Welcome to the Freeport-McMoRan 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.

Thank you and good morning. Welcome to the Freeport-McMoRan third quarter 2014 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 conference 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 conference 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 the call include forward-looking statements and actual results may differ materially. I’d like to refer to the cautionary language included in our press release and in the presentation materials and to the risk factors described in our 2013 Form 10-K and subsequent SEC filings. On the call today are, Jim Bob Moffett, our Chairman of the Board, Richard Adkerson, our President and Chief Executive Officer, Jim Flores, President and Chief Executive Officer of Freeport-McMoRan Oil & Gas and we’ve got several others from our senior management team here in the room. We’ll start by briefly summarizing the financial results and then I’ll turn the call over to Richard who will be reviewing our recent performance and outlook. As usual, we’ll open the call after our remarks for questions. Today, FCX reported net income attributable to common stock of $552 million, $0.53 per share for third quarter of 2014, compared with $821 million or $0.79 per share for the third quarter of 2013. There are several special items as you'll note in the press release included…

Hey, good morning everyone. And we’ve got a lot to talk about today. And I know this complicated geopolitical world we live in with the market conditions we face, we’ve got some issues to talk about in Indonesia; and we’re going to talk about the things that affect our business like in those areas and answer your questions. But I also want to put the situation in context for our company. Kathleen just talked about a quarter despite all these things where we had solid performance from our global operations, both in mining and oil and gas. In Indonesia, we resumed concentrate exports in all of this following the export ban that came into play in January and we are working to -- working with the government on our long-term contract situation. Then when we look at our strategy of growing the volumes of our business, and to do that, we obviously have to focus on making long-term decisions and making long-term investments and being consistent about it. You’re seeing progress made of efforts that began back at the time when the Phelps Dodge Freeport merger in 2007. And the Morenci expansion is expected to reach full rates by the end of this year, the project is essentially complete and it's a major step for us. The Cerro Verde expansion, which is tripling of our output there, project that cost is estimated to be an excessive $4.5 billion is on progress, construction is underway heading for a start up in 2016. And our oil and gas business, Jim will be talking about the commissioning of Lucius this year and the Hollander project where we're completing the well for testing and production as part of our Inboard Lower Tertiary program, important project in that area. Beyond that our exploration activities and…

(Inaudible) average day two good examples Morenci and Lone Star that shows it is Brownfield and related the property that we acquired from (inaudible) iceberg is in there stat oil is there, tip of the iceberg with a big value of the iceberg down their own surface. Remember, the only different oxide ore (inaudible). So, if you look at this and see the growth have you build and (inaudible) need this (inaudible) a non-potential this would be daily (inaudible) in the year and rest of the world. So if you realize the most stable sign we have find into your projects, we shouldn’t have with the infrastructure and on a year or so potentially Africa, as mentioned earlier 60 kilometer (inaudible).

Great. Thanks Jim Bob. Now, just closing we're really excited about the business. It's tough business. There are challenges we have to face. And over the years, we're confident about our ability to do that and we've got a track record of doing it. Great set of assets, great people, great technology; and then on page 15, you can see where we have right now with insight five mines to be world class mines and those are very, very difficult to find with 400,000 to 500,000 tons of annual production. That's again the world and then all these resources that while we won't be spending capital on, in the near term we'll be very disciplined about that. We're going to be focused on the shareholder returns. It gives us a great deal of excitement about this part of our business. And now Jim shares that excitement about oil and gas business and I’ll let him takeover.

