Hello. Good afternoon, everyone. Thank you for joining us in the 2021 Laguna Conference. My name is Carlos de Alba, cover Metals and Mining here at Morgan Stanley, it is a pleasure for me to host today, Kathleen Quirk, President, as well as CFO of Freeport-McMoRan. Thank you very much, Kathleen, for being here again. Thank you, Carlos. Glad to be here. Great. Before we begin, I need to read some disclosures as usual. For important disclosures, please see Morgan Stanley's research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative, and he or she will happily address those. Well, Kathleen, welcome back to this conference. It is an honor to have you here. It's a little bit different to other conference maybe that you guys attend because it is more of an industrial focus, but I guess this is a good opportunity for the company to reach out to a different set of investors. With that in mind, what I thought we could start our conversation with a little bit of an update or an overview on the growth profile of the company. It's something unique that you guys are delivering starting last year with the ramp-up in Indonesia that helps you with more volumes, with lower costs. I think that's something that sets the company apart. You can give us a little bit of an update on Indonesia's production profile and how that is going on. You have the two projects there, the Grasberg Block Cave as well as the DMLZ. Why don't we start with that, if you don't mind? Okay, great. Thanks, Carlos, for having us at this conference. We always enjoy it. We enjoy reaching out to different investor sets and hope to get back to Laguna at some point. It's always a great venue, good to be here virtually with you. Things at Freeport are going very well. As you pointed out, we are in a growth mode. Since last year, we have been ramping up our underground mines in Indonesia, and we've also completed the new project, our latest new mine in the U.S. called Lone Star, and that's gone extremely well. We're ramping up Grasberg at the right time. This year, our volume growth is significant. We've got 20% copper volume growth over 2020. Gold volumes are up significantly as well. As we look into 2022, we're expecting 15%-20% growth in copper volumes, 15% for copper and 20% for gold. This is a ramp-up that's much needed in a market that needs copper. The ramp-up's going well. In the second quarter of this year, we averaged just under 80% of the target annual run rate. That was on budget, on track. By the end of this year, we expect to be at 100% of our annual metal run rate at Grasberg. This is a major accomplishment. When you think about what this team has done during a pandemic is extraordinary. It would be extraordinary at any time, but particularly given what we faced. The team has just done an outstanding job. In Indonesia, we did have a resurgence of the pandemic to deal with in July and August, and partially through September, from the Delta variant. We had to go back to our strict protocols and lockdowns, travel restrictions that we had implemented successfully during 2020 and had started to relax some. We did go back to those. Fortunately, I think we've turned the corner again at Grasberg in terms of the case load going down. We have very few serious cases at the moment, and I'm very encouraged by the vaccine program that we've rolled out there. We've got over 80% of the workforce. We've got a total workforce of almost 30,000 people there all working together in the same area. We've got over 80% with at least one shot, and we've got over 70% with both shots. That was a real important thing for us, is to get our people vaccinated there. Technically, the ramp-up has gone well. We're continuing day by day to increase our ore throughput rates. We put in a new crusher at our Grasberg Block Cave earlier this year. That's allowed us to expand production. Everything is going well, on track, and I can't say enough positive things about the team out there that's really been resilient in plugging along with this major accomplishment in the face of challenging times. Yeah, I know. Certainly very challenging times in the last 18 months. Congratulations on that progress. I do want to come back to Indonesia, you mentioned Lone Star. What can you tell us there? Maybe if you could also add to the back of it, the optionality in terms of growth that you have in the U.S., that given the current prices that we're seeing, not only are you going to generate very interesting profits there, but also you have a lot of NOLs that would result in minimum taxes on those profits in the U.S. If you could talk about that, I think that would be very useful for the audience as well. Yeah. The Lone Star project, as I mentioned, we completed that during the pandemic as well. These are projects that have long lead times, we were well into it. We were able to complete it within our budget and on time last year. This is a project in near a community where we've operated for some time now. It's not common to see a new mine developed in the U.S., Freeport with our franchise and our footprint and trust that we have earned in the communities, we were able to bring this project online. It's relatively small in the context of the overall company right now. It has the opportunity and the potential to be a new cornerstone asset for us over time. It's right near Morenci. My virtual background is our big Morenci mine, which has been in operation for decades and will be in operations for decades to come. Morenci is the largest mine in North America. Of all the copper mines in North America, it's the largest. Lone Star has the potential over time, to be potentially as large as Morenci. We're starting out with mining the oxide surface of the deposit, and that is going well. We were able to take advantage of existing infrastructure in the area, from a mine called Safford that had processing facilities and capacity there. We were able to do this in a capital efficient manner. We have opportunities to incrementally