Freeport-McMoRan, Inc. · NYSE:FCX
Freeport-McMoRan — Q2 2018 Earnings Presentation
31 slides from Freeport-McMoRan's earnings presentation, Jul 25, 2018
Slide 1: 2nd Quarter 2018 Earnings Conference Call
2nd Quarter 2018 Earnings Conference Call July 25, 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: 2Q18 Highlights
2Q18 Highlights Maintained Focus on Productivity, Consolidated Results ($ in bn) Cost Management and Capital Discipline $2.7 Unit Net Cash Costs: $0.96/lb, 19% Below 2Q17 Cash Flows Exceeded CAPEX $1.3 by ~$0.8 bn in 2Q & ~$1.8 bn YTD $0.9* $0.5* Repaid $2.0 bn in debt YTD, Operating Includi
Slide 4: Copper Market Commentary
Copper Market Commentary Global Trade Issues Impacting Commodities Market Sentiment and Causing Macro Uncertainty • Copper Down 14% Since June 15th Current Copper Physical Market Broadly Balanced Globally • Exchange Stocks (LME, COMEX and Shanghai) Down ~90 kt (13%) Since June 15th Real Demand
Slide 5: Heads of Agreement – 7/12/18
Heads of Agreement – 7/12/18 POWERED BY COPPER Transaction Benefits Establishes New Long-term Partnership between FCX and Government of Indonesia Long-Term Stability for Grasberg Operations FCX Retains Current Existing Economics • Preserves FCX Share of Future Cash Flows and Net Asset Values •
Slide 6: PT-FI Operations Review
POWERED BY COPPER PT-FI Operations Review Actual Results Mine Plan Adjustments 2Q18 Mill Rate: 188 t/d Extension of Open Pit Through 1H19 • Copper Grade: 1.06% • Gold Grade: 1.77 g/t Deferred Start-up of Deep MLZ (DMLZ) • Hydraulic Fracturing Operations to Pre- 2Q18 Production Condition Cave
Slide 7: 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 2.65 173 161 80K t/d 1.8 1.9 1.8 1.7 104 106 58K t/d 1.19 103K t/d 25K t/d 64K t/d 30K t/d Cu Au Cu Au Cu Au 2018e
Slide 8: Lone Star in Arizona Advancing
POWERED BY COPPER Lone Star in Arizona Advancing 12/31/2017 Reserve: 4.4 bn lbs of Copper (Oxides Only) $850 mm Project ($113 mm incurred thru 6/30/18) • Utilizes Existing Infrastructure at Safford Commenced Pre-stripping Activities in 1Q18 Provides Exposure to Large Sulfide Deposit (60+ bn
Slide 9: Recent Lone Star Sulfide Intercepts
POWERED BY COPPER Recent Lone Star Sulfide Intercepts N 2Q18 Lone Star Intercepts Plan View LS18-283A LS18-280 Intercept Significant Intervals Drill Hole meters % Cu meters % Cu meters % Cu LS18-270 792 0.46 64 0.68 219 0.64 Extent of LS18-274 +0.30 % Cu Sulfide LS18-274 369 0.39 NA NA NA NA Based o
Slide 10: Americas Development Opportunities
Americas Development Opportunities Future Development Subject to Market Conditions U.S. • Large footprint with substantial (bns of lbs) Large footprint undeveloped sulfidewith substantial resources 257 undeveloped • Significant sulfide existing resources infrastructure Bagdad Significant existin
Slide 11: 2018e Outlook
2018e Outlook* Copper: 3.8 Billion lbs. Sales Gold: 2.4 Million ozs. Outlook Molybdenum: 95 Million lbs. Site Production & Delivery: $1.73/lb Unit Cost of Copper After By-product Credits(1): $1.04/lb (3Q18e: 95¢/lb; 4Q18e: $1.29/lb) Operating ~$4.3 Billion (@ $2.75/lb Copper for 2H18e) C
Slide 12: Sales Profile – Transition Year
Sales Profile Copper Sales (billion lbs) Gold Sales (million ozs) 4.0 4 3.8 3 3.7 2.4 3.3 2 1.6 1.45 3 1 0.75 0 2017 2018e 2019e 2020e - 2 2022e AVG Transition Year Note: Consolidated gold sales include 144k ozs in 2017, 225k ozs in 2018e, 70k ozs in 2019e, ~135k ozs per year for 2020e-2022e for non
Slide 13: EBITDA and Cash Flow at Various Copper Prices
EBITDA and Cash Flow at Various Copper Prices (US$ billions) Average EBITDA ($1,250/oz Gold, $11/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 ($1,250/oz Gold, $11/
Slide 14: Capital Expenditures
Capital Expenditures (US$ billions) $2.3 $2.0 $1.4 Major 1.1* 1.3* Mining Projects 0.9 Other Mining 0.9 1.0 0.5 2017 2018e 2019e * Major mining projects include CAPEX associated with Grasberg Underground development ($0.75 bn per year in 2018e and 2019e) and Lone Star ($0.22 bn in 2018e and $0.37 bn
Slide 15: Financial Policy
Financial Policy Net Debt at 6/30/18: $7.3 Bn* • LTM Leverage Ratio: 0.9x Balanced Approach Significant Deleveraging Over Last Two Years Positive Market to Enable Further Debt Reduction & Enhanced Returns to Shareholders Disciplined Approach to Investing in Attractive Growth Projects Board
Slide 16: Reference Slides
Reference Slides
Slide 17: Financial Highlights
Financial Highlights Sales Data 2Q18 1H18 Copper Consolidated Volumes (mm lbs) 989 1,982 Average Realization (per lb) $3.08 $3.10 Site Production & Delivery Costs (per lb) $1.69 $1.68 Unit Net Cash Costs (per lb) $0.96 $0.97 Gold Consolidated Volumes (000’s ozs) 676 1,286 Average Realization (per oz
