Freeport-McMoRan Inc. (NYSE:FCX) Q3 2021 Earnings Conference Call October 21, 2021 10:00 AM ET

Company Participants

Richard Adkerson – Chairman of the Board and Chief Executive Office
Kathleen Quirk – President and Chief Financial Officer
Mark Johnson – Chief Operating Officer
Mike Kendrick – President of Climax Molybdenum
Josh Olmsted – President and Chief Operating Officer-Americas

Conference Call Participants

Michael Glick – JPMorgan
Emily Chang – Goldman Sachs
David Gagliano – BMO Capital Markets
Chris La Femina – Jefferies
Lawson Winder – Bank of America Securities
Orest Wowkodaw – Scotia Bank
Carlos De Alba – Morgan Stanley
Brian Mc Arthur – Raymond James
Alex Hacking – Citi
Michael Dudas – Vertical Research

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Freeport - McMoRan Third Quarter Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instruction]. I would like to hand the conference over to Ms. Kathleen Quirk, President and Chief Financial Officer. Please go ahead, ma'am.

Kathleen Quirk

Great. Thank you. And good morning, everyone. And welcome to the Freeport McMoRan conference call. Earlier this morning, we reported our third quarter 2021 operating and financial results and a copy of today's press release and the slides 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.

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 FCX 's SEC filings. On the call with me today are Richard Adkerson, our Chairman and Chief Executive Officer, Mark Johnson, our CEO of Indonesia, Josh Olmsted, Chief Operating Officer for the Americas, Steve Higgins, our Chief Administrative Officer, Rick Coleman, who runs our engineering and construction business, And Mike Kendrick who runs a Molybdenum business. I will start by briefly summarizing our financial results, and then we'll turn the call over to Richard, who will go through the materials in our slide presentation materials. After our formal remarks, we'll take your questions. Today, FCX reported third quarter 2021 net income attributable to common stock of 1.4 billion. That was $0.94 per share. And adjusted net income attributable to common stock of 1.3 billion or $0.89 per share.

The $0.89 per share excludes net credits totaling $0.05 a share primarily associated with tax credits related to the release evaluation allowances at PT Freeport, Indonesia and a gain on the sale of FCX 's remaining cobalt business. The details of our adjusted net income are reflected in our press release on page roman numeral 7, we generated adjusted EBITDA for the Third quarter of roughly $3 billion. And we've got a reconciliation of the EBITDA on page 37 of our slide deck.

Favorable results in the third quarter reflects strong execution by our team, growing our production volumes safely, efficiently, and responsibly. Our sales volumes for the quarter for copper exceeded a billion pounds that approximated our prior estimate in July of 2021 and was above the year-ago period. Gold sales of 400,000 ounces for approximately 12% higher than our prior estimate and also significantly above the year-ago period. We also benefited from positive pricing for copper. Our third quarter average realized copper price was 420 per pound. That was substantially above the year-ago period. And gold prices were slightly below the year-ago period. We also benefited from improved Molybdenum prices in the quarter, where prices nearly doubled from the year-ago period.

Net unit cash costs were $1.24 per pound in the third quarter. That was lower than our estimate going into the period. And we had some good performance from our leach production, which reduced our unit production cost in the period. Generated strong cash flows and we've been doing that every quarter this year. Generating $2 billion of operating cash flow, which exceeded capital spending of roughly 500 million during the quarter. Our balance sheet is strong. We ended the quarter with consolidated debt of 9.7 billion and consolidated cash of 7.7 billion, which resulted in net debt of $2 billion. We had no borrowings under our credit facility and have $3.5 billion available. We also announced today some liability management where we called for redemption. Our outstanding notes due 2022, that has a total principal amount of 524 million. I now want to turn the call over to Richard, who will be referring to the slide presentation materials. Richard go ahead.

Richard Adkerson

Thanks to everyone. Thank you for joining our call. Really pleased to be able to review our strong performance for this quarter, where we are with the Company. It's a special time several years ago in call I said if we could be fortunate enough to ramp up our underground production at Gras berg at the same time, we had a positive copper market, it would be a great time for Freeport. And this is really a great time for us. We're going to focus on the future. But just one comment. I was last at jobsite two years ago in October, and we were just completing the mining of the open pit and starting to ramp up the Grasberg Block Cave. And so during this 2-year period, our progress has been nothing short of remarkable. And I really congratulate our team at job site but also in the Americas for what we've been able to accomplish even in the face of all the distractions and challenges that COVID brought on.

I hope you and all your family and your colleagues are staying healthy. This thing's not over. We're keeping our guards up, I encourage you to as well. We have at Freeport, had a successful program to get vaccines to our people internationally. Over 90% of our people in South America are now vaccinated and 85% in Popolo and Indonesia are vaccinated. We continue to be challenged as some of our operations in the United States, which is come in across our country unfortunate. But we're encouraging our people and making some progress there. But the news is we've been able to meet the challenge of COVID and accomplished what we're reporting to you today. Our copper volumes have grown over 20% from a year ago, and that reflects this really exceptional execution of our business. With these prices that we have today, we're generating very strong margin.

Our EBITDA doubled from a year ago. Our strong operating cash flows that Kathleen mentioned in the quarter are really exceptional. And particularly when you look at our capital expenditures, we're only $500 million. Now this is generating cash flows too. Now that we've met our debt target and we met that at the end of June, way ahead of what we anticipated at the beginning of the year, we're now focused on managing these cash flows and that's a happy time for us looking at investments for our long-term future. At the same time, we are being able to increase returns to shareholders and maintain a really strong balance sheet, which is going to be real hallmark of our Company going forward. Everybody is focused on carbon reduction, climate initiatives, and 26 coming up next month. It's going to be all over the papers. We published our second report on our climate initiatives.

We put a lot more resources into it. We're really focused on it. As a Company compared with other natural resource Companies, we have much limited scope 3 emissions and other natural resources, and we're really focused on our scope 1 and 2 emissions, and have a plan to achieve targets that we believe are realistic and achievable. and the other 28 members of ICMM International Council, mining and metals, which I chair, have signed a commitment to work towards having zero net carbon emissions by 205. And everybody is working hard on it. We're also continuing to make progress to certify all of our operations with international copper associations, Copper Mart.

And this clearly demonstrates our commitment to responsible production. You recall that I became chairman earlier this year. When that occurred, I made a real commitment to build the kind of board that the Company like ours really needs and deserves. We've added four new members in 2021. We added two this quarter., Marcela Donadio and Sara Lewis. That brings us to a total of eight independent directors, which have a broad range of experience. And it's going to be a real strength of our Company going forward. Underlying all of this is the fundamental outlook for coppers, incredibly favorable. Copper's role in the economy and as the economy changes with global investments and infrastructure, and I know we have a controversy here, but countries around the world are going to build infrastructure.

