Freeport-mcmoran, Inc. · NYSE:FCX
Freeport-mcmoran — Citi Investment Research 2018 Basic Materials Conference
30 slides from Freeport-mcmoran's conference presentation, Nov 27, 2018
Slide 1: 2018 Basic Materials Conference
2018 Basic Materials Conference Kathleen L. Quirk Executive Vice President & Chief Financial Officer November 27, 2018 fcx.com
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
Slide 3: FCX: Primed for Success
FCX: Primed for Success Premier Portfolio of Copper Assets Copper Arguably Most Attractive Fundamental Market Outlook Strong Margins and Cash Flows Long-lived Reserves Attractive Long-term Development Pipeline Within Existing Portfolio Geographically Diversified – 75% from Americas Exp
Slide 4: Copper Market Commentary
Copper Market Commentary Global Demand Remains Healthy tonnes $/lb • U.S. Construction & Manufacturing Positive 1,000,000 $3.30 • European Market Steady Copper Price • Large Chinese Fabricators Running High 900,000 $3.20 Utilization 800,000 $3.10 • Many FCX Customers Indicate Strong Order Books 70
Slide 5: World's Leading Copper Producers
World’s Leading Copper Producers Top 10 Copper Producers (2018e) Total Operated Production (000 t) 2,000 1,500 1,000 500 0 Source: Wood Mackenzie September 20, 2018. Rankings based on net equity ownership; e = estimate 5
Slide 6: World Class Copper Discoveries Are Extremely Rare
World Class Copper Discoveries Are Extremely Rare Recoverable Copper Reserves Million metric tons 2018e Copper Production Thousand metric tons 0 10 20 30 40 0 200 400 600 800 1000 1200 1400 Escondida - 1981 1981 Escondida - 1981 1981 Collahuasi - 1880 1880 Grasberg Complex - 1988 1988 KGHM Polish Co
Slide 7: FCX's Diversified Global Footprint
FCX’s Diversified Global Footprint Copper Copper Reserves Plus Competitive Strengths Reserves (1) Mineralized Material (1) Global Leadership Position North America North America Operate All Assets – Operational 39% 43% Synergies, Shared Resources, Portfolio- Based Capital Allocation South Indone
Slide 8: 3Q18 Operations Update
3Q18 Operations Update Americas Indonesia Ongoing Focus on Productivity and Cost Strong 3Q and YTD Performance Management Mining Final Phase of Surface Mine - Pit Production and Cost Outlook Expected to Steepening Has Accelerated Metal be More Stable Following Actions in 2018 to Re-establish
Slide 9: Lone Star in Arizona Advancing
POWERED BY COPPER Lone Star in Arizona Advancing Oxide Development Provides Exposure to Major Asset (with 60 bn lbs contained copper potential*) January 30 12/31/2017 Reserves Positive Drilling Results 4.4 bn lbs of Copper 3Q18 Sulfide Intercepts Oxides Only Drill Hole meters % Cu Potential to Grow
Slide 10: PT-FI Underground Ramp-up
POWERED PT-FI Underground Ramp-up BY COPPER Contribution by Deposit Ore Milled Aggregate Metal (000’s t/d) (bn lbs Cu & mm ozs Au) Grasberg open pit DOZ Big Gossan DMLZ Grasberg BC 215 2.7 176 161 80K t/d 1.8 1.9 1.8 113 1.7 105 58K t/d 1.2 103K t/d 25K t/d 64K t/d 30K t/d 2018e 2019e 2020e 2021e 20
Slide 11: De-risking a World-Class Asset - Win/Win Partnership
