Freeport-McMoRan Inc (FCX) Q1 2024 Earnings Call Transcript Highlights: Strong Performance …

  • Adjusted EBITDA: $2.5 billion

  • Operating Cash Flows: $1.9 billion

  • Average Copper Price: $3.94 per pound

  • Capital Expenditures: $800 million (excluding $0.5 billion for Indonesian smelter project)

  • Net Debt: Reduced during the quarter

  • Net Unit Cash Costs: Better than forecast, with a net credit of $0.12 per pound in Indonesia

  • Copper Sales: Exceeded guidance for Q1

  • Gold Sales: In line with estimates

Release Date: April 23, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Q & A Highlights

Q: Liam Fitzpatrick from Deutsche Bank. The first question is just on your U.S. assets. You’ve been talking about for some time, the productivity improvements that you’re targeting. Could you give us a bit more color on when we should expect some of this to be visible in the numbers? And what sort of change are you hoping for? Is this just to do better than inflation? Or could there be more of a step change at some stage? A: Kathleen Lynne Quirk – Freeport-McMoRan Inc. – President & Director: In terms of the U.S. operations, what we’re faced with right now is very low ore grades. The lowest ore grades we’ve had in — since 2010. So that is structurally a challenge for us. Over the last couple of years, we’ve also been dealing with labor shortages in the U.S. and needing to make sure that our people are trained and can gain the efficiencies that we’ve had in 2019 before COVID.

Q: Christopher LaFemina – Jefferies LLC, Research Division – Senior Equity Research Analyst: First, I just wanted to say congratulations on the operating performance in Indonesia. That has been very impressive. And once again, this past quarter, pretty incredible what you’ve done there. So congrats on that. And then secondly, I just wanted to ask a follow-up on the trends in cost in the U.S. So if you did, what, 51 million pounds of leach — production from that new leaching initiatives in the U.S. in the first quarter. And if we assume that’s around $1 a pound, that would imply that the rest of your production in the U.S. is around $3.35, $3.40 a pound for net cash cost. And then if we add to that sustaining CapEx, it’s probably something close to $4 a pound free cash flow breakeven. So my first question is, is that right? Are you at around $4 a pound free cash flow breakeven in the U.S. if you exclude the benefit of the new leaching initiatives? A: Kathleen Lynne Quirk – Freeport-McMoRan Inc. – President & Director: In terms of the leaching initiatives, when you look at our reported cash costs, you have to consider that until we add additional pounds to the stockpiles. What we’re recording as our average cost is reflective of our average cost of per unit and stockpiles. So as we gain more confidence, the denominator will drop, so we’re pulling those pounds out now out of the stockpiles are reflecting like a $3 average cost. When in reality, the incremental cost is closer to $1.

Q: Michael Stephan Dudas – Vertical Research Partners, LLC – Partner: I think you mentioned in response to the question about operating costs and cost moderation. So maybe you can touch a little bit more on what you’re seeing on the ground more specifically in your North America and South American mines on cost improvement, what your expectations are versus what it might have been a few months ago? A: Kathleen Lynne Quirk – Freeport-McMoRan Inc. – President & Director: Yes. I think those issues have moderated a bunch, and we’re getting more into a stable situation, while it’s higher than it has been. It is more stable. For instance, when we were going out for bids for things a year or two ago, you might get one bidder on a project. And now things are opening up some more for us. So on that part, I think it’s stabilized now. We’ll continue to test it.

Q: Bennett Moore – JPMorgan Chase & Co, Research Division – Analyst: It’s actually Bennett on for Bill, this morning. If I could, I wanted to ask what, if any, is the company’s current dialogue with the new leadership in Indonesia and how you see that relationship developing over time? A: Kathleen Lynne Quirk – Freeport-McMoRan Inc. – President & Director: Well, the transition doesn’t take place until October. And we’re continuing to work with the existing administration. We’ve got some matters that we’re working together on with respect to the concentrate license that we talked about earlier as well as the IUPK extension and so we’re continuing to work with the current administration on these matters.

Q: Lawson Winder – BofA Securities, Research Division – VP & Research Analyst: Maybe just on Cerro Verde, if I could. Is there still a pathway to consistently exceeding well over 400,000 tons per day at that asset? A: Kathleen Lynne Quirk – Freeport-McMoRan Inc. – President & Director: Absolutely.

Q: Martin Whittier Malloy – Johnson Rice & Company, L.L.C., Research Division – Director of Research: I wanted to ask, with your leaching technology, does that give you a competitive advantage and maybe looking at acquisition opportunities? A: Kathleen Lynne Quirk – Freeport-McMoRan Inc. – President & Director: Well, we’re focused on — I mean, we’ve got almost 40 billion pounds in our own in our inventory. And that doesn’t include some really old areas where we’re not active. But yes, I mean, to answer your question, it does give us some interest in some things that may have this opportunity to be able to apply our know-how to it. But we’re really focused on our own organic situation.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

Matt Earle

Matthew Earle is the Founder of MiningFeeds. In 2005, Matt founded MiningNerds.com to provide data and information to the mining investment community. This site was merged with Highgrade Review to form MiningFeeds. Matt has a B.Sc. degree with a minor in geology from the University of Toronto.

By Matt Earle

Matthew Earle is the Founder of MiningFeeds. In 2005, Matt founded MiningNerds.com to provide data and information to the mining investment community. This site was merged with Highgrade Review to form MiningFeeds. Matt has a B.Sc. degree with a minor in geology from the University of Toronto.

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