Ladies and gentlemen, thank you for standing by. Welcome to the Freeport - McMoRan Third Quarter Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. I would like to hand the conference over to Ms. Kathleen Quirk, President and Chief Financial Officer. Please go ahead, ma'am.

Great. Thank you. And good morning, everyone. And welcome to the Freeport McMoRan conference call. Earlier this morning, we reported our third quarter 2021 operating and financial results and a copy of today's press release and the slides are available on our website at fcx.com. Our conference call today is being broadcast live on the Internet. Anyone may listen to the call by accessing our website homepage and clicking on the webcast link for the conference call. In addition to analysts and investors, the financial press has been invited to listen to today's call and a replay of the webcast will be available on our website later today. Before we begin our comments, we'd like to remind everyone that today's press release and certain of our comments on the call include forward-looking statements and actual results may differ materially. We'd like to refer everyone to the cautionary language included in our press release and presentation materials, and to the risk factors described in FCX's SEC filings. On the call with me today are Richard Adkerson, our Chairman and Chief Executive Officer, Mark Johnson, our CEO of Indonesia, Josh Olmsted, Chief Operating Officer for the Americas, Steve Higgins, our Chief Administrative Officer, Rick Coleman, who runs our engineering and construction business, and Mike Kendrick who runs our Molybdenum business. I will start by briefly summarizing our financial results, and then we'll turn the call over to Richard, who will go through the materials in our slide presentation materials. After our formal remarks, we'll take your questions. Today, FCX reported third quarter 2021 net income attributable to common stock of $1.4 billion, or $0.94 per share, and adjusted net income attributable to common stock of $1.3 billion, or $0.89 per share. The $0.89 per share excludes net credits totaling $0.05 a share primarily associated with tax credits related to the release evaluation allowances at PT Freeport, Indonesia, and a gain on the sale of FCX's remaining cobalt business. The details of our adjusted net income are reflected in our press release on page 7. We generated adjusted EBITDA for the third quarter of roughly $3 billion. Favorable results in the third quarter reflect strong execution by our team, growing our production volumes safely, efficiently, and responsibly. Our sales volumes for the quarter for copper exceeded a billion pounds, which approximated our prior estimate in July 2021 and was above the year-ago period. Gold sales of 400,000 ounces were approximately 12% higher than our prior estimate and also significantly above the year-ago period. We benefited from positive pricing for copper. Our third quarter average realized copper price was $4.20 per pound, which was substantially above the year-ago period. Gold prices were slightly below the year-ago period. We also benefited from improved Molybdenum prices in the quarter, where prices nearly doubled from the year-ago period. Net unit cash costs were $1.24 per pound in the third quarter, which was lower than our estimate going into the period. We generated strong cash flows every quarter this year. We generated $2 billion of operating cash flow, which exceeded capital spending of roughly $500 million during the quarter. Our balance sheet is strong. We ended the quarter with consolidated debt of $9.7 billion and consolidated cash of $7.7 billion, which results in net debt of $2 billion. We had no borrowings under our credit facility and have $3.5 billion available. We also announced today some liability management where we called for redemption of our outstanding notes due 2022, that has a total principal amount of $524 million. I now want to turn the call over to Richard, who will be referring to the slide presentation materials. Richard, go ahead.

