The operator welcomes participants to the Freeport-McMoRan Fourth Quarter Conference Call and introduces Ms. Kathleen Quirk, President. Quirk thanks everyone for joining and mentions the availability of the press release and supplemental materials on the company's website. She also reminds listeners of the non-GAAP measures and forward-looking statements included in the call and refers them to the cautionary language and risk factors in the company's SEC filings. Quirk introduces other executives on the call and turns it over to Chairman and CEO Richard Adkerson for opening comments.

The first quarter of the year was a successful one for the company, with PT-FI leading the way. Despite facing challenges, the team at PT-FI set records and performed well. The company has also made progress in fulfilling its commitment to invest in downstreaming and copper concentrate business. In terms of the market, there was a small deficit in 2023 instead of the predicted surplus, due to stronger demand in the United States and China. However, there were also supply shortfalls in the industry due to various factors such as political and community issues.

The paragraph discusses the current state of the copper market, with low inventory levels and a high copper price driven by macroeconomic factors. The author expresses confidence in Freeport's position, with existing production and growth opportunities. The paragraph ends with a note of condolences for Rio Tinto, a previous partner of Freeport, who recently experienced a tragic event.

In this paragraph, Kathleen Quirk discusses the achievements of the company in 2023, including their focus on executing plans effectively and safely, managing challenges successfully, and posting solid operating results. She highlights the progress made in Indonesia, reaching milestones in the Americas, and achieving industry recognition for responsible mining practices. The company also ended the year in a strong financial position and is working towards enhancing long-term value for shareholders. Key results for 2023, including production levels and unit net cash costs, are summarized in comparison to historical levels.

In the fourth quarter, the company saw strong sales and gold production, but slightly lower shipments due to timing. They are actively managing costs and have generated strong EBITDA and operating cash flows. They returned $860 million to shareholders and ended the year with net debt of $800 million. In the US, they focused on increasing mining rates, resulting in a 9% increase over the previous year.

The company is focused on improving asset efficiencies and workforce experience levels to combat lower ore grades. They have implemented innovative leach initiatives and are pursuing technology solutions to enhance productivity. They are also working to expand housing options in remote locations to attract and retain employees. In South America, ore milled and stacking rates have increased, but recoveries at Cerro Verde were below expectations due to the type of material being mined. In Indonesia, the company had exceptional performance in the fourth quarter, with higher ore mined and strong grades and recoveries. The installation of a new SAG mill will provide further opportunities for the company. The transition to underground mining has been successful, as shown in the progression over time.

The paragraph discusses the transition from surface mining to underground operations at the Grasberg open pit in Indonesia, which is the world's second largest copper mine and one of the largest gold mines. The project has been in planning for over 25 years and is now generating strong margins and cash flows. The company is also working on securing long term rights and investing in a new smelter to ensure sustainability.

In this paragraph, the speaker discusses progress on two important projects: the completion of a greenfield smelter project and a leach initiative in the US and the Americas. The greenfield project has achieved over 90% completion and is on track to be finished by May 2024. The team has done an impressive job containing costs and maintaining schedules. The leach initiative aims to increase copper production by targeting existing stockpiles and using existing infrastructure. Both projects are seen as important milestones and are expected to be completed efficiently and safely.

The first phase of the initiative involves installing covers over stockpiles, gaining access to new areas, using drilling techniques, and developing sophisticated models. Most of the production increase came from the Morenci mine, and the second phase aims to double the initial target. This will be achieved by scaling current practices and potentially using new technologies in the future. The focus is on sustaining production and adding to the reserve position. The third phase involves research and development to advance the leaching process with different additives and techniques.

The company is conducting testing to improve copper production and increase heat retention in their stockpiles. These initiatives could potentially add 800 million pounds per annum to their production, with low capital intensity, operating costs, and carbon footprint. The copper market is currently tight due to declining inventories and increased demand, with supply disruptions further exacerbating the deficit. This has shifted the market into a deficit in 2024, earlier than previously expected.

The fundamentals of the copper market have improved, but the strength of the US dollar and sentiment about China continue to impact copper prices. Freeport is optimistic about the future demand for copper and has a large reserve and resource position to support future growth. They are focused on increasing value through innovation and efficiency, and have identified projects in the Americas and Indonesia to support long-term production. In the next two to three years, they plan to scale their leach initiatives and improve operational projects to increase production.

