Fcx (FCX) Q3 2026 earnings call transcript

Fcx (FCX) held its earnings call for the third quarter of fiscal 2026 on 27 October 2026. What follows is my machine transcription of the company's public webcast, made on 27 October 2026, and not the company's official text.

A machine mis-hears names and numbers, so where one reads oddly, the webcast is the record. This recording is not split by speaker.

Transcript

Ladies and gentlemen, thank you for standing by and welcome to the report Mac Moran 3rd Quarter Conference Call. At this time, all participants are in a listen-only mode. Later, we will see you next time. All participants are in a listen-only mode. Later, we will conduct a question-and-answer session. If you wish to ask a question during the Q&A session, press star one on your touch-tone phone. If you require assistance during the conference, please press star zero. I would now like to turn the conference over to Mr. David Join, Vice President, investor relations.

Please go ahead, sir. Thank you, Regina, and good morning everyone. Welcome to the free-port conference call. Earlier this morning, FCX reported its third quarter operating in financial results. A copy of today's press release with supplemental schedules and slides are available on our website, FCX.com. Today's conference call is being broadcast live on the internet. Anyone may listen to the conference call by accessing our website homepage and clicking on the webcast link. In addition to analysts and investors, the financial press has been invited to listen to today's call.

A replay of the webcast will be available on our website later today. Before we begin our comments, we would like to remind everyone that today's press release and certain of our comments on the call include non-GAT 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 factor described in our SEC filings, all of which are available on our website. Also on the call with me today are Richard Acterson, Chairman of the Board, Kathleen Quirk, President and Chief Executive Officer, Marie Robertson, Executive Vice President and Chief Financial Officer, and other 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. Thanks, David. We appreciate you all for joining us today. We've been looking forward to speaking with you about our strong third quarter results and our positive outlook for the future. We are pleased and proud of our team with the steady progress throughout the year achieved on the Graspard ramp up and with our initiatives across our business to drive value.

As we look forward, the table is set for growing our volumes in the near term, medium term and longer term, supported by our portfolio of long line of assets and by qualified and experienced team. Leaders in Indonesia have expressed support for the extension of our operating rights beyond 2041. We continue to work with the Ministry of Energy and Minds on documentation to implement the memorandum of understanding we signed with the Government of Indonesia. Freeports growth plans match up exceptionally well with accelerating requirements for copper.

Electrification continues to advance at a rapid pace, bigger and faster than we've seen in the past, and copper is the mental of electrification. The world requires a lot more copper and supplies are challenged. Freeports are particularly well positioned to grow with the market. After working in this industry for decades, today's opportunity for structural trends point to multi-year period of significant demand growth is unique. We have freeport in the right assets, the right time with the strong team and the freeport family and our strong financial positions.

We are well positioned to capture this opportunity for the benefit of our shareholders and all our stakeholders. Kathleen. Great. Thank you, Richard, and thank all of you for participating on today's call. We'll review our third quarter performance and update you on our initiatives, projects and future outlooks. Today, we will be discussing our team's work across our global business to build value. Our solid progress and momentum to safely and sustainably restore large scale production at Graspard, drive operational excellence and new technology initiatives in the Americas, and advance plans for value enhancing organic growth.

Starting on slide three, we show the highlights of our third quarter performance. Copper sales have increased in each of the last three quarters, and we expect fourth quarter sales to be the strongest of the year by far. Steady progress continues at Graspard with 67% ramp up achieved and confidence is building toward full scale. Strong operational execution combined with the favorable metal price backdrop provided significant margins, cash flows and earnings. The diversity of our portfolio and pricing leverage for our U.S. business comes through in the results.

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

We return nearly a billion dollars to shareholders year to date, including 300 million in share purchases. Our financial position remains strong, and as we look ahead, growing volumes combined with a positive market environment for our products sets us up for significant increase in cash flows to support our value enhancing investment program and increasing returns to shareholders. Moving to the copper markets on slide four, as a leading global supplier of a fine copper, Freeport has strategic significance and a strongly positioned to benefit from copper's essential and increasingly important role in societies around the world.

Copper's superior conductivity makes it the metal of electrification, and the global economy is rapidly becoming more electrified. Globally, copper demand is expected to rise in a number of applications, including the massive requirements for the power grid to support new technologies. LME copper prices average $6.09 per pound year to date through September, and currently approximate $6.58 per pound on the LME, and increase to 16% since the start of the year. Our U.S. customers report robust copper demand associated with growing requirements for electricity and energy infrastructure, data center builds, and in the transportation sector.

Copper continues to be strategically significant to China as the world's largest consumer to support its domestic power grid, technology advancement, and manufacturing of autos and consumer goods for growing exports. The sizable movement of product to U.S. whereas it continues, resulting in tight market conditions in the major consuming regions outside of the U.S. The situation underscores the strategic role of copper in the global economy and the supply change to support future growth. The signals we see are clearly pointing to requirements for additional copper supplies to meet growing demand, and at free port we have a valuable geographically diverse portfolio of integrated copper assets with large-scale production facilities that are difficult to replicate, long-line reserves and resources, and a portfolio of low-risk, ground-field expansion opportunities to serve a growing market.

I'm going to move to the operating highlights on slide 5 where we summarize the highlights by geographic regions. Starting with the U.S., we continue to focus on operating disciplines to improve efficiencies and productivity to grow production despite low or grades. We were successful in improving our mining rates compared with the year ago quarter. However, an abnormally high frequency of extreme weather events in the third quarter, which have continued in the fourth quarter, disrupted some of the momentum achieved earlier in the year.

We are deploying new technology tools to enhance our operating models and are investing in more efficient trucks and mining equipment to support our objective of increasing U.S. production and reducing costs. We continue to pursue an exceptional opportunity to unlock meaningful value through application of new technologies for recovering copper in our leaching processes. Data from our work today to support us of a potential breakthrough, and we are looking forward to what we'll learn as we go through 2027 as high potential next-generation proprietary additives are deployed in the field.

