Freeport-McMoRan, Inc. · NYSE:FCX

Freeport-McMoRan — Q4 2017 Earnings Presentation

37 slides from Freeport-McMoRan's earnings presentation, Jan 25, 2018

  1. Slide 1: 4th Quarter 2017 Earnings Conference Call

    4th Quarter 2017 Earnings Conference Call January 25, 2018 fcx.com

  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: 2017 Highlights

    2017 Highlights Strong Execution – “Driven by Value”  Solid Operating Performance Throughout Global Operations  Ongoing Cost Management & Capital Discipline  Strong Cash Flow Generation  Restored Balance Sheet Strength  Developed Attractive Organic Options for Future Growth  Important Progress

  4. Slide 4: Key Metrics

    Key Metrics Strong Cash Flow Generation Unit Net Cash Costs 2016 ($ in mm) 2017 Copper ($/lb) +$916* +$3,272* $4,682 $3,729 $1.26 $1.20 $2,813 $1,410 OCF OCF @ Cu @ Cu $2.28/lb CAPEX $2.93/lb CAPEX 2016 2017 Restored Balance Sheet Strength Year-end Reserves Net Debt Copper ($ in bn) (bn Lbs) 87 87 $

  5. Slide 5: Copper Market Commentary

    Copper Market Commentary Global IP Growth in 2017  Positive Demand Globally was Strongest Since 2010 • Manufacturing Sectors are Performing Well 2017e Change From • Chinese Growth is Exceeding Expectations Consumption Prior Year • European Growth Continues 000’s Mt • U.S. Demand is Solid China 11,0

  6. Slide 6: World's Leading Copper Producers

    World’s Leading Copper Producers Top 10 Copper Producers (2017e) (000 t) 2,000 1,500 1,000 500 0 Codelco Freeport- Glencore BHP Southern KGHM First Antofagasta Rio Tinto Vale McMoRan Copper Quantum Source: Wood Mackenzie December 14, 2017. Rankings based on net equity ownership; e = estimate 6

  7. Slide 7: World Class Copper Discoveries Are Extremely Rare

    World Class Copper Discoveries Are Extremely Rare Recoverable Copper Reserves 2017e Copper Production Million metric tons 0 5 10 15 20 25 30 35 Thousand metric tons 0 200 400 600 800 1000 1200 Escondida - 1981 Escondida - 1981 Collahuasi - 1880 Collahuasi - 1880 1880 Grasberg Complex - 1988 Cerro Ve

  8. Slide 8: FCX Reserves/Mineralized Material/Potential

    FCX Reserves/Mineralized Material/Potential as of 12/31/17 2P Reserves (1) Mineralized Material (2)* Potential (3)* North North America America North 39% 45% America South 66% Indonesia Serbia & America South Indonesia Other 32% 20% America South 29% 19% Other 30% America 5% 15% 87 Billion Lbs 92 Bi

  9. Slide 9: FCX Values Beyond Proven & Probable Reserves

    FCX Values Beyond Proven & Probable Reserves Preserving Optionality for the Future – Driven by Value U.S. • Large footprint with substantial undeveloped sulfide resources • Significant existing infrastructure provides for Brownfield expansions Serbia • District extensions include:  Bagdad • Timok l

  10. Slide 10: Americas Update

    Americas Update Americas Cash Flow  Strong Operating Performance ($ in mm) +$561* +$2,597*  666 mm lbs of Copper Sold in 4Q17 $3,057  Cerro Verde Concentrator Averaged 374 kt/d in 4Q17  Continued Focus on Cost and CAPEX Management $726 OCF OCF $460 @ Cu  Advancing Studies for Future @ Cu $165 $

  11. Slide 11: Large Development Project Inventory

    Large Development Project Inventory Copper Sulfide Opportunities in Americas (bns of lbs)  Bagdad 257 Bagdad Chino/Cobre  Chino/Cobre El Abra  El Abra Lone Star/ 130 Safford  Lone Star/Safford Morenci Sierrita  Morenci 62 Cerro Verde  Sierrita Other 2P Reserves Including Including @ $2.00 Cu M

  12. Slide 12: Lone Star Oxide Project – Moving Forward

    Lone Star Oxide Project – Moving Forward  12/31/2017 Reserve: 4.4 bn lbs of Copper Safford Leach Dos Pobres Pit Safford Facility Stockpile San Juan Pit  $850 mm Project; Utilizes Existing Infrastructure at Safford  Commenced Pre-stripping Activities in 1Q18 Lone  Provides Exposure to Large Sulfi

  13. Slide 13: Lone Star Sulfide Potential

    Lone Star Sulfide Potential Cu > 0.30% N Leach Pit Oxide Chalcocite Chalcopyrite 1 km +0.6% Cu DH 264 718 m 0.60% Cu DH 259 1048 m DH 267 1478 m 0.44% Cu 0.45% Cu DH 265 1202 m 0.63% Cu +0.3% Cu Potential Extension of Sulfide Orebody 13

