Freeport-McMoRan, Inc. · NYSE:FCX

Freeport-McMoRan — Q2 2015 Earnings Presentation

43 slides from Freeport-McMoRan's earnings presentation, Jul 23, 2015

  1. Slide 1: 2nd Quarter 2015 Earnings Conference Call

    2nd Quarter 2015 Earnings Conference Call July 23, 2015

  2. Slide 2: Cautionary Statement Regarding Forward-Looking Statements

    Cautionary Statement Regarding Forward-Looking Statements This presentation contains forward-looking statements in which FCX discusses its potential future performance. Forward-looking statements are all statements other than statements of historical facts, such as projections or expectations relati

  3. Slide 3: 2Q15 Highlights

    2Q15 Highlights Strong Operating & Cost Performance in Mining and O&G Mining Oil & Gas  Morenci Project at Full Rates  Lucius Production Reached Full Capacity  Cerro Verde More Than 87% Complete  Positive Drilling Results at Holstein Deep, QV, KO and Horn Mtn. Updip  Improving Operating Trends

  4. Slide 4: Financial Highlights

    Financial Highlights Sales Data 2Q15 1H15 Copper Consolidated Volumes (mm lbs) 964 1,924 Average Realized Prices (per lb) $2.71 $2.70 Site Production & Delivery Costs (per lb) $1.85 $1.89 Unit Net Cash Costs (per lb) $1.50 $1.57 Gold Consolidated Volumes (000’s ozs) 352 615 Average Realized Prices (

  5. Slide 5: Copper Market Commentary

    Copper Market Commentary  Global Economic Uncertainty and Stronger U.S. Dollar  China Economy Slowing - Requirements for Copper Growing in Absolute Terms  U.S. Recovery Continues At Moderate Rate  Gradual Recovery in Europe  Near-term Price Uncertainty with Bullish Long-term Fundamentals - Cont

  6. Slide 6: World Class Copper Discoveries Are Extremely Rare

    World Class Copper Discoveries Are Extremely Rare Recoverable Copper Reserves 2014e Copper Production Million metric tons Thousand metric tons 0 5 10 15 20 25 30 35 0 200 400 600 800 1000 1200 1400 1981 Escondida - 1981 Escondida - 1981 1880 Collahuasi - 1880 Chuquicamata - 1910 1988 Grasberg Comple

  7. Slide 7: Copper Markets – Long-term Fundamentals Support Positive Outlook

    Copper Markets – Long-term Fundamentals Support Positive Outlook Total Copper Consumption 40  Assuming 2.4% Annual Global +7.6 mm 27% Growth* Over Next 10 Years, Copper 30 +5.2 mm Cu in mm tonnes 23% Market Expected to Grow by +7.6 mm Tonnes (27%) 20 Mature Markets 10 Emerging  Over Same Period, P

  8. Slide 8: 2Q 2015 Mining Operating Summary

    2Q 2015 Mining Operating Summary 2Q15 Unit Production Costs Cash Unit Costs North South (per pound of copper) America America Indonesia Africa Consolidated Site Production & Delivery $1.78 $1.77 $2.26 $1.54 $1.85 By-Product Credits (0.16) (0.04) (2.13) (0.53) (0.59) Treatment Charges 0.12 0.17 0.32

  9. Slide 9: Strong Project Execution

    Strong Project Execution Capital Incremental First Copper/ Construction Costs Copper Achieve Full Commenced ($ bln) (mm lbs/yr) Rates Tenke Fungurume 2Q11 $0.9 150 1Q13/1Q13 Phase II Expansion Morenci 1Q12 $1.6 225 2Q14/2Q15 Mill Expansion Cerro Verde 1Q13 $4.6* 600 4Q15e/3Q16e Mill Expansion ~1 bil

  10. Slide 10: Cerro Verde Mill Expansion

    Cerro Verde Mill Expansion View from Screening Plant to HPGR & Secondary Crushing Plant  Detailed engineering & major procurement activities complete  To become world’s largest concentrating facility  Construction advancing on schedule & more than 87% complete  Completion expected in late 2015 

  11. Slide 11: Positioned for Margin & Free Cash Flow Growth

    Positioned for Margin & Free Cash Flow Growth Growing Copper Sales Profile Declining Unit Net Cash Cost Profile (millions of lbs) $2.00 ($ per lb) 1,500 $1.64 $1.50 $1.50 $1.49 1,350 1,250 ~$1.25 1,225 $1.00 1,000 1,035 960 964 $0.50 750 $0.00 1Q15 2Q15 2H15e * 2016e * 500 Declining Mining CAPEX Pro