In South America, our flagship Cerro Verde operation in Peru continues to demonstrate solid operating performance and productivity consistent with a large-scale world-class operation. At elaborate and chilly, world-grade and operating rates were impacted during the quarter by mine's frequency to address slope management. We're now commissioning new facilities at Elabra that will allow us to enhance metal production by increasing temperatures in our leach pads. We continue to work with the Chilean government to advance our environmental impact study to position Elabra for a major transformative expansion.

In Indonesia, we're pleased to report that the team continues to achieve meaningful progress on the ramp up at the Graspard Block Cave. We operated at 67% of mine capacity during the third quarter, and progress is advancing for meaningful growth as we go into 2027. Upgrades to the material handling system for our automated rail system are progressing on schedule, and we continue to advance work for a restart of production Block 1 South in 2027. We continue to target overall rates reaching 80% by mid-27 and approach full capacity by the end of next year.

We were successful in restarting the smelter and now have both smelters in Indonesia in operation to support our mine ramp up. The team is executing the phased ramp up safely and efficiently, and we continue to de-risk the plants and increase confidence in a long-term outlook. In Indonesia, we continue to experience abnormally dry weather conditions in a closely monitoring forecast, which predict conditions to return to more normal levels as we move into 2027. The dry conditions are generally favorable for mining, but low water availability presents challenges in increasing mill rates.

We're actively managing the situation with limited impacts to date. As Richard mentioned, we're continuing to work cooperatively with the Indonesian government to secure our long-term operating extension in accordance with the MOU reached early in the year. We submitted our application in June, and we're continuing to work to complete the formal process. The government continues to express support for extension to provide long-term continuity of large-scale operations and mutual benefits. Big picture, the third quarter, the team executed well, but experienced challenging operating conditions.

You'll note we continue to expect the fourth quarter will be the strongest of the year, but have adjusted our 2026 copper sales by approximately 2% to incorporate the impact of shortfalls in the U.S. and in chilling. Our team is committed to execution, dedicated to overcoming challenges, and driven for excellence in all that we do. I'm going to move to slide 6, where we have some real excitement around Freeport about the growth catalyst. We're driven to increase copper supply to a growing market in a strongly positioned as we look forward with significant near-term, medium-term, and long-term growth.

The progress we've made throughout 2026 positions us for significant growth in volumes, margins, and cash flows in 2027 and 2028 as Maria will cover shortly. In the short term, we're positioned to grow from 3 billion pounds this year to 3.7 billion pounds in 2027 and over 4 billion pounds in 2028. Continued strong execution of the Graspard recovery is the major driver with improved U.S. production adding incrementally. This growth, notably, does not require a new capital. With our U.S. growth initiative as America's copper champion, we see a path for Freeport to be a 4.5 to 5 billion pound a year copper producer in the 2030 timeframe, with success in our innovative leech initiative and our expansion of our Baghdad mine in Arizona.

We continue to see the innovative leech initiative as one of the most attractive opportunities in our company, because it leverages our existing infrastructure, is scalable, is not capital intensive, and has low incremental operating costs. We've been on this journey and advancing this initiative for the last three to four years, and our excitement continues to build, supported by progress in developing a proprietary next generation additive that would unlock recoveries of low grade ores previously thought to be unrecoverable.

As you'll see in the chart, lab testing of the new Freeport additive is showing incremental recoveries of more than four times those achieved with our initial additive. The next generation additive is now being manufactured on a fast track schedule and will start receiving commercial quantities for field deployment as we go into 2027. While we need to be cautious until it's proven in the field, this could represent the major breakthrough technology that we've been working to achieve.

We expect to make an investment decision on the Baghdad expansion in the four quarter, very excited about this. We see it as an attractive opportunity to transform Baghdad into the second largest copper mine in the U.S. benefiting from economies of scale and the use of modern technology to set the operation up for improved multi-decade performance. We're also advancing further growth options, which could be developed by the mid 2030s, with a large scale expansion of the elaborate mine in Chile, and exciting possibilities for development of our large resource positions in the Stafford Lone Star District in Arizona.

We see our pipeline of organic growth being particularly attractive in the context of an industry where greenfield projects carry significant risk and development timeframes can span 15 to 20 years. We have a differentiated advantageous position since our projects are brownfield in nature, resulting in benefits from leveraging existing infrastructure, lower capital intensity, experienced workforces, and relationships with key stakeholders to move more quickly with less risk than a greenfield project. We're increasingly mindful of escalating inflationary pressures affecting capital costs for major projects and the need to be disciplined on qualifying projects, delivering investment returns, and carefully controlling budgets and schedules.

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

Thanks, Kathleen. Just flipping to slide seven, we show our three-year outlooks of sales volumes of copper, gold, and the lived in them. As Kathleen referenced, we expect significant production and sales growth in the coming years. We have trimmed our 2026 copper sales by about 2%, taking to account slightly lower production in the US and Chile. And by approximately two and a half percent in 2027 to reflect current mine plan updates. Copper sales in 2028 are consistent with previous estimates, and gold and molly sales are unchanged for the three-year period.

We expect our fourth quarter of 2026 sales volumes to be the highest of the year, with copper sales increasing 17% and gold sales nearly tripling from third quarter levels. For the year 2027, we expect annual growth in copper sales of over 20% compared with 2026, and more than a 50% increase in gold volumes, with additional growth in 2028 of 10% for copper and 20% for gold. Our team remains focused on delivering our plan safely and efficiently, which will translate into strong financial performance and meaningful future cash flow growth.

Moving to slide eight, we continue to carefully manage all costs and capital while striving efficiency and productivity programs, particularly in light of inflationary pressures affecting our business and the industry. As discussed on player calls, we continue to experience cost pressures and volatility in global energy and commodity markets, including oil, sulfur and acid, largely associated with the conflict in the Middle East. Rising energy costs during 2026, particularly diesel prices, have impacted costs by approximately $500 million compared with 2075.