Less-developed countries are going to develop. The world is getting increasingly focused on electrification with modern technology, 5G, and artificial intelligence. And then a new major element that people are talking about and recognizing now for demand that's coming, it's not here in real significance now, is all the investments that people are going to be making to reduce carbon. And across the board, those investments are result in significant demands for copper. And then you got, we'll talk about this more, commodity really supported by supply factors.

I mentioned our climate report reported in September is on our website. I encourage you all to take a look at it. It really details work in much more comprehensive way than we did in our first report last year about how our Company will work to reduce green house gas emissions, and how we are approaching climate scenario analysis and reporting in line with recommendations of the task force and climate related financial disclosures. We are, as a Company and as an organization, firmly committed to this. We see it in our everyday lives with the forest fires and our operations in the West and hurricanes on the Gulf Coast, weather patterns all around the world.

We all know we need to do this, and we're committed to do our part for our Company. And as I said, as the rest of the world, the rest of industry focuses on this, it's going to create a lot of copper demand. We established a car target to reduce our greenhouse gas emissions in Indonesia, about 30%, which is a new target for us. We have this aspirational goal of net zero by 2050. Our two big issues are 1. The coal power plant in Indonesia, lot of power required for our massive operations there. We're now investing in a dual fuel powered plant there. We're looking to a future of power being generated by biodiesel initially natural gas, looking at hydro-power opportunity. So we're working on that. And then the other major issue is how to convert our big haul truck fleet, massive trucks, diesel driven, to how to work with our suppliers and others in the industry to convert that to electrical powered or hydrogen powered vehicles.

We'll hear a lot more about this in the -- we just know that our Company is committed to deal with our own emissions and to work with industry and communities in general to meet the things we need to meet with climate change. Copper's essential to that, just the strategic metal in many respects for the future. The world is getting increasingly electrified and more than 65% of the world's copper is used to deliver electricity. And when you look at electric vehicles, charging stations, clean power from wind, solar, all of these require significantly more copper to operate than the way that things are currently doing now.

And so it's a challenging time for us and we're serious about this challenge but it is also a great opportunity for us as a responsible global copper producer. So we've got these rising demand and supply is a real issue for this industry. Even today, with the economic uncertainties in China and globally, copper inventories are remarkably low. The LME recently hit a 47 year-low. Shanghai was lower than it's been since 2009. And while we will be some new projects that were started 4 or 5 years ago, delayed by COVID coming on stream in the next couple of years, that will bring some new, new copper to the market. Beyond that, the coverage is pretty empty in terms of new supply projects of any significance. And the world today, the opportunities are smaller. They're more difficult to develop and produce. Permitting still requires a very long period of time.

And so the industry really 1. Has an issue with meeting the demand with supply. And that's going to require actions across a lot of fronts, more scrap, some substitution. But copper, as a commodity, is so much better than any alternatives that in whatever environment you can envision for the world going forward absent some doomsday situation in the global economy. It's just in a situation of where copper prices have to be strong, and in my view stronger than they are today.

Turning to slide 7, what this means for our Company is with all the work we've done today in preparing our business and building our assets, we're going to have really significant margins in cash flows. Six years ago, our Company was facing real challenges and we worked our way through that very successfully. As we were working so hard and facing dealing with some real tough problems, in dealing with unsustainable debt level at that time. We all looked at ourselves and talked about the assets we had in our Company, the long-term assets, the quality of the team, our track record, our capabilities, and that's really what inspired us all to work so hard to get to where we are today.

Copper volumes are 20%, gold volumes are 50% higher than they were a year ago and they'll be growing another 15%, 20% next year. It's a great feeling as we were ending the quarter and looking at September in particularly, to recognize that the capital and execution risk to achieve these higher volumes which we've been pointing to for a very long period of time, Those risks are behind us. The higher volumes are coming with low incremental cost. At copper prices from $4 to $5, we would generate annual EBITDA for the next couple of years on the order of $12.5 billion to $17 billion per year.

And our capital expenditures, and we have a new project that we'll be talking about in Indonesia, including that our capital expenditures will range on the order of $2 to $2.5 billion a year. So that means we're where we're wanting to be, where we're targeting to, where we thought we would be. But the important part is, now we've done it, we're just not pointing to it. And slide 8 shows that this ramp up of the Grasberg Mine. man that was -- this slide looks like this was really a straight forward, easy to accomplish deal. There are challenges everyday out there. I'd say this is the most complicated mine in the world, when it was an open pit mine.

And now in the industries historically, a historic, large underground mine, is,-- it is truly remarkable. In third quarter was 90% of our target annualized rate. We were at target in September. We're now on track to reach full rates metal production by the end of the year, and our team in Indonesia just needs to be congratulated and recognized for meeting all of these targets and strategically so important for us. And it was a real matter of concern back in March of 2020 when we had COVID facing this. It's easy on paper, but man, it's a challenge every day. And I had a great meeting with our team in advance of this call. The excitement, morale, and so forth is just exceptional. It's really something special for our Company.

And we now look forward to taking the steps that we need to take to sustain this for the life of this. We're beginning to talk with the government and getting positive initial responses about extending our operating rights beyond 2041 Because of the ramp up, the limit of the operating rights, we haven't done much exploratory drilling, extension type core drilling. Our feeling and our confidence is there's a lot more resources beyond what we're developing now. And we're explaining that to the government. As I said, initial reactions is positive. And I'm confident that we will not be facing an end -- this operation 2041, that makes no sense for any stakeholder. We need to look at it to take advantage of the long-term resources available to us. Slide 9 talks about our growth of our Company.

A real strength of Freeport is its large reserve base, 30, 35 years life in it. Proved and probable reserves, which gives us a sustainable ability of our operations for very long period of time. But beyond that, we have resources that are even larger than our reserves that are ground Fuel Resources, which is really important in the Americas Because that means that we are not trying to permit gain community approval to build new mines. We have great support for our communities. We've involved them. We share our benefits with them. And so as a result, we have these multiple options for long-term ground field, low-risk growth. And I'm really encouraged by the opportunities we had in United states where we have great community support. We have the benefit of strong communities and supporting schools, hospitals, education, great workforce, great community.

We pay our people really well. We make sure they have living wages. And we're sensitive to them. So here we see across the board in Baghdad, in northwest Arizona, long reserve life, do a concentrated project, we can double production. Lone Star. You're going hear a lot about Lone Star in Freeport's future. This -- this resource has a long-term opportunity to be a flagship asset. It's just across the ridge from Morenci, the largest mine in North America. We honestly believe this can be another long-term Morenci. And It's got -- right now, we're having real success with our new oxide mine, we started this past year. It's expanding, we've got further expansions. We're able to make it economic by using available production facilities at our nearby Safford mine that's winding down. And then processing this oxide is really a stripping operation for this enormous sulfide deposit. going on now.