Slide 18: 2Q 2018 Mining Operating Summary
2Q 2018 Mining Operating Summary North South 2Q18 Unit Production Costs (per lb of Cu) America America Indonesia Consolidated Cash Unit Costs (Credits) Site Production & Delivery, excluding adjustments $1.94 $1.77 $1.33 $1.69 By-Product Credits (0.25) (0.22) (2.76) (1.04) Treatment Charges 0.10 0.18
Slide 19: 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) $1.91 $1.70 $1.53 $1.73 By-product Credits (0.24) (0.23) (2.72) (0.98) Treatment Charges 0.11 0.19 0.26 0.18 Royalties & Export D
Slide 20: 2018e Quarterly Sales
2018e Quarterly Sales Copper Sales (million lbs) Gold Sales (thousand ozs) 1,200 750 676 700 610 993 989 500 430 970 900 865 250 0 1Q18 2Q18 3Q18e 4Q18e Note: Consolidated gold sales include approximately 57k ozs in 1Q18, 63k ozs 600 in 2Q18, 65k ozs in 3Q18e and 40k ozs in 4Q18e for noncontrolling
Slide 21: Heads of Agreement – 7/12/18
POWERED BY COPPER Heads of Agreement – 7/12/18 Inalum (an Indonesian SOE) and Provincial/Local Government to Acquire: • Rio Tinto JV Interests for $3.5 Billion Cash • PT Indocopper Investama (PT-II) Shares Owned by FCX for $350 Million Cash Inalum to Contribute JV Interests to PT-FI in Exchange
Slide 22: PT-FI Mine Plan
PT-FI Mine Plan PT-FI’s Share of Metal Sales, 2017-2022e 2018e – 2022e Total: 5.3 billion lbs copper 2018e – 2022e Total: 7.6 million ozs gold PT-FI Share Annual Average: 1.06 billion lbs PT-FI Share Annual Average: 1.5 million ozs Copper, billion lbs Gold, million ozs 2.4 1.9 1.54 1.6 1.4 1.4 1.15
Slide 23: Grasberg Mining District
Grasberg Mining District PT-FI History & of Block Caving 1980’s r GBT b Grasberg GBT (depleted) Deplete open pit 1990’s IOZ IOZ bl Deplete DMLZ (depleted) 2000’s DOZ DOZ b (operating) Operati DOZ • DM DMLZ Start Grasberg Future • Gra In de Block Cave Kucing Ertsberg East • Kuc Futu 1980’s Liar Amole
Slide 24: Grasberg Open Pit Extension
POWERED BY COPPER Grasberg Open Pit Extension Grasberg pit life extended 6 months by mining north ramp starting from bench 3325L & will start after pit bottom is mined (year-end 2018) Accelerated ore: 5.3 mm t @ 1.24% Cu & 1.88 g/t Au Aggregate metal impact: 130mm lbs Cu & 250K ozs Au A View N
Slide 25: Grasberg Block Cave – Key Milestones
POWERED BY COPPER Grasberg Block Cave – Key Milestones Reserves YE 2017 GBC Service Shaft 355 meters Chute Galleries 963mm t @ 1.01% Cu & 0.72 g/t Au Hoisting Level Completed to Date +233 km of Development Batch Level Mine Access Service Shaft Extraction Level Initial Fans & Vent Infrastru
Slide 26: Deep MLZ (DMLZ) Commissioning
Deep MLZ (DMLZ) Commissioning Hydraulic Fracturing (from DOZ Truck Level above DMLZ Cave) 437mm t @ 0.91% Cu & 0.76 g/t Au DOZ Truck Level PT-FI continues to address mining-induced seismic activity in DMLZ that began in 2017 HF Holes and continued during 2018. 500m During 2Q18, PT-FI initiated
Slide 27: Sensitivities
Sensitivities (US$ millions) Operating 2019e - 2020e Change EBITDA Cash Flow Copper: +/- $0.10/lb $325 $250 Molybdenum: +/- $1.00/lb $80 $75 Gold: +/- $50/ounce $40 $20 Currencies: (1) +/- 10% $175 $125 2021e - 2022e Change Copper: +/- $0.10/lb $400 $315 Molybdenum: +/- $1.00/lb $80 $75 Gold: +/- $5
Slide 28: FCX Debt Maturities as of 6/30/18
FCX Debt Maturities as of 6/30/18 (US$ billions) $8 Total Debt & Cash at 6/30/18 Actual FCX Revolver $ - Senior Notes 9.9 $6 Cerro Verde Credit Facility 1.2 Total Debt $11.1 Consolidated Cash $ 3.9 $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 29: Adjusted EBITDA Reconciliation
Adjusted EBITDA Reconciliation (in millions) 12-mos Ended 2Q 2018 6/30/18 Net Income Attributable to Common Stock – Continuing Operations $ 873 $2,878 Interest expense, net 142 765 Income tax provision 515 1,544 Depreciation, depletion and amortization 442 1,768 Gain on early extinguishment of debt
Slide 30: 2Q18 Copper Realization & 3Q18 Guidance
POWERED BY COPPER 2Q18 Copper Realization & 3Q18 Guidance 2Q18 LME Average $3.12/lb Copper Price 3-Mo. Fwd Price for Copper $3.01/lb at the End of June $3.08/lb* FCX 2Q18 Consolidated Copper Price Realization (Generally, 50/50 Weight of Qtrly Avg and 3-mo Forward Price at End of Period) FCX 2Q18 Pri
Slide 31: 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 ~46% ~38% 4Q18e ~38% ~38% NOTE: For financial statement purposes only; does not reflect cash taxes. *The consolidated effective income tax rate is a function of the combined