Sulfuric acid, a key input into various copper processing technologies across the industry, has more than doubled this year. Notably, free put is comparatively well positioned given our integrated business model and is generally insulated from price minutes as a significant producer of sulfuric acid throughout smelting operations and consumer of acid in our leaching processes. In addition to operating costs, capital costs across the mining industry have been trending at a greater pace than overall headline inflation rates in recent years.

These pressures affect both sustaining capital and expansion project costs, reinforcing the importance of remaining highly focused on carefully assessing our priorities, pursuing continuous optimization programs and maintaining rigorous and strict project and cost control. On net unit cash costs, we are maintaining our full year guidance for 2026 of $1.90 per pound, with byproducts, particularly malignant, providing an offset to the impact of higher input costs. Putting together our projected volumes and cost estimates, we show model results on slide 9 for EBITDA and cash flow at various copper prices, ranging from $5 to $7 copper.

These are model results using the average of 2027 and 2028, with current volume and cost estimates and holding gold flat at $4,000 per ounce, and malignant flat at $32 per pound. Annual EBITDA would range from over $12 billion per annum at $5 billion copper, $19.5 billion at $7.00 copper. With operating cash flows ranging from over $9 billion per year at $5, for approximately $15 billion at $7.00 copper. We show sensitivities to various commodities on the right.

We note we are highly leveraged to copper prices with each 10 cent per pound change, according to approximately $390 million in annual EBITDA in the 2027-2028 period. We also have exposure to gold prices with each $100 per ounce change in price, approximating $105 million in annual EBITDA into malignant, which has shown significant price strength in recent months. Each dollar per pound change in Malia approximates $85 million in EBITDA per annum. With our long-life reserves and large-scale production, we are well positioned to generate substantial cash flows to find future organic growth and cash returns under our performance-based payout framework.

Slide 10 shows our current forecast for capital expenditure in 2026 and 2027. Our 2026 capital expenditure is currently estimated to approximate $4.4 billion. A 2% increase from the prior estimate, and $5.2 billion for 2027, an increase of approximately $400 million above the July estimate, primarily reflecting additional mining equipment investments to support and enhance productivity improvements in the U.S. and cost inflation. The discretionary projects are expected to approximate $1.6 billion in 2026 and $2 billion in 2027, with roughly 50% related to the continuing our development and the LNG project at Grasberg.

The bellows include acceleration of tailings and other infrastructure to support the Baghdad expansion, upgraded mining equipment and capitalized interests. The discretionary category reflects the capital investments we are making in new projects that under our financial policy are funded with the 50% of available cash that is not distributed. These projects are value enhancing initiatives and are detailed on slide 28 in our reference materials. The capital estimates exclude projects that remain subject to completion of final studies and board approval, including the potential Baghdad QX expansion project.

And as I mentioned on the previous slide, we'll continue to carefully manage our spending and deploy capital strategically to projects with the best return and risk reward profiles. Finally, on slide 11, we reiterate that financial policy priorities centered on a strong balance sheet, cash returns to shareholders and investments in value enhancing growth projects. Our balance sheet is solid with investment grade ratings, robust credit metrics and flexibility within our debt targets to execute on our projects. We have a strong liquidity decision and have substantial flexibility for funding upcoming 2027 maturity.

Our strong balance sheet and significant cash flow generation supports disciplined investment in growth in future growth was returning cash to shareholders. And since adopting our financial policy in 2021, we've distributed $6.6 billion to shareholders through dividends and share purchases, including approximately a billion dollars a year to date in 2026 and have an attractive future long-term portfolio that will enable us to continue to build long-term value for shareholders. Our global team is focused on disciplined execution, profitable growth and long-term value creation.

Thanks for your attention and we'll now turn to questions. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, press star 1 on your touchtone phone. If your question has been answered or you wish to remove yourself from the queue, please press star 1 again. If you are using a speakerphone, please pick up your handset before pressing the numbers. We ask that you please limit your questions to 1.

If you have additional questions, please return to the queue. One moment please for our first question. Our first question will come from the line of Richard Garcharina with Barclays. Please go ahead. Thanks, and congrats on the strong quarter. First, my question on grassberry. Given the progress that you're saying with ramp up on track production from Block 1S expected for mid-2027 and then full run rates by the end of the year, how should we think about the cadence of production for a copper and gold in the first half of next year versus second half?

And then how should we think about the mine plan heading into 28 as you ramp up even further? Thank you, Richard. And we're very pleased with the progress that we're making at Grassburg. The installation of the material handling system upgrades is going well. And we expect that those will be wrapping up towards the end of this year and early next year. So I think as you look at where we are for 2027, you should see first half starting to ramp up.

Second half will likely be higher than the first half, but we expect with the startup of these panels that are currently down, that will add a lot. PB1 South is not a huge contributor in 2027, but you'll see pretty significant ramp up throughout the year, but second half will be higher than the first half. And the first quarter will probably be the lowest of the year. Our next question will come from the line. If Chris slipped in the net with Jeffries, please go ahead.

Hi, Kathleen. Marie Richard, thanks for taking my question. So first, well, I want to say congratulations on the progress you're making at Grassburg. It's been an impressive recovery there in the last couple quarters, but I wanted to ask about the idle facility costs, the recovery and restoration costs that you book each quarter. I think it's 240, some odd million dollars in the third quarter, more than $900 million a year to date. And a question about that, first of all, how much of that is, it relates to costs that are going to go away when Grassburg fully ramps down to the worst cost that you're spending to repair the operation versus proportion to those costs that are actually kind of fixed costs that you continue to carry going forward.

That's my first question. It's around the idle cost at Grassburg. OK, thanks, Chris. Thanks for your comments. The idle costs are essentially fixed costs. The accounting rules require us to charge costs that are not attributable to production directly to production costs rather than going through costs to sales. But those costs won't go away, but they will be in our unit costs going forward. We expect the fourth quarter because rates are consistent between third quarter and fourth quarter.

