Freeport-McMoRan, Inc. · NYSE:FCX
Freeport-McMoRan — Q4 2019 Earnings Presentation
38 slides from Freeport-McMoRan's earnings presentation, Jan 23, 2020
Slide 1: 4th Quarter 2019 Earnings Conference Call
4th Quarter 2019 Earnings Conference Call January 23, 2020 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 plans, projections or expectations
Slide 3: 2019 Highlights
2019 Highlights Building Momentum on 3 Major Initiatives Grasberg Block Cave Crusher in Operation to Support Growing Sales Profile, Decrease Unit Costs and Drive Expanded Margins & Cash Flow Generation 1) Grasberg Underground • Commenced Operating Phase • Ramp-up Progressing on Schedule 2) Lone Star
Slide 4: Committed to Responsible Production for All Stakeholders
Committed to Responsible Production for All Stakeholders SAFETY RESPECT INTEGRITY EXCELLENCE COMMITMENT CONTINUOUS IMPROVEMENT PEOPLE ENVIRONMENTAL COPPER: STEWARDSHIP METAL OF THE FUTURE ACCOUNTABILITY SAFE PRODUCTION MATTERS Robust Environmental Copper Key in Global Strong Safety Culture at the
Slide 5: Copper Market Commentary
Copper Market Commentary tonnes $/lb Strong Fundamental Outlook 1,400,000 3.30 Copper Price Exchange Inventories Near 1,200,000 3.10 Multi-year Low Medium Term Supply Growth 1,000,000 2.90 is Limited 800,000 2.70 Modest Demand Growth Expected to Drive Prices Higher 600,000 2.50 Estimated C
Slide 6: Executing The Plan
Executing The Plan Growing 2019 v. 2021e Sales ~30% ~40% (1) Profile Increase Increase in Copper in Gold Declining Unit Net ~25% (2) Reduction Cash Costs in Unit Costs Strong Financial (3) 100%+ With Leverage Results & EBITDA Increase to Improved Copper Market Conditions Generation in EBITDA Value C
Slide 7: Grasberg – One of the World’s Largest Copper & Gold Deposits
Grasberg – One of the World’s Largest Copper & Gold Deposits Impressive Past / Robust Future Historical Plan View Future Open Pit Era (1990 – 2019) Underground Era (2020e – 2041e) Grasberg & Kucing Liar December 2019 Grasberg open pit DMLZ Big Gossan DOZ Grasberg Block Cave Kucing Liar Amole N 2,900
Slide 8: Underground Ramp-up Building Momentum
Underground Ramp-up Building Momentum Continued Progress in 4Q 2019 Deep MLZ (DMLZ) & Grasberg Block Cave (GBC) Averaged 26,000 t/d in 4Q19: 15% Ahead of Forecast Drawbelling Ore Extraction (000 t/d) 40 DMLZ 40 GBC 35 20 DMLZ 30 18 16 30 Forecast 30 25 15 23 24 15 20 17 20 18 10 13 10 8 11 7 10 10 1
Slide 9: Lone Star Leach Project in Arizona Nearing Completion
Lone Star Leach Project in Arizona Nearing Completion Building Value in New U.S. Cornerstone Asset Low-Risk Development in Established Mining January 2020 District; Wholly Owned Located 8 miles North of Safford; 18 miles Southwest of Morenci First Cu Production Expected During 2020 Estimated
Slide 10: Innovation Driving Results
Innovation Driving Results Combining Data Analytics with Agile Way of Working Processing/Concentrating Mine Agile Way of Working Data systems landscape Crusher Process Integrated Material Characteristics Hauling Data Warehouse Loading Analytics Mineralogy Shovel Data Optimization Engine Chemistry Eq
Slide 11: Freeport: Foremost in Copper
Freeport: Foremost in Copper Portfolio of High Industry Leader Quality Copper Assets with Size, Scale Difficult to Replicate and Durability Strong Track Record & Commitment to Growing Production Communities and and Cash Flow Profile Environmental Responsibility Technically Proficient – Copper Proven
Slide 12: Financial Outlook
Financial Outlook PROVEN ASSETS. FUNDAMENTAL VALUE. FREEPORT-McMoRan
Slide 13: Sales Profile
Sales Profile Copper Sales (billion lbs) Gold Sales (million ozs) 5 4.6 2 1.7 4.3 1.4 4 1.0 1 0.8 3.5 3.3 3 0 2019 2020e 2021e 2022e Transition Years Note: Consolidated gold sales include 182k ozs in 2019, 145k ozs in 2020e 2 262k ozs in 2021e and 318k ozs in 2022e for noncontrolling interest. Molyb
Slide 14: 2020e Quarterly Sales
