Ladies and gentlemen, thank you for standing by. 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. 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, everyone. Welcome to the Freeport-McMoRan third quarter 2017 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 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. 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 2016 Form 10-K and subsequent SEC filings. On the call today are: Richard Adkerson, Red Conger, Mark Johnson, and Mike Kendrick. I'll start by briefly summarizing our financial results and then I'll turn the call over to Richard, who will review our recent performance and outlook and will be using the prepared slide materials that are on our website. As usual, after our prepared remarks, we'll open up the call for questions. Today, FCX reported net income attributable to common stock of $280 million or $0.19 per share for the third quarter of 2017. The third quarter results include net charges of $212 million or $0.15 per share for nonrecurring net charges that are detailed on VII of the press release which include a $188 million charge or $0.13 per share associated with accruals for Peruvian government claims associated…

Thank you all for joining us on our call. Kathleen and I are speaking to you from Jakarta where we've made a series of trips this year to work with the Indonesian government on reaching a resolution of our issues involving our contract. Our quarterly results I believe clearly show the strength of our company. During the third quarter we had strong cash flows generated by our operations which are characterized by very long lived assets. We have significant growth optionality that I'll be speaking about during our call today. And now we have the ability to consider these in light of our company's improved balance sheet and the improved copper market conditions. This will enable us to consider future actions to build incremental shareholder value. We're going to approach this in a very disciplined way as producers are throughout the industry. But we have assets within our company that allow us to look forward to a period of future investment and future growth. During the quarter, we continue to advance our key 2017 goals. We're focused on safe and efficient operations, building long-term value through our operation of our business, production of our reserves, and focusing on our attractive portfolio of long-term copper assets. As I mentioned, we are working hard to resolve our long-term rights in Indonesia. During the quarter, we generated almost $900 million of cash flows from operations in excess of our capital expenditures. And for the nine months to-date in 2017, we have approximately $2 billion of cash flows in excess of our capital expenditures. We are benefiting from the positive copper market that has resulted in higher prices than many expected. The analysts who were predicting the so-called wall of copper have capitulated. We were always skeptical about this looming supplies but there are…

Ladies and gentlemen, we will now begin the question-and-answer session. Our first question will come from the line of Michael Gambardella with JPMorgan. Please go ahead.

Hello, Richard and Kathleen. How are you?

Hey, Mike. We're okay.

Good. Good. A question on Grasberg and the negotiations with Indonesian government. When you guys announced the framework, a lot of the reports coming out from the Indonesian government was that Freeport has agreed to sell down to below 50%. And when you put up the notice and said we're willing to sell down below 50%, obviously, at a fair market value. And there's been reports from the – quoting people in the government talking about value shouldn't include reserves. And I'm just thinking about valuation parameters to get real value for Freeport. First of all, it's hard enough to come to a conclusion on what copper price to put in when valuing Grasberg. But how do you deal with a situation where, supposedly, the government is thinking about not including the reserves?

Well, we – so, the background for that, Mike, is in Indonesia the government owns the resources. Now, that's true with governments around the world. Around the world, governments own the resources and even in the United States, of course, significant resources are on federal and state lands and all the oil resources in the offshore Gulf of Mexico or offshore anywhere are actually owned by the federal government. And governments give operators like Freeport in Indonesia the rights to operate and develop and produce those reserves. And so, any valuation that we are talking to the government about would involve the value of our business today including our rights to develop, operate and produce resources that we have identified through our past exploration and development operations. For example, we have already spent besides the infrastructure that we put in place to enable our operations to continue, in recent years, we've invested $6 billion of capital to develop these underground reserves that will essentially be produced beyond 2021. So, any view of valuation of our business would have to take into account the rights that we have beyond 2021 to 2041. And in our discussions, the government recognizes that. You mentioned copper prices. We had this same issue of dealing with views of copper prices last year and our negotiations with China Molybdenum on Tenke Fungurume and with Sumitomo on Morenci. That was during the first half of 2016 when the world's view of copper prices were decided more pessimistic than they are today. But I think many people were surprised that we were able to, in that environment negotiate deals that were positive for our company in terms of the valuations that we recognized. And we are approaching these negotiations in the same way. Indonesia is a country that has – it's a democracy now. It has free press. There's opportunities for many people who may be in government or of influence to speak to the press. Often, the comments you see are made by people who are not involved in the negotiations, just like you read comments in the United States on matters and you have to take into account the source of the comments. But I can tell you that we are working positively and amicably with the representatives of the government. At the same time, we are going to be relentless in representing the interest of our shareholders. And so, we're not in a position of where we have to concede to unreasonable positions, and we are not going to do that.

And assuming you could come to an agreement on value, it would seem that the raw of size of that value to sell to the private sector would be enormous. Would the government buy that position from you directly and then sell it to the private sector over time because it seems like that would be a big chunk to sell to someone in the private sector today?

Well, there – we're talking with the government now about not only valuation, but the structure of the process for selling these interests. And that includes the alternative of the Government of Indonesia through potentially a state-owned enterprise of acquiring and holding this interest. There's also under consideration, the provision of a portion of this interest for the province of Papua. The Indonesian economy has grown, Mike, as you know. And there are substantial private business interests here, who have the financial capability of doing large-scale transactions. It's unclear whether all of this would be done to a single buyer. We have suggested to the government that the first step that should be considered in our view, would be an IPO of the interest on the Indonesian Stock Exchange, which has developed into a large liquid marketplace. To-date, there's been reluctance on the government to accept our suggestion. My point is there are a number of alternatives to deal with this issue of the structure and timing of divestment and that's one of the issues that we're having these current meetings about.

