent about how we run our business. It's a great strength of our industry to a certain degree but a Freeport is a company because of our strong production base and long live properties and the ability to maximize production out of our existing properties by doing things smarter and using technology and working assets harder.
Hmm.
Speaker 2: Not every application is the same, but on average.
Not every every application is the same but on average.
Speaker 2: We expect these leach pounds to come in at roughly a dollar per pound.
We expect these leach pounds to come in at roughly a dollar per pound.
Speaker 2: And so that is, that's why we're so excited. Most of this is in our US business.
And so that is that's why we're so excited most of this is is is in our U S business.
Speaker 2: And so it'll bring down, it's successful. And we're able to put this into our reserves. It'll bring down our average cost in the US over time. And I just asked Corey Stevens on the line and he and his team are leading this initiative. And.
And so it'll bring down if we're successful.
And we're able to put this into our reserves it'll it'll bring down our average cost in the U S over time and I'll just ask Cory Stephens on the line and he and his team are leading this this initiative.
Speaker 2: Just wanted to ask Cory if there's anything that we didn't cover on leaching that you want to make points out that that hasn't been discussed so far.
Just wanted to ask Cory if there's anything that that we didn't cover on leaching that you Wanna make points of that that hasn't been discussed so far.
Richard Adkerson: Thank you Richard.
Kathleen Quirk: Our next question will come from the line of Alex to rent you with Steve. Please go ahead. Hey good up and good morning everybody. Just two quick questions from you. First, I just want to follow up some of the comments here on Indonesia with the Smeltor Export Duty. Any changes, latest changes in the regulations that would change your view on whether you expect the export duty to go to zero once the Smeltor is built.
Yes Kathleen.
Speaker 11: I guess the one thing I would just add or maybe just emphasize is the momentum that's...
I guess, the one thing I would just add or maybe just emphasizing some of that.
The momentum that's been able to been billed.
Speaker 11: around this effort, really around these executable known technologies.
Around this effort really around these executable known technologies.
Speaker 11: had been significant. So we've been building quarter over quarter.
Has been significant and so we've been building quarter over quarter and now we've got line of sight to the $200 million, but but really the portfolio.
Kathleen Quirk: And then the second question, just circling back on the electric expansion in 800 million pounds or if you can get there in three to five years, that's a pretty impressive number. I just want to get some more details from you if I could. Just on the cost for that. I mean the US operations have been running around color 270 pound or so. Is that a fair cost for us for this as well?
Speaker 11: Now we've got line of sight to the 200 million, but really the portfolio.
Speaker 11: gives us sustainability going forward into the future and builds this foundation that I can see it significantly building from there.
Gives us sustainability going forward into the future and built that foundation that.
You can see it significantly building.
From there.
Speaker 11: And then you've got a whole other portfolio of innovation work, whether it's, you know, additives or alternate flow sheets or, you know, really leveraging temperature at that next level that the team is really excited about. So, super focused on discipline and execution, that the team...
And then you've got a whole other portfolio of innovation works, whether it's you know additives or alternate flow sheets or really leveraging temperature at that next level. The team is really excited about so.
Kathleen Quirk: Or I mean were the operating costs be higher but lower or much lower capital costs? I'm just trying to get a sense of what the upside is for that sort of potential. Yeah. On the duty issue, the duties are paid on concentrate exports. So once we get the Smeltor done and ramped up, we will have no more exports. Of concentrates will be producing copper cathode and gold. There's actual metals. The export duty only applies to this intermediate step of concentrates.
Super focused on disciplined execution.
But the team is super energized and looking forward to the future.
Speaker 2: Yeah. And so there's a lot of value in this opportunity. And we see it, you know, we can feel it and we're pressing forward. But as we talked about earlier, we've got to get that going, you know, at the same time.
Yeah, and so there's a lot of value in this in this opportunity and we see it you know we can feel it and and we're pressing forward, but but yeah as we talked about earlier, we've got to get that going.
At the same time.
We get our productivity.
Speaker 2: Our key performance indicators improved in the US. And that's a big focus as well. So those two things.
Our key performance indicators.
<unk> improved in the U S and that's a big focus as well so those two things.
Speaker 2: We believe we'll generally generate a lot of value in our US business and it's not capital intensive. So that's really our primary focus right now is on getting those two things going at the same time. And we've made great progress on the leach front. We're making progress on the productivity initiative front, but we've got more work to do there. Those are impressive.
Kathleen Quirk: So there hasn't been anything in terms of we're still working with the government. Right now the export license is through May and so we've still got to work with the government to work through this issue beyond May of having a ramp up period. There will still be shipping some concentrates, exporting some concentrates during the ramp up, but we're going to work cooperatively with the government to make sure that those that continuity continues.
