Freeport-McMoRan Q2 2025 Earnings Report

Freeport-McMoRan EPS Results

• Actual EPS: $0.54
• Consensus EPS: $0.45
• Beat/Miss: Beat by +$0.09
• One Year Ago EPS: $0.46

Freeport-McMoRan Revenue Results

• Actual Revenue: $7.58 billion
• Expected Revenue: $6.85 billion
• Beat/Miss: Beat by +$730.63 million
• YoY Revenue Growth: +14.50%

Freeport-McMoRan Announcement Details

• Quarter: Q2 2025
• Date: 7/23/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, July 23, 2025
• Conference Call Time: 10:00AM ET

Freeport-McMoRan (NYSE:FCX) is a leading international natural resources company with a primary focus on copper, gold and molybdenum extraction. Headquartered in Phoenix, Arizona, the company develops, acquires and operates large, geographically diverse mineral assets with significant scale and long-lived reserves. Freeport-McMoRan’s integrated operations encompass exploration, mining, processing and reclamation activities, positioning the firm as one of the world’s largest publicly traded copper producers.

The company’s operations include both open-pit and underground mines, complemented by extensive milling and smelting facilities. In copper production, Freeport-McMoRan’s portfolio of long life, low-cost operations provides a competitive cost structure. In addition to copper, the company recovers gold and silver as by-products and produces molybdenum, which is used in steel alloys and other industrial applications.

Freeport-McMoRan serves customers worldwide through a network of mines and related facilities in North America, South America, Asia and Africa. Key assets include the Grasberg minerals district in Indonesia, one of the world’s largest copper and gold mines; the Tenke Fungurume mine in the Democratic Republic of Congo; and significant operations in North America such as the Morenci and Bagdad copper mines in Arizona and the Cerro Verde operation in Peru.

Tracing its heritage to the Freeport Sulphur Company founded in 1912, Freeport-McMoRan in its current form emerged through the merger of Freeport Minerals and McMoRan Oil & Gas in the late 1980s. Today, the company is led by Chairman and Chief Executive Officer Richard C. Adkerson, supported by a seasoned management team with extensive experience in mining, engineering and global commodity markets. Freeport-McMoRan emphasizes sustainable development and community engagement in its host regions.

Freeport-McMoRan Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Freeport reported net unit cash costs of $1.13 per pound of copper and achieved EBITDA of $3.2 billion with operating cash flow of $2.2 billion in Q2 2025.
• Positive Sentiment: The company started up its new Indonesian smelter at PT Smelting about a month ahead of schedule and expects first cathode output by month-end, positioning it as a fully integrated global producer.
• Positive Sentiment: A $1.25 per pound U.S. premium on copper sales has tripled since Q2, implying an approximately $1.7 billion annual benefit and enhancing U.S. margins amid critical mineral focus.
• Negative Sentiment: Grasberg Block Cave gold production in 2025 was revised down by ~15% after recalibrating ore-flow models, though management expects no material change to multi-year copper or overall gold output.
• Positive Sentiment: A field trial of a new leach additive at the Morenci mine delivered promising lab results, advancing Freeport’s goal to reach 800 million pounds per year of incremental copper production.

Presentation

[Operator]

Ladies and gentlemen, thank you for standing by. Welcome to the Freeport McMoran Second Quarter Conference Call. I would now like to turn the conference over to Mr. David Joint, Vice President, Investor Relations. Please go ahead, sir.

[David Joint, VP-IR at Freeport-McMoRan]

Good morning, everyone, and welcome to the Freeport conference call. Earlier this morning, FCX reported its second quarter twenty twenty five operating and financial results. A copy of today's release with supplemental schedules and slides is available on our website, fcx.com. Today's conference call is being broadcast live on the Internet, and anyone may listen to the 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.

[David Joint, VP-IR at Freeport-McMoRan]

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 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 Actorson, Chairman of the Board Kathleen Quirk, President and Chief Executive Officer Marie Robertson, Executive Vice President and CFO and other senior members of our management team. Richard will make some opening remarks, Kathleen and Marie will review our slide materials, and then we'll open up the call for questions. Richard?

[Richard Adkerson, Chairman at Freeport-McMoRan]

Thank you, David, and thank you all for joining us. Copper is currently in the spotlight, of course. COMEX prices are hitting all time highs. LME prices are strong. Uses are growing.

[Richard Adkerson, Chairman at Freeport-McMoRan]

Electricity means copper, and the world is increasingly electric. This results in high demand and the industry continues to be challenged to find the supplies to meet this demand and future demand. Governments are focused on critical minerals, including copper. Our company is strongly positioned. One third of our copper is in The U.

[Richard Adkerson, Chairman at Freeport-McMoRan]

S, roughly one third in Indonesia and one third in Peru and Chile. We are the dominant producer in The U. S, producing over 70% of the country's refined copper. We're fully integrated. We have substantial organic growth to U.

[Richard Adkerson, Chairman at Freeport-McMoRan]

S. And we're committed to that growth. Freeport committed to its strategy to copper over twenty years ago. Our tagline has been foremost in copper and that's what we're striving to be. The startup for the Indonesian smelter is a big accomplishment.

[Richard Adkerson, Chairman at Freeport-McMoRan]

Congratulations to Team Freeport. We will now be effectively fully integrated producer globally. We're pleased to see the trade agreement between Indonesia and United States and productive discussions with President Prabhu and President Trump. We convey to the Indonesian leaders negotiating the deal to note that Freeport, a widely held public company in The U. S.

[Richard Adkerson, Chairman at Freeport-McMoRan]

With almost a sixty year history of operating in Indonesia is the operator of the world's second largest copper mine located there. Grasberg Operations And District is our cornerstone asset, second largest copper mine in the world. In this most recent quarter, we had a net credit for operating cost of $1 a pound. This asset has enabled us to create the modern Freeport. With the smelter nearing completion, we are progressing our discussions with the Indonesian government by extending our operating rights beyond 02/1941.

[Richard Adkerson, Chairman at Freeport-McMoRan]

Doing so would create great value for FCX shareholders, but it also would be very positive for all stakeholders in the operation. With those comments, I'll turn the call over to Kathleen and Marie and to report on our quarter and our outlook.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

Great. Thank you, Richard. And I'll cover the highlights of the second quarter starting on Page three. We generated strong margins and cash flows during the quarter and achieved significant milestones on several important initiatives. Our sales of copper and gold were better than forecast and net unit cash production costs during the quarter of $1.13 per pound were significantly improved from what we guided to and from last year's second quarter.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

With an average quarter copper realization of over $4.5 per pound, which was about $0.20 per pound above the international benchmark pricing, we generated quarterly EBITDA of $3,200,000,000 and operating cash flows of $2,200,000,000 Our sales volumes exceeded production as we were successful in reducing inventories in Indonesia both at the mine site and newly commissioned precious metals refinery, which performed well during the second quarter. As we look at the balance of the year, we're well positioned for continued strong financial performance. Our sales of copper in the second half are expected to be nearly 10% higher than our first half volumes and gold sales after taking into account revisions to our Grasberg gold production, which we'll talk more about, are expected to be similar to the first half levels. The current premium on our U. S.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

Copper sales, which recently tripled from second quarter levels, as additional margins and cash flows. And as we look ahead to 2026 and 2027, volume growth and lower costs set us up nicely to expand margins and cash flows as we go forward. We achieved a major milestone in the quarter with the startup of our new copper smelter in Indonesia, a project we've been working on for the past ten years. We started up about a month ahead of schedule and have progressed startup activities to the stage of producing our first cathodes, which we expect by the end of this month. We remain focused on ramping up to reach design capacity by the end of the year.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