Thank you very much, Richard.

All right, Mike. Thanks for the question.

Your next question comes from the line of David Gagliano with BMO. Please go ahead.

Okay. Thanks for taking my questions, and first of all, congrats on hitting the targets this quarter as well. Somewhat related to the previous questions. I did want to ask, just a clarification on the wording of the press release and the commentary in Indonesia. It says the parties continue to negotiate documentation on a comprehensive agreement. And obviously, that goal is to complete the required documentation by 2017. So, I just want to clarify, will that documentation by the end of this year include definitive agreements and definitive plans on things like the structure and the timing of the divestment and the construction of the smelter or is that documentation going to be something else?

No. The final documentation would address those issues, all of those. It would be a comprehensive conclusion to the issues that we've talked about with the August framework agreement, and we are working with the government to have a complete resolution of those issues. And the current goal that we're both working under is by the end of the year. So, there's an agreement to take future steps like building the smelter, undertaking the divestment, but it would be a comprehensive and final agreement.

Okay. Great. Thank you for clarifying that. And then just somewhat related, can you remind us again, when do the capital spending deferrals/reduction decisions for the underground development, when do those really need to be made? How much of an impact would those have on the 2018 to 2022 mine plan that's been laid out and when would that start to really cut into that mine plan?

We have, David – earlier this year, we have slowed some of the spending – we cut the spending in the underground by about 25% and you saw the impacts of that earlier this year. We are continuing to spend at a reduced level to prepare the Grasberg Block Cave for startup when the open pit is completed late next year. And, economically, that's what makes the most sense. As you can see from the numbers, the investments that we're making are less than actually the cash flows being generated from the business. So, the business is generating more cash flow than what we're reinvesting currently. But we could make a decision if we reach an impasse to suspend those investments and those would have an impact on our production because the Grasberg Block Cave starts to ramp up during 2019, and as Richard said earlier, if eventually it gets to over a billion pounds of copper a year and over a million ounces of gold. And so that would get pushed out. So, economically, we're incented to continue to make those investments, but we're not going to make them if we reach an impasse and have to go in another direction. But, at this point, our belief is that we'll get this resolved and be able to continue to proceed with our long-term investment plan.

So, would that effectively tie in to that 2017 year-end timeline?

Well, it's a continual thing, Dave. In other words, if we run into an impasse, which we don't expect before the end of the year, then we would take those actions. Our goal is and the government is supportive of this goal of getting this resolved by end of the year. If we are continuing to make progress and for whatever reason it's not done then, then we'll assess that circumstance when it comes about. But we've been talking about this so long and I recognize that all you have heard so much about this, but we really see the most positive objective that we've seen by the government in reaching a resolution. And, now, not only do we have a sense of urgency to do that, we're seeing that on the government's side as well.

Okay. All right. Thanks. That's helpful.

All right, Dave. Thank you for your question.

Your next question comes from the line of Orest Wowkodaw with Scotia Bank. Please go ahead.

Hi. Good morning. My question is around Grasberg as well. In the framework where you discuss divesting your ownership down, the PT-FI ownership down, I guess, to 49%, how does that work with the Rio Tinto JV, i.e., with their 40% kicking in, I think, around 2023, does that mean you would drop down to an effective 29% stake starting around 2023?

Well, just for everybody's information, the project out there and the contract itself is actually a joint venture between us and Rio Tinto. It's a complicated joint venture agreement that was negotiated in the mid-1990s. And under that agreement, Rio Tinto has the right to come in now at roughly, say, 2022 for a 40% joint venture interest. Rio Tinto faces a similar divestiture obligation that PT-FI faces. And PT-FI's interest currently, the government has a 9.36% interest, so PT-FI has roughly over – FCX has roughly over a 90% interest in PT-FI which would, after Rio Tinto comes in, represent a 90% interest in 60%. And so, after that, if we divest 51%, our interest would be in PT-FI's operations, 49% of 60%.

49% of 60%.

That's where the 29% is coming in. But one thing you should appreciate is the cash flows between now and that timeframe where it dropped to 60%, essentially, close to 100% going to Freeport. So, there's differences between the two interests, and we're generating a substantial amount of free cash flow within that timeframe between now and 2022.

I see. And with respect to potential funding for the smelter, I don't believe that's in your CapEx guidance moving forward. How much would that add if that smelter was approved, say, for 2018-2019?

The smelter itself is estimated to be – if we do it on our own – a $2.5 billion to $3 billion project. Our intention would be – and this only gets built after we reach a long term agreement with the government. That's one of the issues that we would be dealing with with the government, and it's not something that we can start developing until the long-term agreement is reached. And so, our framework calls for a five-year period after signing the final agreement. We would structure the ownership interest in the smelter in the way of equity partners contributing equity, and then obtaining financing – debt financing for a substantial portion of the cost of the capital. So, the amount of capital that would be required to be contributed by PTFI would be reduced by the debt financing that would be negotiated with it and the equity participation of partners. We are in discussions with an Indonesian company called Amman which acquired Newmont's Batu Hijau mine in Indonesia and they have plans to develop a smelter and we are in discussions with them about potentially doing a joint venture project for a larger smelter with them, and in that case, they would be a partner in the project as would we and we would have a copper concentrate supply agreement with them, that would have to be appropriately structured. So, there's a number of moving parts here with how we proceed with the smelter project. Including the size, the location, the potential partnership with Amman that all would be triggered by the completion of our negotiation on the global contract resolution.

