The paragraph is an introduction to the Freeport-McMoRan Third Quarter Conference Call. The operator welcomes participants and notes that the call is in a listen-only mode initially, with a Q&A session to follow. David Joint, the Vice President of Investor Relations, takes over to welcome listeners and mentions that Freeport has released its third quarter 2024 results, available on their website. The call is broadcast live online and is open to analysts, investors, and the financial press. A replay will be available later. He reminds everyone of the use of non-GAAP measures and forward-looking statements, with relevant cautionary language and risk factors accessible on their website. The call involves several key executives, including Richard Adkerson, Kathleen Quirk, and Maree Robertson, with Richard set to make opening remarks before moving to the presentation and Q&A.

The paragraph discusses a successful quarter for the company, attributing the achievements to the hard work of the global Freeport team. The company is optimistic about its long-term outlook, particularly for copper and its strategy based on commodities. Kathleen Quirk is set to review the quarterly results, which include strong operational performance marked by high margins, significant EBITDA, and operating cash flows. The company's performance exceeded expectations in terms of sales volumes for copper and gold, along with favorable unit cash costs. Additionally, there's progress on addressing a fire incident at a new smelter in Indonesia. The paragraph also mentions the appointment of Prabowo Subianto as the new president of Indonesia, who has previous experience with the company, potentially benefiting future operations.

In the paragraph, Freeport discusses its strong position with significant copper reserves and ongoing growth initiatives in the Americas, particularly through innovative leach technologies that increased copper production by nearly 70% in the first nine months of 2024 compared to the previous year. They also expanded their ownership of Cerro Verde to 55% by purchasing additional shares on the Peruvian Stock Exchange. Financially strong, Freeport is optimistic about future markets, projecting robust cash flow to support investments and returns to shareholders. During the third quarter, copper prices varied significantly, influenced by global economic conditions and potential economic stimulus in China.

The paragraph highlights the strong demand for copper driven by global electrification trends, particularly in the U.S. and China, despite a cyclical slowdown in other sectors. The demand is boosted by investments in electrical infrastructure, AI data centers, and electric vehicles. Copper remains essential due to its superior connectivity, with forecasts indicating above-trend growth in demand. A tightly balanced market is expected in the short term, with potential deficits in the long run, necessitating investments and innovations in supply. Freeport is well-positioned to capitalize on this outlook, given its industry leadership and operations. Additionally, the company benefits from rising gold prices as a major producer.

The paragraph discusses the quarterly operating results by geographic region. In the US, efforts are being made to improve efficiency and reduce costs, particularly in equipment reliability and resource allocation. In South America, the Cerro Verde operation performed well, with increased mill throughput and improved recovery, alongside securing multiyear labor agreements. Additionally, more shares of Cerro Verde were purchased, increasing exposure to its assets. In Indonesia, the results were strong, with a unit net cash credit of $0.71 per pound due to high volumes of copper and gold production, surpassing sales estimates.

The paragraph provides an update on the company's recent activities, highlighting strong gold sales due to good production and lower inventory levels. The company is focused on executing operating plans, commissioning a copper cleaning circuit, and a precious metals refinery in Papua. A recent setback occurred due to a fire in a gas cleaning facility, temporarily halting start-up activities. Fortunately, no injuries were reported, and the incident's impact was limited. The company is assessing repair needs, expects insurance to cover costs, and is coordinating with the Indonesian government to continue concentrate exports. Mining operations remain unaffected, and efforts are focused on safely resuming smelter operations to achieve integration and secure long-term operating rights in Indonesia.

The paragraph discusses an innovative leach initiative aimed at increasing copper production. Early results show promising value potential, with the current production run rate of 200 million pounds per annum targeted to reach 300-400 million by 2026, and an ultimate goal of 800 million pounds per annum. This initiative is likened to creating a new large-scale mine with minimal capital investment and operating costs, enhancing the company's competitive position. Progress is being made through improved heat retention, data analytics, and new operational techniques like using helicopters for irrigation and expanding solution injection wells. These efforts are driving increased efficiency in well development and drilling, supporting future volume growth.

The paragraph discusses Freeport's initiatives to enhance copper recovery through heating leach solutions and testing new additives. The company is leveraging its existing assets for growth, particularly with leach technology, and exploring expansion opportunities at its Bagdad and Safford Lone Star operations in the U.S. At Bagdad, efforts include automation and infrastructure improvements to facilitate future expansion, with decisions expected next year. In the Safford Lone Star District, studies aim to more than double current production levels, currently at 300 million pounds annually.

