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.”

Freeport McMoRan 4Q16 Earnings Call Notes

Freeport-McMoRan’s (FCX) CEO Richard Adkerson on Q4 2016 Results

Don’t give bows for Act I when the audience is looking for Act II

“as I started thinking about my presentation today I recall a comment that Jack Welch made several years ago and it was, ‘don’t be giving bows for Act I when the audience is looking for Act II’, and I know everyone here is focused on Indonesia. It’s the focus of our senior management team as we go into 2017, but having said that I’m very proud of what our team did during this past year.”

Background on Indonesia

“In 2009, the Government of Indonesia passed a new mining law and implement new regulations over, the law was passed in 2009 and it took time to put regulations in place and really the governing regulations were not completed until 2012. The law provides specifically that existing CoWs remain in effect until they expire. It also instructed the government to seek amendments to the CoW make contracts of work more consistent with the new mining law within one year.

We actually, began discussions with the designated senior representatives of government in 2011. And in 2012, the government established an evaluation team early that year to review CoWs. We’ve been in discussions with the government since 2011, 2012, but have never been able to reach a mutually acceptable agreement on reconciling the contract of work with the new mining law. The law says that the contract remains in effect.

In early 2014, concentrate exports were halted for more than six months following a troubling January regulation on exports. We didn’t export for more than six months. It cost the government roughly a $1 billion in taxes and royalties, it cost us slightly less than that. But a very substantial amount. In that year, we resolved the ban on exports by entering into an MOU with the government, in July, that covered six main points. Exports, smelter development, divestiture, all of these were subject to negotiation of legal and physical certainty and an extension of our operations from 2021 to 2041.

It was contemplated that that MOU would be resulted amendments to the CoW in six months. The government changed in late 2014, the MOU was extended in 2015 and we continued discussions with the government. That led to the government providing our company a letter of assurance regarding extension of the CoW, regarding legal and physical certainty beyond 2021. And it was that assurance, in that letter and in the MOU and in the CoW, the government has, in Freeport have honored this CoW since the first one was signed in the 1960s, and the new one signed in 1991, that has given us the confidence to make the ongoing level of investments that we’ve been making and developing our underground resources.

Now just in January of this year the government has introduced new regulations and these new regulations require CoW holders to convert to licenses called IUPK in order to export, and with a license in and of itself there is no assurance of legal and physical certainty and we have been unwilling to give up our CoW to go to strictly a license. And so, what I want to do now is, and this is in our slides and so you can review this and follow up with questions, but I want to point out what our contract of work actually says.

If we are not allowed to export it will have a significant impact on our company

“So, we’re committed to start working immediately on that. We’ve been given indications that we will be allowed to export, but I want to note specifically, we have not yet been approved for that. If in fact, we are not allowed to export, the significant impact on our company. Each day, it’s 70 million pounds of copper and 100,000 each month — 70 million pounds of copper and 100,000 ounces of gold for each month. The nature of copper concentrate is that it’s bulk material and we don’t have the ability to inventory this to any great extent. We would be allowed to ship domestically to the smelter at Gresik and we would have to restructure our business to allow us to do that, but it would be a major curtailment of our business. Unlike 2014, at this point where our company is not in a position to maintain the existing operations without being able to export.”

At this point we don’t believe that we will have to take steps to curtail operations

“So, we would have to take steps to curtail operations, curtail costs, that means very large layoffs and the cutbacks in capital spending, and we have developed plans to do that. I will say we don’t expect to have to do that based on very recent discussions with the ministry. But we — it still remains for us to get these exports approval and we’ve been given assurances that we will.”

There is the option of international arbitration

“We have the rights to pursue claims against the government in the form of international arbitration. And our legal team advises us that our case is very strong in doing that. We have consistently represented to the government that we don’t want to do that, I don’t believe that would be advantageous for us, but I also think it would be very negative for the Government of Indonesia. So, we have and as long as we have the opportunity to try to resolve these matters in good faith we’ll continue to do it through trying to reach an amicable mutually agreeable situation. But if we get to that point where we can’t and that point would include not being able to export, then we would be left no choice and we’re prepared to do that.”

EPA regulation is important to us

“The area that we’re watching that could have a big influence on us is EPA regulations. Because we inherited legacy environmental obligations all over this country from historical operations that go back into the 19th Century. And we just entered into a settlement that you may have seen with EPA and the Navajo Indian tribe in the Four Corners area with some significant historical uranium clean-up sites. We were very pleased with that, the government I going to pay significant part of that and we’re going to deal with some of those obligations on behalf of our company. So, these EPA regulations which is a big focus of the new administration is important to us.”

