Freeport-McMoRan(FCX) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Freeport-McMoRan reported strong operational performance with total production of 1.1 billion pounds of copper and over 500,000 ounces of gold in Q3 2023 [9] - Average copper prices were $3.80 per pound, generating EBITDA of $2.2 billion, with operating cash flows totaling $1.2 billion, exceeding mining capital expenditures of $800 million [10][11] - Unit net cash costs averaged $1.73 per pound, slightly above guidance of $1.61 per pound due to export duties in Indonesia [10][27] Business Line Data and Key Metrics Changes - Copper sales were 8% above estimates, while gold shipments were slightly below estimates due to administrative approval delays in Indonesia [9] - Incremental copper from leach innovation initiatives totaled 46 million pounds, achieving 90% of the initial target of 200 million pounds per annum [16] - At Cerro Verde in Peru, the mill averaged over 430,000 tons per day, setting a new quarterly record [17] Market Data and Key Metrics Changes - The long-term outlook for copper remains strong, driven by rising demand from electrification and limited supplies, despite short-term price impacts from macroeconomic factors [12][15] - Copper inventories on exchanges have risen recently but remain low by historical standards [12] - Growth in copper consumption is noted in the U.S. and China, with significant investments in renewable energy and electric vehicles [13][14] Company Strategy and Development Direction - The company is focusing on brownfield opportunities and extensions of existing operations rather than high-capital greenfield projects [19][24] - Plans include scaling leach initiatives to potentially double incremental copper production to 400 million pounds per annum [20][21] - The company is also exploring expansion opportunities at the Baghdad mine and El Abra in Chile, with a focus on optionality and timing based on market conditions [23][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term outlook for copper prices, despite current geopolitical and macroeconomic challenges [7][15] - The company is committed to maintaining a strong balance sheet and financial flexibility while navigating current market conditions [33] - Management emphasized the importance of prudent capital investment decisions in light of rising costs and uncertain market conditions [46][48] Other Important Information - The smelter project in Indonesia is 84% complete, with commissioning expected by mid-2024 [30] - The company is advancing climate initiatives, including transitioning from coal to LNG for energy needs [31][32] - A new power purchase agreement in Peru aims for 100% renewable energy by 2026 [32] Q&A Session Summary Question: Cost performance in U.S. operations and production impact - Management acknowledged challenges in productivity and rising costs, particularly in labor and component parts, affecting overall performance [36][37] Question: El Abra project potential and investment clarity - Management confirmed that recent clarity around Chilean mining taxes is beneficial, and they are retesting the project's economics in light of current capital costs [41][42][43] Question: Impact of inflation and interest rates on investment expectations - Management indicated that rising costs and interest rates have pushed out expectations for medium to long-term investments, emphasizing a prudent approach to capital allocation [45][46][48] Question: Timeline for export duty resolution in Indonesia - Management stated ongoing discussions with the government regarding export duties and the potential for life extension beyond 2041 [50][51][53] Question: Funding for Indonesian projects and dividends to non-controlling interests - Management clarified that the smelter project is debt financed, while other capital projects are funded through internally generated cash flows at the PT-FI level [55][57]