Ladies and gentlemen, thank you for your patience. Welcome to the Freeport-McMoRan Fourth Quarter Conference Call. At this moment, all participants are in a listen-only mode. We will have a question-and-answer session later. I would now like to hand over the call to Ms. Kathleen Quirk, President. Please proceed, ma’am.

Thank you and good morning. Welcome to the Freeport-McMoRan conference call, and happy 2023 to everyone. Earlier this morning, we reported our fourth quarter 2022 operating and financial results, and you can find a copy of our press release and slides on our website at fcx.com. This conference call is being broadcast live on the internet, and anyone can listen by visiting our website and clicking the webcast link for the call. In addition to analysts and investors, the financial press has been invited to join us today, and a replay of the webcast will be available on our site later today. Before we begin, I want to remind everyone that our press release and some of the comments made during this call may contain forward-looking statements, and actual results could differ materially. I encourage everyone to review the cautionary language in our press release and presentation materials as well as the risk factors in our SEC filings. Joining me on the call today are Richard Adkerson, our Chairman and CEO; Maree Robertson, our CFO; Mark Johnson, Chief Operating Officer of Indonesia; Josh Olmsted, Chief Operating Officer for the Americas; Mike Kendrick, who leads our molybdenum business; Cory Stevens, who heads our Engineering and Construction and Global Technical Services Group; Rick Coleman, who is involved in all our construction projects; and Steve Higgins, our Chief Administrative Officer. Our management team is fully present today. Richard will start with some opening remarks, and then he will hand it back to me so we can cover the slide materials before opening the call for your questions. Richard, over to you.

Yes. Thanks, Kathleen. Thank you all for joining us today. As Kathleen said, after my overview remarks, which will be brief, she will review our results for the quarter. It was a strong fourth quarter. The numbers speak for themselves. It reflects the performance of our global team, and I appreciate everybody’s hard work. I read one of you said this morning in a report that mining is a tough business, and it certainly is. Nobody knows that, I think, better than me. But what we’ve done and is reflected in our results for 2022 and particularly the fourth quarter is remarkable. Most of you, who know our business, and maybe all of you do, recognize the need to look at Freeport into two major segments. Our operations in Indonesia by PT Freeport Indonesia are characterized by very large volumes and very low costs because of the grades and the gold content; the largest gold mine in the world is a byproduct. As you’ll see in the fourth quarter, it operated as the world’s second-largest copper mine with a net unit cost of $0.06 a pound. Our business in the Americas is quite different. We have among the largest mines in the world; the mines have low grades, and there’s much more material to be processed, to be mined and processed to recover the copper, and it’s an operation that gets challenged by low copper prices and factors like inflation. But when you look at the results and what our team has done this year, it’s been very positive. It’s also characterized by having some large future brownfield expansion opportunities, which is particularly meaningful given the situation of copper in the world. In Indonesia, it was just rock-solid performance. We’ve been operating underground there for over 40 years now. We’ve been investing in the current underground operations that we have been ramping up over the past three years to become the largest underground mining operations in the world for the past 25 years. It just reflects the long-term nature of our business. The last three years have really been notable. We completed mining the Grasberg open pit, which had been the bulk of our operations since the discovery of the ore body in the late 1980s. We completed mining that pit at the end of 2019. Then early in 2020, we faced COVID. And for years, this transition was viewed as a risk overlying Freeport’s business. And it’s just a major accomplishment that we’ve reached our targeted mining and metal production targets, that is what’s arguably the most complicated mine in the world. And it’s all a result of the hard work and accomplishments of our team there; I’m very proud of them. The Americas business has done very well in meeting the challenges that we’ve had there, dealing with inflation, and dealing with a period of low copper prices. We have issues that are challenged in terms of getting workers for our operations in the Americas. Our operation in Peru was facing a severe challenge with COVID, and they managed it very well. The political situation in Peru right now is very complicated. There are protests throughout the country. Our team is doing very well. We are continuing to manage housing, feeding our people, and continuing our operations. We are slowing down a bit to make sure we have supplies for the long run, but we have support from our workforce and fundamental support for our business from the local community there because we’ve established such a great relationship with them. So, as we look out now, trying to predict short-term copper prices is very difficult; we actually don’t even try to do it ourselves. We deal with short-term negative movements when they occur by having a strong balance sheet and a conservative financial policy. It’s actually good to see right now that market sentiment going into 2024 is much improved over going into the fourth quarter. But we are on the outlook for the well-known risks that the world faces today, and we’re prepared to deal with it. We are a long-term business. And everything we do is focused, not on the short run, other than to protect ourselves by having a strong balance sheet, managing our business in the right way, but our success is going to be measured over the long run. And copper’s long-run outlook is increasingly positive based on the fundamentals of demand and supply. We committed to copper 20 years ago when we were a single asset company; the rationale for acquiring Phelps Dodge more than 15 years ago is being reinforced today by the combination of this really special mine we have in Indonesia and the global operations and growing operations we have in the Americas. It was the right decision 20 years ago to focus on copper, and it’s the right decision now.