  12. Slide 12: Indonesia Update

    Indonesia Update  Progressing Discussions with Government on Long-Term Operating Rights − PT-FI Requirement for Assurance of Legal and Fiscal Terms to Support Major Investments • GOI & PT-FI Focused on Developing a Mutually Satisfactory Solution − All Rights Under COW to Continue Until Agreed Amend

  13. Slide 13: Grasberg BC & DMLZ Underground Mine Development

    Grasberg BC & DMLZ Underground Mine Development • Completed development of access to DMLZ Crusher underground ore bodies • Expect DMLZ start-up in late 2015 & Grasberg BC in 2018 • Key development activities include work on ore flow systems & Grasberg BC shaft • Development capital* of $3.3 bln spen

  14. Slide 14: Significant Copper Resources & Potential

    Significant Copper Resources & Potential billion lbs of copper Future Resource Indonesia 104 Development Opportunities America America Reserves* South Africa North  El Abra Mineralized  North America Sulfides Material**  Tenke (contained Cu) Reserves & Mineralized Reserves 207 Material Potential*

  15. Slide 15: 2Q15 Oil & Gas Highlights

    2Q15 Oil & Gas Highlights Growth Momentum in Deepwater GOM  Principally Focused on Lower Risk Drilling and Tieback Opportunities  Drilling Success Since 2014: 10 for 10 on 100%-owned Wells in Producing Fields ̶ 3 Placed on Production in 2014/1H 2015 ̶ 4 High Impact Tieback Wells to Come On-line Ov

  16. Slide 16: Advancing Deepwater GOM Subsea Tieback Development Strategy

    Advancing Deepwater GOM Subsea Tieback Development Strategy Drilled 10 Successful Wells Since 2014 3 Placed on Production; Others to Support Near-term Growth Holstein – 100% Marlin – 100% Horn Mtn. – 100%  Logged 3rd Successful Subsalt  Initial Dorado Well Continues  Drilled Successful Tieback Mi

  17. Slide 17: Benefits of FM O&G's Subsea Tieback Strategy

    Benefits of FM O&G’s Subsea Tieback Strategy  Lower Risk Drilling Near Existing Production Facilities Subsea Tiebacks Enhance Cycle Time  Existing Infrastructure Provides Prospect Estimated TD to 1st Oil Competitive Advantage Dorado ~3 Months ̶ Allows for Accelerated Development Holstein Deep ~12-

  18. Slide 18: Lucius & Heidelberg – Deepwater GOM Development Projects

    Lucius & Heidelberg – Deepwater GOM Development Projects Lucius  Achieved First Oil in January 2015  Reached Capacity of 80 MBbl/d in 2Q 2015 ̶ FM O&G Share of 2Q Sales: 19 MBOE/d  6 Subsea Wells Tied Back to Truss Spar  FM O&G 25.1% WI Lucius Spar  Water Depth: 7,200’ Heidelberg  Designed as

  19. Slide 19: Near-term Growth

    Near-term Growth (MBOE/d) * Reflects Potential to Accelerate Certain Drilling and Completion Activities and Upside in Initial Flow Rates. ~215 ~175 143 Potential * 173 151 2015e 2016e 2017e 2016e/2017e Projected to Benefit from New Production:  Holstein Deep  Horn Mtn. (KO/QV)  Heidelberg e = est

  20. Slide 20: FM O&G Annual Indicative EBITDA at Various Production Rates

    FM O&G Annual Indicative EBITDA at Various Production Rates, Excluding Hedging ($ in billions) $3.3 $2.8 $2.7 $2.3 $2.3 $2.2 $1.8 $1.9 $1.8 $1.5 $1.4 $1.1 Production Rate 150 175 200 225 150 175 200 225 150 175 200 225 (MBOE/d) $60/bbl Brent $70/bbl Brent $80/bbl Brent * EBITDA equals operating inco

  21. Slide 21: Atwater Valley Area to Provide Longer Term Production Growth

    Atwater Valley Area to Provide Longer Term Production Growth Vito Discovery  Large, Deep Subsalt Miocene Discovery Made in 2009  FM O&G Acquired Rights in 2014  Development Options are Under Evaluation  Operator Expected to Propose Sanctioning in 2016  FM O&G 18.67% WI Deep Sleep Drillship Powe

  22. Slide 22: Attractive Deepwater GOM Inventory in Strategic Focus Areas

    Attractive Deepwater GOM Inventory in Strategic Focus Areas 16 Prospects Identified by Seismic Imaging; Includes 154 Undeveloped Well Locations Projected Spud Year 2015 2016 2017 2018+ Horn Mtn. (MC Area) Horn Mtn. (MC Area) Horn Mtn. (MC Area) Horn Mtn. (MC Area)  Horn Mtn. Deep  Orange  Rose 