There's a big sulfide resource there. It would be a big capital projects to build a mill with desalinization plant. We're looking at a number of alternatives there. Chile is going through a process of the government. The people assessing how they're going to tax and what's the fiscal regime is going to be for mining projects. We're going to wait to see how that plays out before making any investment decision. But in the meantime, we're getting more -- we're getting prepared, working with communities, working with -- preparing for permitting and so forth. This will be a project the world will ultimately need going forward. We've got a neat project. It's not very big in Europe with our landing copper smelter, where we're going to be recycling electronic equipment. This responds to people wanting to see this sort of thing happening. It's a way of generating some copper without carbon emissions of significance investments.

And so we're looking for that and looking at other opportunities like that. And then this reaching the air in Indonesia is really special. I was actually out there in the 90s when we were driving the drift, which was a de -watering drift going underneath the Grasberg open pit. As we drive in the pit, we found this ore body. The engineers give our geologists a hard time about it because they literally pierce this ore body that we're not seeing previously that lives really go south flank of the Grasberg pit. And we've been working on getting the right mine plan, the timing part. In the context of if you turn to slide 10, you can see where it's located. It's an ore body that's in a separate mineralization zone from our DOZ, and Grasberg pit. It's along fault line. It may have resources adept.

It has some complicated geology and mineralogy, but this is a big mine. If 90,000 tons a day block cave, you only think of that. It is not being a huge mine because it's next the Grasberg Block Cave. But just like 60% size of Deep MLZ, 40% the size of Grasberg Block Cave, 350 million tons of ore, good copper and gold grades, 90,000 tons a day from a block cave. That's big by global standards. And it's going to occur over a number of years. It will help sustain our high level of low cost production out of Grasberg, 500 million pounds of copper a year, 500,000 ounces of gold, when it's ramped up in 2030. Capital expenditures going to be spent over a number of years. Use existing infrastructure. Just to ask your goal analysts, how they feel if gold Companies were to announce that gold mines was $500,000 a year in 500 million pounds of copper year. This is a significant opportunity for us. 12, I mentioned Lonestar. You can see how we're ramping up the oxides. We've got 2-3 reserves about 5.5 billion pounds.

The real price here is sulfides underlying it. We've done some drilling to identify that we're doing preliminary plans and process it and so forth. Mineral potential is 50 billion pounds -- 50 billion pounds. This is a long-term opportunity, but we're a long-term Company. And this is going to be a flagship opportunity for us going forward. Another area that's emerging, and our guys in this call are really excited about it, is new opportunities to apply technology to leaching. Now, and Freeport predecessors were long leaders in leaching going back to the very start of SX - EW leaching. The opportunities globally for traditional SX - EW leaching are diminishing, because they've been accessed and taken advantage of it. But this opens up a whole new round of opportunities for us that had production with limited capital and low carbon emissions. This will range from looking at a series of additives and approaches for existing leached tax, which would allow us to recover more from those. We're also really getting excited by using these data analytics efforts that we started several years ago.

To apply those to leach tax and know more about what we're doing, what the consequences are of taking certain actions. So it's a combination of things, there are several alternatives we're looking at. The opportunities are really significant. Our guys estimate we had almost 40 billion pounds of copper in our existing stock piles. This is not -- this has already been mined. It's mountain reserves and resources, and any production plant. If we can record -- if we're going to cover just a piece of this, it's a size of a new mine. Low capital, low operating costs, low carbon footprint.

A lot of this is at Morenci, but there are other places. And it could even apply to some old historical mines that have old lead stacks that we can use it for. It's an emerging thing. But we are excited about it, and our Company's particularly well situated to take advantage of that because of the history that we've had with these older mines and what this could mean for it. So this is a stay tuned deal. We're not building in our plans yet. But just like a development project, low capital, low-cost, low carbon. So it's really good. So listen, we're just feeling great about Freeport. I mean, we just -- we've been to the awards together. Our team is -- we're adding some really new resources to our team despite COVID, we're bringing in support. We got young people in our organization stepping up to leadership positions. You know, it's a dynamic Company. It's remarkable that through all the trials and tribulations went through, we had very limited numbers of people to leave us.

Our people look at each other and we're inspired by each other, and it's just great. Strong cash flows. We're going to be responsible. We have this great track record of doing all this. If you look at our success, we've had in developing projects all around the world, different kinds of mining, different kinds of processing technology. Market outlook is great, you got these organic growth opportunities. And really as a shareholder myself, the prospects of seeing returns on those shareholders coming of significance is just a great feeling. So I hope you can -- sense how we feel about our Company and our outlook, and really appreciate your interest. And I'm going to turn it over to Kathleen before we open up for questions.

Kathleen Quirk

Great. Thank you, Richard. I'm just going to cover some brief comments on financial and operating matters and then we'll open up for questions. Starting on Slide 16, we provide some additional details on our operating activities. Richard mentioned Lonestar, and the performance there has been really strong. Our operations are exceeding our design capacity, which was originally 200 million pounds. We're exceeding that now by 25%, and we're continuing to optimize and planning for the next increment of production from Oxides as we study the longer-term opportunities.

Richard mentioned the leach work that we're doing. It's a major focus at Morenci. We have a big effort underway to enhance recoveries and we're deploying a very -- a variety of initiatives. Some of these have already produced results. And that did enable us to increase expected recovery from some of our leach material in the third quarter. And what this does, is it gets us more volumes but also allows us to reduce unit costs, having a bigger pool to spread costs over. So that's a really positive thing and more to come there. We've incorporated some of this into our plans, but we're optimistic that additional copper pounds can be added as we go forward. At Morenci, we're continuing to work to increase mining rates.

We're targeting getting up to 900,000 tons of material per day in 2023. That's a major undertaking. It's 30% higher than where we were in 2012. As we reported, we have started -- we started the historic Morenci Mill, which had been idled since the first half of 2020, and that's proceeding. We started the mill and the third quarter. We did experience some delays, but those are largely behind us. We also had as probably a lot of you've seen the the weather conditions in the Southwest that we experienced this summer. We did experience severe wet weather and some power issues during monsoon season, and we always have monsoon season. But this this year was more severe than normal and that did impact some of our operations in the third quarter. And again, that's behind us as well. I want to just echo what Richard said about our team in South America.

The team has overcome significant challenges in dealing with the pandemic. We've been operating at about 95% of capacity over the last several months, and that's in the face of still restrictions on movement around and our team just does great work in managing this and being creative about how to manage it safely. We're optimistic that as we look forward into 2022, maybe the government restrictions can be lifted safely and we can return to a more normal operating environment there and achieve higher rates at Cerro Verde. El Abra mine in Chile is making great progress. We're increasing the stacking rate of material where we're storing production that we had curtailed during 2020. And we're focused on sustaining a level of production and elaborate in the 200-250 million pound per year range, as we look to potentially expand that as we go forward.