Thanks, Richard. We’ll start on Slide 3, which summarizes our performance for the full year 2022. And just a couple of notes on the fourth quarter from our press release. We finished the year with a strong fourth quarter. Copper and gold sales exceeded our October guidance. And our consolidated unit net cash costs of $1.53 per pound in the quarter were better than our estimates going into the quarter. With average copper realizations in the fourth quarter of $3.77 per pound, we generated strong margins with fourth quarter adjusted EBITDA at approximately $2.25 billion. Looking at the year, we are proud of the performance of our team that stayed focused on effective execution and on driving results in a volatile macroeconomic environment. After successfully growing our volumes in 2021 by 19% for copper and 59% for gold compared with 2020, we achieved another year of growth in 2022, with 11% higher copper sales volumes and a 34% increase in gold volumes. Our team in Indonesia has successfully and materially grown production levels in a sustaining large-scale, low-cost production at the world’s largest underground mining complex. In the Americas, our teams in Peru and Chile proved resilient in restoring production during 2022 that had been impacted by the pandemic. And our teams in the U.S. maintained production at 2021 levels despite ongoing labor shortages, and we also made significant advances on new technologies to enhance value. For the year, we generated $9.5 billion in adjusted EBITDA, and that was a year of dramatic swings in commodity prices and cost drivers. Our operating cash flows for the year, which were net of $1.5 billion in working capital requirements, was in excess of our capital investments in our operations, and we nearly tripled our cash return to shareholders, pursuant to our performance-based payout policy. We ended the year with net debt, excluding the debt associated with our smelter, of $1.3 billion, and that’s substantially below the level of mid-2021 when we initiated our performance-based payout policy. On Slide 4, you’ll see we’ve listed notable accomplishments during the year. In addition to driving value in our operating and financial areas of achievement, we’re very proud of our work with third parties to validate all of our operations under the Copper Mark standards, the measurable progress we’re making on our climate initiatives, and the expanded disclosures we’ve developed to enhance transparency and accountability. We’ll talk about markets next, and we’ve got a slide on Page 5. We experienced significant volatility, as many of you have seen, during 2022, with copper prices trading from a high of $4.87 per pound earlier in the year, falling to $3.18 per pound midyear, and partially recovering to $3.80 per pound by year-end. Prices continued to move higher in early 2023 to a level currently approximating $4.25 per pound as several of the macroeconomic clouds began to lift. We discussed on prior calls that the dramatic moves in 2022 have been largely based on sentiment rather than fundamentals. The facts are that the physical markets for copper have remained tight even during a period of weaker economic data coming out of China, and that’s evidenced by the low levels of available copper inventories throughout the year. At the same time, copper’s importance in the economy continues to grow as a result of the intensity of use in clean energy applications and the global acceleration of electrification. We believe we’re still in the early innings of a broad-based secular driver of long-term demand. The ability of the industry to meet this multiyear period of growing demand continues to be challenged, leading to large market deficits in the future. You read about these challenges every day, and it’s getting harder, not easier; higher long-term prices are needed to incentivize new supplies. We’ve lived through the ups and downs in the copper market. We’ve effectively managed our operations and balance sheet during periods of volatility, and we’re prepared for this, but we believe the long-term fundamentals point to a real step change in how copper is valued in the economy. Turning to our reserve position on Slide 6. We benefit from a geographically diverse high-quality portfolio of copper mines with significant exposure to gold and molybdenum. Our strategy, as Richard discussed, is centered around being foremost in copper. And we benefit from a portfolio of assets with characteristics that are very difficult to replicate. We show our reserve position at the end of 2022 with over 100 billion pounds of proved and probable reserves. We have an average reserve life of over 25 years. We added twice the amount of reserves we produced in 2022, principally at our U.S. mines in the Morenci and Safford Lone Star districts where we’re focused on future growth. In addition to proved and probable reserves, we have enormous mineral resources of 235 billion pounds of copper. Over half of this is located in the U.S., where we have established operations, a great track record, and a valuable franchise. We’ll continue to work as we go forward to convert these resources into viable mine plans and future production. It’s an extraordinarily valuable resource position in a world that’s going to need more copper in the future. We wanted to focus a little bit on molybdenum on this call. And on Slide 7, we’ve got some information about our molybdenum business. We’re a leader in that industry. We’re the world’s largest producer by a significant margin. And with the price move over the last couple of months of over 50% in molybdenum, we thought you’d be interested in learning more about our business. We produced 85 million pounds of molybdenum in 2022, and that’s comprised about 60% from copper mines as a byproduct and the balance from two primary molybdenum mines that we operate in Colorado. And these are the only primary molybdenum mines that are currently operated in the United States. We also operate downstream processing facilities to produce products that are used in a broad range of metallurgical specialty steel and chemical applications. The price moved from $18 per pound at the start of the fourth quarter to over $30 per pound currently has been driven by some of the same supply issues that have impacted copper. In addition, demand drivers continue to be supported from the oil and gas, aerospace, and power generation sectors. So, we note on this slide, the impact of a $5 change in molybdenum prices is material at $400 million in annual EBITDA and $375 million in cash flow. And the recent move of over $10 per pound, if sustained at a higher price, adds additional leverage to our results. Looking at our operating stats for 2022 on