Freeport-McMoRan, Inc. · NYSE:FCX
Freeport-McMoRan — Q4 2016 Earnings Presentation
38 slides from Freeport-McMoRan's earnings presentation, Jan 25, 2017
Slide 1: 4th Quarter 2016 Earnings Conference Call
4th Quarter 2016 Earnings Conference Call January 25, 2017
Slide 2: Cautionary Statement Regarding Forward-Looking Statements
Cautionary Statement Regarding Forward-Looking Statements This presentation contains forward-looking statements in which FCX discusses its potential future performance. Forward-looking statements are all statements other than statements of historical facts, such as projections or expectations relati
Slide 3: 2016 Highlights
2016 Highlights Strong Execution – “Proving our Mettle” Operational Financial Strategic Net Debt Reduced Successful Execution by Over $8 Bn Refocused Business on of $4.6 Bn Cerro Verde Leading Position in Global Expansion Project $20.1 Copper Industry Strong Cost and Retained High-Quality Ca
Slide 4: Completed $6.6 Billion in Asset Sale Transactions in 2016
Completed $6.6 Billion in Asset Sale Transactions in 2016 Aggregate Cash Contingent Consideration Consideration ($ in billions) Morenci (13% Interest) $1.00 n/a Timok Exploration Project 0.13 $0.11 (1) Other Sales 0.25 n/a Completed in 4Q16 (2) Tenke Fungurume 2.65 0.12 (3) Oil & Gas Transactions 2.
Slide 5: Effective Cost & Capital Management
Effective Cost & Capital Management Declining Site Production & Free Cash Flow Trend Delivery Unit Costs for Copper ($ in bns) -$3.1 +$0.9 $1.78 -19% Decline $6.4* $1.44 $1.53 $3.7 $3.2 Net Unit Cash $1.26 $2.8* Costs (after by-product) OCF OCF @ Cu CAPEX @ Cu $/lb $2.42/lb $2.27/lb 2015 2016 2015 2
Slide 6: Copper Market Commentary
Copper Market Commentary LME Copper Price Improved Market Sentiment per pound Supported by Fundamentals $3.00 $2.69 $2.75 1/24/17 Global Economic Conditions Improving $2.50 Supply Growth is Challenged $2.25 $2.00 New Supplies Required >$3/lb Copper Price $1.75 12/31/15 3/31/16 6/30/16 9/30/1
Slide 7: World's Leading Copper Producers
World’s Leading Copper Producers Top 10 Copper Producers (2016e) (000 t) 2,000 1,500 1,000 500 0 Codelco Freeport- McMoRan * Glencore BHP Southern Copper KGHM Rio Tinto Antofagasta First Quantum Vale * Reflects Morenci ownership of 85% interest through 5/31/16 and 72% interest from 6/1/16; excludes
Slide 8: World-Class Copper Portfolio
World-Class Copper Portfolio Long-term Value in High-Quality Asset Base Cu Reserves: 30.4 bn lbs Cu Reserves: 29.5 bn lbs Cu Reserves: 26.9 bn lbs Mo Reserves: 2.3 bn lbs Mo Reserves: 0.64 bn lbs Au Reserves: 25.8 mm ozs Mineralized Mat.: 49 bn lbs Mineralized Mat.: 29 bn lbs Mineralized Mat.: 19 bn
Slide 9: Cerro Verde
Cerro Verde • Expansion Commenced Operations in September 2015 • Achieved Capacity Operating Rates in 1Q16 • Expanded Operations Benefit from: − Large-scale, Long-lived Reserves − Cost Efficiencies (Unit Net Cash Cost Decline 19% YoY) Mill Rate Copper Sales (kt/d) (mms lbs) 353 1,105 152 501 544 121
Slide 10: FCX Reserves/Mineralized Material/Potential