Miscellaneous Earnings Call Notes 10.28.16

SunTrust Banks’ (STI) CEO Bill Rogers on Q3 2016 Results

Regulatory and compliance costs are not likely to abate

“But in terms of overall regulatory and compliance costs, if I look forward, John, I don’t think that in the short- to medium term I would think of regulatory costs in general abating or declining. I think we’re in an environment, where we would expect regulatory and compliance costs to be generally stable or increasing over time. And just the environment that we’re in, I don’t see realistically that anybody in the industry is going to see regulatory and compliance costs fall off.”

Potlatch Corporation’s (PCH) CEO Michael Covey on Q3 2016 Results

Eric Cremers

No rollover in land pricing

” Pricing remains firm. There is a lot of money on the sidelines looking to invest in the asset class. People have an expectation that prices will move higher over the next several years as we continue with this housing recovery that generally gets built into the models that are used to value timberland. And in a low interest rate environment high timberland prices are supported. So we’ve not seen a rollover in timberland pricing at all.”

Lumber prices well supported here. Moving from mid to upper 80s capacity utilization”

” As I think Jerry mentioned in his opening remarks, we might see a real slight rollover in lumber pricing in Q4, and that’s consistent with what the external pundits are forecasting maybe 1% or 2% rollover in pricing. You know generally speaking markets are well balanced, our order book is solid. As you know we sell forward our lumber production. So we’re out into the first or second week of November at this stage. And so we feel very good about where lumber markets are at, at this stage of the game. Just the general backdrop here, if you think about it, we’ve got demand, which has remained strong. Of course the housing market data, there is starts data is volatile from month-to-month. But generally we’re seeing starts increase, we’re seeing strong R&R repair in the model activity, and we’re seeing strong commercial and industrial activity as well. And with industry wide capacity utilization now moving up from the mid to the upper 80s and supply-chain inventories as Mike had mentioned remained very well, we think, lumber prices are well supported here.”

Brown & Brown’s (BRO) CEO Powell Brown on Q3 2016 Results

Hurricane Matthew will have little impact on rates

“We believe Hurricane Matthew will have limited impact on rates, if any. There will be more discussions around flood and wind deductibles, rate for cat property continued downward affecting retail, wholesale, and national programs, and that will continue into Q4 and into 2017.”

Honeywell International’s (HON) CEO Dave Cote on Q3 2016 Results

A favorable setup for 2017

” Darius and Tom will provide more details about 2017 during our annual outlook call in December, but we have a favorable setup. The fourth quarter momentum continues, our long cycle businesses are improving and our inflections start to kick in.”

Tom Szlosek/Dave Cote

A salesperson isn’t productive in his first year on the job

“A salesperson really isn’t productive enough in his first year on the job, so we have to ensure we have enough sales employees in place today to support tomorrow’s business… when you hire salespeople there’s training and familiarization that has to go on. So they’re not immediately productive. It’s the sort of thing that shows up in the future.”

Heidrick & Struggles International’s (HSII) CEO Tracy Wolstencroft on Q3 2016 Results

Rich Pehlke

Improvement in September/October

“we can’t really point to one thing because as we saw July and August kind of soft we really did worry a little bit about was it a sign of some kind of a cyclical trend or a movement but you know September bounced back pretty well and so – and as we talk to our folks and see what’s out there and see how October is progressing. You know there is nothing we can really point to that says that you know there is one – there is one driving factor. So whether or not it could have been client decision caused by things like Brexit et cetera certainly is certainly one of the factors that would have fallen into play but there isn’t any one thing that we can put to, and I don’t know if you want to leverage.”

Zions Bancorp. (ZION) Q3 2016 Results

Harris Simmons

It was a softer quarter for C&I loan demand than we would have hoped for

“I think that’s consistent with what we saw during the third quarter. The third quarter has generally been a softer quarter. You get kind of the summer vacations and everything else baked into it, but this was softer than I think we would have expected. And so we’ll see what happens through the remainder of the year. But it was a softer quarter in C&I than we would have hoped for.”

Brinker International (EAT) Q1 2017 Results Wyman T. Roberts – Brinker International, Inc.

