費利浦·麥克莫蘭銅金 (FCX) 2007 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Freeport-McMoRan Copper and Gold fourth quarter earnings conference call.

During the presentation, all participants will be in a listen-only mode.

Afterwards, we will conduct a question-and-answer session.

(OPERATOR INSTRUCTIONS.) It is now my pleasure to turn the conference over to Ms.

Kathleen Quirk, Executive VP, Chief Financial Officer and Treasurer of Freeport-McMoRan Copper and Gold.

Please go ahead, ma'am.

Thanks, operator, and good morning, everyone.

Welcome to the Freeport-McMoRan Copper and Gold first quarter 2007 earnings conference call.

Our earnings announcement was released early this morning and a copy of the Press Release is available on our web site at FCX.com.

Our conference call today is being broadcast live on the internet.

We also have several slides to supplement the comments this morning, and we'll be referring to the slides during the call.

The slides are acceptable using the webcast link on FCX.com web site home page.

In addition to analysts and investors, the financial press has also been invited to listen to today's call, and a replay is available by accessing our webcast link on our Internet home page later today.

Before we begin today's comments, I would like to remind everyone that today's Press Release and certain of our comments on this call include forward-looking statements.

Like to refer all participants to the cautionary language included in the Press Release and the slide materials, and also to the risk factors described in our SEC filings.

On the call today are Jim Bob Moffett, Chairman of the Board; Richard Adkerson, Chief Executive Officer; Tim Snider, President and Chief Operating Officer; Mark Johnson, our Chief Operating Officer of our Indonesian operations; and Steve Higgins from our Marketing and Sales organization.

I'll briefly summarize our financial results and then turn the call over to Richard who will be referring to the slide materials that are on the web site.

We had a very active quarter this quarter with the acquisition of Phelps Dodge, and we're very pleased to be reporting our first earnings report following the completion of this transaction.

We've summarized the activity related to the transaction and the financings in the Press Release, and we've expanded our disclosures to include pro forma operations on the full quarter.

We completed the acquisition of Phelps Dodge on March 19, 2007.

This created the world's largest publicly traded copper company and a new industry leader with large and long-lived geographically diverse operations.

The results from our first quarter include the operating results of Phelps Dodge for the 12-day period from the closing.

Our first quarter financial results include a summary, we've referred to a summary contribution analysis on page five of the Press Release which summarizes the contribution that Phelps Dodge made to the first quarter, and also the impacts of purchase accounting.

Our first quarter results to net income were $476 million, $2.02 per share.

This compared with net income in the year ago quarter of $252 million, or $1.23 per share.

There are a number of items in the first quarter which we'd like to bring to your attention.

There are charges totaling $177 million, or $0.73 a share.

Those include $79 million, or $0.32 a share, for purchase accounting impacts related to PP&E and inventory charges.

Pretax, these charges totalled $124 million, included $96 million in increased production costs related to the write-up of the Phelps Dodge inventory to fair value, and $28 million in incremental depreciation and amortization associated with purchase accounting.

These items do not affect cash flow.

We also had a $75 million charge for the early extinguishment of debt related to the PD acquisition, and mark-to-market accounting adjustments on Phelps Dodge's 2007 copper price protection programs, netting $23 million to net income.

That was the increase in the mark-to-market net of taxes from the period March 20, 2007, through the end of the quarter.

As you know, we acquired Phelps Dodge's copper collars as part of the transaction, which include 486 million pounds of copper capped at $2.00 a pound.

These contracts will be financially settled in the first quarter 2008, based on the average LME price for the year 2007.

There are no copper contracts beyond 2007.

The consolidated sales from mines in the first quarter, including activity from Phelps Dodge, beginning March 20th, totalled 520 million pounds of copper; 956,000 ounces of gold; 1.7 million pounds of Molybdenum, and this was substantially higher than the year ago period of 225 million pounds of copper, and 472,000 ounces of gold.

Our copper prices during the quarter improved to an average of $3.00 per pound.

This compared with $2.43 per pound first quarter of '06.

Operating cash flows during the first quarter were $669 million, and capital expenditures approximated $142 million.

Richard will go over the outlook of what our cash flows look like in the balance of the year, and in future periods, which are very positive.

Rich will talk about the financings that is we completed during the quarter and, in addition to the debt financings associated with the transactions, we completed a $5.8 billion of equity offering to the sale of common stock, and $2.9 billion of 6 3/4% mandatory convertible preferred stock.

The proceeds of these offerings were used to repay acquisition debt, and at the end of the quarter, we had $12 billion of total debt, and our cash position was $3.1 billion.

Since quarter-end, we repaid $500 million in additional term debt, and on May 4th, we will repay the 10 1/8 notes that we recently called for redemption -- for optional redemption.

The shares outstanding at the end of March, including the effects of the Phelps Dodge transaction and the follow on equity offering total 381 million shares, and it's 451 million shares on a fully diluted basis.

Now I can turn the call over to Richard, who will review the operations and the outlook, and then we will open the call up for questions.

Good morning, this is a very exciting day for us, and a day that we've really look forward to with a great deal of an anticipation since we announced the Phelps Dodge merger on November 19th.

First time to report results post the merger.

As Kathleen just outlined, this is an unusual quarter because we only picked up 12 days of the Phelps Dodge operations.

It has the effects of the financing and the purchase accounting effects in there.

