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David’s Set; Vice President of RI; Freeport-McMoRan Inc.
Kathleen Lynne Quirk; President; Freeport-McMoRan Inc.
Richard Carl Adkerson; Chief Officer; Freeport-McMoRan Inc.
Bennett Moore; Analyst; JPMorgan Chase
Christopher La Femina; Senior Equity Research Analyst; Jefferies LLC, Research Division
Juan Carlos Tumazos; President and Chief Executive Officer; John Tumazos Highly Independent Research, LLC
Lawson Reel; Vice President and Research Analyst; BofA Securities, Research Division
Liam Fitzpatrick; Research Analyst; Deutsche Bank AG, Research Division
Martin Whittier Malloy; Research Supervisor; Johnson Rice
Michael Stephan Dudas; Couple; Vertical Research Partners, LLC
Operator
Ladies and gentlemen, thank you for sticking here and welcome to the Freeport-McMoRan First Quarter Telephone Convention. (Operator Instructions) I would now like to turn to Mr. David Joint, Vice President of Investor Relations. Go ahead, sir.
David Set
Thank you Regina and hello everyone. Welcome to the Freeport-McMoRan convention call. This morning, Freeport released its first quarter 2024 operating and monetary results. You can get a copy of our press release with additional schedules and slides on our online page, fcx. com. Today’s convention call is broadcast live on the Internet. Anyone can pay attention to the convention call by going to the home page of our online page and clicking on the webcast link. In addition to analysts and investors, the monetary press was invited to pay attention to today’s convention. There will be a replay of the webcast on our online page. later today. Before we begin our comments today, we should remind everyone that our press release and some of our comments on the call contain non-GAAP measures and forward-looking statements, and that actual effects would likely differ materially. They come in our press release and slides, as well as the threat points outlined in our SEC filings, all of which are located on our online page. I’m also on the call today with Richard Adkerson, president and CEO; Kathleen Quirk, president; Maree Robertson, senior vice president and chief monetary officer; and other senior members of our oversight team. Richard will make some opening remarks, Kathleen will review our slides, and then we’ll open the call for questions. Now I would like to call and turn the floor over to Richard.
Richard Carl Adkerson
Thank you, David, and thank you all for joining us. We are very pleased to report our first quarter results today. They reflect Freeport’s continued and enduring good fortune in executing our business plans. Kathleen will provide our results, as David said, and then we will answer her questions. Kathleen will become CEO of Freeport, effective at our annual shareholder meeting on June 11. I will continue as president and Kathleen and our leadership team in vital strategic decisions. foreign problems and relations. This will be the smoothest transition of control in history. In fact, there was a 20-year transition. Coincidentally, Kathleen joined Freeport shortly after I did, 35 years ago. And I have been an advisor to the company for 20 years. She progressed within our finance organization to become CFO when I became CEO 20 years ago. And since then, she has been an integral part of controlling the company. When I became president three years ago, I made a private commitment to building a sustainable board and management team. And since then, we have added 6 high-quality independent directors, new directors, who, together with our permanent directors, constitute a very strong independent board to constitute our shareholders. We have reinforced our workforce with internal promotions and external hiring. Freeport is in a strong long-term position and, non-publicly, I’m proud to be able to say that right now. Twenty years ago we assumed a strategic commitment to copper, based on the fundamentals of the origin and demand of the product. The validity of this commitment has never been more evident and the most productive is yet to come. My personal enthusiasm for the future of Freeport has never been stronger. I may not be more pleased with our board of directors and our leadership team under Kathleen’s leadership. Kathleen, I’ll pass it on to you so you can see the slides.
Kathleen Lynne Oddity
Operator
(Operator Instructions) The first comes from Liam Fitzpatrick’s line at Deutsche Bank.
Liam Fitzpatrick
Deutsche Liam Fitzpatrick’Bank. La s first question is just about his U. S. assets. U. S. He’s been talking for a while about the productivity innovations he’s looking for. Could you give us a little more specificity about when we deserve to expect some of the visual in the numbers?And what kind of replacement are you hoping for? Is it just to do more than just inflation?Or can there just be a more drastic update at some point?And then the second consultation, in two parts, only considers your projects. First of all, in relation to Baghdad, I think the timing of your submission suggests that you may make an investment resolution next year. I just tried to see that it was the right time to think. And then at El Abra, if you don’t do anything at this mine, when will you face an even bigger drop in ratings?
