Richard C. Adkerson
Chairman of the Board and Chief Executive Officer at Freeport-McMoRan
Thanks everyone. Thank you for joining our call. Really pleased to be able to review our strong performance for this quarter, where we are with the company. It's a special time. Several years ago on a call I said, if we could be fortunate enough to ramp up our underground production at Grasberg, at the same time, we had a positive copper market, it would be a great time for Freeport. And this is really a great time for us. We're going to focus on the future but just one comment. I was last at the job site two years ago in October and we were just completing the mining of the open pit and starting to ramp up of the Grasberg Block Cave. And so, during this two-year period, our progress has been nothing short of remarkable. And I really congratulate our team at job site, but also in the Americas for what we've been able to accomplish, even in the face of all the distractions and challenges that COVID brought on.
I hope you and all your families and your colleagues are staying healthy. This thing is not over. We're keeping our guards up. I encourage you to as well. We have, at Freeport, had a successful program to give vaccines to our people internationally. Over 90% of our people in South America are not vaccinated, and 85% in pipeline and Indonesia are vaccinated. We continue to be challenged as some of our operations in the United States, which is common across our country unfortunately, but we are encouraging our people and making some progress there. But the news is, we've been able to meet the challenge of COVID and accomplish what we're reporting to you today.
Our copper volumes have grown over 20% from a year ago, and that reflects this really exceptional execution of our business. With these prices that we have today, we're generating very strong margin. Our EBITDA doubled from a year ago. Our strong operating cash flows that Kathleen mentioned in the quarter are really exceptional, and particularly when you looked at our capital expenditures were only $500 million. Now this is generating cash flows to -- now that we've met our debt target and we met that at the end of June, way ahead of what we'd anticipated at the beginning of the year. We're now focused on managing these cash flows. And that's a happy time for us; looking at investments for our long-term future. At the same time, we've been able to increase returns to shareholders and maintain a really strong balance sheet, which is going to be real hallmark of our Company going forward.
Everybody is focused on carbon reduction and climate initiatives. We've got 26 coming up next month. It's going to be all over the papers. We published our second report on our climate initiatives. We've put a lot more resources into it. We're really focused on it. As a company compared with other natural resource companies, we have much limited scope three emissions and other natural resources. And we're really focused on our Scope one and two emissions, and have a plan to achieve targets that we believe are realistic and achievable. We and the other 28 members of ICMM, International Council Mining and Metals, which our chair have signed a commitment to work towards having zero net carbon emissions by 2050, and everybody is working hard on it. We're also continuing to make progress to certify all of our operations with the International Copper Association's copper mark. And this just clearly demonstrates our commitment to responsible production.
You recall that I became Chairman earlier this year. And when that occurred, I made a real commitment to build the kind of Board that the company like ours really needs and deserves. We've added four new members in 2021. We added to this quarter; Marcela E. Donadio and Sara Grootwassink Lewis. That brings us to a total of eight independent directors which have a broad range of experience, and it's going to be a real strength of our company going forward. Underlying all of this is the fundamental outlook for copper is incredibly favorable; copper's role in the economy. And as the economy changes with global investments in infrastructure, and I know we have a controversy here, but countries around the world are going to build infrastructure. Less developed countries are going to develop. The world is getting increasingly focused on electrification with modern technology, 5G, and artificial intelligence.
And then, a new major element that people are talking about and recognizing now for demand that's coming. It's not here in real significance now is all of the investments that people are going to be making to reduce carbon. And across the board, those investments are results in significant demands for copper. And then, you got, we'll talk about this more, the commodity really supported by supply factors. I mentioned our Climate Report reported in September. It's on our website. I encourage you all to take a look at it. It really details work in a much more comprehensive way than we did in our first report last year about how our company will work to reduce greenhouse gas emissions, and how we are approaching climate scenario analysis and we're reporting in line with recommendations of the task force on climate related financial disclosures. We are, as a company and as an organization, firmly committed to this. We see it in our everyday lives with the forest fires in our operations in the West and hurricanes on the Gulf Coast - weather patterns all around the world. We all know we need to do this and we are committed to do our part for our company.
And as I said, as the rest of the world, the rest of industry focuses on this, it's going to create a lot of copper demand. Although, we established our target to reduce our greenhouse gas emissions in Indonesia, about 30%, which is a new target for us. We have this aspirational goal of net zero by 2050. Our two big issues are; one, the coal power plant in Indonesia, a lot of power required for our massive operations there. We're now investing in dual fuel powered plant there. We're looking to a future of power being generated by bio diesel, initially natural gas. We're looking at hydropower opportunity. So, we are working on that.
