Freeport-McMoRan Inc (FCX) — Q3 2016 Earnings Call Transcript

Thank you. Good morning, everyone. Welcome to the Freeport-McMoRan third quarter 2016 earnings conference call. Our results were released earlier this morning and a copy of the press release and slides for today's call are available on our website at fcx.com. Our call today is being broadcast live on the Internet, and anyone may listen to the call by accessing our website homepage and clicking on the webcast link for the call. In addition to analysts and investors, the financial press has been invited to listen to today's call and a replay of the webcast will be available on our website later today. Before we begin our comments, we'd like to remind everyone that today's press release and certain of our comments on this call include forward-looking statements and actual results may differ materially. We'd like to refer everyone to the cautionary language included in our press release and presentation materials and to the risk factors described in our SEC filings. On the call today are Richard Adkerson, Chief Executive Officer. We also have several members of our senior operating team in the room including Red Conger, Mark Johnson and Mike Hendrix (1:40). I'll start by briefly summarizing the financial results, and then turn the call over to Richard, who will be reviewing our recent performance and outlook. As usual, after the prepared remarks, we'll turn the call over for questions and answers. Today, FCX reported net income attributable to common stock of $217 million, or $0.16 per share for the third quarter of 2016. Our results for the quarter included net gains totaling $39 million, or $0.03 per share, which reflected non-recurring tax credits, partly offset by the impairment of oil and gas properties. After adjusting for this net gain, third quarter 2016 adjusted net income attributable to common stock totaled $178 million, or $0.13 per share. Our EBITDA, or earnings before interest, taxes, depreciation and amortization for the third quarter totaled $1.35 billion. Our consolidated sales, including the volumes from Tenke Fungurume which is being reported as a discontinued operation following our agreement to sell our interest totaled 1.2 billion pounds of copper in the quarter, 317,000 ounces of gold, 16 million pounds of molybdenum and 12 million barrels of oil equivalent. Our copper and gold sales were lower than our July estimates, principally reflecting lower mining rates at the Grasberg mine, which affected the timing of access to higher grade ore, which we expect to recover in future periods. Our average copper price during the quarter was $2.18 per pound, which was below the year-ago average of $2.38 per pound. Gold prices averaged $1,327 per ounce during the quarter, which was above last year's third quarter of $1,117 per ounce. Our average net unit cash cost net of byproduct credits totaled $1.14 per pound of copper in the third quarter; we continued our trend of reducing cash costs, which were $1.52 per pound in the third quarter of 2015. Operating cash flows during the quarter totaled $980 million, those cash flows exceeded capital expenditures of $494 million during the quarter. As we previously reported, we commenced a registered offering at the market equity offering of up to $1.5 billion of common stock during the third quarter, and during the quarter, we sold 33.5 million shares of common stock for gross proceeds of $415 million, which averaged $12.39 per share. We ended the quarter with consolidated debt of $19 billion and our cash grew to $1.1 billion at the end of the quarter. We had no borrowings under our revolving $3.5 billion revolver credit facility and as you'll see in the slides, we have very little in the way of near-term maturity. We had 1.36 billion common shares outstanding at the end of the quarter. As you'll see in our release and as Richard will be discussing more in depth in his presentation, we have significant asset sale transactions that we expect to complete during the fourth quarter, a total of $5.2 billion, which includes the previously announced transaction for our Tenke Fungurume stake as well as oil and gas assets including the deepwater Gulf of Mexico and our onshore California properties. I'd now like to turn the call over to Richard, who will be referring to materials, slide presentation materials on our website.