  14. Slide 14: El Abra Sulfide Mill Project

    El Abra Sulfide Mill Project  Large Sulfide Resource  Resource Estimate: 2 Billion Tonnes at >0.45% Copper  Advancing Technical Studies • 240 kt/d Concentrator – Similar to Recent Cerro Verde Expansion • Estimated Production: ~750 mm lbs/year • 6-8 Year Expected Lead Time — 3-4 Years of Feasibili

  15. Slide 15: El Abra Sulfide Potential

    El Abra Sulfide Potential West Cross-Section looking North East 2017 Reserve Pit 2017 % Cu Mineralized >=0.0 Material >=0.1 Pit Shell >=0.2 >=0.3 >=0.4 >=0.6 1 km >=0.8 Significant Intercepts 15

  16. Slide 16: Indonesia Update

    Indonesia Update  Negotiations are Advancing to Achieve a PT-FI Cash Flow Mutually Positive Resolution ($ in mm)  PT-FI Requires Fiscal and Legal Certainty +$792* +$1,656* for Long-term Mining Operations $2,422  51% Divestment: Ongoing Discussions with Inalum (Indonesian SOE) and PT-FI Joint Vent

  17. Slide 17: 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

  18. Slide 18: Grasberg Block Cave

    Grasberg Block Cave World Class Design GBC Rail Lines Service Shaft Rail Car Unloading Station Hoist Room Production Levels Grasberg Block Cave Design Oblique View Looking Southwest Reserves: 964mm t @ 1.03% Cu & 0.78 g/t Au  Construction Progress Will Enable Initial Undercutting in Fixed Facilitie

  19. Slide 19: Grasberg Block Cave – Key Milestones

    Grasberg Block Cave– Key Milestones Completed to Date: Rail Construction Crew at Work  +220 km of Development  Mine Access  Service Shaft  Initial Fans & Vent Infrastructure  Rail Connection  Crusher #1  Batch Plant Near-term Objectives  28 km of Development in 2018 Approaching the Rail Unlo

  20. Slide 20: Financial Benefits to Indonesia

    Financial Benefits to Indonesia  Positive Long-term Historical Relationship Financial Benefits Breakdown  50-Year History of Operations in Indonesia ~$21 Billion  Contributed +$60 Bn to National GDP Since 1992 GOI 59%  Largest Private Employer in Papua & Significant FCX Economic Engine for Devel

  21. Slide 21: 2018e Outlook

    2018e Outlook  Copper: 3.9 Billion lbs. Sales  Gold: 2.4 Million ozs. Outlook  Molybdenum: 91 Million lbs. Unit Cost  Site Production & Delivery: $1.60/lb of Copper  After By-product Credits(1): $0.97/lb, Including $0.95/lb for 1Q18e Operating  Exceed $5.8 Billion (@ $3.15/lb Copper for 2018e)

  22. Slide 22: 2018e Operating Estimates

    2018e Operating Estimates 2018e Unit Production Costs (per pound of copper) North South America America Indonesia Consolidated Cash Unit Costs (1) Site Production & Delivery (2) $1.76 $1.62 $1.37 $1.60 By-product Credits (0.20) (0.19) (2.56) (0.92) Treatment Charges 0.11 0.19 0.25 0.18 Royalties & E

  23. Slide 23: Sales Profile

    Sales Profile Copper Sales Copper Sales (billion lbs) (billion lbs) Gold Sales (million ozs) 4 3 3.9 3.9 2.4 2 3.7 3.45 1.6 3 1 1.4 1.0 0 2017 2018e 2019e 2020e - 2021e AVG 2 Note: Consolidated gold sales include 144k ozs in 2017, 230k ozs in 2018e, 90k ozs in 2019e, 130k ozs for 2020e-2021e avg for

  24. Slide 24: 2018e Quarterly Sales

    2018e Quarterly Sales Copper Sales (million lbs) Gold Sales (thousand ozs) 1,200 750 675 625 650 500 490 1,000 1,020 960 250 900 950 0 1Q18e 2Q18e 3Q18e 4Q18e Note: Consolidated gold sales include approximately 65k ozs in 1Q18e, 60k ozs 600 in 2Q18e, 60k ozs in 3Q18e and 45k ozs in 4Q18e for noncont

  25. Slide 25: EBITDA and Cash Flow at Various Copper Prices

    EBITDA and Cash Flow at Various Copper Prices EBITDA ($1,300/oz Gold, $10.00/lb Molybdenum) (US$ billions) $9 $6 $3 2018e/2019e $0 Cu $3.00/lb Cu $3.25/lb Cu $3.50/lb Operating Cash Flow (excluding Working Capital changes) ($1,300/oz Gold, $10.00/lb Molybdenum) (US$ billions) $6 $4 $2 2018e/2019e $0

