Q4 2024 Freeport-McMoRan Inc Earnings Call
Speaker Change: Ladies and gentlemen, thank you for standing by. Welcome to the Freeport-McMoran fourth quarter conference call. At this time, all participants are in a listen-only mode.
Later, we will conduct a question and answer session.
Speaker Change: If you wish to ask a question during the Q&A session, press star 1 on your touchtone phone. If you require assistance during the conference, please press star 0. I would now like to turn the conference over to Mr. David Joint, Vice President Investor Relations. Please go ahead, sir.
Good morning, everyone, and welcome to the Freeport conference call.
Speaker Change: Earlier this morning, FCX reported its fourth quarter and full year 2024 operating and financial results.
Speaker Change: Today's conference call is being broadcast live on the internet. Anyone may listen to the conference call by accessing our website homepage and clicking on the webcast link for the conference call.
Speaker Change: In addition to analysts and investors, the financial press has been invited to listen to today's call. A replay of the webcast will be available on our website later today.
Speaker Change: Before we begin our comments, we'd like to remind everyone that today's press release and certain of our comments on the call include non-GAAP measures and forward-looking statements.
Speaker Change: and Action Results may differ materially. Please refer to the cautionary language included in our press release and slides and to the risk factors described in our SEC filings, all of which are available on our website.
Speaker Change: Also on the call with me today are Richard Adkerson, Chairman of the Board, Kathleen Quirk, President and Chief Executive Officer, Marie Robertson, Executive Vice President and CFO, and other senior members of our management team.
Speaker Change: Richard will make some opening remarks, Kathleen and Marie will review our slide materials, and then we'll open up the call for questions.
Richard
Good morning, everyone. Thank you all for joining us.
Kathleen will review our continuing
Speaker Change: a strong financial position in our significant organic growth opportunities. Marie will review our financial outlook.
Speaker Change: It goes without saying we're living in a very interesting world today. We have new presidents in the United States and in Indonesia.
Speaker Change: At Freeport, we will support their administrations as we do in all the countries where we operate.
Speaker Change: I first worked with Craveau Subianto in Indonesia in the late 1990s, when he was a general in Capacis.
Speaker Change: At that time, he helps us resolve social unrest in our operating area of BACWA.
Speaker Change: Kathleen and I met with him recently in Jakarta, again in Washington, and in Lima at APEC.
Speaker Change: I was very impressed by his knowledge of global affairs, and his candid engagement on issues important to investors.
Speaker Change: We're now working with this government on several issues important to our company, including obtaining permission to continue exporting copper concentrates in 2025 as we complete repairs.
Speaker Change: from the unfortunate fire at our massive new smelter, and as we work on the extension of our license to operate beyond 2041.
Speaker Change: I'm confident we will find common ground on these and other issues.
Speaker Change: as we have done over the almost 60 years of our operating in Indonesia. I'll turn the call over to Kathleen and look forward to her comments.
Kathleen Quirk: Thank you, Richard. Thanks everyone for being on the call. I'm pleased to report on our fourth quarter results.
Kathleen Quirk: review our 2024 performance, and update you on our projects and outlook for the future.
Kathleen Quirk: We look back on our performance in 2024, and I'm on slide 3 here. Our team executed our plans in solid fashion.
Kathleen Quirk: We enhanced our strong foundation to support a positive long-term future centered on value creation.
Kathleen Quirk: We show on slide 3 the annual information on our copper sales, unit costs, and financial metrics for the year 2024.
Kathleen Quirk: compared to 2023. Our team delivered on our plan. We essentially met our sales targets developed at the start of 2024, and we slightly improved on net unit cash costs compared with 2023 and our plan going into the year.
Kathleen Quirk: We're proud of Freeport's long track record for successful execution, and we don't take this as a given.
Kathleen Quirk: It requires that we stay disciplined each day on managing the many underlying metrics which drive our results.
Kathleen Quirk: requires that we manage risk and stay on top of what matters, both for the short-term and the long-term.
Kathleen Quirk: It also requires that we find solutions to overcome unforeseen challenges which, as we all know, are inevitable given the nature of our business.
Kathleen Quirk: Strong operational execution combined with improved pricing allowed us to achieve $10 billion in EBITDA for the year 2024. That was 14% above 2023 EBITDA. And our operating cash flows in 2024 of over $7 billion were 35% improved from the prior year.
Kathleen Quirk: This was our average copper realization during 2024 of 421 per pound and our realization for gold was slightly above 2400 per ounce.
Kathleen Quirk: As we go forward, our team is focused on opportunities to continuously improve and drive value in our existing operations and through our organic growth portfolio.
A second focus area is scaling our leach opportunity.
Kathleen Quirk: We've set a target to reach a run rate of 300 million pounds by the end of 2025, and to build on that with additional scale in 2026, on our path to 800 million pounds of incremental copper per annum by 2030.
Kathleen Quirk: A third focus area is the PTFI smelter. Our team has executed this complex project well and has stepped up to respond to the recent fire incident.
Kathleen Quirk: We have a plan, a solid recovery plan that we're executing on, and that will enable us to deliver this project during 2025.
Kathleen Quirk: It's important for us not only to be fully integrated and get the smelter up and running, but also important as we seek to extend our operating rights beyond 2041 in Indonesia.
Kathleen Quirk: You'll see us talking more about innovation. Innovation is a major priority as we go forward. Our work to date indicates a significant untapped potential value in this area, and we've got a team working on it to drive that value.
Kathleen Quirk: Equally important, we're continuing to build optionality in our growth portfolio. We have a number of key milestones identified in 2025, and we've got three major projects that we're currently working on for future growth.
Kathleen Quirk: I'm going to review markets on slide 5, and you can see where copper prices have been. They traded in a broad range during the year 2024, between 367 per pound and 492 per pound, averaging 415 per pound on the LME.
Kathleen Quirk: On the U.S. COMEX exchange, prices were slightly higher than the LME, and year-to-date the differential has grown and is now, is averaged about 17 cents per pound through the first part of 2025.