Another real exciting development during the quarter was the start of a field trial at our U. S. Morenci mine using an internally developed leach additive. Our team of scientists have been working on this for some time and we are progressing work on additional options which are showing very impressive lab results. There's more work to do, but we're making real progress.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

Identifying the right additive combined with our precision leaching operating practices will be a big step toward reaching our objective of producing 800,000,000 per annum from this initiative. We continue to advance optionality in our organic growth pipeline and we're well positioned with our significant resources and experienced team and our strong financial position. We purchased 1,500,000 shares of stock during the second quarter, bringing our first half stock purchases to 2,900,000.0 shares at an average cost of $36.41 per share. And we continue to target 50% of excess cash flow for shareholder returns in line with our financial policy. Turning to the next slide on four, it's a summary of our 2025 priorities.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

We've covered these on previous calls and these are the areas that are defining our everyday pursuit of value creation. First, execution, mastering the basics, and making everyday count are key objectives. We're focused on delivering our plans safely and efficiently and driving our costs lower particularly in The U. S. Scaling the leach opportunity is a major value driver for Freeport.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

We continue to target a 40% increase in our run rate to achieve £300,000,000 by the end of the year on our path to £800,000,000 per annum. Delivering the smelters, a safe and efficient ramp up of the PTFI smelter is strategically important. It'll re derisk our plans and position us for extension of our long term operating rights in Indonesia. With the early start up, we're well on our way. We posted a video this morning of the progress on our on our website, and we hope you'll have the chance to review it.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

We're very proud of what our team is accomplishing there. Innovation is an increasingly important value driver for our business. Our operating teams are embracing technologies and new tools to enable better productivity and cost performance. And we're continuing to build optionality in our growth portfolio. We have three major project opportunities being advanced in The Americas, which we'll talk more about.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

Turning to copper markets on Slide five. Copper has been actively covered in the media recently with widespread recognition of the rising strategic importance of this essential metal and a broad use of applications. Market fundamentals remain positive underpinned by copper's increasing use in the global economy and is an important driver of electrification, global energy requirements and defense systems. Copper prices averaged $4.32 on the London Metals Exchange during the quarter and $4.72 on the U. S.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

COMEX exchange. Following the July 8 U. S. Tariff announcement, U. S.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

Prices rose significantly. While tariff policies have dominated headlines and resulted in rising inventories in The U. S, global exchange inventories remain at low levels, particularly in relation to consumption trends. Copper demand globally continues to benefit from the secular trends and major new investments in AI technology, power infrastructure, decarbonization and transportation. In The U.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

S, demand continues to be supported by these secular drivers and we are seeing improving trends in Europe. China continues to be a major driver of copper demand and India represents an important growth market in the future. As we've talked about in the past, the fundamentals of the copper markets are highly attractive with the outlook for demand growth to outpace available supplies as we go forward. Here at Freeport, we're in a great position to increase volumes in the coming years to supply a world with growing requirements. Moving to Slide six, we talk about the regional premiums and the market differentials between The U.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

S. Pricing benchmarks and international benchmarks. For background, the reference price for Freeport's copper sales contracts is based on geography. Our international sales are based on the London Metals Exchange price and our U. S.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

Sales are based on The U. S. COMEX reference price. These two benchmarks have been closely correlated in the past, but as you can see, a differential emerged earlier this year after The U. S.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

Opened the Section two thirty two investigation and the differential widened significantly earlier in July following The U. S. Announcement of a 50% tariff on copper imports with an expected implementation date on August 1. We're still waiting on additional details on implementation of the tariff announcement. The U.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

S. Currently imports approximately half of its copper cathode requirements and the current domestic supply of cathodes, the rest of it are majority produced by Freeport. As indicated in the charts, as of yesterday's close, The U. S. Premium approximates $1.25 per pound or about 28% above the LME price.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

This implies an approximate $1,700,000,000 annual financial benefit on Freeport's U. S. Sales. Longer range, the differential will be determined by market factors, including how the tariff structure is applied to various copper products, available domestic supplies and requirements for imported copper and other factors. We're actively working to boost domestic supplies of copper with a special emphasis on growing our refined production in a cost effective manner through our innovative leach initiative and we're focused on supporting the growing requirement for our U.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

S. Customer base. RePort is an important American copper producer and is by far the largest contributor to The U. S. Copper market with an established and successful franchise dating to the late 1800s.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

As America's copper champion, we appreciate the administration's recognition of copper as a critical mineral and the efforts underway by the US government to boost domestic production. Our operations in The US supply approximately 70% of the refined copper produced here. Our operations in The US are fully integrated with mines and smelting and refining facilities and innovative leach processes that efficiently produce refined cathode. About 60% of our U. S.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

Production is sourced through leaching processes and the balance through our smelter. We employ a large workforce in The U. S. And importantly, we've earned the trust of communities in the Southwest U. S.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

Where we operate and with our U. S. Copper customers. In talking about our global refined metal on Slide 8, Freeport is a significant producer. With the completion of our new smelter in Indonesia, Freeport will essentially be fully integrated globally with internal processing facilities for its mine production.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

This is important because countries are becoming more and more focused on critical mineral supply chain resilience, national security issues and global trade. Freeport's positioning as a major producer of refined copper is of strategic significance for the long term. As indicated, we produce a substantial amount of refined copper from leach processing, which does not require a smelter process. And we're going to continue to pursue innovative opportunities to add refined copper on a cost effective basis. Moving to operations on Slide nine, we'll talk about the operating highlights by geographic region starting in The U.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

S. Where we continue to drive operating disciplines to enhance efficiencies and improve costs and margins. Making progress as indicated by the improved performance compared with the year ago quarter. With several initiatives underway, there's more opportunity ahead. Our operating teams are benefiting from new tools and data analytics to drive value.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

We continue to rebuild skills within our workforce to reduce reliance on more costly contractors. As we look forward, we expect production in The U. S. To increase in 2025 and 2026 compared with 2024 levels. Absent changes in commodity based input costs, we're talking unit costs to trend to the $2.5 per pound range in 2027.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

The autonomous haul truck conversion at our Baghdad mine in The US will allow us to test this potential of applying this technology to for use at other locations. At Baghdad, we have half of the autonomous trucks in service and expect to complete the balance over the next few months. We have several initiatives in progress to achieve further scaling in our innovative leach program. This is a high priority. Our teams are now much better equipped with new data and analytic tools, expanded areas under leach and precision leaching processes to achieve higher recoveries in material previously considered waste.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

Achieving our targeted run rate to £300,000,000 per annum will benefit 2026 production. We are planning projects to use heat in our injection process to further enhance recoveries and we're advancing internally developed leach additives to provide additional volumes toward our ultimate target of 800,000,000 pounds per annum. As I mentioned, a field trial is underway at Morenci with our first internal generated additive and we've recently identified a potential second additive with initial lab testing indicating superior performance compared with anything we've seen to date. In addition, we're advancing new technology and automation in our basic mining processes to optimize performance. Our work to date indicates a significant opportunity for value creation through meaningful cost reduction and reserve expansion within our existing operations.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