FCX Reserves/Mineralized Material/Potential as of 12/31/16 2P Reserves (1) Mineralized Material (2)* Potential (3)* North North America America North 35% 50% America South 67% America Indonesia Serbia Indonesia South 34% 20% 18% South 31% America America 30% 15% 87 Billion Lbs 102 Billion Lbs 156 Bi
Slide 11: Large Development Project Inventory: Copper Sulfide Opportunities
Large Development Project Inventory Copper Sulfide Opportunities 1 km % Copper N >=0.00% >=0.10% • Bagdad >=0.20% >=0.30% Reserve Pit >=0.40% >=0.60% >=0.80% >=1.00% • Chino +0.3% Cu • El Abra • Lone Star/Safford 1 km N Reserve Pit • Morenci % Copper >=0.00% • Sierrita >=0.20% >=0.30% >=0.40% >=0.50
Slide 12: Grasberg Operations Update
Grasberg Operations Update Mining Rates (kt/d) Continue Revised Plans Incorporate to be Impacted by Lower Productivity Timing of Open Pit Production from 2017 171 to 2018 160 122 Grasberg Block Cave Start-up Adjusted by 23% 3 Months Below Revisions to Deep MLZ Mine Ramp-up Plan Target 3Q16 4Q1
Slide 13: Indonesia – Historical Dates
Indonesia – Historical Dates FCX Signs COW, Providing Legal & Fiscal Certainty Through 2041, 1991 Multi-billion Dollar Investment Campaign Begins FCX Formed Strategic Partnership with Rio Tinto to Advance 1995 Development 1999 FCX Completed Construction of Gresik, Indonesia’s First Copper Smelter 20
Slide 14: PT-FI's Contract of Work Dated December 1991
PT-FI’s Contract of Work Dated December 1991 Extension – Article 31 “…this Agreement shall have an initial term of 30 years from the date of the signing of this Agreement; provided that the Company shall be entitled to apply for two successive ten year extensions of such term, subject to Government
Slide 15: PT-FI's Contract of Work Dated December 1991 (continued)
PT-FI’s Contract of Work Dated December 1991 (continued) Divestment – Article 24 “If after the signing of this agreement then effective laws and regulations or Government policies or actions impose less burdensome divestiture requirements than set forth herein, such less burdensome divestiture requi
Slide 16: October 7, 2015 Assurance
October 7, 2015 Assurance Government Assured PT-FI that it Will Approve Extension of Operations Beyond 2021 with Legal & Fiscal Certainty “Regarding PT-FI’s proposal of contract extension, GoI warrants PT-FI would be able to submit the proposal of contract extension immediately upon implementation
Slide 17: Indonesian Regulatory Matters
Indonesian Regulatory Matters Government of Indonesia Issued New Mining Regulations on January 12, 2017 - Allows Continuation of Exports, Subject to Conditions, Including Conversion of COW to Special Operating License (IUPK) PT-FI Advised Government of Willingness to Convert to an IUPK, Subject
Slide 18: 2017e Outlook
2017e Outlook* Copper: 4.1 Billion lbs. Sales Gold: 2.2 Million ozs. Outlook Molybdenum: 92 Million lbs. Unit Cost Site Production & Delivery: $1.50/lb of Copper After By-product Credits: $1.06/lb (1) Operating ~$4.3 Billion (@$2.50/lb Copper in 2017e) Cash Flows (2) Each 10¢/lb Change
Slide 19: Sales Profile