Kathleen Quirk: During 2024, copper prices mostly followed macro sentiment, which weighed favorable U.S. economic data, rate cuts in the U.S., and the potential for economic stimulus in China.
Speaker Change: against ongoing economic pressures in China, a strong U.S. dollar, and uncertainties on U.S. tariff and trade policies that the markets have been focused on from late last year.
Speaker Change: At a micro level, demand continues to grow, and that's supported by secular demand trends associated with electrification, which has offset some of the impact of weakness that we've seen in certain more cyclical sectors.
Speaker Change: In the U.S., our customers are reporting solid demand for power cable and building wire associated with substantial investment in electrical infrastructure and AI data centers.
Speaker Change: The growth in the power sector is offsetting weakness in traditional demand sectors, currently coming from residential construction weakness and the auto sector.
Speaker Change: Turning to China, demand from China continues to be supported by significant investments in the electrical grid and continued growth in China's production of electric vehicles.
Speaker Change: We've seen a highly publicized report of weakness in China's property sector, and that's influenced sentiment. But the reality is China's demand for copper continues to grow, albeit it had modest growth in demand in 2024.
Speaker Change: We're seeing recent data points out of China that indicate a number of sectors are poised for better growth in 2025.
Speaker Change: and together with potential stimulus actions to support economic growth targets.
Speaker Change: their support for potentially higher growth and demand from China as we move through 2025.
Speaker Change: We want to highlight copper's superior conductivity and that makes it D-metal when it comes to electrification.
Speaker Change: New massive investment in the power grid, renewable generation, technology infrastructure, and transportation will drive an increased demand for copper and forecast calls for above trend growth and demand for the foreseeable future.
Speaker Change: As we match this up with supply, we continue to see a balanced market near-term and significant deficit conditions longer run.
Speaker Change: This is going to require significant investment by the industry, as well as innovative technologies to build supplies longer term, and at Freeport we're driven to supply copper reliably and responsibly to this growing market.
We'll move into the fourth quarter results on slide six.
where we provide a summary of the results.
Speaker Change: Our operating performance in the fourth quarter was solid. Our sales and net unit costs were slightly better than our guidance going into the quarter.
Speaker Change: We've made a lot of progress since our last update call in October at our Indonesian smelter and refinery project. The smelter recovery activities are in progress.
Speaker Change: Long lead items are expected to arrive in the March-April time frame, and we expect to recommence production by middle of this year.
Speaker Change: The Precious Metals Refinery, which was designed to refine precious metals from our existing smelter in Indonesia, as well as the new smelter, was not impacted by the fire and we produced our first gold bar in late 2024.
Speaker Change: Startup operations at the refinery have gone very well and following completion of the smelter ramp up, our Indonesian mining and smelting operations will be fully integrated.
Speaker Change: In parallel with working on the smelter recovery, we've made great progress with the Indonesian government to allow us exports during the period of the smelter repairs.
Speaker Change: We did receive approval in late 2024 to update our quota for the year 2024 and that allowed us to make some additional shipments in December.
Speaker Change: We're currently working with the government on 2025 exports and we expect to receive approval in the first quarter.
Speaker Change: We're also working very hard to progress initiatives to build value from organic growth. We've benefited Freeport from a large reserve and resource position, with near-term, medium-term, and long-term embedded growth options.
Speaker Change: We're challenging ourselves to take advantage of innovation to improve efficiencies, reduce costs and capital intensity, and shorten lead times for our projects.
Speaker Change: The High Potential Innovative Leach Initiative is a great example of this.
Speaker Change: We achieved an approximate 50% in copper production from this initiative in 2024.
Speaker Change: at a very low cost, and have projects in motion to target an annual run rate of 300 million pounds by the end of this year, and that's 40% higher than what we achieved in 2024, with opportunity for further gains in the future.
Speaker Change: We're also advancing our brownfield expansion opportunities to position the business for longer-term growth to supply a market with increased requirements for copper.
Speaker Change: and future prospects for strong cash flow generation to support investments in value-enhancing projects and returns to shareholders.
Speaker Change: I'll go through on slide 7 our operations update across our geographic regions. And I'll start with the U.S.
Speaker Change: where we're making good progress with our initiatives to improve efficiencies and cost performance despite a decline in ore grades in recent history.
Speaker Change: Data we monitor regularly regarding our asset efficiencies and other key indicators have trended more favorably over the last several months.
Speaker Change: As we look forward, we expect production in the U.S. to increase by 8% in 2025, with opportunities for further increases in 2026 and 2027.
Speaker Change: Absent changes in commodity-based input costs, we're targeting unit costs to trend lower each year over this three-year period.
Speaker Change: With 2024 behind us, our goal is to make 2024 the low-water mark year for our U.S. business.
Speaker Change: Structurally, we deal with lower grades in the U.S. and halls are getting longer.
Speaker Change: The autonomous haul truck conversion being deployed in 2025 at Baghdad will allow us to test the potential for this application on a broader scale at other operations.
Speaker Change: The incremental leach pounds at scale will also benefit our cost position as we go forward.
Speaker Change: We also initiated a new project during 2024 centered on integrating new technology and automation to optimize performance in our basic mining functions.
Speaker Change: We believe there is significant opportunity here for value creation through meaningful cost reduction, which would enhance margins and also expand reserves from no mineralization, which is currently economically limited under our current reserve pricing.
Speaker Change: Many of you have been following this. We're following it very closely. U.S. legislation, considering copper as a critical mineral for integrated producers.
Speaker Change: If this is enacted, this will give us a further benefit of potentially being eligible for a tax credit of 10% of our operating costs in the U.S.
Speaker Change: In South America, the team in our Cera Verde operation posted another solid quarter with strong operating rates and no recoveries.
Speaker Change: The team is doing a really good job with cost management, as evidenced by a 13 percent improvement in South America unit costs over the year-ago fourth quarter.
Speaker Change: As you'll see in our guidance, Cera Verde grades are expected to be slightly lower in 2025 compared with 2024. We expect long-term averages to recover to the 900 million pound per annum range at Cera Verde.
Speaker Change: At Alibro, we're positive about the opportunity to test an initiative to add heat to our leach process and that has a lot of promise to provide incremental near-term production there.