Thanks to everyone. Thank you for joining our call. Really pleased to be able to review our strong performance for this quarter and where we are with the company. It's a special time. Several years ago in a call, I said if we could be fortunate enough to ramp up our underground production at Grasberg at the same time that we had a positive copper market, it would be a great time for Freeport. And this is really a great time for us. We're going to focus on the future, but just one comment. I was last at the job site two years ago in October, and we were just completing the mining of the open pit and starting to ramp up the Grasberg Block Cave. During this two-year period, our progress has been nothing short of remarkable. I really congratulate our team at the job site, but also in the Americas for what we've been able to accomplish even in the face of all the distractions and challenges that COVID brought on. I hope you and all your family and your colleagues are staying healthy. This thing isn't over. We're keeping our guards up. I encourage you to do the same. Freeport has had a successful program to get vaccines to our people internationally. Over 90% of our people in South America are now vaccinated and 85% in Papua, Indonesia, are vaccinated. We continue to be challenged as some of our operations in the United States face challenges, which is unfortunately across our country. But we're encouraging our people and making some progress there. The good news is we've been able to meet the challenge of COVID and accomplish what we're reporting to you today. Our copper volumes have grown over 20% from a year ago, and that reflects this really exceptional execution of our business. With the prices that we have today, we're generating very strong margins. Our EBITDA doubled from a year ago. Our strong operating cash flows that Kathleen mentioned in the quarter are really exceptional, particularly when you look at our capital expenditures which were only $500 million. Now that we've met our debt target at the end of June, we are now focused on managing these cash flows and that's a happy time for us, looking at investments for our long-term future. At the same time, we are able to increase returns to shareholders and maintain a really strong balance sheet, which will be a real hallmark of our company going forward. Everybody is focused on carbon reduction, climate initiatives, and COP26 coming up next month. It's going to be all over the papers. We published our second report on our climate initiatives. We put many more resources into it. We're really focused on it. As a company compared with other natural resource companies, we have much less scope 3 emissions than other resources, and we're really focused on our scope 1 and 2 emissions, and have a plan to achieve targets that we believe are realistic and achievable. The other 28 members of the International Council on Mining and Metals, which I chair, have signed a commitment to work towards having zero net carbon emissions by 2050. Everybody is working hard on it. We're also continuing to make progress to certify all of our operations with the International Copper Association, Copper Mark, which clearly demonstrates our commitment to responsible production. You recall that I became chairman earlier this year. When that occurred, I made a real commitment to build the kind of board that a company like ours really needs and deserves. We've added four new members in 2021. We added two this quarter, Marcela Donadio and Sara Lewis. That brings us to a total of eight independent directors, which have a broad range of experience. This is going to be a real strength for our company going forward. Underlying all of this is the fundamental outlook for copper, which is incredibly favorable. Copper's role in the economy is changing with global investments in infrastructure, and I know we have a controversy here, but countries around the world are going to build infrastructure. Less-developed countries are going to develop. The world is getting increasingly focused on electrification with modern technology, 5G, and artificial intelligence. A new major element that people are talking about and recognizing now for demand that's coming is all the investments that people are going to be making to reduce carbon. Across the board, those investments are going to result in significant demands for copper. Commodity prices are really supported by supply factors. I mentioned our climate report published in September is on our website. I encourage you all to take a look at it. It details work in a more comprehensive way than we did in our first report last year about how our company will work to reduce greenhouse gas emissions, and how we are approaching climate scenario analysis and reporting in line with recommendations of the task force on climate-related financial disclosures. We are, as a company and as an organization, firmly committed to this. We see it in our everyday lives with the forest fires and our operations in the West and hurricanes on the Gulf Coast, weather patterns all around the world. We all know we need to do this, and we're committed to doing our part for our company. As the rest of the world, the rest of the industry focuses on this, it's going to create a lot of copper demand. We established a target to reduce our greenhouse gas emissions in Indonesia by about 30%, which is a new target for us. We have this aspirational goal of net zero by 2050. Our two big issues are, one, the coal power plant in Indonesia, which requires a lot of power for our massive operations there. We're now investing in a dual-fuel powered plant. We're looking to a future with power