expand, and that's what we're doing. The project was originally developed and designed for 200 million lbs per year. Our objective now is to get that up to roughly 285 million lbs a year. We can do that by filling up the existing processing facility at Tank House, making some minor additional investments in equipment to increase our mining rates. What we're doing there is really exciting because as we're mining the oxides and generating profits from the oxide material, we're exposing the deeper mineralization that will be available over time to expand, and we call it the sulfide mineralization, to potentially develop a major concentrating complex at this site. Very attractive initial investment. Started out relatively small, but we'll build on that, and we'll have the chance to incrementally expand and then potentially consider a major expansion down the road. As you mentioned, we've got other opportunities in the U.S. We are working to qualify a project at an existing mine. What we have really is brownfield projects, lower risk than going into a totally new location that our community support by doing a brownfield expansion. We're looking to potentially double our production from Bagdad mine, which is located in northwest Arizona. We're working on the engineering and design associated with that project, working through those considerations we need in terms of where we'll put tailings and the water requirements that we'll have. We're working through those things, but expect that we'll be in a position next year maybe to start going forward. Now it's a multi-year project, but it's one that we think because of the long reserve life there, we've got over 80-year reserve life currently. We're looking to bring some of that value forward. That's exciting at Bagdad. Elsewhere in the U.S., we've got a really exciting, I think you'll probably ask me about this, but a really exciting opportunity to get more out of what we have. We've been working over the last few years on automation, artificial intelligence, really trying to work our assets harder, improve productivity, improve automation. We're digitizing pretty much everything that we can in the workplace. We're doing a lot to try to get more out of what we already have. In that regard, we have a real opportunity to get additional recoveries from material that has already been mined. We've got substantial stockpiles of material across the world, but mainly in the U.S. If you look at our last presentation, we identified 38 billion lbs of copper, contained copper that's not in our reserves. This is material that's already been mined, and we don't expect to recover. Because when you leach, you only recover a certain percentage of the metal. We're looking at technologies, both internally and externally, to try to increase the amount of recovery we can get from that material. Think about this, Carlos, this is material that's already been mined. The carbon footprint of it is low. You're not having to go put new trucks or new shovels or use a lot of energy to bring this to production. It's R&D, so there's still risks with it, but it's trying to get more out of what we already have, incremental value. We believe that is a place where we can go and create value for our shareholders as opposed to trying to do a lot of greenfield exploration right now. This is really our focus, is getting more out of what we have, getting additional value, extracting value in the markets we believe are going to need it. Well, that's very interesting. Thank you for that summary. I want to ask a question that I just got from the audience, and I'm going to put it in the context of another question that I have for you, Kathleen. They're asking that since you operate in multiple jurisdiction, can you try to put some ranking around where do you think the lowest and the highest political regulatory risk to operate globally are? I would like to bridge this question from the audience with something that I wanted to ask you about, how do you see the pecking order of all these options for growth that you just sort of alluded to a minute ago? Yeah. Well, it's a great question. We do have insights because we operate in multiple jurisdictions, and have opportunities really across the globe within our portfolio. In our business, as you know this, we have to take a long-term view. We have to make sure when we go into a project that it has the opportunity to meet the needs of society, right? We need to make sure that communities benefit from these operations. We need to make sure that the workforce is there. We need to make sure there's a regulatory environment and rule of law that we can rely on. Now, recognizing that regulations change over time, and we need to anticipate that. We need to have robust enough economics to be able to address those risks. We have to take a long-term view. Where we are attracted is not only just the regulatory and risk, this political risk, but also the resource. You've got to start with a resource that is long-term. If you try to make your return in a very short period of time, you could get something wrong. You could get the commodity price wrong, you could get the political situation wrong. Really, what we're trying to do as a company and an industry is create value for all of our stakeholders, producing a product responsibly that the world needs. When we go to rank projects around the world, there are many criteria that we take into account, but the first criteria is really the resource. Is the resource a long-term resource that, because the capital investments up front are very, very large, something that you can develop over time and create economic velocity for the community and returns to shareholders over a long period of time. That's really what we're looking for. We're looking really for places that we already are, where we have experience, where we have community support, where we have the workforce. We have those opportunities really within our portfolio. There are going to be