We're also continuing to advocate for U. S. Legislation to recognize copper as formally as a critical mineral and eligibility for incentives to promote domestic production. Moving to South America, the team at Cerro Verde operation posted another solid quarter with volumes and costs in line with our expectations. As anticipated, volumes at Cerro Verde were below the year ago quarter because of lower ore grades.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

At Alabra, we have advanced plans to test heated raffinate injections in our leach stockpile there expected in 2026 and that is targeted to increase copper recovery and metal volumes. We continue to plan for a major expansion at Alabra, which would capitalize on the large resource we have there and bring substantial scale and operating efficiencies to the mine. In Indonesia, during the second quarter, copper sales copper and gold sales were boosted significantly by a reduction in concentrate and in process inventory following the mid March approval of our export permit and good performance at the newly commissioned precious metals refinery, which processed all of the anode slimes produced at PT smelting during the quarter. Milling rates improved in the second quarter compared with first quarter levels and that reflected a restart of our SAG III mill in the second quarter. In April, we commenced a large planned maintenance project on our SAG II mill, which is expected to be completed by the end of the third quarter.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

This will set us up for return to mill rates in the 220,000 ton per day range in the fourth quarter and beyond. Notably, during the second quarter, net unit cash costs at Grasberg were actually a net credit of $0.99 per pound. As indicated, the smelter startup in the second quarter was a meaningful accomplishment and we're working to ramp up in the balance of the year. We have revised our near term outlook for gold to incorporate adjustments to our draw point flow model in the Grasberg Block Cave. This resulted in an approximate 15% reduction in expected 2025 gold production, but did not significantly impact long range plans as indicated on the next slide.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

We provided some information on Grasberg ore grades on Slide 10. And for background, the Grasberg Block Cave is one of three currently producing block cave mines in the Grasberg District. It's the same ore body we mined from the surface for over twenty five years prior to transitioning to underground mining in the 2020 timeframe. For those of you who have followed us over time, you'll recall there are sections within the Grasberg ore body with significant grade variation, especially for gold. This results in large swings in gold grades depending on where the material is coming from within the ore body.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

At the Grasberg Block Cave, it's a massive block cave. We extract ore from five production blocks and have over 900 draw points currently producing within these five production blocks. We have a practice across the company of updating our forecast quarterly, taking into account all available information. For our block cave mines, we use industry proven software to model cave flows and ore grades. And during the second quarter, we experienced lower grades for gold than our scheduling model estimated and undertook a process to review our ore grade models.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

We recalibrated the model on a draw point by draw point basis to better reflect the timing of various ore grades flowing through the draw points. Importantly, the changes are timing related and not expected to impact the ultimate recoveries over the life of deposit. In looking at the updated model, we were able to replicate historical results with better precision than the prior ore grade distribution model. With with mining, there are always learnings throughout the life of a mine, but the management systems and data tools we use today, particularly in our underground, are much improved from the historical open pit era. You can see from the revised multiyear production forecast that the impact is limited to twenty twenty five gold production.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

Over the five year period, the actual the aggregate production of gold is close to our prior estimates and there was no significant impact on copper production. With the completion of major mill maintenance in 2025, we're set up to increase mill operating rates in the future. Also in our 2025 forecast, we've incorporated an increase in copper concentrate consumption at the new smelter in Indonesia because of the earlier than forecast startup. This results in more in process inventory than previously forecast and as a timing item. We want to point out that as we transition from an exporter of concentrate to a fully integrated producer in Indonesia, there will be timing differences between production and sales by quarter.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

The sale of concentrates historically were recognized immediately on loading of ships at our mine site. And with the smelter, sales will be recognized after processing and sale of refined metal. So this is really a timing match between production and sales. As we look forward, and I'm moving now to our project pipeline, it's clear that additional copper supplies are required to support energy infrastructure, new technologies and more advanced societies. We have an extensive copper resource position and a broad range of projects in various stages of development.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

These initial initiatives totaled 2,500,000,000 pounds of copper, which can be developed from Freeport's known resources in jurisdictions where we have established history and experience. Our projects in Indonesia also have the benefit of high gold content that go along with the copper. Because these projects are brownfield in nature, we benefit from leveraging existing infrastructure, our experienced workforces, and relationships with key stakeholders to move more quickly with less risk than a greenfield project. Well, as as we mentioned, we're also looking at innovation and really feel this can bring improvements to the capital intensity of developing new projects. In The US, the projects have the potential to increase production by over a billion pounds per annum with a large portion of that coming from low cost and low capital intensive incremental leach volumes.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

In addition, we have an actionable expansion opportunity at our Baghdad mine and are also studying the potential to expand and double production in the Safford Lone Star District. In South America, we and our partner Codelco are planning a major expansion at Alabra through the addition of a new concentrator which would provide seven fifty million pounds of incremental copper per annum. We're completing our permit application. We expect to file that in early twenty twenty six. And we're encouraged by the Chilean government's initiatives to expedite the permitting process broadly in Chile.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

In Indonesia, our Kuchin Liyar development continues and we expect to commence production by 02/1930. We're conducting additional exploration below our Deep MLZ ore body and expect that with an extension of our operating rights beyond 02/1941, we'll be set up for additional long term development options in the highly attractive Grasberg District. We'll continue to be disciplined in our approach, targeting opportunities and enhance long term value. And we've got some additional details on these projects covered on Slide 26 of the reference materials. Marie is going to cover financial outlook on the next few slides, and then we'll open up the call for your questions. Marie?

[Maree Robertson, EVP & CFO at Freeport-McMoRan]

Thanks, Kathleen. Just moving on to Slide 12, we show our three year outlook for sales volumes of copper, gold, and molybdenum. Our guidance for 2025 takes into account the Grasberg ore grade revision, which Kathleen has already discussed, and the timing of production versus sales associated with the smelter startup. 2025 guidance for copper is around 1% below the prior forecast with gold sales down around 17%. But as discussed, these changes are not expected to impact our long range plans, and guidance for 2026 and 2027 remain consistent with our previous estimates.

[Maree Robertson, EVP & CFO at Freeport-McMoRan]

And continued success in our leaching initiative would provide upside to these estimates. We provide quarterly estimates on slide 23 of the reference material. As you can see, copper sales in the second half of the year are nearly 10% higher than the first half. Our current estimate, the unit the net unit cost for the year 2025 using $3,300 for gold and $22 for moly is approximately a dollar 55 per pound, about 5¢ per pound above the April estimate, principally reflecting the impact of lower gold volumes, partly offset by higher prices of gold and molybdenum. The current unit net cash cost estimate is better than our estimate going into the year of a dollar 60 per pound.

[Maree Robertson, EVP & CFO at Freeport-McMoRan]

We are continuing initiatives to drive costs lower as we go forward. The details of costs by region are presented on slide 22 in the reference materials. Moving to slide 13, putting together our projected volumes and cost estimates, we show modeled results for EBITDA and cash flow at various copper prices ranging from $4 to $5 copper. These are model results using the average of 2026 and 2027 with current volume and cost estimates and holding gold flat at $3,300 per ounce and molybdenum flat at $22 per pound. Annual EBITDA would range from over $11,500,000,000 per annum at $4 copper to over 15 and a half billion dollars per annum at $5 copper, with operating cash flows ranging from $8,500,000,000 per year at $4 to over $11,500,000,000 at $5.