Thank you Richard and good morning everyone. As Kathleen articulated in our opening comments, oil and gas business is doing well. Our sales of 12.5 million barrels of oil equivalent in the third quarter were slightly above the July estimate but it was impacted by our earlier $3.1 billion rationalization of the Eagle Ford Shale assets in the second quarter. We continue to have good steady production performance in California and our Deepwater Gulf of Mexico while higher margin barrel of oil come from. The cash operating margin was $600 million for the quarter and with the $48 barrel margin, it was impacted by the decent price activity and the Brent pricing, 68% of Gulf of Mexico with the $65 margin and we’ve done a good job over the summer to position the company for future growth out of our key area, which is the Deepwater Gulf of Mexico. Also our oil hedges that were carried over from the plains days come in handy with this current oil price where we have put to this rocket 90 bucks, they cost us $3 or $4 a barrel and so forth and when you start talking about $80, $85 oil in this type of market, volatility imbalance that there is a fire protection you need to make sure you continue to protect your capital budget, your shareholder returns that we’re all pledged to protect. On page 17, the reserves and resource potential, we’re trying to articulate here but what the rotation of our business has been from purely production assets that are flat to declining to something that’s going to be impactful for the company with large growth. As you can see California and Deepwater Gulf of Mexico is a great comparison, two excellent oil assets. The cash margin obviously in the…

Okay. Thanks Jim. Let’s look at the outlook slide, our update to our outlook for the year 2014. Current copper is projected to be 3.9 billion pounds that reflects the sale of Candelaria and some timing issues at Grasberg gold molybdenum and oil this also reflects the most recent information we have from the operative Lucius about the start-up from it, it’s going fine, but it’s starting just a bit later in the fourth quarter and some maintenance that we’re having in our modern platform, some unscheduled maintenance, but that gives our current outlook for our oil production. You can see our unit costs outlook is consistent in a $1.50 range. Operating cash flows at $3 copper would be $5.8 billion for the year and our capital expenditures are consistent with our previous estimates. On a quarter-by-quarter basis, we have the projected sales volumes on page -- for the annual -- this is the annual, I’m sorry on the slide here to myself. This is the annual sales volumes going from 2013 to 2016. Again copper reflects the adjustment for Candelaria and our most recent outlook for plans at Grasberg. You can see 2016 as we approach the completion of mining from the pit continues to be a big year. Some of that may go into 2017 based on the work that's been done there. And you can see the ramp up in our growth in oil and gas business as well. Now we get to the quarterly slide that I was talking about earlier, but it shows again the adjustments for the year and gives our quarter-by-quarter projection of our volumes. The site operating cost, union operating cost that we have by region is shown on page 27. It shows good performance at each one of our operating sites,…

Operator, we'll take questions now.

Ladies and gentlemen, we will now begin the question-and-answer session. (Operator Instructions). Our first question will come from the line of Curt Woodworth with Nomura. Please go ahead.

Hi, good morning.

Hey Curt.

I just wanted to drill down more into this capital allocation for the company going forward; obviously this year there has been pretty significant shifts both in terms of monetizing some of oil assets and then reinvestment in the deepwater. So, could you just comment on, do you continue to expect to pursue more bolt-on acquisitions in the deepwater and does the recent decline in the oil price change any thinking regarding exploration spending and/or potential to what you would want to do with California?

Okay. Curt, this is Jim. The aspect of spending, we’re spending a minimal amount of exploration spending in the Gulf of Mexico, most of this development and exploitation spending around our facilities. So, as far as exploration and we'll be willing to change, there has not much of it been done. We are obligated to drill one well in Morocco on the exploration front, that's on the international side to go and call that the deepwater aspect. The bolt-on acquisitions and so forth, the market -- I think it's going to continue to be there from the seller’s perspective. Our needs, when you look at our portfolio on page 20; we have a tremendous portfolio; sure we’ll buy a few leases when the [March] lease sale coming up. I don’t forecast as active a year as we had this year. Even though there will be opportunity, we just don’t -- we don’t have the need. As far as California and thinking about that, it’s a monetization asset because of the flat production curve and growth. I think it kind of falls in the area where Richard talked about with the creativity and so forth; we still have partnership concepts and ways to do that. It’s a tremendous asset to finance. And we’re working on something as a project like that with partners to see obviously the market volatility. We’re not rushing out to price something in this type of market; we want to see what things stabilize. And we have probably a little more constructive outlook on commodity prices than the banks at this point in time. They’ve been calling for $80 oil for three years and so they finally got it; now they call it for $70 oil. So, we see demand around the world, we have a pretty good look at it is continuing to be healthy. There is a lot of financial noise in the markets right now and all this will calm down and we’ll get back to business usual, maybe early as first half of next year and maybe take a little longer, but we don’t think so. So we continue to have that I guess error and aquiver and we’re talking about something that works that’s very smart and value creative for the FCX stakeholders. And so that’s more of a dry powder, but as far as rotating more Gulf of Mexico assets, we’re probably developing those with the drill bit on our properties versus third-parties at this point in time.