generated by biodiesel and initially natural gas, also looking at hydro-power opportunities. So we're working on that. The other major issue is how to convert our big haul truck fleet, massive trucks, diesel driven, to electric or hydrogen powered vehicles. We'll hear a lot more about this in the coming months. We know our company is committed to addressing our emissions and to work with the industry and communities in general to meet the challenges we face with climate change. Copper is essential to that; it is a strategic metal in many respects for the future. The world is getting increasingly electrified, and more than 65% of the world's copper is used to deliver electricity. When you look at electric vehicles, charging stations, and clean power from wind and solar, all of these require significantly more copper to operate than current systems. This is a challenging time for us, but we're serious about this challenge, and it's also a great opportunity for us as a responsible global copper producer. With rising demand, supply is a real issue for this industry. Even today, with the economic uncertainties in China and globally, copper inventories are remarkably low. The London Metal Exchange recently hit a 47 year-low. Shanghai was lower than it's been since 2009. While we will see some new projects that started four or five years ago, delayed by COVID, come on-stream in the next couple of years, that will bring some new copper to the market, beyond that, the coverage is pretty empty in terms of new supply projects of any significance. The world today has opportunities that are smaller and more difficult to develop and produce. Permitting still requires a very long period of time. The industry really has an issue with meeting demand with supply. This is going to require actions across various fronts, more scrap, some substitution. But copper, as a commodity, is much better than any alternatives. In whatever environment you can envision for the world going forward, absent some doomsday situation in the global economy, it's in a situation where copper prices must be strong, and in my view, stronger than they are today. Turning to slide 7, what this means for our company is that with all the work we've done in preparing our business and building our assets, we're going to have significant margins and cash flows. Six years ago, our company was facing real challenges, and we worked our way through that very successfully. While we were facing some tough problems, dealing with an unsustainable debt level at that time, we looked at ourselves and talked about the assets we had in our company, the long-term assets, the quality of the team, our track record, our capabilities, and that's what inspired us all to work hard to get to where we are today. Copper volumes are up 20%, and gold volumes are 50% higher than they were a year ago. It's a great feeling to recognize that the capital and execution risk to achieve these higher volumes that we've been pointing to for so long, is behind us. The higher volumes are coming at low incremental costs. At copper prices from $4 to $5, we would generate annual EBITDA for the next couple of years in the order of $12.5 billion to $17 billion per year. Our capital expenditures, which will include a new project we're discussing in Indonesia, will be in the range of $2 to $2.5 billion a year. That means we're where we want to be, where we're targeting, where we thought we would be. The important part is, now we've done it; we’re not just pointing to it. Slide 8 shows the ramp-up of the Grasberg Mine. This slide looks like this was a straightforward, easy-to-accomplish deal. There are challenges every day at the site. I'd say this is the most complicated mine in the world; when it was an open-pit mine and now industry historically as a historic, large underground mine, it is truly remarkable. In the third quarter, we hit 90% of our target annualized rate. We were on target in September and now we're on track to reach full rates of metal production by the end of the year. Our team in Indonesia just needs to be congratulated and recognized for meeting all of these targets. This is a strategically important milestone for us. It was a real concern back in March 2020 when we were facing COVID, a concern that has turned into a major success. It’s easy on paper, but it’s challenging every day. I had a great meeting with our team in advance of this call. The excitement and morale are exceptional. It's something special for our company. We now look forward to taking the necessary steps to sustain this for the life of the operation. We’re beginning discussions with the government and are getting positive initial responses about extending our operating rights beyond 2041. Because of the ramp-up, we haven't done much exploratory drilling or extension-type core drilling. Our feeling and confidence are that there are more resources beyond what we're developing now. We're explaining that to the government, and initial reactions are positive. I'm confident that we will not face the end of this operation in 2041; that makes no sense for any stakeholder. We need to look at taking advantage of the long-term resources available to us. Slide 9 talks about the growth of our company. A real strength of Freeport is its large reserve base, providing a 30 to 35 year life. Proven and probable reserves give us sustainable operational abilities for a long period. Beyond that, we have resources larger than our reserves that are ground-fuel resources, which is essential in the Americas because that means we are not trying to permit and gain community approval to build new mines. We have great community support. We've