Freeport (FCX) Q2 2025 Earnings Call Transcript

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DATE

• Wednesday, July 23, 2025, at 10 a.m. EDT

CALL PARTICIPANTS

• Chairman and Chief Executive Officer — Richard Adkerson
• President and Chief Financial Officer — Kathleen Quirk
• Senior Vice President and Chief Accounting Officer — Maree Robertson
• Senior Vice President and Chief Operating Officer — Mark Johnson
• Senior Vice President, Marketing and Sales — Steve Higgins

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RISKS

• Kathleen Quirk stated, "We have revised our near-term outlook for gold to incorporate adjustments to our draw point flow model in the Grasberg Block Cave. This resulted in an approximate 15% reduction in expected 2025 gold production but did not significantly impact long-range plans as indicated on the next slide."
• Kathleen Quirk said, "we're currently estimating a potential 5% impact on our cost, but that's something we're monitoring." This estimate was discussed in the context of current tariff impacts as of Q2 2025. She added, "tariff is impacting our operating costs, but not to a significant degree."
• Maree Robertson reported, "Our guidance for 2025 takes into account the Grasberg ore grade revision ... 2025 guidance for copper is around 1% below the prior forecast. Gold sales are down around 17%," noting this represents a downward revision from previous internal guidance for 2025.

TAKEAWAYS

• EBITDA: $3.2 billion for the quarter, with modeled annual EBITDA (non-GAAP) ranging from over $11.5 billion at $4 per pound of copper to over $15.5 billion at $5, assuming average 2026–2027 volumes and a flat gold price of $3,300 per ounce.
• Operating Cash Flow: $2.2 billion reported for the quarter; projected annual operating cash flow ranges from $8.5 billion at $4 per pound of copper to over $11.5 billion at $5, excluding the US premium, based on the average of 2026 and 2027 modeled results.
• Copper Sales Volume: Second-half 2025 copper sales are projected to be nearly 10% higher than in the first half, with 2025 copper guidance approximately 1% lower than previously forecast.
• Gold Sales Volume: 2025 gold sales guidance reduced by approximately 17% relative to prior outlook, primarily due to the recalibration of the Grasberg Block Cave ore grade model, which affected 2025 gold production.
• Net Unit Cash Cost: Consolidated net unit cash production cost for Q2 2025 was $1.13 per pound; The full-year 2025 net unit cash cost is currently estimated at $1.55 per pound (non-GAAP), reflecting a 5¢ per pound increase in the 2025 net unit cost estimate since April, primarily due to decreased gold volumes.
• US Copper Price Premium: As of the Q2 2025 earnings call, the US copper price premium was approximately $1.25 per pound, about 28% above the LME price, implying a potential $1.7 billion annual benefit to US sales if sustained, according to management, based on the US copper premium as of July 22, 2025.
• US Tariff Impact: The recent U.S. tariff announcement imposes a 50% import tariff on copper imports, with an expected implementation date of August 1, driving a significant COMEX premium and prompting the company to monitor potential 5% cost impacts, as currently estimated by management.
• Smelter Start-Up: The new Indonesian copper smelter began operations about a month ahead of schedule, with production ramping up and first cathodes expected by the end of the month (Q2 2025); with full design capacity targeted by the end of the year.
• Sales & Inventory: Quarterly copper and gold sales exceeded production, primarily due to inventory reductions in Indonesia and strong performance at the new precious metals refinery during Q2 2025.
• Leach Initiative Progress: Field trial underway at the Morenci mine for an internally developed leach additive, supporting a targeted 800 million pounds per annum production via leaching; with a current target run rate of 300 million pounds by the end of the year.
• Share Repurchase: 1.5 million shares were repurchased in Q2 2025 at an average price of $36.41 per share; totaling 2.9 million shares in the first half of 2025.
• Capital Expenditure: Discretionary project capital expenditures are expected to be $1.6 billion to $1.7 billion per year for 2025 and 2026, with approximately 50% allocated to the Kitching Liard development and the Grasberg LNG project over 2025 and 2026.

SUMMARY

Freeport-McMoRan (FCX -2.10%) management highlighted major strategic milestones, including the early commissioning of its Indonesian copper smelter and ongoing ramp-up, which positions the company as a fully integrated global producer. Management emphasized that the tripling of the U.S. copper price premium, as a result of the new tariff regime, could substantially increase future earnings and cash flow if current differentials persist. While the company revised its 2025 gold and copper guidance downward following a recalibration of the Grasberg ore model, it reiterated its long-term production and cost guidance for 2026 and 2027, citing unchanged multi-year forecasts. Shareholder returns remain closely tied to cash flow generation, with ongoing repurchases and a policy-driven mix of dividends and buybacks, as management continues to prioritize disciplined capital allocation across organic growth initiatives.