Okay. That's great. And then just a follow-up on the sulfide projects, Richard, can you give a sense for how the capital costs curve for say pounded capacity would look compared to some of the recent Brownfield expansions that you've been doing?

You know, Curt that I'm always reluctant to use averages because we are assessing these projects based on the individual economics of each property. The nature of the properties are similar though. And that the available sulfide projects that we have to work with are these large low grade deposits. And we are looking at the individual aspects of what it takes to develop them. In other words, if we compare an El Abra with our Bagdad mine and when we look longer range at Morenci and Lone Star, all of those things have attributes for development, permitting water access, power that vary significantly. So, if we match those up, we eliminate projects that don't fit in the portfolio, don't have good rates of return or ones that are not impactful or ones that we consider in a way we manage variations and prices overtime. So, with the real detail dynamic study of what to do and then we look at execution risk, which ones can be approached and achieved with the least amount of risk in terms of engineering design, tailings management it’s a very dynamic kind of project. So, we can give you averages, but that’s not really the way we look at. You look at the Morenci project that we just completed that we’re ramping up now. Here we added our modern hot pressure grinding roll mill, goes along a 1940s area mill. We’re taking material that we were wasting and now we’re finding a way to economically process it. It’s a lot different situation than at Cerro Verde where we’re basically tripling where we had an existing site. We developed an innovative approach with a waste water system for the (inaudible) water. We had about a straight forward of building size you can have in this industry in terms -- and we have technology that we’ve just put in place when we started the project and so we’re tripling that and that gave us the opportunity to go for that. So, as I said, what I’m looking forward to is having a day where we can bring a group of investors here in and go into some detail, this is the process we go through in analyzing this thing. The issue is -- and this is the reason that the outlook for copper price is so good in situations that we have where we have the resource we have the ability to do it, we want to do it as fast as we can, we’re talking 10 years plus or minus. And that’s what’s so supportive of prices. Now if you’re talking about a Greenfield project, you can just see -- might watch those that are going on around the world. And that’s why I say when we’re looking at market, that’s really supportive of copper price. And grades are falling; mines are having to go underground to help those having to deal with these social issues. So, we think it's great business.

No question. Thank you.

Your next question will come from the line of Oscar Cabrera with Bank of America Merrill Lynch. Please go ahead.

Thank you operator. Good morning everyone.

Hi Oscar.

Hi guys. I’d like to get started with the $12 billion in net debt target that you had set for 2016, would the presumption that the California sale at current oil prices doesn't make sense. Would you be willing to be flexible with that, because 2016 appears to be a pretty good year for production from your projects? And in addition to that, I noticed that you have been continuing to buy back high cost debt which makes absolute sense to me. So, could you just provide more color around that?

Well, when we set the $12 billion target, it was just following the announcement of the acquisition of the oil and gas business. And we have faced some headwinds since that initial analysis with lower commodity prices, with the interruption of production in Indonesia and that's led us to find ways of selling assets and establishing our business. We're going to continue to do that. We are looking at capital spending, one of the attractive things in the oil and gas business it is; it is a business that has great more financial flexibilities than the mining business. Once we start spending on a mine like Cerro Verde, it’s very difficult to pull the plug. So it gives opportunity for partner arrangements that could help us for timing and spending for selling partial interest. And so we’re going through all of our business, looking at all of our capital spending seeing what we can differ, how we can deal with it, how we can generate cash. And we are going to be committed to reaching the strong balance sheet target. All of you run your models and many of you said Richard my model shows it’s going to be tough for you to get 12 billion by 2016, you’re right by the way. Does that mean, we’re going to change our focus from getting to a strong balance sheet, none of us know what commodity prices are going to be in 2015, 2016. We have a great set of flexible assets, we’re all very confident, we’re going to reach the goal of having the kind of balance sheet that you -- most of you as investors are encouraging us to get to and we’re going to work diligently to try to get there. While, we work to keep our production volumes up, execute deal with our issues in Indonesia, deal with our long-term growth plans to be disciplined about how we spend capital over the long range, we’re going to deal with it.

