Freeport-mcmoran, Inc. · NYSE:FCX

Freeport-mcmoran — Freeport-McMoRan Copper & Gold — 2008 FBR Capital Markets Fall Investor Conference

33 slides from Freeport-mcmoran's conference presentation, Dec 3, 2008

  1. Slide 1: Kathleen L. Quirk, Executive Vice President & CFO

    Kathleen L. Quirk Executive Vice President & CFO New York City www.fcx.com December 3, 2008

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

    Cautionary Statement Regarding Forward-Looking Statements This presentation contains forward-looking statements in which we discuss factors we believe may affect our performance in the future. Forward-looking statements are all statements other than historical facts, such as statements regarding pro

  3. Slide 3: FCX Investment Summary

    FCX Investment Summary  World’s Premier Publicly Traded Copper Company  World’s Largest Molybdenum Producer & Significant Gold Producer  World Class, Long-lived, Geographically Diverse Operations  Financially Strong  Attractive Project Pipeline  Significant Exploration Potential 3

  4. Slide 4: Geographically Diverse

    Geographically Diverse Major Mine Operations & Development Projects All major assets majority-controlled and operated North North America America11 Reserves Copper Cu 25.8 billion lbs Copper/Gold/Silver Mo 1.8 billion lbs Molybdenum Production Grasberg (90.64%) Cu 1.3 billion lbs Reserves Mo 70 mill

  5. Slide 5: Long-Lived Asset Base

    Long-Lived Asset Base Consolidated Consolidated Reserves 12/31/07 (1) Copper (billion lbs) 93.2 Molybdenum (billion lbs) 2.0 Gold (million ozs) 41.0 Average Sales Volumes (2009e-2010e) Copper (billion lbs) 4.1 Molybdenum (million lbs) 70 Gold (million ozs) 2.2 Implied Reserve Life (years) Copper 22

  6. Slide 6: A World of Opportunities

    A World of Opportunities Exploration Targets in Major Mineral Districts Safford/Lone Star/Morenci Cerro Verde Tenke Fungurume/Africa Grasberg/Indonesia District SW US Indonesia Africa South America 6

  7. Slide 7: Copper Price & Inventories

    Copper Price & Inventories 2,000 400 High Low Avg 2003 $1.05 $0.70 $0.81 1,750 350 2004 $1.50 $1.07 $1.30 2005 $2.10 $1.37 $1.67 1,500 2006 $3.99 $2.08 $3.06 300 2007 $3.80 $2.40 $3.24 2008* $4.04 $1.56 $3.31 1,250 250 000’s Metric Tons Cents Per Pound LME Copper Price 1,000 200 750 150 500 100 250

  8. Slide 8: Copper Market – "What Happened"

    Copper Market – “What Happened” Change in Prices  Continued Financial Market Turbulence, Since Mid-September 2008 Credit Issues, and Outlook for Global 0% Economy are Major Force in Price Collapse  Anticipation of Surpluses and Slowing -10% Global Demand, Including China  LME Copper Stocks Up ~10

  9. Slide 9: Underlying Fundamentals of Copper Business Remain Positive

    Underlying Fundamentals of Copper Business Remain Positive  Low Exchange Inventories – ~ 6 Days of Global Consumption  Supply Constraints/Shortfalls  Absence of New Projects  Current Market Will Further Delay Projects  60% of Today’s Mines Deplete or Go Underground by 2021  Urbanization in Chi

  10. Slide 10: Copper Supply Side Challenges – Production Has Not Met Expectations

    Copper Supply Side Challenges – Production Has Not Met Expectations Production Shortfalls Have Averaged ~ 770 kt Per Year 0 -250 Annual Shortfalls (kt) -500 -3.0% -750 -4.0% -5.0% 4-Year Average -4.9% -1,000 2005 2006 2007 2008e Note: Based on Brook Hunt estimates per January report for given year,

  11. Slide 11: Gold Market Update

    Gold Market Update  All-time High of $1,011/oz London Gold Price ($/oz) in March 2008 $1,200 $1,000  Price Weakened as US $800 Dollar Strengthened in 3Q $600 $400  Most Analysts Projected $200 Gold Would Have Performed $0 Better in This Environment Jan- 99 Jan- 00 Jan- 01 Jan- 02 Jan- 03 Jan- 04