Speaker Change: turning to Indonesia with another solid quarter and the team achieved multiple new operating records again in 2024.
Speaker Change: Our team is consistently delivering strong volumes of both copper and gold from our large scale underground ore bodies and has demonstrated this consistently over the last several years.
Speaker Change: And as you'll see in the reference slide on slide 26, the outlook for Grasberg is positive with a strong multi-year outlook for significant copper and gold production.
Speaker Change: For 2025, our guidance at Grasberg reflects downtime associated with two major mill repair projects scheduled during the year. This is expected to result in lower volumes in the first quarter compared with the balance of 2025.
Speaker Change: We also wanted to comment we've received some questions about recent press reports coming out of Indonesia regarding the potential change in requirements for retention of export proceeds.
Speaker Change: There were new regulations issued in 2023 and that required PTSI to deposit 30% of its U.S. dollar export proceeds in a domestic cash bearing account for 90 days.
Speaker Change: The government is currently considering potential changes to this regulation, which would increase the requirement, but also allow withdrawals from the balances to fund business requirements.
Speaker Change: The details of the potential modifications have not been finalized and Freeport and other companies in Indonesia are discussing the proposals with the government in an effort to avoid requirements that could have a negative impact on our business.
Speaker Change: We'll move to our growth and innovative leach opportunity, where we continue to be encouraged by the significant value potential from this initiative.
Speaker Change: The chart on the left side of slide 8 shows our progress over the last few years. We've been successful in deploying a new series of operating practices to recover incremental copper previously thought to be waste.
Speaker Change: Our recent gains have been in the areas of adding scale to our targeted solution injection wells, innovative approaches to regional areas in the leach stockpile previously inaccessible
Speaker Change: and expanding thermal covers on top of the stockpiles and optimizing our solution chemistry.
Speaker Change: We have several additional projects underway in 2025, and we're targeting reaching the annual run rate of 300 million pounds by the end of this year, with the potential to produce 300 to 400 million pounds during 2026 from these initiatives.
Speaker Change: Really excited about projects being planned to add heat to the stockpiles and field testing of additives.
Speaker Change: Ultimately, our goal is to achieve 800 million pounds per annum from this value-enhancing growth initiative, the size of a major new mine, that's got very low capital investment required, very low incremental operating costs.
Speaker Change: which will significantly enhance the value and competitive position of our America's production.
Speaker Change: Just to comment on the cost of this innovative leach, to date it's been well below a dollar incrementally per pound. And what's so exciting about it is we're bringing on production of a product that was
Speaker Change: We've already incurred the mining costs, so we're spending incremental dollars to get it more copper. And it's got really a lot of value potential, and that's why we're pursuing it so aggressively.
Speaker Change: We've got an extensive inventory of substantial residual copper from material already mined. We've got industry-leading technical expertise and a strong multi-discipline innovation team dedicated to the initiative.
Speaker Change: On slide nine is a brief update on our organic growth projects, all of which are brownfield opportunities where we can leverage existing assets and establish operations.
Speaker Change: We talked about the leach opportunity. In addition, we also have opportunities for expansion at Baghdad and our Safford Lone Star operations in the U.S.
Speaker Change: At Baghdad, we're continuing to make investments in site infrastructure and tailings expansion to position us to execute the project more efficiently when the time is right.
Speaker Change: We expect to have the majority or most of the autonomous trucks deployed in the field this year. That will provide the ability to be more efficient with labor at this remote location.
Speaker Change: In parallel, we're also continuing to pursue opportunities to reduce the capital intensity of the project. We're monitoring markets and site-specific factors and hope to be in a position to make a decision on the path forward by the year end.
Speaker Change: in the Stafford Lone Star District where we already have existing operations. It's our newest mine in the U.S.
Speaker Change: We're targeting opportunities there that could double the current production levels of 300 million pounds per annum. We've got a very large resource at this location and expect this district will become a significant asset for Freeport and Arizona in the next decade.
Speaker Change: At LABRA in Chile, we've talked about this in the past, we're preparing an environmental impact statement. We expect to be complete and submitted by the end of this year.
Speaker Change: The project involves investment in a new concentrator of scale similar to the size of the Cerro Verde concentrator we installed 10 years ago.
Speaker Change: We've got plans for investments in a desalinization plant and also a pipeline system to support our water requirements.
Speaker Change: The opportunity from the project is to provide 750 million pounds of annual copper production, it's a very large scale, and 9 million pounds of molybdenum per annum.
It's got a long lead time to it, it requires...
Speaker Change: seven to eight years of lead time. We're currently advancing it to provide options for the future and value-driven options to boost our production in the future as the world needs more copper.
Speaker Change: In Indonesia, we're continuing to develop the Kuching Liyar ore body within the Grasberg District. That development continues.
towards a targeted commencement of production by 2030.
Speaker Change: We're also very excited about additional exploration opportunities below the deep MLZ ore body and extension of our operating rights will get set us up for additional long-term development options in this highly attractive and valuable district
Speaker Change: Our overall objective is this, to move quickly to define the opportunities across the portfolio, rank them on value potential, and allocate capital on a risk-reward basis to provide profitable growth options for the future.
Speaker Change: We're going to be disciplined in our approach, targeting opportunities that enhance long-term value and where we believe we can create that value at a manageable risk.
Speaker Change: We're moving to our outlook on slide 10, where we show a three-year outlook for sales volumes of copper, gold, and molybdenum.
Speaker Change: Our COPPA guidance for 2025, as you'll note, has been adjusted by approximately 5%.
Speaker Change: That incorporates updated estimates for the mill maintenance projects planned in 2025 in Indonesia.
Speaker Change: Our gold estimates for 2025 are about 7% higher than the prior estimates, and that's benefiting from inventory drawdowns during 2025 and also slightly higher ore grades for gold.
Speaker Change: We provide quarterly estimates on slide 25 of the reference materials. The first quarter.
Speaker Change: The volumes are expected to be the lowest of the year because of mill maintenance and timing associated with the expected export approvals, but you'll see we get back to large scale production as we move through the year.