And Richard, just to add one thing; Oscar this is Jim. You mentioned only California sale. Remember, we have a very strong hedge book on the oil from the standpoint; I’m looking from where commodity prices are now and what the current financial community’s outlook for it is through ‘15. So that gives us a bridge to still be strongly considering a transaction evolved in California that has -- that is like I said accretive to the stakeholder report. So we’re in a unique position there to carry over some of those hedges on floors. So, I would not take that off the table at this point in time as part of our flexibility and bullets toward getting to the goals that Richard outlined because we're all committed across the board to making sure because we're talking about a business that lasts as Richard said for decades and 100 years, stock reserves. So the quicker we get to a balance sheet that we're proud of that we feel like it's going to give us the flexibility to accelerate the growth, the faster we'll all be happy right here. So if that helps you?

No, that's great. From my perspective, you already have a strong balance sheet. Then if I may, second question with regards to Grasberg. COW would notice the agreement that Vale reach in their Indonesian nickel operations ahead of the President taking office. And I understand it's a difficult situation but I was just wondering if you could just compare and contrast your situation with that of Vale because it seemed that they've got an extension to the contract of work that they've been happy for and in addition to that, it seems just based on the press released that they can go directly to the Indonesian Stock Exchange to this dispose off 20% of the stake they need to do.

All right. Well Oscar, let me say first of all, it's going to be a limit amount that I want to say about another company. You need to -- Vale will explain their situation but a key thing to remember for all of you looking at our situation in Indonesia, is that all of these contracts are different. They were signed at different times. Vale’s operations like three forth go back; ours go back to the 70s, theirs go back at least to the 80s. And so where they ended up where we ended up with was contracts that have historical legacy and that have significantly different terms going into this process. For whatever reason, for some reason the Indonesian government has elected to treat nickel and copper differently. Valley produces an intermediate project called nickel matte, which represents 80% of the value of refined nickel. That product is allowed to be exported under Indonesian regulations without any restrictions without any duty. We produce a product called copper concentrate that is worth 90% plus 90% to 95% of value of refined copper and yet it’s treated essentially as an ore and we’re subject to these restrictions. I don’t have any answer for that. But Valley’s contract according to their press reports did not have legally the same degree of assurance in the contract authorized to extend. Legally our contract work has very strong provision that gives us the right for extensions from 2021 to 2041. Valley’s contract extended to 2025 and did not have the same kinds of legal provisions. They’ve breached some agreement with Indonesian government, we’re not sure the details, but allows them to continue operate under a business license approach. And typically under a business license you have the right to operate, but you’re subject to prevailing laws and regulations that can be changed. We’re working with the government and it was acknowledged in our MoU with the need for us to have assurance about the terms of our operations beyond 2021 about our rise to operate physical terms legal enforceability because we're spending so much capital now between now and 2021 that won't be produced until after 2021. 75% of our reserves are produced after 2021. So, we have to be in a position of saying we'll spend this money, we've agreed to work with them on our smelter, but provided we have assurance of terms beyond 2021. Valley’s situation is different and I don't know enough about it really to give you a detailed comparison in any event I don't want to talk about another company. But our situation is just what I described.

No that was great Richard. That’s the sentiment I was looking for. Thank you very much.

Thank you, Oscar.

Your next question will come from the line of Ash Lazenby with HSBC. Please go ahead.

Yes. Good morning all, just a couple of questions. Just if you could possibly expand a bit more you commented about the hedge book on to next year. If you do give us an idea of how significant the volumes are and sort of prices and to the extent that you can disclose that? And then secondly, just a point of clarification in terms of the CapEx and on oil, the $3.5 billion to $4 billion, how can we think about that in terms of flexibility? For example, if the oil price wasn't recover from these sorts of level, how much sort of flexibility do you have within those CapEx figures where you could potentially bring in some of that and free up some more and then boost the free cash flow generation. And what would that be In terms of the reduction of any of sort of production that you've currently got in the profile? Thank you.