Slide 8, you’ll see our sales for the year were about 35% from the U.S., 28% from South America, and 37% from Indonesia. In the U.S., our sales were similar to 2021 levels, and we grew sales volumes by 10% in South America and by 20% in Indonesia. In the U.S., we’re continuing our focus on productivity, given the current limitations on adding to our workforce. We’re taking advantage of technology advancements and opportunities to expand production from leaching at low incremental cost, and we’re planning our next phase of growth, as we’ll talk about in a few minutes. As discussed, the biggest resource position and source of long-term growth we have is a real opportunity in the United States. In South America, both Cerro Verde and El Abra grew production in 2022 in a complex social and political environment. After successfully recovering from the pandemic-related interruptions in 2022, our team in Peru is now dealing with challenges associated with civil unrest that you’ve all read about. We’re prioritizing the safety and security of our workforce. We’re navigating disruptions to transportation routes and supply chains. To date, the impacts have not been significant, but the situation is dynamic day by day, and we’re watching it very carefully. The bottom of the chart shows the 2022 cost performance. As we’ve talked about on prior calls, we experienced significant inflation pressures across the business during 2022, particularly for energy and other commodity-related consumables, and in the second half of the year, started to see inflation from a rising cost of materials, supplies, and services. The situation started to improve in 2022 with a number of the commodity-related consumables, but we’re still dealing with costs in excess of historical levels. If you look at the average cost for the year at Grasberg of $0.09 per pound, that is remarkable, particularly in the context of this cost environment. Richard talked about the significant success story of the Grasberg transition, and we’ve got some details on Slide 9, significant success for not only Freeport but also something for the global mining industry to be proud of in the country of Indonesia. We started planning for this transition over 25 years ago, and the team has just done an outstanding job. We benefit from the fact that several from the team who were involved in the planning of this project, including Mark Johnson, who’s on this call, stayed with it over this period. And over the years, we’ve added great talent to our team with experts from around the world. The success of this project and the mutual respect built over the years between Freeport, the government of Indonesia, and local communities has established a really strong foundation for the future. We’ve got the opportunity with this resource to plan a new phase of development longer term and are continuing to discuss with the government the opportunity to extend our long-term partnership beyond 2041. If you go to Slide 10, we’ve got an update on our smelter project. This is a key feature of our commitment to the Indonesian government, which is to expand domestic copper smelting and refining capacity in Indonesia. We’re making really good progress on constructing the new smelter in Eastern Java; it’s near our existing smelter, PT smelting at Gresik. You can see from the pictures that construction is advancing. We’ve got thousands of workers now on site. We’re working very closely with our EPC contractor to try as much as possible to make up delays that were caused by the pandemic. We reached a milestone of over 50% completion recently, and we are expecting to begin commissioning the smelter during 2024. As you recall, the capital investments for this project are being funded from a successful bond offering that PT-FI completed during 2022. So, we have the funding between the bond offering and a revolver at PT-FI to fund this project. Moving to our growth outlook. This is exciting opportunities for the company, and we continue to plan our next phase of growth. We’ve got the benefit from having multiple organic projects to develop within the portfolio over time. We operate all the mines we have an interest in. We’re able to share experiences, new technologies, operating synergies, and best practices across the portfolio as we develop projects, and we can direct capital across the portfolio to the highest value opportunities. Our proven technical capacity capabilities and management is a notable strength. And importantly, we’ve earned a track record and a reputation for operating sustainably and responsibly. The world, we believe, is going to need all of our projects and more. The project with the shortest lead time is our Americas leach initiative. We’ve talked a lot about it in recent calls. The economics are compelling: low capital intensity, low incremental operating costs, and a low carbon footprint. The new data analytics capabilities we are continuing to apply to prioritize our work streams on the highest value. We’re continuing our work to apply covers to the leach stockpiles because of the benefits that you get from heat retention in enhancing recoveries, and we’ve identified new areas that were not pursued historically. This is a really significant opportunity for us. We’re continuing to target a run rate of 200 million pounds per annum by the end of this year, and success at this level would provide opportunities to scale larger. We’re in a great position to lead this innovation with our long history in leaching and a large inventory to work with. At our Bagdad mine in Northwest Arizona, we’re progressing a feasibility study to double production at that site. We expect to complete the feasibility this year, and we’ll be in a position to assess options on how we time the future development. We started advanced planning to commence construction of a new tailings site that would support the existing operation but would also provide flexibility for the expanded production. As a brownfield expansion, this project could be developed more quickly than a greenfield development. Our Lone Star opportunity is really something special. We’ve been successful in increasing production levels substantially above the original project. We’re really in the early stages in the development of this mine. As we mine the oxide ores more quickly, we’re opening up the opportunity for a major sulfide development long term. The resource is massive. You’ve seen the numbers; 50 billion pounds of potential resource here. We’re doing a lot of drilling. And importantly, it’s located in an established mining district in the U.S. In Chile, we’ve defined the opportunity for a major expansion at our El Abra mine. As we continue to monitor regulatory