  26. Slide 26: Sensitivities (US$ millions)

    Sensitivities (US$ millions) 2018e/2019e Operating Change EBITDA Cash Flow Copper: +/- $0.10/lb $380 $290 Molybdenum: +/- $1.00/lb $80 $70 Gold: +/- $50/ounce $85 $50 Currencies: (1) +/- 10% $145 $100 (1) U.S. Dollar Exchange Rates: 654 Chilean peso, 13,500 Indonesian rupiah, $0.75 Australian dollar

  27. Slide 27: Capital Expenditures

    Capital Expenditures (US$ billions) Includes Lone Star Oxide Project $2.1 $2.2 $1.4 Major 1.2* 1.2* 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 in 2018e and 2019e) and Lone Star ($0.25

  28. Slide 28: Strong Execution of Deleveraging Plan

    Strong Execution of Deleveraging Plan Net Debt at Varying Copper Prices (US$ billions) $20.0 $20.1 $15.0 $11.8 $10.0 $8.7 $5.7 $4.8 $5.0 $3.9 $0.0 Net Debt/ YE 2015 YE 2016 YE 2017 $3.00 $3.25 $3.50 Adjusted EBITDA 4.6x 2.4x 1.5x 0.7x 0.5x 0.4x YE 2018e Note: Sensitivity assumes $10/lb molybdenum an

  29. Slide 29: Positive Long-term Outlook

    Positive Long-term Outlook Executing Clearly Defined Strategy Industry-Leading Experienced Team Long-Lived, Financially Copper Position of Operators & Geographically Strong Developers Diverse Portfolio Optimistic About Market Outlook for Copper – Attractive Long-Term Fundamentals 29

  30. Slide 30: Reference Slides

    Reference Slides N/ BY/VAN UU E |eol FReepont-McMoRan

  31. Slide 31: Financial Highlights

    Financial Highlights Sales Data 4Q17 2017 Copper Consolidated Volumes (mm lbs) 1,017 3,700 Average Realization (per lb) $3.21 $2.93 Site Production & Delivery Costs (per lb) $1.62 $1.61 Unit Net Cash Costs (per lb) $1.04 $1.20 Gold Consolidated Volumes (000’s ozs) 593 1,562 Average Realization (per

  32. Slide 32: 4Q 2017 Mining Operating Summary

    4Q 2017 Mining Operating Summary 4Q17 Unit Production Costs Cash Unit Costs (Credits) North South (per pound of copper) America America Indonesia Consolidated Site Production & Delivery $1.79 $1.71 $1.36 $1.62 By-Product Credits (0.21) (0.20) (2.18) (0.89) Treatment Charges 0.10 0.21 0.26 0.19 Royal

  33. Slide 33: 2017 Operating Summary

    2017 Operating Summary 2017 Unit Production Costs (per pound of copper) North South America America Indonesia Consolidated Cash Unit Costs Site Production & Delivery (1) $1.64 $1.59 $1.58 $1.61 By-product Credits (0.17) (0.18) (2.05) (0.67) Treatment Charges 0.10 0.22 0.27 0.19 Royalties & Export Du

  34. Slide 34: Preliminary Reserves

    Preliminary Reserves Consolidated Proven & Probable Reserves Copper Molybdenum Gold 12/31/17 billion lbs billion lbs million ozs Copper Reserves Reserves @ 12/31/16 86.8 2.95 26.1 by Geographical Region Additions/revisions 3.6 (0.02) (1.0) Production (3.7) (0.09) (1.6) Net Change (0.1) (0.11) (2.6)

  35. Slide 35: PT-FI Mine Plan

    PT-FI Mine Plan PT-FI’s Share of Metal Sales, 2017-2022e 2018e – 2022e PT-FI Share Total: 5.3 billion lbs copper Copper, billion lbs Annual Average: 1.07 billion lbs Gold, million ozs 2018e – 2022e PT-FI Share Total: 7.6 million ozs gold Annual Average: 1.5 million ozs 2.4 1.54 1.4 1.4 1.4 1.3 1.2 1

  36. Slide 36: FCX Debt Maturities as of 12/31/17

    FCX Debt Maturities as of 12/31/17 (US$ billions) $8 Total Debt & Cash at 12/31/17 FCX Revolver $ - Senior Notes 11.8 $6 Cerro Verde Credit Facility 1.3 Total Debt $13.1 Consolidated Cash $ 4.4 $4 $2.8 $2.9 $2.8 CV Non-recourse $2 $1.4 $1.4 5.40% & $1.0 5.45% CV Non-recourse $0.8 Sr. Notes 3.55% & 3

  37. Slide 37: Adjusted EBITDA Reconciliation

    Adjusted EBITDA Reconciliation (in millions) 4Q 2017 2017 Net Income Attributable to Common Stock – Continuing Operations $1,025 $1,755 Interest expense, net 168 801 Income tax provision 136 883 Depreciation, depletion and amortization 457 1,714 Gain on early extinguishment and exchanges of debt (13

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