Freeport-McMoRan Discusses Third-Quarter Results and Grasberg Production Ramp-Up

Freeport-McMoRan (NYSE: FCX ) reported third-quarter financial results on Tuesday. The transcript from the company's third-quarter earnings call has been provided below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

View the webcast at Summary Freeport-McMoRan reported strong third-quarter results with significant increases in copper sales and consolidated net income, driven by operational execution and favorable metal prices. The company is focused on ramping up production at the Grasberg mine, achieving 67% capacity and aiming for full capacity by the end of next year. Freeport-McMoRan is strategically positioned to benefit from growing global copper demand, with plans to increase production from 3 billion pounds in 2026 to over 4 billion pounds by 2028.

The company is advancing growth projects, including the potential Bagdad expansion in Arizona, which is expected to double copper production at the site. Freeport-McMoRan is investing in technology and initiatives to improve efficiency and recovery rates, particularly in the U.S. operations, and is optimistic about proprietary leaching additives that could significantly enhance copper recovery. Capital expenditures are rising due to inflation and additional investments in equipment, but the company maintains a strong financial position with plans for significant shareholder returns and disciplined capital management.

The company anticipates substantial cash flow growth in the coming years, supported by strong copper demand and strategic investments. Full Transcript OPERATOR Ladies and gentlemen, thank you for standing by and 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.

If you wish to ask a question during the Q&A session, press star one on your touch-tone phone. If you require assistance during the conference, please press star zero. I would now like to turn the conference over to Mr. David, Vice President, Investor Relations.

Please go ahead, sir. David (Vice President, Investor Relations) Thank you, Regina, and good morning everyone. Welcome to the Freeport-McMoRan conference call. Earlier this morning FCX reported its third quarter operating and financial results.

A copy of today's press release with supplemental schedules and slides are available on our website, fcx.com. Today's conference call is being broadcast live on the internet. Anyone may listen to the conference call by accessing our website homepage and clicking on the webcast link. In addition to analysts and investors, the financial press has been invited to listen to today's call.

A replay of the webcast will be available on our website later today. Before we begin our comments, we would like to remind everyone that today's press release and certain of our comments on the call include non-GAAP measures and forward-looking statements, and actual results may differ materially. Please refer to the cautionary language included in our press release and slides and to the risk factors described in our SEC filings, all of which are available on our website.

Also on the call with me today are Richard Adkerson, Chairman of the Board, Kathleen Quirk, President and Chief Executive Officer, Maree Robertson, Executive Vice President and Chief Financial Officer, and other members of our management team. Richard will make some opening remarks. Kathleen and Maree will review our slide materials and then we'll open up the call for questions. Richard.

Richard Adkerson (Chairman of the Board) Thanks, David. We appreciate you all for joining us today. We've been looking forward to speaking with you about our strong third quarter results and our positive outlook for the future. We are pleased and proud of our team with the steady progress throughout the year achieved on the Grasberg ramp-up and with our initiatives across our business to drive value as we look forward.

The table is set for growing our volumes in the near term, medium term, and longer term, supported by a portfolio of long-lived assets and by a qualified and experienced team. Leaders in Indonesia have expressed support for the extension of operating rights beyond 2041. We continue to work with the Ministry of Energy and Mines on documentation to implement the Memorandum of Understanding we signed with the Government of Indonesia. Freeport's growth plans match up exceptionally well with accelerating requirements for copper.

Electrification continues to advance at a rapid pace, bigger and faster than we've seen in the past, and copper is a metal of electrification. The world requires a lot more copper and supplies are challenged. Freeport is particularly well positioned to grow with the market. After working in this industry for decades, today's opportunity for structural trends point to a multi-year period of significant demand growth is unique.

We have Freeport at the right assets, the right time. With a strong team in the Freeport family and our strong financial positions, we are well positioned to capture this opportunity for the benefit of our shareholders and all our stakeholders. Kathleen Quirk (President and Chief Executive Officer) Great. Thank you, Richard, and thank all of you for participating on today's call.

We will review our third quarter performance and update you on our initiatives, projects, and future outlook. Today we will be discussing our team's work across our global business to build value, our solid progress and momentum to safely and sustainably restore large-scale production at Grasberg, drive operational excellence and new technology initiatives in the Americas, and advance plans for value-enhancing organic growth. Starting on slide three, we show the highlights of our third quarter performance. Copper sales have increased in each of the last three quarters, and we expect fourth quarter sales to be the strongest of the year by far.