and fiscal matters in Chile, we’re planning a project to invest in infrastructure, water infrastructure to provide flexibility to extend existing operations and optionality to support a new concentrator. We’re also planning at El Abra to test new leaching technologies in the near term to evaluate the potential for expanded leach production and possibly competing technologies to a concentrator. We’re continuing our development of the Kucing Liar deposit in Indonesia. We’re really gaining a lot of efficiencies from the work we did at Grasberg Block Cave. Like that development, this is a long-term project. We expect to have initial production from Kucing Liar deposit towards the end of this decade. Moving to Slide 12, we provide a three-year outlook for our sales volumes. As we talked about, we achieved two years of growth in copper sales. Currently, our forecast reflects sales in the ‘23 to ‘25 period that are similar to 2022 levels. Our mine production is actually going to be higher than our sales by about 100 million pounds in 2023 and 2024. This is a result of our domestic processing arrangements in Indonesia, where the point of sale has changed from selling concentrate to selling cathodes. A portion of our production will be inventoried until it’s processed and sold through our smelters. Previously, this inventory would have been held by third-party smelters. We’ve got small revisions otherwise to 2023 guidance that reflects the assumption of a continuation of tight labor markets in the U.S. That’s impacted our ability to increase mining rates. The success also in our leach recovery initiative could provide some upside in the U.S. as we look over the next three-year period. In the reference materials on Slide 30, we provide information on our 2023 sales by quarter. The decline in the first quarter is due to the impact of the tolling arrangement in Indonesia. The remainder of the year shows stability with over 1 billion pounds of copper sales per quarter. Regarding the cost outlook for 2023, we’re guiding an average cost of $1.60 per pound for the year, compared to $1.50 per pound in 2022. The site production cost is about 4.5% higher than the 2022 average, resulting from our forecasts of increased average electricity and coal costs and higher power needs, primarily in Indonesia, along with increased costs for equipment, supplies, and labor. Other line items balance this out, including lower royalties and duties due to a recent decrease in our export duty in Indonesia as a result of smelter progress. This outlook also assumes a molybdenum price of $20 per pound in 2023. The current price is $30 a pound, and each $2 change in molybdenum affects our net cash costs by $0.02 per pound. If current prices remain, we would expect to see approximately $0.10 less in cash unit net costs because of that. Recently, inflationary pressures have eased compared to 2022, which is encouraging. We will continue to focus on managing the costs within our control and are pursuing technology-driven improvements to mitigate impacts, especially in the U.S. Getting to our cash flows, we have significant leverage to copper prices. We’ve got on Slide 14, we show modeled results for EBITDA and cash flow at various copper prices ranging from $3.50 per pound to $5 per pound copper. These are modeled results; we use the average of 24 and 25 with current volume and cost estimates and holding gold flat at $1,900 per ounce and molybdenum flat at $20 per pound. You’ll see here that annual EBITDA would range from nearly $9 billion per annum at $3.50 copper, to $15 billion per annum at $5 copper. Our operating cash flows would range over these prices from $6 billion at $3.50 copper to $11 billion at $5 copper. And we show sensitivities to various commodities on the right and input costs. With our long-life reserves and large-scale production, we’re well positioned to benefit from future metals intensive growth trends with prospects for increasing cash returns under our performance-based payout framework. Our capital expenditure plans are summarized on Slide 15. The capital expenditures totaled $2.7 billion, excluding the smelter, in 2022. We’ll note that this was lower than the $3.3 billion estimate we provided going into 2022, and that reflects lead times and our focus during the year to prioritize critical projects. The current forecast for 2023 totals $3.4 billion, and that’s a slight change from our previous estimate of $3.3 billion for 2023. Capital expenditures for 2024 are currently forecast to approximate $3 billion as spending on the Grasberg projects reaches completion. We are always very careful in managing our capital costs to maintain flexibility in response to market conditions while ensuring that our investments are sufficient to support a reliable long-term production profile. Returning to the financial policy that we began to implement in the second half of 2021, it’s really centered on three priorities. The cornerstone of the financial policy is maintaining a strong balance sheet and liquidity. That provides significant flexibility for the future. We’ve been executing on this performance-based payout. It provides for 50% of our free cash flow to be allocated to shareholder returns in the form of dividends and share purchases, and the balance available to invest in our projects. Since commencing the performance-based payout policy in the second half of 2021, we’ve returned about 60% of our free cash flow to shareholders through dividends and share purchases. At the same time, we also further strengthened our balance sheet, providing capacity for funding new projects over time. We did not purchase shares in the second half of 2022 because of the significant change in market conditions and the resulting impact on cash flows in the second half of the year. The improved market conditions will drive increased free cash flow, which will boost shareholder returns, and our future discretionary share purchases will be dependent on our cash flow and overall market conditions. We believe the three priorities of balance sheet strength, allocating cash flows to a mix of shareholder returns, and organic growth will enhance the long-term value of our business. In closing, I just want to reiterate our view about the positioning for the Company, a bright long-term future supported by our attractive portfolio of assets, supported by the fundamentals of the copper business and the positive outlook for the markets we serve. Our team is energized. We’re motivated to continue building long-term value in our business and executing our plans responsibly, safely, and efficiently. And I want to thank you for your attention, and operator, we’ll now open the call for questions.