  23. Slide 23: 2015e Outlook

    2015e Outlook Sales Outlook Unit Cost  Copper: 4.2 Billion lbs.  $1.53/lb(2) of Copper  Gold: 1.3 Million ozs.  $19/BOE  Molybdenum: 93 Million lbs.  Oil Equivalents(1): 52.3 MMBOE (~67% Oil) Operating Cash Flows (3) Capital Expenditures  ~$3.6 Billion (@$2.50/lb Copper for  $6.3 Billion Rem

  24. Slide 24: Sales Profile

    Sales Profile Copper Sales (billion lbs) Gold Sales (million ozs) 3 6 2 2.4 1.9 5.4 1 1.25 1.3 5.0 0 2014 2015e 2016e 2017e 4 4.2 Note: Consolidated gold sales include 123k ozs in 2014, 120k ozs in 2015e, 3.9 175k ozs in 2016e and 220k ozs in 2017e for noncontrolling interest. 2014 included 67k ozs

  25. Slide 25: 2015e Quarterly Sales

    2015e Quarterly Sales Gold Sales (thousand ozs) Copper Sales (million lbs) 400 1,250 300 352 315 380 1,225 200 263 100 1,000 1,035 0 960 964 1Q15 2Q15 3Q15e 4Q15e Note: Consolidated gold sales include approximately 24k ozs in 1Q15, 33k ozs in 2Q15, 30k ozs in 3Q15e and 33k ozs in 4Q15e for noncontro

  26. Slide 26: 2015e Operating Estimates

    2015e Operating Estimates 2015e Unit Production Costs (per pound of copper) North South America America Indonesia Africa Consolidated Cash Unit Costs (1) Site Production & Delivery (2) $1.74 $1.61 $2.29 $1.58 $1.81 By-product Credits (0.14) (0.06) (1.79) (0.52) (0.50) Treatment Charges 0.12 0.19 0.3

  27. Slide 27: EBITDA and Cash Flow at Various Copper Prices

    EBITDA and Cash Flow at Various Copper Prices Average EBITDA ($1,200 Gold, $8 Molybdenum & $70 Oil) $15 (US$ billions) $10 $5 2016e/2017e Average $0 Cu $2.50/lb Cu $3.00/lb Cu $3.50/lb Average Operating Cash Flow (excluding Working Capital changes) ($1,200 Gold, $8 Molybdenum & $70 Oil) $12 (US$ bil

  28. Slide 28: Sensitivities (US$ millions)

    Sensitivities (US$ millions) 2016e/2017e Operating Change EBITDA Cash Flow Copper: +/- $0.10/lb $500 $350 Molybdenum: +/- $1.00/lb $90 $70 Gold: +/- $50/ounce $100 $60 Oil Sales: +/- $5/bbl(1) $215 $170 Oil Sales Net of Diesel Costs:(1,2) +/- $5/bbl $170 $140 Natural Gas: +/- $0.50/Mcf $32 $26 Curre

  29. Slide 29: Capital Expenditures

    Capital Expenditures (1) (US$ billions) $8 $7.2 $6.3 $6 $5.6 Oil & Gas $5.1 3.2 2.8 $4 2.9 Major 2.9 Projects TOTAL 2.5 (2) $2 2.9 MINING 1.5 3.5 1.2 4.0 2.7 2.2 Other Mining 1.0 1.2 1.0 1.1 $0 2014 2015e 2016e 2017e (1) Capital expenditure estimates include projects in progress. Project spending wi

  30. Slide 30: Committed to Balance Sheet Management

    Committed to Balance Sheet Management Strong Track Record  Large Resource Base with Strong Cash 6/30/2015 Balances Flows and Capital Discipline ($ in bns)  Have Taken Steps to Reduce Cost & CAPEX, Complete Asset Sales and Reduce Common Stock Dividend $20.9 $20.4  Increasing Volumes & Declining CA

  31. Slide 31: Key Priorities

    Key Priorities  Strong Balance Sheet  Manage Operations and CAPEX to Maximize Cash Flow in Weak Market Environment  Obtain O&G Funding to Accelerate Growth  Complete Near-term Mining Projects  Generate Values from Large Resource Base Strong Track Record for Execution in Challenging Market Envir

  32. Slide 32: Reference Slides

    = FREEPORT- McMoRAN ‘ie Reference Slides

  33. Slide 33: PT-FI Mine Plan

    PT-FI Mine Plan PT-FI’s Share of Metal Sales, 2015e-2022e 2015e – 2019e PT-FI Share Total: 5.6 billion lbs copper Copper, billion lbs Annual Average: 1.12 billion lbs Gold, million ozs 2015e – 2019e PT-FI Share Total: 7.6 million ozs gold Annual Average: 1.52 million ozs 2.4 1.9 1.5 1.5 1.3 1.3 1.1