involved them in our operations. We share our benefits with them. As a result, we have multiple options for long-term, low-risk growth. I'm really encouraged by opportunities in the United States, where we have strong community support. We have the benefits of strong relationships in communities supporting schools, hospitals, education, and good community workforce. We pay our people well and ensure they have living wages. We're sensitive to them. In Baghdad, northwest Arizona, we have long reserve life due to concentrated projects, where we can double production. Lone Star, you're going to hear a lot about Lone Star in Freeport's future. This resource has a long-term opportunity to be a flagship asset. It’s just across the ridge from Morenci, the largest mine in North America. We believe this can be another long-term Morenci, and it has a great potential. We are having real success with our new oxide mine, initiated this past year and expanding further. We can make it economically viable by using existing production facilities at our nearby Safford mine that is winding down. We're in the process of stripping to access this oxide material, a stripping operation for this enormous sulfide deposit. There's a significant sulfide resource available that will entail big capital projects to build a mill with a desalinization plant. We're looking at multiple alternatives there. Chile is going through a process of the government reassessing how they are going to tax and what the fiscal regime is for mining projects. We're waiting to see how that plays out before we make investment decisions. In the meantime, we are preparing by working with communities for permitting and so forth. This will be a project the world will ultimately need going forward. We've got an exciting project in Europe with our landing copper smelter, where we're going to be recycling electronic equipment. This responds to the desire for such initiatives. It's a way of generating some copper without significant carbon emissions. We’re looking for that and exploring other similar opportunities. Reaching the ore body in Indonesia is special. I was there in the 90s when we were driving a dewatering drift underneath the Grasberg open pit. As we drove into the pit, we found this ore body, surprising our geologists as they explored the south flank of the Grasberg pit. We're working on getting the right mine plan and timing. If you look at slide 10, you can see where it's located. It's an ore body in a separate mineralization zone from our DOZ and Grasberg pit. It's along a fault line and may have resources beyond what we’re aware of. It has some complicated geology and mineralogy, but this is a significant mine. If we aim for 90,000 tons a day block cave, we must understand that it is a big mine globally. This will occur over several years to help sustain our high level of low-cost production from Grasberg, which will yield 500 million pounds of copper a year and 500,000 ounces of gold, when fully ramped up in 2030. Capital expenditures will be spent over several years, utilizing existing infrastructure. I want analysts to consider how they would feel if gold companies reported $500 million a year in copper production. This is a significant opportunity for us. Slide 12 highlights Lone Star. You can see how we are ramping up the oxides, with reserves at about 5.5 billion pounds. The real prize here is sulfides beneath it. We've conducted drilling to identify this, and we're doing preliminary plans for processing. The mineral potential is 50 billion pounds. This is a long-term opportunity, but we're a long-term company. This will be a flagship opportunity for us going forward. Another emerging area is the new opportunities to apply technology to leaching. Freeport was a frontrunner in leaching, going back to the very start of SX-EW leaching. The opportunities globally for traditional SX-EW leaching are diminishing because they have been fully utilized. We’re moving into new rounds of opportunities that involve production with limited capital and low carbon emissions. This ranges from looking at a series of additives and techniques for existing leach stockpiles which will allow us to recover more. We're also excited to leverage our data analytics initiatives started a few years ago to apply to leach technologies, allowing us more informed decision-making. There are several innovative alternatives we are pursuing. Our estimates show we have almost 40 billion pounds of copper stockpiled from previously mined reserves. If we recover a portion of this, it's akin to discovering a new mine. With low capital and operating costs and minimal carbon footprints. Much of this is at Morenci and similar locations. This could even apply to historical mines that have old leach heaps. This is an emerging discussion, and we are well-positioned to capitalize on these opportunities because of our history with these older mines. So stay tuned. We're still evaluating, but this could offer significant potential. We're truly excited about Freeport. Our team is dynamic, and despite COVID, we've been bringing in support and nurturing young people in leadership roles. We have a strong team that inspires each other. We have strong cash flows, and we're committed to being responsible. Our track record of success in developing projects worldwide demonstrates our capabilities. The market outlook is favorable with organic growth opportunities. As a shareholder, I feel optimistic about seeing significant returns ahead. I hope you can sense our positivity about our company and outlook and appreciate your interest. I will now hand it over to Kathleen before we open the floor to questions.