Speaker Change: Our 2026 guidance for copper is unchanged, and our gold for 2026 is up about 100,000 ounces compared with our prior guidance.
Speaker Change: We've added 2027 to our outlook, which is similar to the outlook for 2026.
For slide 11...
Speaker Change: We show our cost estimates for 2025, and we show the geographic mix, which has an impact on the overall average.
Speaker Change: When you look at our cash cost estimate currently for 2025 of $1.60 per pound, that compares to $1.56 per pound in 2024.
Speaker Change: The two results are similar, but the weighting of volumes between the regions results in a slight increase.
Speaker Change: The important point we want to get across on this slide is that we expect U.S. costs to be lower in 2025.
Speaker Change: and we're focused on driving these costs lower as we go forward.
Speaker Change: You can see the cost by region presented on slide 24 in the reference material, which will show you the makeup of the cost.
Speaker Change: I will now turn the call over to Marie who is going to review our cash flow outlook and then we will come back and take your questions.
Good to see you, Murray.
Thanks, Kathleen.
Speaker Change: Just turning to slide 12, putting together our projected volumes and cost projections, we show modelled results on slide 12 for our EBITDA and cash flow at various copper prices, ranging from $4 per pound to $5 per pound.
Speaker Change: These are modeled results using the average of 2026 and 2027, with current volume and cost estimates, and holding gold flat at $2,700 per ounce and molybdenum flat at $20 per pound.
Speaker Change: Annually the DAR would range from over 11 billion dollars per annum at four dollar copper to over 15 billion dollars per annum at five dollar copper.
Speaker Change: Operating cash flows at these ranges would be nearly $8 billion per year at $4 and over $11 billion per year at $5.
Speaker Change: We show sensitivities to various commodities on the right. You will note we are highly leveraged to copper prices, with each 10 cent per pound change equating to approximately $425 million in annual EBITDA.
Speaker Change: We will also benefit from improving gold prices, with each $100 per ounce change in price approximating $150 million in annual EBITDA.
Speaker Change: With our long-lived reserves and large-scale production, we are well positioned to generate substantial cash flow to fund future organic growth and cash returns under our performance-based payout framework.
Speaker Change: Moving on to slide 13, this shows our current forecast for capital expenditures in 2025 and 2026.
Speaker Change: Capital expenditures for 2024 were $3.6 billion and are expected to approximate $4.4 billion per year in 2025 and 2026.
Speaker Change: 2025 capital expenditures are about 5% above our October estimate, which largely reflects minor revisions to project estimates and an increased allocation of capitalised interest.
Speaker Change: The Discretionary Projects approximated $1 billion in 2024 and are expected to approximate $1.6 to $1.7 billion in 2025 and 2026.
Speaker Change: with roughly 50% related to the Kitchener Yard development and the LNG project at Grasberg.
Speaker Change: The balance includes acceleration of tailings and other infrastructure to support the Baghdad expansion.
Speaker Change: The Atlantic Copper Circular Project, which is expected to be completed in the first half of 2026 and allocated capitalised interest.
Speaker Change: The discretionary category reflects the capital investments we are making in new projects that under our financial policy are funded with the 50% of available cash that is not distributed.
Speaker Change: These projects are value-enhancing initiatives and are detailed on slide 28 in our reference material.
Speaker Change: We have a track record of managing capital in a disciplined manner, and we will continue to deploy capital in a manner that builds long-term value.
Speaker Change: And finally, on slide 14, we reiterate the financial policy priorities centred on a strong balance sheet, cash returns to shareholders, and investments in value-enhancing growth projects.
Speaker Change: Our balance sheet is strong with investment grade ratings, strong credit metrics and flexibility within our debt targets to execute on our projects.
Speaker Change: In the fourth quarter, we redeemed $730 million in maturing senior notes for cash.
We have no significant debt maturities until 2027.
Speaker Change: We have distributed $4.7 billion to shareholders through dividends and share purchases since implementing the financial policy.
Speaker Change: and have an attractive future long-term portfolio that will enable us to continue to build long-term value for shareholders.
Speaker Change: We actively monitor current market conditions and carefully manage the timing of our projects to ensure our financial flexibility remains strong.
Speaker Change: Our global team is focused on driving value in our business, committed to strong execution of our plans, and providing cash to invest in profitable growth and returns to shareholders.
Kathleen Quirk: Thank you everyone for your attention. I'll now hand back to Kathleen and we can take your questions.
Thank you, Marie. Operator, we're ready to take questions.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, press star 1 on your touchtone phone. 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 speakerphone, please pick up your handset before pressing the numbers.
Speaker Change: We ask that you limit your questions to one. If you have additional questions, please return to the queue. One moment, please, for our first question.
Speaker Change: Our first question comes from the line of Liam Fitzpatrick with Deutsche Bank. Please go ahead.
Liam Fitzpatrick: Good morning Kathleen and Richard. I'll just stick to one question given the guidance there. Just around the approval of the approval to export concentrate from Indonesia. You said you hope to receive it in Q1 but do you have any more?
visibility on when in Q1.
Speaker Change: And does there come a point in this quarter when you'll start to run out of storage capacity and therefore could that start to impact your production rates and your guidance?
Thank you
Thank you, Liam.
Speaker Change: As we mentioned, we're making really good progress with the government.
Speaker Change: We've reviewed with them the incident, the repairs, the lead times required.
They visited the site.
Speaker Change: and they have indicated support for allowing us to continue exports during 2025. They've also encouraged us to move as quickly as we can to finish the repairs.
Speaker Change: But they've indicated support for this. Now it's a matter of getting documentation.
Speaker Change: for the amendment to the regulation. We understand that they're working on the drafts of the new regulation or the amendment to the regulation to allow this.
and we expect this...
be approved in the near term.
Speaker Change: We're still shipping to our existing smelter there, but our inventories are building a little bit. But if we get...
Speaker Change: This export permit, as we expect in the coming weeks, will be good to start shipping exports and also bringing down those inventories.
Okay, thank you.