Ash, it’s a two part. On page 35 in our presentation and I need Kathleen to take it a later bit. 35 has got a detail on all our volumes. And we have 83 million barrels a day that’s a hedge profile talked about in 2014 or 107 in 2015. So significant portion, all of our California volumes decided to do a transaction, so page 35 will help you there. As far as flexibility in CapEx, there is couple of different ways to do it, right, there is -- you can just reduce activity, but in spite of flexibility that oil and gas business has, we do have significant relationships in contracts with drill ships and the Gulf of Mexico, you have to plan your business much further ahead due to the regulations today and go through all that regulatory process and permitting that causes a little lengthier situation. I think the easiest or the best way to do it, start looking at the longer dated projects and develop joint venture relationships and basically bring in partners to share the spending. And that’s something we’ve been active in doing for the past several months and going to be continue to have those discussions, mainly out of solicitations from investors to us versus us really reaching out to other investors. So we’re ramping up those activities to make sure that we continue to maintain that. Our front end loaded development activity versus doing too much drilling for the future while, even though it’s development, during any kind of period of constraint commodity prices. So we’re looking at building that flexibility. And I think you’ll see the realization of it in the second half of 2015, if we’re able to be successful there. I think in the first half of 2015, you would look at rationalization of assets like California; in the second half, you look at the realization of joint ventures reducing CapEx and we're going to proceed to have a flexibility in our program irrespective of where our prices are if it makes sense.

Okay, thanks.

Your next question will come from the line of John Tumazos with John Tumazos Very Independent Research. Please go ahead.

Good morning. Thank you for taking my call. I was taking a look at the commodity prices on December 5, 2012 when you announced the oil and gas acquisitions versus yesterday. It implies about 2.8 billion a year less after-tax cash flow. It would seem as though some of the CapEx is more, things like smelter in Indonesia came up small. And some of the CapEx that's a large project in midstream is hard to change like the Cerro Verde Mill ones you've started. Given the decline in cash flow, what are the levers of spending that you can turn off? And would it be less damaging to just omit the dividend as opposed to cutting off these oil and gas projects when they're permitted or the Peruvian CapEx in midstream and you've got probably some regulatory CapEx for [provision] control? And I know it's very complicated, it’s a terrible question but the realities of markets in the markets.

Right. Well John, you’re exactly right and that’s what we’ve been dealing with. I mean we have as this situation has unfolded with the lowering of commodity prices, with the interruption we had in Indonesia, we’ve been taking steps all along. In our mining business we scrutinized spending to differ delay spending all along and we’ve done that in oil and gas and we’re going to continue to do it. We are not in a 2008 crisis mode. Oscar made the point, thank you Oscar for saying that at the end of his -- as we answered his questions; we’ve got a strong balance sheet. I mean we’re an investment grade rated company right now. We’ve had very positive discussions with the agencies. And so the issue of having to take the draconian steps that we took in the fall of 2008 where I came back from LME; we called our team together and said we’re stopping spending right then. I mean we stopped Climax; we stopped the spending on Cerro Verde which was an earlier stage on Morenci. We just stopped all the projects; we cut the dividend; we even raised a little capital if you recall. We’re not like that now. We don’t have to go through that kind of analysis. But what we want our shareholders to understand is we’ve got this commitment to work to strengthen our balance sheet in a rational way. We’re not going to fire sale assets, we don’t have to. We’re going to find ways; we’re going to look at all of our capital spending, see if things can be deferred with that of where we’re honoring our contracts to spend where we’re doing what we need to do. This is not something we're bringing our hands about here. We can manage our way through this and preserve our long-term growth. We're not having any discussions about cutting the dividend. We are just talking about managing our business. And we got the assets, the balance sheet and the way to do it. And we're going to do it in a way that John you're going to be happy with and we're going to be happy with.