Great. Thank you, Richard. I'm going to cover some brief comments on financial and operating matters and then we'll open up for questions. Starting on Slide 16, we provide additional details on our operating activities. Richard mentioned Lone Star, and the performance there has been really strong. Our operations are exceeding our design capacity, which was originally estimated at 200 million pounds. We're exceeding that now by 25%, and we're continuing to optimize and plan for the next increment of production from oxides as we study longer-term opportunities. Richard mentioned the leach work that we're doing; this is a major focus area at Morenci. We have a significant effort underway to enhance recoveries and we're deploying a variety of initiatives, some of which have already shown results, enabling us to increase expected recovery from some leach materials in the third quarter. This gets us more volumes and allows us to reduce unit costs, spreading costs over a larger pool, which is a real positive thing. We've incorporated some of this into our plans but we are optimistic that additional copper pounds can be added going forward. At Morenci, we’re continuing to work to increase mining rates, targeting 900,000 tons of material per day in 2023. This is a significant undertaking, 30% higher than where we were in 2012. As we reported, we have started up the historic Morenci mill, which had been idled since the first half of 2020, and that’s proceeding now after experiencing some delays, which are largely behind us. We also faced severe weather conditions in the Southwest this summer, experiencing severe wet weather and power issues during monsoon season, but those conditions are behind us as well. I want to echo what Richard said about our team in South America. The team has overcome significant challenges related to the pandemic while operating at about 95% of capacity over the last several months, despite ongoing mobility restrictions. Our team has shown impressive creativity and management to navigate these challenges safely. Looking forward to 2022, we are optimistic that government restrictions can be lifted safely, allowing us to return to a more normal operating environment, which will enable higher rates at Cerro Verde. At El Abra mine in Chile, great progress is being made. We're increasing the stacking rate of material that we previously curtailed during 2020, and we will be looking to sustain production in the 200-250 million pound per year range while potentially expanding further. Richard mentioned the solid results at Grasberg. The team there continues to deliver excellent results quarter after quarter, and we expect to be at our quarterly run rate for metal production beginning in the fourth quarter. For the next several quarters, we project that the mill will run at about a 175,000 tons per day until 2023, when we install the new SAG mill, which is currently under construction. This will allow for higher rates as we ramp up the Grasberg Block Cave and the Deep MLZ while making room for the Kucing Liar project that Richard mentioned earlier. A lot of talk currently revolves around inflation. Our team is focused on cost management and efficiency projects. This includes extending equipment lifecycles, improving energy efficiency, and efficiently implementing maintenance practices while utilizing technology. Like everyone else, we have experienced some cost increases. These have primarily been associated with rising energy prices, with lesser impacts from consumables like steel, sulfuric acid, and freight costs. We really appreciate our global supply chain team for their outstanding work in keeping operations stocked with critical supplies and ensuring business continuity in these uncertain times. I will also note that Molybdenum prices have been strong, which offsets some of the inflationary pressures we have seen on the cost side. Turning to slide 17, we provide an update of our activities with the Greenfield smelter we're developing, working closely with PT Smelting to expand the facility. We're focused on completing this project as efficiently and timely as possible. We have advanced the engineering and commercial arrangements for it and are preparing the land for construction. You may have seen in press reports that the president of Indonesia recently visited the site for a groundbreaking ceremony, indicating the significance of this project to the country. We have a billion-dollar bank credit facility in place for PT-FI to use for advancing the projects. We plan to secure additional debt financing for the project at attractive rates given the project's long-term potential. As we discussed before, the long-term costs for financing the smelter will essentially be offset by a phaseout of the 5% export duty, making the economic impact to PT-FI negligible. This project is being shared, with 51% owned by our PT-FI shareholder, MIND ID, and the balance by FCX. Regarding our volumes, as Richard mentioned, we have great success in execution. Our three-year outlook listed on Slide 18 is generally consistent with our previous guidance, with minor adjustments made to the fourth quarter of 2021. You'll see our plans are on track. We show on Slide 19 the strong cash flow generation of this business. We've significant free cash flow generated using our volume and cost estimates and prices ranging from $4 to $5 copper while holding gold flat at $1,800 and Molybdenum at current prices around $19 per pound. The significant growth in our volumes, with low incremental costs, demonstrates that our projected EBITDA ranges from $12.5 billion annually for 2022 and 2023 at $4 copper, increasing to $17 billion at $5 copper, as Richard mentioned. Our operating cash flows, net of tax, range from $9 billion to over $12 billion, which provides significant cash flows not just to invest in our business and fund initiatives but also to increase capital returns to investors. Our capital spending plans are detailed on slide 20. You'll see here that we reduced our outlook for capital spending from $2.2 billion previously, now to $2 billion, which excludes the smelter investment. This reflects timing issues in getting projects going, with some of the investment falling into 2022. We have also included our forecast plans to commence development of the Kucing Liar ore body that Richard mentioned previously. We're looking at $9 to $12 billion in operating cash flows with CAPEX below $3 billion. This translates to very strong free cash flow. We have growing volumes, a strong market outlook, and low capital requirements, allowing us to reduce our net debt by nearly $6 billion over the past 12 months. We're now down to $2 billion in net debt. I know many of you recall a time when this was multiples of that, so we're in a fantastic situation from a balance sheet standpoint with extremely strong credit metrics. This positions us well for future investments and increasing payouts to shareholders. The last Slide 22 refers to our financial policy, centered around our strong balance sheet. The combination of a robust balance sheet and growth in volume will support a strong position. Earlier this year, our board established a policy that provides for up to 50% of free cash flow used for shareholder returns, with the remaining available for growth and further balance sheet improvements. With the achievement of our net debt targets, we look forward to implementing this policy. We expect our board will determine the structure and size of additional payouts to shareholders with our annual results, and this will be updated and reviewed periodically. That concludes my remarks. We look forward to reporting our progress and continuing to build momentum as we move forward. Operator, we'd now like to turn the call over for questions.