2020e Quarterly Sales Copper Sales (million lbs) Gold Sales (thousand ozs) 1,000 990 300 285 915 205 850 200 180 105 750 725 100 0 1Q20e 2Q20e 3Q20e 4Q20e Note: Consolidated gold sales include approximately 20k ozs in 1Q20e, 34k ozs 500 in 2Q20e, 38k ozs in 3Q20e and 53k ozs in 4Q20e for noncontroll
Slide 15: Growing Sales & Declining Unit Costs
Growing Sales & Declining Unit Costs ($ per pound of cu) Sales Volume Roll Forward Copper Gold (bns of lbs) (mms of ozs) 2020e 3.5 0.8 Indonesia 0.6 0.6 Americas 0.2 - 2021e 4.3 1.4 $1.74 $1.75 Lower Lower Unit Site Unit Costs in Production Indonesia ~$1.30 Costs Following Ramp-up Offset by Producti
Slide 16: EBITDA and Cash Flow at Various Copper Prices
EBITDA and Cash Flow at Various Copper Prices ($ in bn) EBITDA ($1,500/oz Gold, $10/lb Molybdenum) $10 $8 $6 $4 Transition $2 Year Average 2020e ’21e/’22e $0 Cu $2.75/lb Cu $3.00/lb Cu $3.25/lb Operating Cash Flow Excludes Working Capital Changes ($1,500/oz Gold, $10/lb Molybdenum) $8 $6 $4 Transiti
Slide 17: Consolidated Capital Expenditures
Consolidated Capital Expenditures ($ in billions) Net of Scheduled Contributions $2.8 $2.65 (2) $2.7(2) $2.4 $2.5 $2.2(2) $1.60(1) Major Projects $1.8(3) $1.2(3) $1.05 Other Mining $1.0 $1.2 2019 2020e 2021e (1) 2019 actuals include $0.1 bn for new Indonesia smelter project. (2) Net of scheduled con
Slide 18: New Copper Smelter Project in Indonesia
New Copper Smelter Project in Indonesia Capacity of 2 mm tonnes per annum of Concentrate, Bringing Domestic Capacity to ~3 mm tonnes per annum Estimated Capital Cost ~$3 Billion • Completing Front-end Engineering and Design • ~$0.5 Billion in Estimated Spending During 2020e • Expected to be Fund
Slide 19: Strong Financial Position & Liquidity
Strong Financial Position & Liquidity ($ in billions) Net Debt* $20.2 Liquidity Position as of 12/31/19 Consolidated Cash $2.0 Undrawn Credit Facility $3.5 $7.8 Total Liquidity $5.5 12/31/15 12/31/19 * Net debt equals consolidated debt less consolidated cash. See Cautionary Statement. 19
Slide 20: Executing Clearly Defined Strategy to Build Value for Shareholders
Executing Clearly Defined Strategy to Build Value for Shareholders Substantial Growth in Cash Flow Growing Sales Continued Profile Execution of Grasberg Declining Unit Underground Costs Innovation-Driven Ramp-up More Than Productivity Doubling EBITDA Improvements & Cash Flow (2019 v. 2021e) Ad
Slide 21: Reference Slides
Reference Slides PROVEN ASSETS. FUNDAMENTAL VALUE. FREEPORT-McMoRan
Slide 22: Financial Highlights
Financial Highlights 12 mos. ended Sales Data 4Q19 12/31/19 Copper Consolidated Volumes (mm lbs) 906 3,292 Average Realization (per lb) $2.74 $2.73 Site Production & Delivery Costs (per lb) $2.12 $2.15 Unit Net Cash Costs (per lb) $1.67 $1.74 Gold Consolidated Volumes (000’s ozs) 317 991 Average Rea
Slide 23: Preliminary Estimated Consolidated Copper Reserves & Mineralized Material
Preliminary Estimated Consolidated Copper Reserves & Mineralized Material As of 12/31/2019 Reserves (1) Mineralized Material (2) bn lbs of copper By Region 249 Mineralized North America Material (2) 48% (contained copper) 40% 133 South Indonesia America 18% 29% 31% 29% Reserves (1) Other (payable co
Slide 24: 4Q19 Mining Operating Summary
4Q19 Mining Operating Summary North South 4Q19 Unit Production Costs (per lb of Cu) America America Indonesia Consolidated Cash Unit Costs Site Production & Delivery, excluding adjustments $2.07 $1.85 $2.69 $2.12 By-product Credits (0.22) (0.18) (2.38) (0.69) Treatment Charges 0.11 0.17 0.23 0.16 Ro
Slide 25: 2020e Outlook
2020e Outlook Copper: 3.5 Billion lbs. Sales Gold: 0.8 Million ozs. Outlook Molybdenum: 88 Million lbs. Unit Cost Site Production & Delivery 2020e: $2.04/lb (1Q20e: $2.24/lb) of Copper After By-product Credits 2020e: $1.75/lb(1) (1Q20e: $2.02/lb) Operating ~$2.4 Billion @ $2.85/lb Copper
Slide 26: 2019 and 2020e Sales by Region
2019 and 2020e Sales by Region 2019 Sales by Region 1,442 1,183 (1) 1.0 (2) 90 667 Cu Mo Au mm lbs mm lbs mm ozs North America South America Indonesia 2020e Sales by Region 1,580 1,150 88 (1) 750 0.8 (2) Cu Mo Au mm lbs mm lbs mm ozs North America South America Indonesia (1) Includes molybdenum prod