• Kathleen Quirk stated, "Our current estimate for the net unit cost in 2025, using $3,300 for gold and $22 for molybdenum, is approximately $1.55 per pound." (Time period: 2025; GAAP/non-GAAP designation: NOT FOUND) About 5¢ per pound above the April estimate, principally reflecting the impact of lower gold volumes, partly offset by higher prices of gold and molybdenum."
• Maree Robertson said, "If we incorporate a 25% premium to our US sales, which is similar to current levels, annual EBITDA would increase by approximately 10%, and operating cash flows would increase by approximately 15%," based on modeled results averaged over 2026 and 2027. highlighting substantial leverage to US premium dynamics.
• Operational focus in the US is directed at scaling the leach program, automating mining processes, and pursuing cost efficiencies to drive unit costs toward $2.50 per pound by 2027.
• Management confirmed active engagement with US and Indonesian authorities regarding supply chain security, operating rights extension, and potential long-term incentives, but said no exemptions or US smelting subsidies have been agreed to date.
• Company leadership outlined several major brownfield expansion opportunities in North and South America, including Baghdad and El Abra, totaling 2.5 billion pounds of potential incremental copper capacity within existing jurisdictions.
• Management reported a flexible approach to global refined copper sales from Indonesia, noting a lack of binding long-term supply commitments and ongoing evaluation of optimal end-market allocation in response to evolving trade and tariff structures.
• Kathleen Quirk stated, "We are planning projects to use heat in our injection process to further enhance recoveries. And we're advancing internally developed leach additives to provide additional volumes toward our ultimate target of 800 million pounds per annum."
• Richard Adkerson reminded listeners that the impact of revised 2025 Grasberg Block Cave gold volume is not a fundamental change to the resource or a reason for the company to make operating changes.

INDUSTRY GLOSSARY

• Leach Initiative: An internal Freeport-McMoRan program to increase copper recovery through advanced leaching additives and optimized operating practices, with a long-term production target of 800 million pounds per year.
• COMEX: The primary commodities exchange for copper pricing in the United States, where domestic premiums influence Freeport’s realized sales.
• PTFI: PT Freeport Indonesia, Freeport-McMoRan’s Indonesian subsidiary operating the Grasberg district mines and related smelting facilities.
• Kitching Liard: A Freeport-McMoRan development project in Indonesia targeting high-copper and high-gold resources, also referenced as "KL" in management discussion.
• Block Cave Mining: A large-scale underground mining method used at Freeport’s Grasberg Block Cave, involving ore extraction from multiple draw points to maximize recovery from a single ore body.

Full Conference Call Transcript

Richard Adkerson: Thank you, David, and thank you all for joining us. Copper is currently in the spotlight, of course. COMEX prices are hitting all-time highs. LME prices are strong. Uses are growing. Electricity means copper. And the world is increasingly electric. This results in high demand, and the industry continues to be challenged to find the supplies to meet this demand and future demand. Governments are focused on critical minerals, including copper. Our company is strongly positioned. One-third of our copper is in the US, roughly one-third in Indonesia, and one-third in Peru and Chile. We are the dominant producer in the US, producing over 70% of the country's refined copper. We're fully integrated.

We have substantial organic growth in the US, and we're committed to that growth. Freeport committed to its strategy to copper over twenty years ago. Our tagline has been foremost in copper, and that's what we're striving to be. The start-up for the Indonesian smelter is a big accomplishment. Congratulations to team Freeport. We will now be effectively a fully integrated producer globally. We are pleased to see the trade agreement between Indonesia and the United States, productive discussions with President Prabowo and President Trump.

We conveyed to the Indonesian leaders negotiating the deal to note that Freeport, a widely held public company in the US, with almost a sixty-year history of operating in Indonesia, is the operator of the world's second-largest copper mine located there. Grasberg operations are just our cornerstone asset. Second-largest copper mine in the world. In this most recent quarter, we had a net credit for operating cost of a dollar a pound. This asset has enabled us to create the modern Freeport. With the smelter nearing completion, we are progressing our discussions with the Indonesian government about extending our operating rights beyond 2041.

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

Kathleen Quirk: Great. Thank you, Richard. And I'll cover the highlights of the second quarter starting on Page three. We generated strong margins and cash flows during the quarter and achieved significant milestones on several important initiatives. Our sales of copper and gold were better than past, and net unit cash production costs during the quarter of $1.13 per pound were significantly improved from what we guided to and from last year's second quarter. With an average quarter copper realization of over $4.50 per pound, which was about 20¢ per pound above the international benchmark pricing, we generated quarterly EBITDA of $3.2 billion and operating cash flows of $2.2 billion.

Our sales volumes exceeded production as we were successful in reducing inventories in Indonesia, both at the mine site and in our newly commissioned precious metals refinery, which performed well during the second quarter. As we look at the balance of the year, we're well-positioned for continued strong financial performance. Our sales of copper in the second half are expected to be nearly 10% higher than our first half volumes, and gold sales, after taking into account revisions to our Grasberg gold production, which we'll talk more about, are expected to be similar to the first half levels. The current premium on our US copper sales, which recently tripled from second quarter levels, adds additional margins and cash flows.

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

Another real exciting development during the quarter was the start of a field trial at our US Morenci mine using an internally developed leach additive. Our team of scientists has been working on this for some time, and we are progressing work on additional options which are showing very impressive lab results. There's more work to do, but we're making real progress. Identifying the right additive combined with our precision leaching operating practices will be a big step toward reaching our objective of producing 800 million pounds per annum from this initiative. We continue to advance optionality in our organic growth pipeline, and we're well-positioned with our significant resources, experienced team, and strong financial position.