Speaker Change: Our next question will come from the line of Katja Jancic with BMO Capital Markets. Please go ahead.
Katja Jancic: Hi, thank you for taking my question. Kathleen, you mentioned the 10% tax credit potential. What are some of the next steps that need to happen for COPPER to actually qualify for that? And is there any timeline? In other words, is this still possible in 2025?
Speaker Change: It's a matter of legislation. There was a bill that passed through the House late last year.
Speaker Change: which allowed for the copper to be added to the list. And so we've got to get additional legislation passed through the other processes in the U.S.
Speaker Change: And so it still is possible. We're flagging it. We're monitoring it.
Speaker Change: and so I can't predict U.S. legislation timing, but it is important. There are a number, it's a bipartisan support for this and so we're following it very closely.
Okay, thank you.
Speaker Change: which would be very significant for us if you look at something on the order of $500 million of benefit.
Speaker Change: Our next question will come from the line of Alex Hacking with Citi. Please go ahead.
Yep, thank you. Good morning.
discretionary
CapEx spend for 2025.
The $400 million at Baghdad on the tailings infrastructure.
Speaker Change: Is that explicitly tied to the expansion, or that's something you would need to do anyway? And is that part of...
the $3.5 billion CapEx for the project.
and then the 600 million at Cushing-Lear.
Speaker Change: When that arrives, can you remind me, does it increase Grasberg production or it's just gonna fill the mill as other sources of ore are depleting? Thank you very much.
Speaker Change: Thank you, Alex. With respect to Baghdad, we do need to expand tailings infrastructure long-term.
Speaker Change: We don't need to do it now, and that's why it's discretionary.
If we don't move forward with an expansion...
Speaker Change: that those dollars could be deferred into the future. But what we're doing now...
is advancing this tailings infrastructure.
and I'm David Quirk.
Speaker Change: we would have to do in any case in the future.
Speaker Change: so that it gives us better optionality once we decide on whether to move forward.
Speaker Change: to move more quickly. So we could, if we decide not to move forward with Baghdad, we could push that sailings investment out.
The three-and-a-half billion...
Speaker Change: of capital for the Baghdad expansion is really the incremental capital. The tailings would have to be done at some point in the future in any case, so we don't include that as capital for the expansion.
Speaker Change: but we do have flexibility on the timing of this tailings infrastructure if we don't go forward with the with the expansion.
And then on on KL
What we're talking about there is...
Speaker Change: under our long-term plans, adding 90,000 tons a day from K.L. We're also looking at the opportunity to bring more K.L. production as we look at the mine plans longer term.
Speaker Change: And that will allow us to sustain a very long life at high rates at Glassberg as we go through 2041.
Speaker Change: When we think about the extension beyond 2041, there's a lot of KAL material that's still left over at the end of 2041. So an extension would essentially allow us to increase reserves without additional exploration.
Speaker Change: success. So it's part of our long-range plans. We'd always expected to have some declines in various ore bodies over time and this will allow us to sustain long-term large-scale production at Glassport.
Thank you.
Speaker Change: Your next question comes from the line of Chris LaFemmina with Jeffries. Please go ahead. Thanks, operator. Hi, Kathleen. Hi, Richard. Thanks for taking my question.
I'm just thinking about
Speaker Change: kind of the geopolitical risk profile for Freeport. So your organic growth is mostly in the Americas, but Indonesia at the end of the day, because it's such an amazing war body, is always going to be a significant
Speaker Change: contributed to earnings and a really important part of the Freeport investment case. And if we think back to the acquisition of Phelps-Thijs, in hindsight that was brilliant because it
Speaker Change: gave you geographic diversification, and when you did have challenges in Indonesia, you had other assets in the portfolio that were able to basically sustain the business as you dealt with those other challenges, so
Speaker Change: So one option now, which is an option that it sounds like you're pursuing, is early stage investments in these longer lead time organic growth projects, which at the end of the day would help diversify your earnings mix a little bit more to the Americas. But I wonder...
Speaker Change: is M&A a potential path to de-risking the business from a geopolitical perspective?
David Joint, Richard Adkerson
Thank you, Chris.
Speaker Change: In terms of the investment case, of course we've got a great opportunity in Indonesia and as Richard was saying earlier, we've got...
Speaker Change: close to a 60-year history there, and our team has always found a way to execute very positively and generate value. So we have a lot of
Speaker Change: confidence and feel positive about the long-term outlook there. But in terms of the opportunities, we're really excited about the investment case we have in the Americas and particularly in the U.S.
The Leach Initiative, when you think about...
Speaker Change: getting to 800 million pounds, and I know we're not there yet, we've got more work to do to get there, but the opportunity to have...
at a cash cost, which is...
Speaker Change: We're way less than the current $3, and we've been less than $1 right now.
Speaker Change: and really very limited CapEx, you know, you're talking about an opportunity there where some people are investing $10 billion to achieve that.
Speaker Change: opportunities. And those drop right to the bottom line. We've got this new innovation initiative that we stood up last year and we've got ambitious targets to reduce our costs meaningfully in the U.S.
Speaker Change: That will drop right to the bottom line and create a lot of value, not only from being able to have higher margins, but expanding the reserves, because we've got a lot of reserves in the U.S. that are economically limited.
We're very excited about the opportunity for low capital intensity.
Speaker Change: opportunities in the U.S. that'll generate a lot of value. And you remember, that drops to the bottom line. We don't have...
Speaker Change: significant taxes we're paying in the U.S., we don't have a royalty structure, etc. So we're very, very excited about that.
with regard to M&A and...
Speaker Change: will let Richard comment as well on his thoughts, but we do monitor, we do monitor opportunities across the industry on a regular basis.
The self-dodge opportunity that you mentioned in 2007, we were...
Speaker Change: Not planning to do an acquisition, but the opportunity was presented and we were able to take advantage of it because we were prepared.
Speaker Change: So, we will always look, we will always be prepared for opportunities as they may come.
Speaker Change: But we don't see, as part of our strategy, getting involved in a competitive auction process.
Generate Synergies, where we can use our...