Thank you. Ladies and gentlemen. We will now begin the question-and-answer session. The first question comes from the line of Michael Glick with JPMorgan. Your line is now open.

Good morning. Just on the cost side, the trajectory in Q4 looks good as Grasberg ramps. But relative to the trajectory in Q4 and really into '22, how should we think about inflationary pressures given what's happened with coal in Indonesia, freight power, particularly in Europe and Spain, diesel consumables and labor as well? Are there any annual contract resets we should be mindful of going into 2022?

We've built into our projections current levels of energy costs. We do have a coal contract in Indonesia that is done annually. But for the most part, our energy costs are floating with the market. Because of the volume increase that we're expecting next year, we have a big fixed cost business, so we're expecting this to come at a low cost. We project that our unit costs will decline year-on-year from '21 to '22, along with additional growth. While inflation is a factor, it is being managed well, with higher volumes produced at low incremental costs helping us drive costs lower even amid rising inflation.

Great. Thank you.

Yeah. Michael, I raised this question with our team in preparation for this because, quite frankly, when I saw the out years, I was pleasantly surprised by what we're expecting. Despite everything you're reading in general about these matters. Currency rates are benefitting us, and these background credits are significant. Our team has done a stellar job in managing operations. We benefit from the integrated management of our Americas business. We operate all the mines as one business and maintain excellent relationships with suppliers. Some costs are correlated to copper prices, but I found our projections to be better than I expected, frankly.

Awesome. Thank you.

Our next question comes from the line of Emily Chang with Goldman Sachs. Your line is now open.

Good morning, Richard and Kathleen. My question is just around capital returns. You have clearly surpassed your net debt target here. Could you give us color on what's driving the hesitation around accelerating this announcement? Is it macro uncertainty you talked a bit about earlier, or are you still balancing the cadence of growth projects over the next couple of years before announcing a return? Thank you.

Usually, it's just more a question of how quickly this is developed. When we set the policy, we anticipated meeting our debt target sometime in the future. It happened much quicker. The business has performed well. We've added new board members and have moved on a faster track than we originally anticipated. This is a good situation, but it's just a matter of how we proceed accordingly.

There's no hesitation, Emily, we just need to implement it.

Yes.

Appreciate it; looking forward to it.

We are too, Emily. Thanks.

Our next question comes from the line of David Gagliano with BMO Capital Markets. Your line is now open.

Hey, thanks for taking my questions. There’s a lot going on here. I wanted to focus on the leaching potential itself and opportunities. Specifically, I wanted to ask about the Kucing Liar project. If you could discuss its capex cadence over the next 10 years and the primary developmental risks as you see them today. Again, I know it's early days, but could you share insights on the geology and mineralogy challenges?

David, on the capex, like our other block caves, it will be spread out over a long period of time, starting next year over an approximate 10-year horizon. The production will be sequenced in line with our mill availability. But Mark, if you'd like to provide additional context?

Thanks, David. The Kucing Liar operation will have a similar geological setting to the Deep MLZ, benefiting from lessons learned there. We've planned to utilize hydrofracking technology, leveraging geotechnical knowledge to manage risks effectively. We've adjusted our mine planning approach here to focus on higher-value materials that can be processed at our current mill. This provides a much more straightforward process compared to previous plans that had overly complex metallurgy.

Thanks very much for that insight. Just to clarify on the projected capex and the timing of spending, should we expect the majority in the latter half of the decade? Is that reasonable to assume?

Yes, that is an accurate understanding.

It's consistent over time. Most of the development will progress consistently without significant spikes.

Got it. Thank you for the clarity.

Our next question comes from the line of Chris LaFemina with Jefferies. Your line is now open.

Hi, Richard, hi Kathleen, how are you?