Our first question will come from Emily Chieng with Goldman Sachs. Please go ahead.

Good morning, Richard and Kathleen. And thank you for taking my questions. I would like to sort of ask around Freeport’s growth appetite. And as you think about the copper price environment and how the market is trending, has anything in your mind changed around how you view Freeport’s need to pursue or accelerate growth plans? There’s clearly been a lot that has changed in the broader macro environment as well. And I wouldn’t mind hearing about how maybe some of the leaching opportunity can play into that and what the potential annual run rate basis could look like when fully developed? Thank you.

Thanks, Emily. With leaching, we’re not constraining ourselves to conserve capital or anything else. We believe this is such a great opportunity for us that we are pursuing it as aggressively as we can, and we are pursuing it on a number of different fronts; some using outside vendors, some doing things on our own, and some in joint ventures with companies. It’s just such a great opportunity to add production at low capital cost and with low carbon. So, it’s not something we’re constraining. The other projects that we have, and Kathleen reviewed them, we have a series of major capital projects that are multiyear large capital requirements. For those, we are working hard to prepare ourselves for them and doing work so that we can go forward. But we are going to wait until the uncertainties that we’ve been facing recently become clearer. As I said, the current sentiment is much stronger than it was three months ago, but there’s still a lot of overhang in the market, as you can see in the market today. So, we are waiting to see that our project in Chile is dependent on the direction the country goes in with this current consideration of its laws and its constitution. So, that is really going to be on hold until that becomes clear. So, we’re not preparing any major change in the first part of 2023 versus what we did in 2022.

Emily, regarding the leaching run rate, we believe that the 200 million pound target we established can be achieved through the operational changes we are implementing. Improvements in heat retention, leaching in previously untouched locations, and directing solutions to enhance recoveries are driven by the data analytics we receive, which guide our daily operations. We think these operational adjustments alone can lead us to our goal. Additionally, the ongoing research and development related to additives could allow us to scale up even further. The 200 million pounds we are discussing really focuses on maximizing our leach stockpiles and moving forward significantly; in recent years, the industry's emphasis has been on concentrating. Now, we are shifting our attention back to leach initiatives, and we have identified some actionable items. I wouldn't describe them as low-hanging fruit, but they are achievable, and we are already starting to see positive outcomes.

Your next question will come from the line of Orest Wowkodaw with Scotiabank.

Just given the uncertainty out there with respect to both Chinese and ex-China markets, can you give us an updated outlook on what you’re seeing from your customers? Are you seeing any indications of slowing demand?

Richard, would you like me to respond to that? Orest, in the residential markets, there are some areas of weakness, but we are still experiencing strong physical demand. We are selling everything we can produce, and we can't increase production to meet customer demand. Overall, I would say the physical market remains healthy, and our insights primarily come from the U.S. since we are a significant player in that market. Generally, the market continues to be strong, and we are selling all that we can produce. If we could produce more, our customers would demand it.

Even looking back to 2022, I mentioned on more than one conference call that there was a disconnect between the physical world we were experiencing with our customers and what the market was doing. The strength of demand has been striking; we had no issue selling our production. There was actually a shortage of wire rod in the United States, and we couldn't meet all the demand. With our copper concentrate customers, including those in China, they were buying everything we produced and actually wanted more. Market sentiment is better now, but our customers remain very positive.

Your next question will come from the line of Chris LaFemina with Jefferies. Please go ahead.

You have $1.3 billion of net debt as of the end of 2022. Your net debt target range is $3 billion to $4 billion. So, I guess, the first question is, is that the range that we should think about, or are you comfortable maintaining net debt below that range? In other words, if you really want to get to $3 billion to $4 billion, how do you get that from here, generating positive cash flow? You can step up the buybacks, maybe accelerate returns. But do we get to a $3 billion to $4 billion range this year, or is that not going to happen?

Well...

The $1.3 billion, go ahead.

No, I was just going to say, Chris, and Kathleen can talk about the details. When we announced the financial policy, as I looked out, I said, the likelihood is cash is going to come in faster than we can spend it just because of the nature of our capital projects being long term. This has happened before at Freeport. On two previous occasions in our history, we got down to zero net debt. This is setting aside the smelter because that’s financed on its own. What this does is by having that cushion between where our debt is and our debt target is, it allows us to readily be able to finance future construction projects. We don’t feel any compulsion to spend money to get the debt up to that target.

