Freeport-McMoRan, Inc. · NYSE:FCX
Freeport-McMoRan — Q2 2017 Earnings Presentation
27 slides from Freeport-McMoRan's earnings presentation, Jul 25, 2017
Slide 1: 2nd Quarter 2017 Earnings Conference Call
2nd Quarter 2017 Earnings Conference Call July 25, 2017 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: 2Q17 Highlights
2Q17 Highlights Strong Execution Free Cash Flow Generation • Cost Management ($ in mm) • Ongoing Capital Discipline • Improving Ore Grades in Indonesia +$675 +$1,123 $9.5 Billion Reduction in Net Debt Since $1,829 YE 2015 Primary Focuses • Safe & Efficient Operations $1,037 • Resolving Long-te
Slide 4: Copper Market Commentary
Copper Market Commentary LME Copper Price Market Fundamentals Remain Solid per pound • Chinese Demand Better than Expected in $3.00 First Half of 2017 $2.72 • European Demand Healthy 7/24/17 $2.75 • North America Stable $2.50 Supply Side Issues in Focus • Higher than Average Disruptions YTD $2.2
Slide 5: Americas Status Report
Americas Status Report Strong Operating Performance Cerro Verde – Expanded Operations Continue to Americas Free Cash Flow* Perform Well ($ in mm) Lone Star Project Near Safford Operation +$509 • Initial Production from Oxide Ores Could Begin in 2021 Following ~3 Years of Stripping $626 • Proje
Slide 6: Large Development Project Inventory: Copper Sulfide Opportunities in Americas
Large Development Project Inventory Copper Sulfide Opportunities in Americas (bns of lbs) 266 • Bagdad Bagdad Chino/Cobre • Chino/Cobre El Abra • El Abra Lone Star/ 137 Safford • Lone Star/Safford Morenci Sierrita • Morenci 60 Cerro Verde • Sierrita Other 2P Reserves Including Including @ $2.00 Cu M
Slide 7: PT-FI Update
PT-FI Update Exports Resumed in April 2017 PT-FI Free Cash Flow* Experienced High Level of Worker Absenteeism ($ in mm) During 2Q +$292 • Unfavorably Impacted Mining and Milling Rates $505 • Despite Lower Rates, Higher Ore Grades and Sales from Inventory Boosted Sales Volumes (26% Increase YOY)
Slide 8: Deep MLZ Update
Deep MLZ Update Plan View Grasberg & Kucing Liar In June, DMLZ Impacted by Mining-Induced Grasberg open pit Seismic Activity (Not Uncommon in Block Caving) DMLZ Conditions at DMLZ (Depth Beneath Surface and Big Rock Strengths) Different from PT-FI’s Other OreGossan DOZ Grasberg Bodies Kucing Blo
Slide 9: Grasberg Block Cave
Grasberg Block Cave World Class Design GBC Rail Lines Service Shaft Rail Car Unloading Station Train Car Test Track Hoist Room Production Levels Grasberg Block Cave Design Oblique View Looking Southwest Reserves: 964mm t @ 1.03% Cu & 0.78 g/t Au Fixed Facilities Ventilation Drifts Pump Tunnels from
Slide 10: PT-FI History of Block Caving
PT-FI History of Block Caving 1980’s GBT GBT block cave mine Depleted (depleted) IOZ 1990’s (depleted) IOZ block cave mine Depleted DOZ (operating) 2000’s DOZ block cave mine Operating DMLZ • DMLZ Start-up Future • Grasberg BC In development • Kucing Liar Future development Ertsberg East 10
Slide 11: Financial Benefits to Indonesia
Financial Benefits to Indonesia Positive Long-term Historical Relationship Financial Benefits Breakdown 50-Year History of Operations in Indonesia ~$19 Billion Contributed $60+ Bn to National GDP Since 1992 GOI 62% Largest Private Employer in Papua & Significant FCX Economic Engine for Devel
Slide 12: 2017e Outlook
2017e Outlook Copper: 3.7 Billion lbs. Sales Gold: 1.6 Million ozs. Outlook Molybdenum: 93 Million lbs. Unit Cost Site Production & Delivery: $1.58/lb of Copper After By-product Credits (1): $1.19/lb, Including $1.28/lb for 3Q17e Operating ~$3.8 Billion (@ $2.65/lb Copper for 2H17e) Cash
Slide 13: Sales Profile
Sales Profile Copper Sales Copper(billion Sales lbs) (billion lbs) Gold Sales (million ozs) 5 4.65 3 3.7 3.85 4 4.17 2 2.4 Net of Volumes 1.6 1 3 Sold in 1.1 Tenke/Morenci Transactions 0 2016 2017e 2018e 2 Note: Consolidated gold sales include 99k ozs in 2016, 150k ozs in 2017e and 220k ozs in 2018e
Slide 14: EBITDA and Cash Flow at Various Copper Prices
EBITDA and Cash Flow at Various Copper Prices EBITDA 10¢ change in copper = $360 mm ($1,250/oz Gold, $7.50/lb Molybdenum)* $1 change in moly = $50 mm (US$ billions) $50 change in gold = $115 mm $8 $6 $4 $2 2018e $0 Cu $2.50/lb Cu $2.75/lb Cu $3.00/lb Operating Cash Flow (excluding Working Capital ch