We purchased 1.5 million shares of stock during the second quarter, bringing our first half stock purchases to 2.9 million shares at an average cost of $36.41 per share. And we continue to target 50% of excess cash flow for shareholder returns in line with our financial policy. Turning to the next slide on four, it's a summary of our 2025 priorities. We've covered these on previous calls, and these are the areas that are defining our everyday pursuit of value creation. First, execution, mastering the basics, and making every day count are key objectives. We're focused on delivering our plans safely and efficiently and driving our costs lower, particularly in the US.

Scaling the leach opportunity is a major value driver for Freeport. We continue to target a 40% increase in our run rate to achieve 300 million pounds by the end of the year on our path to 800 million pounds per annum. Delivering the smelter, safe and efficient ramp-up of the PTFI smelter, is strategically important. It'll de-risk our plans and position us for extension of our long-term operating rights in Indonesia. With the early start-up, we're well on our way. We posted a video this morning of the progress on our website, and we hope you'll have the chance to review it. We're very proud of what our team is accomplishing there.

Innovation is an increasingly important value driver for our business. Our operating teams are embracing technologies and new tools to enable better productivity and cost performance. And we're continuing to build optionality in our growth portfolio. We have three major project opportunities being advanced in The Americas, which we'll talk more about. Turning to copper markets on Slide five. Copper has been actively covered in the media with widespread recognition of the rising strategic importance of this essential metal in a broad use of applications. Market fundamentals remain positive, underpinned by copper's increasing use in the global economy and as an important driver of electrification, global energy requirements, and defense systems.

Copper prices averaged $4.32 on the London Metals Exchange during the quarter, and $4.72 on the US COMEX exchange. Following the July 8 US tariff announcement, US prices rose significantly. While tariff policies have dominated headlines and resulted in rising inventories in the US, global exchange inventories remain at low levels, particularly in relation to consumption trends. Copper demand globally continues to benefit from the secular trends and major new investments in AI technology, power infrastructure, decarbonization, and transportation. In the US, demand continues to be supported by these secular drivers, and we are seeing improving trends in Europe. China continues to be a major driver of copper demand, and India represents an important growth market in the future.

As we've talked about in the past, fundamentals of the copper markets are highly attractive, with the outlook for demand growth to outpace available supplies as we go forward. Here at Freeport, we're in a great position to increase volumes in the coming years to supply a world with growing requirements. Moving to Slide six, we talk about the regional premiums and the market differentials between the US pricing benchmarks and international benchmarks. For background, the reference price for Freeport's copper sales contract is based on geography. Our international sales are based on the London Metals Exchange price, and our US sales are based on the US COMEX reference price.

These two benchmarks have been closely correlated in the past, but as you can see, a differential emerged earlier this year after the US opened the section 232 investigation, and the differential widened significantly earlier in July following the US announcement of a 50% tariff on copper imports with an expected implementation date on August 1. We're still waiting on additional details on implementation of the tariff announcement. The US currently imports approximately half of its copper cathode requirements, and the current domestic supply of cathodes, the rest of it, are majority produced by Freeport. As indicated in the charts, as of yesterday's close, the US premium approximates $1.25 per pound or about 28% above the LME price.

This implies an approximate $1.7 billion annual financial benefit on Freeport's US sales. Longer range, the differential will be determined by market factors, including how the tariff structure is applied to various copper products, available domestic supplies, and requirements for imported copper and other factors. We're actively working to boost domestic supplies of copper with a special emphasis on growing our refined production in a cost-effective manner through our innovative leach initiative, and we're focused on supporting the growing requirement for our US customer base. Freeport is an important American copper producer and is by far the largest contributor to the US copper market, with an established and successful franchise dating to the late 1800s.

As America's copper champion, we appreciate the administration's recognition of copper as a critical mineral and the efforts underway by the US government to boost domestic production. Our operations in the US supply 70% of the refined copper produced here. Our operations in the US are fully integrated with mines and smelting and refining facilities and innovative leach processes that efficiently produce refined cathode. About 60% of our US production is sourced through leaching processes and the balance through our smelter. We employ a large workforce in the US, and importantly, we've earned the trust of communities in the Southwest US where we operate and with our US copper customers.

In talking about our global refined metal on Slide eight, Freeport is a significant producer. With the completion of our new smelter in Indonesia, Freeport will essentially be fully integrated globally with internal processing facilities for its mine production. This is important because countries are becoming more and more focused on critical mineral supply chain resilience, national security issues, and global trade. Freeport's positioning as a major producer of refined copper is of strategic significance for the long term. As indicated, we produce a substantial amount of refined copper from leach processing, which does not require a smelter process. And we're going to continue to pursue innovative opportunities to add refined copper on a cost-effective basis.

Moving to operations on slide nine. We'll talk about the operating highlights by geographic region. Starting in the US, where we continue to drive operating disciplines to enhance efficiencies and improve cost and margins. Making progress as indicated by the improved performance compared with the year-ago quarter. With several initiatives underway, there's more opportunity ahead. Our operating teams are benefiting from new tools and data analytics to drive value. We continue to rebuild skills within our workforce to reduce reliance on more costly contractors. As we look forward, we expect production in the US to increase in 2025 and 2026 compared with 2024 levels.