Kathleen Lynne Oddity
Thanks, Liam. Regarding operations in the United States, we are currently working with very low ore grades. The lowest ore grades we have noticed since 2010. So it is a structural challenge for us. Over the past two years, we have also faced a shortage of hard labor in the United States and want to ensure that our painters are trained and can be as effective as they were in 2019 before COVID. advances in the paintings we make. It is not a simple job. It’s hard work every day, but we know what the work is. And we want to make sure that our device is working and that we get the power from our resources that we deserve. If we look back at the last two years, we have not surpassed the asset efficiencies that we have seen in the past. And then we worked on that. We have been running maintenance to make sure our device is in good condition, we are running education with a less consistent paint strength. And those are just fundamental blockages and struggles, but the headwind has to do with the laws of minerals. And in fact, we are pleased with the effects of the leaching initiative, and it has provided us with some benefits as we process those lower grade minerals. But we still believe we have a lot of potential. And we are moving forward. We have detailed dashboards of what we do each and every day in all the spaces that make us effective. Everyone is focused on that. We also focus on technological advances. You will be briefed on the progress we have made in Baghdad, where we are looking to convert the transport truck fleet into a fully autonomous fleet. We have all kinds of generational assignments that we haven’t had before. And I think that’s also a key factor for us as we look to improve our coherent relationships in North America. But we believe we have opportunities within the portfolio, within the North American portfolio, to increase production as we gain productivity, and that is the $200 million. E-book consistent with the year. And that is one of our priorities. And I think we are on the right path. It is not achieved overnight, but it takes work every day and discipline, but we know what to focus on. Regarding your consultation in Baghdad, we carried out the study. What we focus on is actually this hard work scenario where we want to make sure that when we move forward with the task, we can do it effectively and we can complete the task in a timely manner. limits of capital charge estimates and timeliness. Therefore, we want to take our time making more paintings, de-risking the plan as we move forward over the next 18 months. And then once we convert that autonomous fleet, we can rethink the scenario and be able to do that. a position to move forward. It’s not. . . in an ordinary environment. This is not a complex task. This is an abandoned task where we have significant history in the district. In reality, the challenge is to work hard under the conditions of market position. We also want to continue to monitor the police in a manner consistent with market positions, etc. , as we do. But this is a very feasible plan if we can deal with the painting challenges we are having in Arizona, which is a very competitive position right now given all the activity in the state. Regarding El Abra, we are hunting for the existing scenario. The steady stream, which is very small compared to the length of Freeport, has come back to life in the next few years and will begin to taper off, which will probably give us another 10 years, but we still have some water. We want to get expanses of water and the things we’re running there. But the task of El Abra is very interesting from the point of view of resources. It’s actually big. It is not in our existing reserves. So we have the ability to load scale reserves. As for the general task, as I mentioned, we have painted a lot of things. We are very satisfied to be able to execute it. But the things that we’re running there are actually going back and looking at our investment charge estimates, we’re actually testing them, understanding what’s being positioned in other assignments in Chile and determining, assuring them that we’re sure that the economics of the task is as smart as it seems at first glance. And that’s what we’re currently testing. The long delivery time to Chile is due to authorization requirements. It takes a lot of time to download the desired knowledge to register the application. And then, as you know, there is a constant review that can grow in 2 or 3 years. And I know that Chile is racing to speed up its authorization procedures, which would also be useful to us. But actually our goal is to get to a point where we can record the environmental effect in the declaration, which will then give us an additional option. But this assignment has a smart price for us.
Operator
The next one will come from Chris LaFemina’s lineage with Jefferies.
Christopher the Woman
First of all, I just wanted to congratulate you on the consistent national functionality in Indonesia. It was very impressive. And again, this last quarter, what he’s done there is pretty incredible. Congratulations on that. And then secondly, I simply wanted to ask for a follow-up of cargo trends in the United States. So if they did, what?51 million pounds of leaching: Production from those new leaching projects in the U. S. in the first quarter. If we assume it’s about $1 per pound, that would mean the rest of its production in the U. S. UU. es approximately $3. 35, or $3. 40 per pound in terms of net monetary charges. And then, if we add to that the maintenance of capital expenditures, the break-even point for loose money is probably close to $4 per pound. So my first question is: is this true? Are you at a break-even point of about $4 per pound in the U. S. ?UU. si exclude the benefits of new leaching projects?