Thanks, Kathleen. And good morning, everyone. We're here with a beautiful sunrise here in Phoenix, and that's a good way to start our call off. We want to talk about where we've been and what we've accomplished here in 2016. It was a year ago when our board acted to restructure our board and return our focus to our global leading copper business. During 2016, we have made some significant accomplishments and we've positioned our company for the future with these significant copper resources and with an improved balance sheet. But before I really talk about that, I want to address right at the outset the reason why our copper production volumes in this quarter fell short of the estimates. As you know, we are mining in the last phase of the Grasberg open pit. Some ways it's hard to believe, but we started developing it in 1990, and here we are at the very end of the pit. It is at this point, physically a very confined area right at the bottom of the pit, the ore body extends lower but we're going to mine that as an underground operation. Aside from current mining in an area that's constricted, it has extraordinarily high grades of copper and gold, and these grades are increasing as we mine. During the quarter, our planned mining rate, the actual physical material we moved, was about 15% short of what we had planned. As a result of that, we simply did not access as much of this high-grade ore as we expected and what our plans projected. We'll talk more about this later, and we're certainly disappointed with this mining rate. A lot of it has to do with some worker issues that we're addressing, and we believe we can manage as we go forward. But we have the equipment, the mine designs, the people, and the ore grades to allow us to mine this material. So, what we're faced with now is the fact that we didn't get to it this quarter means that it's a timing issue. We will get to it as we go forward; we'll make up a lot of it in 2017. It will have an impact in the fourth quarter, and we should finish mining it early in 2018, so this is not a valuation issue or a really significant economic issue but more of a timing issue. Now, looking back, the fourth quarter of 2015 was a very difficult time, but as we went into 2016, the first half was really tough, as you'll remember. We set out on a path to cut our debt. You pressed me to say what was our target for debt reduction, and I said $5 billion to $10 billion. At that point, to be candid with you, the market was tough, and I really didn't have a clear-cut view of how we were going to do it, but we committed to do it. Now, we believe we have clear sight to reducing our debt by $10 billion. We executed this plan in a way that will enable us to retain a core set of assets that we will build a great company around. It's characterized by long lives, good cost positions, long-term growth options when markets indicate that future investments will be needed, and it will be a balance of geographic diversity. We're really pleased here that we are on a solid path to cut our costs and our capital spending. Our global team has really stepped up to this challenge. We delivered completion of the Cerro Verde project on time and on budget. It was a very complicated project, and we moved quickly to adjust our operating plans and our capital spending at each one of our operations to respond to the situation. Our net unit cost averaged $1.14 per pound during the quarter, 25% below last year's third quarter, and before byproduct credits, costs were down 20% over the year. At each of our sites, we really focused on cash flow generation, and we've been very tough on capital at this point. Despite these low prices, our team is very enthusiastic and focused on maximizing cash flows. During 2015, our CapEx exceeded our cash flows, primarily because of the oil and gas business. We worked hard to reverse this and generated $500 million in cash flows above CapEx in the third quarter. We expect to continue to generate free cash flow over the next several quarters, even at low prices, because we're going to constrain capital spending until the market warrants new investments, and that will contribute to our debt reduction targets. Year-to-date, we've announced $6.6 billion in anticipated proceeds from asset sales transactions. This does not include potential additional consideration of $680 million. We have to date received proceeds of $1.4 billion and expect to receive $5.2 billion by year-end from transactions that are under contract, which we expect to close. These steps will enable us to achieve our delevering objective of cutting our debt in half by the end of 2017 while keeping a really strong set of assets that will enable our shareholders to benefit as the market recovers. Slide four is a summary of our recent announcements of our oil and gas transactions. You'll recall that at the end of 2015, we announced a process to evaluate options for this business. Our board engaged special financial advisors, and we went into the marketplace in the first quarter to see if we could find a buyer for the whole business. That was a tough time to try to find someone to buy those assets. By the end of the quarter, in the first quarter, we concluded that we would likely retain these assets for a longer period while waiting for a market recovery. We reorganized our management of our oil and gas business. We changed it from being a standalone separate business to being a division of our company. After the first quarter, parties emerged with renewed interest in purchasing some of those assets. At the end of the day, we had a competitive process and reached a transaction in September to sell our production in the Deepwater Gulf of Mexico to Anadarko. In October, we've now announced a transaction to sell our production onshore in California. In the aggregate, we will receive $2.6 billion in gross proceeds and $300 million in contingent consideration. We took all that into account and concluded that these transactions were consistent with our strategy and would allow us to focus on what our future is going to be. I have read analysts who assigned a much higher value to these assets than what we sold them for, but buyers weren't willing to pay that. After a very extensive process that we went through, I'm convinced we got very attractive prices for us. The purchasers will likely do well with these assets because they're good assets. But for our company, considering the total implications of continuing to be in that business and hold them, I'm very comfortable with what we did and really pleased that we were able to get that done. Now, we continue looking at page 5, to progress the sale of our PT asset. You've all heard me say that this is an asset that we sold with great reluctance. It's a great long-term asset that fits very well in our portfolio, and I'm very proud of our team. But it's also an asset whose values are going to be realized over very long periods of time. We were able to find a buyer at a valuation that's attractive in relation to near-term cash flows. China Molybdenum, a