Richard talked about the terrific results at Grasberg. Team there is just continuing to deliver results quarter-after-quarter. We expect to be at our quarterly run rate for metal beginning here in the fourth quarter. And for the next several quarters, we project the mill will run at about a 175,000 tons per day, until 2023, when we install the new SAG Mill, which is currently under construction. And that will support higher rates as we continue to ramp up the Grasberg Block Cave And the Deep MLZ and then make room for the Kucing Liar project that Richard mentioned. A lot of talk right now about inflation. Our team is really focused on cost management and efficiency projects. We're focused on extending equipment lines, ways to improve our energy efficiency, ways to efficiently implement maintenance practices and really use technology in all of this.

We have like everyone else experienced some cost increases. Those have really principally been associated with the energy price increases. To a lesser extent, we've had some other impacts on our consumables, the impact of steel prices on some of our consumables. We've had higher sulfuric acid costs, freight costs. But we really want to send appreciation to our global supply chain team. They are doing excellent work in keeping our operations stocked with critical supplies and managing in these uncertain times. And they've just done an outstanding job in keeping our business business continuity going. I will note that we have seen very strong prices in Molybdenum and those have more than offset some of these inflationary pressures we've had on the cost side.

Turning to the smelter. On Slide 17, we provide an update of our activities with the Greenfield smelter we're developing in and the work we're doing with our partner at PT Smelting to expand the facility there. We were focused on completing this project as efficiently, as timely as possible. We're advancing the engineering in commercial arrangements. And we've commenced preparing the land for construction. You probably have seen in press reports that the president of Indonesia recently visited the site in a groundbreaking ceremony. And that just indicates the significance of this project to the country. We've got a billion-dollar bank credit facility in place for PT-FI to use to advance the projects. And we are going to plan additional debt financing for the project, which can be obtained at attractive rates just on the project long term. As we previously discussed, the long-term costs for the financing for the smelter will essentially be offset by a phase out of the 5% export duty.

So the economic impact to PT-FI is not material. And this is a project that is shared 51% by our shareholder of PT-FI, shareholder MIND ID in the balance of FCX. Turning to our volumes, and Richard talked about the growth in volumes, we've had great success and execution. We've got our three-year outlook listed on Slide 18. And this is generally consistent with our previous guidance. We made some relatively minor adjustments to the fourth quarter of 2021. But you'll see here that the execution of our plan is on track. We'll share one on Slide 19, the strong cash flow generation of this business. We've got very significant free cash flows using our volume and cost estimates and prices ranging from $4 to $5 copper. Holding gold flat at $1,800 and Molybdenum at current prices around $19 per pound. The real growth in our volumes with low incremental costs and show EBITDA ranging from $12.5 billion per annum on average for 2022 and 2023 at $4 copper and 17 billion if $5 copper as Richard has mentioned.

And operating cash flows, and this is net of tax, ranges from $9 billion to over $12 billion, which provides significant cash flows not only to invest in our business and fund programs, grow our business, but also increase capital returns to investors. Our capital spending plans are detailed on the next slide, slide 20. You'll see here that we reduced our outlook for 2021 for capital spending from $2.2 billion previously to $2.2 billion and that excludes the smelter investment. But that reflects really timing. We've had really a timing issue in getting these projects going and so that would just -- some of that falling over into 2022. We've also added the -- in our forecast plans to commence development of the Kucing Liar ore body that Richard mentioned previously. So you're talking about $9 to $12 billion of operating cash flows and capex below $3 billion. Very strong free cash flow. We've got growing volumes, strong markets, low capital requirements.

And that's really allowed us just over the past 12 months to reduce our debt, our net debt by nearly $6 billion. And so we're down now to $2 billion in net debt. I know some of you remember a time when it was multiples of this. And so we're in a great situation from a balance sheet standpoint. Our credit metrics are extremely strong and it positions us well as we go forward to invest in future growth and increase our payouts to shareholders. The last Slide 22, refers to our financial policy. It is centered around our strong balance sheet. The combination of the strong balance sheet and the success in growing our volumes will put us in a strong position. Our board had established earlier this year a policy that provides for up to 50% of free cash flow to be used for shareholder returns with the balance available for growth and further balance sheet improvements. With the achievement of our net debt targets, we look forward to the implementation of this policy.

We expect our board will determine the structure and size of additional payouts to shareholders with our annual results. And this will be something that we update and it gets reviewed periodically. So that concludes our remarks. We look forward to reporting our progress and continuing to build on our momentum as we go forward. And operator, we'd now like to turn the call over for questions.

Question-and-Answer Session

Operator

Thank you. Ladies and gentlemen. We will now begin the question-and-answer session. [Operator Instructions]. The first question comes from the line of Michael Glick with JPMorgan. Your line is now open.

Michael Glick

Good morning. Just on the cost side, the trajectory in 4Q looks good as Grasberg ramps. But relative to the trajectory in 4Q and really into '22, how should we think about inflationary pressures given what's happened with coal in Indonesia, frayed power, particularly in Europe and Spain, diesel consumables and labor as well. And are there any annual contract resets we should be mindful of going into 2022?

Kathleen Quirk

We've built into our projections current levels of energy costs. We do have a coal contract in Indonesia that is done annually. But for the most part, our energy costs are floating with the market. Because of the volume increase that we're expecting next year and that really we've got a big fixed cost business, so it comes at a low cost. We are projecting that our unit costs will decline year-on-year from '21 to '22, and we've got additional growth. So while costs inflation is a factor for us, it's being managed well and producing volumes at low incremental costs will help us drive costs lower in the place -- in the face of rising inflation.

Michael Glick

Great. Thank you.

Richard Adkerson

Yeah. Michael, I raised this question with our team getting ready for this because quite frankly when I saw the out years I was pleasantly surprised because of everything you're reading just generally about things. But you know, the currency rates are helping us and these background of credits or aren't really important to us. And of course in Indonesia, their gold is growing and Molybdenum is doing well. And our team has just done a great job in managing these things. We benefit because Freeport manages America's business as one business. We operate all the mines that we operate, and we have incredibly good relationships with suppliers. We're premium customer for all of our major suppliers. So some we're watching and we're -- some of our costs are correlated to copper prices. So it's a factor, but I was struck. I was expected to be more, quite frankly, myself. And it's turning out to be in our plans.

Michael Glick

Awesome. Thank you.

Operator

Our next question comes from the line of Emily Chang with Goldman Sachs. Your line is now open.