We've tried in our Press Release to separate out those effects, and also to give substantial pro forma combined information so you can see from a historic perspective what the Company would look like historically and going forward.

As we went through the process leading to the merger, and as we worked on business integration during 2007, and in earnest since March 19th, we at Freeport have gotten more and more excited about the opportunities that this combined Company gives us.

We knew about the projects at Phelps Dodge was committing capital on to expand this business as we've learned more about the growth opportunities beyond that.

The impact of the positive copper markets on the resources that Phelps Dodge has, we are getting more excited and see greater opportunities for our shareholders as we go forward.

We have begun a process of looking individually at the ore bodies that Phelps Dodge has, and looking at the potential development projects that that has.

Jim Bob and the technical team are working closely with Tim Snider and his group, and looking for the opportunities, and we believe they are very significant.

We're, of course, very pleased by the current commodity price environment for the commodities that we're producing and selling in such large volumes, and we're encouraged about the future outlook for those marketplaces as we go forward.

It is allowing us to generate very strong cash flows, and to move very quickly toward getting to our -- the capital structure that we targeted when we first began the transaction.

We -- turning to page four, the Reserves and Sales Volumes for copper, Molybdenum, and gold are presented.

You can see the very large reserves in the proved and probable categories that we have now.

Consolidated 94 billion pounds of copper, 2 billion pounds of moly, over 40 million ounces of gold principally from Grasberg.

Significant sales volumes and reserve-like based on those proved and probable reserves, oblique.

But beyond that, in the substantial mineralized materials that's associated with the properties we're currently mining, we have the opportunity to increase the reserves, to increase our reserve life and potentially to develop -- to enter into -- to spend money to develop new levels of production.

On a long-term basis, reserves are stated at a long-term price for the Phelps Dodge properties at $1.05.

At Grasberg, our reserves were not sensitive to prices because of the high grades of that ore body.

That's not the case with the Phelps Dodge reserves.

Moving prices up by relatively small amounts can result in substantial additional reserves coming into the Company.

And that's what we're going to be looking at, to see what makes sense in the current and projected copper price environment to give us opportunities to build assets in this Company.

We have achieved diversification of the Grasberg significantly.

As you can see on the charts on the right, in terms of 2006, copper production at Grasberg was roughly a third, it's less than half of the reserves, with substantially the majority of the reserves coming from investment-grade rated countries.

So, all of that is very positive in terms of getting an appropriate valuation for Grasberg and giving us a chance to look at the opportunities with the Phelps Dodge assets, of producing substantial volumes, and looking for future growth opportunities.

As Kathleen mentioned, on page five -- as illustrated on page five, at the date we closed the merger and closed our debt financings, we immediately moved forward to issue additional equity in this Company.

We had talked about that doing that throughout the process of the merger, beginning with the initial conference call.

And what this allowed us to do was essentially get back to a deal that we had sought to achieve in our negotiations with Phelps Dodge, and that was a deal that was roughly 50% cash and 50% stock.

We did this through the issuance of common stock and mandatory convertible referred.

It raised $5.75 billion, and actually by doing this, subsequently, when our stock price was higher, it was priced off of a $61 stock price, we were able to do it by having to issue less shares than had we negotiated the original transaction on this basis.

At -- depending -- the number of shares will depend on the future stock price of FCX when the mandatorily converts change into common stock.

But at today's stock price, it is -- it would take less than 10 million shares, maybe up to as few as 14 fewer shares than would have if we had original deal had been on 50/50 basis.

So, this was a big step.

It allowed us to take a major step immediately toward getting to the kind of capital structure that we believe will be appropriate for us, then, to go forward in building assets in this Company, and then adopting a shareholder-friendly basis for benefiting shareholders as Freeport has done so consistently in the past.

The first quarter highlights are driven by the great, great performance we had at Grasberg during the first quarter.

As you may recall from our first quarter -- from our year-end earnings call, we have an unusual situation at Grasberg this year because of the sequencing of our high grade ore.

The vast majority of our production this year is going to come in the first half, with the first quarter being the strongest quarter.

This is driven totally by the access that we have to the very high grade of ore at the lower regions of the Grasberg pit.

During the quarter, because we were able to get access to ore quicker than we anticipated going into the quarter, we had more copper production, 17 million pounds more copper than we had anticipated, but almost 100,000 ounces higher gold sales in the first quarter than we had had.

This works out well from a consolidated basis because, while we'll have lower grades at Grasberg during the second half of the year, Phelps Dodge's properties will be ramping up.

The Cerro Verde project is expected to be reaching its full targeted production by mid year, and so we end up with a good match on production by the year.

But this ended up with very substantial revenues, very substantial cash flows for us.

We had earnings per share of $2.02, but as Kathleen outlined, that included a series of special items that we have sought to highlight for you in our release.

We made a real effort in this release to do what we said we were going to try to do during all of our investor meetings leading up to the merger.

We have sought to give detailed disclosures about our financial situation, more detailed disclosures about the cost of our operations by area, and also more information about projected future volumes.

So we've made a big step in the first quarter.

We're going to continue to work on this as we go forward to give the marketplace transparent information about our combined Companies' operations.

Page seven gives you some information about these special items.

It shows the preliminary purchase accounting allocations that we made as of the date of the merger, March 19th.

As the accounting rules provide, we will have an ongoing process looking at the valuations of the assets and liabilities, and that may result in adjustments to these initial allocations.