Thanks, Chris; doing great.

Just a follow-up on the KL project? It sounds like the gold grades there are significantly higher than they are at Grasberg Block Cave and the DMLZ, and that the copper grades are similar. Is this a project where we should expect operating costs to be at least as well, if not lower, than what you're going to get from the two current block cave projects?

The answer is yes, operating costs are indeed expected to be lower.

What should we also think about it in terms of extending the mine life of the Grasberg Block Cave, or should we expect it to operate concurrently with both until we maximize every production opportunity?

This fits well with changes in our existing mines and serves as a sustainability project as production will be ongoing rather than primarily growth-focused.

To add, we project up to milling capacities of around 240,000 tons per day, adjusting as grades at the current projects decline while production from KL comes online.

To put that in context, back in the 1990s, when we were designing the Grasberg open pit, we anticipated a 120,000 tons per day milling rate. Over time, the value of this ore body will allow us to double from that to 240,000 tons of throughput.

That's very insightful; thank you. Just to shift gears slightly, during the last five years, you faced challenges with balancing the balance sheet while developing those two difficult underground projects in Indonesia, and navigating negotiations regarding ownership. The way the company has turned things around is commendable. Now, you have a robust organic growth pipeline that appears to be underappreciated. As you develop these projects, how do you foresee the catalytic leaching technology affecting supply growth in the industry? Should we be concerned about copper supply-demand balance in light of such advancements?

That's been a question I've been posing to our team from the start. While this represents a tremendous opportunity, it needs to be balanced with effective management. People are pursuing various technologies, but I wouldn’t expect it to be as much of an industry game-changer as fracking was for the oil and gas sector.

That's great; thank you very much.

Our next question comes from the line of Lawson Winder from Bank of America Securities. Your line is now open.

Hi, good morning, and thank you for the update. I’d like to touch on your ESG efforts, particularly in Indonesia. It's fantastic to see you're targeting a certain percentage reduction in emissions by 2030. How do you approach the costs associated with that? What's the estimated cost that you have factored in to achieve those targets?

That’s a very good question and an often underappreciated factor in our industry. We're particularly focused on this within ICMM, as we have the 28 largest mining companies representing about a third of the global mining industry making this commitment. For Freeport, because of our limited scope 3 emissions, it’s not as large of a challenge compared to some others. However, we do not yet know the costs to achieve our goals and there will be significant investments required. I've met with executives in the industry to consider designing larger equipment suitable for our operations. The technology is evolving but costs will certainly be involved. Our major effort now is in converting the coal plant in Indonesia, and that is one key priority.

Furthermore, with the transition from surface to underground mining, we’re focusing our energy on ore rather than waste removal. This transition in mining will lead to efficiency improvements as Richard pointed out, along with potential electrification across our operations.

We really need to address this juxtaposition within the copper business, balancing increased copper demand with considerations for carbon emissions. We recognize that overall, this may become a significant barrier for future supply development.

Thank you for your thoughts.

Our next question comes from the line of Orest Wowkodaw from Scotia Bank. Your line is now open.

Yes. Good morning. I was wondering if you could provide some details on the potential timeline for the Baghdad concentrator expansion. What are the timeframes involved for permitting something of that scale? And in terms of the Lone Star expansion, is it fair to say it's likely we wouldn't see any significant capex for either in 2022?

We will have capex for Lone Star with its oxide expansion; we started at a certain level and will step up. Kathleen, would you provide additional context?

Yes, it will be a small amount of capital in 2022. For Baghdad, we are advancing feasibility studies over the coming years; probably still five years out for production at that point. Thus, meaningful capex for it is potentially a couple of years away. However, we are focused more on the growth through lower capital-intensive operations, including automation and leaching technologies that enable us to maximize output.

I want to emphasize what Kathleen mentioned about Baghdad. Historically, higher copper prices would have prompted new production to come online faster. Now we are working on further feasible executions even though we remain five years out from decisions but at the same time, we are tapping into pre-existing wells of resource. Thus, we must layout the correct framework for developing this long-range project and its value, retaining the necessary investment lines.

I absolutely agree with that. Richard, just as a quick follow-up regarding the capital allocation framework. Where does the smelter capex fit into the discussion regarding the overall framework for returns? Is that excluded from the free cash flow formula?