Emily Chang

Good morning, Richard and Kathleen. My question is just around capitals for tonnes. You clearly well below your net debt target here. But could you give us some color as to what's driving the hesitation around, maybe accelerating this announcement. Is it a macro uncertainty you talked a little bit about earlier or are we still balancing what the cadence of growth projects is in the next couple of years before announcing something positive then? Thank you.

Richard Adkerson

Usually it's just more a question of how quickly this is developed. When we set the policy, we were anticipating meeting our debt target sometimes out in the future. And it happened so quickly. Business has gone so well. We've added new board members. And so we accept much earlier, a process that would result in this being addressed after the beginning of the year when we got our annual results.

And so we'll be talking with our board about it. We are also having engagements with a number of our significant shareholders about stock buybacks and dividends. From the traditional thinking, it is seems to be shifting some. But it's nothing about reluctance about the future that's causing us to do that. And we have regular scheduled board meetings and we talk about it every board meeting. So it's just more of a question of how we set process early on. And clearly we're making progress much faster because of markets, but also because of our execution than we had anticipated. And so it's a good situation, but that's why we are where we are.

Kathleen Quirk

And there's no hesitation, Emily, on this. We just got to implement it.

Richard Adkerson

Yeah.

Emily Chang

Appreciate and looking forward to it.

Richard Adkerson

All of us are, Emily, but thanks.

Operator

Our next question comes from the line of David Gagliano with BMO Capital Markets. Your line is now open.

David Gagliano

Hey, thanks for taking my questions. Obviously a lot going on here. The leaching potential itself and opportunity, etc. I just wanted to focus in on Kucing Liar for a minute. In respect it's early days, but Kucing Liar obviously been a well-known part of the Grasberg district for a long time. Now that you're starting to develop it, I just have 2 questions. First of all, if you could talk about the cadence of the upcoming capital spending over the next 10 years. And then secondly, talk about the primary developmental risks as you see it today. Again, I know it's early days that you referenced complicated geology, mineralogy, what are in your view, the primary developmental its challenges for Kucing Liar? That's it for me.

Kathleen Quirk

David, on the capex, like our rather Block caves, is spread out over a long period of time. So it'll start out next year somewhere in the and so that's done over approximate 10-year period. And the production will come on to seek when that all this is sequenced together, but the production will come on to sequence when we have availability in the mill, as we have some declines with other ore bodies. But Mark, if you want to give some background about KL. As Richard was saying, this is just a natural progression for us. It gives us really a place to continue to use all, everything we learned from Deep MLZ and Grasberg Block Cave to extend that to KL. And so we're -- we think it's a natural time to begin transitioning to develop another ore body there.

Mark Johnson

Yeah. And David, it's going to look very much like Deep MLZ instead of similar elevation. It is going to benefit from the lessons learned at Deep MLZ, for instance, our plans now would be that we would apply this hydrofracking technology to it in advance. Where with Deep MLZ, we ended up having to play a bit of catch-up. So we've got a much better geotechnical knowledge and how to address that part of the risks. It does with Kathleen says it benefits. It, ties in development, some of the infrastructure it shares. There's common parts of the ore flow system, ventilation access we're driving three headings, starting very soon. And they all tie off of the development that's either off of the big DAS or off of drifting that goes back to GBC. The previous KL reserve had much more complex metallurgy and geology.

Over the last couple of years, we changed our mine planning approached, we focused on what turned out to be much higher value material that was a little bit lower grade, but the material could be processed through our current mill. So that took away a lot balances that the previous kale mine plant had. We had to change our flotation circuit. We have much more of the environmental management with pyrite concentrate that would be generated. So this plan, it's above 0.9 Copper, 0.9 per ton gold. The times that Richard mentioned are very much driven by this 2041 dates that we're working on. And this deposit has a lot of growth, both on the same footprint that we're working out now and at deeper levels. So I feel like this is going to be our chance to take all the lessons learned. We're looking at the potential of applying electrical -- electric mining equipment there. So I think we get a fresh start with a lot of experience that's going to apply itself. And KL is going to benefit from it.

Richard Adkerson

I want to tell you today that when Mark -- the original reserve, as Mark said, had all this material and our gold recovers are very low and processing is complicated. And dealing with the Pyrite tails was real complicated. I was just so impressed with Mark and his mine planning team came in with this new plan, which makes it much more traditional, much less risky, much less capital intensive, and in fact, created more value. Because originally we were only getting 50% recovery out of that pyrite laden gold and ore. So it's a great example of having really good mine planning theme and lead by mark.

David Gagliano

Okay, that's helpful. Thank you. Just a quick follow-up on the time of the CapEx. So 4 billion over roughly 10 years, 200 million in 2022, is the lion's share of the spend likely towards the latter half of the decade? Is that reasonable to say? Can you give us a little more color on the timing of that ramp?

Kathleen Quirk

It'll average around that.

Richard Adkerson

It's pretty consistent. Because we develop most of the access and ventilation and all those sorts of things, it's not chunky. This is --

David Gagliano

Okay.

Richard Adkerson

-- more or less mine development. And that occurs on a regular pattern.

David Gagliano

Okay. Understood. Thank you.

Operator

Our next question comes from the line of Chris LaFemina with Jefferies. Your line is open.

Chris La Femina

Hi, Richard, hi Kathleen, How are you?

Kathleen Quirk

Thanks, Chris. great.

Chris La Femina

Just a follow-up question on the KL project? It sounds like the gold grades there are quite a bit higher than they are at the Grasberg Block Cave, and the DMLZ, and the copper grades are similar. So is this a project where we should expect operating costs to be at least as well, if not lower than what you're going to get from the two current Block Cave projects? And secondly --

Richard Adkerson

The answer -- the answer is yes.

Chris La Femina

Certainly lower cost. And what should we also think about it as just being sort of a mine life extension to the Grasberg Block Cave or is it would it be a period where you have I mean, you obviously constrained by the mill capacity, but would you be a period where you might have higher production as this is online along with you still operating the Block -- the Grasberg Block Cave.

Richard Adkerson

It just fits in really well with great changes with our existing mines. It just folds right in. It's a sustainability of production projects as opposed to a significant growth project.

Mark Johnson

And one thing I might add to it is with the SEK3 projects, we get up to a mill capacity of 240, that milligrand, somewhere around 220. So scale benefits somewhat off the mill capacity that they provide. And then as Richard and Kathleen mentioned, it just fits in nicely as the grades and some of the deposits thing to decline, kale comes up. And so we're able to adjust those other mine plans and room for kale to be that 90,000 ton producer. And want the grades at are better than the grades, for instance, at Deep MLZ.