We believe we'll generally generate a lot of that value in our and our U S business and it's not no.
It's not capital intensive so that's that's really our primary focus right now is on getting those two things going at the same time and we've made great progress on our Leach front, we're making progress on the productivity initiative front, but we've got more work to do there.
Yes, those are impressive numbers on the production of close friends, who are the best.
Lots of you and your team.
Thanks Al.
Speaker 1: Your final question will come from the line of Brian McArthur with Raymond James. Please go ahead.
Kathleen Quirk: With respect to the leach pounds, Not every application is the same, but on average we expect these leach pounds to come in at roughly a dollar per pound and so that is, that's why we're so excited most of this is in our U.S, business and so it'll bring down if we're successful. And we're able to put this into our reserves, it'll bring down our average cost in the U.S, over time. Just ask Cory Stevens on the line and he and his team are leading this initiative and just wanted to ask Cory if there's anything that we didn't cover on leaching that you want to make points out that hasn't been discussed so far.
Your final question will come from the line of Brian Macarthur with Raymond James. Please go ahead.
Speaker 11: Good morning, Richard and Kathleen. My question just goes back to the export.
Hi, Good morning, Richard and Kathleen My question, just goes back to the export duty the $147 million you incurred this quarter two things I assume that Gordon retroactive back to March 29th when it <unk>.
Speaker 11: The 147 million you incurred this quarter, two things. I assume that Gordon Retro actually backed the March 29th.
Speaker 11: with scaled down to your sort of paying two quarters. And the second thing is the text talks about incurring
<unk> scaled down to your sort of paying two quarters in a subtle thing it detects talks about incurring it.
Speaker 11: Have you actually paid it on a cash basis? Or is it just a payable as you kind of find work through all this?
Have you actually paid it on a cash basis or is it just a payable as you've kind of worked through all of this.
Hum.
Speaker 2: It was a go for the word duty so it wasn't based on
It was a go forward dirty so it wasn't based on you.
Speaker 2: you know, retroactive. So go forward duty. And 7.5% of the exports.
No retroactive.
I'll go forward duty.
And seven 5% of the of the exports.
Speaker 2: values were assessed.
Values where were assessed.
Speaker 2: Some of it's been paid, some of it's not been paid.
Some of it has been paid some of it has not been paid and there's a process in Indonesia, where just like any other process, where you have.
Speaker 2: And there's a process in Indonesia where just like any other process where you have...
Kathleen Quirk: Yeah, Kathleen, I guess the one thing I would just add or maybe just emphasize is some of the, the momentum that's been able to been built around this effort really around these executable known technologies has been significant and so we've been building quarter over quarter and now we've got line of sight to the 200 million but really the portfolio. Give us sustainability going forward into the future and build this foundation that you know what I can see it significantly building from there and then you've got a whole other portfolio of innovation work whether it's you know additives or alternate flow sheets or really leveraging temperature at that next level that the team is really excited about so.
Speaker 2: a defeated amount or amounts that you're objecting to, you know, you can go through a process and pay it, but you pay it with that.
It.
Disputed amounts or amounts of the ear objecting to.
Go through a process and pay it but you pay it with that with that you know it.
Speaker 2: with that, you know, it advisory that it remains to speed it. But for financial accounting purposes,
Advisory that it's you know that it remains disputed it so but but for financial accounting purposes.
Speaker 2: Given just the uncertainty of Howard would all play out, we have accrued those costs. And so we've extents those as we go. If it gets resolved, that'll get favorably, it'll get reversed. But at this point, we're accruing for these costs pending the ultimate up.
Given just the uncertainty of Howard would all play out we have we have.
Accrued those costs.
And so the expense those as we go if it gets resolved now that'll get Fei.
Favorably and it'll get reversed but at this point were accruing for these these cost pending the ultimate outcome.
Speaker 11: Great thing. And I just just to be clear, fine if you can have last quarter. Yeah. Okay, first. We'll call it.
Great. Thanks, David and I, just just to be clear, Brian if you could get from last quarter.
Kathleen Quirk: Super focused on discipline and execution that the team is super energized and looking forward to the future. Yeah, and so there's a lot of value in this in this opportunity and we see it you know we can feel it and and and we're pressing forward but but we as we talked about earlier we've got to get that going. You know at the same time we get our productivity our key performance indicators improve in the US and that's a big focus as well so those two things we believe will generally generate a lot of that value in our and our US business and it's not you know it's not capital intensive so that's that's really our primary focus right now is on getting. Those two things going at the same time and we've made great progress on the leach front we're making progress on the productivity initiative front but we've got that more work to do there.