privately owned Chinese company that's making global investments in the mining industry, is progressing their transaction. The process has gone smoothly. There is still a condition remaining to close that is resolving a transfer right that our minority partner, Lundin Mining, has in the property in contract. We have currently extended the timeframe for resolving it to November 15. We disagree with Gécamines' assertion on this, and our legal advisors support our conclusion. But we are working with China Moly, Lundin, Gécamines, and the government to find a way forward. We still expect to close this transaction in the fourth quarter. It's $2.6 billion in proceeds and $120 million in contingent consideration, and we're also giving them exclusive rights to acquire an exploration property we have in the DRC and a downstream cobalt business. So, all of that is working to get closed in the fourth quarter. Putting this all together on slide 6, you can see the aggregate steps we have taken: the completion of these asset sales transactions, completion of the previously announced $1.5 billion after-market offering, which to-date we have completed about 25% of that amount. Execution of our operating plans, we expect to achieve our debt targets by the end of 2017. We have the portfolio of remaining assets that we want to keep. We're not planning additional divestments. We may take some steps to deal with the remaining assets in our oil and gas business, and we are prepared to divest at Grasberg an additional roughly 20% interest in discussions with the Indonesian government. That is contingent on getting our long-term rights extended on the basis of giving us fiscal and legal certainty, and we're committed to the government to sell an additional 20% interest. At the end of the day, we will have a reasonable balance sheet and an industry-leading portfolio of copper assets that will be available for long-term development. These are the kinds of assets in the copper business that are very difficult to replicate. Looking at those assets on page 7, we will have seven copper mines, led by our flagship Morenci mine, which is a fabulous operation. These mines are long-lived, providing us long-term optionality on copper prices and future investment opportunities. We will have two mines in South America: the Cerro Verde mine, which today has the largest processing facilities globally and is operating very well, and the El Abra mine in Chile, which has significant long-term growth opportunities for us as well as Grasberg. We've managed these assets successfully over a long period in different price environments. Within these mines, we have significant growth opportunities that we'll pursue when the time is right. Slide 8 shows our copper sulfide development opportunities, listed alphabetically, still assessing from a priority standpoint which ones we would attack first, and even though we're not spending capital on these projects, we're spending effort to develop plans for future investments. These are sulfide opportunities identified through our exploration drilling and analysis on large ore bodies, where we can take advantage of existing infrastructure to develop them profitably. The copper market remains challenging, with prices at today's levels still very low reflecting the global economy and a slowdown in China, but stepping back, the predicted surpluses are lower than expected. Recent supply growth is not sustainable, and long periods of low prices will impact future supplies. The top 10 mines in the world today produce less than 5.5 million tons of copper a year, and Wood Mackenzie feels the incentive price to develop new mine supplies is around $3.30. Despite increases in inventories during the quarter, they remain relatively low by historical standards. Hence, small increases in demand or supply disruptions could move the market to a deficit in a short span. Page 10 illustrates the 10 largest mines in the world by reserves in copper production, three of which are Grasberg, Cerro Verde, and Morenci. Finding world-class mines is extremely rare, and having them in our portfolio will be very valuable over time. The lack of significant technology revolution in copper mining has resulted in challenges in establishing new projects. Before we reinvest, we will look for every opportunity to reduce costs and increase production. The transition from the open pit to the underground at Grasberg is a critical aspect, and we are challenged to mitigate production declines while minimizing capital investment. A successful operation involves optimizing our slopes to add ore, which can reduce costs as we increase output. I mentioned page 12 discusses Grasberg; we had to deal with labor grievances tied to bonus issues and supervisor-employee relationships. There was a 10-day work stoppage in late September, which impacted productivity and contributed to our mining rate shortfall. However, we do not question the availability of ore or its grades, and we have developed plans to recover from the shortfall. Our negotiations with the government are twofold: addressing the current regulation that prohibits the export of ores beyond January of 2017 and securing the extension of our operating rights beyond the primary term of our existing contract, which extends until 2021. We are working amicably with the government officials to resolve these issues; it's crucial for both Indonesia and us. Page 13 shows our adjusted mining plan for Grasberg, with a new outlook for copper and gold production detailed in the appendix. Our 2016 outlook now stands at 4.8 billion pounds of copper, 1.26 million ounces of gold, and 73 million pounds of molybdenum, with adjusted site costs at $1.20. Operating cash flows would be $3.6 billion at $2.10 copper in the fourth quarter. Our CapEx for the year is projected to be $2.8 billion, including over $1 billion for oil and gas, carried over from 2015. Our sales profile for 2017 is exhibited on slide 15. You can see both our copper production now that excludes Tenke and the incremental interest sold at Morenci earlier in the year, as well as the impacts from lower volumes in 2016 extending into 2017 and 2018. Page 16 outlines 2017 EBITDA and cash flows without the oil and gas business, revealing a range of operating cash flows as copper prices rise. Our curtailed capital spending, as touted, will fall from $2.8 billion in 2016 to $1.7 billion in 2017, focusing on developing the underground at Grasberg and constrained sustaining capital across the other operations. Slide 18 shows our debt structure; we had $19 billion of debt and $1.1 billion of cash as of 9/30. We expect to end the year with $3.3 billion in cash and ample liquidity to manage near-term obligations. We've talked earlier this year about execution, and we are focused on addressing the mining rate and securing our long-term rights in Indonesia. While we faced challenges in Q3, safety remains our top priority, which is paramount for everything we do. Thank you for your patience during this overview, and I look forward to your questions.

