• EBITDA: $2.7 billion for the third quarter.

• Operating Cash Flows: $1.9 billion for the third quarter.

• Copper Sales Volume: Exceeded guidance for the quarter.

• Gold Sales Volume: Exceeded guidance for the quarter.

• Unit Net Cash Cost: $1.58 per pound for 2024, below the previous estimate of $1.63 per pound.

• Cerro Verde Share Purchase: 5.3 million shares purchased for $210 million, increasing ownership to 55%.

• Copper Price Range (LME): $3.91 to $4.47 per pound during the quarter.

• Capital Expenditures: Forecasted at $3.6 billion for 2024 and $4.2 billion for 2025.

• Projected Annual EBITDA: $11 billion at $4 copper, $15 billion at $5 copper.

• Projected Operating Cash Flows: Over $7 billion at $4 copper, $10.5 billion at $5 copper.

• Warning! GuruFocus has detected 4 Warning Signs with PII.

Release Date: October 22, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Freeport-McMoRan Inc (NYSE:FCX) reported strong financial performance with $2.7 billion in EBITDA and $1.9 billion in operating cash flows for the third quarter.

• Sales volumes for both copper and gold exceeded guidance, contributing to favorable unit cash cost performance.

• The company increased its ownership in the Cerro Verde asset from 53.6% to 55%, enhancing its stake in a high-quality asset.

• Freeport-McMoRan Inc (NYSE:FCX) is advancing its innovative leach technologies, which have shown a 70% increase in incremental copper production compared to the previous year.

• The company is well-positioned for long-term growth with a large reserve and resource position, and ongoing initiatives to expand low-cost copper volumes in the Americas.

Negative Points

• A fire incident at the new smelter in Indonesia has temporarily suspended start-up activities, potentially impacting concentrate exports.

• The company faces challenges with high unit cash costs in North America, which are currently above $3 per pound.

• There is uncertainty regarding the timeline for repairs and resumption of operations at the Indonesian smelter.

• Freeport-McMoRan Inc (NYSE:FCX) is subject to a restricted cash policy in Indonesia, requiring 30% of export proceeds to be held in local banks for 90 days.

• The company is dealing with lower grades in North America, which has impacted cost efficiency and requires ongoing efforts to improve asset productivity.

Q & A Highlights

Q: Can you provide details on the insurance coverage for the smelter fire in Indonesia and any potential business interruption? A: Kathleen Quirk, President and CEO, explained that the insurance policy covers repair costs but does not include business interruption coverage. The company is focused on completing repairs quickly and is in discussions with the Indonesian government to ensure continuity of concentrate exports.

Q: Regarding the $1 billion of restricted cash in Indonesia, will this policy continue after the smelter ramps up? A: Kathleen Quirk stated that the restricted cash policy applies to all exports in Indonesia and will continue unless regulations change. The cash is held temporarily for 90 days and earns returns while in deposit.

Q: What is the expected timeline for repairs to the smelter in Indonesia, and how is the government reacting? A: Kathleen Quirk mentioned that the timeline for repairs is still being assessed, but the government has been supportive. The company is working to expedite repairs and ensure continued exports, with the government understanding the economic benefits of continuity.

Q: Are there plans to increase Freeport’s stake in Cerro Verde, and what is the strategy for share buybacks? A: Kathleen Quirk noted that increasing the stake in Cerro Verde was opportunistic, and the company is open to further purchases if opportunities arise. Freeport will continue share buybacks as part of its cash allocation framework, balancing shareholder returns and organic growth.

Q: How does Freeport view larger-scale M&A opportunities in the sector? A: Richard Adkerson, Chairman of the Board, stated that while M&A is not fundamental to Freeport’s strategy, the company is prepared to respond to opportunities. The focus remains on organic growth, but they are monitoring market activity and potential opportunities.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.