We expect the fourth quarter to be similar to the third quarter, but beginning in 2027, we don't expect to have those costs treated separately, and they'll be in our all-in unit costs. But of course, with the rising volumes, we've got a very significant increase in volumes going from 700 million pounds of copper this year to 1.2. Next year, you'll see very low unit costs continuing at Grassburg. So it's really an accounting classification as opposed to a change in cost.

Got it. Thanks. And just one question on the US operation. So you're doing a lot of good work there in terms of getting mining rates up. Obviously, grades there are low, but I've noticed that recovery rates have been trending lower and wondering if that will continue and why that might be happening is the nature of the ore changing. Is this something that's temporary? What's going on there? Thanks. Thank you. I'm going to let Corey Stevens cover that one.

But it is. You write your last comment about nature of the different types of ore that does affect recovery. But Corey, why don't you give us some color on that? So Kathleen and team, the really the recovery rates are driven by how the ore body presents itself. And we've really been mining lower volumes in past years. To be honest, missing expectations of where we really wanted to be. And there's a bit of catch up at this point in time as we increase volumes.

And the ore presents itself to get to the better locations for for better grading. So that's where a lot of our focus is really placed on. Increasing mine performance and really adjusting to the employed various. Technologies as we go forward, we've launched our officially launched our remote operating center here in Phoenix. They're really coupled up the high operating standard and state of the art technology and analytics to be able to. Deploy and, and work with the teams at sites to help them be successful as they work through the higher volumes were implementing new tooling with new new.

Higher payload overclass fall trucks, better mind plans and road designs. But really we see the solution going forward at this point with with higher volumes to really set these processing plans up and then coupling that with the new technologies that we're developing on the on the leach enhancements and the additives on that front. So do you expect the recovery rates to rise from where they are today or should they stabilize where they are. Yeah, so so really, you know that that's kind of goes back to this additive development work, which is really giving us a lot of confidence that, you know, our gen one additives we've deployed in 2025 and 2026.

That's really giving us expected results from our lab protocols and that gives us confidence that, you know, our gen two additives are really going to really launch us into this next phase of development that's that really could change. Quite everything in terms of, you know, how we're going to be leveraging the big, the copper that's in the existing stockpile, but also harness the resource that's in the ground still. So we're really pretty excited about where that's headed, and we've got limited, you know, demonstrations that are in the portfolio right now.

That's really going to, you know, set the stage for how we want to really want to leverage that going forward, but we're quite optimistic on how that's going to play out. And yes, there's going to be learnings with with those commercial developed deployments that we have planned in 2027, but the team stands ready to adapt and adjust as we pursue America's copper champion. And Chris, you know, I think you're referring to Cory was talking about the leach recoveries, but I think you're also referring to the, to the mill recoveries and those are impacted by the types of the types of war and what those recoveries are.

So those will vary depending on the types of wars that that are being milled. But as Cory was saying, you know, we're really very excited about the opportunities in the US, you know, we're thinking bigger and bolder. These resources are very large, they're low grade, but the more that we can drive productivity and we're leveraging technology, we see that as a major value unlock for us. The more that we can drive productivity, Cory talked about a different kind of trucks that we're, that we're, that we're using.

We've had great success with those in. More productive as we go forward, and so we're really focused on increasing our mining rates in the US, particularly at Morency, where we pretty much process everything that we mine there. And the more progress we make on building those mining rates up, the better, the better we're going to be in terms of increasing production in the US, not just from the leach, but also through our mill. So we're very excited about the opportunity to enhance our operating models within our US mine.

Great. Thank you. Good luck. Our next question will come from the line of caught again sick with the mo capital markets. Please go ahead. Hi, thank you for taking my question. Let me stay on the US side, specifically on the lead thing. I think you mentioned that the new additives are performing as expected, but it does seem that leaching ramp up is a bit slower than previously expected. Can you talk about what is driving that? So, as Corey was talking about, the current additive that we're, that we're using is, is showing what we expected in the lab.

It's consistent, maybe a bit better than what it was predicted to be in the lab. We have always been, you know, as I mentioned over the last couple of years, we've always been testing multiple additives. And so we have not yet tested in the field. This next generation additive that is that has the potential to put us on the path for scale that combined with the work that we're doing to increase temperature of our stockpiles as a potential to to really help us with scale.

We've got 300 million pounds targeted in 2027 compared to just over 200 million pounds in 2026. But those new additives, which I said are being manufactured now, really show the potential that we were looking for to supercharge these recovery. So, we'll have to wait a little bit longer, but the optimism is an excitement around this initiative is building because, you know, we have, as we've talked about before, over 40 billion pounds of copper that's already been mined.

It's in above ground stockpiles and prior technologies didn't allow us to recover copper from it. And so now with the promise of potential next generation additives, we see a real opportunity to build scale. So to date, we've been using principally operating tactics to get more solution to areas within the stockpile that we're dry. But now we're able to enhance that with additives, we've started to with the initial additive, but we expect that that'll be replaced with these new additives.

We've got coming in in 2027. So this is a, this is going to evolve. It'll be a dynamic period for us in 2027. But we really see it having the potential to unlock a lot of copper throughout, not just in North America, but South America, a lot of copper as we go forward. And again, this is something proprietary to free for it. Very proud of the teams that we have that have been working on this to unlock this value.

It's unlike anything we have in the, in the mining industry, because it doesn't require significant new capital. So stay tuned. But we're very, very excited about, about the laws ahead. Thank you. Our next question will come from the line of or is to walk with all with Scotia bank. Please go ahead. Yes, good morning. I'm wondering if you can give us some more color on the increase to the CAPX guidance for 27. It looks like it would up 400 million from the Q2 guidance.

Is there, is that just inflation on the existing plan projects or have you added, I guess, if you added projects to the list? Well, we've added, we've added in our, in our, the category that we call other sustaining and other. We've added more mining equipment. As I mentioned, you know, the success we've had with, with the ultra class trucks in, in Peru at Sarah Verde has been very strong. And so we've added some additional trucks to allow us to continue to increase mining rates to unlock more production or copper production as we go forward.