The company has identified potential opportunities to increase copper production by 400 million pounds per year without major investments. They are focusing on improving productivity and asset efficiencies, and have completed a feasibility study for expanding their Bagdad operation in Arizona. The expansion would require a $3.5 billion investment and would significantly increase copper production and reduce costs. However, the company is not making a decision on the timing of the project due to current market conditions. They are making investments in autonomous haulage, housing, and tailings infrastructure to enhance optionality for the future. In Chile, the company also has the opportunity to install a new concentrator at El Abra, similar in size to the one added at Cerro Verde in 2015.

The company is continuing to work on retesting the economics and updating the capital costs for their project, while also starting work on an environmental impact statement for future development. They have several projects in development, including the Kucing Liar project in the Grasberg District and the Safford Lone Star District in the US. They also have a major opportunity to extend their rights in Indonesia, which would allow for reserve and resource expansion. The company is focused on disciplined and value-creating projects and has a history of successfully developing large projects.

The company's ability to successfully execute projects is a key strength, achieved through a hands-on approach and a business model of pairing internal resources with trusted contractors. The company remains committed to safe and reliable execution of operating plans, with a focus on enhancing performance in the US and completing the smelter project in Indonesia. There is also a focus on enhancing optionality and defining the value of growth options. Sales volume estimates for copper, gold, and molybdenum are slightly reduced for 2024, but higher for gold in 2025. The company has also added 2026 sales estimates, which are slightly above 2025 levels.

In 2024, the company estimates its consolidated unit costs to be around $1.60 per pound, similar to 2023. The projected volumes and cost projections show that at copper prices ranging from $4 to $5, the annual EBITDA would range from $10 billion to $14 billion and operating cash flows would range from $7 billion to $10 billion. The company is well positioned for future growth opportunities and has the ability to generate returns on projects. The capital expenditures for 2024 and 2025 are currently forecasted to be $3.6 billion and $3.8 billion, respectively, with $1.2 billion allocated for discretionary growth projects.

The speaker discusses the company's category of capital investments, which are funded with 50% of available cash. They also mention their financial policies, including a strong balance sheet, cash returns to shareholders, and investments in value enhancing growth projects. The speaker emphasizes the team's focus on being foremost in copper and their commitment to executing plans responsibly, safely, and efficiently. The first question from a participant is about the technical study for Bagdad.

The speaker is discussing the high cost of the CapEx for a concentrate project, which is $3.5 billion or $35,000 per ton. They believe this is the new normal for concentrator projects due to low ore grades and other factors. However, they point out that the projects in the US have lower tax burdens and may have different risks and economics compared to projects in other locations. The speaker also mentions that the current market has a higher incentive price for developing new copper projects.

The speaker discusses the need for markets to adjust to incentive prices for copper projects and the company's desire to be prepared but not front-run the market. Another speaker adds that the company's US operations have positive factors that need to be considered when comparing to global benchmarks. The question then turns to cost, with the company explaining that the first quarter guidance is impacted by gold shipments, making it lower than the average for the full year.

The speaker discusses the potential impact of export duties in Indonesia on the company's cost guidance for the year. They clarify that the cost guidance includes the duties and that they are in ongoing discussions with the government to reduce them. The speaker also mentions that the duties will start to decline as the company ramps up production at their smelter. The next question asks about cost trends in North America, specifically at Morenci, and the speaker explains that the slight increase in site production delivery costs is due to lower volumes. They also mention potential improvements in productivity and new technologies that could help offset these costs in the future.

Kathleen Quirk discusses the current low-grade period in the US and the challenges it presents for reducing production and delivery costs in the mining industry. She mentions the importance of bringing on units with lower incremental costs and the potential benefits of the leach opportunity. Quirk also acknowledges other factors such as inflation and the cost of materials, but emphasizes the company's focus on self-help measures to improve efficiency and reduce reliance on expensive contractors.

The company is focused on reducing costs and is considering different configurations for the Morenci project. They are also constantly monitoring the market for potential M&A opportunities, but have not found any attractive options yet. They believe their internal growth opportunities will create more value for shareholders than external opportunities.

