The operator introduces the Freeport-McMoRan First Quarter Conference Call, with participants in listen-only mode. David Joint, Vice President of Investor Relations, welcomes everyone and directs them to the company's website for more information. He also reminds listeners of the cautionary language and risk factors mentioned in the press release and SEC filings. Richard Adkerson, Chairman and CEO, and other senior members of management will be discussing first quarter results.

The paragraph discusses the successful transition of leadership at Freeport and the company's strong position for the future. The current CEO, Richard, will become Chairman and will support the new CEO, Kathleen, who has been with the company for 35 years and has been integral to its management. The company has also added six new independent directors and has a strong management team. Richard's strategic commitment to copper has been proven successful and he is confident in the company's future under Kathleen's leadership.

The incoming CEO is focused on executing the company's copper-leading strategy and driving profitable growth. The company has released its annual report and will soon publish its sustainability report. The key focus areas for 2024 were previously discussed and the company had a strong start to the year, exceeding copper sales guidance and generating strong margins and cash flows. Capital expenditures were $800 million and net debt was reduced.

The company has made significant progress on key initiatives, such as the Indonesian smelter and copper leach project, and is seeing positive market conditions for copper and gold. Demand for copper is increasing due to electrification and other factors, while there are constraints on supply and extended lead times for new projects. This has led to tight market conditions and a rise in copper prices, similar to what happened when China emerged as a major consumer of copper 20 years ago.

In 2023, despite some cyclical drivers of copper demand weakening, the secular drivers will lead to a growth in demand. Supply disruptions have tightened the market and manufacturing data suggests a global economic recovery. This, combined with physical market conditions, has driven copper prices higher and analysts predict even higher prices in the future. Freeport's financial performance is heavily influenced by copper prices and they have large-scale assets and development opportunities. In the U.S., efforts are being made to improve efficiency, productivity, and cost reduction. The innovative leach initiative has helped mitigate the impact of lower ore grades.

The company has reached a 200 million pound per annum run rate and plans to scale it to 300-400 million pounds in the next two years. They are utilizing new technologies and automation to improve performance. Challenges were faced at the Cerro Verde mine in South America, but the team was successful in achieving copper volume targets. A new labor agreement was finalized at Cerro Verde. In Indonesia, there was exceptional performance with higher mill rates, ore grades, and recoveries. The Grasberg Block Cave mine is the largest in the district and is performing well. Production costs were offset by gold byproduct credits. The underground ore mined at Big Gossan has also increased by 30%.

The new SAG mill at PT-FI is performing well and a mill recovery project is almost complete, which will lead to higher mill recoveries. The team at PT-FI is doing excellent work in optimizing value from their resource position. A new two-year labor agreement has been finalized with the workforce. The completion of the new smelter in Indonesia is a crucial catalyst for securing an extension of long-term operating rights. Progress has been made in the first quarter and the focus is now on remaining critical path and transitioning to commissioning and start-up activities. The smelter is on track to begin operations in June, with first cathode expected in October. Discussions with the Indonesian government have been positive. A talented local team will be supported by Freeporters from around the globe for an efficient start-up. The company is also focused on growth and has dedicated teams working on various projects to increase production in the future.

The company is updating stakeholders on their major initiatives, starting with the leach project which has the highest potential for value due to low costs and their existing resources and technology. They are also taking steps to derisk the brownfield expansion project at their Bagdad operation and plan to make an investment decision by the end of next year. At their Lone Star, Safford project, they are commencing a pre-feasibility study for a major expansion. They also have plans for a new concentrator at their El Abra operation in Chile, but are retesting the economics and considering capital costs in light of recent industry experience.

The company is working towards filing an environmental impact statement by the end of next year for a project in Indonesia that is expected to begin production in 2030. They are also exploring other long-term development options in the region. The company has been successful in using data analytics and new operating practices to recover additional copper from previously mined material, and this has become a major value driver for their business. They have achieved their initial target and are now focused on doubling their annual run rate. The company is also exploring new additives and options for adding heat to existing stockpiles to further increase copper recovery.

Freeport has several initiatives in place that have the potential to reach 800 million pounds of copper per year, which is equivalent to a large copper mine with low costs and a low carbon footprint. About half of this potential can be achieved through scaling and the other half is related to technology under development. These initiatives are expected to support long-term production in the Grasberg District. In the near-term, medium-term, and longer-term horizons, Freeport has identified projects in the Americas, totaling 1.7 billion pounds of copper. In the two to three-year category, the focus is on incremental production and operational improvements, which could add an additional 400 million pounds of copper. In the three to five-year category, there is potential for expansion at the Bagdad mine and additional leach initiatives. The KL development in Indonesia is expected to begin production before 2030 and ramp up to over 500 million pounds of copper and 500,000 ounces of gold.