So that was about half, half or so of the increase. We do have some inflation that's part of it. And we have some additional costs as we complete the project at Atlanta copper, the circular project that we expect to complete during 2027. Those are the key categories. But as Marie mentioned, we are seeing capital cost inflation. You know, you see it in operating costs, but we also are seeing it in capital costs, the cost of, of the type of equipment that we purchase has gone up and it's higher than, than, than CPI in recent years.

So we are continuing to, to work to, to control costs to prioritize, you know, what, what, what makes sense. But from a big picture standpoint, this industry, you know, historically in recent years, I mean, arguably has been under invested. And as we look forward at making sure that we've got the ability to grow our business in line with where we see demand for copper growing. We've got to be thinking bigger and bolder. That doesn't mean we're, we're not going to control spend.

We're going to control spend. It's in our DNA. But, but bigger and bolder in terms of how can we get more out of our existing assets and incremental capital spend can make us more efficient, more productive, help us address the labor challenges that we have. So we're, we're thinking differently about the future than, than maybe we have in the past in terms of making sure that all these operations are producing at their max rates to, to be able to meet the requirements of the future.

Because we've been saying, you know, what we see in front of us is, is, is very significant growth and demand. And we've got to be prepared to step up to that, is that demand and do it in a, in a, in a profitable and economic way. But that's, that's part of what you're seeing or. Thank you appreciate the color is it fair to sort of read into this that approach likely continues into 28 in terms of more of an elevated spend.

Well, as we see the markets today, you know, we, we see a need a signal to, to produce more. And so we're going to be looking within our portfolio of what is the, what is the cheapest way, the most economic and productive way to, to build new capacity and get more out of what we already have the resources that we already have. So if we can add incremental capital and get, get, you know, benefits and quick payouts, those are things that we're going to be inclined to do.

Now we've got also the major project and, and, and our board will be considering the, the investment in Baghdad. We're very enthusiastic about moving forward with that, that project. So, but as, as we look at this, you know, we, it all fits into our balance of investing in our business, growing our, our copper production to match what we see is, is, is strong demand going forward. The absence of, of supply growth across the industry, the absence of real significant supply growth.

So what we're doing is trying to figure out, you know, on a brownfield basis, how can we get more to be able to meet these, these demands. So that's an, and we'll, we'll monitor it. We'll monitor market conditions as well. You know, in free port, we've had a, a long history of adjusting to market conditions. If we need to conserve capital, we can. But as we see it right now, these are going to be very strong economic capital decisions that we're making that, that help us set us up for the future growth that we're, that we're pursuing.

Thanks, thanks. Thank you. Our next question will come from the line of loss and lender with Bank of America securities. Please go ahead. Thank you operator. Good morning, Richard and Kathleen and Marie. Thank you for this call. And congratulations on the nice quarter. If I could, I'd like to ask about the Baghdad and the investment decision that's expected in Q 426. I mean, I think this is a really exciting moment for free port USA. When thinking about the CAPX that you've now put out the $4.5 billion, you've had now another quarter to refine the engineering work.

Do you see any potential change in that that's $4.5 billion estimate? And then could you just walk us through timelines? Are there any permits outstanding that still need to be concluded? You know, post an FID decision later this quarter. And then when would be a reasonable time for us to assume commissioning would would start for this asset and then ultimately run rate capacity. Thank you. Thanks. In terms of permits, we don't we have what we need to go forward with this expansion.

We've been working on it for some time. You know, we've been spending money to to ready the operation for for this investment. We have been advancing work on our tailings. There to be that we would have needed to do anyway down the road, but to be ready for new production. We have converted the the haulage fleet there to fully autonomous to prepare for the ability to scale. You know, one of the things that has been a factor for us and thinking about.

Growing in the U.S. has been the tight labor market, particularly for the types of skills that we need. And so we have been leaning on technology to help us scale. And at Baghdad, that was the first line we selected to deploy the the autonomous trucks. And so as we move forward with an expansion, that will allow us to scale and and add autonomy and continue to add autonomous trucks to scale that without, you know, without needing to as many people as we would have otherwise needed.

So, but in terms of your question on the on the capital cost, our estimate now, you know, on a go forward basis is still at that four and a half billion dollar level. We've done a lot of work on it this year. We've been working with our with our contractors. We've been working to do to make it as efficient as possible. It's a competitive market in Arizona with with all of the not just copper projects, but but but all the other activity really is driving the man for skill in Arizona in the semiconductor sector with all the bill going on in in electricity build out and and data centers.

It is a it's a very active time in Arizona. And so we have been planning this, working to de-risk the capital as much as possible, preset, you know, working on them on a model that would allow us to prefab certain of the material. So we didn't have to we don't have to do everything or limit what's done on site. So we've been doing a lot of things to try to de-risk the capital, but it is an environment where, as we mentioned, escalation, you know, labor costs, the cost of steel, other things, you know, care of other things that are affecting.

Affecting cost energy markets have a degree of an impact. So all those things are are things that we're taking into account. And we don't know, you know, what the future inflation will be, but in current dollars. We're drawing a circle around, you know, four and a half billion dollars and we're going to work very hard to manage both the capital spend and the. And the time schedule, we expect the project would come in within the next.

From the final decision come in around three and a half years. And so our team is well organized. You know, one of the things about Freeport is we have a project development execution team that is best in class. And the project controls are excellent. Our work with contractors is very strong. We have an approach where we don't just turn over a project to a contractor to execute. We're right in there executing all the costs and everything are on our system so that we can manage and control those of having said that, it's a challenging environment.

But if any team was ready, this team is ready. A lot of the people on this team that we're forming were integral in getting that melter done in Indonesia during a very challenging time during the pandemic. And really worked hard to bring that project in. So we've got resource capacity within the company that are dedicated to this. We've got contractors that we've been working with for some time, both on the EPC side and on our labor side.

