Freeport-McMoRan(FCX) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Freeport-McMoRan reported a strong fourth quarter with adjusted EBITDA of nearly $10 billion for 2025, similar to 2024 levels, despite a 10% impact on annual copper volumes due to the Grasberg incident [6][12] - Consolidated unit net cash costs for the year were $1.65 per pound, within 3% of guidance, while copper sales and net unit cash costs were slightly better than adjusted guidance [6][12] Business Line Data and Key Metrics Changes - The U.S. business saw a 5% increase in production compared to the fourth quarter of the previous year, with operating income three and a half times higher than the fourth quarter of 2024 [13][14] - South America’s copper sales totaled $1.1 billion for 2025, with expectations for similar sales in 2026, while unit net cash costs averaged $257 per pound in the fourth quarter [15][16] Market Data and Key Metrics Changes - Copper prices on the LME averaged $4.51 per pound for 2025, with current prices approximately 30% higher than the 2025 average [9][10] - Demand for copper was driven by electrification and AI data centers, offsetting weaknesses in traditional sectors like residential construction and autos [10][11] Company Strategy and Development Direction - Freeport's long-term strategy remains focused on being a leader in copper production, with a commitment to executing operational initiatives and enhancing cash flow generation [5][7] - The company is targeting a 40% increase in production from leach initiatives in 2026, aiming for $800 million per annum in the future [8][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the future of copper, citing strong prices and a well-designed recovery plan following the Grasberg incident [4][5] - The company anticipates a tightly balanced copper market in 2026, with significant growth in demand expected due to investments in power grids and technology infrastructure [11][12] Other Important Information - Freeport's reserves at year-end 2025 included over 17 billion pounds of copper from the El Abra project, with ongoing regulatory processes for expansion [22][23] - The company is focused on innovation and automation to enhance operational performance and reduce costs, particularly in the U.S. business [8][28] Q&A Session Summary Question: Guidance for future years considering leaching opportunities - Management included $250 to $300 million in the 2026 outlook for leaching and did not include anything beyond that for expansion [34] Question: Unit cash costs in South America - Forecasted net cash costs in South America for 2026 are around $258 per pound, similar to the fourth quarter, with increases attributed to labor and energy costs [35] Question: Reducing U.S. costs by 2027 - The target to reduce costs to $250 per pound by 2027 assumes successful scaling of leach opportunities and driving efficiencies [36] Question: Copper imports and tariffs - Management indicated that leach initiatives could significantly reduce imports, but they are not relying on tariffs to support investments [38][42] Question: Timing for Bagdad project updates - The decision on the Bagdad project is expected mid-year after completing engineering work and obtaining fixed pricing [46][47] Question: Lessons learned from Grasberg incident - The company is on track with the Grasberg recovery plan, with mud removal nearly complete and infrastructure improvements ongoing [54][55]