De-risking a World-Class Asset - “Win/Win” Partnership With Long-term Stability Grasberg Copper Reserves Enhanced Alignment of Interests (bns of lbs) • ~51%/49% Partnership with Indonesian Government SOE 38.8 FCX Equity Share Extension of Long-term Operating Rights 25.1 22.8 • Rights Through 204
Slide 12: Grasberg Block Cave – Key Milestones
POWERED BY COPPER Grasberg Block Cave – Key Milestones Reserves GBC Service Shaft YE 2017 Completion Chute of Conveyor Transfer Galleries 355 meters 963mm t @ 1.01% Cu & 0.72 g/t Au Hoisting Level Completed to Date +241 km of Development Batch Level Mine Access Service Shaft Extraction Level
Slide 13: 2018e Outlook
2018e Outlook* Copper: 3.8 Billion lbs. Sales Gold: 2.45 Million ozs. Outlook Molybdenum: 95 Million lbs. Unit Cost Site Production & Delivery: $1.75/lb of Copper After By-product Credits: $1.06/lb(1) (4Q18e: $1.45/lb) ~$4.2 Billion (@ $2.85/lb Copper for 4Q18e, Including Operating ~$500
Slide 14: Transition Year
Sales Profile Copper Sales (billion lbs) Gold Sales (million ozs) 4 3.9 3 3.7 3.8 2.45 3.3 2 1.6 1.45 3 1 0.75 0 2017 2018e 2019e 2020e - 2 2022e AVG Transition Year Note: Consolidated gold sales include 144k ozs in 2017, 228k ozs in 2018e, 70k ozs in 2019e, ~135k ozs per year for 2020e-2022e for no
Slide 15: EBITDA and Cash Flow at Various Copper Prices
EBITDA and Cash Flow at Various Copper Prices (US$ billions) Average EBITDA ($1,200/oz Gold, $12/lb Molybdenum) $10 $8 $6 $4 Transition Yrs $2 Average Average ’19e/’20e ’21e/’22e $0 Cu $3.00/lb Cu $3.25/lb Cu $3.50/lb Average Operating Cash Flow Excludes Working Capital Changes ($1,200/oz Gold, $12/
Slide 16: Sensitivities
Sensitivities (US$ millions) Operating 2019e - 2020e Change EBITDA Cash Flow Copper: +/- $0.10/lb $325 $245 Molybdenum: +/- $1.00/lb $80 $75 Gold: +/- $50/ounce $40 $20 Currencies: (1) +/- 10% $165 $115 2021e - 2022e Change Copper: +/- $0.10/lb $400 $325 Molybdenum: +/- $1.00/lb $85 $80 Gold: +/- $5
Slide 17: Capital Expenditures
Capital Expenditures (US$ billions) $2.3 $2.0 $1.4 $1.3* $1.2* Major Mining Projects $0.9 $0.8 $1.0 Other Mining $0.5 2017 2018e 2019e * Major mining projects include CAPEX associated with Grasberg underground development ($0.8 bn per year in 2018e and 2019e) and Lone Star ($0.24 bn in 2018e and $0.
Slide 18: Financial Policy
Financial Policy Net Debt at 9/30/18: $6.6 Bn* • LTM Leverage Ratio: 0.8x Balanced Approach Significant Deleveraging Over Last Two Years Positive Market to Enable Enhanced Returns to Shareholders Disciplined Approach to Investing in Attractive Growth Projects Board Reinstated Quarterly Cas
Slide 19: Reference Slides
Reference Slides
Slide 20: Financial Highlights
Financial Highlights Sales Data 3Q18 9-mos 2018 Copper Consolidated Volumes (mm lbs) 1,044 3,026 Average Realization (per lb) $2.80 $2.96 Site Production & Delivery Costs (1) (per lb) $1.73 $1.70 Unit Net Cash Costs (1) (per lb) $0.93 $0.95 Gold Consolidated Volumes (000’s ozs) 837 2,123 Average Rea
Slide 21: 3Q18 Mining Operating Summary
3Q18 Mining Operating Summary North South 3Q18 Unit Production Costs (per lb of Cu) America America Indonesia Consolidated Cash Unit Costs (Credits) Site Production & Delivery, excluding adjustments $1.98 $1.84(1) $1.40 $1.73 (1) By-Product Credits (0.26) (0.23) (2.72) (1.12) Treatment Charges 0.10