  12. Slide 12: Molybdenum Market Update

    Molybdenum Market Update Molybdenum Price* ($/lb)  2008 Range: $8.75 - $34/lb $40 ̶ First 9 Months: $32 - $34/lb $35 ̶ Since September 30: $8.75 - $30/lb $30 $25  Down 72% Since Sept. 30 $20 $15 $10  Sharp Decline in Demand $5 $0  Destocking by Consumers & Traders Jan- Jul- Jan- Jul- Jan- Jul- J

  13. Slide 13: Near-Term Business Strategy Revisions

    Near-Term Business Strategy Revisions Prior Strategy (since PD acquisition) Revised Strategy  Reduce Debt   Aggressively reduce costs and capital  Define the potential spending of our resources   Protect liquidity  Develop growth and expansion projects   Preserve resources and growth  Ret

  14. Slide 14: Summary Impacts

    Summary Impacts  Reduce Volumes in 2009e/2010e Compared with October 2008 Estimates • Copper – 5% in 2009e and 11% in 2010e • Molybdenum – 13% in 2009e and 30% in 2010e  18% Reduction in Estimated 2009 Unit Site Production and Delivery Costs Compared with 2008e  $1.2 bn Reduction (50%) in 2009 Ca

  15. Slide 15: Operating Plan Revisions

    Operating Plan Revisions  Reviewed operating plans at each Run “Lean site to develop lowest cost Operations” operating scenarios in $1.50-$2.00 Sierrita copper environment* Bagdad Cerro Verde  Curtail high-cost copper volumes El Abra Candelaria/Ojos  Reduce moly volumes in response Grasberg to ma

  16. Slide 16: Operating Plans Review: North America Copper Revisions

    Operating Plans Review North America Copper Revisions  Reduce mining & milling at Morenci by approximately 25%  Reduce mining & stacking rate at Safford by about 50%  Suspend mining/milling at Chino; produce from leach pads  Reduce mining rate at Tyrone by about 50% Copper Sales Estimates  Defe

  17. Slide 17: Operating Plans Review: South America & Indonesia

    Operating Plans Review South America & Indonesia South America Indonesia  Reduce costs, capex  Reduce costs, capex  Defer incremental  Grasberg accessing higher expansion at Cerro Verde grade material with 2009 volumes front-end loaded  Defer capital projects,  Slow Big Gossan mine including E

  18. Slide 18: Operating Plans Review: Climax/Molybdenum

    Operating Plans Review Climax/Molybdenum  Reduce Henderson underground mine production by 25% Molybdenum Sales Estimates  Reduce cost/defer (million lbs) capital projects, 2008e 2009e 2010e including Climax October 74 80 100 Current 72 70 70 Restart Change (2) (10) (30)  Reduce manpower levels e

  19. Slide 19: 2008e Quarterly Payable Metal Sales

    2008e Quarterly Payable Metal Sales Gold Sales (thousand ozs) Copper Sales (million lbs) 500 1,250 400 1,165 375 307 280 265 1,016 250 1,000 911 942 125 0 1Q08 2Q08 3Q08 4Q08e 750 ____________________ Note: Consolidated gold sales include approximately 29 k oz in 1Q08, 27 k oz in 2Q08, 31 k oz in 3Q

  20. Slide 20: Sales Profile 2006 - 2010e

    Sales Profile 2006 - 2010e Gold Sales (million ozs) Copper Sales (billion lbs) 3 2.3 2.2 2.2 1.9 5 2 1.3 1 4.1 4.1 3.9 4.0 4 3.6 0 2006 2007 2008e 2009e 2010e Pro Pro Forma Forma* ____________________ 3 Note: Consolidated gold sales include approximately 185 k oz in 2006, 228 k oz in 2007, 130 k oz

  21. Slide 21: Sales Estimates Rollforward

    Sales Estimates Rollforward October 21st v. Current Copper (million lbs) 2009e 2010e October 4,300 4,600 North America* (190) (375) South America (10) (100) Indonesia 0 (25) Total change (200) (500) Current 4,100 4,100 Molybdenum (million lbs) October 80 100 Change** (10) (30) Current 70 70 Gold (00

  22. Slide 22: 2008e and 2009e Sales by Region

    2008e and 2009e Sales by Region 2008e Sales by Region North America South America Indonesia 1,425 1,500 1,100 72 (1) 1.1 Au mm ozs Cu Mo Cu 0.1 Cu Au mm lbs mm lbs mm lbs mm lbs mm ozs 2008e 2007e 2008e 2008e 2008e 2007e 2009e Sales by Region (2) North America South America Indonesia 1,300 1,400 1,3