Absent changes in commodity-based input costs, we're talking unit costs to trend to the $2.50 per pound range in 2027. The autonomous haul truck conversion at our Baghdad mine in the US allows us to test this potential of applying this technology for use at other locations. At Baghdad, we have half of the autonomous trucks in service and expect to complete the balance over the next few months. We have several initiatives in progress to achieve further scaling in our innovative Leach program. This is a high priority. Our teams are now much better equipped with new data and analytic tools, expanded areas under Leach, and precision leaching processes to achieve higher recoveries and material previously considered waste.

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

Our work to date indicates a significant opportunity for value creation through meaning cost reduction and reserve expansion within our existing operations. We also continue to advocate for US legislation to recognize copper as formally as a critical mineral and eligibility for incentives to promote domestic production. Moving to South America, the team at our Cerro Verde operation posted another solid quarter with volumes and costs in line with our expectations. As anticipated, volumes at Cerro Verde were below the year-ago quarter because of lower ore grades. At El Abra, we have advanced plans to test heated raffinate injections in our leach stockpile there, expected in 2026. And that is targeted to increase copper recovery and metal volumes.

We continue to plan for a major expansion at El Abra, which would capitalize on the large resource we have there and bring substantial scale and operating efficiencies to the mine. In Indonesia, during the second quarter, copper and gold sales were boosted significantly by a reduction in concentrate and in-process inventory following the mid-March approval of our export permit and good performance at the newly commissioned precious metals refinery, which processed all of the anode slimes produced at PT smelting during the quarter. Milling rates improved in the second quarter compared with first quarter levels, and that reflected a restart of our SAG three mill in the second quarter.

In April, we commenced a large planned maintenance project on our SAG two mill, which is expected to be completed by the end of the third quarter. This will set us up for a return to mill rates in the 220,000-ton per day range in the fourth quarter and beyond. Notably, during the second quarter, net unit cash costs at Grasberg were actually a net credit of 99¢ per pound. As indicated, the smelter start-up in the second quarter was a meaningful accomplishment, and we're working to ramp up in the balance of the year. We have revised our near-term outlook for gold to incorporate adjustments to our draw point flow model in the Grasberg Block Cave.

This resulted in an approximate 15% reduction in expected 2025 gold production but did not significantly impact long-range plans as indicated on the next slide. We provided some information on Grasberg ore grades on slide 10. And for background, the Grasberg Block Cave is one of three currently producing block cave mines in the Grasberg district. It's the same ore body we mined from the surface for over twenty-five years prior to transitioning to underground mining in the 2020 time frame. For those of you who have followed us over time, you'll recall there are sections within the Grasberg ore body with significant grade variation, especially for gold.

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

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

You can see from the revised multiyear production forecast that the impact is limited to 2025 gold production. Over the five-year period, the aggregate production of gold is close to our prior estimates, and there was no significant impact on copper production. With the completion of major mill maintenance in 2025, we're set up to increase mill operating rates in the future. Also, in our 2025 forecast, we've incorporated an increase in copper concentrate consumption at the new smelter in Indonesia because of the earlier than forecast start-up. This results in more in-process inventory than previously forecast and is a timing item.

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

These initial initiatives totaled 2.5 billion pounds of copper, which can be developed from Freeport's known resources in jurisdictions where we have an established history and experience. Our projects in Indonesia also have the benefit of high gold content to go along with the copper. Because these projects are brownfield, we benefit from leveraging existing infrastructure, our experienced workforces, and relationships with key stakeholders to move more quickly with less risk than a greenfield project. As we mentioned, we're also looking at innovation and really feel this can bring improvements to the capital intensity of developing new projects.

In the US, the projects have the potential to increase production by over a billion pounds per annum, with a large portion of that coming from low-cost and low-capital-intensive incremental leach volumes. In addition, we have an actionable expansion opportunity at our Baghdad mine and are also studying the potential to expand and double production in the Safford Lone Star District. In South America, we and our partner, Codelco, are planning a major expansion at El Abra through the addition of a new concentrator, which would provide 750 million pounds of incremental copper per annum. We're completing our permit application. We expect to file that in early 2026.

And we're encouraged by the Chilean government's initiatives to expedite the permitting process broadly in Chile. In Indonesia, our Kuchin Liar development continues, and we expect to commence production by 2030. We're conducting additional exploration below our deep MLZ ore body and expect that with an extension of our operating rights beyond 2041, we'll be set up for additional long-term development options in the highly attractive Grasberg District. We'll continue to be disciplined in our approach, targeting opportunities, and enhancing long-term value. And we've got some additional details on these projects covered on slide 26 of the reference materials.

Maree is going to cover our financial outlook on the next few slides, and then we'll open up the call for your questions. Maree?

Maree Robertson: Thanks, Kathleen. Just moving on to slide 12, we show our three-year outlook for sales volumes of copper, gold, and molybdenum. Our guidance for 2025 takes into account the Grasberg ore grade revision, which Kathleen has already discussed, and the timing of production versus sales associated with the smelter start-up. 2025 guidance for copper is around 1% below the prior forecast. Gold sales are down around 17%. But as discussed, these changes are not expected to impact our long-range plans. And guidance for 2026 and 2027 remains consistent with our previous estimates. Continued success in our leaching initiative would provide upside to these estimates. We provide quarterly estimates on slide 23 of the reference material.