Yes. John this is Jim. There is no well that support enough to drill before paying the dividend on the oil and gas side. They can be drilled later or that type of things just because of structure of our business as Richard talked about on the mining aspect. They are very co-relative of both sides. And I think what's impacted is trying to impress everybody about this company is that we're not only trying to put our business in great shape for the future, now we're in great shape for the present. At the same point in time, increase our flexibility about paying that debt all at the same time. That it is that hard to do, yes, we’ve all acknowledge that. But that's the kind of goals and realizations that our Board expects and we're proud of the flexibility of our business to be able to even -- to discuss a proposal. And we've made some progress this year with Candelaria and the Eagle Ford sale and we've got more progress to do. So, we're all in the same boat and I think it will be beneficial for the shares irrespective where commodity prices go and that's what our job is.

Thank you, I'm a shareholder.

Thanks John. So are we, John.

Your next question will come from the line of Lee Gorin with (inaudible). Please go ahead.

Hi. Yes Richard, just two questions. First is that a lot of chatter regarding the copper tied up in financial deals, China has tied down. And I was wondering if you had any comment on that? And second, this is the first time I’ve heard you talk of Serbia. And I’m very curious about where that project lies as far as in your priority of your capital investments and new projects going forward between now and 2020? And a bit to that property, so it’s very interesting.

Yes. I knew you’ve been there, Lee. Great hearing from you, it’s been a long time since we’ve seen each other. This financing deal in China has always been murky as to what it meant; they had this fraudulent situation developed, but of course that for a period of time really raised everybody’s concern. We’ve talked about over the years at any point in time in China there is always some story about things that could be happening. And I got to tell you, I don’t know all the details of the financing scheme, but when I look at the size of the Chinese economy and the amount of money that’s being spent on development even in this lower gross situation and thinking about all they have to do to meet their development goals for the interior and what’s they grid is pacing this year, next year with over 20 year period in terms of development, how much copper that involves. So, I got to tell you, I think a lot of these stories about inventories at any point in time, financing deals or slide shows that are probably really meaningful for companies that are traders, companies that have to make short-term statements about what to do with copper stocks and buying and selling. For company like ours, we’re again focused on the longer term situation. Just like you as investors often have to be more concerned about short-term movement as to how you realign your portfolios, we understand that. But if we ever were to let short-term deals affect the way we run this business, then we're going to miss out on some huge opportunities because of the time it takes to get projects ready to go. Now Serbia: There is nothing in the natural resource business like Greenfield…

Thank you Richard very much.

Okay.

Your next question will come from the line of Joan Lappin with Gramercy Capital. Please go ahead.

Good morning. I have a question about the water bates flowing through on this recent test. I would presume that what you haven’t said straight out is you have solved the problem of how to perforate these wells now and whether we’re getting out hydrocarbons in commercial quantities is less significant in a way then all the problems that we had at Davy 1. So, my question is, am I correct in surmising that that the guns are now working and the ability to perforate at these steps is now perfected? And would that mean that would you ever go back to Davy 1; what this implies for Davy 2 and for -- and can you elaborate a little on whatever the problems were you had at Highlander?

Joan this is Jim Bob. That’s a possibility, the other possibility is the reservoirs are different and the porosities and permeabilities were better at Davy Jones 2 versus Davy Jones 1. When we’re in the business of producing salt water versus oil and gas, it’s scientific but as far as economic and financial, all eyes are on Highlander, that’s where we have even better porosity and permeability and core evidence and log evidence of having accumulations so that’s where we’re focused. The delays in Highlander were strictly oil field related equipment that failed that we had we retrieved out of the whole and just put us behind schedule. But we think we're getting closer and closer to the development test and we've got a little more work to do out there. And feel like here in the fourth quarter, we'll deal with kind of test of Highlander and put it in the sales very quickly, once it happens. So, that's what we're focused on; we're really just updating everybody over the operational results of those existing wellbores from McMoRan.

Well, I know you are not in a business of producing water. But I'm asking it's more specific question which is…

And Joan, I'd say that is a possibility but there is also another possibility.

What's the possibility?

The possibility is that it was -- it's purely mechanical with the perforating guns. But the other possibility, more likely possibility is just different, reservoir characteristics. So, I know I'm answering your question with two answers and either one a possibility that could be the reservoir characteristics has changed or the mechanical aspects of the guns, I happen to think and I have think it has to be reservoir characteristics, but that guns are an issue. But at the end of day, we're focused on Highlander and perfecting the flow rates of gas and oil there and that's what we're are concentrating.

