Freeport-McMoRan(FCX) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics - The company generated $2.7 billion in EBITDA and$1.9 billion in operating cash flows during the quarter [4] - Copper prices ranged between $3.91 and$4.47 per pound on the LME and $3.94 to$4.66 per pound on the COMEX, with an average settlement price of $4.18 per pound on the LME [5] - The company expects its average unit net cash cost for 2024 to approximate$1.58 per pound, below the July estimate of $1.63 per pound [14] - Annual EBITDA at$4 copper would range from $11 billion to approximately$15 billion per annum at $5 copper, with operating cash flows ranging from over$7 billion at $4 copper to$10.5 billion at $5 copper [14] Business Line Performance - In the US, the company is improving efficiencies and cost performance to mitigate the impact of lower grades, with positive trends in asset efficiency and equipment reliability [7] - In South America, the Cerro Verde operation posted a solid quarter with mill throughput exceeding 420,000 metric tons of ore per day and improved mill recovery [8] - In Indonesia, the company achieved a unit net cash credit of$0.71 per pound, with strong volumes of both copper and gold from large-scale underground ore bodies [8] Market Performance - In the US, strong demand for power cable and building wire associated with investments in electrical infrastructure and AI data centers offset weakness in traditional sectors like residential construction and autos [6] - In China, demand for copper continues to grow despite a weak property sector, supported by significant investments in the electrical grid and growth in electric vehicle production [6] Strategic Direction and Industry Competition - The company is focused on organic growth, leveraging its large reserve and resource position, and advancing innovative leach technologies to add low-cost copper volumes [4] - The company is pursuing brownfield expansion opportunities in the US, Chile, and Indonesia, with projects like Bagdad, Safford Lone Star, El Abra, and Kucing Liar [12][13] - The company is well-positioned to benefit from the fundamental outlook for copper, driven by increased demand from electrification, renewable energy, and technology infrastructure [6] Management Commentary on Operating Environment and Future Outlook - The company is optimistic about the markets it serves, its portfolio of high-quality copper assets, and the future prospects for strong cash flow generation [5] - The company is focused on restoring smelter operations in Indonesia following a fire incident, with repair costs expected to be covered by insurance [9] - The company is advancing its innovative leach initiative, aiming to scale production to 300-400 million pounds per annum in the next couple of years, with a long-term goal of 800 million pounds per annum [10][11] Other Important Information - The company purchased 5.3 million shares of Cerro Verde, increasing its ownership from 53.6% to 55% [5] - Capital expenditures for 2024 are forecast at $3.6 billion, with an estimate of$4.2 billion for 2025 [15] - The company has distributed $4.5 billion to shareholders through dividends and share purchases since implementing its financial policy framework [16] Q&A Session Summary Question: Impact of the smelter fire in Indonesia and insurance coverage - The company confirmed that the insurance policy covers repair costs but does not include business interruption coverage. The company is working with the government to ensure continuity of concentrate exports during the outage [17] Question: Restricted cash policy in Indonesia - The restricted cash policy, which requires holding 30% of export proceeds in Indonesian banks for 90 days, applies to all exports and is expected to continue beyond the smelter startup [18] Question: Timeline for smelter repairs and potential delays - The company is still assessing the damage and lead times for replacement equipment, with no specific timeline yet provided for repairs [19] Question: Potential for further stake increases in Cerro Verde - The company is interested in purchasing additional shares of Cerro Verde if opportunities arise, but it depends on willing sellers [20] Question: Filing for IUPK extension in Indonesia - The company is working with the new government to file for an IUPK extension, with confidence that it will happen [22] Question: Pre-feasibility study for Safford Lone Star - The company is studying a brownfield expansion at Safford Lone Star, with the potential to more than double current production levels to 600 million pounds per annum [23][24] Question: Cost reduction initiatives in North America - The company is focused on improving efficiencies, reducing contractor costs, and enhancing equipment reliability to lower unit costs in North America [26][27][28] Question: Capital allocation and potential for share buybacks - The company follows a framework for cash allocation, with 50% of available cash flow after CapEx allocated to shareholder returns, including potential share buybacks [37] Question: M&A strategy - While M&A is not fundamental to the company's strategy, it remains open to opportunities that align with its focus on organic growth [39] Question: Capital allocation for major projects like Bagdad and El Abra - The company is evaluating capital allocation across its portfolio, with Bagdad being a near-term executable project, while Safford Lone Star and El Abra are longer-term opportunities [41][42] Question: 2025 CapEx outlook - The company does not anticipate significant changes to its 2025 CapEx plans, with investments focused on derisking projects like Bagdad [43] Question: Updates on smaller discretionary projects - The company provided updates on projects like the Lone Star oxide expansion, Grasberg mill improvements, and Atlantic Copper recycling, with most nearing completion or expected to be operational by next year [45] Question: Progress on cleanup work at Grasberg - The company reported strong progress at Grasberg, with operations exceeding forecasts and grades performing well [46]