The paragraph discusses Freeport's strategic initiatives in expanding its mining operations. At the Safford Lone Star location, they aim to make it a significant asset for the company and Arizona. In Chile, their joint project with Codelco at El Abra involves significant investment in a new concentrator, desalinization, and pipeline system, expected to produce substantial amounts of copper and molybdenum annually, although it requires a lengthy permitting process. In Indonesia, they are advancing the Kucing Liar development and exploring beneath the Deep MLZ ore body, expecting to start production by 2030 and seeking to extend operating rights beyond 2041. Freeport is focused on disciplined advancement of projects that support long-term copper demand and enhance future growth while being mindful of market conditions.

The paragraph discusses Freeport's three-year sales and cost outlook for copper, gold, and molybdenum, which is updated quarterly. The 2024 unit net cash cost estimate for copper is expected to be $1.58 per pound, lower than previous estimates. Slide 9 includes modeled EBITDA and cash flow projections based on copper prices between $4 and $5 per pound, while keeping gold and molybdenum prices flat at $2,600 per ounce and $20 per pound, respectively. It highlights the company's leverage to copper prices, with each $0.10 change per pound affecting annual EBITDA by approximately $420 million. Sensitivities for gold prices are also presented, where each $100 change impacts annual EBITDA by around $150 million. Freeport's substantial reserves and large-scale production enable significant cash flow generation for future growth and returns. Slide 11 will present the current capital expenditure forecast.

The paragraph discusses the capital expenditure forecasts for 2024 and the subsequent year, indicating that there have been minor timing shifts but no material changes overall. It highlights that $2.5 billion is allocated to discretionary projects, which are value-enhancing and funded by 50% of available cash not distributed, as detailed in the reference materials. The focus remains on disciplined capital deployment and investing in growth opportunities. Slide 12 outlines financial policy priorities such as maintaining a strong balance sheet, returning cash to shareholders, and investing in growth. The company has distributed $4.5 billion to shareholders via dividends and share buybacks. The paragraph concludes with a commitment to executing plans effectively, followed by opening the call for questions, with Chris LaFemina from Jefferies asking about Indonesia and a smelter fire insurance issue.

In the discussion, Kathleen Quirk addresses concerns about insurance coverage for delays in exporting copper concentrate, clarifying that their policy is a construction insurance policy without business interruption coverage. It covers repair costs but not lost shipments or additional royalties. Despite the repairs needed at a critical but small part of their facility, they aim to complete repairs quickly, negotiating with the government for export flexibility in 2024 and possibly 2025. Since the government benefits significantly from taxes, royalties, and dividends, cooperation is likely. Additionally, Chris LaFemina points out that $1 billion, or 30% of export proceeds, is held for 90 days in Indonesian banks.

The paragraph discusses the restricted cash policy in Indonesia, which requires exporters to temporarily hold export proceeds in bank accounts for 90 days. This measure, affecting all exports including copper and oil, was implemented by the government to address currency and fiscal issues, and it will continue beyond the startup of the smelter unless regulations change. The cash is invested during this period and withdrawn after 90 days. During a follow-up, Liam Fitzpatrick from Deutsche Bank inquires about potential delays related to the smelter's operation and the timeline for government export extensions. In response, Kathleen Quirk mentions that the company does not yet have information on the timeframe for necessary repairs.

A recent event caused damage to equipment at a site, leading teams to assess and determine necessary replacements. Fortunately, the structural steel remains unaffected, though some equipment and piping require replacement. The team is collaborating with vendors to understand lead times for fabrication since the parts are not readily available. Supply chain conditions are favorable, allowing quick vendor responses. Efforts are underway to find the incident's root cause with vendor collaboration. The government and police are supportive and involved in the investigation. The situation is not unprecedented in the industry, and measures are in progress to prevent hazards and achieve start-up goals.

The paragraph discusses the ongoing efforts and challenges faced by a company in completing a smelter and working collaboratively to mitigate the impacts of an incident through insurance and exports. It also touches on the company's interest in acquiring more shares of Cerro Verde, which trades on the Peruvian Stock Exchange, but notes that purchasing more depends on the availability of willing sellers. Additionally, Richard Adkerson addresses a question about filing for an IUPK extension in Indonesia, expressing initial hopes to achieve this during President Joko Widodo's term. However, the transition to a new president has delayed these plans, affecting their ability to file as originally expected.

The paragraph discusses the potential expansion of the Safford Lone Star mine, which has identified a resource significantly larger than the current reserve. Kathleen Quirk highlights the possibility of transforming it into a cornerstone asset by adding milling operations to the existing 100% leach operation. This could potentially double the copper production from 300 million pounds to 600 million pounds annually. The mine, located near Morenci and operational since 2007-08, benefits from a skilled workforce and community support. A pre-feasibility study is underway to determine the next steps for expanding the operation, with more details expected next year.

The paragraph discusses Freeport's project opportunities and focuses on their potential to fast-track a project that may not require the extensive permitting process seen with projects like El Abra. The company is optimistic about using technology to enhance efficiency and automating processes to improve their US operations in the long term. Kathleen Quirk addresses questions about cost efficiency initiatives and mentions challenges faced due to rising costs and lower-grade resources since 2022, highlighting an ongoing focus on reducing mining costs.