As you can see, copper sales in the second half of the year are nearly 10% higher than the first half. Our current estimate, the net unit cost for the year 2025 using $3,300 for gold and $22 for molybdenum, is approximately $1.55 per pound. About 5¢ per pound above the April estimate, principally reflecting the impact of lower gold volumes, partly offset by higher prices of gold and molybdenum. The current unit net cash cost estimate is better than our estimate going into the year of $1.60 per pound. We are continuing initiatives to drive costs lower as we go forward. The details of costs by region are presented on slide 22 in the reference materials.

Moving to slide 13, putting together our projected volumes and cost estimates, we show modeled results for EBITDA and cash flow at various copper prices ranging from $4 to $5 copper. These are model results using the average of 2026 and 2027 with current volume and cost estimates and holding gold flat at $3,300 per ounce and molybdenum flat at $22 per pound. Annual EBITDA would range from over $11.5 billion per annum at $4 copper to over $15.5 billion per annum at $5 copper, with operating cash flows ranging from $8.5 billion per year at $4 to over $11.5 billion at $5. These estimates assume the US price is the same as the international benchmark price.

If we incorporate a 25% premium to our US sales, which is similar to current levels, annual EBITDA would increase by approximately 10%, and operating cash flows would increase by approximately 15%. A 50% premium would increase EBITDA by over 20%, and operating cash flows by almost 30%. We show sensitivities to various commodities on the right side of the slide. You will note we are highly leveraged to copper prices, with each 10¢ per pound change equating to approximately $425 million in annual EBITDA. We will also benefit from improving gold prices, with each $100 per ounce change in price approximating a $150 million in annual EBITDA.

Moving on to slide 14, this shows our current forecast for capital expenditure in 2025 and 2026. Total capital expenditures over the two-year period are similar to our previous guidance, with some timing variances, which has deferred approximately $100 million of spend from 2025 to 2026. The discretionary projects are expected to approximate $1.6 billion to $1.7 billion per year in 2025 and 2026, with roughly 50% related to the Kitching Liard development and the LNG project at Grasberg. The balance includes acceleration of tailings and other infrastructure to support the Baghdad expansion, the Atlantic Copper Circular Project, which is expected to be completed by mid-2026, and capitalized interest.

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

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

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

Operator: Ladies and gentlemen, we will now begin the question and answer session. If your question has been answered or you wish to remove yourself from the queue, please press 1 a second time. If you are using a speakerphone, please pick up your handset before pressing the numbers. We ask that you limit your questions to one. If you have additional questions, please return to the queue. One moment, please, for our first question. Our first question comes from the line of Bill Peterson with JPMorgan. Please go ahead.

Bill Peterson: Good morning, Kathleen and team. For taking the question. Wanted to ask about the mine plan change. And it sounds like you look at this on a quarterly basis, but trying to get a sense for what's changed now. Is it something you had seen earlier? But felt you needed more data to change the plan and just anything else that went into the modeling update and plan.

Kathleen Quirk: Yeah. Thanks for the question. And Mark Johnson is here on the call if we need to fill in anything. But we update our quarterly forecast, as I mentioned. We update our multiyear forecast every quarter. In Grasberg, we go through a process. It's for each of the ore bodies and look at what the expected rates are in determining the grades we use and establish software package that industry uses for modeling block caves. And we did detect starting in the first half of the year, some differentials between what we were actually getting out of the recovery of ore grades versus what the model suggested. Historically, it's been a pretty close match.

We did recalibrate it once before at the end of 2023. It didn't have material impacts, but we took on a process to look at the various settings within the scheduling model and were able to develop an update to the calibration that replicated very, very closely the match that we've historically realized. And so we have updated that. You need to consider just the background of the variation of grade within this ore body. And we have 900 draw points that we're collecting all through, and there could be changes in the timing of how that ore flows through the draw points from which sections it's coming from, particularly below the pit.

Where you remember in the open pit area, we had a very high-grade core of gold at the bottom of the pit. So the interplay of the flows, where it's moving, is really just a timing of figuring out scheduling of how that will roll through our grades. And we were very close when we recalibrated the model over the long term, but it did have this short-term impact. So don't know, Mark, if you want to add anything, any perspectives to those comments.

Mark Johnson: No. I think you handled it very well, Kathleen. Now one thing I just might want to mention is what we're seeing is that as we start mining from a draw point, we're very confident because the material is just directly above the area that we're mining. As we continue to pull through this column of rock, some of it is up to 500 meters above us. This estimation becomes a bit more complex. Not all the material makes its way through that column at an equal rate. The smaller material tends to work its way through the column of rock quicker. And then, also, we have material that shifts laterally and can end up in other draw points.

So it becomes a bit more of a big mixing as you get further up. And as Kathleen mentioned, the team that we have on this, the tools that we use are world-class. And, really, we didn't see much variability at all on the copper. It's much more stable in the grades. But the gold can shift in value quite dramatically over a relatively short distance, same as it was in the open pit. But in the open pit, we knew exactly that volume of material that we were mining at any given point.

And as I mentioned in the block cave, that becomes a bit more of a complex estimating of how that material will work its way from the higher areas of the block cave down into these draw points.

Kathleen Quirk: Thank you, Mark.

Mark Johnson: Thanks, Mark and Kathleen.