Okay. So, should we think of it more as a net debt target of below $4 billion rather than $3 billion to $4 billion?

Well, I think...

$3 billion to $4 billion is the limit. Yes, $3 billion to $4 billion is what we... yes.

Got it. Okay. Good. And then sorry, second question on Grasberg. It looks like you’ve increased your gold production guidance for 2024, 2025, and 2026, but copper volumes remain about the same. So, what’s happening there that leads to an increase in your expectations for gold from that mine over those three years?

Well, while the numbers look simple, the mine planning is complicated. We report the results of our mine planning quarterly. What you’re seeing there is some revisions in mine planning to optimize resource recovery. It wasn’t any target. It’s just the way that the mineralization of these ore bodies fall out as we change future mine plans.

Yes, there were some changes between Grasberg Block Cave and Deep MLZ. And additionally, we’ve been getting higher gold recoveries than we had previously forecasted, and that’s helping us as well. So, those are the main differences.

It’s not about targeting, Chris. We didn't do anything specifically to acquire more gold. When we examine the ore body, we aim to maximize its value. It's an ongoing process, and we communicate the outcomes of that process to you, and that’s what it is.

Your next question will come from the line of Lawson Winder with Bank of America Securities. Please go ahead.

Good morning, Richard. Good morning, Kathleen. Very nice to hear from you both, and thank you for your time and the update today. I wanted to hopefully ask you two questions. Just one on the C1 cash cost guidance for 2023. To what extent might some of these higher costs year-over-year continue into 2024? What is the percentage of those that are more structural as opposed to potentially more cyclical?

You can look at the makeup of our costs. We provide a breakdown on that slide. Labor costs tend to be consistent, while materials and supplies have components that are influenced by commodities and services. Energy costs are more variable, and items like sulfuric acid also show variability. That pie chart gives you a sense of which costs are likely to change, and we offer some insights on factors such as currency fluctuations and diesel costs.

One significant advantage of Freeport that we often mention, though it may not be fully appreciated, is that we manage every mine in which we have an interest. While we do have joint venture partners, unlike other operations where these ventures function as separate entities, we operate on a global scale utilizing our operatorship rights. This positions us as major customers for our suppliers, typically making us one of their largest clients. As these suppliers have been working to transfer their rising input costs, our global supply team, in collaboration with our operations, has been impacted in managing certain of these costs. We have experienced some effects, but it’s a constantly evolving situation. As you may notice, we reported results below our previous quarter's estimate. Some costs are stabilizing while others continue, making it an ongoing concern. We strive to provide the best outlook possible and are committed to operating as cost-effectively as we can.

And then, I wanted to follow up on your comments around El Abra and the plans to advance water infrastructure. Are you considering desalination capacity? Is that what you’re referring to there?

Yes.

Yes. That’s really the only alternative.

Okay. And then what would the timeline be on that?

We’re working on it right now, and we’re structuring, so that we have the alternative of going forward with our current operations and maximizing those or undertaking a large-scale investment in new concentrator there. We’re approaching it to give ourselves the alternatives of going in either of those directions. But we wanted to get started with that because it was going to be required one way or the other.

Yes. And so, we’ve got to go through a permitting process on that as well. So, it’s unlikely we’ll have any material spending on it until a few years out.

It takes time to do it. However, we have made the decision to expand the concentrator. Recently, we decided to proceed with the permitting for the water desalination plant, as we will need it regardless.

Your next question will come from the line of John Tumazos with John Tumazos Very Independent Research. Please go ahead.

Good morning. Congratulations on all the progress in the tough business. Thinking of Slide 11 with the five projects, I realize it takes a lot of engineering resources for each of these projects. Is five sort of the maximum number, or do you have time for a little more? You’re engineering El Abra, but the constitution and taxes and all that stuff is up in the air. So, that’s a big investment in time. You don’t have the Sierrita mill, Chino mill, or an additional Morenci mill projects there. I know you can’t do everything. But a $30-plus moly Sierrita new mill must be very attractive; you’re budgeting 20 and maybe lower for the long term at 15 for your reserves. Is there too much Indonesia in your CapEx and not enough Americas since you’re the biggest U.S. copper producer? And with politics, the U.S. looks better every day. I know that’s a lot of thoughts, but how you fix the projects?

No. And you know it’s a good new story to have this large pipeline of future projects, and I personally believe the world is going to need that copper. Going to your last question first, there is no relationship between Kucing Liar and projects in the U.S. It doesn’t bump out projects. It doesn’t prioritize anything. It’s something that fits right in. It will be financed by PT-FI out of cash flows from PT-FI. It will support our volumes there through our current operating rights to 2041. We’re talking with the government about extending those. There are opportunities for Kucing Liar beyond that. We believe, although we haven’t been engaged in drilling exercises in the Grasberg Block Cave and Deep MLZ and who knows what else is down there because we really haven’t fully drilled to explore future opportunities. You know the thing about Grasberg, ever since we discovered it, it keeps getting bigger and bigger and bigger. But that’s on its own; there is no effect on what we’re doing at Kucing Liar with what we do in the United States. We have the financial resources to do in the Americas, the United States and South America. The ones we’ve listed are the ones we believe are the largest, most significant executable projects initially. The Bagdad expansion is a straightforward doubling of mill capacity, and we’ve dealt with water issues and so forth.