Operator, we're ready for questions.

Hi good morning, Richard and everybody.

Good morning, Matt.

So, let me ask on this: you had the mining rate issues this quarter, you had the labor stoppage, and the implication seems to be that the problems over the third quarter that you saw are going to hamper production in the fourth quarter, effectively pushing some of that back into next year. Can you clarify are you more constrained in what you can produce over fourth quarter because of these lingering issues, or is this move around any kind of conservatism? I'm just trying to understand how much of the shift is you responding to conditions at the mine? And how much, if any, is market conditions positioning as you negotiate with the Indonesians, etc.

Okay. There is just a physical aspect to it. As we progress our mine plan at this stage, we get to higher grades as we go forward. So, the fact that we were not able to mine the material that we planned to mine in the third quarter, means it's just simply going to take longer to get to the higher grade material that we had originally planned to mine in the fourth quarter, and that gets pushed out. We can't do more to get to it quicker because we're constrained by physical space. Our plan calls for us to do everything we could do all along, and when it gets pushed back, it gets pushed back over time physically. So, it's not a strategic or tactical decision, but it's a physical consequence of what we face now. We know we've got to be diligent about keeping our equipment operating and available and so forth, because delays in that can have an impact in the future. We're working hard to address these issues of concern by our workers; we made some responsive steps to the issues they raised in terms of the bonus, in terms of the relationships between supervisors and the workers. It's a complicated labor situation there in Papua with the nature of the workforce, and how it's changed over the years. All of this requires a lot of attention and work. What it doesn't change is the high-grade ore that's there. I mean that remains there, and it's a question of getting to it as quickly as we can. While we're doing this, I might add that our work in underground development is going extraordinarily well, and we're getting approvals from the government to do what we need to do. That's a big project, a $15 billion investment, and we are spending roughly a $1 billion a year on that, as our future with our partner Rio Tinto as we move forward.

And Matt you can see on – this is Kathleen, on slide 12, we show the grades of both copper and gold in the open pit. Because of the variability in the grade, we'll be mining in the fourth quarter, material that previously had a higher grade. But because we got behind in the third quarter, we'll be mining material that we thought we were going to mine in the third quarter that has a lower grade. But we do expect to get to all of it, because the open pit will be transitioned to the underground in 2018. So, that, as Richard talked about, it is shifting now by a couple of months the access to the higher grade material which cascades into 2017 and 2018.

Got it, Kathleen. I appreciate the clarity there. Let me follow-up with a question for you, if I could. Looking at the language in your filings, there is the springing collateral trigger, and if the $3 billion kind of threshold in asset sales isn't reached, you've been very clear expecting – in laying your expectations for things still moving for the fourth quarter. But in a bad outcome, let's say anything happens with Tenke, anything happens with Deepwater, what kind of collateral would we be talking about? What would be that actually look like numerically?

Well, the terms of our amendment that we did with the banks in the first quarter of this year have a springing collateral really for all of the assets. Our plan is if we don't get to the sales proceeds, the $3 billion, we would sit down and discuss with the banks the nature of the collateral. But as it reads right now, it's basically all the assets. But we're very confident that we'll be able to meet that test. We've got three transactions. We've already completed a significant amount of proceeds already in the first part of the year. So, we're confident that we'll be able to meet that test and avoid the need to grant the collateral, that the springing collateral test that you referenced.

Got it. Thanks very much, folks.

And Matt, I'll just say, we have great relationships with our bank group. This goes back years of how we managed things historically. We work very well. We have a lot of credibility and so we'll continue to work together.

Hi, guys. Just a couple of questions from me. Just following up on Grasberg. I'm thinking about the transition period between the open pit and the underground. Your latest mine plan does that have the open pit finishing at around the end of Q1 2018. Is that correct?