Okay. But on a kind of high level basis, if you're divesting your ownership stake and then Rio Tinto's got a 40% JV, is it conceptually correct that Freeport might only have to fund 29% of the total CapEx, like excluding any – where the funding is coming from?

Well, it would be PT-FI would be funding it. And if you look through PT-FI to Freeport's net interest in that, you're correct.

Thank you.

Now, one of the conditions that we are – as part of the global agreement that this is another current point of discussion is while we've agreed to divest 51%, our position is, is that we maintain control over operations and the company. And so, even though we would only own 49%, with that control, we expect that we would continue to consolidate PT-FI in our financial statements.

I see. Thank you very much.

Okay.

Your next question comes from the line of Chris Mancini with Gabelli & Company. Please go ahead. Christopher Domenic Mancini - Gabelli & Company: Hi, everybody. Excuse me. Just on – getting back to that Rio situation relative to Grasberg. I mean, like, the way that I thought about it was that there's a certain net present value that can be attributed to – for Grasberg that can be attributed to Freeport and a certain net present value of the mine that can be attributed to Rio based on the cash flows that each entity would be receiving during the years in which Freeport owns 90.6% and Rio – and then during the years in which Freeport has, what, the 50%, whatever percent, based on the current structure. And so, then, like, therefore, if there were a divestiture under the current scenario that it could end up such that Freeport would end up having, at the end of the day, still more than that 30% because, currently, the way that I calculate it is that the net present value of Grasberg is something like 65% to Freeport currently and 35% to Rio. So that if there were – if there were a divesture now of a certain portion of the value to Indonesian entities that it wouldn't be like if – that Rio wouldn't get 40% of your 50% kind of thing. You know what I mean?

No no no. Yeah. First of all, we would not agree with your PV analysis. Christopher Domenic Mancini - Gabelli & Company: Okay.

Okay. But we're not in a position to disclose that, but I'm just going to comment on that. So, all I'll tell you to do is think again. Christopher Domenic Mancini - Gabelli & Company: Okay.

And then, you have one contract where you have currently two assignees of interest in that contract. Rio Tinto has an assignment and PT-FI has an interest. We are negotiating on behalf of PT-FI and the Indonesians, as part of our deal, we're agreeing to a divestment. The Indonesians will also be looking at Rio Tinto's interest and expecting a divestment of that interest. Christopher Domenic Mancini - Gabelli & Company: Okay.

And so, while there is 60/40 beyond 2022, as Kathleen said, and it will depend on copper prices and so forth, but there's substantial values between now and 2022 that'll be going to PT-FI that will not be going to Rio Tinto. Christopher Domenic Mancini - Gabelli & Company: Right.

Rio Tinto has some obligations to contribute capital. They will get some dividends going forward. But the bulk of the dividends would be coming to PT-FI. So, the relative values are affected particularly when you look at the present value calculation. Christopher Domenic Mancini - Gabelli & Company: Yeah.

By the fact that near-term cash flows are going to PT-FI, longer term, Rio Tinto comes in for a 40% interest, but that's subject to divestiture as well. Christopher Domenic Mancini - Gabelli & Company: Right.

I will tell you this, Rio Tinto has the right, under our joint venture agreement, of approval for any changes we make to the contract. Christopher Domenic Mancini - Gabelli & Company: Right.

We've had an extraordinary positive relationship with Rio Tinto. They've been great partners. We feel an obligation to be good partners to them, and this has been going on now for 20 years. And we will work together to achieve the mutual goal of building values in this asset that would benefit both parties. Christopher Domenic Mancini - Gabelli & Company: Right.

It's not a question of competing interest with us versus Rio Tinto. Christopher Domenic Mancini - Gabelli & Company: Okay. So, right. So, it's not – so, again, I mean, I guess I was thinking about it wrong in that after 2022, the way that you understand it now is that Freeport will own that 29%. But before or through 2022, Freeport will have, under the current scenario, 90.6% of the cash flows from Grasberg. But after this agreement, will have – like after this agreement is struck, will have only 49% after its...

Well, as I mentioned, one of the matters under discussion... Christopher Domenic Mancini - Gabelli & Company: Yeah.

...is the process and timing for divestitures. Christopher Domenic Mancini - Gabelli & Company: Okay.

We're not talking about a divestiture at one point in time, but a series of steps towards that. And we have not yet agreed on that, but it's not likely that you would expect Freeport to retain 90% through 2022. But it's also likely that there would be steps taken along the way to work towards that goal. Christopher Domenic Mancini - Gabelli & Company: Okay. All right. Okay. Thanks. And then, a quick question is in terms of the ability to IPO a portion of Grasberg on the Indonesian Stock Exchange, how much do you think you could – how much liquidity could the market bear at this point do you think, of Grasberg stock? So, could there be a $1 billion issuance, do you think, or...

Yes. The exchange has had offerings of that size and slightly more. We were suggesting perhaps a 10% float of an IPO. Christopher Domenic Mancini - Gabelli & Company: Okay.