times, like there are today, where there's heightened risk in certain places where we operate, like in South America. You can't just completely stop making investments. You have to keep the options open and keep things going, to be able to have the opportunity when the time is right. In Indonesia, Freeport made a lot of investments during times when there was significant risk. We felt confident, given we knew that what we were doing was the right thing, that the country needed our project, and we needed to cooperate with the country. We worked out a deal that was a win-win for both parties. That's the kind of spirit that really we have to do to go into these things. Now, having said all that, we would love to find additional growth opportunities in the U.S. We have a footprint in the U.S. We have customer relationships. We're the largest supplier of copper to the U.S. market. With all the infrastructure demands in the U.S., more copper is going to be required. More copper is going to be required for the decarbonization initiatives, really globally, but also in the U.S. We have an opportunity as Freeport, where we have existing franchises, we have the trust to build increments to our existing mining operations. That's really what our first priority is to continue this development and growth in the U.S. We've also got bolt-on opportunities in Indonesia. Our Kucing Liar deposit is an attractive deposit. We've gained a lot of experience in block caving. That's a natural progression for us. We have this wonderful opportunity in Chile with our El Abra project. The sulfide opportunity there is very attractive. That project's going to be developed at some point. We may not pull the trigger right now, but it'll be part of the mix. We'll keep it warm. We'll have the optionality in our portfolio. None of these things happen overnight. These projects, they're taking longer. The regulatory requirements are longer. Our management team and management teams across the industry are focused on carbon reduction, and we're very serious about that. That's not going to result in growth necessarily. We've got to focus on getting more out of what we have, and doing that in a very carbon-efficient way. It's a challenging time to develop new sources of growth. We at Freeport are fortunate that we have projects that were already in the pipeline. In terms of new projects of scale, are going to take some time to get those up and running. Yeah. Your comments basically are right in line with what Robert Friedland was telling us earlier in the week. We had him in the conference, and he was also pointing to exactly the same challenges to keep production, to keep more copper coming out of the ground that the world requires more than ever, perhaps, now and in the coming years. Maybe just a little bit further on what you were discussing, is there any update or any comments that you can share on the situation in Chile and in Peru, how that is evolving with the potential royalty in Chile, with the new administration in Peru? What can you share with investors? Well, it's something that all of us are watching very closely. The good thing in Chile is the industry is at the table. Copper is such an important component of Chile's economy. Chile is important to the overall world of copper. Roughly 25% of copper is produced there. We both have an interest, both the industry and the government having an interest in making sure we have a balance. We're both at the table, we're both listening, and we're confident that over time this will work out. We don't know exactly what the end result will look like, but it's got to be something that works for the industry, works for the government, works for society. Copper industry there in Chile is a major employer, a great provider of social and community benefits. The wages that are paid to workers are very high and attractive. It is a real contributor to society. Of course, we're producing a product that's needed for decarbonization. All that is good, but we need to listen. Times change in different countries from time to time, and as an industry, we want to listen, and we want to make sure that we're responsive. We all can't do everything that everybody wants us to do, but we do want to listen and be constructive. In Peru, we've had limited discussions to date with the new administration. We're looking forward to having additional discussions here soon as we go forward. Where we operate at Cerro Verde, we're a very sizable contributor to Arequipa, which is the second-largest city in Peru. We have a stability agreement there, but we do pay taxes above what the current statutory rates are under that agreement. In addition to the taxes we pay, there's also, as you probably know, a substantial profit-sharing component that a good piece of that goes to our workers, and some of that, if there's excess, goes to taxes. A big part of what we do there is around the community. A mine cannot be successful without the community being successful. Over time, we've had the great pleasure of working closely with the community where our mine is. In the last expansion, we were able to put in a clean water plant to deliver clean water to the City of Arequipa, which they didn't have enough before. During the pandemic, we've really been able to reach out to the community and provide oxygen and other things that the community really needs, equipment, et cetera. It's a real partnership, and it's a give-and-take relationship. We can't say enough that you have to take a long-term view, and it has to be successful for all parties, and it's an evolution to get there. I think we have the right framework, the right model that provides for substantial benefits to the country, and at the same time, provides a framework to generate a ROI for our other stakeholders. It's a balancing of stakeholders, but our industry is very accustomed to dealing with those kinds of challenges. Yeah. Certainly, you have a lot of experience in dealing with all these topics. In the time