Yeah, that's correct.

And that transition would be sort of Q2 2018, and is the underground all on track for that?

Yeah, the Grasberg Block Cave development has gone on without any interruption. We expect to have the ore flow system, which is one of the main systems for the Grasberg Block Cave to come online by the end of 2017, well in advance of the start of the block cave. We will not initiate the cave, but can do a lot of the preparation for the cave prior to the pit completing. As soon as the pit is complete, we start a process of initiating the block cave and that ramp-up process will take place as we develop more draw points. So, it's on track. The Deep MLZ, we initiated the cave earlier this year, and that continues to advance, and we're well positioned for that mine to continue to grow in capacity to 10,000 tons a day by year-end.

Alright. Thanks. Thanks for the color. And then the last question from me, just on the SG&A, what are your thoughts about how 2017 into 2018 might look?

Yes. We are going through that process now. We're taking steps to deal with SG&A we had in the oil and gas business. But we’re also continuing to look at corporate G&A, and our overall target is to return this to levels that were in place before the oil and gas deal and find ways of reducing that.

Thank you very much. Hi, Richard, Kathleen, Red and Mark.

Hi, Tony.

First of all, congratulations on all the progress so far. You've been doing some tremendous things, so kudos. My question is I really wanted to drill down on Indonesia, and I was wondering, Richard, how would you describe the overall tenor of your negotiations with the government these days? Obviously, there have been a lot of moving parts with the cabinet officials, etc.

Okay. And Tony, I know you're well aware of all of this. We haven't really been engaged in negotiations. We set a plan in mid-2014 when we signed a memorandum of understanding about how to go forward, agreeing to pay higher royalties, to divest up to 30%, and to develop the smelter. It’s just been more of a question of talking with the government about getting that approved as opposed to continuing negotiations on terms. The MOU was extended once in early 2015, and in October of 2015 we received a letter from the government affirming all of that. There has been political changes in Indonesia, but we haven't been in negotiations per se, it’s more about getting the agreement previously reached in place.

I guess I'm trying to get at has there been a change in the tone, or are they becoming a little bit more accommodative, do you think? And would it be your expectation that we could see tangible progress on the export situation? Obviously, you've got the license right now, but would your expectation be that the 2017 situation would be resolved maybe in advance and not having to go down to the wire again?

The tone has been a recognition by the government that this needs to be addressed. How they address it is of great interest for us. The president has been very positive about the need for foreign investment and treating existing investors well, and we continue emphasizing our history of investment, and the employment benefits that our operations provide.

Thanks for all the color, Richard. I appreciate it.

Hi, good morning. I still have a couple of follow-up questions on Grasberg. If the export ban is upheld as it currently stands, can you give us an idea of what percent of the concentrate would be unavailable to go to Gresik next year, i.e. could be impacted?

It's a very large amount. I mean Gresik could absorb no more than 40%, probably a little less than that. As a practical matter, with today's copper prices, we could not continue our operations if the export ban is in place. We would have to make very significant adjustments to employment and spending. It's a very important issue for us.

So, if the export ban stays in place, you'd reduce production pretty quickly?

We would have no choice.

In terms of the guidance for CapEx, I assume that 2017 guidance excludes any smelter spending. Is that correct?

It does not include smelter spending.

Okay. And then in terms of your long-range plans at Grasberg, it sounds like you're suggesting that you'll continue to spend the $1 billion a year developing the underground even without the CoW extension. Is that the right way to think about it, and it's really just the smelter that you're holding back on?

That's correct. We've relied on the assurances from the government to keep that spending going.

And if you decide there is no resolution on the horizon and you do decide to pull back the spending, where would we see that in terms of the production profile? Would it be 2018 or 2019 where we would see the impact?

No question. If we don't have the Block Cave ready to start ramping up, it would push that ramp-up back.

Good morning, Richard and Kathleen. Just got a couple of quick ones. Mainly on the net debt. You guys obviously have flagged the $5.2 billion in gross proceeds. I just wanted to make sure I'm reading this right and that sort of includes the preferred dividend and if we take that out, it’s more like a $4.6 billion that you guys would expect to receive in Q4?

Yes. We have a $582 million requirement for redemption of a preferred at a subsidiary level that would net out those proceeds.

And that's included in page 6 when you're talking about your net debt next year at different copper prices?

Correct.

Perfect. And then my last one is just that you also talked about being about 25% of your upmarket equity offering, given the price that you guys have disclosed in your average share price. Is that something that we should look forward to in the next six months that you guys would be more comfortable transacting?

