Freeport-McMoran, Inc. (FCX)

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Freeport-McMoRan Copper & Gold Inc. (FCX)

Q3 2009 Earnings Call

October 21, 2009; 10:00 am ET

Executives

Kathleen Quirk - Executive Vice President & Chief Financial Officer

Jim Moffett - Chairman of the Board

Richard Adkerson - President & Chief Executive Officer

Analysts

David Gagliano - Credit Suisse

Michael Gambardella - JP Morgan

Sal Tharani - Goldman Sachs

Anthony Rizzuto - Dahlman Rose

Mark Liinamaa - Morgan Stanley

David Lipschitz - CLFA

Kuni Chen - Merrill Lynch

Brian MacArthur - UBS Securities

Jorge Beristain - Deutsche Bank

Charles Bradford - Affiliated Research

John Tumazos - John Tumazos Very Independent Research

Thomas Shaw - Stifel Nicolaus

Dave Katz - JP Morgan

Brett Levy - Jeffries & Co.

Ben Elias - Sterne, Agee

Presentation

Operator

Welcome to the Freeport-McMoRan Copper & Gold third quarter earnings conference call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions)

I would now like to turn the conference over to Ms. Kathleen Quirk, Executive Vice President and Chief Financial Officer. Please go ahead, ma’am.

Kathleen Quirk

Thank you and good morning everyone. Welcome to the Freeport-McMoRan Copper & Gold third quarter 2009 earnings conference call. Our earnings announcement was released earlier this morning and a copy of the press release is available on our website at www.fcx.com.

Our conference call today is being broadcast live on the internet and anyone may listen to the call by accessing the webcast link on our internet home page. We have several slides to supplement our comment this is morning. We’ll be referring to the slides during the call. They’re also accessible using the webcast link on our www.fcx.com website home page.

In addition to analysts and investors the financial press is also invited to listen to today’s call and a replay of the call will be available by accessing the webcast link on our home page later today. Before we begin today’s comments I’d like to remind everyone that today’s press release and certain of our comments on the call include forward-looking statements.

Please refer to the cautionary language included in our press release, the slide presentation and to the risk factors described in our SEC filings. On the call today are Jim Moffett, Chairman of the board, Richard Adkerson, President and Chief Executive Officer. We also have Red Conger with us today as well as Mark Johnson and Dave Thornton.

I’ll start by briefly summarizing in our financial results and then turn the call over to Richard to be referring to the slide presentation materials and after that we will open the call for the questions. Today FCX reported third quarter 2009 net income attributable to common stock of $925 million, $2.07 per share compared with $523 million or $1.31 per share for the third quarter of 2008.

For the nine months period ended September 30, 2009, FCX reported net income of $1.6 billion, $3.70 per share compared with $2.6 billion or $6.20 per share for the nine months 2008 period. Our third quarter copper sales totaled 1 billion pounds. That was similar to last year’s third quarter, but higher than our July 2009 estimate of 910 million pounds as we had access to the high grade section of Grasberg during the period.

Our gold sales were up 706,000 ounces or significantly higher than last year’s third quarter of 307,000 ounces and our July 2009 estimate of 550,000 ounces reflected accelerated mining of a high grade section at Grasberg. Our molybdenum sales during the quarter of 16 million pounds were lower than last year’s level of 19 million pounds, but slightly better than our July 2000 estimate of 15 million pounds.

Our recorded copper prices for the quarter average 2.75 per pound that was lower than last year’s third quarter, which averaged 3.14 per pound. Our gold prices averaged $987 per ounce during the third quarter of 2009 and that compared with $869 per ounce in the year ago period. Our molybdenum realizations were 1395 per pound that was about 57% lower than last year’s 32 per pound level in third quarter of 2008.

As you will see from the press release our results reflect strong performance in all of our operation and continued successful execution of our plans, which we will talk more about in the slides. Consolidated unit, net cash costs which exclude Tenke Fungurume operations which are currently in start up average $0.50 per pound in the third quarter of 2009, substantially lower than last year’s level of $1.29 per pound.

Strong cash flows were generated in the third quarter totaling $2 billion at brought the year-to-date number to $2.9 billion. Capital expenditures during the period totaled $244 million bringing the year-to-date total to $1.1 billion. We ended the quarter with debt total debt of $6.6 billion and consolidated cash of $2.3 billion.

We took steps during the quarter to repay debt through yesterday. We had repaid total of $638 million in debt including $340 million of redemption of our 6 and 7/8% notes and open market purchase open of our 8.25% and 8.375% senior notes. We also called for redemption our 5.5% convertible preferred stock during the quarter, and that was converted into 17.9 million common shares.

At the end of September, we had 430 million common shares outstanding and assuming conversion of our 6.3/4% Mandatory Convertible Preferred Stock, which is mandatorily convertible in May of 2010, we would have between 469 million and 477 million common shares outstanding. We also announced today that our Board has reinstated an annual cash dividend on our common of $0.60 per share that would be $0.15 per quarter.

Now, I’d like to turn the call over to Richard, who will refer to the slide material.

Richard Adkerson

Thanks Kathleen and good morning everyone. We’ve all livered through a very interesting this year. I just thinking back to our call a year ago, we had been several weeks into the process of starting the changes to our business that this results for this quarter reflect tremendous uncertainties facing us because of the real desperate situation in the world’s financing industry a year ago.

We knew we had changes, but at this time last year we didn’t know exactly what those changes we’re going to has to be. We have reported a good quarter in the third quarter of 2008, and now to look at these results for the third quarter of 2009, a year ago we wouldn’t have expected them to have expected them to advance so much stronger than they were a year ago.

We still have some uncertainties in our business, but we’ve shown we can adjust to changing economic conditions, and we’re tremendously optimistic about the future of Freeport-McMoRan Copper & Gold as we look forward because of the assets that we have our ability to manage those assets and the positive outlook for the markets that we operate into some real key numbers to focus in on are simply the level of earnings that the $2 billion of operating cash flows we generated in the quarter with only $240 plus million of capital expenditures is very strong performance.

That’s really all stated on slide four, where we show some results. Reducing three by-product credit costs by over 30% year-on-year is a significant accomplishment. When with you look at the work that our team, where congress team did in North America and South America, where we set some very aggressive plans to change our cost structure and adjust our production profile and our capital spending and the team really executed that in South America, but particularly important in North America where our costs were approaching $2 a pound in the third quarter of 2008, to now this positive result.

Read the rest of this transcript for free on seekingalpha.com