And then, the other major issue is how to convert our big haul truck fleet; massive trucks, diesel driven. They've had to work with our suppliers and others in the industry to convert that to electrical power or hydrogen powered vehicles. We'll hear a lot more about this in the week. Just know that our company is committed to it, to deal to deal with our own emissions, and to work with industry and communities in general to meet the things we need to move with climate change. Copper is essential to that. It's a strategic metal in many respects for the future. The world is getting increasingly electrified and more than 65% of the world's copper is used to deliver electricity. And when you look at electric vehicles charging stations, clean power from wind, solar, all of these require significantly more copper too operate then the way that things are currently done now. And so, it's up it's a challenging time for us and we're serious about this challenge, but it is also a great opportunity for us as a responsible global copper producer. So, we got these rising demand and supply is a real issue for this industry. Even today, with the economic uncertainties in China and globally, copper inventories are remarkably low. [Indecipherable] recently hit a 47-year low. Shanghai's lower then it's been since 2009. And while there will be some new projects that were started four years to five years ago, delayed by COVID, coming on stream in the next couple of years, that will bring some new copper to the market. Beyond that, the cupboard is pretty empty in terms of new supply projects of any significance.
And the world today, the opportunities are smaller. They're more difficult to develop and produce. Permitting still requires a very long period of time. And so, the industry really, one, has an issue with meeting the demand with supply and that's going to require action across a lot of fronts; more scrap, some substitution. But copper as a commodity is so much better than any alternatives that in whichever environment you can envision for the world going forward, absent some doomsday situation in the global economy, it's just in a situation of where copper prices have to be strong in my view, stronger than they are today.
Turning to slide 7. What this means for our company is with all the work we've done today in preparing our business in building our assets, we're going to have really significant margins and cash flow. Six years ago our company was facing real challenges and we worked our way through that very successfully. As we were working so hard and facing, dealing with some real tough problems, and dealing with it on a sustainable debt level at that time, we all looked at ourselves and talked about the assets that we had in our company, the long-term assets, the quality of the team, our track record, our capabilities, and that's really what inspired us all the work so hard to get to where we are today.
Copper volumes are 20%. Gold volumes are 50% higher than they were a year ago, and they'll be growing another 15% to 20% next year. It's a great feeling as we were ending the quarter and looking at September, in particularly, to recognize that the capital and execution risk to achieve these higher volumes, which we've been pointing to for a very long period of time, that those risks are behind us. The higher volumes are coming with low incremental cost. And copper prices from $45, we would generate annual EBITDA for the next couple of years on the order of $12.5 billion to $17 billion per year. And our capital expenditures, and we have a new project that we'll be talking about in Indonesia. Including that, our capital expenditures will range on the order of $2 billion to $2.5 billion dollars a year. So that means we are where we wanted to be, where we targeted to be, where we thought we would be. But the important part is, now we've done it. We're just not pointing to it.
And slide 8 shows that is ramp-up of the Grasberg mine. And that was -- this slide looks like this was really a straightforward, easy to accomplish deal. There are challenges every day out there. This is the most complicated mine in the world when it was open pit mine. And now, in the industries historically and historic large underground mine, it is truly remarkable.
The third quarter was 90% of our target annualized rate. We were at target in September. We're now on track to reach full rates metal production by the end of the year. Our team in Indonesia just needs to be congratulated and recognized for meeting all these targets. And it was strategically so important for us. And it was a real matter of concern back in March of 2020 when we had COVID facing us. Looks easy on paper, but man it's a challenge every day. And I had a great meeting with our team in advance of this call and the excitement, morale and so forth is just exceptional. It's really something special for our company and we now look forward to taking the steps that we need to take to sustain this for the life of this robot [Phonetic]. We're beginning to talk with the government and getting positive initial responses about extending our operating right beyond 2041, because of the ramp up, the limit of the operating rights, we haven't done much exploratory drilling, extension type core drilling. Our feeling and our confidence is there's a lot more resources beyond what we're developing there and we're explaining that to the government. As I said, initial reactions are positive. And I'm confident that we will not be facing an end to this operation in 2041. That makes no sense for any stakeholder. We need to look at it, to take advantage of the long-term resources available to us.
Slide 9 talks about our growth of our company. The real strength of Freeport is its large reserve base, 30 years to 35 years life in its proved and probable reserves, which gives us a sustainable ability of our operations for a very long period of time. And beyond that we have resources that are even larger than our reserves that are brownfield resources, which is really important in the Americas because that means that we are not trying to permit, getting community approval to build new mines. We have great support for our communities. We've involved them. We share our benefits with them. And so, as a result, we have these multiple options for long-term brownfield low-risk growth. And I'm really encouraged by the opportunities we have in United States where we have great community support. You have the benefit of strong communities and supporting schools, hospitals, education, great workforce, great community. We pay our people really well. We make sure they have living wages. We're sensitive to them. So, here we see, across the board, Bagdad in Northwest Arizona; long-reserve life, through a concentrated project, we can double production.
Lone Star, you're going to hear a lot about Lone Star in Freeport's future. This resource has a long-term opportunity to be a flagship asset. It's just across the ridge from Morenci, the largest mine in North America. We honestly believe this can be another long-term Morenci. And it's got -- right now, we're having real success with our, the new oxide mine we started this past year. It's expanding. It's got further expansions. We're able to make it economic by using available production facilities at our nearby Stafford mine that is winding down. And then, processing this oxide is really a stripping operation for this enormous sulfide deposit.