We're going to -- we have a year to do that.

We're going to seek to try to get most of that done by the end of this calendar year.

But you can see of the step-up in assets, roughly $15 billion went to property plant and equipment, $1.7 billion went to inventories.

Phelps Dodge for their inventories had -- in the U.S., it followed lipil accounting.

We have conformed that accounting method to an average cost accounting method that we're now using company-wide, and that will result as those stepped up valuations of inventories roll through our cost of sales in the near term, in additional noncash charges.

In the table below, we have laid out for you for the purposes of doing your models what the incremental DD&A will come through based on these preliminary numbers, and the step-up by quarter, as well as the additional inventory cost effect on production cost.

So these are numbers that will be incremental, noncash costs flowing through the earnings, solely as a result of purchase accounting.

Then, we turned to look at what the Company would have looked like on a pro forma basis had we been together since the first of the year, and that's shown on page eight.

We would have had 1 billion pounds of copper production, substantially over the pro forma amounts for the previous quarter in 2006.

The strong gold production, just under 1 million ounces of gold; sales volumes coming from Grasberg, and very positive unit cost basis because of those impacts.

And you can see the change by area, North America, South America, and Indonesia, that shows the changes in sales volumes for our products, copper, Molybdenum and gold, quarter by quarter, year-on-year.

Our production costs are summarized on page nine.

This, again, is on a first quarter pro forma basis because we think that's a meaningful way of looking at it.

It shows site production, delivery costs, royalties, treatment costs, and by-product credits.

For Phelps Dodge's North American mines, which are characterized as being low grade but with low stripping requirements, and using SX/EW, the average net unit cost which has benefited significantly by the current high price of Molybdenum for those operations was $0.84, $0.94 in South America, and a credit of $0.30 in Indonesia because of the high levels of gold sales and the high gold price, coupled with the attractive overall cost structure for Indonesia.

So for a consolidated basis on a by-product basis, net of by-product costs, we had an average cost of $0.40 in the first quarter of '07.

Markets for our commodities are, obviously, very strong now.

We went into the fourth quarter -- first quarter with copper prices at roughly $2.80.

At the time of our announcement, they are nearly $3.10 on November 19th.

Late in '06, early in '07, as inventories rose, as there was questions about the U.S.

economy, questions about China's buying patterns, the price dropped for a moment in time to below $2.40.

Then, as the Chinese buying and imports of copper improved so dramatically, beginning in late January, and January and extending throughout the quarter, the price has risen to above $3.55 currently, And a much higher average price for the first quarter of '07 then for '06.

And the market remains very tight because of the strength of the global economy, and so much of it is now driven by factors outside of the U.S., and, even in the U.S.

where the residential housing weakness has had an impact, other segments of the U.S.

market is evidenced by Phelps Dodge's order book for its copper sales in the United States has been strong.

So we have a very strong copper market now and a good outlook.

Molybdenum continues to be strong because of the demand for that product and the steel industry and the special chemical business, and gold prices are approaching $700.

So, this is really a great story for our Company in terms of putting the business together at this time, having the benefit of the current levels of cash flows that the strong commodity prices gives us, and we have a positive view for the future for our markets, recognizing that we are in the commodity business, and we have to be prepared to operate under whatever the world turns to.

But right now, the market looks very good.

That gives us a strong outlook for 2007.

Pro forma combine for the year, we're looking for having combined sales of 3.9 billion pounds of copper, 1.9 million ounces of gold, and 7 -- at least 70 million pounds of Molybdenum, at a price level of $3.00 a pound for copper, $650 for gold, $20 a pound for Molybdenum for the remainder of the year.

Our operating cash flows for our Company, would exceed $5.3 billion, with roughly $4.5 billion of that coming during the last three quarters of the year.

Our capital expenditures are currently estimated to approximate $1.6 billion for 2007.

Some of the capital has been committed, but we are in the process of reviewing opportunities and capital spending, and that number is likely to change, to change over time.

Historically, both Companies have had difficulties in spending the capital that they budget in any particular year.

But at that level, that would give us a great chance to further reduce our debt during the year, and on a modeled basis, using those numbers in the projected production, our debt would drop from $12 billion to $9 billion, or $7 billion net of cash by year-end, which is just a great story from our perspective.

The development projects that our Company is undertake are proceeding well.

At Morenci, the flagship Phelps Dodge mine, the project to restart the mill was in place there that's been down for several years has been completed.

The mill tie-ins were started in the first quarter, I was there last week.

It is really interesting to see an older facility like that operating so efficiency.

The exciting new technology that's being applied there was technology that Phelps Dodge has been working on for a number of years, and that's using leach processes for concentrates, and the concentrated leach plant is under construction, proceeding well, expected to start in the third quarter.

It's a $250 million project, adds 115 million pounds of copper a year, and really improves the cost structure and gives us the technology that we could apply elsewhere.

Nearby, it's only 20 miles away by air, is the Safford mine, which is a major, new green field mine.

This project is proceeding very well.

It is an SX/EW facility scheduled to begin operations in early 2008.

And a chance that we might get some production out of there by year-end because of production -- the project is going so well.

It is just under $600 million project; 240 million pounds a year, and it's located at a site that is adjacent to a major new ore body called Lone Star, which is being evaluated and has the potential for significant expansion of reserves and production facilities going forward.