[Maree Robertson, EVP & CFO at Freeport-McMoRan]

These estimates assume The US price is the same as the international benchmark price. If we incorporate a 25% premium to our US sales, which is similar to current levels, annual EBITDA would increase by approximately 10%, and operating cash flows would increase by approximately 15%. A 50% premium would increase EBITDA by over 20% and operating cash flows by almost 30%. We show sensitivities to various commodities on the right side of the slide. You will note we are highly leveraged to copper prices with each 10¢ per pound change equating to approximately $425,000,000 in annual EBITDA.

[Maree Robertson, EVP & CFO at Freeport-McMoRan]

We'll also benefit from improving gold prices with each $100 per ounce change in price approximating $150,000,000 in annual EBITDA. Moving on to slide 14, this shows our current forecast for capital expenditure in 2025 and 2026. Total capital expenditures over the two year period are similar to our previous guidance, with some timing variances, which has deferred approximately $100,000,000 of spend from 2025 to 2026. The discretionary projects are expected to approximate 1,600,000,000.0 to $1,700,000,000 per year in 2025 and 2026, with roughly 50% related to the Kuching Liar development and the LNG project at Grasberg. The balance includes acceleration of tailings and other infrastructure to support the Baghdad expansion, the Atlantic Copper Circular Project, which is expected to be completed by mid twenty twenty six, and capitalized interest.

[Maree Robertson, EVP & CFO at Freeport-McMoRan]

The discretionary category reflects the capital investments we're making in new value enhancing projects that under our financial policy are funded with the 50% of available cash that is not distributed. These projects, which are detailed on slide 31, will benefit our results in the future. We will continue to be disciplined in allocating capital to projects that enhance our position and generate attractive returns. This is consistent with our track record of efficient capital allocation and value driven approach. On slide 15, we reiterate the financial policy priorities centered on a strong balance sheet, cash returns to shareholders, and investments in value enhancing projects.

[Maree Robertson, EVP & CFO at Freeport-McMoRan]

Our balance sheet's solid with investment grade ratings, strong credit metrics, and flexibility within our debt targets to execute on our projects. We don't have any significant debt maturities until 2027. In addition to paying our first quarter base and variable dividend, we have repurchased $107,000,000 of FCX common stock in the open market year to date. In total, we have distributed over $5,000,000,000 to shareholders through dividends and share purchases since adopting our financial policy of returning 50% of excess cash flow in 2021. And we have an attractive fee future long term portfolio that will enable us to continue to build long term value for shareholders with the remaining 50%.

[Maree Robertson, EVP & CFO at Freeport-McMoRan]

We actively monitor current market conditions and carefully manage the timing of our projects to ensure our financial flexibility remains strong. Our global team is focused on driving value in our business, committed to strong execution of our plans, providing cash to invest in profitable growth, and return cash to shareholders. In concluding today's presentation on slide 16, Freeport's large scale, low cost, proven producing assets, actionable low risk growth options, experience and leadership in the global copper industry, as well as our advantageous US footprint provide a strong foundation for the future. Thanks for your attention. We'll now take your questions.

[Operator]

Ladies and gentlemen, we will now begin the question and answer session. Session.

[Operator]

Our first question comes from the line of Bill Peterson with JPMorgan. Please go ahead.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

Good morning, Bill.

[Bill Peterson, Equity Research at JP Morgan]

Yes. Hi. Good morning, Kathleen and team. Thanks for taking the question. I wanted to ask about the, I guess, mine plan change.

[Bill Peterson, Equity Research at JP Morgan]

And it sounds like you're you look at this on a quarterly basis, but trying to get a sense for, I guess, what's changed now. Is it something you had seen earlier, but felt you needed more data to, I guess, change the plan? And just anything else that went into basically the modeling update and plan?

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

Yeah. Thanks for the question. And Mark Johnson is here on the call if we need to fill in anything. But we update our quarterly forecast, as I mentioned. We update our multiyear forecast every quarter.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

In Grasberg, we go through a process for each of the ore bodies and look at what the expected rates are. In determining the grades, we use an established software package that industry uses for modeling block caves. And we did detect starting in first half of the year some differentials between what we were actually getting out of the recovery of ore grades versus what the model suggested. Historically, it's been pretty close match. We did recalibrate it once before in at the end of twenty twenty three.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

It didn't have material impacts, but we took a took on a process to look at the various settings within the scheduling model and and we're able to develop a update to the calibration that replicated very, very closely the match that we've historically were were were were realizing. And so we have updated that. You you need to consider just the background of the variation of of grade within this ore body. And we have 900 draw points that we're collecting ore through, and there could be changes in the timing of how that ore flows through the draw points from which sections it's coming from particularly below the pit where remember in the open pit area, had a very high grade core gold at the bottom of the pit. So the interplay of the flows where it's moving is really just a timing of figuring out scheduling of how that will roll through our our our grades.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

And we were we were very close when we when we recalibrated the model over the long term, but it did have this this short term impact. So I don't know, Mark, if you wanna add anything, any perspectives to those comments.

[Mark Johnson, President & Chief Operating Officer at Freeport-McMoRan]

No. I think well, you handled it very well, Kathleen. The one thing I just might wanna mention is is what we're seeing is that as we start mining from a drop point, we're very confident because the material is just directly above the area that we're mining as these as we continue to pull through this column of rock, some of it is up up to 500 meters above us. This estimation becomes a bit more complex. Not all the material makes its way through that column at an equal rate.

[Mark Johnson, President & Chief Operating Officer at Freeport-McMoRan]

The smaller material tends to work its way through the column of rock quicker. And then, also, we have material that shifts laterally and can end up in in other drop points. So it it becomes a bit more of a big mixing as you get further up. And as Kathleen mentioned, you know, the team that we have on this, the tools that we use are are world class. And, really, we didn't see much variability at all on the copper.

[Mark Johnson, President & Chief Operating Officer at Freeport-McMoRan]

It it's much more stable in the grades, but the gold can shift in value quite dramatically over a relatively short distance, same as it was in the open pit. But in the open pit, we knew exactly that volume of material that we were mining at any given point. And as I mentioned in the block cave, that becomes a bit more of a a a complex estimating of how that material wake work its way from the higher areas of the block cave down into these draw points.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

Thank you, Mark.

[Bill Peterson, Equity Research at JP Morgan]

Thanks, Mark and Catherine.

[Operator]

Our next question comes from the line of Katja Yancic with BMO. Please go ahead.

[Katja Jancic, Metals & Mining Analyst at BMO Capital Markets]

Hi. Thanks for taking my questions. Maybe, Kathleen, you mentioned you continue to expect costs in North America to decline over the next two years. But if I'm not mistaken, that doesn't incorporate expectation for the impact from tariffs. Can you maybe talk a bit about how could tariffs impact that outlook?