That will also include moly, John, from Bagdad.

Bagdad has molybdenum, and its main challenge is attracting mine workers from nearby remote communities. While the project itself is manageable, we need to address the worker housing situation. As the housing market stabilizes, this project will be ready to initiate. El Abra's progress depends on government decisions. Lone Star shows potential for becoming a significant operation for Freeport, and we aim to optimize its oxide ore and explore the large sulfide resource we’ve identified. Additionally, we are evaluating growth opportunities at Morenci, Sierrita, and Chino. It’s crucial to remain focused and avoid a haphazard approach as these projects offer internal growth, reducing the likelihood of pursuing external acquisitions. The current market makes acquiring resources costly, and the substantial investment required to recover them is significant. Therefore, by developing our existing resources, we can create incremental value for our shareholders rather than for others.

John, in response to your question, I apologize, Richard.

Go ahead. No, go ahead.

I was just going to address your question regarding the molybdenum situation. We have excess milling capacity at our Climax mine. Recently, we've been operating below capacity due to market conditions, but we have initiated a stripping campaign that will enable us to increase production from Climax. Over time, this won't require a new concentrator. The incremental costs are appealing, so we are proceeding with that. As Richard mentioned, we have numerous projects underway. These are our strategic priorities. The leach technology is a near-term project, Bagdad is medium-term, and the Lone Star major expansion is planned for the longer term. We believe the El Abra project is viable and will move forward; it’s just a matter of timing. We're still assessing when to advance that project. Our investment in some infrastructure and water will provide us with options to support an expansion. Our team is focused on these initiatives, and we possess a substantial resource base in the U.S., where we have established operations and community support. We’re well-positioned to meet the future demand for new copper supply, but as you know, none of this can happen quickly.

If I could add one more point. A few years ago, Freeport acquired a drinking water system and a sewage system for Arequipa, the third largest city, as you were expanding the Cerro Verde mill and mine. I believe you might have some short-line rails to reduce truck traffic on the road. Can you confirm that your daily production is between 350,000 and 400,000 tons and that there have been no issues at Cerro Verde? There seems to be a lot of confusion in the media regarding the situation.

Yes. In the past few days, we’ve been operating at around 350,000 tons per day. Before that, we were closer to 400,000 tons. We’ve been running at about 10% to 15% lower to manage our supply issues, and we monitor that daily. I’ll let Richard provide insights on the community situation. In terms of operations, we are continuing our activities, but we have restricted our mill throughput to address the limitations and concerns regarding key supplies.

Yes. I’m glad you asked the question because I wanted to elaborate on what I said about Peru in my opening comments. I think all of you know that the Cerro Verde milling complex is the largest in the industry, with a 400,000-plus per day capacity. The tailings dam will be one of the largest earthen dams ever constructed in the history of mankind, if not the largest. What John is referring to is a number of years ago, we did a community project and invested in a freshwater system for Arequipa, the second largest city in Peru. As we were developing the expansion of the concentrator and tailings dam, we shifted away from building a new dam on the river that runs just outside of the city of Arequipa. We built a wastewater collection and treatment system. And with doing that, we got water for our concentrator and markedly improved the ecology of the river, and that has been very positively received by downstream farmers and the community itself. That’s really helped foster our positive relationship there. Our team there does overall good. Having said that, the situation in Peru is very complicated, and nobody at this point can predict how it’s going to unfold. The motions are very high. The government is reluctant to use extreme steps to deal with roadblocks and disruptions, and this thing is a day-to-day evolution. We’re faced with the problems that caused us to cut back on our production rates to conserve materials and other inputs so that we can continue to operate. We have the ability to house workers on a temporary basis on-site. Most of our workers live in the region of the city of Arequipa, and sometimes those roads have been blocked. So, we’re prepared for it. Our team does a great job in managing things like this over time like COVID. I just wanted to make the point that these concerns that people are raising are directed towards the issues with the government and not directed against us at Cerro Verde and our operations. So far, we’ve been able to continue to operate.

Your next question comes from the line of Michael Dudas with Vertical Research. Please go ahead.

I found your comments about labor and availability interesting. I assume you're referring mainly to the U.S. How much is that situation impacting your volume plans for 2023? Is it likely just a small percentage, or is it more about the ongoing challenge of finding qualified, productive miners and operators for all your mines? Will that also be a factor in how the industry adapts to market signals indicating a need for increased supply in the future?