Kathleen Lynne Oddity
Regarding leach projects, if you look at our reported cash prices, you’ll want to keep that in mind until we add more pounds to inventory. What we record as average charge reflects our unit-consistent average charge consistent with inventory. Then, as we gain confidence, the denominator will go down, so we are now removing those books from inventory, reflecting an average charge of $3. When in reality the additional charge is closer to $1. So, as we gain confidence and are able to load more pounds, multi-year quantities of that leach reserve, we see unit prices go down. But based on your analysis, it would possibly be less than the $4 you’re talking about, but right now we’re in a lower quality region of North America. Therefore, our unit prices are relatively high compared to old levels. We’ve had fee inflation, as everyone has noted, but the other domain we’re focusing on is more about the things we can control. And we’ve seen some of the inflationary pressures moderate, but the things we want to continue to work on are avoiding unscheduled maintenance, avoiding. . . reducing our maintenance prices. Additionally, as we hire more of our own team and exercise that staff, we will decrease our dependence on contractors, which is a significant position for us. And that’s what we’ve had to do during this time of hard labor issues is rely more on contractors, so now we’re streamlining contractors and training our staff to be able to do these paintings. Overall though, this will actually be a maritime update as we progress into the United States. And if we can bring in another two hundred million pounds of leaching initiative at a very low incremental cost and improve our generation – I mean, our productivity gains, see our prices start to come down a lot in the United States – United States, and That’s what we’re headed for. That’s what Josh and his team focus on. Maree is also very focused on this and her team. So we’re done with that, Chris.
Christopher the Woman
So, that dollar per pound in cash for leaching is not what’s reflected in the cost of production in the first quarter and what’s reflected in the full-year 2024 forecast, right?Also use something like $3 per pound in tips.
Kathleen Lynne Oddity
Oui. Il is just an average when we report it. And this will be reflected in our money accounts through an accumulation of long-term estimates and estimates, as prices are distributed among what is left in inventory. And as we bring more volumes into inventory, it will decrease the freight charge and actually reflect what’s really going on. From a money flow perspective, this is not a money flow. So, in terms of cash flow, we actually get advantages from the sub-$1 load. carry.
Christopher the Woman
So, if we think about the flow of money, we have the following: The structure of the foundry is almost complete. One way or another, royalties may not be paid to the smelters that will increase. The value of copper is notoriously higher: tariffs, sorry. The value of copper is notoriously higher, the value of passld is higher, and the balance is clear. It has its transfer based on the performance of the capital policy, which it didn’t actually put into effect last year. There’s a lot going on, but I’m wondering when we’ll get through so we can see those additional passes to capital. Is this something the Council will do imminently?Or is it somehow: do we have to go through certain occasions before?Are we delivering those capital returns?
Kathleen Lynne Oddity
Oui. Eh well, we follow the policy. Since the inception of the policy, we have distributed 50% of our loose coins, and so all the items that you quote and that exclude smelting, however, all of the items that you quote are giving us more coins that will be available for distribution. And we will continue to argue that the higher value policy will generate more coins and more coin returns for shareholders. And that’s politics.
Operator
The next one will come from the lineage of Michael Dudas of Vertical Research Partners.
Michael Stephan Dudas
I believe that, in response to the query, he discussed trading pricing and charge containment. So maybe you can tell us a little bit more about what you’re seeing on the ground, i. e. at your mines in North and South America, in terms of improvements in charges, what are your expectations compared to what they might have been a few months ago?Do you see that in some of the feasibility studies that you’re running and that you’ve done?And what kind of. . . Have you noticed that double-digit inflation continues on the capital requirements side, which will continue to make it a little more difficult for Freeport and others to meet the desires of our market?
Kathleen Lynne Oddity
Yes. I think those demanding situations have been significantly alleviated and we are moving towards a more solid scenario, although the scenario is higher than before. It’s more solid. For example, when we called for tenders a year or two ago, there may have been only one bidder for a project. And now things are opening up a little more for us. So on that side, I think it’s stabilized now. We will continue checking it. And every time we do our projects and our economic analyses, we take a look at a variety of capital prices and what the sensitivities are to an increase or reduction in capital expenditures. But in terms of the extremes that we’ve noticed in recent years, we’re not facing them right now. And in terms of prices of inputs and other fundamental products. They have been more subdued and more solid than we have noticed in a long time. We all know that this can change, but the scenario is more solid. The things we want to work on are, specifically in the United States, this factor that I mentioned in relation to hard work and experience with contractors and the third thing, and one of the most important is the reliable effectiveness of resources. . These are the demanding situations we have and we are taking advantage of them. I am convinced that we are taking a step forward in this area. We continue to make smart progress to actually expand the strength of operations in the United States. We have not had this challenge in South America and in Indonesia we have a much stronger and much more enjoyable force. We also benefit from a stronger dollar. A large part of the prices of our hard work are in foreign currencies. So there we benefited from a stronger dollar and obviously we did not see that obtaining advantages in the United States. But we think there are some things that are out of our control that we are focusing on right now. And now that things have calmed down. some with inflation, we notoriously strive to be as effective as possible, finding that poor grades become a challenge. But we want to do more than inflation. I mean, that’s what we want to make sure we can beat our inflation rate through productivity and power gains. And we have technologies that we didn’t have before. And I think, as a company, we’re going to look much more toward innovation as a tool to help us increase our productivity.
