Freeport McMoRan at Deutsche Bank Conference Notes

Kathleen Quirk – Chief Financial Officer

Copper prices have recovered, but not enough to incentivize new supply

“You’ve seen a recovery in copper, beginning last fourth quarter of 2016. We’ve been in a period of time where copper was in the $2 plus range and then copper prices started to improve in the fourth quarter of last year. We didn’t see the wall of supply come into disrupt the copper market fundamentals as many market analysts had thought previously. And what we started to see is supply side issues come more into focus. We started to see more disruptions taking place because of labor issues or other issues in the industry, and so copper prices have recovered. And while they have recovered, they are still not at a point where the industry is investing in new dollars to replace supplies. And part of that is because of the incentive price required to build new supplies. And Wood Mackenzie estimates that that price is roughly $3.30 a pound. So we’re in a period right now where the companies aren’t making large investments in new projects. And so the longer that goes on, the longer you’ll see the situation where the market is very tight.”

Market is essentially balanced this year

“The market is essentially balanced this year, and many analysts believe that it will be finally balanced in 2018 and 2019. And so you’re left with the supply disruptions that have occurred. And like I said, year-to-date, they’re running higher than average. In the first quarter, we did see availability of scrap, as prices increase, more scrap become available. But here in the second quarter, we’re not seeing as much scrap availability as what we had in the first quarter.”

China going to be key. Demand remains strong

“China is going to be a key as it has been to this marketplace. They’ve been a very strong source of demand for copper, approximating upwards towards 50% of the market. And while the credit has tightened in China, the demand as we see it remains strong, particularly in the wire and cable markets. So we’re focused on the long-term fundamentals of this business. We think it’s a great industry to be in. And we believe Freeport is placed very well with its assets, and you can see the assets here.”