Steady progress continues at Grasberg with 67% ramp-up achieved, and confidence is building toward full scale. Strong operational execution combined with the favorable metal price backdrop provided significant margins, cash flows, and earnings. The diversity of our portfolio and pricing leverage for our U.S. business comes through in the results.

Operating income for our U.S. mining operations more than doubled in the third quarter compared with last year's third quarter, with strong conversion to the bottom line. This contributed to an increase of over 80% in our consolidated net income compared with the year-ago quarter. The progress achieved during 2026 sets us up for growing volumes and improving financial performance as we look ahead to 2027 and 2028.

Additionally, we are advancing our future growth plans with a series of projects in progress. We returned nearly a billion dollars to shareholders year to date, including $300 million in share purchases. Our financial position remains strong, and as we look ahead, growing volumes combined with a positive market environment for our products sets us up for significant increase in cash flows to support our value-enhancing investment program and increasing returns to shareholders.

Moving to the copper markets on slide four, as a leading global supplier of refined copper, Freeport-McMoRan has strategic significance and is strongly positioned to benefit from copper's essential and increasingly important role in societies around the world. Copper's superior conductivity makes it the metal of electrification, and the global economy is rapidly becoming more electrified. Globally, copper demand is expected to rise in a number of applications, including the massive requirements for the power grid to support new technologies.

LME copper prices averaged $6.09 per pound year to date through September and currently approximate $6.58 per pound on the LME, an increase of 16% since the start of the year. Our U.S. customers report robust copper demand associated with grant requirements for electricity and energy infrastructure, data center builds, and in the transportation sector. Copper continues to be strategically significant to China as the world's largest consumer to support domestic power grid technology advancement and manufacturing of autos and consumer goods for growing exports.

The sizable movement of product to U.S. warehouses continues, resulting in tight market conditions in the major consuming regions outside of the U.S. The situation underscores the strategic role of copper in the global economy and supply chains to support future growth. The signals we see are clearly pointing to requirements for additional copper supplies to meet growing demand.

And at Freeport-McMoRan, we have a valuable, geographically diverse portfolio of integrated copper assets with large-scale production facilities that are difficult to replicate, long-life reserves and resources, and a portfolio of low-risk brownfield expansion opportunities to serve a growing market. I'm going to move to the operating highlights on slide five, where we summarize the highlights by geographic region. Starting with the U.S., we continue to focus on operating disciplines to improve efficiencies and productivity to grow production. Despite low ore grades, we were successful in improving our mining rates compared with the year-ago quarter.

However, an abnormally high frequency of extreme weather events in the third quarter, which have continued in the fourth quarter, disrupted some of the momentum achieved earlier in the year. We are deploying new technology tools to enhance our operating models and are investing in more efficient trucks and mining equipment to support our objective of increasing U.S. production and reducing costs. We continue to pursue an exceptional opportunity to unlock meaningful value through application of new technologies for recovering copper in our leaching processes.

Data from our work to date is supportive of a potential breakthrough, and we are looking forward to what we'll learn as we go through 2027 as high-potential next-generation proprietary additives are deployed in the field. In South America, our flagship Cerro Verde operation in Peru continues to demonstrate solid operating performance and productivity consistent with a large-scale, world-class operation. At El Abra in Chile, ore grades and operating rates were impacted during the quarter by mine sequencing.

To address slope management, we're now commissioning new facilities at El Abra that will allow us to enhance metal production by increasing temperatures in our leach pads. We continue to work with the Chilean government to advance our environmental impact study to position El Abra for a major transformative expansion. In Indonesia, we are pleased to report that the team continues to achieve meaningful progress on the ramp-up at the Grasberg Block Cave. We operated at 67% of mine capacity during the third quarter, and progress is advancing for meaningful growth as we go into 2027.

Upgrades to the material handling system for our automated rail system are progressing on schedule, and we continue to advance work for a restart of production block one south in 2027. We continue to target overall rates reaching 80% by mid-'27 and approach full capacity by the end of next year. We were successful in restarting the smelter and now have both smelters in Indonesia in operation to support our mine ramp-up. The team is executing the phase ramp-up safely and efficiently, and we continue to de-risk the plans and increase confidence in a long-term outlook.

In Indonesia, we continue to experience abnormally dry weather conditions and are closely monitoring forecasts which predict conditions to return to more normal levels as we move into 2027. The dry conditions are generally favorable for mining, but low water availability presents challenges in increasing mill rates. We're actively managing the situation with limited impacts to date. As Richard mentioned, we're continuing to work cooperatively with the Indonesian government to secure our long-term operating extension in accordance with the MOU reached early in the year.