It's excluded. Keep in mind that it’s a PT-FI project and it's significant. I was focused on designing this back in 2018 for consolidation. The smelter costs will impact PT-FI's obligations through tax and tax calculations. The positive momentum we have cultivated with the government and gain from various stakeholders makes this initiative forward-thinking and fits into our broader objectives.

Thanks, Richard; appreciate that.

Our next question comes from the line of Carlos with Morgan Stanley. Your line is now open.

Yes. Thank you very much. Good morning to both Richard and Kathleen. Just on KL. How much, if anything, of the estimated 500 million pounds of copper there would be incremental? Or would 100% be displacing existing production? Additionally, as you negotiate for the potential extension of rights in Indonesia, will the government likely seek a higher stake?

Carlos, we give a five-year outlook for production from PT-FI in our press releases, and this will help you gauge the prevailing trends. With respect to your second question, it's still early in discussions but we have initiated conversations with government officials about it, along with our partner MIND ID. Everyone recognizes the mutual benefits of working together. While a larger government stake may be desirable for them, we have to balance that against our planned investments that will enhance production and how costs will be shared.

I understand. Thank you.

Importantly, KL's economic fundamentals are not dependent on any extension of contracts.

Our next question comes from the line of Brian McArthur with Raymond James. Your line is now open.

Hi, good morning. Richard, you already answered my question, so I’ll pass. On the Molybdenum side, things are certainly improving. I see Climax has come back a bit. What’s your strategy going forward for Molybdenum, particularly in terms of ramping up production there as well as at Sierrita, which is known for its big Moly credit? Why hasn't it gotten fully ramped up?

We benefited at Freeport due to significant investments made in the Molybdenum business prior to our acquisition of Phelps Dodge. We've effectively leveraged our processing capabilities and improved outputs from our operations in North America and South America very effectively. We expect Molybdenum's price to reflect higher metal prices into the future and anticipate substantial cash flow from that business. Its strategic importance remains essential for us.

We do have opportunities to increase primary Moly production at the Climax mine. If you consider the growing copper deficiencies, they could parallel those seen in Molybdenum. We want to be positioned to meet that demand with our qualitative products. We're focused on mine stripping and aligning our outputs with market needs.

At Sierrita, we’re ramping back up in alignment with our mine plan and further stripping will be matched with resource availability. The focus is primarily on optimizing value to align closely with Molybdenum pricing and market demand.

Thank you very much.

Thanks, Brian.

Our next question comes from the line of Alex Hacking from Citi. Your line is now open.

Thank you, Mike. My question is already answered regarding KL. So I’ll pass. Thank you.

Our next question comes from the line of Michael Dudas from Vertical Research. Your line is now open.

Good morning, Richard, Kathleen. It’s great to hear about the positive relationship with the Indonesian government. Could you share additional insights about what you’re observing in Peru with the new administration, potential developments in Chile's fall elections upcoming issues from Washington that may impact the mining sector or potential investments?

I must be cautious with my comments on these topics. Chile is facing considerable uncertainty politically, with widespread discussions surrounding social programs and governance initiatives tied to the upcoming elections. The situation in Peru is historically complex, with President Castillo addressing the need for increased financial contributions from miners. However, after discussing with his administration, I felt optimistic about the potential to find ground for collaboration on this front.

I appreciate your insights, Richard.

The perceptions of our operations at Cerro Verde allow us to build on great community relations and improve stability.

Absolutely; I feel optimistic given the groundwork we’ve laid. We hope to find common ground with government stakeholders for long-term vision.

Thank you. And now we’ll turn the call over to management for any closing remarks.

Well Kathleen, I thought going into this call, with such a good quarter, it would be a short call. I appreciate your good questions and engagement. There are a lot of complex subjects to address. I woke up this morning feeling great but then opened my screen to see market activities. It’s a reminder we face daily in business. But we couldn’t be more positive; I hope my enthusiasm is shared by all of you throughout the company. We are a long-term organization and have no pressure to engage in any aggressive M&A or investment actions. Instead, we’ll focus on what we’ve accomplished and where we’re headed. Thank you all. If further questions arise, please connect with David or myself and we will respond as needed.

Ladies and gentlemen, that concludes our call for today. Thank you for your participation. You may now disconnect.