And so we feel we're ready. We're going to talk with the board about it. But this was a real opportunity for us as America's copper champion to leverage what we have there. The facilities are currently undersized for the size of the resource. And so we're really looking at this for the long term and to set this operation up to be more efficient, more modernized. This was done in the 1940s and more modernized and this will be a mind of the future and one that we're very excited about moving forward.

So we'll make a decision with our board here soon and hopefully be on our way. In terms of the incremental production, the Baghdad we're looking at, you know, a doubling. It would be something on the lower of 200, 250 million pounds a year. The concentrator size will be more than doubled. We're also, we've benefited Baghdad from a large amount of more lived in production. So we'll be adding 10 to 12 million pounds a year of more lived in them.

So big, big feature of the project is using economies of scale to bring down our costs. And that's, you know, what we're focused on and across the U.S. is finding ways to reduce our, reduce our costs as we go forward. Thank you very much, Kathleen. I appreciate that. Nice awesome. Our next question will come from the line of Tim the Tanner's with Wells Fargo. Please go ahead. Yeah, he's good morning. I hope you're doing well. I wanted to ask if I could two quick follow ups.

One is regarding the leaching discussion. Really helpful detail on the potential benefits from the new additives, but I wanted to just clarify. Is it possible that this is not in your numbers right now and could result in upside to your numbers? Or do you think that the success of the additive would be beyond 2027? Just a little more color on that. And then, yeah, I'll let you go to one next. Yeah, sure. We have 300 million pounds in our numbers for 27 and 28.

That is lower than potentially could be expected if the additive is as successful in the field as it is in the lab. And then with that data, that would give us the plan to decide where to go. This is a test. It's a commercial test. We've got enough quantities that we've got manufactured to be able to fully test it. But if it's successful, this could be really what we've been looking for. And you could have a situation where leach recoveries start to compete with a mill recovery.

And that could have implications to how we think about the future. Like the Stafford opportunity we're pursuing a mill, but that could change the flow sheet as well. But remember our target or our potential or our aspiration is to scale the leach opportunity from just over 200 this year to 300 next year. And then ultimately, you know, by 2030 to get to this 800 million pound level. And that would be done with a combination of a successful leach additive and the increased temperatures that we're currently testing now.

It would just starting a project at a lava now to heat the solution that's going into the stockpiles there. We're doing some at Serra Verde. We have smaller stock, smaller leaching operations, and we have plans to do it in marency as well. But we'll have to see that the testing work that we're doing is showing really strong recoveries. And it's a possibility that we may not even need heat in the U.S. if the recoveries are as good as what the lab is showing.

So it's dynamic and we'll have a lot more information as we go through 27. But it's not in our forecast we feel confident we can get to 300, but the 800 is going to depend on the results in the field. And so we're not at a point where we can give guidance. We see it as a potential value driver that we're pursuing aggressively. But we're not at a point to put it into our forecast. Okay, appreciate that.

And if I could, I know you've been talking, of course, I'll call about organic growth opportunities. But to the extent that this high copper price yields a pretty attractive free cash flow going forward, do you consider M&A? Do you consider other ways to grow outside of your organic opportunities? Always. I mean, as we have our base case plan of organic growth and, you know, at Freeport we have, we're advantaged in that we do have a significant organic growth pipeline.

But we're always monitoring market opportunities. Richard just did a podcast for those of you who haven't seen it yet. He did a podcast with Andrea Hodder about the self dodge deal. And if for those of you who haven't seen it, you should see it because it was a, it's a good example. We're going on our 20 year anniversary there. And at the time, we didn't expect that opportunity to become available. But we were prepared and we're ready to move on it.

And it ended up being, I believe, one of the best M&A transactions in our sector going back to looking at where we were and where Freeport is today. So we'll continue to monitor the landscape, look for opportunities that could add value to the company, but we're on a path with our base case of creating value to our organic plan. So, I would not rule out M&A, but it's not, you know, our base cases are organic growth opportunities, which, you know, we can create a lot of value from.

Okay, great. Thank you all the best. Our next question will come from the line of Bill Peterson with JP Morgan. Please go ahead. Yeah, hi, good morning. Nice job in the quarter and thanks for taking the questions. I guess on the, on the impact of cost so 500 million higher and 26 relative to 25. I might have missed it, but can you provide a further breakdown between diesel and electricity, as well as, you know, callouts per region us in North Asia and South America.

Yeah, I think Marie covered some of that in her comments. It's on the order of 500 million in increase energy, which includes electricity and diesel was the biggest factor. But we are seeing, we are seeing increased electricity rates. We saw that quarter to quarter in the US between second quarter and third quarter, you know, significant increase in electricity rates. But the biggest part of that was, was, was, was diesel and you've seen, you know, more than doubling of diesel costs for the year.

We consume about 275 million gallons of diesel a year and 100 of that is in, is in the US. And then we've got 80 in Peru and the balance in Indonesia. Thanks, Kathleen. And then I guess on for the next year, the TFS for Stafford Lone Star is there any more granularity you can provide on that timing. And I guess conceptually when we think about the capital intensity of dollars per ton. You know, we think about Baghdad, and I'm not sure a lot of that may be US related to labor and other costs, but I guess that's, that's, that's like over $40,000 per ton.

Is that the right kind of ballpark will bring that in lower what could bring that in, I guess, higher as we think about capital intensity. With the Baghdad one, you know, when you consider the molybdenum credits. So on a copper equivalent basis, it's around 35,000 a ton. But the Lone Star, Stafford, we're looking at potentially a mill on the same size as at Baghdad. We do have some gold at one of the deposits at Stafford. So that's helpful.

But as I said, one of the things that we are wanting to get more information on as we go into 27 to kind of form our final views on the ultimate development of Lone Star and Stafford is the success of the Leaching Initiative. So that, that will play into, you know, ultimately what the flow sheet looks like. So we're getting, we're feeding in data to those studies, you know, as we, as we get it to do the, to do the trade off work.