Challenging times across casual dining

“Just as we said last quarter, these continue to be challenging times across casual dining. We’re already seeing some of the weaker players struggle with their viability in this choppy environment. ”

There are some examples of concepts that are shrinking

“We don’t have great metrics around capital spending in the category. But there are some examples of concepts that are shrinking. And in some numbers that are reasonable, we’re talking now in tens and hundreds. So that does make a difference. We’re also hearing from some competitors a dial back, which I think is again encouraging that people are starting to say, hey, listen let’s address the overcapacity and slow things down a little bit. And I heard something recently from a competitor that the expectation was that would also maybe take some of the steam off some of the real estate market, which has not really come back in our opinion kind of represented the softer overall economic situations out there. Still paying a pretty good premium in this environment we think for real estate. So all of those things I think bode well for getting the economics right and getting the supply and demand situation more in line”

United Technologies (UTX) Q3 2016 Results Gregory J. Hayes

China Otis sales down 10%

“We also continue to make good progress at Otis. Our China new equipment orders and units were up 2% in the third quarter and 3% year-to-date. This is in the face of an overall market, which is down more than 5%. I would remind you though, the pricing pressure remains intense, so despite unit orders being up, new equipment orders on a sales basis in China were actually down 10% in the quarter. A tough market right now, but we remain focused on increasing our installed base and converting those units into our service portfolio, which will deliver recurring revenue for decades to come.”

Have seen a slowdown in construction activity in UK

“In Europe, we have seen a slowdown in construction activity in the U.K., we think as a result of the Brexit vote, but the rest of Europe appears to be improving slowly, more than compensating for the slowdown in the U.K.”

Freeport-McMoRan (FCX) Q3 2016 Results
Richard C. Adkerson

It’s clear there’s going to be a need for copper

“Is just, unless you see the world really turning upside down economically, it’s clear that there is going to be a need for copper that’s going to require a significant price increase to justify the spending, and that’s why we feel very good about our long-term strategy.”]

C.H. Robinson Worldwide (CHRW) Q3 2016 Results Andrew Clarke

Carriers raised rates when Hanjin filed for bankruptcy

“Hanjin filed on August 31 and what happened shortly thereafter is the other carriers that remained in the Trans-Pacific eastbound lane began to raise rates. I think what happened then shortly thereafter was that they doubled them. They were up as high as $750 as I mentioned earlier, $750 to $900 a box. Now, we weren’t able to immediately pass those rate increases along to our customers. As I mentioned, our account managers are out there right now having those discussions with our customers to reflect the rates that are now in place in that trade lane. We would expect the impact to trickle into the fourth quarter, but not much beyond that.”

Applied Industrial Technologies (AIT) Q1 2017 Results
Neil A. Schrimsher

October a little softer than September

” I’d say on our sales per day trends – did include expected seasonal softness in July with improvements then in August and even stronger in September. Order trends for October, as expected, developing a little softer than September. However, we still have a handful of days to go. And I’d say year-over-year October is just kind of down low single-digits, which, again, is what we expected looking at the comparables. And, again, that’s got still a handful of days for us to positively impact it.”

Mark Eisele

Foreign exchange rate impact down to zero

” That’s exactly the expectation. If you look at foreign exchange rates, let’s say, for September and if those would stay relatively stable through December, when we look at our overall sales, we would expect to have a 0% impact of currency translation in the December quarter. Then if you keep going on through the rest of the fiscal year, you’d actually see a small positive impact probably in the March quarter and then more flattish in the June quarter. So, our view is, for the entire year, we may end up at virtually zero on FX. Obviously, it depends upon how the rates move from today forward, but that’s our perspective. We’re seeing some stability.”

Range Resources (RRC) Q3 2016 Results
Jeff Ventura

Supply and demand for gas could be more balanced into 2017

“On a macro level, there are signs that later this year and into 2017, supply and demand will be more balanced and pricing could improve. We expect natural gas production in the U.S. to continue declining for the remainder of the year. Based on available data, it appears 2016 will be the first time that natural gas production will decline on the year-over-year basis since 2005. This supply decline is happening while demand for natural gas is increasing, driven by Mexican exports, power generation and LNG exports. Looking towards 2017, the NYMEX Strip has moved above $3 and we think it can continue to climb. Based on where strip pricing is today, we believe that we can grow the combined company at 33% to 35% for 2017. This equates to an organic growth rate of 11% to 13% for 2017, coupled with the full year of the North Louisiana division versus roughly a quarter in 2016. Importantly, this preliminary plan for 2017 also results in strong growth for 2018, assuming a $3.25 per mcf and $60 per barrel, we are projecting that we should achieve organic growth for 2018 of approximately 20%

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.