Richard Adkerson

And Chris, to put that in perspective, way back in the 1990s when we were designing the Grasberg open pit and looking forward to life beyond the pit, our original targets was a 120,000 tons states we can mill. So over time, this amazing ore body is allowing us to go from anticipated a 120,000 ton per day mill rate from the underground to 240,000 tons from the underground. Just to put it in perspective.

Chris La Femina

And sorry, if I could a second question regarding your projects. It's really actually incredible when you think about over the last five years you went from being in a position where you were kind of managing the balance sheet, trying to develop these two really difficult underground projects in Indonesia, negotiating with the government regarding ownership at Grasberg. And you probably couldn't have drawn it up any better as to how it's progressed in terms of development of the projects, the deleveraging of the balance sheet, the ramp up of the Grasberg Block Cave in DMLZ has been really impressive.

I think there was a lot of skepticism in the market about whether you can actually deliver on that, and it seems like you are delivering. But now you are kind of unleashing this massive organic growth pipeline, which is probably underappreciated until recently. I mean, you've kind of been highlighting in recent quarters, but now we're there. So you're going to be developing these projects and you're obviously talking as well about this kind of catalytic leaching and leaching thread of old leach stacks, power doors which historically have not been commercial. Is this a technology that you think could potentially be revolutionary in the industry in terms of leading to a lot of supply growth from old what had been leach stockpiles? Do we have to worry about the copper supply demand balance as a result of these sorts of new technologies leading to lots of growth?

Richard Adkerson

That's again, Chris, question I've been asking our team all along. In a prior life, I actually worked with the first Company out in Houston that is a very first fracking operations for the whole oil and gas industry way back in 80s. And so I've asked that question. And while it's a tremendous opportunity and particularly good for our Company considering the nature of our stockpiles and the history of our operations in the way we've dealt with low grade, this will be beneficial. People are really going to be pursuing it. There are -- is not just one technology is being pursued, but a series of different options. So it's an evolving story. It's not likely to be the account of game changer that fracking was in the oil and gas business.

Chris La Femina

That's great. Thank you for that.

Operator

Our next question comes from the line of Lawson Winder from Bank of America Securities. Your line is now open.

Lawson Winder

Hi, good morning and thank you for the update. It's nice to hear from both of you. There's so much to discuss, but I'd like to actually touch on your efforts around ESG, particularly in Indonesia. I mean, it's really exciting that you're targeting a certain percent reduction in emissions by 2030. And I was wondering, how do you think about the cost of that? Or what is the cost that you've factored in order to achieve that? And then when you think about it, maybe some of the other way in terms of IRR, if you assume some carbon pricing assumption around where maybe European coke prices today, but what kind of IRR can you get on those types of investments? Thank you.

Richard Adkerson

So that -- I kind of hate people who say that's a good question. And some people will say it all the time, but that is real good question. And it's something that is really underappreciated right now. And we're particularly focused on it within ICMM, because here we had the 28 largest mining companies, we represent about a third of the global mining industry, unanimously, making this commitment. And as I said, with Freeport, because of our limited scope, three emissions, it's not as big a challenge as it is for some other miners and resource companies. But we don't know yet what the cost of this is going to be. And it's going to be significant. There's just no way around it.

Met with senior management caterpillar and to try to think about designing 400 ton haul trucks, we can make the grades of these big pits that we have. The battery in those, at this current level of technology is changing, but then battery weighs a time. It's life is very short, so you've got to deal with all the recharging and trying systems and so forth. So there are lots of unknowns here. There's no question it's going to involve a lot of costs. And right now, while people are really making these commitments in good faith, they're doing it at a time, and we talked about this in our climate report, of where it's going to rely on technology advances and some of those things there's more questions than answers and with all that right now.

We have a good -- I think we've got our arms around converting the Coal Plant in Indonesia, and that's one of our big things. But the questions is how do you deal with halogen electrifying shovels and -- I know our shovels are already electric, but just light vehicles and so forth. In our underground mines, we have a big electric train helping us deliver ore, but there would have to be some investments there. So it's going to be an unfolding story and you raised the point that people following us and companies in our industry ought to really be tracking. Because as we sit here today, there's more questions than answers in that area. I just want to add on to that. That's going to be another factor. That's going to be a barrier to supply development in the copper business.

I mean, low grade end-of-life mines -- And we got 30 years or so to have this on wine. But it's going to affect mine life. It's going to affect the economics of project development. All of those things are going to come into play. So in your list of items that are are barriers to supply development, this is a factor that you can add to it.

Lawson Winder

Very fair.

Kathleen Quirk

One of the other things to keep in mind in Indonesia is we have -- with the transition to underground when we were mining and at the surface, we had to move both ore and waste to get the metal production here on the ground. It's very efficient. You're with the block-caving and you really just mining ore and so it is more efficient. As Richard said, we've got some electrical applications underground. Mark talked about expanding that as we as we look at new developments in KL. So there are some benefits that we have in Indonesia from the change from surface mining to our underground mining.

Richard Adkerson

Yeah. We were moving 800 thousand to a million metric tones a day in that open pit mine. Think about that. We still don't have to move material around to manage waste and deal with our tailing system and so forth. But that's a big change. But we've got plans in developing new mines in the world. This is kind of a conundrum. The world needs more copper and yet more copper until technology breaks through, is going to result in more carbon emissions. And this is not the only industry where that's an issue that's unknown right now. But it's certainly true in our industry.

Lawson Winder

Thank you for your thoughts.

Operator

Our next question comes from the line of Orest Wowkodaw from Scotia Bank. Your line is now open.

Orest Wowkodaw

Yes. Good morning. I was wondering if you can get some details on the potential timeline for the Baghdad concentrator expansion. How much time's involved for permitting something like that. And even with the Lonestar expansion, is it fair to say that probably we wouldn't see any capex for either in 2022?

Richard Adkerson

Well, I'll let others answer. We will have capex for Lonestar with this oxide, cause we're expanding to oxide. We started out at a certain level and we're stepping it up. But Kathleen, you were are calling somebody?

Kathleen Quirk

It will be a small amount of capital in 2022. And at Baghdad, we're really jsut advancing feasibility next year. We're thinking Baghdad is probably still five years out or so before we will have production. And so you won't have meaningful capex for another couple of years associated with it. And Lone Star, the next increment of expansion is relatively low in terms of capital intensity. The longer-term opportunity is more 20, 30 type, but it's meaningful. The big thing that we really were focused on is growth through these low capital intensive opportunities to get more out of what we already have, either through automation or this leach technologies that we're pursuing. And so that's really where we can impact things in the short-term.

Richard Adkerson

I'm going to put an exclamation point to what Kathleen just said about Baghdad. Because going back to the early 2000, there was just a feeling that higher prices would bring production. I mean that's been the history of the copper industry. But here we are at Baghdad where we already have the reserves. We have established operations, full support of the community, and we're just talking about shortening the reserve life by building a new concentrate. And that's five years out. That's as a easy a project as you're going to find in this industry. So that's what I was just saying. This coming situation, absent some doomsday global economic situation, there's just going to be a time when the world is going to be very short of copper.

