Freeport-McMoRan (FCX) Deutsche Bank 2016 Global Industrials and Materials Conference (Transcript)
Kathleen L. Quirk – EVP, CFO and Treasurer
Focused on cost and capital discipline
We are very focused on cost and capital discipline, we have been for a number of years, and we really have tightened that focus with the decline in commodity prices, as the others in our industry are doing the same thing, but we’ve made very significant achievements in not only reducing capital expenditures but also in continuing to focus on cost reductions
Positive about outlook for copper
we feel very positive about the long-term outlook for copper. We are realistic about the short term, we recognize that copper is currently influenced by the uncertain situation in China in terms of demand growth there and other uncertainties about the economic growth, but where we really take comfort in looking at the copper market is that the supplies of copper are very hard to come by.
It takes a long time to develop new supply
We know that because we have been working in this industry for a very long time. It takes a very long time to develop new sources of supply, and older mines over time grades will decline and production will fall off, cost will go up if you have to go underground or have longer haul.
Industry hasn’t been developing supply
we know that the current price of copper of just over $2 a pound is not sufficient to create new investment. Everyone in the industry is cutting back investment, trying to reduce cost, but that’s going to have a meaningful impact we believe on the industry as we go forward. The new mines or the expansions that were being pursued are largely coming to an end and it takes a long time for new supplies to be developed, if they can even be developed.
Underinvestment in oil can’t go on forever
This can’t go on forever, like in copper as well, you can’t not invest and expect to maintain or grow production, but we will be able to do this during a period where we are trying to reduce debt. And you’ve seen oil prices today approaching $52 plus for Brent, and so you can see here, in 2017 we are expecting our oil business to contribute to our debt repayment objectives.
Debt capital markets have improved significantly
We are looking at that, we are looking at a broad range of opportunities available to us. The market has improved, the capital markets have improved significantly, particularly the bond level. So we are monitoring those conditions and we’ll look to refinance debt as it makes sense economically, but our real focus is on deleveraging.