Speaker Change: Our technical capabilities to add value to existing operations, this LEACH initiative is one that may give us an opportunity in the future to consolidate more and generate more value from it.
But it's not...
Speaker Change: Not necessarily, we don't have to do M&A. We look, we will be opportunistic. But we feel within our own plan, we've got a real opportunity to create value and don't have to do M&A. But Richard, do you want to add to anything I said there?
Thanks Kathleen, thanks Chris.
Speaker Change: And I'm going to try to be real short with this, Chris. We can talk later. But you point out how.
Acquiring Pelfstein, yeah, diversify.
Precourt in Indonesia.
Speaker Change: But on the other hand, having Indonesia to support the operations in the Americas, gave us the ability to be much more aggressive in the way we manage those operations and took advantage of opportunities in Southside or any other company could have with those low-grade mines.
Speaker Change: Actually I've been talking to Phelps-Dodge for almost 10 years before we acquired them to get them to acquire us and they never would do it.
Speaker Change: The world changed with China, and we had that opportunity. You look back on our industries, when management teams
Forced an M&A transaction for strategic reasons.
It's almost always a bad answer.
Speaker Change: So we position ourselves to run our company without having to make acquisitions, but we're in the market.
so that if an opportunity comes to us...
we're in a position to take advantage of it.
I believe in our industry, M&A driven by opportunities.
is the way to have successful M&A.
Thank you very much.
Thank you for that. Good luck. Thank you, Cliff.
Operator: Our next question comes from the line of Daniel Major with UBS. Please go ahead.
Hi there, can you hear me okay? Yes.
Operator: Great, thanks. Yeah, a few questions. Just the first one, I noticed an increase in the CapEx allocated to the smelter at Grasberg. Is there any insurance coverage for the additional work to fix the fire at the smelter?
The
The repair cost is estimated at approximately $100 million.
Operator: We have not increased our estimates overall for the cost of the smelter.
Operator: What you're seeing come through in 2025, for the most part, is costs that we incurred.
in 2024.
Okay, that's clear, thank you. And then a second question...
Speaker Change: Prior to the election, well, the change of government in Indonesia, you were heading towards, I guess, the conclusion of the review of the license extension, etc. Do you have a visibility on the timeline for when you'll be entering a similar process with the new government?
Speaker Change: The benefits of this operation, we're reviewing with the President the financial benefits. He remembers numbers from when he was involved, as Richard said, but he's been very impressed with the performance over the last...
Thank you.
Speaker Change: Many years and so we'll engage in that we there's a regulation that was put in place last year that has a as an outline of how how you qualify for the the extension and
Speaker Change: with the smelter repairs will be fully integrated, which will allow us to move forward. We also have the 10% requirement to sell an additional 10%.
Speaker Change: It was effective in 2041, and we're having discussions with MindID about a sale and purchase agreement. That's another criteria for the extension. But it's in everyone's interest, and I think both...
Speaker Change: both Freeport and the government understand this. It's in everyone's interest to extend this operation, to continue to make investments so that the benefits of this
Speaker Change: wonderful operation can continue well into the future, and that's clearly recognized within the government of Indonesia.
Speaker Change: So we're hoping to be in a position to apply for the extension during 2025.
Okay, so 20-25 timeline. Okay, thanks.
Speaker Change: legislative pathway in the Senate for the critical mineral. Do you have any visibility on when the Senate will be reviewing the bill?
Speaker Change: We do not. There are a number of agenda items they're working on and we do not have visibility on it. It's on the agenda for review but we don't have a time frame.
Great. Thanks. Thanks for taking my questions.
Speaker Change: Thank you. Our next question comes from the line of Oris Walkadall with Scotiabank. Please go ahead.
Oris Walkadall: Hi, good morning. Question about your CAPEX guidance. I was surprised to see the increase in 25, but
Speaker Change: But probably the the 26 guide of 4.4 billion Seemed high to me is given that you haven't approved any of the major growth projects yet. Is there any CapEx associated with those new growth projects in that 26 guidance already?
Speaker Change: As we were talking with Alex earlier, we've got some capital in 2026 that if we don't move forward with Baghdad would come out.
Speaker Change: That assumes that we're going to go forward, but if we don't decide to go forward, we could spread it out beyond 2026.
It also includes some LNG spend.
Speaker Change: As Marie was saying, we've got, you know, over 50% of the discretionary relates to Couching-Lear.
Speaker Change: and Ellen G. But the only other thing really in there, in 26, is...
is this flexibility around Baghdad's tailings expansion.
Speaker Change: I will say, though, we're going to be very disciplined about CapEx.
Speaker Change: We have in the past, will continue to be, we are gonna have to make investments in this business, the oil production in the future. We're gonna be very focused on.
bringing down capital intensity, working where we can to...
Speaker Change: defer items that we don't need to spend, and so we review it very carefully and and it will do it in a prudent fashion as we have in the past.
Speaker Change: If I could just follow up, what's a good run rate to assume for sustaining capital now for the business, say, beyond 26?
Speaker Change: Well, I think what you're looking at, you know, we separate these.
Speaker Change: These projects between the sustaining capital line that you see on the capital side, that's a pretty good run rate.
The planned investments...
Most of it relates to the underground at Grasberg.
Speaker Change: number will not stay at a billion dollars a year. We expect over time that that can come down. So, I mean, you're probably looking at something on the order of two to two and a half run rate without major projects.
Thank you.
Speaker Change: Our next question comes from the line of Bill Peterson with J.P. Morgan. Please go ahead.
Bill Peterson: Good morning, and thanks for taking the questions and all the details thus far. Realizing the question is hypothetical, but how does Freeport view the potential impacts to copper markets in general, and Freeport specifically from tariffs, whether they be...
Bill Peterson: you know, 10% blanket or 25% towards Mexico or Canada? I mean, I guess what is the ability of Freeport to move product from one region to another? And I guess, how does having US assets help protect or even benefit Freeport relative to other copper producers?
Speaker Change: Yeah, well in terms of the tariffs, with respect to specifically in the U.S.,
Speaker Change: Report does not, we basically sell all of our products in the U.S.