And that would be an amount that would be in excess of $1 billion. Christopher Domenic Mancini - Gabelli & Company: Okay.

There's one more point that I think is important to build into your analysis, is that as we divest, we are going to be receiving fair market value for the divested interest. Christopher Domenic Mancini - Gabelli & Company: Right. Right.

And so, while our interest in the participation in Grasberg would be reduced, we would be receiving cash from that interest, which would reduce our exposure to Indonesia. There's positives and negatives to that. But it would provide cash for us to supplement achievement of our financial goals for the rest of our business. Christopher Domenic Mancini - Gabelli & Company: Yeah. That's the idea right, getting the full value or the fair value of the full value is what you've been talking about.

Exactly. Christopher Domenic Mancini - Gabelli & Company: Okay, great. Well, thanks very much.

Your next question comes from the line of Chris LaFemina with Jefferies. Please go ahead.

Hey. Good morning, Richard, Kathleen. Thanks for taking my call.

Hey Chris.

It seems like the biggest issue regarding Indonesia is just the bid/ask spread around the majority stake. And back in early 2016, you had said that you valued all of PT-FI at something slightly above $16 billion. There were some reports at the time that Indonesia had said that it was worth about $6.5 billion. I think you had said that that was never a formal response from Indonesia. And in fact, as far as I know, you've not gotten a formal offer from them yet. Recently though, the Mining Minister of Indonesia said that based on Grasberg being 40% of your profits and based on your $20 billion market cap, that would imply that your ownership stake in Grasberg is worth about $8 billion. And there were some reports as well that he said, we understand that to buy a majority stake, we'd have to pay some premium to that.

Okay, well, Chris...

Is that not accurate – that's just some reports from Indonesia. Just want to get the facts. (1:08:16)

The press report was accurate. But think about this, and I'm not agreeing or disagreeing with Grasberg being 40% of Freeport's assets. That's just – that's what he said. But you wouldn't apply the 40% to the equity value. It would be to the enterprise value. So, besides the $20-plus billion of equity value now, we have $10 billion of debt. And so...

Yeah.

...that 40% would be applied to $30-plus billion. And that represents 90% of PT-FI because the government owns 9.36%.

Right.

So, you'd have to gross it up for that 10% to get a number that would be comparable to our $16 billion number.

Right. So, your $16 billion is for 100% of PT-FI. Their $8 billion for the 90-plus percent stake, implies $8.8 billion for 100%. Regardless of how they got to that number, I guess...

Well, before you say that, just remember, that if you're talking about the percent of an asset to an enterprise, it's not logical to look at the equity market value, you need to look at the enterprise market value. So, with the equity plus debt, so it would be $30-plus billion. And following that analysis, you would say 40% of $30-plus billion is over $12 billion, that's 90%. So, you need to gross that up to 100%. So, you'd get to something over $13 billion. Now, I'm not agreeing or disagreeing with that analysis, but I'm just saying to be a logical analysis, that's the process you'd have to go through.

But I guess my point is that...

So, the difference between those two is not as great as the press accounts would have shown.

Right. But I guess my question is, regardless of how we got to that number, the point is, he did say $8 billion for the 90-plus percent stake. And then, I think he also said that some premium for a majority ownership might be required. The question really comes down to whether or not that offer is on the table to Freeport. Is that something that they've presented to you? And then...

No. No. And in fact – well, let's see, now I've got it. That's not what the government would say today...

Yeah.

...even in talking about it. I mean, they recognized what I've just said about the different in equity value and enterprise value. But we are working with the government. They have indicated fair market value is the right standard, and now we've got to negotiate what that fair market value is just as we had to negotiate with China Moly and with Sumitomo and with others who were trying to look at buying our assets. So, we've had a lot of experience with this. They're going to get expert financial advice, and we will sit down and find out – and determine what's a fair value. Again, we believe the best way to do it is to allow us to do an IPO on the exchange. And that way, the market determines it. They so far have been reluctant to do that. So, we will engage in these discussions but it will be on a rational basis for coming up with a fair market value.

Do you think that the $16 billion estimate that you've provided in January or February 2016 is a stale number now that copper markets have improved, and you've invested more in the asset. In other words, in your mind, is $16 billion too low now?

Well, the $16 billion number, just like in our 2016 transaction, was not a number that was based on the then-existing copper price. It was based on what people like Wood Mackenzie, sell-side guys like yourself what your outlook for copper prices were. So since that time, we have updated that valuation. It's part of private discussions with the government. You'd have to take into account we've produced a year-and-a-half of those values in our current operations and received cash for it. We've had some adjustments to our mine plans and the copper prices are what they are. So, we're at a number but in terms of what you're perceiving to be significantly higher, there are some things going in the other direction that affect that number as well.

And I'm sorry, just one last quick one for me. So, let's assume that an IPO is ultimately not an option, therefore, it's about a negotiation and the bid/ask spread, it never closes. In other words, you can never come to an agreement. Would Freeport, and this might be too hypothetical to answer, but would Freeport be willing to accept an offer that is below what you deem to be fair market value in order to avoid the potential lose-lose scenario of arbitration. In other words, is there an opportunity cost to not getting it done even if you accept a price lower than you'd like.

Now, Chris, if you were in my shoes, would you answer that question?

No. Hypothetical, sorry.