It's just a question of one of the reasons that attracted us to this kind of equity raise is that we can time when we go in the market. We executed it, backed off and we expect over the next six months or more to be back in the market when we feel better about doing it at our discretion.

And one more, so you guys obviously – the balance sheet is well on the way to where you want it to be. Does that mean that there's no more asset sales over the next 12 months?

I think I was clear about that we like the assets we have in our mining business and we wouldn't expect to have sales there. We have some minor oil and gas assets that we may find ways of doing transactions there, but no, we're basically done with asset disposals.

Okay. Thanks very much.

Thank you, Andrew.

Hi, everybody. Just a quick question on the copper sulfide opportunities. Would this essentially entail, if you were to go ahead with these, just a modification to the back-end of the plant and then laybacks on your current pits? Is it similar to what you did at Morenci? And then, what copper price do you think you would need to incentivize the development of these sulfide opportunities? And like, for example, if your balance sheet were – if you had no net debt for example, would you potentially proceed with some of these projects now?

It would be unlikely to do so now because we are at $2.10 copper and there are significant questions near-term about where the global economy is going. Even if we had all the cash in the world, we wouldn't be pursuing these projects as we speak right now. The development itself varies depending on the ore bodies.

Okay. Great.

It's going to be an outlook. We'll aggressively prioritize plans for these projects. We're seeing demand continue to rise, and the need for copper will eventually require a significant price increase, and we feel good about our long-term strategy.

Hey. Good morning, guys. Thanks for taking my question. Just wanted to focus briefly on the balance sheet; you announced a lot of actions over the last couple of quarters. One thing that a lot of other mining companies have done is issue debt now that the markets are relatively favorable and extend their maturities. Is that something that you considered at all just to get a bit more cash on the balance sheet as you head into a time when you have quite a few maturities coming due?

We've really been focused on taking debt down. Once we achieve our targeted debt level, we'll look to what makes sense in terms of any refinancing, but we've been focused on taking absolute debt levels down.

That makes sense. One other low-cost option just kind of near term is, as you look at your credit facilities, I saw on page 18 and appreciate the clarity you provided there, that pro forma for the asset sales, it looks like it's your intention to pay down the bank term loan and the revolver as well and keep those paid down. At some point in time, would that be something you'd consider going to, to get a bit more funding there? Presumably you can do it much more cheaply than in the open bond markets. And do you think you could do that without having to provide security to those lenders?

The slide showing repayment of the full term loan is really just math, the 50% of the proceeds being applied to the term loan. I think they would be looking for security given the company's credit rating.

Okay. I appreciate that. Thanks very much.

Hey, everyone. Just wanted to ask one sort of more question on Grasberg and then a bigger picture question to finish it out. Given where we were three months ago with the mine plan at Grasberg and where we are today, it seems like there is a lot of a shortfall. And I know that production stoppages for 10 days are sort of unforeseen. But it seems like you would have anticipated that the physical area of the bottom of the pit would be smaller. It seems like the shortfall in production that you're anticipating is more than just unexpected stuff. So, my question is sort of what happened that you weren't expecting, and is there a chance that that could happen in 2017 as well?

Well, our talk about the physical constraints is to explain the consequence of these unexpected things happening. We projected, based on experience, on equipment availability and worker productivity, what we would achieve. Then we were faced with issues related to the workers, and that had the consequence that it had. If we don't execute these plans, some of the ore gets deferred. It's not a big economic issue because the ore is there and we will get it over time. We have to execute the plans to meet these numbers. We give you our best outlook on what we're doing; we've got to go try to do it.

Yeah. So, you touched on the sulfide expansion opportunities earlier, I'm just wondering longer term after the high gold years at Grasberg, what's the sort of can you rank your expansion opportunities to get copper back up to 4 billion a year sort of longer term, whether it's the sulfide expansions or new development projects or even if M&A is on the table?

The M&A strategy will just depend on circumstances and is always out there. But really it's the sulfide projects and how we time them. We have a huge amount of proved and probable reserves, as well as resources, so we've got a lot of opportunities for long-term growth.

Do you have a cameo in the upcoming Matthew McConaughey movie?

Well, I'm interested to see it because I was living it all. I was out there in early 1988 when we started drilling. I've lived through this and I'm amazed every time I go out there. In the early years, when we'd fall short, we had other places to mine. We now face these quarter-to-quarter issues that we have to manage. Thanks for your interest, and if you have follow-up questions, contact David Joint.