Richard Carl Adkerson
Let me just make a point about the broader implications of this for the copper market. Kathleen described the things we do at our company very well. And when she looks at our charge history relative to overall inflation, we’ve done some smart work with our upstream team. But the shocking amount of cost overruns in the big task in Chile, and also the political scenario in Panama, as I communicate with the CEOs of the sector, makes us all take a step back and say: we have to be careful. We have to be careful because the cost overruns are not just inflation, and we are still watching to see what is happening with those allocations to delay them and bring them to similar rate scenarios. Ultimately, this is just another major component of the positive outlook for copper prices. I mean, if those disruptions were resolved smoothly, and it is a complicated sector, we would not have the shortage of sources that we are experiencing, and that has been something paramount after the recent increase in copper prices, and this is also very favorable. to the long-term outlook for copper prices.
Operator
The next one will come from Bill Peterson’s line at JPMorgan.
Bennet Moore
In fact, Bennett will replace Bill this morning. If I could, I would try to ask him what, if any, is the company’s current discussion with the new Indonesian leadership and how he thinks those quotes will emerge over time.
Kathleen Lynne Oddity
Well, the transition probably wouldn’t happen until October. And we continue to work with the existing management. We are working together on some issues related to the concentrate license that we talked about earlier, as well as the expansion of IUPK, so we continue to work with the current administration on those issues. history in Indonesia. We have just celebrated 57 years of activity there. And we have worked with many governments over the years and many administrations, and we are confident that we will continue to have a good relationship with the new administration and what we focus on, we are not, we are not. “We don’t worry about politics, so we focus on what we do there to be a smart Indonesian citizen, to bring benefits to the national government, local government, all our paint, network paints and stakeholders, The paintings we make there are very important, and it is, they endure and survive the managements. That is why we focus on the things that make the asset smart for Indonesia and for all stakeholders, and that is what we will continue. Richard, I don’t know if you need to add anything to those comments.
Richard Carl Adkerson
Of course. I’ve been going to Indonesia for my entire Freeport career, for over 35 years, and our appointments have never been better. I was in Washington on Friday night for a reception celebrating 75 years of positive relations between the U. S. government and the Republic of Indonesia. and the Minister of Finance, Sri Mulyani, and the Governor of the Central Bank, Perry, were present. And I wish that everyone could hear the positive things that have been said at this table through various corporations and various Indonesian government officials about how Freeport is doing lately. and how positive they see our partnership with PT-FI construction, which is an Indonesian company and for being a good story for all stakeholders.
Bennet Moore
What if you could upload one more on the issue of long-term mining rights in Indonesia?Last week we saw a headline saying that such measures could be granted as early as next June. And what other request can the government ask for?
Richard Carl Adkerson
I will just say that we have an agreement with the government on the design beyond 2041. There is no controversy about it and there is general help for it. The fact that the elections have taken place and we have just passed through Ramadan has an effect on the calendar. But we are very satisfied. I mean, it’s vital to know that currently, under our current permission, we don’t have rights to anything beyond 2041. And that doesn’t make sense for any party interested in executing this operation without having a long-term plan to do more. drill to perceive what resources are available, make long-term plans, or determine how those resources will be developed. This is perceived by Indonesians, our Indonesian shareholder MIND ID, the Ministry of Mines, and the President’s workplace. That is why I am convinced that we will be able to achieve this. As always, there is uncertainty as to when the concrete procedures will be concluded to grant the agreements that will allow us to continue. But there’s no real controversy about long-term design.
Kathleen Lynne Oddity
And casting delivery is a vital component of this. And the government is very pleased with the progress made in bringing the smelter to a point where it can come online in the next quarter, this quarter.
Operator
Next up will be Lawson Winder of Bank of America Securities.
Lawson Reel
Perhaps only in Cerro Verde, if I can. Is there still the possibility of systematically exceeding 400,000 tons per day of this asset?
Kathleen Lynne Oddity
Absolutely.