The speaker discusses the current state of negotiations with the government of Indonesia regarding the extension of the company's export license, which is set to expire in May 2024. The speaker also mentions the alignment between the company and the government's interests in maintaining consistent operations at PT-FI and the ongoing constructive discussions between the two parties. The President has been involved in these discussions and the speaker clarifies that they are not negotiations, but rather ongoing conversations.

The Mines Minister understands the administrative decision not to grant export rights beyond a certain date, and it will only require administrative approval to do so. Freeport always looks for opportunities to push out capital expenditures if not required in the current year and will continue to do so in the future. There is no one big thing that led to the change in the prior estimate for 2024. Freeport is looking for a risk-adjusted rate of return on their proposed investments in the US and Latin America, and the industry may be ahead or behind the curve in meeting expected demand opportunities in the market.

Kathleen Quirk explains that when evaluating projects and returns, they do not target one specific number. They consider the project's location, execution risk, and run various commodity price assumptions. Their focus is on investing in projects with long-term reserves and a long life span, rather than trying to predict the copper price. They also apply higher risk factors for projects outside of the US and aim for higher rates of return. Richard may have additional insights on the lack of new projects being sanctioned in the industry.

The recent fluctuations in copper prices have caused delays and caution among developers, making long-term projects more significant. The company is focused on planning and utilizing technology to maximize resources, but not all companies have this ability. The company approaches investment and business planning on a scenario basis, rather than trying to predict specific prices, in order to protect themselves from downside risk and take advantage of long-term prices.

The speaker believes that the demand for copper remains strong and is influenced by investments in carbon reduction. The project capital for Bagdad is $3.5 billion and includes infrastructure benefits and tax benefits, which may make the incentive price lower than it would be for a greenfield project without these benefits. The speaker also mentions other factors contributing to the demand for copper, such as global growth and electrification. A question is raised about the impact of these benefits on the project's economics.

In this paragraph, Kathleen Quirk and Richard Adkerson discuss the challenges of investing in the copper industry, using a specific project as an example. They highlight the increasing costs and difficulties in finding workers and housing, and explain that the current copper price is not enough to justify investments. They also mention that if another project is successful, it may push back the timeline for the Bagdad project, but both projects are important for meeting future demand.

Kathleen Quirk and Richard Adkerson discuss the Bagdad project and the leach initiative. The leach initiative is a low-cost and low-incremental operating cost project that they are prioritizing. They believe that the world will need more copper in the future and the Bagdad project could be a good option for that. However, they are not currently pulling the trigger on it and are instead focusing on enhancing its optionality and implementing autonomous technology. They have a strong financial position and are open to pursuing projects that make sense.

Kathleen Quirk explains that the strong performance in December was due to the completion of a new SAG mill, which allowed for higher ore throughput and contributed to record-breaking results. She also mentions the potential for continued strong performance and the possibility of reaching a run rate of 240,000 tons per day with the addition of Kucing Liar. She also notes that the Gossan mine, although small, has high-grade ore and the company is working to improve its performance.

The company has plans to increase throughput from Gossan, which will add copper and gold production. This will be done over the next five years, with an initial increase in 2026 from 120,000 to 140,000 tons per day. The company is also focusing on leaching efforts to access previously untapped areas of stockpiles, which will contribute to the incremental 200 million pound increase in production. The specific time frame for this increase has not been given, but the company expects it to be completed within a couple of years. The capital associated with this project is low and there has been no significant increase in costs.

The company is excited about their targeted drilling method which allows them to access blocked ore. They are testing this method on a larger scale and hope it will increase production. They are also using covers and targeting pyrite ores for heat. They will provide updates on this initiative in the future and have not spent much capital on it. The operating costs are low and they see it as a valuable opportunity.

The company is confident that it can apply and deploy its projects at scale and in an economical manner, without spending a lot of capital. There are no permitting issues, which is a major advantage. The company's dividend policy is regularly reviewed by the Board, taking into account market conditions and the company's strong financial position. The company also reaches agreements on long term TCRCs once a year.

The speaker discusses the decrease in spot rates due to tight supply, and mentions that most sales are made through fixed contracts. They also mention the upcoming smelter in Indonesia and the renegotiation of TCRCs each year. The current situation with smelters not being able to get concentrate is seen as an indicator of the market's direction. The speakers thank the participants for joining the call and offer to continue discussing the topic. The call concludes.

This summary was generated with AI and may contain some inaccuracies.