Yeah, I'll follow up with David because just last quarter the export duty zero M D.
Speaker 11: zero on the cost of the pounds. That's what I'm just trying to figure out exactly how this was working. Yep.
Cost per pounds, so that's where I'm just trying to figure out exactly how this is working.
Yeah.
Okay.
Remember.
Just remember Brian .
Speaker 3: We weren't exporting for our fairly substantial period of time there.
Our next 40 for a fairly sustained.
After a period of time there.
Speaker 3: Well, we had this administrative delay for even having any exports and that's when our inventory built up so much we were able to sell it down But we went for what was it Catherine about six weeks With the
We had this administrative delay.
For even have an EDI exports and I just wanted to inventory built up so much.
Dan.
We went from what was the cap maybe about six weeks.
Yes.
And so the duties.
The duties paid.
Speaker 2: House of Audience triangle
Yeah, the new regulation didn't come out in June and July time frame.
And and.
So the second quarter, we didn't have duties.
Speaker 2: It was the June 10th date that triggered some new regulations.
It was this June 10th date that.
Triggered some new regulations.
Speaker 12: So we didn't have, you're right, that we didn't have duties in the second quarter. So the duties that you're seeing in the third quarter relate to the third quarter shipments. Great, thanks.
Unknown Attendee: Those are impressive numbers on the production and cost funds so best of luck to you and your team.
So we didn't have we you're right we didn't have duties in the in the in the second quarter. So the duties that you're seeing in the third quarter relate to the third quarter shipments.
Kathleen Quirk: Thanks. Your final question will come from the line of Brian McArthur with Raymond James please go ahead. Good morning Richard and Kathleen my question just goes back to the export duties the 147 million you incurred this quarter two things I assume that's going retro active back to March 29, when it technically was scaled down to your sort of paying two quarters. And the second thing is the text talks about incurring it.
Great. Thanks, very much that's very clear and thank you Richard that's very helpful as well.
Okay.
Speaker 1: Thank you. With that, we'll turn the call over to management for any closing remarks.
With that I'll turn the call over to management for any closing remarks.
Speaker 2: Well, thanks everyone for your participation and we're available if anybody has any questions or comments and just to talk to David and we'll look forward to continuing to report to you on our progress.
Well thanks, everyone for your for your participation and were available if anybody has any questions or comments and just talked to David and we'll look forward to continuing to report to you on our progress.
Kathleen Quirk: Have you actually paid it on a cash basis, or is it just a payable as you kind of son worked through all this? It was a go-forward duty, so it wasn't based on, you know, retroactive, so go-forward duty. And seven and a half percent of the exports values were assessed. Some of it's been paid, some of it's not been paid, and there's a process in Indonesia where, just like any other, process where you have a defeated amount or amounts that you're objecting to, you know, you can go through a process and pay it, but you pay it with that, you know, advisory that it's, you know, that it remains defeated.
Speaker 1: Ladies and gentlemen, that concludes our call for today. Thank you for your participation. You may now.
Ladies and gentlemen that concludes our call for today. Thank you for your participation you may now disconnect.
Okay.
Okay.
Kathleen Quirk: But for financial accounting purposes, given just the uncertainty of Howard would all play out, we have, we have accrued those costs. And so we've extents those as we go. If it gets resolved, that'll get favorably, it'll get reversed. But at this point we're accruing for these costs pending the ultimate outcome.
Kathleen Quirk: Great, thank you. And just to be clear, fine, if you get the last quarter, yeah, I'll follow up with David, because just last quarter, the export duties were zero on the, you know, cost per pound, so that's where I'm just trying to figure out exactly how this was working. Yep. Just remember, just remember, Brian, we weren't exporting for our fairly substantial period of time there. Well, we had this administrative delay for even having any exports, and that's when our inventory built up so much we were able to sell it down, but we went for, what was it, Catherine, about six weeks.
Kathleen Quirk: Yeah, the duty is paid when the export. Yeah, the new regulation didn't come out to June and July timeframe, and, and so the second quarter we didn't have duties. It was the June 10th date that triggered some new regulations, so we didn't have, you're right, that we didn't have duties in the, in the second quarter. So the duties that you're seeing in the third quarter relate to the third quarter shipments. Great, thanks very much. That's very clear, and thank you, Richard.
Unknown Attendee: That's very helpful as well.
Unknown Attendee: Thank you.
Richard Adkerson: With that, we'll turn the call over to management for any closing remarks. Well, thanks, everyone, for your, for your participation, and we're available, if anybody has any questions or comments and talk to David, we'll look forward to continuing to report to you on our progress.
Unknown Attendee: Ladies and gentlemen, that concludes our call for today. Thank you for your participation.
Unknown Attendee: You may now.