Orest Wowkodaw

I couldn't agree more. Richard, just as a quick follow-up. In terms of the capital allocation framework of paying out up to 50% of the effectively free cash flow. How does the smelter CapEx fit into that? Is that excluded from the formula or included?

Richard Adkerson

It's excluded. And you need to keep that in mind because that is a PT-FI project. It's good. That was one of the goals I was trying to achieve when we were negotiating all of this back in 2018, is we consolidate PT-FI. The economics of -- and so that will show up as consolidated debt for us. But if it's financed at the subsidiary level, the obligation is going to be shared by the 2 shareholders; FCX and MIND ID. It will go into PT-FI's tax calculations. So the project will be something that will affect PT-FI 's taxes. When you step back from that Indonesian operations, I would really please -- I don't know if any of you review the Indonesia media coverage, but they just had these athletic games in Papua, where the president was there and senior government people. They had the ground breaking.

I have never in 30 years seeing such positive comments in the media in Indonesia about Freeport, as we saw with this. And the president is recognizing what a great investment country made when they bought out Rio Tinto's joint venture interest in 2018. We've already started paying dividends. The dividends are going to be really spectacular for the government going forward. And when you look at the government's equity position, their 51% share of equity, which will step up to that in stages. You look at the tax rate, we have royalties, we pay. You look at the payments that are made for inter-Company transfers to FCX. The government's economic interest in the project. We exceed 70%. We were able to retain through the negotiations, the interest we had going into it. So this is truly something that all the parties are very happy with. And what a release it is to be working in Indonesia and not have to deal with the kind of complications we had for so many years.

Orest Wowkodaw

Thanks, Richard.

Operator

Our next question comes from the line of Carlos with Morgan Stanley. Your line is now open

Carlos De Alba

Yes.Thank you very much. Good morning. Richard and Kathleen. Just on KL. How much, if anything, of the estimated 500 million pounds of copper at KL would be incremental. Or a 100% would be just you to replace a sustained and new production profile in Indonesia? And together with that and just following on the discussion that we just had on the prior question, how do you envision Richard arising on the negotiating a table for the potential extension of your rights in Indonesia. Would the government potentially get a higher stake in Indonesia? Or what is the scope of the negotiation.

Richard Adkerson

So with your first question, Kathleen help me. Well, let me just say though. We give a five-year outlook for PT-FI's production. And is that in the press release or was that --

Kathleen Quirk

Yeah.

Richard Adkerson

Okay. So Carlos, just follow that and you can see that is we said before, this is more of a question of sustaining production levels as opposed to a growth project. But you can see what we show for five years, and that will give you a view of the trend going forward. Now, with respect to your second question, it's really early stages. But we have broached it. I've talked with senior government people about it, and our partner MIND ID, the state-owned Company under the auspices of the minister state of enterprises, everybody recognizes the mutual benefits. For sure the government like a bigger interest.

But think about the complications of that because with an extension, we will want to start, as Mark said, we've got opportunities to KL and elsewhere to invest and we will make those investments in advance of 2041. And so we have to balance out how you share those costs, where we basically have 50% economics of new investment, with what's our interest going to be going forward. So that's early days to be discussed. Tried to raise it earlier, but it was just not possible to get traction on those discussions. But the logic and benefits to all stakeholders for finding a way forward on this are clear cut.

Carlos De Alba

I understand.

Richard Adkerson

The alignment between FCX and the government is really good. To have the kind of incentives for both parties to have a win-win, that's what really we tried to design in 2018. And that's really what's happened.

Carlos De Alba

Given everything that goes around developing a project of this magnitude, KL, what will be ideally the expansion of the time for those either you were looking for 20, 30 years or something around those lines?

Kathleen Quirk

Well, just to be clear on KL --

Richard Adkerson

To be clear on KL -- yeah, Kathleen. Those economics are baked into 2041?

Carlos De Alba

Okay.

Richard Adkerson

So they're not dependent on extension. What the opportunity is is to make the KL bigger and to find other resources because we really have done very limited delineation type exploration work in a number of years. And so we don't know the answers, but we're optimistic that there's resources there that we don't know about yet. And the best answer is for projects like this to not have a time frame, but to have incentives for all the parties to work to maximize the resources over the long term. Time frames make no sense.

Carlos De Alba

Thank you very much.

Richard Adkerson

But I want to be clear. The KL economics are not dependent on an extension -- the current project.

Operator

Our next question comes from the line of Brian McArthur with Raymond James. Your line is now open.

Brian Mc Arthur

Hi, good morning. Well, Richard, you just answered the question I had right there, so they don't try something else. Just on the Molybdenum business, obviously, doing a lot better. I see climax has come up a little bit. Like what's the strategy going forward, but like you plan to reference up more there and at Sierrita, which obviously has a big Molly credit. Why wouldn't it get fully ramped up bigger in the whole thing in the near-term too?

Richard Adkerson

Well, we benefited at Freeport because there's some very significant investments in that Molybdenum business prior to our acquisition of Phelps Dodge. And then creating the processing facilities capabilities -- And Mike Kendrick is on the line. He can chip in on this, but rather than just being a metal producer and a byproduct producer, the past efforts created a really sustainable in this global leading business of where we're able to maximize the value of our ore resources in Colorado from our Molybdenum mines through the bi-product credits in North America and South America. And we can expect those to come with expansion projects and more.

And so we were able to generate higher than the metal price value for Molybdenum back processing as a chemical products. And we run this thing as a business. It obviously ebbs and flows with the price of Molybdenum. Today's price look out 3 or 4 years and a lot of cash coming out of that business. But it's strategically important to us. We just got a great team. It's a global team. They work together very well. Colorado is a state where you've got -- all states are, but you got to be very careful about environmental management. City of Denver gets maybe 10% of its drinking water off the Climax mountain. And so it's a business that goes back 100 years, more than a 100 years for our predecessors and is strategically very important. And now, it's generating cash. Mike, you want to add anything?

Kathleen Quirk

I'm going, Richard. Brian, we do have opportunities to increase primary Molly production at the Climax mine. If you think about what the big deficits people are talking about in copper, there could be mounting deficits in Mali at some point. And so we want to be in a position -- and that's what our primary mines can do, is It's need market demand. And we've got -- we had curtailed capacity in the past to match up with markets. And now we have the opportunity potentially to increase. And so we're going to be doing some mine stripping and that sort of thing to be positioned so that the markets are there, we can be there to participate with this quality product that the market wants. So we're looking at all of that, and Mike, if you want to add something to that.