Very orderly lay out of this new mine, really a great-looking facility that is progressing well.

In South America and Peru, Phelps Dodge had completed a $900 million capital project late in 2007 at the Cerro Verde mine, involved a new mill expansion, it is ramping up in the first quarter with full rate expected by the second half.

It is basically tripling production there adding 430 million pounds of copper.

Ramp-up during the first quarter was slower than anticipated as systems were being dealt with and some start-up issues were being addressed.

Early in this quarter, we're meeting design rates and we're projecting to be, as I said, at full rate by mid year.

Great project with additional production opportunities that would allow us to complete I think I said '07, this was the fourth quarter of '06 when it was completed.

In Indonesia, we're moving forward with the expansion of our DOZ mine.

This is a mine that was originally 25,000 tons a day, then 35,000 tons a day.

It's been operating above main plate at 40 to 50,000 ton as day.

We're adding a new crusher and there's a picture of the new crusher on page 14.

That will allow us to sustain 50,000 tons a day, and we're working on a further expansion to 80,000 tons a day which makes this a very, very large, efficient and profitable blockading underground mining operations.

We're advancing our (inaudible) for our common infrastructure project which will allow us to reach the very significant reserves that allow underneath the Grasberg open pit to begin development of those reserves to, then, come into production when the Grasberg pit is expected to be completed in 2015.

We're working to optimize that, but we have this and several other projects, and we're continuing to work with the great ore body of the Grasberg.

The initial development project of the Tenke Fungurume mine development project is underway.

This is in the Democratic Republic of Congo.

Phelps Dodge had completed the -- these ability study for this project in the fourth quarter prior to the completion of our merger.

Construction activities are underway for infrastructure there, and that is a significant component of this project because of the absence of infrastructure in the Congo.

But the environmental and social impact was such as has been completed.

The initial project is a $650 million capital cost, of which our Company bears 70% of the cost.

And it is designed to bring initial production on by early 2009, 250 million pounds of copper annually.

An important component is the cobalt mineralization that's at this project, and it would be designed to produce 18 million pounds of cobalt a year.

The initial reserves are, for this project are 100 million metric tons, but that only begins to tell the story because of the very significant mineralization that exists at this 600 square mile concession, which has not yet been fully evaluated.

The challenges are to go forward with infrastructure, getting a power contract.

Dealing with those issues puts a degree of risk on meeting the timing requirements, but this is an extraordinary opportunity for our Company, and one that we're going to be doing a lot of work on and are very excited about.

Beyond the development projects and beyond the potential opportunities that we might have by looking at the mineral resources of this Company, we are -- we are also looking at the expiration.

Expiration, of course, has been the cornerstone of Freeport.

Jim Bob has led this effort over the years and is very excited about having the great opportunity we have now of continuing our exploration in Papua and areas outside of the Grasberg's production, and looking at the geology and development opportunities at the Tenke Fungurume project in the Congo, which is, we believe, to be the world's largest undeveloped high grade copper/cobalt project in the world today.

Then beyond that, there's opportunities for exploitation and exploration around the existing ore bodies.

And we have a global exploration effort that we will be examining the strategy that we'll be following there in the context of our new Company.

As we look at all of assets of the Company in terms of making decisions about what makes sense for strategically going forward, which assets are strategic, which aren't, what would be the best portfolio so we could focus the efforts and potentially generate some cash, and deal with our objectives in terms of getting into the balance sheet.

The slide on page 17 shows the current exploration budget, which we're evaluating.

Roughly a third of that is targeted in North America, principally at Lone Star and expansion -- potential expansions at Morenci, a quarter of it is in Africa with the Tenke Fungurume project and the Kisanfu project, that's separate, and then continuation in Grasberg and elsewhere around the world.

With the projects that we're currently committed to and spending capital on, we will be seeing increasing volumes over time.

And that is shown on page 18.

Copper volumes pro forma for 2007 will increase roughly 10% over the combined pro forma for 2006, and build up substantially over the next two years as we bring projects online and commit capital.

You can also see the variations in the gold sales, which principally have to do with grades at Grasberg and also the profile for the Molybdenum sales.

On a quarterly basis as we look forward, based on the current mine plans, on page 19, you can you see that we will be producing at levels of over 900 billion pounds -- 900 million pounds of copper to a billion pounds on a quarterly basis throughout the year.

And I want to particularly point out the gold sales declined.

That strictly is as a result of sequencing at Grasberg.

We went into this with some detail in our first quarter -- in our year-end call.

And attached to our slides here are reference slides so you can see where sequencing will occur at Grasberg, but this is all according to the mine plan, and it just sets us up to allow us to continue to mine this ore body over time in the way that maximizes its economic value.

Page 20 shows our pro forma sales and unit costs projected pro forma combined for the full year 2007.

With our performance sales by region, and then you can see the pro forma cost basis disclosed in a way that we have traditionally disclosed cost for Freeport, showing the former Phelps Dodge operations in North America with a pro forma cost for 2007 net of by-product Molybdenum credits of $0.87 a pound; in South America, $0.85 a pound; with Indonesia at $0.55 a pound; consolidated for the year at $0.78 a pound.

This, of course, reflects the current high level of input costs that the industry is experiencing, but also shows the attractiveness of our asset base.

Again, we want to show some outlooks for what our business might look like in the future based on varying commodity prices, and that's shown on page 21.