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

We're monitoring very closely the impact of tariffs. In terms of what Freeport brings in as the importer of record, it's not a significant impact so far. The the the bigger impact that we're working with our suppliers on is what they are seeing and what various inputs they have into their cost. And so we're working very closely to to monitor that. We've got a we got a task force set up to to monitor it so that we don't have suppliers that are just trying to pass along use the opportunity to pass along price increases, but we're really getting down into the data to understand what it could mean.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

The tariffs to date and I know there's some negotiations that are ongoing, but we're currently estimating potential to have a a a 5% impact on our on our cost. But that's something we're monitoring. We're going to look for ways to to to modify our supply chains if possible and work closely with our vendors to make sure that we're sourcing the material as much as possible that it that's tariff free. So but but things like, you know, the steel and aluminum tariffs, you know, that's that's that's hitting us to a degree as well. So we benefit on the one hand to a much much larger extent on on the copper situation, which we talked about.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

But the the tariff is is impacting our operating cost, but not to a significant degree. We're really the cost savings that we're talking about, really the efforts underway to drive better efficiencies through through our our innovation that we're doing, focusing on the basics, rationalizing contractors like we talked about, reducing unplanned downtime, getting better asset efficiencies. Our asset health is in much better situation in The US than it has been in recent years. And so we're really now that inflation is somewhat moderated, we're now in a position where we're really driving what we can do to bring costs lower. We've got a lot of automation projects underway.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

So and of course, the Leach initiative will really help us out because those those incremental pounds are coming in at at a very low cost. And so we're really excited about the opportunity in The US to bring down cost. And at the same time, we're seeing this premium. So our US business should perform very, very well as we look forward. As a reminder, we don't have we have NOLs in The U.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

S. Net operating losses, so it can come in to our margins and cash flows and drop to the bottom line through our results. And so it's a real opportunity for us and we're very focused on driving value in our U. S. Business through efficiency programs and cost reduction programs in addition to the benefit we're getting on this premium.

[Katja Jancic, Metals & Mining Analyst at BMO Capital Markets]

Thank you.

[Operator]

Our next question comes from the line of Orest Wowkodaw with Scotiabank. Please go ahead.

[Orest Wowkodaw, Managing Director & Senior Research Analyst at Scotiobank]

Hi. Good morning. A couple of questions, if I could. Firstly, I was wondering if there's been any discussions with the US administration with respect to financing or incentives to advance any of your US based growth.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

We've had discussions with various government authorities about Freeport. You know, we've gone through submission of the two thirty two comments, and and we've engaged with with various representatives of the US government just as an education about what Freeport is doing in The US as a dominant producer. We talk about supplying 70% of the refined copper that's produced in The U. S. To this market.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

We've talked about the technology and the innovation that we have in the business that will allow us to potentially in the short term bring on some additional refined copper. You know, it's not a given that you can bring on refined copper very quickly in terms of there's only two operating smelters in The US. And what we can do in the short term is is is is really try to boost production, refine production through our leach initiative. We've talked with The US about the IRA benefits that being a critical mineral, you have a 10% production credit. Copper is not currently on that list and we're working to try to get copper on that list.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

We know with the recent legislature legislation, some of the the IRA benefits are being phased out. But, really, what we are are hoping to accomplish, we we're very happy about, the attention to permitting reforms, but we're hoping to accomplish incentives that would be long term in nature and really could boost US refined production. So we're educating. We're getting it's a two way conversation. Richard's been involved in various discussions as well.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

And so we're in a good position on this. Our Baghdad expansion is actionable. We're wanting to get our autonomous truck conversion completed. We want to understand the how this tariff situation will be implemented, etcetera. But in the near term, we're really looking at our Leach initiative as an opportunity to grow refined production in The U. S.

[Orest Wowkodaw, Managing Director & Senior Research Analyst at Scotiobank]

And just as a quick follow-up, do you see any opportunity for potential tariff exemptions on your refined copper coming from either Atlantic Copper or Indonesia into The U. S?

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

We don't know. We're waiting on the details of the implementation to be released. We don't we're not aware of any exemptions at this point.

[Orest Wowkodaw, Managing Director & Senior Research Analyst at Scotiobank]

Okay. Thank you.

[Operator]

Your next question comes from the line of Alan Spence from BNP Paribas. Your line is open.

[Alan Spence, Executive Director at Exane]

Good morning and thank you. Indonesia has $0.27 per pound related to treatment charges in cash cost guidance for 2025. Into next year with Nanyar up and running, what do you think your internal cost to operate that smelter would be on a cents per pound basis?

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

So there's there's they're gonna be in different categories in terms of where the the impacts of the smelter will be. The the operating cost of the smelter, the new smelter, is is somewhere on the order of 27¢ a pound. That doesn't take into account the additional revenues that we get from from getting, you know, essentially when you when you sell concentrate to a smelter, the smelter takes a percentage of the of the of the metal that you sell in them. So that'll show up in revenue, something on the order of of of two and a half percent of the of the revenues of the additional volumes will show up in our revenues. But, you know, net cost will be credited, you know, especially when you look at the impact of the smelter, you're looking at something on the order of 15 or 16¢ net when you consider the the revenue impact.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

And then, of course, the the export duty will go away, which was, you know, something on the order of of 30¢ or more in the in the in the second quarter. So it should, at the end of the day, benefit our margins.

[Alan Spence, Executive Director at Exane]

Thank you very much.

[Operator]

Your next question comes from the line of Lawson Winder from BofA Securities. Your line is open.

[Lawson Winder, Director & Equity Research Analyst - Metal & Mining at Bank of America]

Thank you very much, operator. Good morning, Richard, Kathleen and Marie, and thank you for the update. I wanted to just follow-up on the Indonesian question there about potentially sending refined copper from Grasberg to The US. So just looking at the two agreements as or the agreement as we know it is today and then looking at what the import tariffs are as proposed, so 50% versus 19%. I mean, there any thought internally for the potential just to ship refined copper from Indonesia to The U.

[Lawson Winder, Director & Equity Research Analyst - Metal & Mining at Bank of America]

S. And take advantage of that spread, assuming these agreements and the and the section two thirty two tariffs are finalized as proposed?

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

Historically, Indonesia has not has not shipped copper with any significance to to The US. You know, we've been a a concentrate producer mostly historically, although we've had the the existing smelter at PT smelting. But historically, the the the copper produced has been shipped out as concentrate or domestically consumed or or or consumed within Southeast Asia. We'll look at whatever, you know, makes sense in the future as to where where it makes the most sense to to sell the the the cathode coming out of our our new smelter. The logical places in the near term will be continue to to to sell in Asia, but we'll we'll look at what, you know, what what makes the the most sense.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

The point is is that as as The US is looking at its strategic interest in critical minerals, you know, having a US company with a significant ownership of this operation in Indonesia and and management over it, it gives The US essentially a a security of supply if if it makes sense to to if it's if it's required to to to use it. Today, you know, the the trade flows are mostly, as you know, or is coming to The US from places like, like like, Chile is the predominant, suppliers in Canada and Peru as well. And and so we'll have to just look to see how all this unfolds and what makes the most sense for trade flows.

[Lawson Winder, Director & Equity Research Analyst - Metal & Mining at Bank of America]

Yes. Thanks so much for that color. And then just a sort of follow-up on that concept in terms of refined copper within The United States. Have you given any thought to whether if Freeport were to build a smelter in The US, whether a brownfield expansion at Miami would make more sense or, you know, you know, would it possibly make more sense to to build a greenfield smelter? Thank you.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

Yeah. We're we're doing some work, and we have been doing some work even before this on, whether there's an opportunity on a on a cost effective basis to expand the Miami smelter Miami, Arizona smelter. And so we're continue continuing to study that as well as, you know, is there an opportunity potentially to recover some additional scrap and use our infrastructure in The US to do that. That that that's been very, limited historically, and we'll we'll look at whether there's there's an opportunity to do it in the future. But so we're looking at an expansion of of Miami.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

The the smelter in The US is a greenfield would be, you know, very challenging. I mentioned the the in terms of time frame, the the I mentioned the Indonesia smelter, you know, we were working on that. It it it feels like a lifetime, but we've been working on it for for ten years in terms of identifying a site to to location for it, you know, going through all that needed. And Indonesia really, really wanted to fast track it, But but it it takes a long time to to go through and find the proper site, find the find the the and go through the permitting process, engineering, all those things. But but we do have, you know, the existing infrastructure here in The US and Arizona, and we'll look to look to look to whether it would make sense to to expand it.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

You know, I I wanna emphasize though the the real opportunity for us in the near term to get more refined metal in The US is continued success with our leach program. And I mentioned the the additive, trial we're doing. We're making some progress on, additional additives. That combined with our precision leaching processes as well as we're gonna introduce heated graphonate into the into the solutions that we're injecting into the stockpiles. So we're working on those things.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

And those that can happen more quickly than trying to develop a more costly greenfield smelter.