Sales Profile CopperCopper Sales (billion Sales lbs) (billion lbs) Gold Sales (million ozs) 5 4.65 4.1 3 3.9 4 4.17 2 2.2 2.15 Net of Volumes 1 3 Sold in 1.1 Tenke/Morenci Transactions 0 2016 2017e * 2018e 2 Note: Consolidated gold sales include 99k ozs in 2016, 202k ozs in 2017e and 200k ozs in 201
Slide 20: EBITDA and Cash Flow at Various Copper Prices
EBITDA and Cash Flow at Various Copper Prices EBITDA ($1,200/oz Gold, $7/lb Molybdenum)* $8 (US$ billions) $6 $4 $2 2017e/2018e $0 Cu $2.50/lb Cu $2.75/lb Cu $3.00/lb Operating Cash Flow (excluding Working Capital changes) ($1,200/oz Gold, $7/lb Molybdenum)* $6 (US$ billions) $4 $2 2017e/2018e $0 Cu
Slide 21: Sensitivities (US$ millions)
Sensitivities (US$ millions) 2017e/2018e Operating Change EBITDA Cash Flow Copper: +/- $0.10/lb $415 $320 Molybdenum: +/- $1.00/lb $55 $50 Gold: +/- $50/ounce $105 $60 Currencies:(1) +/- 10% $145 $100 (1) U.S. Dollar Exchange Rates: 670 Chilean peso, 13,500 Indonesian rupiah, $0.74 Australian dollar
Slide 22: Capital Expenditures
Capital Expenditures (US$ billions) $2.8 Future Spending Dependent on Improvement in Market Conditions Oil & Gas 1.2 $1.8 $1.8 Major 0.9* Mining 1.1* Projects TOTAL MINING 1.2 1.6 Other Mining 0.7 0.9 0.4 2016 2017e 2018e * Major mining projects include $0.9 billion associated with Grasberg Undergro
Slide 23: Restoring Balance Sheet Strength
Restoring Balance Sheet Strength Year-End 2017e Net Debt at Varying Copper Prices (US$ billions) $20.1 $20.0 $15.0 $11.8 $10.0 $9.4 $8.5 $7.6 $5.0 $0.0 12/31/2015 12/31/2016 $2.50 $2.75 $3.00 Net Debt/2017e EBITDA 1.7x 1.3x 1.0x YE 2017e Note: Sensitivity assumes $7/lb Molybdenum and $1,200/oz Gold
Slide 24: Committed to Balance Sheet Management – Strong Track Record
Committed to Balance Sheet Management – Strong Track Record (US$ billions) Manageable Near-Term Debt Maturity Schedule (1) $5 FCX Debt Structure 12/31/15 12/31/16 $4 $3.5 bn Revolver $ - $ - Bank Term Loan 3.0 - $3 Sr. Notes 14.8 14.4 Cerro Verde Non-Recourse $2 Credit Facility 1.8 1.4 $1.5(2) Bank
Slide 25: Positive Long-term Outlook
Positive Long-term Outlook Industry Leading Experienced Team Long-lived, Financially Copper Position of Operators & Geographically Strong Developers Diverse Portfolio Executing Clearly Defined Strategy 25
Slide 26: Reference Slides
Reference Slides
Slide 27: Financial Highlights
Financial Highlights Sales Data 4Q16 2016 Copper (1) Consolidated Volumes (mm lbs) 1,186 4,651 Average Realization (per lb) $2.47 $2.27 Site Production & Delivery Costs (per lb) $1.44 $1.44 Unit Net Cash Costs (per lb) $1.20 $1.26 Gold Consolidated Volumes (000’s ozs) 405 1,079 Average Realization (
Slide 28: 4Q 2016 Mining Operating Summary
4Q 2016 Mining Operating Summary 4Q16 Unit Production Costs Cash Unit Costs North South (4) Consolidated (per pound of copper) America America Indonesia Africa Including Africa Site Production & Delivery $1.46 $1.35 $1.50 $1.42 $1.44 By-Product Credits (0.13) (0.10) (1.34) (0.41) (0.50) Treatment Ch
Slide 29: 2016 Operating Summary
2016 Operating Summary 2016 Unit Production Costs (per pound of copper) North South Consolidated America America Indonesia Africa (3) Including Africa Cash Unit Costs Site Production & Delivery (1) $1.42 $1.26 $1.63 $1.58 $1.44 By-product Credits (0.12) (0.10) (1.30) (0.39) (0.41) Treatment Charges