We have EBIDTA numbers, but focusing on operating cash flows which takes into account cash taxes and cash interests, we show that at $3.00 copper, annual average operating cash flows $500 gold, $15 Molybdenum, for the next three years would average roughly $6 billion, $4.5 billion at $2.50, $3 billion at $2.00.

So this Company has the opportunity to generate very substantial amount of cash flows.

We're highly leveraged to copper, plus or minus $0.20 change per pound in copper, and we've obviously seen multiples of that in the first quarter.

It's $500 million per $0.20 change, and this gives our variances for Molybdenum and gold as well.

I mentioned earlier that our capital expenditures for 2007 are projected to be $1.6 billion.

These decline as we go into '08 and '09 based on our current outlook because we'll be completing certain of the projects that we've committed capital to so far, but this is the current outlook.

We're reviewing this, we're looking for opportunities, and we're reviewing the appropriateness of the capital spending plan.

And we'll update this as we go along.

Our debt maturities are shown on page 24.

As you can see, our Company has very significant amounts of financial flexibility because of the structure of our loans.

And Kathleen mentioned, we've taken steps past March 31st to use $500 million of cash to further reduce the term loan that we incurred in the acquisition.

We've also called for a redemption, $270 million of existing Freeport debt to tentative A-bonds, and so we are going to be extracting cash from the operations and using that cash initially to aggressively pay debt, and over time, to provide returns to shareholders.

What the equity offering did for us, and the change for this capital structure, really allows us to be more aggressive in pursuing opportunities and getting to the right capital structure that we feel is appropriate for our Company.

That, together with the strong cash flows, as shown on page 25, this shows how significant the combination of the equity offering and positive commodities markets are for us.

Our debt net of cash at March 31st was roughly $9 billion.

If, I'm not saying we will, I'm just saying "if," we were to be able to average $3.00 a pound for copper over the next three years, and with lower than current Molybdenum prices and gold prices, we would get very close to retiring all of our debt.

We, of course, wouldn't do that.

We want to carry in this Company, over along-term basis, an appropriate level of debt.

So, if we do have the kinds of positive commodity prices, that would allow us to be aggressive in investments and aggressive in returning cash to shareholders in the form of dividends and stock buy-back.

On page 26, we just summarized our financial policy, this is very -- this is consistent with what we indicated when we announced the merger and throughout the following months as we've been on the road raising capital and talking about the combined Company.

We are committed to maintaining a strong financial position.

We are using our current cash to pay debt beyond the maintenance of our capital spending and our current $1.25 common dividend, and our preferred dividends.

Obviously, we have great commodity markets now.

The outlook continues to be good.

We are going -- we are looking and we will continue looking at the assets to this Company to determine what is strategic, what isn't, what other valuations available to us in the marketplace, and that is the current level of focus and a matter that we will be working on until we reach the appropriate decisions on how to proceed in that area.

We are continuing with our regular common dividend, as I mentioned, at $1.25 a share, and we are committed, we're all here committed to our long standing tradition of maximizing value of this Company for our shareholders.

There's a lot of information in the earnings release.

We try to be responsive to your needs.

I've -- I talked longer about this than we normally do, but we had a lot to talk about with the unusual first quarter, the combination, and the outlook.

But we're pleased to be able to do it to you, all of us are available here to do it with you.

All of us are available here to answer your questions, and Tommy, we'd like to turn the call over to questions.

Certainly.

(OPERATOR INSTRUCTIONS.) One moment, please, for the first question.

And our first question from the line of Mr.

John Hill of Citigroup.

Please go ahead with your question.

Good morning, everyone.

And thanks for a great presentation.

It's nice to see it being expanded to include a lot of assets.

I'm sure you've had David working hard on that one.

Yes, John.

It is David had worked hard as had a number of other people.

Yes, I'm sure.

Just curious.

We didn't talk much about the smelting business on the call, and I'm wondering, whether, with the new and expanded base of assets, whether there isn't a different view on the necessity to maintain the exposures in Spain and aggressing?

We'll be looking at all the of the assets.

But let me just talk about those particular assets.

In the last couple of years, because of the higher levels of TCs and RCs Atlanta copper, our Spanish smelter, has been earning some operating income.

PC and RC rates are coming down significantly, with the change in the structure of the industry of getting away from price participation and just the overall supply of balance with the absence of concentrates available to smelters.

At the same time, the EURO is strengthening against the dollars, and that effects Atlantic Copper's profitability, so at these levels it's not generating cash.

But it does serve a very important role for us in our overall concentrate marketing opportunity.

PT-FI is still one of the world's two largest custom concentrate producers.

And by having Atlantic Copper, it gives us a lot of flexibility in the way that we deal with that marketplace, and the way we look at Atlantic Copper as part of our concentrate marketing, as opposed to looking at it as a stand alone asset in the terms of its profit contribution.

Gresik is a special situation because it is in Indonesia, and Indonesia's only smelter is part of our contract negotiations in 1991, we committed to the government to seek to develop that smelter.

We were able to do a partnership with Mitsubishi.

It's a very efficient smelter that is operating in an attractive cost structure and serves an important role in the marketplace.

But our situation with our smelters are the same.

Then with the new Phelps Dodge operations and the Miami smelter, the tie-in with the Wire Rod plants and the distribution of copper to the U.S.

marketplace, it all plays an important role there.