Operator: Our next question comes from the line of Katja Jancic with BMO. Please go ahead.

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

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

The tariffs to date, and I know there's some negotiations that are ongoing, but we're currently estimating potential to have a 5% impact on our cost, but that's something we're monitoring. We're going to look for ways to modify our supply chain if possible and work closely with our vendors to make sure that we're sourcing the material as much as possible that is tariff-free. But things like the steel and aluminum tariffs, that's hitting us to a degree as well. So we benefit on the one hand to a much larger extent on the copper situation, which we talked about. But the tariff is impacting our operating costs, but not to a significant degree.

Well, really, the cost savings that we're talking about, really, the efforts underway to drive better efficiencies through our innovation we're doing, focusing on the basics, rationalizing contractors like we talked about, reducing unplanned downtime, getting better asset efficiencies, our asset health is in a much better situation in the US than it has been in recent years. And so we're really now that inflation is somewhat moderated, we're now in a position where we're really driving what we can do to bring costs lower. We've got a lot of automation projects underway. So and, of course, the Leach initiative will really help us out because those incremental pounds are coming in at a very low cost.

And so we're really excited about the opportunity in the US to bring down cost. And at the same time, we're seeing this premium. So our US business should perform very, very well as we look forward. As a reminder, we have NOLs in the US, net operating losses. So it can come into our margins and cash flows and drop to the bottom line through our results. And so it's a real opportunity for us, and we're very focused on driving value in our US business through efficiency programs and cost programs, in addition to the benefit we're getting on this premium.

Katja Jancic: Thank you.

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

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

Kathleen Quirk: We've had discussions with various government authorities about Freeport. You know, we've gone through submission of the 232 comments. And we've engaged with various representatives of the US government just as an education about what Freeport is doing in the US as a dominant producer. You know, we talk about supplying 70% of the refined copper that's produced in the US to this market. We've talked about the technology and the innovation that we have in the business that will allow us to potentially in the short term bring on some additional refined copper. You know, it's not a given that you can bring on refined copper very quickly. In terms of there's only two operating smelters in the US.

And what we can do in the short term is really try to boost production, refine production through our leach initiative. We've talked with the US about the IRA benefits that, you know, being a critical mineral, you have a 10% production credit. Copper is not currently on that list, and we're working to try to get copper on that list. We know with the recent legislation, some of the IRA benefits are being phased out. But really, what we are hoping to accomplish, we're very happy about the attention to permitting reforms. But we're hoping to accomplish incentives that would be long-term in nature and really could boost US refined production. So we're educating. It's a two-way conversation.

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

Orest Wowkodaw: And just as a quick follow-up, do you see any potential for tariff exemptions on your refined copper coming from either Atlantic Copper or Indonesia into the US?

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

Orest Wowkodaw: Okay. Thank you.

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

Alan Spence: Good morning and thank you. Indonesia has 27¢ per pound related to treatment charges in cash cost guidance for 2025. Into next year with Manyard up and running, what do you think your internal cost to operate that smelter would be on a substitute basis?

Kathleen Quirk: So there's going to be in different categories in terms of where the impacts of the smelter will be. The operating cost of the smelter, the new smelter, is somewhere on the order of 27¢ a pound. That doesn't take into account the additional revenues that we get from getting, you know, essentially, when you self-concentrate to a smelter, the smelter takes a percentage of the metal that you're selling them. So that'll show up in revenue, something on the order of two and a half percent of the revenues of the additional volumes will show up in our revenues.

But, you know, net cost will be credited, you know, essentially, when you look at the impact of the smelter, you're looking at something on the order of 15 or 16¢ net when you consider the revenue impact. And then, of course, the export duty will go away, which was, you know, something on the order of 30¢ or more in the second quarter. So it should, you know, at the end of the day, benefit our margins.

Alan Spence: Thank you very much.

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

Lawson Winder: Thank you very much, operator. Good morning, Richard, Kathleen, and Maree. And thank you for the update. Wanted to just follow-up on the Indonesian question there. About, you know, potentially sending refined copper from Grasberg to the US. So just looking at the two agreements as we know it is today and then looking at what the import tariffs are as proposed, so 50% versus 19%. I mean, is there any thought internally for the potential just to ship refined copper from Indonesia to the US and take advantage of that spread, assuming these agreements and the section 232 tariffs are finalized as proposed?

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

The point is that as the US is looking at its strategic interest in critical minerals, having a US company with a significant ownership of this operation in Indonesia and management over it gives the US essentially a security of supply if it makes sense to use it. Today, the trade flows are mostly, as you know, or is coming to the US from places like Chile is the predominant supplier.

Lawson Winder: In Canada and Peru as well.

Kathleen Quirk: And so we'll have to just look to see how all this unfolds and what makes the most sense for trade flows.

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

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

It feels like a lifetime, but we've been working on it for ten years in terms of identifying a site, location for it, going through all that needed. And Indonesia really wanted to fast track it. But it takes a long time to go through and find the proper site, find the and go through the permitting process, engineering, all those things. But we do have, you know, the existing infrastructure here in the US and Arizona. And we'll look to whether it would make sense to expand it. You know, I want to emphasize, though, the real opportunity for us in the near term to get more refined metal in the US is continued success with our leach program.