Slide 30: 2017e Operating Estimates
2017e Operating Estimates 2017e Unit Production Costs (per pound of copper) North South America America Indonesia Consolidated Cash Unit Costs (1) Site Production & Delivery (2) $1.58 $1.50 $1.42 $1.50 By-product Credits (0.14) (0.11) (1.97) (0.72) Treatment Charges 0.11 0.22 0.26 0.19 Royalties & E
Slide 31: 2017e Quarterly Sales
2017e Quarterly Sales Copper Sales (million lbs) Gold Sales (thousand ozs) 1,200 750 760 500 1,030 1,055 1,020 460 470 480 1,000 250 900 0 1Q17e 2Q17e 3Q17e 4Q17e Note: Consolidated gold sales include approximately 43k ozs in 1Q17e, 44k ozs 600 in 2Q17e, 45k ozs in 3Q17e and 70k ozs in 4Q17e for non
Slide 32: Preliminary Reserves at 12/31/16
Preliminary Reserves at 12/31/16 Consolidated Proven & Probable Reserves Copper Molybdenum Gold billion lbs billion lbs million ozs Reserves @ 12/31/15 (1) 99.5 3.05 27.1 12/31/16 Divestitures* (8.6) (0.02) -- Copper Reserves Additions/revisions 0.5 -- 0.1 by Geographical Region Production (4.6) (0.
Slide 33: Grasberg Minerals District
Grasberg Minerals District Plan View Reserves* Grasberg & Kucing Liar Grasberg Grasberg open pit (as of December 31, 2016) DMLZ Block Cave DMLZ Big Tonnes (mm) 439 964 Gossan DOZ Copper Grade (%) 0.9 1.03 Grasberg Block Cave Gold Grade (g/t) 0.75 0.78 Kucing Liar Amole Copper (bn lbs) 7.6 18.5 N 2,9
Slide 34: PT-FI Mine Plan
PT-FI Mine Plan PT-FI’s Share of Metal Sales, 2017e-2022e 2017e – 2021e PT-FI Share Total: 5.7 billion lbs copper Copper, billion lbs Annual Average: 1.15 billion lbs Gold, million ozs 2017e – 2021e PT-FI Share Total: 8.2 million ozs gold Annual Average: 1.63 million ozs 2.2 2.15 1.4 1.4 1.33 1.26 1
Slide 35: FCX Debt Maturities as of 12/31/16
FCX Debt Maturities as of 12/31/16* $8 (US$ billions) Total Debt & Cash at 12/31/16 (US$ billions) Actual FCX Revolver $ - $6 Senior Notes 14.4 Cerro Verde ($1.4) & Other 1.6 Total Debt $16.0 Consolidated Cash $ 4.2 $4 $2.9 $2.8 $2.3 $2.4 $2 CV Non- $1.6 Recourse $1.2 $1.1 5.40% & 5.45% $0.9 3.55% $
Slide 36: Adjusted EBITDA Reconciliation
Adjusted EBITDA Reconciliation (in millions) 4Q 2016 YTD 2016 Net Income (Loss) Attributable to Common Stock – Continuing Operations $313 $(3,898) Interest expense, net 181 755 Income tax provision 292 371 Depreciation, depletion and amortization 593 2,530 Impairment of oil and gas properties - 4,31
Slide 37: Adjusted EBITDA - Discontinued Operations Reconciliation
Adjusted EBITDA - Discontinued Operations Reconciliation (in millions) 4Q 2016 YTD 2016 Net Loss Attributable to Common Stock from Discontinued Operations $(21) $(256) Reversal of eliminations and adjustments (1) 38 214 Allocated interest expense (2) 6 39 Income tax provision (benefit) 17 (8) Deprec
Slide 38: Adjusted EBITDA - Oil & Gas Reconciliation
Adjusted EBITDA - Oil & Gas Reconciliation (in millions) 4Q 2016 YTD 2016 Net Loss Attributable to Common Stock $(80) $(5,967) Interest expense, net 103 369 Depreciation, depletion and amortization 173 869 Impairment of oil and gas properties - 4,317 Drillship settlement/idle rig and contract termin