But one thing, Bill, that I know you know this, but one thing to point out when you're comparing capital cost intensity across different operations. One of the things that needs to be taken into account in overall economics is the U.S. fiscal situation, where, you know, while you might have a higher capital intensity because of the lower grades, you, you, it offsets itself because you don't have royalties. Our tax rate is very low in the U.S. And so there's some offsetting, offsetting factors that make the, make the economics attractive.

So, so all those things need to be to come and play. You can't just compare capital intensity and say one project is better, better than the other. Yeah, no, totally makes sense. Thank you. Corey, do you want to add anything about Lone Star or Safford that I didn't mention? No, yeah, I think all those trade offs now really are going to converge to give us the right solution. But, you know, we're trying to balance, you know, capital intensity versus, you know, the value proposition and how do we best harness the resource between leaching and milling.

It's not really one solution or the other, but it's going to be a combination of both. That's really unlocking the true value. Great. Thanks for that. Our next question will come from the line. It's Daniel Major with UBS. Please go ahead. Hi. Nothing Richard. Thanks for questions. Maybe a couple of just focusing back on on Grasberg, the longer dated production guidance given in the mind plans come down a little bit over the last couple of updates.

Can you just walk us through the drivers there? I think he previously said it's not associated with normalizing after the mud rush and then associated with that. Have you, you know, anything changed with respect to bringing back PB1C and PB1N and they needed to achieve sustainable production in line with the guidance you given over the medium term? Thank you. In terms of the overall five years at Grasberg, it's very similar to the prior guidance. I think there was a small change in 2030 from what we had previously.

But in general, the plan that we laid out in the last quarter is consistent. Each quarter we update our plans. We go through updates to the expected mind sequence, you know, what makes sense in terms of the production rates right now with this El Nino situation and limits on the mill on water availability. What we end up doing is reducing some production that's very low grade. So ultimately we maximize as much as possible the metal production and adjust the mill rates to do that to maximize it.

But the long term plans include a restart of PB1 South, as we said, in the -- by mid-year we also continue to evaluate the restart of PB1C, which is where the incident occurred. And PB1C is a very small -- a very small piece of our -- you know, you look at it at 28, it's, you know, very inconsequential. As you go out, it's a little bit more by 2030. It's, you know, probably 3 to 6%, 3% for copper, 6% for gold in the 2030 timeframe.

But we're constantly looking at, you know, what's the right way from a -- from a safety standpoint and productivity standpoint to mind VBC. And so that'll -- that'll continue to evolve as we go forward. We also are reviewing a schedule for Coochingly R. That is expected to, you know, start ramping up in the 2029, 2030 timeframe. And with the focus that we've had on the GBC, we are somewhat behind on development rates in KL. So we're working on looking at our plans there to figure out what we can -- what we can make up between that now and then.

But our focus has been on a safe and sustainable ramp up of Grasberg, and we feel, you know, big picture that's well in hand. Mark, I don't know if you want to have any of those comments. No, you said it well. We really haven't changed anything with the PB1 North and PB1C. We continue to look at options that'll potentially make it more robust. And we're also working on, you know, as we look at the five years, PB3, PB4, I'll play a big role.

We've been doing some rehab in PB3, but we're beginning the undercutting and PB4 as well, you know, along with the major production that's coming out of PB2 right now. I think Kathleen mentioned the construction of the conveyor or the shoot galleries is going well, both in the PB2 area and for the restart of PB1C out. Okay. Our next question will come from the line of Bob Brackett with Bernstein Research. Please go ahead. Good morning. Coming back to the gen two additives, you mentioned you'll have sufficient quantities to start a trial in 2027.

Should we think about a six to 12 months trial so that perhaps this time next year will no go, will know whether it's go or no go, or could it be a bit faster than that. No, I think that's a good, I think that is a good benchmark to use. You know, interestingly, you know, as it's gone in the testing we've done, the longer it stays under leech, the better recovery. So the tail continues to increase as it goes.

So that we'll be getting information continually, but I think, you know, we'll have some information this time this next year. We'll update quarterly. Of course, this is something we're very, very excited about. Can't wait to get it in. And so we'll, you know, we'll keep you updated as we get, as we have additional insight. The fact that you mentioned that it could compete with no recoveries is quite a tease, but my follow up would be talking about Grozburg risk management.

You have four initiatives around mud removal, two of them underway, and it feels like the slower of the two initiatives you've slipped a little. Should we interpret that as a good thing that the early initiatives are doing their job, or how should we think about that delay from 27 to 28. I'm going to give that to Mark comment on. Yeah, we just as we got into the two projects that you mentioned the input pumping and the drift that we're developing.

Those are both going well we. We were still learning a bit more about. Well, as we got into the drift development, there was a little bit of poor ground. We've gotten through that. That's going well now. A lot of them were just a little bit of an adjustment. It's nothing major. We believe all of these initiatives that are going on in parallel are going to be tools that we have available to us. We just want to have all the options possible as we get into the PB one restart.

Obviously, El Nino has helped us out a great deal like we're not getting as much. We're getting very little water in some of the dewatering drilling that we put into the pit bottom, and that's simply because it's dried up. So the the dryer weather, although it's had some challenges as Kathleen mentioned on our mill rate. It's really helped us in a lot of areas, particularly in GBC on these initiatives. Very good. Thanks for that. Our next question will come from the line of Nick Cash with Goldman Sachs.

Please go ahead. Hi team, and thank you for answering the question here. Just wanted to jump back to the U.S. for a second in your comments of, you know, 500 million of higher energy costs versus 25. You know, with U.S. site production in delivery costs, et cetera, now at around 380 per pound versus 365 less quarter for the full year. As we bridge into 27, how much of the cost increase should reverse with normalized U.S. weather or operating rates versus remain embedded from some of the structurally higher cost inputs that you mentioned before in terms of labor or other input cost inflation?

