Freeport McMoran 2Q16 Earnings Call Notes

Freeport-McMoRan (FCX) Richard C. Adkerson on Q2 2016 Results

Oil production costs cut to $15 from $19 per barrel

“Oil and gas business, we cut our production cost from $19 a barrel to $15 a barrel.”

We have turned the corner for Freeport

“we have truly turned the corner for Freeport. And our ability to do that wasn’t just clear cut as we started the year. We proved that our assets are attractive. And our strategy and we’ll talk about how our financial strategy fits with our longer term business strategy is focused on leaving us with a core set of assets to build long-term value for shareholders.”

We have to live through the short term to experience the benefits of a positive long term market

“I’m going to talk about the longer term view, but we have to live through the short term to experience the benefits of a positive long-term market. So we sit here with a balancing act. The balancing act was to look at these debt levels, understand what it’s going to take operationally to get to those, then think about what next steps should we take to address the uncertainties of the short-term market. And we are still open and on the table for all strategic moves, whether that means selling assets, selling the company, we’re focused really on creating value for our shareholders, and to create that long-term value.”

There is ample copper supply but price is not high enough to incentivize investment

” rather than the market being overwhelmed with supply, there is ample copper around the world today. So, the market is fully supplied. But it’s not being overwhelmed with new supplies and continued production even with very modest demand growth. And as you go forward, existing mines will produce less. People aren’t investing in new projects. There is barriers to project development that relate to environmental, community, country issues. And as we’ve shown in this process that we’ve had about selling property, there is a significantly higher than current price required to develop new production.”

We’re still telling bankers that we’re open to ideas

“I mean, we started off the year saying that every asset we had was up for consideration for sale. And we made progress. We continue to have discussions. But we’re still telling the market and tell bankers if you got ideas for our business, come share them with us. And we’ve had a lot of interest and a lot of discussions.”

Tone from Indonesian government has been good for some time

“I would tell you the tone we’ve had with the senior government officials has been good for some time now. I’ve had the chance of watching President, Joko Widodo closely, as he’s been in United States and as he talked internationally about foreign investment and so forth. And there is not an issue of tone there. Within the country politically there is a feeling of resource nationalism, which is true of lots of places around the world today. And with us what’s going on here in United States, but I’m convinced the President and senior advisors understand the issues from an Indonesia standpoint.”

I tell buyers that I wish I were on their side of the table

“I keep telling all these people who are sitting on the other table about negotiating right now, I wish I were in your shoes, I wish we had a company where we could be buying assets now rather than selling, but we’re not, we can’t wish that away, we are what we are.’

Freeport McMoran at Deutsche Bank Conference Notes

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.