Freeport McMoran 4Q15 Earnings Call Notes

Freeport-McMoRan (FCX) Richard C. Adkerson on Q4 2015 Results

We face serious challenges with our balance sheet

“This is going to be a different call than we have – have been done in the past for obvious reasons. We face serious challenges because of what’s going on in the marketplace and because of the situation with our balance sheet, and we want to convey that we’re addressing this seriously and with a degree of urgency and we’re very focused on it.”

This is the worst of the scenarios that we were looking at

“as we talked about it at the end of the third quarter, we were looking at various scenarios that ranged from a further decline in prices at that time to other more positive scenarios. We’re experiencing the worst of those scenarios right now, with copper dropping to $2 and oil dropping to $30.”

What are we doing about it? We’re aggressively managing cost and capital raising transactions

“So the issue is what are we doing? What’s Freeport going to do about this right now? And I want to convey to you what we are doing…We are aggressively managing cost, CapEx, production, cash flow and working for capital raising transactions to address our balance sheet.”

Issued $2B in equity and are talking to parties about asset sales

“We’ve taken steps to protect our balance sheet by suspending our dividend. We raised equity proceeds through two ATM initiatives that have generated $2 billion of equity for us. Now we’re going to talk about further steps. As we look at restoring our balance sheet to reflect current market conditions, we’re going to focus and manage our cost and capital and continue to generate cash flow in a safe way. We’re going to take immediate steps to reduce debt to enhance shareholder value. We are in active discussions with a number of parties on alternatives for asset sales.”

The copper market is very different than other commodity markets

“So much talk about copper market commentary that I’m just going to make a couple of comments about it. Unquestionably, the uncertainty about the global economy is negatively impacting financial market sentiment. China’s demand growth is slowing. Our Western demand is not as good as we and others had hoped it would be, but it’s still expanding gradually. I’m not going to debate anyone about the market. The market is what the market is. But the facts are that in the copper business differs from other commodities in that there is not an enormous excess supply in inventories”

The story is not as negative as financial markets are reacting

“The story is fundamentally, in today’s world, the business we’re seeing is not as negative as the financial markets are reacting to it. We have no particular insight as to what’s going to happen in China in the future. We have to prepare ourselves for what the market is and the market is we’ve got $2 copper and we’ve got to react to it.”

We have adequate liquidity

” We have total debt at the end of December of just over $20 billion. We have adequate liquidity, as we go forward. We have very limited amounts, $200 million of debt maturing in 2016. We have no funds drawn under our $4 billion bank credit facility. I’m sure you all have followed the rating actions taken on our company and have also followed the rating agency’s public comment about their broadly based reviews of credits in the metals and mining and energy sector. We have worked with agencies over the year to demonstrate our commitment to protecting our balance sheet, and we’ll continue to do so.”

The situation has developed very quickly and aggressively

“I know everyone would like to be more specific now. I would like to be more specific now. The situation has developed in a negative way very quickly and aggressively, and we’re responding to it. And we will report to you at a time when we can be more specific. But today, we can’t.”

Going to look at the opportunities that we have in the oil and gas business

“Well, as I said, our strategic focus is around our mining business, so that’s going to be the focus. We are looking to see what market opportunities we have available to us with our oil and gas asset to generate value, and we’re going to assess how to do that either near term or over time. I mean, we are not going to make irrational decisions based on just current market conditions. But we have a number of interested parties who are anxious to talk with us about how we might go forward with it.”

Going to use proceeds from asset sales to reduce debt

“We recently restructured our bank credit facility so that we’ve agreed that half of any asset sales we have will be used to reduce debt. Practicality of it is we’re going to use proceeds from asset sales to reduce debt. I mean, that’s just what – that’s why we’re doing it. So there’s not any real restriction now”