that we have left, there are two topics that I would like to address. One is the Indonesia smelter. Any updates there? What is the timeline looking like? The latest discussions with the government, and a more specific question within this topic is, does the precious metal refinery need to be completed in the same timeframe as the copper smelter? Then I'll come back to the last topic I want to discuss with you. Okay. Just real quick, Carlos, on that, we did provide an update in July. Nothing really new from there. We are proceeding with the smelter at the site in East Java. We have the government support for that site. We're proceeding. The PMR is part of that project as well. We're looking to complete it with the same timeline. The whole question of timeline has been interesting because, unlike the Grasberg Block Cave in DMLZ, we were well advanced in construction, and we were more in execution of ramp-up when the pandemic hit. With the smelter, early stages, so involves a lot of international contractors to come in. We were not able to, and have not been able to make the same progress there that we made with the Grasberg ramp-up. We're focused on it. We've talked to the government. Our objective is to get the smelter and PMR done as quickly as we can, but it's going to take some time because we're in the early stages. We're just preparing land, putting in pilings. We've got to go through and complete all the engineering, et cetera. We are trying to fast-track it to the extent that we can, and the government understands. This latest issue we've had with the Delta variant there didn't help matters, but we're all committed and focused to do it as quickly as we can. The last topic I want to discuss is something that maybe may not be as visible for people or when they think about Freeport, and that is the moly exposure that you guys have. Moly prices, of course, have almost doubled in the last 12 months. Right? What is your latest thinking there? Is there anything that you could do to produce more? Is that something that is an option for you, or you are just really more focused on taking advantage of this high price that reduces your cost, increases your cash generation? Well, at Freeport, we do have a good bit of optionality with moly. Most of the production of moly comes from by-products of mines. We have a large portion, the majority of our production, the vast majority, comes from by-product mines. Just like the issue we're seeing with copper supplies going forward, that also will have an impact on scarcity of by-product molybdenum production. We at Freeport also have, as you know, primary molybdenum mines, which we can flex to a certain degree in response to market conditions. Molybdenum prices have risen significantly in recent months. We will look at the portfolio. Again, you've got to take a little bit the longer-term view on it. We'll look at the portfolio. We have a lot of capacity in our primary mines, particularly at our Climax mine in Colorado, where we could increase some production. We're looking at that. We want to make sure that the market really needs this excess production. We have the flexibility and optionality within the portfolio to increase moly production from these primary mines over time without major new investments. It's going to require some investment, but not like building a new mine, and we can do it relatively quickly. All right. Fantastic. Let me squeeze one more, maybe in a minute or so. Sure. With a very strong balance sheet that now the company has and the significant cash generation, how should we think about maybe dividends and share buybacks in the context of the new capital allocation model that you have put in place? I'm glad you squeezed that one in. I'm happy that you did that. We reached our net debt target at the end of June. We had been targeting $3 billion-$4 billion of net debt. We got to $3.4 billion at the end of June, several months in advance of our original target. Now we're in a position, we're generating cash flow well above our planned capital expenditures. Now we're in a position to implement the framework that we announced in February to return up to 50% of our cash flow beyond our planned capital expenditures to shareholders in the form of dividends and share buybacks. The other 50% would be used for investments in our growth. Those are longer dated, but we want to have a balanced approach to where we're returning substantial cash to shareholders and investing in our long-term future. With our year-end results, we'll be in a position to give some numbers around. We'll know what the numbers are or some numbers around. You can make your own estimates on what we're generating, some numbers around those excess cash flows. We'll be talking a lot with our shareholders about dividends versus share buybacks, getting feedback from them on their preferences. We've done both in the past. We've had strong dividends, we've had buybacks. May have a combination of both. The main thing is we're in a very strong position at Freeport with the balance sheet now in a position to return cash to shareholders. It could be very sizable given where we are, where a lot of capital has been invested, and now we're in more of a harvesting mode of cash flow. This will give us a great opportunity not only to give really strong returns to shareholders, but also invest in our future. That's our plan, and that's why we're so focused on execution and looking forward to that day where we can show the incremental returns to shareholders. Well, I'm really sure that this is very encouraging for shareholders, and we're looking forward for those further details. With that, Kathleen, it was a pleasure talking to you, catching up. Thank you for joining us again, and I guess we'll keep talking in the coming weeks as you report the third quarter numbers. Good luck with the rest of the quarter and with the closing of the year. Thank you very much. Thank you. Thanks, Carlos, and thanks Morgan Stanley for hosting us.