Slide 27: 2019 and 2020e Unit Production Costs by Region
2019 and 2020e Unit Production Costs by Region North South 2019 Unit Production Costs (per lb of Cu) America America Indonesia Consolidated Cash Unit Costs Site Production & Delivery $2.05 $1.85 $2.91 $2.15 By-product Credits (0.24) (0.27) (2.13) (0.63) Treatment Charges 0.11 0.18 0.26 0.17 Royaltie
Slide 28: World Class Block Cave Design
World Class Block Cave Design Substantial Infrastructure in Place to Support Large-Scale Production Grasberg Block Cave DMLZ Ramp-up Schedule Ramp-up Schedule (000’s t/d of Ore) (000’s t/d of Ore) 130 80 80 103 59 64 29 30 9 10 3 Cave Fronts 2 Cave Fronts 2019 2020e 2021e 2022e 2023e 2019 2020e 2021
Slide 29: Grasberg Block Cave Extraction Level - Plan View
Grasberg Block Cave Extraction Level - Plan View PB2N N 150 meters PB1S Open drawbells Drawbells to be opened in 2020 PB Production Block PB2S Direction of Caving 3 Cave Fronts 29
Slide 30: Deep MLZ Block Cave Extraction Level - Plan View
Deep MLZ Block Cave Extraction Level - Plan View N 150 meters PB2N Open drawbells Drawbells to be opened in 2020 PB Production Block Direction of Caving PB1N 2 Cave Fronts 30
Slide 31: PT-FI Mine Plan
PT-FI Mine Plan Metal Sales, 2019-2024e Copper 2020e – 2024e Gold 2020e – 2024e Total: 7.2 billion lbs copper Total: 7.4 million ozs gold Annual Average: 1.4 billion lbs Annual Average: 1.5 million ozs 1.8 1.7 1.7 1.7 1.7 1.6 1.4 1.4 Transition Years 1.0 0.75 0.8 0.67 Cu Au bn mm lbs ozs 2019 2020e
Slide 32: Sensitivities
Sensitivities (US$ millions) Operating 2020e Change EBITDA Cash Flow Copper: +/- $0.10/lb $375 $305 Molybdenum: +/- $1.00/lb $75 $65 Gold: +/- $50/ounce $40 $30 Currencies: (1) +/- 10% $195 $135 2021e-2022e Avg. Change Copper: +/- $0.10/lb $440 $345 Molybdenum: +/- $1.00/lb $90 $85 Gold: +/- $50/oun
Slide 33: FCX Debt Maturities as of 12/31/19
FCX Debt Maturities as of 12/31/19 (US$ billions) $8 Total Debt & Cash at 12/31/19 Actual FCX Revolver $ - Senior Notes 9.0 Cerro Verde Credit Facility 0.8 $6 Total Debt $ 9.8 Consolidated Cash $ 2.0 $4.1 $4 $2.4 $2 CV Non-recourse $1.9 5.00%, 5.25%, 5.40% & 5.45% $0.9 Sr. Notes $0.5 and 3.55% 3.875
Slide 34: 4Q19 Copper Realization & 1Q20e Guidance
4Q19 Copper Realization & 1Q20e Guidance 4Q19 LME Average $2.67/lb Copper Price 3-Mo. Fwd Price for Copper $2.80/lb at the End of December $2.74/lb(1) FCX 4Q19 Consolidated Copper Price Realization (Generally, 50/50 Weight of Qtrly Avg and 3-mo Forward Price at End of Period) FCX 4Q19 Prior Period R
Slide 35: Adjusted EBITDA Reconciliation
Adjusted EBITDA Reconciliation (in millions) 12 mos. ended 4Q19 12/31/19 Net Income (Loss) Attributable to Common Stock – Continuing Operations $ 8 $(242) Interest expense, net 219 620 Income tax provision 329 510 Depreciation, depletion and amortization 391 1,412 Metals inventory adjustments 79 179
Slide 36: Underground Block Cave Mine Development: Grasberg
Underground Block Cave Mine Development Grasberg Block Cave Development Diagram Air Gap Undercut Ring Cave Muckpile Drilling Drawbell Drawbell Drilling Slot Raise Undercut Level 2850m Elevation Grizzly Extraction Level & Rock Breaker 2830m Elevation Drawpoints Orepass Service Level 2810m Elevation L
Slide 37: Underground Block Cave Mine Development: Deep MLZ
Underground Block Cave Mine Development Deep MLZ Block Cave Development Diagram Hydro Fractured Ground Air Gap Undercut Ring Cave Muckpile Drilling Drawbell Drawbell Drilling Undercut Level 2600m Elevation Slot Raise Grizzly Extraction Level Orepass & Rock Breaker 2585m Elevation Drawpoints Loading
Slide 38: Glossary of Key Terms
Underground Block Cave Mine Development Glossary of Key Terms Air Gap space between the cave muck pile and the uncaved ore above it Block Caving a mass mining method that primarily utilizes the action of gravity for extraction and fragmentation of the ore By undercutting about 3-5% of the bottom of