Mike Kendrick

No, I think you both have captured it really well, is that we've made -- three quarters made tremendous investments in the molly business over the last decade, including the Climax Mine, tremendously productive circuit at Cerro Verde and at our other by-products circuits in North America. And we've been able to take that with our downstream operations that we've inherited. And we've made incremental investments over time there, and they are very productive. And we can service not only the metallurgical, but the chemical industry and the lubricant industry very well. And as Kathleen says, we're definitely evaluating the next steps.

Brian Mc Arthur

And sorry, just on Sierrita, given the big molly credit there, is that all the way back to full capacity yet?

Richard Adkerson

Josh?

Josh Olmsted

Yeah. Good morning. I was going to jump in with respect to Sierrita. So they've been -- we've been ramping back up at Sierrita in terms of the mine plan and stripping over the last 6 to 8 months. And so if you think about it from a molly perspective, it's really been driven by the sequencing and the great available in the mine. And so as the molly price has gone up, we're looking at what's the best way to optimize the value at Sierrita. But the upside is incremental. It's not significant because the mill is at its capacity as we sit today and going forward. There's opportunities, as Kathleen touched on earlier, with respect to incremental billing rate increases, which we're working on through the data analytics and digital type tools. But it will be incremental at best as we go forward.

Brian Mc Arthur

Thank you very much.

Kathleen Quirk

Thanks, Brian.

Richard Adkerson

Thanks, Brian.

Operator

Our next question comes from the line of Alex Hacking from Citi.

Alex Hacking

And thanks Mike. Mike question was already answered, which was around the economics of KL. If the contract of work is not extended beyond 2041, but you were very clear that the economics work in that scenario. So I will let someone ask the last question. Thanks.

Richard Adkerson

Thanks, Alex.

Operator

Our next question is from the line of Michael Dudas from Vertical Research. Your line is now open.

Michael Dudas

Michael.

Good morning, Richard, Kathleen. Great, great news on the relationship with the Indonesian Government.Maybe you could share some additional thoughts on what you're observing in Peru with the new administration. What's coming up in Chile in the fall on elections. And is there anything out of Washington with all the noise that's going to could impact mining, could impact potential investment or how the mining industry will react as some of this legislation comes forward?

Richard Adkerson

Well, I got to discipline my comments with those questions.

Michael Dudas

I'm sorry about that, Richard.

Richard Adkerson

The world we live in. Chile is separate from Peru. And it's got a really, a lot of questions about it right now. It's driven by this wide spread feeling within the country of people as things were happening around the world dealing with income inequalities and social programs versus other government initiatives and so forth. And it's got a complicated election coming up. There's no clear-cut front runner right now. There's processes going on within the parliament within issues related to consideration of constitutional changes. And so it's really, from my perspective, muddy waters there.

It's not chronically nearly as significant as Peru in terms of El Abra 's production is a small part of our production, but it is affecting our consideration of expansion. But we're working with the industry. We're not we're -- not top of the charts in terms of production there, so we're working with others on it. In Peru, Peru always, consistently has complicated presidential politics. And we've seen this story before, where a less leaning candidate gets into office and runs on platforms that are very much addressing -- getting more money out of mining companies. And President Castillo ran on that platform. He had the backing of the far left wing parties there. I've got to meet him within this past month. He came to Washington.

It was a Sunday before and with a small group of mining executives, had dinner with him. And my first time to meeting -- he comes from a nonpolitical leader background. He was a teacher in the interior for Peru. And when he talked to the set and I, I found him to be very compelling in his emotional feelings about doing more to help the people from the region where he came from but also throughout Peru. The poor people in terms of education and so forth. And I didn't know what to expect when I went there.

I had better feeling than I had going into it. He listened. I had the chance to have exchanges about different issues. None of us got into details about specific fiscal proposals and so forth. But he emphasized that he recognized the importance of mining place in Peru. And that's what always happens when people get an office to achieve social programs. They see how much mining contributes to the country financially. And that's needed to do other things. So I'm having a lot of conversations with other CEOs of countries that operate in Peru. After that meeting, he revamped his cabinet at the very upset of this administration and replaced a very aggressive guy that was prime minister. And so it's really wait and see thing, but I'm more encouraged about it. We're working with others in the industry. We need to be responsive. Here's concerns, and that's what I'm trying to.

We focus all of our -- almost all of our community programs on the regions where we operate. I think we've got to take a broader view and show people in the interior that mining can help their lives. And so that's what I'm working on right now. And so I am more optimistic now than I was during the election. You'll hear different views by different miners there. People are very concerned, rightly so. Our situation is we have a new stability agreement. We're maximizing the operations at Cerro Verde. It's a big producer.

A major contributor to our volumes. It's got the world's largest mine site, concentrate facilities. We have great relationships with the local community. So we want to build off that and try to reach out and find some common ground work for President Castillo. But it's uncertain. Man, what about the U.S? What can you say? I mean, It's just a head scratcher about what also is going on in Washington these days. The current administration recognizes the importance of minerals like copper to achieve their goals of climate change, And yet, I don't expect them to lessen up any requirements for permitting environmental management community issues runs against their political situation.

So it's really uncertain. We're all hopeful we'll see some steps towards infrastructure building. The country really needs it. You see it in ports and roads, and bridges all over the country. But I just don't have any comment on the political situation other than be distressed about it. And we also need to have a more thoughtful approach to relationships with China in this country. And that's a byproduct parties and issue and it's a complicated one. But China is going to be important part of our world going forward and the country is too big and people are very smart. They work hard and they create a lot of economic loss of these. So anyway, I'm focused staying out of politics and focused on Freeport.

Michael Dudas

You sound like a true ambassador, Richard, thank you.

Kathleen Quirk

He's right.

Operator

Thank you. And Now we'll turn the call over to management for any closing remarks.

Richard Adkerson

Well Kathleen, I thought, going into this thing, we had such a good quarter, we'd have a real short call, but I really appreciate your good questions. As always, there a lot of complicated issues to face with -- I woke up this morning, feeling on top of the world and then I opened my screen to see for the first in a number of days, a weekday in the market and I said, that was just God's way of reminding me about the business for him. But we couldn't be more po -- I think you get -- I hope you get the sense, not just for me, but from our whole team of just how good we feel about what we've done.

And we're not going to focus on what we've done. We're focusing on where we go from here. And it's a long-range business. This is a long range Company. We don't feel any pressure to do -- to do anything from any kind of M&A standpoint, the overly aggressive and new investment decisions. We're going to approach this in a very straightforward, logical way. And in the meantime, make a lot of money and show shareholders some gratitude for sticking with us and being part of our Company. So thank you all. If you have follow-up questions, as always, let me and David know, and we will be responsive.

Operator

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