Slide 15: Capital Expenditures
Capital Expenditures (US$ billions) Future Spending Dependent on $2.8 Improvement in Market Conditions and Continued Grasberg Underground Development Oil & Gas 1.2 $1.9 $1.6 Major 0.9* Mining TOTAL 0.9* Projects MINING 1.2 1.6 Other Mining 0.7 1.0 0.4 2016 2017e 2018e * Major mining projects include
Slide 16: Cerro Verde Credit Facility Amended & Extended
Cerro Verde Credit Facility Amended & Extended Amended in June 2017 Loan Amount Increased from $1.3 Bn to $1.5 Bn Extended Final Maturity from March 2019 to June 2022 All Other Terms, Including Interest Rates, Remain the Same Increases Financial Flexibility & Reduces 2018 and 2019 Maturiti
Slide 17: Restoring Balance Sheet Strength
Restoring Balance Sheet Strength Year-End 2017e Net Debt at Varying Copper Prices (US$ billions) $20.0 $20.1 $15.0 $11.8 $10.7 $10.0 $9.6 $10.0 $9.2 $5.0 $0.0 YE 2015 YE 2016 6/30/2017 $2.50 $2.75 $3.00 Net Debt/2017e EBITDA 2.1x 1.8x 1.5x YE 2017e Note: Sensitivity assumes $7.50/lb Molybdenum and $
Slide 18: Positive Long-term Outlook Executing Clearly Defined Strategy
Positive Long-term Outlook Industry-Leading Experienced Team Long-lived, Financially Copper Position of Operators & Geographically Strong Developers Diverse Portfolio Executing Clearly Defined Strategy 18
Slide 19: Reference Slides
Reference Slides N/ BY/VAN UU E |eol FReepont-McMoRan
Slide 20: Financial Highlights
Financial Highlights Sales Data 2Q17 1H17 Copper Consolidated Volumes (mm lbs) 942 1,751 Average Realization (per lb) $2.65 $2.65 Site Production & Delivery Costs (per lb) $1.64 $1.62 Unit Net Cash Costs (per lb) $1.20 $1.29 Gold Consolidated Volumes (000’s ozs) 432 614 Average Realization (per oz)
Slide 21: 2Q 2017 Mining Operating Summary
2Q 2017 Mining Operating Summary 2Q17 Unit Production Costs Cash Unit Costs North South (per pound of copper) America America Indonesia Consolidated Site Production & Delivery $1.59 $1.55 $1.80 $1.64 By-Product Credits (0.16) (0.13) (2.21) (0.70) Treatment Charges 0.10 0.22 0.26 0.18 Royalties & Exp
Slide 22: 2017e Operating Estimates
2017e Operating Estimates 2017e Unit Production Costs (per pound of copper) North South America America Indonesia Consolidated Cash Unit Costs (1) Site Production & Delivery (2) $1.59 $1.57 $1.56 $1.58 By-product Credits (0.16) (0.14) (1.96) (0.65) Treatment Charges 0.11 0.21 0.26 0.19 Royalties & E
Slide 23: 2017e Quarterly Sales
2017e Quarterly Sales Copper Sales (million lbs) Gold Sales (thousand ozs) 1,200 750 500 610 1,020 432 250 375 900 942 940 182 809 0 1Q17 2Q17 3Q17e 4Q17e Note: Consolidated gold sales include approximately 17k ozs in 1Q17, 40k ozs 600 in 2Q17, 36k ozs in 3Q17e and 57k ozs in 4Q17e for noncontrollin
Slide 24: Sensitivities (US$ millions)
Sensitivities (US$ millions) 2018e Operating Change EBITDA Cash Flow Copper: (1) +/- $0.10/lb $360 $280 Molybdenum: (1) +/- $1.00/lb $50 $45 Gold: (1) +/- $50/ounce $115 $65 Currencies: (2) +/- 10% $140 $100 (1) Impacts as noted for changes in commodity prices for the period 2018e (2) U.S. Dollar Ex
Slide 25: PT-FI Mine Plan
PT-FI Mine Plan PT-FI’s Share of Metal Sales, 2017e-2022e 2017e – 2022e PT-FI Share Total: 6.2 billion lbs copper Copper, billion lbs Annual Average: 1.0 billion lbs Gold, million ozs 2017e – 2022e PT-FI Share Total: 9.0 million ozs gold Annual Average: 1.5 million ozs 2.4 1.6 1.5 1.3 1.2 1.2 1.2 1.
Slide 26: FCX Debt Maturities as of 6/30/17
FCX Debt Maturities as of 6/30/17 (US$ billions) $8 Total Debt & Cash at 6/30/17 FCX Revolver $ - Senior Notes 13.9 $6 Cerro Verde Credit Facility 1.5 Total Debt $15.4 Consolidated Cash $ 4.7 $4 $2.9 $3.0 $2.8 CV Non-recourse $2 $1.9 $1.5 CV Non-recourse $1.6 5.40% & CV Non-recourse 5.45% $0.7 $0.8
Slide 27: Adjusted EBITDA Reconciliation
Adjusted EBITDA Reconciliation (in millions) 12 Months Ended 2Q 2017 6/30/2017 Net Income Attributable to Common Stock – Continuing Operations $260 $1,011 Interest expense, net 162 697 Income tax provision 186 538 Depreciation, depletion and amortization 450 2,075 Net (credits) charges for drillship