  34. Slide 34: PT Freeport Indonesia

    PT Freeport Indonesia Grasberg Minerals District Life-of-Mine Production Sequencing* Plan View Grasberg Open Pit 179mm mt (includes stockpiled ore) 0.96% Cu & 1.06 g/t Au 146mm mt Grasberg & DOZ 0.54% Cu & 0.69 g/t Au Kucing Liar Grasberg Big Gossan 54mm mt open pit 2.26% Cu & 0.99 g/t Au DMLZ 472mm

  35. Slide 35: Quarterly Oil & Gas Operating Summary

    Quarterly Oil & Gas Operating Summary 2Q 2015 Oil & Gas Margins by Region Haynesville/ Operating Margin Madden/ California Other GOM Consolidated Realized Revenue per BOE $48.30 $16.15 $47.82 $50.04 Cash Production Costs per BOE 27.13 13.55 16.98 19.04 Cash Operating Margin per BOE $21.17 $2.60 $30.

  36. Slide 36: Deepwater Gulf of Mexico Focus Areas

    Deepwater Gulf of Mexico Focus Areas Louisiana \ Dorado Marlin Viosca Knoll Horn Mountain Updip King Horn Mississippi Mountain Canyon Vito KO/QV Power Nap Green Canyon Holstein Deep Deep Sleep East Breaks Garden Banks Holstein Atwater Valley Diana Heidelberg Hoover Facilities Alaminos Canyon Keathle

  37. Slide 37: Holstein Facility Holstein Deep Development

    Holstein Facility Holstein Deep Development M18 Sand Structure Phase 2  Logged 3rd Successful Subsalt Development Wells (M13) (M18) Miocene Well in July 2015 SS#2 Development  Results from 3-Well Program Well (M18) Established Sand Continuity Discovery Well Across Primary Reservoir Phase 2 Develop

  38. Slide 38: Horn Mountain Field Infill Development Program

    Horn Mountain Field Infill Development Program M2 Sand Structure HORN MOUNTAIN Mississippi Canyon 127  Cumulative Field Production 120 MMBOE  Infill Program Will Target Undrained Compartments and Attic Potential  Miocene J and M Sand Reservoirs are Part of a Regionally Extensive Turbidite Sand De

  39. Slide 39: International Exploration - Morocco

    International Exploration - Morocco Spud MZ-1 Exploration Well in May 2015; Drilling in Progress Chevron Chariot FM O&G Morocco Mazagan Permit Area Kosmos, BP Kosmos, BP Agadir Chevron Kosmos, BP Genel Cairn Cairn, Genel Genel Algeria GALP Africa Exploration Area Covers 2.2 Million Gross Acres in Wa

  40. Slide 40: 2015e Oil & Gas Operating Estimates

    2015e Oil & Gas Operating Estimates Madden & Operating Cost: $2.10/Mcfe California Haynesville Pricing: NYMEX Operating Cost: $31/bbl Gulf of Mexico Operating Cost: $15/bbl Pricing: HLS/NYMEX 2015e Oil & Gas Sales by Region California Haynesville/ GOM Madden/Other 65 38 137 107 Oil Gas Oil Gas MBOE/

  41. Slide 41: Oil & Gas Capital Expenditures

    Oil & Gas Capital Expenditures ($ in billions) 2015e 2016e Accelerated Plan DW GOM Near-term Development California/ ~75% ~75% & Tiebacks Other ~15% ~15% ~10% ~75% ~10% ~10% ~15% Longer-term Growth in DW GOM $2.8 Bn $2.9 Bn $3.8 Bn NOTE: Amounts include capitalized interest and G&A e = estimate. See

  42. Slide 42: Adjusted EBITDA Reconciliation

    Adjusted EBITDA Reconciliation (in millions) 12-Month Q2 2015 Trailing Net loss attributable to common stock $(1,851) $(6,625) Interest expense, net 149 600 Income tax benefit (687) (1,743) Depreciation, depletion and amortization 890 3,713 Impairment of oil and gas properties and goodwill 2,686 11,

  43. Slide 43: O&G Adjusted EBITDA Reconciliation

    O&G Adjusted EBITDA Reconciliation (in millions) Q1 2015 Q2 2015 Net loss before income taxes $(3,517) $(2,983) Interest expense, net 38 40 Depreciation, depletion and amortization 530 485 Impairment of oil and gas properties 3,104 2,686 Net noncash MTM losses on oil and gas derivative contracts 48

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