And I mentioned the additive trial we're doing. We're making some progress on additional additives. That combined with our precision leaching processes as well as we're going to introduce heated raffinate into the solutions that we're injecting into the stockpiles. And so we're working on those things. And those can happen more quickly than trying to develop a more costly greenfield smelter.

Lawson Winder: Thanks very much, Kathleen. Appreciate it.

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

Liam Fitzpatrick: Good morning, Kathleen and team. First one on buyback. It was still very modest in Q2 in terms of the pace of buyback, and despite net debt being well below your target now, can you just outline what's holding you back at the moment in terms of increasing the pace of share repurchases? And if I can, one quick follow-up on Indonesia. I know you've said the 2026 guidance on copper and gold is unchanged. But given the variability you're experiencing, what level of confidence do you have or can you really have in that medium-term gold guidance? Thank you.

Kathleen Quirk: On the first question regarding the buyback, we are applying our financial policy, which is to distribute through dividends and share buybacks 50% of our available cash flows. And that's about where we are through the program of about at 50%. Now we've just seen this change on the US premium, you know, it tripled from the second quarter. So should it continue to be significant as it is today, that will provide more cash flow for shareholder returns under the policy.

And with respect to being below our net debt target, you'll recall that half was for shareholder returns and half was for balance sheet or profitable growth, and we've got several projects that we are looking at that like, you know, for instance, the Baghdad expansion project, which we haven't made a decision on, but potentially that could use some of the other 50% that we've generated since we put the policy in place at the end of the second half of 2021. So that is where we stand. We should have, as we look forward at today's prices, we should have more cash flow to deploy to our shareholder returns.

With respect to the gold volumes, you know, we go through a process every quarter. We feel confident with the modeling that we've done and that we feel that the gold grades are there, and so we'll just keep working as much as we can to get our rates up. You know, we were impacted in the first half by two major projects, maintenance projects. One of the concentrators was down for the first quarter in Indonesia, and the second one is down now. But the maintenance will be completed at the end of the third quarter, and we'll be able to increase our mill rates and keep the mine rates going.

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

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

Liam Fitzpatrick: Okay. Got it. Thank you.

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

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

Kathleen Quirk: Yep. So with respect to the Miami expansion, we've been looking at something on the order of 30% increase to the current concentrate treatment. Miami, by the way, the Miami smelter is performing very well. And that team has been very helpful, and the Atlantic Copper team both have been very helpful with our new smelter in Indonesia and helping our team there to achieve the ramp-up. But we've been looking at something on the order of 30%. Interestingly enough, on the Lone Star project, it will be kind of like over time, kind of like a Morenci, where you have a significant portion coming from the production coming from the leach volume.

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

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

Carlos De Alba: No. Definitely, the optionality that you have is quite unique here in the US. I wonder if as part of your discussions with the US administration, have you talked about the challenges of bringing smelting capacity in the US? And how have they responded to that? Would they potentially consider some loans or investments, private-public partnership, or something to that end to solve that issue and maybe accelerate the refining expansions?

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

Carlos De Alba: Oh, that makes sense. Thank you very much, Kathleen. Congratulations, and good luck.

Kathleen Quirk: Thanks, Carlos.

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

Daniel Major: Hi, Kathleen, and thanks for the questions. A follow-up on the smelter Indonesia smelter and the sales destinations for those volumes. You mentioned the possibility of selling to the US in an environment where there was a preferential tariff kind of regime. Can you make any comments on whether any of the volumes are contractually committed from either the existing or the new smelter over the next twelve months that would prevent you from selling to the US?

Kathleen Quirk: I just want to come back. I'm not sure that you've characterized exactly what we're saying about Indonesia. You know, in the near term, our plans are based on selling our copper cathode that will be produced. We've been working on marketing plans, and our near-term plans are that will be sold in Asia. We have flexibility. We don't have long-term contracts locked up. We do have flexibility to send it to the place that makes the most sense. I mentioned that the trade flows currently are logistically advantageous selling it in Asia.

What's happening in Indonesia with respect to domestic production, there's a real desire in Indonesia to bring up its domestic consumption of copper, and there's actually been some infrastructure developed by other companies near our operating site. So we'll sell domestically, and then look to where the best market is to sell. But we're not locked up long-term.

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

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

Daniel Major: Okay. Thanks very much.

Operator: Our next question comes from the line of Chris LaFemina with Jefferies.

Chris LaFemina: So, basically, I want to ask you about the market. So we have COMEX prices up more than 40% year to date. I'm not sure we've ever had the price rally this much in such a short period of time from a pretty high starting point. And, you know, the US industrial economy isn't exactly firing on all cylinders right now. So I'm wondering, demand implications of this massive price spike in the US and even globally with LME prices rising as well, do you think these sorts of price increases can be tolerated? Demand is inelastic enough that this isn't really going to be affected by higher prices?

Or are we getting to a point now with COMEX approaching $6 a pound that you could see real negative implications on demand?

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

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

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

Richard Adkerson: Yeah. Let me just say a couple of things, Chris. This move that you've talked about reflects the fact that there was this global exporting of copper in the United States in advance of the tariffs. You know, getting it in here now before the tariffs came to place. Now there's this big question about what are the tariffs ultimately going to be. They certainly don't reflect the even at these prices, they don't reflect the 50% tariff that was that's been floated. But we really don't know. And so once the tariffs are announced, then there will be an adjustment in flows, and there will be, you know, potentially benefit on LME prices.