So, I'm not going to answer the question. And I'll also point out that the $16 billion number that we disclosed there was 100%, we own 90% of that value. Because the government already owns 9.36%. Okay. That's just a fact.

Thank you for that.

Okay.

Your next question will come from the line of Andreas Bokkenheuser with UBS. Please go ahead.

Actually, all of my questions were answered. So, thank you very much. Appreciate the clarity.

Okay, Andrew (sic) [Andreas], thank you.

Your next question will come from the line of Lucas Pipes with FBR Capital Markets. Please go ahead. Lucas N. Pipes - FBR Capital Markets & Co.: Yes. Good morning, everybody. So, Richard, you drew a couple of parallels to negotiations that took place in 2016 which were all market-driven, in my opinion. So, would you say you have agreed with the government of Indonesia on the set of assumptions that go into fair market value?

Not yet. I mean, we've agreed on a concept of fair market value, but that's been part of the process of getting to where we are now. And so, the next stage is to deal with those parameters. Lucas N. Pipes - FBR Capital Markets & Co.: Got it. That's helpful. And then, here we are kind of at the midpoint between the framework agreement in late August and the end of year. And what progress would you say has been made since the announcement of the framework agreement?

Let's see. Kathleen is going to kick me, but not as much as I'd hoped for. But I think the clarity of the government's desire, and sense of urgency for reaching a deal has – that was my hope when we announced the framework, and I think that is coming into play. We've made a good bit of progress on – and all of these things are incredibly complex, but we've made a good bit of progress on fixing the financial and the fiscal and legal terms for the extension. We're still having discussions on the form of that. We are working to get that documented in a contractual agreement between us and the government that gives us the ability to defend that and not be subject to future changes in laws and regulations. So, that's the place where we've made the most specific progress. We still have to firm up the form of that. But the big issues on divestment, the valuation issue we've made progress in dealing with this issue that was raised earlier about not considering reserves, I think Mike Gambardella raised in the first question the issue about whether it's to 2021 to 2041. All of those things we've made progress with the teams we're taking to with Indonesia. Lucas N. Pipes - FBR Capital Markets & Co.: That's very helpful. Thank you. And then maybe a follow-up on the Rio point. So, if the Government of Indonesia were to buy Rio's stake hypothetically, would that satisfy your portion of the local ownership rules?

Well, there's kind of two aspects to that. I mean, there is a possibility that Rio could stay involved. In other words, they could continue to own 49% of their interest. They publicly commented on questioning whether they would do that or not and if they do decide to exit we would work with them to achieve their objectives and then work with the government to see how that would fit in to our overall divestment situation. Lucas N. Pipes - FBR Capital Markets & Co.: Got it. Great. And then.

I can't say more than that but that's part of the discussions. Lucas N. Pipes - FBR Capital Markets & Co.: And then I have a quick operational question as well. Last quarter, you mentioned some seismic activity in the DMLZ zone and I don't think it was mentioned at all this time, could you give us a quick update on where that stands?

Sure. We did alter our plans last quarter, as we mentioned, and this is one of the things, going back to Chris's question, about how this affects value. But we altered our plans and the effect of which was to slow down some of the near-term production in the Deep MLZ. And we have followed those plans, feel good about the progress we're making in terms of the plans and the ultimate resolution of that. But the reason is not highlighted in our report is that we've operated according to plan that we set out going into third quarter. And Mark Johnson, you're on the call. I think that summarized it but if you have anything to add, feel free to. Hey, Mark. Are you there?

Mark's line is on mute. Mark, could you unmute your phone? Okay. I opened your line.

Okay. Yes. Richard, you're right. After the June event in Deep MLZ, we came out with a revised plan that had two months of undercutting, a focus on the undercutting. We're nearing the end of that undercutting activity. The mine's performed well. We haven't had any unexpected seismic activity. We expect in mid-November after we continue to assess the situation that we would initiate a period of production. So we're feeling confident that the changes that we made to the plan, that the mine's reacting well, and we're on schedule. Lucas N. Pipes - FBR Capital Markets & Co.: All right. Great. Well, thank you, everybody, and good luck.

Thanks a lot. Appreciate that.

Your next question will come from the line of Alex Hacking with Citi. Please go ahead.

Hi, Richard and Kathleen and thanks for taking the time to do the call from Indonesia. Just a quick follow-up on Grasberg. I think at some point we had seen a local media article that had suggested that Freeport might give up the right to international arbitration as part of the new framework. That seems very unlikely given your previous very clear comments on that issue. But could you just quickly comment on that? Thank you.

No. That's part of our position when we use the term legal certainty in talking about the extension with fiscal and legal certainty that means defining taxes royalty in fiscal terms and legal enforceability which would include international arbitration.

Okay. Thanks. And then just turning elsewhere, with copper back above $3 a pound, is there any – been given any consideration to resuming full mining rates at El Abra and what would be the cost of doing that? Thanks.

Well, at El Abra, it's really not really a significant cost in doing it. I mean, we have reduced mining rates, so there would be some incremental cost, but it's not significant. What's really factoring into that is the planning we're doing about the major project and when that might be commenced. We haven't – as I keep emphasizing, we haven't made that decision. We have a lot of work to do before we do that. But part of the mine rate decision is more coordinating that with the potential commencement of the major expansion project.