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”

Freeport McMoran at Deutsche Bank Conference

Kathleen Quirk – EVP & CFO

Seeing global growth continue at a moderate pace

“We are seeing the U.S continuing to grow at a moderate rate, and we are seeing stimulus activity help economies in Europe and Japan, and also talk about stimulus in China.”

The swing for copper comes from the supply side though

“But the real underpinning of the market comes from the supply side. Demand — copper is very, very significant in the economy, it’s very important to the global economy. But it’s a market where the supply side is constrained.

You see things like disruptions going on all the time, labor disruptions, weather related issues, technical issues, political issues; there is a whole host of things that impact supply.”

Market conditions have led to under-development

“the market conditions over the last few years have been such that no significant new projects are being developed. So it’s going to create a gap in copper supply as we go forward. We think that’s going to be constructive for the market and where we’re positioned at FCX; we’re very well positioned to participate in this with our large low-cost ore bodies with expansion potential.”

Demand growth is expected to outstrip supply over next 10 years

“This is from Wood Mackenzie. You look over the next 10 years; they’re assuming global growth averaging about 2.5%. That works out to 7.6 million tonnes of copper demand over the same period the existing mines are expected to fall by 3.1 million tonnes. So you need over 10 million tonnes of new supply to be able to make up for this. And that is significant, that’s a significant percentage of today’s supply — of today’s mine production. In 2014, the top 10 mines in the world produced less than 5 million tonnes. So you make it a lot of big mines to be able to meet the shortfall.”

IPOing the oil and gas business

“Well we are working on a registration statement that would be filed, that would give us the opportunity to consider the IPO this fall and so, we expect to be filing a S-1 registration statement this summer, and we’ll have the opportunity to consider in the fall. ”

Going to sell less than 20% of it though

“as I mentioned we’ll file the S-1 during the summer, and what we’re talking about is selling a minority interest, the minority position in the oil and gas subsidiary. So it would be somewhere and likely below 20% because we do get — we do have some advantages, some tax advantages of consolidating that entity. So it would likely be less than the 20% that we sell through public.”

Industry production has not met expectations this year

“most market observers are expecting a small surplus this year. Now that started out higher and over time has declined because production has not — from the industry has not met expectation.”

It’s been very hard to bring on new supply

“Its very, very difficult to increase copper production as we saw, we’ve had incentive pricing for several years, back 2010, ’11, ’12 you had prices above $3 averaging between almost $4 in some years, and there is a lot of capital available to our industry. Lot of big companies in our industry interested in copper and even though there was a lot of desire to expand copper production. It really has not been a meaningful increase in production because mines are aging and production declines at the same time. So, again we just reiterate our view that this is, this is one of the most positive commodities from a fundamental standpoint that you could be in “

Freeport McMoRan 1Q15 Earnings Call Notes

2015 is a transition year for investments

“I want to look back on our January call when we discussed this year 2015 as being a bridging year as we complete our major copper expansion projects that we started in 2010 and transition to 2016 when we will realize the ongoing benefits of these investments. These projects will generate volumes that will be accompanied by lower cost, lower capital expenditures. All of this adds up to a significant free cash flow generation which will not be dependent on higher copper prices.”

Optimistic about long term outlook for copper

Now we remain very optimistic about the outlook for the copper markets. We supported by the world’s need for copper and the challenges in developing supplies and maintaining supplies for copper, but we are cognizant of the near term uncertainties and commodity prices so we’re going to continue to be diligence about controlling cost and will remain flexible to respond to market conditions.”

Evaluating a public listing of a minority interest in Freeport Oil and Gas

“We are going to talk today that among these alternatives we are considering a public listing of minority interest in Freeport-McMoRan Oil & Gas. Publicly trated Freeport-McMoRan Oil & Gas would — values of our oil and gas assets through a public market evaluation and enable us to expand the financing alternatives for our oil and gas operations on a standalone basis. Subject to market conditions this alternative essentially would be completed in late 2015 following the completion of an SEC review of the required registration statement”

Copper surplus that people were forecasting has not materialized

“When you step back and look at where we are right now in 2015, the surpluses that had been projected for a number of past years are not developing as they were estimated. Projects have been delayed, production has been interrupted and the market has not moved into a large surplus position. The focus by investors and people involved in the industry has been on China, with China’s lower growth rate and uncertainties about its economy, its base has grown significantly. The government is providing economic stimulus and China’s need for copper is going to continue to be significant and the key factor in terms of near-term.”