We have a great project in Chile, at our El Abra mine, where we're partners with CODELCO. This is a mine that we have a sulfide leaching project going on now. There is a big sulfide resource there. It would be a big price capital project to build a mill desalination plant. We're looking at a number of alternatives there. Chile is going through a process of the government, the people assessing how they're going to tax and what the fiscal regime is going to be for mining projects. We are going to wait to see how that plays out before making any investment decision. But in the meantime, we're getting prepared working communities, working with -- preparing for permitting and so forth. This will be a project that the world will ultimately need going forward. We've got a lead [Phonetic] project that's not very big in Europe at our Atlantic Copper smelter where we are going to be recycling electronic equipment. This responds to people wanting to see this sort of thing happening. It's a way of generating some copper without carbon emissions of significance and investments. And so, we're looking for that. We're looking at other opportunities like that.
And then, this Kucing Liar in Indonesia is really special. It is -- I was actually out there in the '90s when as we were driving the Amoli [Phonetic] drift, which was a dewatering drift going underneath the Grasberg open pit. As we were driving in the pit, we found this ore body. The engineers gave our geologists a hard time about it because they literally pierced this ore body that we had not seen previously that lies really to the south flank of the Grasberg pit. And we've been working on getting the right mine plan, the timing for it in the context of -- and if you turn to slide 10, you can see where it's located. It's an ore body that's in separate mineralization zone from our DOZ, Deep MLZ, and the Grasberg pit, it's a long fault line. It may have resources at depth. It has some complicated geology and mineralogy but it's a big mine. I mean it's 90,000 tons a day from a Block Cave, you only think of that as not being a huge mine because it's next to the Grasberg Block Cave. But it's like 60% size of Deep MLZ, 40% the size of Grasberg Block Cave, 350 million tons of ore, good copper and gold grades. 90,000 tons a day from a Block Cave, that's big by global standards. And it's going to occur over a number of years. It will help sustain our high level of low-cost production out of Grasberg; 500 million pounds of copper a year, 500,000 ounces of gold when it's ramped up in 2030. Capital expenditure is going to be spent over a number of years, use existing infrastructure. Just ask your gold analysis how they'd feel if gold companies were to announce that the gold mine and it was $500,000 a year and 500 million pounds of copper a year. This is a significant opportunity for us.
12, I mentioned Lone Star. You can see how we're ramping up the oxides. We've got 250 reserves of about 5.5 billion pounds. The real price here is sulfide underlying it. We've done some drilling to identify it. We're doing preliminary plans of how to process it and so forth. Metal potential of 50 billion pounds. 50 billion pounds. This is a long-term opportunity, but we're a long-term company. And this is going to be a flagship opportunity for us going forward.
Another area that's emerging and our guys on this call are really exciting about it is new opportunities to apply technology leaching. Now, [Technical Issue] guides and Freeport's predecessors were long leaders in leaching, going back to the very starting of, I'd say, CW leaching. The opportunities globally for traditional XSCW leaching are diminishing because they've been accessed and taken advantage of it. But this opens up a whole new realm of opportunities for us to add production with limited capital and low carbon emissions. This will range from looking at a series of additives and approaches for existing leach stacks which would allow us to recover more from those. We're also really getting excited by using this data analytics efforts that we started several years ago, to apply those weak [Phonetic] stacks and know more about what we're doing, what are the consequences of taking certain actions. So, it's a combination of things.
There are several alternatives we're looking at. The opportunity is really significant. Our guys estimate we have almost 40 billion pounds of copper in our existing stockpiles. This is not -- this is our demand. It's not in reserves and resources in any production plant. We can record -- if we can cover just a piece of this, it's the size of a new mine; low capital, low operating costs, low carbon footprint. A lot of this is in Morenci but there are other places. And it could even apply to some old historical mines that have whole leach stacks that we can use it for.
It's an emerging thing, but we are excited about it. And our company is particularly well situated to take advantage of that because of the history that we've had with these older mines and what this could mean for it. So this is a stay tuned deal. We're not building in our plans yet. But it's like a development project; low capital, low cost, low carbon. So it's really good. So, listen, we're just feeling great about Freeport. I mean, we've been to the wards together.
Our team is -- we're adding some really new resources to our team despite COVID. We're bringing in support. We've got young people in our organization stepping up to leadership positions. You know it's a dynamic company. It's remarkable that through all the trials and tribulations we went through, we had very limited numbers of people to leave us. Our people look at each other and we're inspired by each other and it's just great. Strong cash flows. We are going to be responsible. We have this great track record of doing all of this. If you look at our success we've had in development projects all around the world, different kinds of mining, different kinds of processing technology. Market outlook is great. We've got these organic growth opportunities. And really as a shareholder myself, the prospects of seeing returns on those shareholders coming of significance is just a great feeling.
So, I hope you can sense how we are feeling about our company and our outlook. And really appreciate your interest. And I'm going to turn it over to Kathleen before we open it up for questions.