So, at the end of the day, John, I don't think anything has really changed with the merger with the role that smelters play in our business.

Great answer.

Great answer.

And then just a very quick follow-up.

We've obviously shaved production guidance for this year three times, pretty narrow range, but from 4.1 billion pounds to 4 and now 3.9.

How high is the level of conviction at the various pieces, various components of randomness will cancel out and then will make numbers there?

Well, John, as we sit back and we've talked about this, because the -- what you're seeing here -- and let me say first, with Grasberg, because of the nature of that mine, absent some very unusual situations, which we've had on occasion, we've had a really high degree of competence about the ability to predict volumes.

That's been established over the years.

When we look at the new Company, I think it is more typical of what you see with the overall copper industry today and the challenges that the industry itself is facing in meeting the production expectations of analysts and others in the industry.

When you come up with estimates, you come up with estimates that reflect your best view of how your mines will operate.

How new projects will start up.

Of what goes on with your workforce.

And what goes on with the weather patterns, and all of those things.

At the end of the day, when you have a tight market situation, and a Company like ours, which is like everyone else in the industry, we are trying to produce all the volumes that we can produce to generate cash.

So we're challenging each operation to do as much as it can do, and at the end of the day, you run into issues, and as you say, they are not huge issues, but weather patterns in the Southwest U.S.

are issues associated with the start-up of Cerro Verde.

Things like that can have their effects.

All I can tell you is we're going to work as hard as we can to meet our expectations.

We're going to work hard to find ways of exceeding them, and we'll report to you the changes as they occur.

But I would -- if I were an analyst, I would be skeptical about the industry's ability to meet current outlooks for production volumes because of the factors I just mentioned.

Very good.

Thank you.

Thank you very much.

And our next question comes from the line of Michael Gambardella from JPMorgan.

Please go ahead with your question.

Good morning Richard.

How are you?

Great.

Great.

First of all, I just wanted to thank to you for adding some much greater transparency to the whole situation here on the release today.

And second, my question is really around what you are talking about in terms of possible non-core pieces of the business.

Is there a chance that you could monetize the moly part of your business, given some of the attractive valuations out there, for comparable moly businesses?

Mike, we will have no sacred cows.

We're all committed to that.

And we will be looking at the Molybdenum business as well as other assets of the Company.

It's a great business.

The Phelps Dodge people and their primary Molybdenum operations have really improved its value since they acquired that business from Cyprus in 1998.

They developed products that increase margins, and also take steps to be responsive to the overall moly market situation.

Then, added to that is the very significant amounts of by-product moly that come out of Sierrita and now Cerro Verde and other mines.

It's a great business, it generates lots of cash, and this environment it really aids the economics of some of the lower grade copper mines going forward.

We are -- we are going to look to see what potential valuations are there in the marketplace.

And that is one of the focuses of these potential asset sales that we've talked about.

There is a different situation, of course, in Molybdenum than there is copper.

Molybdenum has a global overhang of supply that could potentially come to the marketplace.

One of the most important one of those is the Climax mine that we own at Leadville, which has not operated in several years, but which Phelps has begun a feasibility study to look at potentially operating it is the most attractive incremental production source of new moly in the world today.

But there's also other Molybdenum sources in China and elsewhere.

So that is a factor in terms of looking at valuations.

We're in a real attractive position here because we don't -- we don't have to do anything.

We, we--

Uh-huh.

-- have got this Company at a state of where we don't have to sell assets to manage our debt situation any longer.

So we will look at opportunities, and if we find a way that is value enhancing for this Company, then we'll go forward with it.

But we're in a really good situation that I think maybe some of the marketplace didn't expect us to be in.

I think some thought that we would be forced to look at the selling Molybdenum or doing something with the International Wire and Cable business, with Freeport's gold stream which may have opportunities for us.

And then looking at other nonstrategic assets in the portfolio.

So we're going to look at all of those, but it will be from the standpoint of pursuing transactions that can add incremental value to the Company.

And, thanks, Rich.

One last follow-up on that.

If you were to choose to go forward with monetizing the moly business, could you do that for the by-product part of the business as well?

You could, it would be more complicated, obviously, because it's kind of like the discusses we've had over the years about trying to separate out Freeport's gold stream.

Right.

It can be done.

Together, it's a strong business, because they complement each other and give you a strong place in the marketplace.

But there would be a possibility of doing something solely with the primary moly production and the processing facilities or potentially doing something broader.

Okay.

Thanks a lot.

Keep up the great work.

All right, thanks, Mike.

Thank you very much.

Our next question comes from the line of Tony Rizzuto of Bear Stearns.

Please go ahead with your question.

Thank you very much.

Congrats, and I wish you all a great deal of future success.

It was also to follow up on the moly question a little bit and you partially answered it, Richard, by talking a little bit about the expectations for that market.

It seems to me that you are more sanguine about the outlook for copper than the moly.

But what about for those folks that you're looking at the merit of the deal having diversification, and the fact that you do have Climax but you could hold that away from the market, maybe slow down the timing of that.

How would you answer those folks on balance diversification?

The diversification is an interesting deal.

We have geographic diversification, but Tony, when we did this deal, we made a conscience decision to expose ourselves to the copper market.

We feel very confident about that, understanding the risks, but we think the potential rewards of this being a Company that's driven by the copper market allows investors to take their own view about it.