Speaker Change: The U.S. as a market itself does import copper, but we do not export copper from the U.S.
Speaker Change: So the imports of copper is what people are wondering about and whether those will carry a tariff. And you see the premium being built in right now to the COMEX versus the LME.
Speaker Change: And people are trying to handicap what that tariff might be for copper being imported into the U.S. But for us, we sell copper that we produce in the U.S.
Speaker Change: If there is a continued premium for copper in the U.S., we would capture that at Freeport because our U.S. contracts are based off of the U.S. price.
in terms of globally.
Speaker Change: You know, we produce in Indonesia, we'll be producing copper. Those flows will generally go to Asia.
from South America.
They will go to...
Speaker Change: Generally, they don't come to the U.S., the piece from Sara Verde. So, in terms of the impact on our...
Speaker Change: on our situation is, it's not a, it's not a play flow issue for us.
Speaker Change: The more concerning thing that we're watching with respect to tariffs is whether or not they would impact global growth, and that's the focus, the concern that we have. We want to make sure that
Speaker Change: The tariffs are in place, it doesn't impact overall global growth.
that we're just coming off of.
Speaker Change: moderating inflation and so those are the two things that we're focused on is whether the tariffs will have a have an impact on an overall global economic growth and and whether they will be inflationary for our for US operations those are the two major things
Speaker Change: Thanks for those insights. And then on leaching, and I may have missed it, but you know, we saw the step down in the quarter, but you're targeting now 300 million.
Powell's run rate.
and next in 25.
Speaker Change: I guess maybe in more detail, what drove this sequential decline and on the latter, on the on the increase, is that driven by expanding efforts in Alhambra or is this further tech advances or benefiting from, I guess, prior development that you've already, you know, accomplished?
Speaker Change: The fourth quarter, we essentially met our plan for LEACH, it was roughly 50 million pounds, which was in line with our plan and reflected the projects that we were doing for this initiative in that quarter. As we look at what's in our estimates right now for 2025,
Speaker Change: We've got just over roughly 225 million pounds of incremental copper in our current forecast.
We have a number of projects
that are in progress right now.
with respect to
Speaker Change: Deep Raffinate Injection, which is, you know, getting access to areas within the stockpile that need to get more solution to it, and we're doing that through injection, through drilling, we're scaling that initiative. We've got a number of projects where we're continuing to
Speaker Change: We call it Leach Everywhere, get access to areas that previously have not been able to get to and we found creative ways like using helicopters to get to these areas.
And then this heat.
this heat opportunity.
Speaker Change: We'll start to test that later this year and next year, and that's what allows us to...
Speaker Change: to scale from 300 to 400, but we think based on the initiatives we have going on now, we should be able to get to 300 by the end of this year.
Speaker Change: And then hopefully by the end of 26, getting to 400 with these additional initiatives we've got going on. So, it's on track. It's continuing to...
Speaker Change: the opportunity to get to 800 million pounds at a very low cost.
Speaker Change: And to say that, we've got 39 billion pounds of copper that has previously been placed that we've considered waste and we're trying to get as much of that as we can. If we get 20% of it, that's a huge gain for us. [inaudible]
Speaker Change: Thanks Kathleen. Best wishes to you and the team in 2025. Thank you, Bill.
Speaker Change: Our next question comes from the line of Tim Nataners with Wolf Research. Please go ahead.
Speaker Change: Yeah, hey, thanks for including me. I wanted to just follow up on that a little bit more detail if you could on the North American cost-cutting initiatives like how much of that is the more favorable mine plan, how are you seeing labor challenges, how are you considering 45x when you think about growth opportunities on top of already favorable NOLs. Just a little more color there please.
Speaker Change: Well, the 45X would be, you know, it's not in our plans, it would be, you know, incremental and be, you know, beneficial, you know, 10% reduction.
We are really focused on
you know, driving costs lower.
Speaker Change: over the next few years and we're doing that through just the basics. We're really rationalizing contractors. We've had
Speaker Change: We've had the assets that, over the last couple of years, have...
Speaker Change: underperformed expectations. We're now starting to get better performance, better efficiencies out of the asset, better utilization, better uptime, reducing the unplanned downtime. That's a key focus of ours.
Speaker Change: So that's where we're very optimistic in terms of the labor situation.
It's stabilized for us.
Speaker Change: We're not having the turnover that we've had in the last couple of years.
train people, have them be retained and become more productive.
Speaker Change: I talked about automation. We're doing that. We're doing that at Baghdad. We're going to broaden that. We're going to work on centralizing.
from Opportunities to Reduce Costs.
Speaker Change: We've got a whole series of opportunities and we're very excited about this innovation opportunity that will allow us to bring down the cost. I can't overemphasize how much value that is for us.
Speaker Change: as we look forward. You know, the 45X would be 10%. Our goal is, you know, way more than that to get our costs down. So, stay tuned. It's high on our priority list.
as we look forward.
Okay, we'll do thanks Kathleen for the additional color.
Speaker Change: Our next question comes from the line of Michael Dudas with Vertical Research. Please go ahead.
Good morning, Richard, Kathleen, Marie. Hi, Mike.
Speaker Change: Looking at a financial profile, Kathleen, it was net debt at 0.4 times, net billion dollars, I guess, ex smelter funding.
Speaker Change: and looking and given comfort levels that you've indicated three to four billion of range and staging of the capital expending and you got a lot of moving parts I understand the next couple years but
be a little bit more opportunistic in some capital allocation.
Speaker Change: available to either reduce debt or invest in our projects. And given our profile, we want to invest in, you know, projects that have a high value and return.
on investment.
but since implementing the policy in late 2021,
Speaker Change: increase in discretionary spending. And we'll be, as we talked about earlier, we'll be careful and prudent about how we manage it, but that debt capacity of where we are at a billion versus, you know, three to four,
is really earmarked to fund these discretionary projects.
Speaker Change: and when we look at the cash available for distribution to shareholders
That line is excluded.
You know, you're really looking at 50% of cash flow.
Speaker Change: that is excluding the discretionary, so just the 1-6 and the 1-1 for this year.