[Lawson Winder, Director & Equity Research Analyst - Metal & Mining at Bank of America]

Thanks very much, Kathleen. Appreciate it.

[Operator]

Our next question comes from the line of Liam Fitzpatrick with Deutsche Bank. Please go ahead.

[Liam Fitzpatrick, Managing Director, Head of European Metals & Mining at Deutsche Bank]

Good morning, Kathleen and team. First one on the buyback, it was still very modest in Q2 in terms of the pace of buyback and despite net debt being well below your target now. Can you just outline what's holding you back at the moment in terms of increasing the pace of share repurchases? And if I can, one quick follow-up on Indonesia. I know you've said the 2026 guidance on copper and gold is unchanged.

[Liam Fitzpatrick, Managing Director, Head of European Metals & Mining at Deutsche Bank]

But given the variability you're experiencing, what level of confidence do you have or can you really have in that medium term gold guidance? Thank you.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

On the first question regarding the buyback, we are applying our financial policy, which is to distribute through dividends and share buybacks 50% of our available cash flows. And that's about what where we are through the program about at 50%. Now we've just seen this change on on The US premium, it tripled from the second quarter. So should it continue to be significant as it is today, that will provide more cash flow for shareholder returns under the policy. And with respect to being below our net debt target, you'll recall that half was for the shareholder returns and half was for balance sheet or profitable growth.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

And we've got several projects that we are we are looking at that, like, you know, for instance, the the the Baghdad expansion project, which we haven't made a decision on, but potentially that could that could use some of the the the other 50% that that we've generated since we put the the policy in place at the end of at the second half of twenty one. So that is that's where we stand. We should have as we look forward at today's prices, we should have more cash flow to deploy to our shareholder returns. With respect to the gold volumes, we go through a comprehensive process every quarter. We feel confident with the modeling that we've done and that we feel that the the gold grades are there.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

And so we'll just, you know, keep keep working as as as much as we can to to get our rates up. We were impacted in the first half by two major projects, maintenance projects. One of the concentrators was down for the first quarter in Indonesia and the second one is down now. But those are the maintenance will be completed at the end of the third quarter and we'll be able to increase our mill rates and keep the mine rates going. So we feel confident in in in using the the best information we have today.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

Mining is, you know, has does have have have risks as as as you know well, but but we're working, you know, working hard with the data we have. And and you can look at our historical performance, and and I think we've done pretty well when it comes to to to executing on on and keeping our information up to date so that we don't have we don't have surprises. The other area that's real important for us is getting the smelter up and running. You know, in the fourth quarter, we expect to not be exporting concentrates in The US. Our plan does not assume any exports in fourth quarter and all of it will be coming from the new smelter.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

And so we're real focused on making sure that we get that smelter up and running and things are going well so far. But the nature of these smelters is such that you do have issues from time to time. We've incorporated the ramp up curve in estimates, but we're going to work hard to execute on these plans as we've done in the past.

[Liam Fitzpatrick, Managing Director, Head of European Metals & Mining at Deutsche Bank]

Okay. Got it. Thank you.

[Operator]

Our next question comes from the line of Carlos De Alba with Morgan Stanley. Please go ahead.

[Carlos de Alba, Equity Research Analyst at Morgan Stanley]

Yes. Thank you. Good morning, everyone. So just coming back to the discussion of the smelting, I mean, Kathleen, what can the potential Miami expansion accommodate the increased concentrate from Baghdad and the concentrate portion of Lone Star expansions when it comes? Or if not, then what would be Freeport's options to handle those additional concentrates when they come?

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

Yes. So with respect to the Miami expansion, we've been looking at something on the order of 30% increase to the current the current concentrate treatment. Miami, by the way, the Miami smelter is performing very well, and and that team has been very helpful. That and the Atlantic Copper team both have been very helpful with our our new smelter in Indonesia and helping our team there to achieve the the ramp up. But but we've been looking at something on the order of of 30%.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

Interestingly enough, on on the Lone Star project, it will be, you know, kinda like over time, kinda like a Morenci, you know, where you have a significant portion coming from of of of the production coming from the from the leach volume. So depending on how we deal with our leach additives, we may have the option to send more to leach production as opposed to concentrating. But we do have at the Lone Star project, we do have a a part of the deposit that has has both copper and gold in the grade, and so that will likely require a concentrator. But we're in a we're in a great position, Carlos, with with this focus on getting refined production. We're in a great position with the smelters we have today to leverage those and and also with this leach processing where Freeport has a has a very significant experience in in in that.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

So so we're in a good position. It's not easy, you know, looking at the future of how to bring in more refined copper, but we're we're we're pleased with the portfolio we have that allows us to leverage it more quickly.

[Carlos de Alba, Equity Research Analyst at Morgan Stanley]

No. Definitely, the the optionality that you have is is quite unique here in The US. I wonder if as part of your discussions with the U. S. Administration, have you talked about the challenges of bringing smelting capacity in The U.

[Carlos de Alba, Equity Research Analyst at Morgan Stanley]

S? And how have they responded to that? Would they potentially consider some loans or investments, private public partnership or something to that end to to solve that issue and maybe accelerate the the the refining expansions?

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

We have not gotten into that that level of discussion with the government. There is a, there is a desire to see more copper refined copper being produced in The US, but we have not gotten into any discussions about about Greenfield. What we really just emphasized, what Freeport's doing in the near term through our lease innovation initiative and what we're doing to advance our Baghdad project as well.

[Carlos de Alba, Equity Research Analyst at Morgan Stanley]

Well, that that makes sense. Well, thank you very much, Clint. Congratulations, and and good luck.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

Thanks Carlos.

[Operator]

Our next question comes from the line of Daniel Major with UBS. Please go ahead.

[Daniel Major, Metals & Mining Analyst at UBS Investment Bank]

Hi, Kathleen and thanks for the questions. Just a follow-up on the smelter Indonesia smelter and the sales destinations for those volumes. You mentioned the possibility of selling to The U. S. In an environment where there was a preferential tariff kind of regime.

[Daniel Major, Metals & Mining Analyst at UBS Investment Bank]

Can you make any comments on whether any of the volumes are contractually committed from either the existing or the new smelter over the next twelve months that would prevent you from selling to The U. S?

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

Just wanna come back. I'm I'm not sure that that that you've characterized exactly what we're saying about about Indonesia. You know, in the near term, our plans are based on selling our cathode copper cathode that will be produced. We've been working on marketing plans and our our near term plans is that that will be sold in in Asia. We have, you know, flexibility.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

We don't have long term contracts locked up. We do have flexibility to send it to the place that makes the most sense. I mentioned that the trade flows currently are advantage, you know, logistically advantage selling it in Asia. We're we're very what's happening in Indonesia with respect to domestic production. There's there's a real desire in Indonesia to to bring up its domestic consumption of copper and there's actually been some infrastructure developed by other companies our near our operating sites.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

So we'll sell domestically and then look to where the best market is to sell, but we're not locked up long term.