  23. Slide 23: 2008e and 2009e Unit Production Costs by Region

    2008e and 2009e Unit Production Costs by Region 2008e North South (per pound of copper) America America Indonesia Consolidated Unit Cash Costs (1) Site Production & Delivery (2) $1.86 $1.16 $1.59 $1.53 Royalties (2) - - 0.10 0.03 Treatment Charges 0.09 0.14 0.25 0.15 By-product Credits (0.64) (0.14)

  24. Slide 24: Site Operating Costs by Category

    Site Operating Costs by Category 2009e Materials 37% 35% 22% North Manpower 26% Indonesia America 5% Acid 10% Other Energy 17% 27% 21% 33% 23% 35% 24% South Consolidated America 7% 4% 13% 13% 24% 24% Note: Amounts are projections. See Cautionary Statement. 24

  25. Slide 25: Exploration

    Exploration 2008e 2009e $275 million $100 million 22% 13% 10% North South 7% America America 42% 40% 18% Africa 4% 27% Indonesia Activities focused on 17% incorporating significant data Australasia obtained in 2008 into our & Other Areas future plans Note: Amounts are projections. See Cautionary Sta

  26. Slide 26: EBITDA and Cash Flow at Various Copper Prices

    EBITDA and Cash Flow at Various Copper Prices 2009e & 2010e Average Annual EBITDA ($750 Gold & $10 Molybdenum) $5 (US$ billions) $4 $3 $2 $1 $0 Cu $1.50/lb Cu $1.75/lb Cu $2.00/lb 2009e & 2010e Average Annual Operating Cash Flow (excluding Working Capital)* ($750 Gold & $10 Molybdenum) $3 (US$ billi

  27. Slide 27: Sensitivities (2009e & 2010e Avg.)

    Sensitivities (2009e & 2010e Avg.) Operating Change EBITDA Cash Flow (US$ millions) Copper: -/+ $0.10/lb $400 $280 Molybdenum: -/+ $1.00/lb $60 $50 Gold: -/+ $50/ounce $100 $60 Diesel (1): -/+ 10% $37 $23 Purchased Power (2): -/+ 10% $47 $28 Currencies (3): +/- 10% $94 $55 ____________________ (1) $

  28. Slide 28: Capital Expenditures

    Capital Expenditures Major Projects All Other (US$ billions) $3.0 $2.7 $2.5 1.1 $2.0 $1.8 $1.5 $1.3 1.0 $1.1 $1.0 0.6 1.6 0.6 $0.5 0.8 0.7 0.5 $0.0 2007 (1) 2008e 2009e 2010e (1) Includes PD expenditures beginning March 20, 2007 Note: Includes capitalized interest. e = estimate. Please see cautionar

  29. Slide 29: 2009e Capital Cost Deferrals/Reductions

    2009e Capital Cost Deferrals/Reductions $1.2 Billion Reduction Since October 2008 El Abra 16% Tenke Climax 19% 25% 6% Underground Mine Development at Grasberg 6% Sustaining 28% Cerro Verde Incremental Expansion e = estimate. See Cautionary Statement 29

  30. Slide 30: Tenke Fungurume Development Project Update

    Tenke Fungurume Development Project Update  Construction activities being advanced Leach & CCD  Initial production target -- 2H09; aggregate annual production of 250MM lbs Cu & 18MM lbs Co  $1.75 billion in aggregate capital costs  includes substantial amounts to support larger operation  $215M

  31. Slide 31: Achievement of Significant Debt Reduction

    Achievement of Significant Debt Reduction (US$ billions) $20 (1) $17.6 $15 Total Debt $10 $7.2 $5 $0 At Time of PD Acquisition 9/30/08 in March 2007 (1) Pro Forma year-end 2006 total debt of $1.6 billion plus $16 billion in acquisition debt 31

  32. Slide 32: FCX Debt Maturities 9/30/08

    FCX Debt Maturities 9/30/08 $6,000 (US$ millions) Total Debt & Cash at 9/30/08 $5,000 (US$ billions) Senior Notes Issued in 2007 $6.0 Heritage PD Debt 0.6 $4,006 $4,000 Other Debt 0.6 Total Debt $7.2 8.375% Senior Notes Consolidated Cash $1.2 and $3,000 PD $2,514 Senior Notes Floating Rate & $2,000

  33. Slide 33: Financial Policy

    Financial Policy  Since March 2007 Acquisition of Phelps Dodge, Strategy was Focused on Defining Potential of Resources and Development of Growth Plans  Following Achievement of $10 Billion in Debt Reduction During 2007, Financial Policy was Designed to Use Cash Flows to Invest in Growth Projects

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