And, Alex, as you remember, we had cut back production at El Abra and also at Sierrita. We've been gradually bringing some of that back on and again doing it in a manner that would allow us to continue to preserve our operating cost position. And, also, part of the reason why we cut back was to defer capital spending. So, we are bringing some of it back on line, but we're doing it in a very careful manner so that we don't alter in any significant way our cost structure or capital spending plans.

Okay. Thanks. And then, just very quick on Cerro Verde. If I remember right, Cerro Verde hasn't been paying a dividend to its shareholders for a while, given the expansion and the spending there. Is there any timing on when Cerro Verde is expected to resume paying cash dividends to shareholders? Thanks.

That is under consideration. As you've seen, you know we did complete the expansion and we refinanced the loan at the Cerro Verde level, which allowed us to repay shareholder loans that were made from the shareholders to advance into Cerro Verde to fund some of that project. And so, we do believe we will be in a position to resume dividends at Cerro Verde, and that's under consideration as we review the outlook, you've probably seen in the press release the royalty matter which has created some uncertainty in terms of the timing of when any payments would have to be made in connection with that. But even after the royalty matter, we do believe we'll have flexibility to resume dividend payments at Cerro Verde. And so, we're currently assessing the timeframe and the extent of those dividends.

Okay. Thanks. And just on the royalty, I think in the slides, you said you paid $135 million so far. Is that against the total amount or against your net amount?

That's of the gross amount. So, that's the amount at Cerro Verde that's been paid.

And that's an accrual.

But we have been paying – we've paid $135 million under the installment method towards that.

Okay.

Thanks, Kathleen and Richard. Thank you again.

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

Hi. I'm thinking about dividends as I ask the question. In terms of the Kisanfu exploration project, the Serbian deep stuff, smelter in Indonesia, the heap leach at Lone Star, the sulfide mill at Lone Star or the sulfide mill at El Abra. Are all of those things likely to be 2020 or later outlays that really don't influence the decision as to how much of a dividend to pay in 2018? And could you just talk to the question of dividends. Happy days are here again.

Well, the answer is yes to your first question. Those are 2020 projects and beyond. The big issue on dividends rest with our success in reaching a resolution on this Indonesian question. And so, as we go forward, with success on that and with copper to markets which we believe will be positive, we'll be looking at debt levels with potential for capital spending. And we will be, what can I say, I'm confident our board will be very positive about paying dividends when the stars align.

So, the bond rating agencies might be, in a way, pleased if a quarter or two is going to go where you just put all the cash to reducing debt while you're settling those affairs.

Well, I can tell you that the bond rating agencies are extraordinarily pleased with what we've done over the past almost two years now and in seeing where we are and the cash we're generating. And like you say, if we continue to reduce cash, we get Indonesia settled, we will be in good shape with the rating agencies even with beginning to pay a dividend.

Thank you very much.

Okay, John. Thanks for your question.

Your next question comes from the line of Chris Terry with Deutsche Bank. Please go ahead.

Hi, Richard and Kathleen. A couple of questions from me. Just in terms of the export license that you've renewed until the end of 2017. Just curious on that, normally it's a six-month renewal, I think going back over the last couple of years. Was that your call or the government's call to try to just lock that in, and I assume that's to try to push the agenda along on settling this dispute. Is that how we rate it or how did that come about?

That's exactly right, and it was a mutual decision.

Okay. Okay. And then, you've touched on the Grasberg CapEx what you're spending now and then going forward only a couple of questions earlier. And it doesn't look like you've changed the guidance at all for that. But based on the 2Q presentation and the 3Q, there's a small adjustment down in 2019. It's only minor from 0.8 billion pounds down to 0.7 billion. Is that just around the edges or has there been any change, I guess, in the last three months to what you're actually spending on the underground or it is still like Kathleen said, about 25% down on the start of the year what you're expecting?

Well, we go through a process every quarter. We don't – here at Freeport, we don't have an annual planning process. We have a detailed review of capital allocation, capital spending every quarter. We meet with all of our mine managers and review results and outlooks. And we challenge people on capital spending, and we defer wherever we can. So, particularly in Indonesia, we want to – we're making efforts to reduce capital spending to the maximum level we can while achieving our objectives of moving forward these projects so that we could begin caving at the end of next year.

But the production change you're talking about is just that. It's around the edges, rounding numbers change in 2019 and over the five-year period, there really wasn't a significant change in the overall copper or gold production or a significant change in spending.

Yeah. Yeah. Understood. I recognize that moves around a little bit quarter-to-quarter and I think it's done that in the past. So, I was just trying to check whether the last, say, three months anything has moved on the underground. And then the last question I had just on Lone Star, the $850 million CapEx, do we think about that as being mainly spent in 2019, 2020 or into 2021 or what's the profile on that?

Well it depends on when we start it. But it's roughly three-plus years. And the bulk of it is for mining equipment and to start the pre-production and stripping. But you could spend roughly $800 million of the total in 2018, 2019, and 2020 ratably if we were to move forward in the next several months, but it's still under consideration at this point.

Okay. That's all for me. Thanks. Thanks, Kathleen, and thanks, Richard.

Thank you very much.

Your next question comes from the line of Oscar Cabrera with CIBC World Markets. Please go ahead.

Thank you, operator. Hi, guys. Just in terms of the capital spend that you are deciding, whether Grasberg gets resolved or not, and it's good to see that there's other projects that could surface value within the company. Kathleen just mentioned 2018, 2019, and 2020 for CapEx in Lone Star, is that based on a go ahead or not go ahead decision in Grasberg?