[Daniel Major, Metals & Mining Analyst at UBS Investment Bank]

Okay. That's clear. Thanks. Just one of the modeling couple of modeling questions, I may. Could you give us any guidance around working capital for the Q3 given the changes in shipment timings out of Indonesia?

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

Yeah. We do we do have some working capital requirements in the third quarter, but that's expected to turn in the fourth quarter. For the year, you know, we've had a we've had a use of of working capital so far this year, but for the year, we're not expecting any kind of material working capital requirements for 2025.

[Daniel Major, Metals & Mining Analyst at UBS Investment Bank]

Okay. Thanks very much.

[Operator]

Our next question comes from the line of Chris Lefimina with Jefferies. Please go ahead.

[Chris LaFemina, Equity Research Analyst at Jefferies Financial Group]

Hi, Kathleen. Hi, Richard and Marie. Thanks for taking my question. So basically, want to ask about the market. So we have COMEX prices up more than 40% year to date.

[Chris LaFemina, Equity Research Analyst at Jefferies Financial Group]

I'm not sure we've ever had the price rally this much in a short period of time from a pretty high starting point. And U. S. Industrial economy isn't exactly firing on all cylinders right now. So I'm wondering demand implications of this massive price spike in The U.

[Chris LaFemina, Equity Research Analyst at Jefferies Financial Group]

S. And even globally with LME prices rising as well, you're seeing do you think these sorts of these price increases can be tolerated? Demand is inelastic enough that this isn't really going to be affected by higher prices? Or are we getting to a point now with COMEX approaching $6 a pound that you could see real negative implications on demand?

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

Thank you,

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

Chris. It's an interesting question. When we look at the demand drivers for copper and the secular trends, we see continued strong demand. What we do see from time to time and we saw it last year in China and, you know, you may see some of it going on in The US is when prices move rapidly in a in a in a short period of time. You know, some customers will try to figure out if, you know, if it's real, you know, before they before they they buy and people are trying to understand what the implications of this tariff are, and the details haven't been released yet.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

But underlying what's going on with you hear about it every day, the AI data centers, the need for for more energy infrastructure, more power generation. The underlying trends are are significant. Copper within big projects doesn't end up being, the biggest item. And so, you know, people can you know, people need it and it's it's a, you know, metal that is is is is the best metal when it comes to conducting electricity. So I don't you know, I can't give you a a precise answer about, you know, whether there'll be any short term impacts from it, but I think the long term trends are are positive in terms of needing copper to fulfill what we're trying to do from a technology standpoint and overall energy infrastructure standpoint.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

Richard or and and Steve Higgins is on as well. Richard, I don't know if you wanna add anything or or Steve to to what I said.

[Richard Adkerson, Chairman at Freeport-McMoRan]

Yeah. Let let me just say a couple of things, Chris. This move that you've talked about reflects the fact that there was this global exporting of copper in The United States in advance of the tariffs, getting it in here now before the tariffs came to place. Now there's this big question about what are the tariffs ultimately going to be. They certainly don't reflect the even at these prices, they don't reflect the 50% tariff that was that's been floated, but we we really don't know.

[Richard Adkerson, Chairman at Freeport-McMoRan]

And so once the tariffs are announced, then there will be an adjustment in flows and there will be potentially benefit on LME prices. Ultimately, it's going to be global supply demand that will end up driving it. And then whatever tariffs are there, how they're absorbed, where they're absorbed in The U. S. Marketplace.

[Richard Adkerson, Chairman at Freeport-McMoRan]

Copper is just so difficult to replace for its fundamental uses because of its inherent qualities. So it's not like and there'll be pushes as prices rise to find ways to substitute copper, to thrift it and so forth. But underlying all of that is just nothing conducts electricity like copper in the world's electric so that demand the fundamental strength and demand will be there. Steve, I don't know if you have any other thoughts.

[Stephen Higgins, EVP & Chief Administrative Officer at Freeport-McMoRan]

No, nothing to add. That was very well said.

[Chris LaFemina, Equity Research Analyst at Jefferies Financial Group]

Yes. I mean, I guess what I was thinking there But I was thinking the competitiveness of kind of downstream in The U. S. And if we let's assume these tariffs are a permanent thing, do you start to get a mix in demand globally to other regions?

[Chris LaFemina, Equity Research Analyst at Jefferies Financial Group]

And I get it that the LME price depends on global supply and demand. But for Freeport specifically, obviously, COMEX premium matters as well. So you start to get a shift in tons away from The U. S. To elsewhere, which means that the benefit of the tariff to U. S. Producers becomes less over time.

[Richard Adkerson, Chairman at Freeport-McMoRan]

Well,

[Stephen Higgins, EVP & Chief Administrative Officer at Freeport-McMoRan]

think that very much depends on how it's applied to downstream derivative products, which we don't know.

[Richard Adkerson, Chairman at Freeport-McMoRan]

And there's another factor here that really we haven't mentioned on this call that's a big uncertain. Going back to a previous question in the past, we've really only lobbied the federal government to try to make permitting more efficient and try to coordinate permitting between state and federal government. Today, you know, we're encouraging the government, not lobbying because we can't lobby, but encouraging the government to reach deal with our international partners that are favorable to both both companies both both both countries and trying to educate people. I'm sure you all watch news commentators, and you hear things that sometimes is just astounding, like people wanting to open up of these old smelters, reopen them, the old smelters. They don't realize they're gone.

[Richard Adkerson, Chairman at Freeport-McMoRan]

You know, the smelters that are once there are no longer here. And and to try to build a new smelter in today's world where you have, you know, zero or negative TCs and RCs is is is a tough deal now. They have not raised the idea of government subsidies and so forth. We've been trying, as Kathleen said, to get this production credit applied to copper, but that's the challenge. The thing that's the overhang is that we're looking into more is the impact of scrap in The US.

[Richard Adkerson, Chairman at Freeport-McMoRan]

There's primary scrap and secondary scrap, and The US had over time had closed its secondary scrap processors because of the environmental issues and cost issues associated with it. And almost all secondary scraps can go into China or elsewhere. Now there's been some new secondary scrap facilities opened up and that's the potential source of US refined supply. But it's complicated as well for the reasons I just mentioned. And but that's the thing to watch is what we're watching as we look at at all of these things going forward.

[Richard Adkerson, Chairman at Freeport-McMoRan]

It's just a complicated five year world, and we just all have to focus on doing it. And listen, I'm real proud of what our team is doing. I mean, you know, we've been through history at Freeport of having to dig our way out of some real tough problems over the years. Now we've got a lot of those past problems behind us and definitely leading the team and focusing on technology, get more copper out of what we have there, reducing costs, get ways of doing that. And that's what we're really focused on as we wait for this political situation to clear and to see where we're going from here.

[Chris LaFemina, Equity Research Analyst at Jefferies Financial Group]

Great. Thank you.

[Operator]

Our next question comes from the line of John Tumazos with John Tumazos Very Independent Research. Please go ahead.

[John Tumazos, Owner & CEO at John Tumazos Very Independent Research]

Thank very much. Could you explain some of the hurdles in engineering, the Baghdad expansion? Clearly, you've been mining a long time. You know about the reliability of the ore grades, the comminution character. And explain just how it takes a year or so to get the definitive fees.