Speaker Change: including the discretionary. So we've got room on the balance sheet to fund these discretionary cash with what we've accumulated in the past and the other 50% that we're generating.
So...
Speaker Change: We've learned over a long period of time that it's prudent to have a strong balance sheet and we'll continue to do that, but we do have some capacity within our current financial targets to make investments that are prudent, that make sense, that drive value in our business.
Thanks Kathleen.
Speaker Change: Our next question comes from the line of Bob Brackett with Bernstein Research. Please go ahead.
Bob Brackett: Good morning. A couple of U.S.-related questions. One is probably just buckets of capital, but the lone-star oxide expansion,
Bob Brackett: For example, where has that moved in terms of discretional capital projects?
Bob Brackett: And the other would be an update on Jenny Resources and sulfide leaching. I think the trial at Baghdad's been there since 22.
Bob Brackett: El Abra since 23. Where is your level of prudent optimism, should I say?
Bob Brackett: Yeah, well with respect to the the Safford project that's that's essentially done this year
Thank you. Bye.
Bob Brackett: the sulfide expansion. But the oxide expansion has gone well and you'll start to see saccharin rates and volumes increasing. We've got that in our forecast for this year.
With respect to Jetty.
Speaker Change: And Corey Stevens is on the line, and he works a lot on this leach initiative and works a lot with other third parties, including Jetty. I'll let him comment on it, but we're continuing to work.
Internally, we have our own team that is testing additives.
Speaker Change: We have our own team that's driving these operational tactics that we've been so successful with over the years.
But we're also partnering with third parties.
Speaker Change: to share experiences and understand what the art of the possible is with respect to this leaching technology. With respect to JETI, we did do a trial at Baghdad. This was a...
Speaker Change: It was not a major deal for us. It was a stockpile that we didn't expect to use in the future.
and it had mixed results.
Speaker Change: that will continue to have dialogue with JETI about what they may be able to bring to the table.
But we're really focused on...
Speaker Change: I'm trying to figure out ways that we can build this on our own, because that allows us to retain the economics as much as possible. But we are using relationships that we have with industry participants that
Speaker Change: will allow us to enhance our understanding and share the results that others have experienced and share some of our techniques as well. But, Corey, do you want to add anything on third-party discussions versus our own?
Speaker Change: Yeah I know Kathleen we're pretty excited about the the attitudes that we have in play and fact.
Speaker Change: We're using an AI model actually to generate candidates and we have a pretty sophisticated and rapid test method where we go through and qualify candidates for
Speaker Change: for additives and then work those through the system for commercial deployment in a way that we're actually going to go in the next few months and
Speaker Change: have our first deployment at Marenci at a commercial scale. So we're pretty excited. So much so that we've got other candidates in the pipeline, but we're going at a pace to move forward with a pilot, but also scale it across.
Speaker Change: Morenci with the infrastructure so we're betting on the come that that's going to work and then go go big very quickly so that
That's what's going on on that front.
Thank you, Quirk.
Thank you very much.
Speaker Change: Our next question comes from Alina Blossom Linder with B of A. Please go ahead.
Speaker Change: Thanks, operator, and thanks for fitting me in, guys. I appreciate it. And good morning, Richard, Kathleen, and Marie. Just wanted to quickly ask on El Alhambra. So, Richard, you spoke about submitting permits in 2025 back in December, or early November, I think it was. Just curious, when you think about that project,
Speaker Change: What do you think about the right copper price for that to work and what's the right IRR to justify that investment? And then can we expect a stability agreement as part of the board approval for that full funds decision? Thanks so much.
Speaker Change: And we've done a lot of work, given the experience that others have had with recent projects in Chile. We've done a lot of work to test our capital and understand what happened in the other situation.
Speaker Change: to make sure that our economics are robust. And you look at the capital spend here, it's a large number. It would be shared between Freeport and Fidelco, but it is below
the lower $4 price.
Speaker Change: And, you know, if you use the same discount rate in the U.S., it's well below $4. But getting the price at $4 would give us a higher rate of return.
Speaker Change: to adjust for the risk that we have at Baghdad in the U.S.
Speaker Change: in Chile. We'll look at the landscape there. We currently do not have an agreement for Alaba, but we will look at whether that would make sense for this project long term.
We'll submit the EIS by the end of this year.
and then we'll go through a permitting process.
for a few years with the government.
Speaker Change: and we'll be in a position after that to make a decision.
Speaker Change: But what getting the permit does is gives us a lot of optionality to have a shovel-ready project, which are few and far between in this world. So having a large-scale project like this permitted will bring great value for Freeport.
Okay, very well said. Thank you.
Speaker Change: Our final question comes from the line of Brian MacArthur with Raymond James. Please go ahead.
Brian Macarthur: Thank you for taking my question. Can I just get a clarification on the 7.5% export tax?
Brian Macarthur: Is that going to happen even if you get the smelter up and running, or is it still working the way it used to work, where ultimately when the smelter's running, that export tax goes away, or is something changed in all the negotiations as you work to get your concentrated exports?
Brian Macarthur: Yeah, well, the current regulation in Indonesia is 7.5% on exports.
So... ... ... ... ... ... ... ...
Brian Macarthur: We're expecting that the smelter will be started up by the end of June, but then there will be a ramp-up period. So we'll continue to have some exports in the second half of the year, but they will decline.
Brian Macarthur: significantly as we go through and begin ramping up. So we've got, in our cost guidance, we have export duties built in on anything we're exporting, which is in line with the current regulation.
Brian Macarthur: But then in 2026 it would still change, assuming the smelter is up and running at full capacity by year-end, right? 2026 is zero, yeah. I mean, assuming we have capacity, full capacity, and we don't have exports, it would be zero.
Great. Thanks very much.
Thank you, Brian.
Speaker Change: And with that, I'll turn the call back to management for any closing remarks.
Speaker Change: Well, thank you everyone for your participation, your interest, your good questions, and if you have any follow-ups, David Joint is available.
We look forward to keeping you updated on our progress.
Speaker Change: Ladies and gentlemen, that concludes our call for today. Thank you all for joining. You may now disconnect.