The paragraph discusses a focus on improving productivity and reducing costs in North American operations compared to South America. While there has been some relief in energy costs and stabilized overall expenses, productivity is paramount. The company is aiming to enhance efficiency by better utilizing equipment and improving workforce training. Efforts are also being made to reduce downtime through improved planning and maintenance, leading to better equipment utilization. Additionally, there is a focus on managing contractor costs by reducing dependency on external contractors, despite facing some labor rate increases. Overall, the company is concentrating on day-to-day improvements in asset availability and productivity metrics.

The paragraph discusses efforts to reduce costs by reallocating internal resources and challenging price increases for component parts and maintenance supplies. The company is implementing multifaceted initiatives, including a leach initiative, to achieve more reasonable vendor returns and lower unit costs by 2025. Teams are focused on key performance indicators to manage and decrease costs despite potential grade stagnation. Josh Olmsted highlights the importance of efficiency, productivity, and managing contractor expenses in achieving these cost reductions.

In the article's paragraph, the discussion centers on cost management strategies related to equipment reliability and copper production. Improved equipment reliability enhances productivity and reduces costs. An inquiry from Orest Wowkodaw at Scotiabank addresses North and South American cost projections for copper production, suggesting potential cost reductions through initiatives. Kathleen Quirk confirms the cost range expectations and highlights a promising "leach initiative" in the U.S. that could significantly lower production costs by efficiently extracting additional copper from already mined materials, potentially reducing average costs below $1.

The paragraph discusses potential changes in cost structures for mining operations in the U.S., specifically Morenci, Safford, and the Chino mine, with anticipated lower costs by 2025 due to new leaching technologies. Kathleen Quirk expresses optimism that costs will decrease compared to 2024, although factors like molybdenum prices could affect this. On capital allocation, Freeport's strategy involves using 50% of cash flow for shareholder returns and 50% for organic growth. The company has opportunistically acquired more stock in Cerro Verde and plans to conduct share buybacks when generating cash above dividend levels.

The paragraph discusses a company's strategic approach to capital allocation, mergers and acquisitions (M&A), and shareholder engagement. Richard Adkerson mentions the potential for opportunistic purchases of assets like Cerro Verde stock and highlights ongoing discussions with the Board about dividends and stock buybacks, emphasizing a strong financial position. The company is observing larger M&A transactions in the industry but views M&A as complementary rather than central to their strategy, focusing instead on organic growth for shareholder value. They remain open to M&A opportunities that arise naturally. The discussion also touches on capital allocation for major projects like Bagdad, El Abra, and Lone Star.

Kathleen Quirk discusses Freeport's approach to decision-making regarding their projects in Bagdad, El Abra, and Lone Star. She highlights that while Bagdad is a near-term project that can be executed within a three to four-year horizon, the decision on Lone Star will require further study, expected to complete by the end of next year. Freeport regularly evaluates its various assets to ensure capital is allocated to projects that offer the best returns and align with long-term strategic goals. Bagdad is viewed as a valuable long-term investment due to its extensive reserve life, and investment decisions are guided by where resources can be leveraged efficiently. These projects are not mutually exclusive in their execution.

The paragraph discusses the company's approach to handling projects and capital expenditures (CapEx) for upcoming years. They have the ability to manage multiple projects simultaneously, aiming to advance those that create value efficiently. Regarding 2025 CapEx, Kathleen Quirk states there are no significant changes expected compared to 2024. Investments are planned for Bagdad to reduce risks, focusing on power infrastructure and tailings work. Although they remain open to new opportunities, current plans do not indicate substantial CapEx changes for El Abra, Bagdad, and Lone Star projects. Additionally, smaller discretionary projects with potential investment returns, like increasing stacking at Lone Star and improvements at the Grasberg mill, are underway.

The paragraph discusses several projects and developments. By 2025, the company aims to produce 300 million pounds of copper annually. At the Lone Star site, a major expansion is being studied. At Grasberg, a copper cleaner is being installed to enhance concentrate grades and metal recoveries, with major construction completed and commissioning expected in the fourth quarter. The circular project at Atlantic Copper is developing a new circuit to recycle electronic scrap, expected to be operational by the end of next year, generating $60 million annually for Atlantic Copper. This project leverages Atlantic Copper's market position and infrastructure for business beyond copper. Progress at Grasberg includes successful cleanup work and exceeding forecasted mill throughput and grade expectations.

The operations are progressing well, and the call is being turned back to management. Kathleen Quirk expresses gratitude for the questions and participation, mentions they will provide updates, and invites follow-up contacts with David. The operator concludes the call, thanking participants and signaling that they may disconnect.

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