And we have a really special place to invest in copper because you, of course, have Kodelco, which is a state-owned company.

And then, most of the major copper properties around the world are owned by diversified companies, which offer a different investment opportunity.

So we feel very good about the copper exposure.

Over time we will look at whatever opportunities come about, but we like that.

We see, of course, the Molybdenum business is structurally different from the copper business.

We're the world's largest producer, and we have, as you mentioned, an impact on that marketplace with our own production and development plan.

So we're going to take all of that into account.

At the same time, as in my response to Mike, we're going to understand what the potential value is of that to our Company, and then we're going to reach a judgment about with a to do.

That's not something that we have decided on, but we've said from the start, we are going to look at this as something to review.

We don't have to do it.

And at the end of the day, we may conclude that because of diversity, because as we learn more about the Molybdenum business, we may end up deciding that's a great business to be in.

It's certainly a great business to be in right now.

But all of that is something that we will be looking at and analyzing.

Richard, as an aside, one of my contacts indicated that from a permanent standpoint at Climax doesn't anticipate that it would be a problem.

You basically, are the permits in place, or is it something that generally there would be no anticipated issues to try to secure those?

They aren't in place.

The feasibility study and permitting is underway.

But this, of course, is a mine that has been operating 100 -- at this complex for 100 years.

The town of Leadville is supportive of reopening the mine, that's really unusual wherever you go around the world today, but particularly in Colorado.

But there's a lot of community support for opening.

So we don't anticipate that there would be a permitting or community issues that would block us going forward if that's what we decided we should do.

All right, Richard.

And then I've got one other question, if I may.

Regarding your workforce, the combined entity, is there any sense that your workforce elsewhere, El Abra, Candelaria, Cerro Verde, may try to kind of piggy back onto what's just occurred at the Grasberg, are there labor expires coming up?

Well, yes.

That's just an ongoing feature of our business and the industry's business.

And the question is, who piggy backed on who, I guess, because around the world today, workers, governments, are having discussions about participation in the operations.

We -- the situation that you referred to in Indonesia was an issue relating to our Papuan workforce.

We have agreed to be responsive to the concerns in terms of the minimum wage structure.

That's going to be dealt with in the context of our negotiations that we're just beginning now for our overall labor contract.

In South America, our contracts come up in 2008.

But as you well know, because of the way you follow this, this is just a feature of our industry that all of us are going to have to deal with and address in a way that's responsive to the market conditions and the workforces of our properties.

No doubt about that.

Thanks, Richard.

All right.

Thanks a lot, Tony.

Thank you very much.

And our next question from the line of Mr.

Brian MacArthur with UBS Securities.

Please go ahead with your question.

Good morning, everyone.

First of all, I'd like to echo my appreciation like everybody else about the detail in the presentation.

I think it's very, very helpful in understanding the Company going forward.

Just following up on a couple things, though.

The -- you gave the DD&A and the incremental production costs for the inventory through 2007.

By the end of 2007, have we cleaned out all of the acquisition costs in the inventory?

That is to say that going on in 2008, we'll only have the incremental DD&A to worry about from an income statement point of view?

Brian, this is Kathleen.

We've got $1.7 billion, as look at Slide 7, you'll see what the step-up in inventories were, $1.7 billion.

So most of the impact is being released in 2007, but we will see additional impacts in 2008.

And then the depreciation will continue over the life of the assets, but the inventory will be released more quickly.

Okay.

But -- okay, so by the end of '08, we'll have released all of the inventory, is fair to say?

No.

There will be some that stays.

Some of this is associated with stockpiles and leach inventories, and so some of that will stay.

And we're on a weighted average cost.

So not all of it will roll out in 2008.

We'll -- as we go forward, we will give you guidance on what our expectations are.

Great.

Thank you.

But you can see, just from this total, just how much comes out quickly.

I mean, it --

Yes.

Yes.

That's what I want so we get a cleaner number going forward.

Yes.

That's just a fact of life with purchase accounting.

Yes.

I know.

Second question, again, you gave us the deconsolidated cash positions.

I must admit I should probably know, but just with all the debt transactions, is there -- I think Cerro Verde still has some project debt, how much debt there on the balance sheet now that actually has a -- is likely to minority interests?

The minority interest portion against?

Yes.

A very, very small amount, Brian.

There's some debt at Cerro Verde in the order of $200 million.

But most of the debt is at the parent company.

Okay.

So, it is -- so when we just net out to get a net free cash as you've done here, it's really only the minority interest of that $200 million I have to adjust for then?

Yes.

There may be small amounts elsewhere.

But in order of magnitude, it's at the parent company.

Great.

Thank you very much.

Thanks, Brian.

Thank you very much.

And our next question comes from the line of John Tumazos of Prudential.

Please go ahead with the question.

Your Slide 17 on exploration is very, very interesting.

Could you explain the total exploration expense budget for 2007, and the exploration capitalized budget.

And if you could just take, maybe one or two regions, maybe Congo, maybe Morenci, and give us a flavor for how many feet of drilling and how many dollars of feasibility study?

Because we know you spend your money very carefully.

And I'd like to find a lot of future earnings for the shareholders.

Yes, John, all of our exploration is expensed.

So there's -- there's none that is capitalized in that.

I don't have--

What's the dollars that that pie breaks down?

Is it over 100?

Yes.

Total is $125 million which is indicated on the slide.