Ultimately, it's going to be global supply-demand that will end up driving it. And then whatever tariffs are there, how they're absorbed, where they're absorbed in the US marketplace. Copper is just so difficult to replace for its fundamental uses because of its inherent qualities. So it's not like and there'll be pushes as prices rise to find ways to sub copper, to thrift it, and so forth. But underlying all of that, it's just nothing conducts electricity like copper, and the world's electric. So that demand, the fundamental strength and demand will be there. Steve, I don't know if you have any other thoughts.

Steve Higgins: No. Nothing to add. That was very well said.

Chris LaFemina: Yeah. I mean, I guess what I was thinking there is thank you for that. But I was thinking, you know, the competitiveness of kind of down in the US. And if we let's assume these tariffs are a permanent thing. Do you start to get a mix in demand globally to other regions? And I get it that the LME price depends on global supply and demand, but for Freeport specifically, obviously, COMEX premium matters as well. So you start to get a shift in tons away from the US to elsewhere, which means that the benefit of the tariff to US producers becomes less over time.

Richard Adkerson: Well, that very much depends on, you know, how it's applied to downstream derivative products.

Chris LaFemina: Right. Which we don't know.

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

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

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

I mean, you know, we've been through history at Freeport of having to dig our way out of some real tough problems over the years. Now we've got a lot of those past problems behind us. And Kathleen's leading the team and focusing on, like, technology, get more copper out of what we have there, reducing cost, get ways of doing that. And that's what we're really focused on as we wait for this political situation to clear and to see where we're going from here.

Chris LaFemina: Great. Thank you.

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

John Tumazos: Thank you very much. Could you explain some of the hurdles in engineering the Baghdad expansion? Clearly, you've been mining a long time. You know about the reliability of the ore grades. The comminution character. Explain just how it takes a year or so to get the definitive fees. And concerning Lone Star, is the expansion and consideration increasing the mining and stacking rate 120,000 tons a day oxide? Or is it also bringing forward the sulfide mill? Just looking forward to all the good progress.

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

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

But we've been advancing it so that when we're ready to go, we can just move forward with construction. So we've been creating optionality with the project, but the main, the caution that we've had with it is just wanting to make sure that we convince ourselves that we can execute the project efficiently within our capital budget. Now we've got we want to monitor what's happening with tariffs and how that might be affecting capital costs. And so we want some more clarity there while we continue to advance the autonomous truck fleet. So that's where we stand at Baghdad. Lone Star, we're advancing a study to look at what the next phase of expansion could be.

We've got the Dos Pobres deposit at Safford, which I mentioned earlier, is high grade and also has gold in it. So that would be a concentrator project. But with respect to Lone Star, sulfides, we're going to look at the right mix of leach versus concentrating. If we put the concentrator in for the Dos Pobres deposit, that will help the economics ultimately if putting some through the mill. But the vision, big picture vision, this is an enormous resource in this district. Big picture vision is to have a cornerstone asset like Morenci that'll be a leach and concentrate producer of scale over a very long period of time.

You know, Lone Star was the last big mine that, I mean, Safford Lone Star was the last big mine that was done in the US. We brought it online in the 2007, 2008 time frame. And we've expanded it since then. So it's for a US mine, it's relatively new, even though that was some time ago. So we're really excited about the potential there, and we want to get this study done to really define what the flow sheet looks like.

John Tumazos: Thank you very much.

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

Brian MacArthur: Good morning, and thank you for taking my question. Can I just go back to Grasberg? Make sure I understand this? You sort of lost 200,000 ounces over your five-year plan, and, again, that's something we had just different flow through draw point. But if I look past the five years, is there anything different I should worry about there? And is there anything you've learned through this whole process that would change your thinking on KL just given it is a lot higher goal, Greg, going forward? Thanks.

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

Currently, the recovery assumptions in our reserves are lower than what we're getting in the mill recoveries, what we're getting in Grasberg Block Cave, but that's a real opportunity for us. So but you're right to point that out, Brian, and we'll constantly look relooking at what the right sequencing is between these ore bodies. And with a 2041 extension, it's going to open up a whole lot of opportunity for us to recover more than we could have otherwise. So we're very excited about the long range and what we can do there.

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

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

Brian MacArthur: Great. Thanks very much for answering my questions.

Richard Adkerson: Oh, yeah. This is Richard. Let me add just one quick thing on this because I've observed some things about this grade issue with the Grasberg Block Cave. Just want to point out a couple of things. One, when you look at that shortfall, don't forget to take into account the tax effect of that and also the noncontrolling interest effect. The government of Indonesia has 51% of that, and there's a tax effect to it. So I've observed some people overstating the impact of it. And as Kathleen and Mark said, this is not a fundamental change that the resource is requiring us to make operating changes in the way we operate.

What we're talking about here is getting a better handle on when that gold in the ore is going to be processed. And we're learning more about it. We're using better models. It's not a resource question. It's a timing question. And we want to give the market, as we always do, our best effort in giving you guidance as to when that gold is coming. It's going to be there. It's going to come. It's a question of when.

Brian MacArthur: Thank you, Richard.

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

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

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