Freeport McMoran 3Q13 Earnings Call Notes

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. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“The quarter reflects a significant contribution from our oil and gas business and that’s very exciting.

“China remains, of course, the important global user of copper and the source of copper growth globally. The demand in China during this year has been stronger than many people expected. The Chinese are confident about their economy going forward, and all our indications from our business there is optimistic. What we’re also seeing is improvement in the U.S. demand in sectors that are important to copper usage.

Construction, both residential and commercial, automobile activity is very positive and despite all of the political uncertainties associated with economy, our business and our customers’ business in the U.S. in the current conditions is progressing well. And we’re seeing some initial signs of improvement in Europe through some demand activities”

“you’ve got a lot of market swings in WTI that we are not experiencing because of our location of our reserves being on the coastal areas of the United States and the Gulf of Mexico where we are pricing at our California spot or LLS off [ph] the Brent pricing. And as you hear more and more about the increases of production coming out of Bakken, the Permian and so forth, they’re really going to have widening differentials in the Mid-Con for the United States. And our projects won’t be — have to suffer those differential widenings and therefore we will be able to maintain the margins that Richard and Kathleen alluded to in their talks and so forth”

“as a company, we don’t run our business on any sort of particular predictions on short term movements. You know I read the same analyst reports that are out there. I was at LME. And I was sort of struck by the two different views at LME, a lot of people with investors and who follow the investor community were really pessimistic about metals in general and about copper because of this expectations of supply coming on stream, then as I talk to end users and customers and traders and other company CEOs, you know, the theme that came back was, hey, demand is stronger in 2013 than we expected, premiums are strong. When you get and look at a number of these projects, you know, while Escondido and Grasberg are performing well, the timing of when other projects come on is uncertain, that’s been a feature of the industry forever. So, when I look at the most recent book on CRU outlooks, I see relatively small surpluses that could swing one way or another depending on what happens.

So, I think the story is, is even as the situation of where there’s as much concerns about the global economic market, about new supplies and we see a copper market in fundamental that’s relatively tight. We’re prepared for whatever comes down the pike. I mean, we have a flexible set of assets that allows us to make a lot of money if prices are strong. And as we’ve shown in the past we can adjust to deal with prices that are weak, if that is something we have to deal with. My point is, that the longer-range story about the copper business is intact. Demand from global development and global economic growth over time will be strong and supplies will continue to be challenged.”

“you’ve got a company here with a 100 year copper reserve, or 50 year reserve, 50 year oil reserve and we are trading at 5 times or something at that.”

Freeport McMoRan 2Q13 Earnings Call Notes

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. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“within China, fundamental copper demand is really strong. It’s growing at 8% to 10% a year. The downstream business is strong, scrap is short, premiums are up. I’ll just refer you to the analysts that follow the business, the — that follow the business and you can substantiate that. But the prices are what they are because of markets. Sentiment in Europe remains weak.”

“We did have this horrific accident that we talked about earlier on May 14, where we had a tunnel collapse in a training facility, and we had fatalities and injuries. This wasn’t really a mining accident, it was apart from our mining operations. It was an incredibly horrific convergence of events that came together because of the geology of the rock and the influence of water and air on our ground support facilities, and unfortunately just happened just as we were having this training meeting. And then it was terrible, and all of our organization has responded in a caring and professional way about it.”

“In the quarter, we lost roughly 125 million pounds of copper and 125,000 ounces of gold. The full year impact will be greater than that. We estimate 230 million pounds of copper and 250,000 ounces of gold. That resource is still there. I mean, it’s not going anywhere. We’ll produce it in the future. But the impact for the year reflects a couple of factors: One is the time it takes to ramp up underground to get back to full production levels; plus, as you’ll recall in the first quarter, we talked about how we were going to assess high-grade ore at the end of the year under our mine plans. Now some of that higher-grade ore will be pushed out into future years.”

“…Looking at the Oil & Gas development activities first…”

“Total debt, net of cash, and most of that cash will be used to fund capital expenditures going forward, is $17 billion. We have this commitment by 2016 to reduce this debt roughly to $12 billion level through strong — using our cash flows, using capital operating cost discipline. We have a large resource base. We’ve started a divestiture process. We’re considering other opportunities. We’re going to respond to market conditions. That’s the mandate of our board, and we have a number of ways to achieve that even if we have to face a period of low copper prices.”

“In our business, you need to look at Indonesia as one set of assets, Africa as one set of assets with tremendous growth opportunities, very high grades. And then in Americas, kind of the standard of what the global copper industry has available to it is resources that have relatively low grades. The thing that we have as a benefit in relation to the rest of the industry is ours are brownfield expansions. And the projects that are challenging are greenfield expansion with low grades and big infrastructure development, lots of pre-stripping and those sorts of things, which we don’t have with our operations. So we think with the positive copper movement going forward for a very long period of time, we will have a series of growth opportunities that take time, take permitting, take resources. That’s why copper prices are above and likely to continue to be above production cost.”

Freeport-McMoran 1Q13 Earnings Call Notes

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. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“Like all of you, we’ve been focused on the markets over the past two weeks.”

“As we look at the environment today, we walked away from the meetings in Chile with a lot of confidence in the long-term copper markets based on the fundamentals of the world’s requirements for copper longer term and continuing challenges of maintaining supplies from existing mines and also of developing new sources of supply.”

“China, of course, remains the important demand driver…The government of China continues to express confidence in meeting their targeted GNP growth for the year and…we’re certainly not seeing any diminishment in demand for our copper concentrates that we ship there and our other products. Chinese growth is likely to drop over time, because the growth levels in the past were extraordinarily high and unsustainable. But the economy has grown so much that when you look at the demand for physical copper based on a larger economy, even with slower growth rates in relation to what the industry can produce longer term, it still indicates a very positive outlook for copper longer term.”

“The market will work. Over time, the lower price will encourage consumption, the inventories will work off.”

“In connection with [our acquisitions], we completed $10.5 billion in financings during the first quarter. We sold $6.5 billion of senior notes in four tranches in March and also entered into an agreement for a $4 billion bank term loan which will be funded at closing of the transaction. The weighted average interest rate of these financings approximates 3.1%”

“we are taking on significant debt, as a result of this, the closing will have roughly $20 billion of debt and we’ll have $4 billion of cash”

“At this point, we have not made any decisions to sell the assets.”

“this mining is a tough, tough business”