[John Tumazos, Owner & CEO at John Tumazos Very Independent Research]

And concerning Lone Star, is the expansion and consideration, increasing the mining and stacking rate 120,000 tons a day oxide, Or is it also bringing forward the sulfide mill? Just looking forward to all the good progress.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

Yes. Thank you, John. On the Baghdad side, we've done a lot of work there, and we've been working with internally and with our with our outside engineers on defining that project. And, really, it's not been it's the the the the the big constraint for us has just been the ability to execute a project in the environment where we've been in the last few years in a in a inflationary environment where labor was labor was really, really tight and, you know, we watched projects elsewhere in the industry have big cost blowouts, and that's not something that we wanted to to do. And really from from bad debt standpoint, we're gonna be able to produce these reserves regardless of whether we expand.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

The expansion obviously would give us more near term production, near term cash flows, but it's really a question of when, you know, when the right time is to start it. And we've been taking the time while we've been considering to advance some things and derisk the project with with this autonomous truck conversion that we're doing is is gonna reduce reliance on on on on unemployment. We will have to expand our employment there, but not to the degree if we had, you know, the the trucks that were all, you know, they were all operated with people. So so we've been doing that. We've been dealing with housing at Baghdad.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

We've been advancing some of the tailings work, which we would ultimately have to do long term, but we've been advancing it so that when we're ready to go, we can we can just move forward with with construction. So we've been creating optionality with the project, but the main the caution that we've had with it is just wanting to make sure that we convince ourselves that we can execute the project efficiently within our capital budget. Now we've got we wanna monitor what's happening with with tariffs and how that might be affecting capital costs. And and so we wanted some more clarity there while we continue to to advance the the autonomous truck fleet. So that's where we stand at Baghdad.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

Lone Star, we're advancing a study to look at what the next phase of expansion could be. We've got the Dos Pobre's deposit at Safford, which I mentioned earlier, is is high grade and also has gold in it. So that would be, you know, a a a concentrator project. But with respect to to Lone Star sulfides, we're we're gonna look at the right, you know, the right mix of leach versus versus concentrating. If we if we put the concentrator in for those probres deposit, that that will help the economics ultimately of putting sense sending some through the mill.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

But the vision, big picture vision, this is an enormous resource in this district. Big picture vision is to have a cornerstone asset like Morenci that'll be a a leach and and concentrate producer of scale over a very long period of time. Lone Star was the last big mine that I mean, Safford Lone Star was the last big mine that was it was done in The US. We we brought it online in the 2728 02/2008 time frame, and we've expanded it since then. So it's it's for for US mines, it's relatively new even though that was some time ago.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

So we're really excited about the potential there and we want to get this study done to really define what the flow sheet will look like.

[John Tumazos, Owner & CEO at John Tumazos Very Independent Research]

Thank you very much.

[Operator]

Our final question will come from the line of Brian MacArthur with Raymond James. Please go ahead.

[Brian Macarthur, Managing Director at Raymond James]

Good morning and thank you for taking my question. Can I just go back to Grasberg to make sure I understand this? You sort of lost 200,000 ounces over your five year plan. And, again, that sounds to me it's just different flow through draw points. But if I look past the five years, is there anything different I should worry about there?

[Brian Macarthur, Managing Director at Raymond James]

And is there anything you've learned through this whole process that would change your thinking on KL, just given it is a lot higher goal, Greg, going forward? Thanks.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

Yeah. Not and then nothing has changed with respect to our long range, Glassdoor Block Cave plans. We are, to your point about KL, looking at, you know, what is the the best NPV when, you know, when when we're we're developing KL, but what's the best NPV if and we always look at the interplay between the grades coming from various ore bodies that could maximize the the net present value. So we'll have that opportunity that the development of Kuchel Liyar adds additional optionality within the portfolio. And you've pointed out, we've got high grades there, both copper and gold.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

Currently, the recovery assumptions in our in our reserves are lower than what we're getting in in, you know, the mill recoveries, what we're getting in in Grasberg Block Cave, but that's a real opportunity for us. So but you're right to point that out, Brian, and we'll we'll we'll constantly look we're looking at what the what the right sequencing is between these ore bodies. And with a a 2,041 extension, it's gonna open up a whole lot of opportunity for us to recover more than than than than than we could have otherwise. So we're we're we're very excited about the long range and and what we can do there.

[Brian Macarthur, Managing Director at Raymond James]

And, sorry, you actually went to bissection question there. As you as you pointed out, I mean, the recoveries at KL and the metallurgy was different with an awful lot lower in the goal. Would you from what you see now, do you think you're gonna be able to get up to the current recoveries you see at GVC? Or, because, obviously, you said that's a pretty big opportunity.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

Yeah. We we have we have not yet. I mean, we've been able to to make some changes over time and have brought the recoveries up, but that's still an opportunity for us.

[Brian Macarthur, Managing Director at Raymond James]

Great. Thanks very much for answering my questions.

[Richard Adkerson, Chairman at Freeport-McMoRan]

Brian, this is Richard. Let let me let me add just one quick thing on this because I've I've observed some things about this this grade issue with the Grasberg Block Cave. I just want to point out a couple of things. One, when you look at the shortfall, don't forget to take into account the tax effect of that and also the non controlling interest effect. The government of Indonesia has 51% of that and there's a tax effect to it.

[Richard Adkerson, Chairman at Freeport-McMoRan]

So I've observed some people overstating the impact of it. And as Kathleen and Mark said, this is not a fundamental change that the resource is requiring us to make operating changes in the way we operate. What we're talking about here is getting a better handle on when that gold in the ore is going to be processed. And we're learning more about it. We're using better models.

[Richard Adkerson, Chairman at Freeport-McMoRan]

It's not a resource question. It's a timing question. And we want to give the market as we always do our best effort in giving you guidance as to when that goal is coming. It's going to be there. It's going to come. It's a question of when.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

Thank you, Richard.

[Operator]

And with that, I'll hand the call back to management for any closing remarks.

[Kathleen Quirk, President & CEO at Freeport-McMoRan]

Thank you, everyone, and thanks for comprehensive call. We're available if anyone has any follow-up questions. Thanks for your thanks. We'll keep you updated as we go forward.

[Operator]

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

Participants

Executives

• David Joint, VP-IR
• Richard Adkerson, Chairman
• Kathleen Quirk, President & CEO
• Maree Robertson, EVP & CFO
• Mark Johnson, President & Chief Operating Officer
• Stephen Higgins, EVP & Chief Administrative Officer

Analysts

• Bill Peterson, Equity Research at JP Morgan
• Katja Jancic, Metals & Mining Analyst at BMO Capital Markets
• Orest Wowkodaw, Managing Director & Senior Research Analyst at Scotiobank
• Alan Spence, Executive Director at Exane
• Lawson Winder, Director & Equity Research Analyst - Metal & Mining at Bank of America
• Liam Fitzpatrick, Managing Director, Head of European Metals & Mining at Deutsche Bank
• Carlos de Alba, Equity Research Analyst at Morgan Stanley
• Daniel Major, Metals & Mining Analyst at UBS Investment Bank
• Chris LaFemina, Equity Research Analyst at Jefferies Financial Group
• John Tumazos, Owner & CEO at John Tumazos Very Independent Research
• Brian Macarthur, Managing Director at Raymond James