Yeah. In all of our numbers that Marie was talking about in terms of EBITDA, et cetera, we have baked into our numbers, kind of the current energy market environment. And so we're not, you know, at some point, you know, hopefully those will start to decline, but those are baked in. The thing that we can bring down the unit cost for in the U.S. The thing that has the biggest potential is getting, you know, getting volumes up, copper volumes up.

And that's, you know, we're working to do that with increasing the mining rates. But next year, we are expecting an increase from this year. Of course, we've got the increase in Leech, but we've also got some other small increases, but that really is what our goal is, is to build productivity, increase the production in the U.S. to reduce the overall cost. But we are, you know, we've got, you know, high, you know, high energy costs right now.

Acid costs, while we're insulated globally, we are affected, you know, when you look at the U.S. We're a net buyer of acid. That's offset in our revenues elsewhere, as Marie was talking about, but it does show up in the asset prices, you show up in the unit cost, materials and supplies, you know, with the, it had moderated a lot, but now with the inflationary environment, we're starting to see increases again. So the thing that we can do the best is to improve our productivity.

And, you know, Corey was touching on some of the things we're doing to do that around technology. And that's going to be the biggest driver for us to control the unit cost is getting more productivity. That's super helpful, Kathleen. Thank you. Our next question will come from the line of Brian MacArthur with Raymond James. Please go ahead. Good morning and thank you for taking my question. Can I go back to the comment that was made? The teaser is Bob called it for recovery from the leaching that you might get up to mill like levels.

And if I looked at getting from 300 million pounds to 800 million pounds, how much of that is recovery improvement versus just more volume over time. I guess maybe the way asking is none of this other stuff works. Can you go above 300 or conversely, if you do get the mill like recovery, can you get above 800 out in 2030. Ultimately, it's about recovery. So, you know, when you look at the residual copper that's in our stockpiles, you know, it depends on the or types.

But at Berency, for instance, the recovery is very, very low. So, if you have an uplift of, you know, 40% or more, you know, that's not going to be a mill recovery. But in places like Chino, where the leach recovery is higher, to start with, you know, you add 40% or more, you get, you know, you get closer to the 80 or 85. So, it depends on the or types that are involved. But the thing that could help us in addition to, in addition to, you know, the residual copper is these additives are going to be helping us also with new placements.

So, we're just going to have to wait, Brian, I don't want to speculate on whether we can be over or under 800. We've been through the model several times and we feel that 800 is a, you know, it's aspirational, but it's, you can model it based on what we know. So, let us, you know, give us a few more quarters to give you, you know, more feedback specifically on what that could look like. The 200 was really tactical things.

Those are things like, you know, having sensors everywhere that tell you where you need to put more solutions. You know, and so we've been, we've been doing that. We've been injecting solution to targeted levels, you know, using advanced drilling and targeted drilling. We've been using helicopters to, to drop drip lines where they couldn't be, they couldn't be accessed in the past. So, we've been doing a lot of tactical things to get what we call get the rocks wet.

This, this, this new era over the next few years will be about technology. And it'll be about the additive plus, you know, the work we're doing to increase temperature of the stockpile. So both of those things coming together is where we see the production curve, you know, starting to scale. But we're at the point now where we have to test it and see how it does in the field and what the implications are. Great, so that's very helpful color.

And maybe if I could ask another question, I know it's not core business, but just on the molybdenum, it's come up a number of times in the call and you do have a slide talking about being the world's largest molly producer. How much excess capacity is there in the primary. I mean, it's in the US, I would think if you could get it up in these markets to be a good thing to do. And my second question is, if you sales go down next year is that just by product.

Coming out of the US mines or the international mines, like, like, why would it go down next year in a good molly market. Yeah, it's a very, you know, we've got our two primary minds. And then is the production will vary, you know, depending on what the production is from our product lines. We're very positive on the outlook from all, you know, a lot of the same drivers that we're talking about with copper, you know, supply challenges at the same time, where, where uses from a libdenum are growing.

So we see it as, we see it as a real, real privilege business we have in being the world's largest producer. We do have some opportunities to expand primary at climax. And, and so we're kind of dusting off our old schedules of those to look at those, but, you know, our priority, Brian is really to, to, you know, move the move copper, but we'll, you know, we'll continue to look at what the opportunities are so that we can have, you know, additional optionality in the, in the, in the molly business.

Great. Thanks very much, Kathleen. Our final question will come from the line of Liam Fitzpatrick with Deutsche Bank. Please go ahead. Good morning, Kathleen and team two quick ones I hope firstly just a clarification on the capex guidance for 2027 does that include anything for Baghdad in terms of the 4.5 billion project number that could be approved later this year. And then the second one is just on buybacks based on what you're showing us here on on sensitivities at current spot prices that could be a very material uplifting in cash flows next year.

So based on that 50% of available cash flows that could be managed to share holders. Do you make that decision in terms of how much stops to buy back? Is it on a kind of rolling quarterly basis or is it less frequent? We generally monitor the, the, we have a policy where 50% of the cash flow is over for investments in our, in our future growth and the other half is for shareholder returns. So we have the dividends and then we have been using cash flows above that to get to the 50% to, to, to stop.

So we, we monitor it quarterly and, and, and look at our, make sure that we're, we're being consistent with the overall distribution policy. But you're right, we're going to be generating a lot in the, in the current market environment and with our, with our growth coming, you know, very significant rise in cash flows. So that will, you know, buy the policy mean we have more cash to distribute while at the same time investing in growth. There, we do not have for the, for the four and a half billion, we do not have anything in, in 27 at this point.

Thank you. And I'll now turn the call over to management for any closing remarks. Well, thank you all for, for participating. Lots of good questions. Just ask Richard if he wants to make any observations, comments or closing remarks. And please, Kathleen, you can tell everyone that our management team are boards, very excited about free ports outlook and what we have available to this going forward. We appreciate your attention and your support. And if you have any follow up questions, let us know.

Thank you. Ladies and gentlemen, that will conclude our call for today. Thank you all for joining. You may now disconnect.

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