Richard Carl Adkerson
I can’t tell you what a wonderful job our team has done there. I visited it recently and I mean, just the spirit, the relationships with the local netpaintings. And as you all know, Peru is a very confusing country and has a lot of political and economic messes to sort out, but it’s just a pleasure to see what our team has done there. I had friends with me and I saw an operation where we moved 400,000 – over 400,000 tons of curtains per day, which is equivalent to 80,000 trucks selling fabrics in a single day. So, for me, it’s a pretty frank inspiration to see that. Network paintings are us. We have a wonderful team. We actually bring some of our Peruvian operatives to work in Arizona and New Mexico to our operations there, but it’s an inspiring position for me.
Kathleen Lynne Oddity
Lawson, not without demanding situations This team has shown, as Richard said, that they can do it: they are a very resilient team and can cope with many other demanding situations. But water remains a concern. We did our expansion almost 10 years ago to install a water treatment facility, supply empty water to the grid, and it also supports our own operations. But especially at this time where we’ve been through El Niño and droughts and the concentrate is still in the water, but the ore is there, the resource is there, and the equipment has. . . We have the assets there and the team has very smart execution practices. And as Richard said, networking is great. .
Operator
The next one will come from the lineage of John Tumazos Very Independent Research of John Tumazos.
Juan Carlos Tumazos
In the first quarter, the minority stake was $689 million and the shareholders’ source of income was $473 million. Can we deduce from this that the US lines made about $200 million less in profits than overall prices or that the US operations lost money? And what are the short-term remedies? For example, how temporarily can we move to autonomous trucks and mitigate wage inflation, etc. ?
Richard Carl Adkerson
One thing, Juan. Kathleen, let me say something to John before I answer the question, Kathleen. I’ve noticed some of your writing, John. And the minority stake in PT-FI arose from the agreement with Rio Tinto in the mid-1990s. And that hasn’t really changed. That was just transferred to the Indonesian government and that interest in the joint venture was transferred to shares, however, in 2018 Freeport, through the agreement that we signed, retained virtually the same economic interest in the mine that we had. So this is not something that happened because of the government, but rather because of an agreement that was reduced in the mid-1990s. And when you look at it and I communicate about it with our people in the Americas and our people in the United States United, because even though our mines in the United States are low grade, given that we have a very favorable source of In the income tax scenario in the United States, reinforced through net operating losses carried forward, we own our lands as royalties, so there are no royalties. We have a support network for schools and hospitals through our workers. We don’t have to get the same things we’re looking for overseas, so the profitability of those mines is actually very interesting, and that’s what makes those expansion opportunities in the United States so interesting for Freeport. You and me both. Don’t forget a time when other people even thought the southwestern copper district was dead. And right now, that represents a large component of our country’s long term in terms of providing the copper resources necessary for the energy transition and electrification in general, but it is also a wonderful opportunity for our shareholders to create prices and, for Freeport, believe price. for our shareholders.
Kathleen Lynne Oddity
John, I’m just going to show you the press release. There’s. . . There’s. . . At the end of the press release, there’s an industry analysis, and you can take a look at the segments where we show the contribution of U. S. mines, and so on. And if that doesn’t answer your question, touch us later.
Operator
Our peak will come from the lineage of Martin Malloy of Johnson Rice.
Martin Whittier Malloy
I wanted to ask you, with your leaching technology, does that give you competitive merit and perhaps acquisition opportunities?
Kathleen Lynne Oddity
Well, we’re focused on. . . I mean, we have almost £40 billion in our inventory. And that doesn’t come with some very old spaces that we’re not active in. But yes, I mean, to answer your question, it provides We have some interest in some things that might have that opportunity to be able to apply our knowledge. But we are focused on our own biological situation. If an opportunity arises in that direction, we’d be interested to see what we can do. get out of this. But we have a lot of things in our portfolio that allow us to achieve really broad value for our shareholders.
Richard Carl Adkerson
Oui. Et represents many things. It’s huge, the opportunity we have to grow from what Freeport already owns from our existing stock, and Kathleen talked about our old stock. So yes, if an opportunity presented itself, I don’t expect it. I think we’re going to be able to increase the price a lot by doing with what we have, what the company has now, others have opportunities. No one else has it on such a scale as we do.
Operator
That said, we’ll turn it over to control for any final feedback.
Kathleen Lynne Oddity
Thank you all for all of your wonderful questions and your interest in Freeport, and we look forward to reporting on our progress in the future.
Richard Carl Adkerson
Thank you all.
Operator
Ladies and gentlemen, this concludes for today. Thank you all for your participation and you can now log out.