We submitted our application in June, and we're continuing to work to complete the formal process. The government continues to express support for extension to provide long-term continuity of large-scale operations and mutual benefits. Big picture, the third quarter the team executed well but experienced challenging operating conditions. You'll note we continue to expect the fourth quarter will be the strongest of the year, but have adjusted our 2026 copper sales by approximately 2% to incorporate the impact of shortfalls in the U.S.

and in Chile. Our team is committed to execution, dedicated to overcoming challenges, and driven for excellence in all that we do. I'm going to move to slide six, where we have some real excitement around Freeport-McMoRan about the growth catalyst. We're driven to increase copper supply to a growing market and are strongly positioned as we look forward with significant near-term, medium-term, and long-term growth.

The progress we've made throughout 2026 positions us for significant growth in volumes, margins, and cash flows in 2027 and 2028, as Marie will cover shortly. In the short term, we're positioned to grow from 3 billion pounds this year to 3.7 billion pounds in 2027 and over 4 billion pounds in 2028. Continued strong execution of the Grasberg recovery is the major driver, with improved U.S. production adding incrementally.

This growth notably does not require new capital. With our U.S. growth initiative as America's Copper Champion, we see a path for Freeport-McMoRan to be a 4.5 to 5 billion pound a year copper producer in the 2030 time frame. With success in our innovative leach initiative and our expansion of our Baghdad mine in Arizona, we continue to see the innovative leach initiative as one of the most attractive opportunities in our company because it leverages our existing infrastructure, is scalable, is not capital intensive, and has low incremental operating costs.

We've been on this journey and advancing this initiative for the last three to four years, and our excitement continues to build, supported by progress in developing a proprietary next-generation additive that would unlock recoveries of low-grade ores previously thought to be unrecoverable. As you'll see in the chart, lab testing of the new Freeport-McMoRan additive is showing incremental recoveries of more than four times those achieved with our initial additive. The next-generation additive is now being manufactured on a fast-track schedule and will start receiving commercial quantities for field deployment as we go into 2027.

While we need to be cautious until it's proven in the field, this could represent the major breakthrough technology that we've been working to achieve. We expect to make an investment decision on the Baghdad expansion in the fourth quarter. Very excited about this. We see it as an attractive opportunity to transform Baghdad into the second-largest copper mine in the U.S., benefiting from economies of scale and the use of modern technology to set the operation up for improved multi-decade performance.

We're also advancing further growth options which could be developed by the mid-2030s, with a large-scale expansion of the mine in Chile and exciting possibilities for development of our large resource position in the Safford/Lone Star district in Arizona. We see our pipeline of organic growth being particularly attractive in the context of an industry where greenfield projects carry significant risk and development time frames can span 15 to 20 years.

We have a differentiated, advantageous position since our projects are brownfield in nature, resulting in benefits from leveraging existing infrastructure, lower capital intensity, experienced workforces, and relationships with key stakeholders to move more quickly with less risk than a greenfield project. We're increasingly mindful of escalating inflationary pressures affecting capital costs for major projects and the need to be disciplined on qualifying projects, delivering investment returns, and carefully controlling budgets and schedules.

We're going to continue to be focused, selective, and deliberate as we go forward, and on balancing investments and growth with shareholder returns. At Freeport-McMoRan, we benefit from an experienced and highly respected project development team with proven experience in successfully managing major projects around the world. Putting this all together, the setup for Freeport-McMoRan is exceptionally strong, and Team Freeport is intensely focused on execution and delivery to capture the value and the special opportunities that lie ahead. Now I'm going to turn the call to Marie, who will review our outlook, and then we'll take your questions.

Maree Robertson (Executive Vice President & Chief Financial Officer) Thanks, Kathleen. Just flipping to slide 7, we show our three-year outlook for sales volumes of copper, gold, and molybdenum. As Kathleen referenced, we expect significant production and sales growth in the coming years. We have trimmed our 2026 copper sales by about 2%, taking into account slightly lower production in the U.S.

and Chile, and by approximately 2.5% in 2027 to reflect current mine plan updates. Copper sales in 2028 are consistent with previous estimates, and gold and moly sales are unchanged for the three-year period. We expect our fourth quarter of 2026 sales volumes to be the highest of the year, with copper sales increasing 17% and gold sales nearly tripling from third-quarter levels. For the year 2027, we expect annual growth in copper sales of over 20% compared with 2026 and more than a 50% increase in gold volumes, with additional growth in 2028 of 10% for copper and 20% for gold.