Yes. Well, during COVID, we did have some impacts on our mining rates and also suspended some milling operations at Morenci. Speaking about the U.S. right now, we started ramping back up in the U.S. during 2021, and that continued into 2022. We have a situation where we currently have about something on the order of 1,300 job openings. We typically have 10,000 to 12,000 employees in the U.S. We’ve seen a lot of turnover as well. It’s been a very competitive marketplace for labor, as you’ve read about in the U.S. We don’t have that situation in Indonesia or in South America, but we do have competition in the U.S. with other sectors, and that’s continued into 2023 and what’s caused us to change our outlook somewhat. We could have in 2022 produced more if we were fully staffed, and I believe that is the case again this year. That’s why we’re making some progress on hires, and we are conducting training. Some of these workers that we’re hiring now are new to the industry, so we do have to go through training, and the experience level is not what it was five years ago. We’re going through that process. I think it does have some implications to the ability to develop a mine in the U.S. just because of the labor force. But we’ll see what happens. You’re starting to see some changes in payrolls and that sort of thing, and we’ll see how this unfolds. But it is a factor in our U.S. mining output.

Yes. So, it’s broader than mining. When I talk with people at the business council around the table, it’s a common theme you hear across many industries. When all the COVID relief funds went out, that was a factor. Our work is hard work. It’s harder to drive a big haul truck than it is to drive an Amazon or UPS or FedEx truck. We compete with those. We pay our people strong living wages. We’re giving people substantial increases this year. We invest in recreational facilities and try to deal with housing. It’s an issue in Colorado with our molybdenum mines. You can imagine what it’s like there. It’s a big issue for us. As a result, our mine rates aren't meeting what we would like for them to meet, and that affects not only current but future production, and it’s a strategic challenge for us. It’s not just us, and it’s not just the mining industry. But the mining industry, because of the nature of the work, presents special problems.

This leaching initiative that we’re pursuing is not labor-intensive because the material has already been mined. So, that’s a real opportunity for us to execute on.

What it opens up for us is incredible. Morenci is the largest leaching operation in the world and has been for many years. By enhancing the existing leaching operations with tools, data analytics, and heat covers, we are witnessing something remarkable. This approach allows us to revisit historical leach stacks and possibly leverage places like Lone Star to reduce or minimize concentrator investments. It's truly exciting. This goes beyond the 200 pounds we are currently targeting. If we are successful, it presents a significant opportunity for us. The enthusiasm of our team working on this initiative is very rewarding.

Our final question will come from the line of Bendik Folden Nyttingnes with Clarksons Securities. Please go ahead.

With the changes in the mining operations in Chile progressing positively, I would like to know what specific factors you would need to feel secure about proceeding with the El Abra expansion.

Yes. I had the chance for the first time to meet the President of Chile when I was at APAC in Bangkok. We had a very long conversation in advance of his presentation, and it was really positive. He explained to me what he’s facing, which I can appreciate, Kathleen met with him earlier. Like what’s going on in a lot of different countries around the world, particularly when commodity prices go up, people see the opportunity to take financial benefits through royalties and taxes and use them to meet social needs. It’s just always a balancing situation. At one point, Chile built its whole economy on copper and was very successful. When I was talking with people in Indonesia, the Congo, and other places, I would always point to Chile as an example of a country that was successful by encouraging mining. Chile has lost and is losing competitive advantage for a number of reasons: labor and now the government situation. These officials run on platforms of enhancing social programs and end up facing the reality of going too far. The President of Chile understands that, and you can see a more positive tone in dealing with these issues. We’re not a real leader in Chile, although we are in the global copper business. We participate with the government and other companies there in the conversations, sharing our experiences. The current direction is clearly more positive than it was a year ago. The President is facing a low level of popularity now, so it’s a question of facing reality for political leaders. We certainly have lived our share of those things. As a mining company, you work hard to gain the trust of the politicians. If you do things the right way, being sensitive, you don’t try to take advantage every time you can. We’ve actually walked away from projects because we didn’t believe the deal the government was offering was sustainable long-term.

We’ll also be looking at how the constitutional process advances this year. It appears the financial package is moving forward, and they’re reaching some determination; looks as if that’s progressing. But we also want to look at how this constitutional process unfolds as well. In the meantime, we’re maintaining our options by planning to move forward with the water infrastructure investments.

I can’t let this call go by without telling you how personally pleased I am with our much-improved relationship with the government in Indonesia. We had multiyear discussions, negotiations over our mining rights in our contract. It’s been remarkable what’s happened in the last six months; I made three trips there. The President had an incredibly positive visit to our job site at the end of August, early September. He asked me to accompany his investment minister, and Kathleen was there too. We did a university road trip, and then the two of us went back for the B20 part of G20 and got to see the President and others. It’s a great feeling to feel that we’re all together now working for the benefit of all the stakeholders and having the success we’re having on the ground at PT-FI.

With that, I will turn the call over to management for any closing remarks.

All right. Thank you everybody for participating today. We’re always available for follow-up calls. You can call David initially, and he can make arrangements to talk with Kathleen or me or whoever we need to bring into the conversation. Thank you for your participation. It’s great to have a quarter like this, and we’re really excited about our future.

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