No. No. We're at the point now with our improvement in our debt levels in our balance sheet, that that's an independent decision. So, going forward on Lone Star is not dependent on having success with Grasberg.

Okay. And then – I'm sorry. Go ahead.

No. I was just going to say it fits in with the timing of the declines in the Safford and how to best maximize the NPV of the project in connection with the expected production at Safford because what we're doing really is leveraging the existing infrastructure. And so, as long as that infrastructure is being used for already developed reserves, we're better off deferring the spending at Lone Star. But we're getting to the point now – and we've gotten the permits, et cetera. We're going to the point now where we can see line of sight in terms of when those two intersections will cross. And so, we are going to be considering with our board the timing of that project.

According to your 10-K the life in Safford ends in 2024, so you're saying that the new or the greater Lone Star are better than what you're currently mining?

Yeah. And it ends in 2024, but it has a – it will start falling off before then.

Yeah. The oxides at Safford are nearing the end of their lives. This would be a whole different project if you had to build all these processing facilities and infrastructure to produce those reserves. But when you have those available to you with excess capacity to deal with it, that's what makes it so attractive. And for 200 million pounds of copper a year, with that kind of cost structure, the payback for this investment is pretty quick.

Yeah. And I think I'm going to manage to ask another question without asking about Indonesia. So, on El Abra, you are holding a six to eight year of expected lead time. If a new government gets elected in Chile, do you think you can accelerate that process? And if so, Codelco has quoted $40 billion in expenditures over the next eight years? I'm assuming El Abra is not part of that.

No. El Abra is not part of Codelco's capital spending there. I think most of you know, they are our 49% partner, but that would be funded within the company itself. The government issue I don't believe will have an impact on the process. While there may be a potentially more favorable outlook for the industry – like around the world, in Chile environmental concerns are significant and widely held. And so, I believe we'd go through the same permitting process regardless of the government. And this is a project, being a brownfield expansion in this mining region near Anapagasa (01:36:15), it's the kind of project that Chile will welcome regardless of the government. And regardless of the government, they would want to make sure that the planning and environmental management is handled in the right way.

Okay. Thanks very much and good luck with the approach in Indonesia.

Thanks, Oscar. Good to hear your voice.

Your next question will come from the line of Brian MacArthur with Raymond James. Please go ahead.

Good morning. I hate to go back to Indonesia again, but just one of the points you make all the time is how much benefits the government gets out of this. And on the slide, you talked about $40 billion through to 2041, and I'm just – there's been talk about changing taxes in Indonesia as part of this or whatever. I was just curious to the extent you can what you actually assume to get to $40 billion. Did you assume the current structure going forward? Is that your share? Does that include Rio, or what actually went in that?

That's total for the project, and it includes the current contract tax and royalty provision. We – as part of our agreement, we are – we've agreed to increase royalties to the royalty levels that are currently applicable under the new mining law. And then, we're working on new fiscal terms so that the fiscal burden on our business would be equivalent to what it has been under the cap.

Okay great.

So, the government would be receiving more benefits which has been one of their objectives. Those incremental benefits would come from higher royalties, but we're working together to reshuffle the cards somewhat on the taxes and other fees. But the objective would be that the burden for our business would be equivalent to what it has been.

And Brian, we've been paying the higher royalties since 2014. You'll remember that our royalty rates...

Yeah.

...we're paying more than what's under our CAL today. So, we're not anticipating a material change in the aggregate of our fiscal terms.

Right. And I assume – but you assume through to 2022, you sort of worked under the strip and everything the same and then switch to 60-40 there and spending, I mean, roughly, are you just going to kind of make it work it out, so it's neutral?

Yeah. Well, the way it works now is PT-FI pays its taxes, Rio Tinto pays its taxes...

Right.

...for this joint venture. So, I mean – you know this, but to remind everybody else, we have a 35% income tax rate, whereas the general tax rate in Indonesia is 25% and they're talking about potentially reducing it. We also pay a 10% withholding tax for dividends that are paid from Indonesia to FCX. So, there's a very substantial tax burden already in place on us which, as I said, is the highest of any country that we operate in.

Great. Thanks very much, Richard.

All right. Good to hear your voice, too.

Your next question will come from the line of Michael Dudas with Virtual (sic) [Vertical] Research. Please go ahead.

That would be Vertical, and I'm sorry I have to – no Indonesia question here. Just interested, Richard, your thoughts on early part of the cycle. Are you getting some interesting (1:39:48) pressures from your vendors, equipment, labor, contractors? Is that something you've been able to push back? Or is that something we're going to see as we move forward as the cycle strengthens?

Well, it's just natural that you go from a period of very low levels of activities with vendors to an increased level. There is going to be a price impact with that. We are such a large customer with our vendors that we have a partnership with them, and so we work together to get to fair deals with them. But I see some of the analysts already commenting on some cost increases in the industry, and obviously as prices rise you can expect costs to rise. There is a correlation. One of the reasons we've never been attracted to hedging is there is a correlation between copper prices and many of our input costs. And so, that's just – that correlation is going to continue.

I appreciate that. Thanks, Richard.