Okay. So, you will not say that the guns are now working?

They've always worked.

Well, there is some question about that. But okay, thank you.

There you go.

Your next question will come from the line of Steve Bristo with RBC Capital Markets. Please go ahead.

Yes, thanks. I just had a question on your hedging portfolio in oil and gas. And I know you commented on that being an asset possibly in the divestiture of California. Are there any plans to add to that portfolio because it was acquired with the plant’s exploration and since announcing you guys have added to it at all?

Steve, this is Kathleen. We’ve not added to the positions, PXP had positions going into the deal, which will benefit us during this period of time. We continue to monitor markets and look at how a hedging program might fit in with our overall plans and capital spending. But at this point in time with these markets we’re not looking to add to positions, but it’s something that will continue to evaluate overtime in the future.

All right. And then…

Steve I just might note too, company situation is different than [plains] and FCX. I mean we have a broader set of assets, stronger balance sheet. We’re also short oil in a lot of our businesses. It’s kind of different to match it all up piece-by-piece, but we’re a big energy user, energy is 20% to 25% of our costs. It’s from a variety of sources in our mining business natural gas, hydro, but all other component of it. So, when we step back and look at the overall business in terms of what our financing strategy should be, it’s a different circumstance than having an independent oil and gas I think my point was.

Steve, this is Jim. I will just highlight and it gives us a lot of flexibility during the comparative time that other people do not have when it comes to valuations and financial flexibility of financing deals with California. So that was -- that’s unique to us and unique to our situation.

Okay, thanks. And then just on the debt target, it came up early about the $12 billion net debt target by 2016, but it sounds like you're sort of shying away from that and then you targeted just a strong balance sheet without a certain number around that. Is that correct in assuming that's where you're sort of leading into?

Look, all I'm acknowledging; let me just say I'm acknowledging is we have a target and we're working to get that, never anything magic about that target. We want it just to be as clear as we could to the marketplace at the time about trying to make it. It would be unrealistic of me to sit here and look at these circumstances and what we're dealing with and say if I got $12 billion, it’s $12 billion. We're going to continue to work towards it. We're going to work to have a strong balance sheet. We're going to look at the time of when we can get there and I'm just being realistic than not being realistic.

And Steve, that is really the discipline that brings into all the spending, all our business, it sure keeps everybody focused on creating value. So it's been a beak and it’s been endorsed by the board. So we’ll continue to focus on it.

Perfect. That's it for me. Thanks a lot.

Our last question comes from the line of with Wilfredo Ortiz with Deutsche Bank. Please go ahead.

Yes, good morning everyone. Just a quick question on your volume guidance for copper for the fourth quarter, does this include any type of impact if like at Grasberg were to take place? And if it does take place, would it impact the whole operation or just partially a portion of the operation? Just wanted to get a sense as to what we're seeing as far as the guidance versus what could potentially happen if the strike doesn’t sue post November 6.

The answer is it does not include any impacts of any kind of potential work disruption strikes or otherwise. And there is no real clear answer to your question. As I said, as we speak now there is a group of workers primarily in the Grasberg open pit who are not reporting to work that’s in violation of our collective labor agreement. The work continues in our DOZ mine, in our underground development, in the mill operations and so forth. So, we’re just going to have to work through this. It’s unclear even if the union were to declare a strike; to what extent will the workforce respond to that. There is a -- it’s a dynamic situation with a lot of interest represented even within the union. And so we’re going to deal with it, could have an impact. That impact is not reflected in any of our numbers and there is one thing you can be sure of Indonesia, you’ve got a real time news flow coming your way because whatever the union does is in the paper every day. And we’re going to be active in our communications efforts to make sure the market is aware of what the circumstance is.

Understood. Thank you.

Okay. Thank you, Wilfredo.

Now we will turn the call over to management for any closing remarks.

We appreciate everybody’s interest and your good questions. We’re going to work hard to achieve all these goals that we have. And we’re very confident we’re going to be successful. So, thanks for your interest in following our company.