The market isn’t recognizing the value of the oil and gas business

“There is a big disconnect between the value of our oil and gas business within Freeport-McMoRan today and the public market perception is stand alone. I guess we have had more success than anybody with the drill bed in the last two years and it’s caused more spending but it is also likely reflected in our equity. So the aspect of being able to get that visibility for the Freeport shareholder we think is an important part of it.”

Reported reserves are a function of prices

“it’s important to note that reserves are function of prices as well. As prices go higher economic limits extend and reserve volumes increasing, lower prices put limits on how much reserves you can add at a particular point in time.”

Freeport McMoran at Goldman Sachs Conference

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

New Pres of Indonesia may be market friendly

“I was just at APEC last week which has always great insight into what’s going on in Asia Pacific region and the new Indonesia President Joko Widodo was there. It was not clear who is going to show up, but he was on. His presentation was right before mine, I was with Humala and some other people, but he did a great job. I mean, his English was not supposed to be great, most leaders at that conference don’t speak English, they speak their own language, but he gave his presentation in English. He used PowerPoint slides and was really emphasizing infrastructure development and the economy saying the right things who was the G-20 this week.

So the early signs are is that he is bringing a new philosophy into the government of Indonesia. He has appointed ministers many of which were not like virtually all of which were not part of the established political system before. ”

Very positive on the outlook for Copper

“We are so optimistic about the long term future of copper prices. You know you just voted on, what you just voted on is going to be another factor that’s going to be very supportive on constraining long term supply. You know supply is constrained by geologic reasons, by environmental reasons, community issues, government issues and just physically where our new projects are located and as we go through time, exist – great and existing projects are dropping, people are having to move underground in Chile and we’re having to move underground in Indonesia and you know you cut China’s growth rate in half from what we’ve had the last ten years and by the way the President of China was very optimistic about his country’s economy last week.

And you see the decline in existing land and it’s pretty impressive about what’s going to be the requirements for copper 10, 15 years out where’s it going to come from. And so for a company like ours where we have these enormous SEC qualified approved in probably reserves over a 100 million pounds, where we have additional resources that are bigger than that from our existing mines that are not yet reserves but have been identified through core drilling and exploration work.

Our question is how do we get those projects identified, underway so we can have production for the future. That’s a two-edge sword and the copper business, one of the reasons, the price outlook is so strong is because you just can’t turn to spigot on. You just can’t turn to spigot on; you have a do a hell of a lot of work to identify what the resources, how you will mine it, how do you get water or power, other facilities there. And so that’s what we are working on now.”

In any commodity business sometimes you have to make drastic changes

“In any of the commodity business there are prices where you have to make radical changes. I mean, 2008 wasn’t that long ago, because was price of copper in June 30, 2008 was $4 and by midway in the fourth quarter was $1.30. And so we shut down a 100 of those big oil trucks in Morenci, just shut them down. We’ve got our mining rate in half we stopped all of our capital expenditures.”

Freeport McMoran 4Q13 Earnings Call Notes

A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

Copper demand strengthening

“copper markets appear to be strengthening from where we were a year ago.”

China went through change to internal focus, but infrastructure spending still a big part of things

“During 2013, China went through a government change, a reorientation of its economy towards internal consumption with less emphasis on exports and infrastructure development and major spending on infrastructure continues as evidenced by the recent announcement by state grid to increase its capital spending and that has a major impact on copper consumption there, but consumer demand remains strong. Infrastructure investment in China is a major part of this marketplace.”

Budgeting for $100-$105 oil

“So we continue to maintain our budget process between $100 and $105 a barrel of Brent and going forward. based on the production struggles around the world, grow production from North America and also the aspect of consumption demand expanding around the world on a consistent basis that we continue to see accelerating this year.”

More optimistic about China than a year ago

“In China you do have this copper that’s in the bonded warehouses that are off-exchanges. So depending on how that goes, depending on how these financing deals go, but when you look at the performance of the economy in China, even though there’s some slowdown, the size of the economy is growing to the extent that the somewhat lower percentages still translate into very substantial amounts of copper demand. So we are optimistic about it. We are also realistic to know that there could be changes depending on how the manage the inventories, how these financing transactions work and just how their whole activities go but we are optimistic about it. And as I said, I think in general, that market is much more optimistic about it than they were a year ago.”