Slide 22: 2018e Operating Estimates
2018e Operating Estimates North South 2018e Unit Production Costs (per lb of Cu) America America Indonesia Consolidated Cash Unit Costs (1) Site Production & Delivery (2) $1.92 $1.78 (3) $1.50 $1.75 (3) By-product Credits (0.25) (0.25) (2.66) (0.98) Treatment Charges 0.11 0.19 0.26 0.18 Royalties &
Slide 23: 2018e Quarterly Sales
2018e Quarterly Sales Copper Sales (million lbs) Gold Sales (thousand ozs) 1,200 1000 837 750 676 1,044 610 993 989 500 330 900 250 790 0 1Q18 2Q18 3Q18 4Q18e Note: Consolidated gold sales include approximately 57k ozs in 1Q18, 63k ozs 600 in 2Q18, 78k ozs in 3Q18 and 30k ozs in 4Q18e for noncontrol
Slide 24: 9/27/18 Definitive PT-FI Divestment Agreement
POWERED BY COPPER 9/27/18 Definitive PT-FI Divestment Agreement PT Inalum (an Indonesian SOE) and Provincial/Local Government to Acquire: • PT Indocopper Investama (PT-II) Shares Owned by FCX for $350 mm Cash (5.6% Interest After 2022) • Rio Tinto JV Interests for $3.5 bn Cash (40% After 2022) P
Slide 25: PT-FI Mine Plan
PT-FI Mine Plan PT-FI’s Share (Net of Rio Tinto) of Metal Sales, 2017-2022e 2018e – 2022e Total: 5.3 billion lbs copper 2018e – 2022e Total: 7.6 million ozs gold PT-FI Share Annual Average: 1.06 billion lbs PT-FI Share Annual Average: 1.5 million ozs Copper, billion lbs Gold, million ozs 2.44 1.9 1.
Slide 26: Grasberg Mining District
Grasberg Mining District PT-FI History & of Block Caving 1980’s r GBT b Grasberg GBT (depleted) Deplete open pit 1990’s IOZ IOZ bl Deplete DMLZ (depleted) 2000’s DOZ DOZ b (operating) Operati DOZ • DM DMLZ Start Grasberg Future • Gra In de Block Cave Kucing Ertsberg East • Kuc Futu 1980’s Liar Amole
Slide 27: FCX Debt Maturities as of 9/30/18
FCX Debt Maturities as of 9/30/18 (US$ billions) $8 Total Debt & Cash at 9/30/18 Actual FCX Revolver $ - Senior Notes 9.9 $6 Cerro Verde Credit Facility 1.2 Total Debt $11.1 Consolidated Cash $ 4.6 $4 $2.9 $2.7 $2.4 CV Non- $2 recourse $1.3 5.40% & $1.0 5.45% CV Non- $0.8 Sr. Notes recourse 3.875% &
Slide 28: Adjusted EBITDA Reconciliation
Adjusted EBITDA Reconciliation (in millions) LTM Ended 3Q18 9/30/18 Net Income Attributable to Common Stock – Continuing Operations $ 560 $3,161 Interest expense, net 143 604 Income tax provision 522 1,679 Depreciation, depletion and amortization 458 1,808 Net gain on sales of assets (70) (141) Accr
Slide 29: 3Q18 Copper Realization & 4Q18 Guidance
POWERED BY COPPER 3Q18 Copper Realization & 4Q18 Guidance 3Q18 LME Average $2.77/lb Copper Price 3-Mo. Fwd Price for Copper $2.84/lb at the End of September $2.80/lb* FCX 3Q18 Consolidated Copper Price Realization (Generally, 50/50 Weight of Qtrly Avg and 3-mo Forward Price at End of Period) FCX 3Q1
Slide 30: 2018e Consolidated Effective Tax Rate
POWERED BY COPPER 2018e Consolidated Effective Tax Rate Projected Quarterly Rate Annual Rate* 1Q18 38% 38% 2Q18 33% 36% 3Q18e 44% 38% 4Q18e ~32% ~37% NOTE: For financial statement purposes only; does not reflect cash taxes. * The consolidated effective income tax rate is a function of the combined e
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