Then I will just complement, Red, Mark, Mike and their teams for the job that they do to find efficiencies in everything from truck usage to tires to engines, and we've done studies. We've had to do that because we got these low grade mines and our guys have done a great team. We've benchmarked our operations against other mining operations around the world. And when they show that to me, I get very proud of our team. They're just doing a great job.

Your next question will come from the line of Novid Rassouli with Cowen & Company. Please go ahead. Novid Rassouli - Cowen & Co. LLC: Hi, Richard and Kathleen. Thank you for all the color thus far. I was wondering if you could give your thoughts on the potential Chinese scrap import ban and if that is affecting or if you guys are seeing that affecting Chinese domestic buying behavior at all? Or any thoughts surrounding that would be greatly helpful.

Well, there's so many moving parts in China today with the issues related to scrap, with their focus on environmental management with – they are taking steps to deal with inefficiencies in their industry, and that carries over to the copper-processing industry. And then, their efforts to continue to stimulate their economy and build infrastructures, and now with the One Belt One Road initiative to devote spending to infrastructure development in other countries. You add all of that up and what you see in China is growth at a much lower absolute level of growth than in the past. But with the size of their economy which, by many measures, it's the largest economy in the world now and even lower growth with absolute levels, you end up with very significant amounts of copper demand. But what's happening too in our industry is whereas China, for many years, was the source of all the growth, today, growth from year-to-year is now coming from outside China with the recovery of economies in Europe and in the United States. Perhaps half of the growth now is coming from countries outside of China. And so, that's what is fundamentally good about our business. We're so correlated to general economic levels in developed countries. And then, when you have countries like China and other developing countries that are spending money, it creates good demand. I was counting today the building cranes outside my window near the hotel in Jakarta, and I counted 18 high-rise building cranes going up. And that's just one instance of growth in a Southeastern Asia economy and the demand for copper that that creates. Novid Rassouli - Cowen & Co. LLC: Great. And then just one follow-up. Going back to slide 22 with respect to leverage, I just wanted to see longer term, what's your goal or what do you have in mind for maybe a long-term average kind of debt-to-EBITDA level that you'd be comfortable with, just so we can get a sense of kind of how things could trend and what type of bandwidth you might have for future investments?

So, we've never managed our business to have any kind of target of debt-to-EBITDA. We do a series of long-term forward cash flow analysis using different scenarios of copper prices and then we match capital spending to go with that and we manage our debt levels to be comfortable with that. I mean, we're at a debt level now that we would be comfortable with, living with for the long term. But because we're not prepared to commit to long-term capital right now and we have this overhang of the Indonesian situation, we're going to be using cash flows to continue to reduce debt. You may recall that in 2011, at the time we announced the oil and gas deal, our company had zero debt. And we were paying substantial dividends. So, we don't have a targeted debt level. It's all based on cash flow analysis and we'll continue to run it on that basis and make disciplined decisions about investing capital when that's warranted. Novid Rassouli - Cowen & Co. LLC: Thanks, Richard.

Okay. Thanks for your question.

Your next question comes from the line of Piyush Sood with Morgan Stanley. Please go ahead. Piyush Sood - Morgan Stanley & Co. LLC: Hi, Richard and Kathleen. Thanks for taking the question. First one, just want to understand the optionality you have at Grasberg, where you could advance mining of some higher grades in 2018 and 2019. So, can you give us some idea on what's the upside there? And if that could keep the open pit running longer than expected?

Well, we are going after the highest grades available and all of that is a function of the pit design. We're at the very bottom of this pit right now, and so Mark and his team are constantly looking for opportunities to get the highest grade available consistent with maintaining the integrity of the pit and the safety of the slopes. So, there's not a question of having opportunities to high grade. We're going after the very highest grade that we have. Now, we are – as we get to the bottom of this pit, we're looking for opportunities to maximize PV and that's an ongoing mine planning exercise. And so, that may well be that we can find some opportunities for temporarily extending the pit, but that's just going to be something at the margin. We are – and that would be a trade-off for what we could get through the pit and how much we could get from committing the block caving underground because to the extent we defer that then you're deferring the ramp-up, and so. But it's strictly a safety first exercise and then maximizing NPV for deciding where to access the ore. Piyush Sood - Morgan Stanley & Co. LLC: And that's helpful. And switching gears to El Abra and I realize the project is in its early days. The technical study is a few years out. But just want to check if that's an operation for the world where copper is at $3 or is it maybe a project for a $3.50 or a $4 copper world?

It's more in the range of $3. It's not a $4 project. No. We have reserves at $2, but we're not – we wouldn't run the mine plan on that, but it would require confidence that you got a $3 copper price to proceed with it. Piyush Sood - Morgan Stanley & Co. LLC: Okay. Thanks, Richard. Thanks for the color.

And by the way, that's the industry we live in. I mean, we always look over all these analyst reports before our earnings call. I mean, Wood Mackenzie's long-term incentive price for copper is $3.30. That's just what it is. I'm not commenting on it one way or another other than saying that's what their analysis shows for the industry as a whole. Piyush Sood - Morgan Stanley & Co. LLC: That's very helpful. Thank you.

Now, we'll turn the call over to management for any closing remarks.

Well, those were good questions. Not unexpected questions, I would say. But we appreciate your participation, your good questions. We look forward to reporting our progress as we go forward. If you have any follow-up issues you'd like to get clarification on, please contact David Joint and he will arrange for us to respond to any questions or comments that you might have. So, thanks, everyone. Have a good day.

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