The company is optimistic about their future in Indonesia, where they have a strong position to continue supplying copper to meet global demand. They have increased their sales outlook for copper and have estimated their net unit cash costs to be lower than previously expected. The company also has strong cash flow and is well-positioned to benefit from improved pricing, which will allow for investments in organic growth and cash returns to shareholders.

The company is providing updates on their capital expenditures for 2024 and 2025, with no major changes from previous estimates. They will be investing in value-enhancing projects and have a strong balance sheet. They have distributed $4 billion to shareholders and will continue to monitor market conditions to ensure financial flexibility while pursuing growth opportunities. The company is focused on executing their plans responsibly and maximizing the value of their resources.

The speaker thanks the audience and invites questions. The first question is about the company's U.S. assets and when productivity improvements will be visible in the numbers. The speaker explains that low ore grades and labor shortages have been challenges, but they are making progress and will focus on improving equipment efficiencies. The second question is about the timing of a potential investment decision for the Bagdad project and when the El Abra mine may face a drop in grades.

The company has been focusing on maintenance and training to improve equipment health and workforce productivity. They are also implementing technology advancements, such as converting haul truck fleets to autonomous. They believe there is potential to increase production within the North American portfolio, and are currently working on a project at Bagdad. However, they want to take their time and de-risk the plan before moving forward with the project.

The company is working on a brownfield project with a substantial history in the district. They are monitoring labor market conditions and the copper market. The El Abra project is exciting and has the potential to add reserves of scale. The company is stress testing capital cost estimates and working on obtaining permits. Chile is working on streamlining the permitting process. The company is focused on filing an environmental impact statement to gain more options and sees good value in the project.

The operator introduces the next question from Chris LaFemina, who congratulates the company on their impressive operating performance in Indonesia. He then asks about the trends in cost in the U.S. and calculates the free cash flow breakeven to be around $4 per pound, but Kathleen Quirk clarifies that the average cost is currently higher due to the use of stockpiles and will decrease as more pounds are added. She also mentions that the current unit costs are relatively high due to being in a lower grade area of North America.

The company is focused on controlling costs and reducing reliance on contractors through training workers. The leach initiative is expected to significantly lower costs in the U.S. and the current guidance reflects an average cost, which will decrease as more volumes are added to stockpiles.

Kathleen Quirk and Chris LaFemina discuss how the current copper and gold prices, along with the completion of the smelter construction and a clean balance sheet, will positively impact cash flow for the company. They also mention the company's performance-based capital return policy and the potential for increased cash returns to shareholders. Michael Dudas asks about the company's plans for cost moderation, to which Quirk responds that they have been executing their policy of distributing 50% of available cash flow and will continue to do so as cash flow increases with higher prices.

Kathleen Quirk discusses the current situation with cost improvement and inflation in North America and South America mines. While there has been some stabilization, there are still challenges with labor force and reliable asset efficiency. However, progress is being made in driving efficiency within the US operations.

The company has not experienced labor issues in South America and Indonesia due to a stable and experienced workforce, as well as a stronger dollar. They are focused on improving efficiency and productivity to combat inflation and have access to new technologies. The CEO also mentions concerns about overruns and political situations affecting the industry's outlook for copper prices.

The speaker discusses the current supply shortages in the copper industry and how it has contributed to the recent increase in copper prices. They also mention their positive relationship with the current Indonesian administration and their confidence in maintaining good relations with the new administration. They emphasize their focus on being a good citizen and providing benefits to all stakeholders in Indonesia.

Richard Adkerson discusses the positive relationships between Freeport and the Indonesian government, with recent celebrations and positive comments from government officials. He also mentions that there is an agreement in place for the structure beyond 2041, but the timing of granting future mining rates may be affected by the recent election and Ramadan. Adkerson emphasizes the importance of having a long-term plan for the operation beyond 2041 and states that all stakeholders are aware of this.

The speaker expresses confidence in being able to continue operations at Cerro Verde and mentions the progress made in delivering the smelter. They also highlight the positive impact of the team and community support in achieving a daily material movement of over 400,000 metric tons. The speaker finds the experience uplifting and inspiring.

In the first quarter, the minority interest in PT-FI was $689 and the income to shareholders was $473. This suggests that the U.S. mines made about $200 million less in profits than the overhead, but this has been the case since the mid-1990s when the minority ownership was transferred to the government of Indonesia. In 2018, Freeport maintained the same economic interest in the mine through an agreement reached with the government.

The speaker explains that the company's profitable U.S. mines are a result of a deal made in the 1990s and favorable tax and land ownership situations. They also discuss the importance of these mines for the country's future and creating value for shareholders. The speaker also mentions the company's leaching technology and their focus on their own mines rather than acquisition opportunities.

The speaker states that while they may be interested in opportunities to apply their know-how, they are primarily focused on their own organic situation. They believe they have a lot of potential within their portfolio and are not actively seeking additional opportunities. They also mention the unique scale of their company compared to others. The speaker thanks the participants for their questions and expresses their interest in reporting on their progress in the future.

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