Freeport-McMoRan Inc. 3Q 2026 Conference Call - FREEPORT-MCMORAN INC

Explicit Guidance:

• Copper Sales Volumes:
  • FY2026: Trimmed by ~2% to approximately 3.7 billion pounds (up from ~3.0 billion pounds in FY2025). Q4 2026 expected to be strongest quarter, with copper sales increasing 17% sequentially from Q3.
  • FY2027: Annual growth of >20% vs. 2026; copper sales expected to reach over 4.0 billion pounds. Gold volumes expected to increase >50%.
  • FY2028: Copper sales growth of 10% vs. 2027; gold sales growth of 20%.
  • Long-term Aspirational Target: 800 million pounds of leach recovery by 2030 (subject to field test results); total U.S. production target of 4.5–5.0 billion pounds annually by the 2030s.
• Costs and Margins:
  • FY2026 All-in Sustaining Costs (AISC): Maintained full-year guidance of $1.90/lb (byproducts offsetting inflation).
  • Energy Cost Impact: FY2026 energy costs (diesel/electricity) expected to be ~$500 million higher than FY2025 due to inflation and conflict impacts.
• Capital Expenditure (CapEx):
  • FY2026: Estimated at $4.4 billion (2% increase from prior guidance). Discretionary CapEx ~$1.6 billion.
  • FY2027: Estimated at $5.2 billion (increase of $400 million vs. July estimate). Discretionary CapEx ~$2.0 billion.
  • Baghdad Expansion: Investment decision expected in Q4 2026; estimated cost $4.5 billion; construction timeline ~3.5 years post-FID; excludes potential future "2x" expansion.
• Cash Flow & Returns:
  • FY2027/2028 Modeled EBITDA: $12.0B at $5/lb copper to $19.5B at $7/lb copper.
  • FY2027/2028 Modeled Operating Cash Flow: $9.0B at $5/lb copper to $15.0B at $7/lb copper.
  • Shareholder Returns: FY2026 YTD ~$1.0B returned (including $300M buybacks). Policy: 50% of available cash flow for growth investments; 50% for shareholder returns (dividends + buybacks), monitored quarterly.

Business-Segment Outlook:

• Grasberg (Indonesia): Ramp-up at Rock Cave achieved 67% in Q3; targeted to reach 80% by mid-2027 and full capacity by end of 2027. Block 1S restart expected mid-2027; full impact in H2 2027. Block 1C and 1N restarts under evaluation; PB1C adds 3-6% impact by 2030. Dry weather conditions persist but forecast to normalize in 2027; water availability remains a constraint on mill rates.
• Americas (U.S. & South America):
  • U.S. Production: Focus on increasing mining rates and leveraging new tech (autonomous trucks, remote ops center) to offset low ore grades. Leach initiative targeting 300M lbs in 2027 (up from ~200M lbs in 2026); aspirational scale to 800M lbs by 2030 contingent on Gen-2 additive field success. Baghdad expansion aimed at doubling concentrator size and adding 200–250M lbs copper + 10–12M lbs molybdenum annually.
  • Peru (Cerro Verde): Operating as world-class; focusing on efficiency.
  • Chile (El Abra): Commissioning new facilities to enhance leach pad temperatures; advancing environmental impact study for major transformative expansion (targeted mid-2030s).
• Productivity & Technology: Gen-2 proprietary additives in fast-track manufacturing for commercial deployment in 2027; expected to unlock recoveries of previously unrecoverable low-grade ores (lab data shows >4x improvement over Gen-1).

Market and Competitive Outlook:

• Copper Demand: Structural trends indicate a multi-year period of significant demand growth driven by electrification (power grids, data centers, EVs). U.S. customers report robust demand.
• Supply Dynamics: Global supply challenged; tight market conditions in major consuming regions outside the U.S. due to stockpiling.
• Pricing: LME copper average YTD $6.09/lb; ~$6.58/lb as of call date (+16% YoY).
• Competitive Advantage: Freeport positioned as a "copper champion" with large-scale, long-life, integrated brownfield assets (low-risk expansion) contrasting with high-risk, long-timeline greenfield projects industry-wide.

Macro / Industry Outlook:

• Inflation & Costs: Escalating inflationary pressures affecting capital and operating costs (steel, labor, equipment) at rates exceeding CPI. Global energy markets volatile due to Middle East conflict.
• FX & Commodities: High leverage to copper prices (~$390M EBITDA impact per $0.10/lb). Moderate exposure to gold ($105M per $100/oz) and molybdenum ($85M per $1/lb).
• Regulatory & Geopolitical:
  • Indonesia: Working with Ministry of Energy and Mines on extension of operating rights beyond 2041; government expresses support for extension.
  • Chile: Continuing engagement on environmental impact study for El Abra expansion.
  • U.S.: Navigating tight labor market; leveraging technology to mitigate labor constraints.

Strategic Initiatives:

• M&A: Base case is organic growth; M&A remains a monitored option (e.g., Fels Dodge precedent). No specific current targets.
• Brownfield Expansion:
  • Baghdad (AZ): Investment decision Q4 2026; aims to transform into second-largest U.S. copper mine.
  • Safford/Lone Star (AZ): Large resource position; development path dependent on leach initiative success (mill vs. leach flow sheet decisions).
  • El Abra (Chile): Major transformative expansion planned for mid-2030s.
• Capacity Additions: Acquisition of ultra-class trucks in U.S. to boost mining rates; LNG project at Grasberg and Kitching Yard development funded by discretionary CapEx.

Risks and Headwinds to Outlook:

• Operational: Extreme weather events (El Niño/La Niña) impacting mining and mill rates; water availability constraints in Indonesia.
• Technical: Success of Gen-2 leach additives in field deployment (not yet proven commercially) required to achieve 2030 leach targets; potential delays in PB1C/PB1N restarts at Grasberg.
• Cost: Persistent inflation in energy, labor, and materials; cost escalation on major projects (Baghdad).
• Regulatory: Uncertainty in permitting timelines for expansions; finalization of Indonesian mining rights extension.
• Market: Copper price volatility impacting EBITDA sensitivity.

Management Tone on the Future:

• Confidence: High confidence in execution and growth trajectory; described as "exceptionally strong" setup with "unique" multi-year demand opportunity.
• Stance: Optimistic but cautious regarding the unproven leach technology ("need to be cautious until proven in the field").
• Strategic Shift: Moving to "bigger and bolder" capital allocation to meet demand, emphasizing brownfield efficiency and technological innovation over greenfield risk.
• Guidance Adjustments: Adjusted 2026 copper sales down 2% to reflect short-term headwinds, but maintaining positive long-term volume growth outlook.

Miscellaneous:

• Idle Costs: $900M+ year-to-date idle/restoration costs at Grasberg will be capitalized into unit costs starting 2027 as volumes rise, rather than remaining separate.
• Molybdenum: World's largest producer; monitoring opportunities to expand primary capacity at Climax.