The total is $125 million, so you can see what percent of that is spent in each particular area.

At Morenci, is that all drilling?

At Lone Star, Morenci, or is some of it metallurgical testing or feasibility study?

Well, it would include both.

Tim, do you want to make a comment on what we're doing at Morenci?

Yes, you bet.

You know your question of drilling.

We try to put as much of our exploration dollars into drilling as possible because that's where you get the data.

But it's also feasibility study work in there.

But at Morenci and Lone Star in North America, we're doing a lot of drilling right now to help define that resource.

So would that be, for example, 100 kilometers at Morenci, Lone Star and Morenci?

I don't have the specific numbers of drilling footage.

But I can tell you, that it is pretty extensive, the amount of drilling that we're doing in southeastern Arizona.

At Tenke and Kisanfu, is it just drilling or are you doing some feasibility study and other planning?

In Tenke, of course, we have a lot of work going on on development of the project itself.

But we also have a lot of drilling going on on both of those properties.

How many rigs you got going there?

I would say most of the dollars are in drilling, but some for feasibility work.

And I'm sorry, what did you --

How many rigs you got at Tenke and Kisanfu?

We have several rigs.

I don't know the exact number.

Part of our issues in exploration that Phelps Dodge and Freeport have and everybody else in the world has is a limitation on the number of rigs.

But we have been increasing the number of rigs over the last several quarters.

And John, this whole exploration area is one that we are putting a new review focus on, it's going to -- it's going to be changing as we -- as we learn more about it and make decisions about what to do.

So, I wouldn't get too hung up on exactly where we are right now, but we will be reporting on where we are going as we go forward.

John, this is Jim Bob.

Let me just re-emphasize what Tim and Richard have said.

We've been reviewing since the close of this deal very carefully the exploration properties and the exploration budgets you see, of course, as Tim and Richard said is principally drilling.

We're going to be looking really hard at the -- where we are to focus exploration in light of the new portfolio of Companies.

So, as Richard said, I wouldn't get too hung up on those kind of details.

What we're going to be doing is taking a hard look at where we can add reserves.

Richard already mentioned that the Phelps Dodge reserves, principally the $1.05, and take a look at the exploration opportunities and some of the areas.

And our exploritation efforts, some of which is simply taken the information that's already been achieved by substantial amount of drilling and look at a different price -- prices as your cut-off.

So our exploration philosophy/exploritation philosophy is going to be very slanted to where we can get the biggest bang for the buck.

Still keep these green field projects that we've been trying to evaluate as a potential growth area.

So these exploration dollars of 125, all of that's being reviewed and what's going to be spent and what's going to add the most value to the Company.

Short-term and long-term and you know how we look at those things in the past, and going to be done on the property mix just like we've done in the past.

If I can ask -- thank you, Jim Bob.

It's great to hear how good you sound, we're both alive and kicking still.

And the 73% of the common infrastructure project that's done in Grasberg, is it possible the engineers might be conservative and you go underground at Grasberg sooner than 2015?

No.

We did a major study, John, which we announced at year-end conference call, and we're now focus on a mine plan that will take the Grasberg through 2015.

We had the opportunity to go earlier, but the economics indicated that it should be -- that 2015 would maximize the economics for us.

And now we're working to see how we can optimize that operations at the open pit between now and 2015.

But--

So even with the tire prices up 10-fold and all of that stuff, and I guess if you doubled the minimum wage for the miners last week, and where are the big swing factors?

In terms of how bad the tire guys raise their prices, or how much the miners' wages change?

Because all of the metrics are changing everyday.

Yes.

But there's actually underground mining is very labor-intense.

And so that is a factor there.

But we have -- we did a very comprehensive study during 2006 on those economics.

Our overall cost structure really increased between 2002 and 2005.

That the changes since then have been much less, and we've been able to offset some of those costs.

One of really attractive things that we're being able to do with the new Company is exchanging some, using some equipment that Phelps Dodge has.

We're working with vendors in a more effective way.

We've got a process going on to see how see how we can optimize the combined relationship.

So at this point, we're confident in saying that this 2015 target is a good one.

And I, personally, believe we're going to be able to optimize the mine plan in the pit between now and then because the opportunities it will give us.

Thank you.

Thank you very much.

Our next question from the line of Dave Martin of Deutsche Bank.

Please go ahead with your question.

Thank you.

My first question is just on acquisition accounting again.

And correct me if I'm wrong.

It looks like some of your step-ups, the balance sheet line items look as bit different than your most recent estimate -- your prior estimates?

For example, I guess the fixed asset would be slightly higher, and the inventory and good will would be slightly lower.

Can you explain?

Sure.

That's a natural process of what you do in a transaction like this.

The initial estimates had to be made on the basis of very limited data because we filed those in connection with our proxy material very quickly, so we made broad based estimates and we looked at the information about data that was available to us.

We also took into account price changes.

Because initially, we were working with September 30th prices, and then December 31st.

And now, we're uses these prices.

So all of these things, it is -- for much of the reserves, it's a discounted cash flow analysis.

And we use the most current prices.

Do that, prices are higher; values are higher; more costs get allocated to the properties.

Okay.

And then lastly, just on your cost assumption for Indonesia, in light of what you have agreed to this week, I guess, at Grasberg.

What type of assumptions are built into the costs from a new wage agreement for '07?

Let me say that what we agreed to with the Papuan workforce was a new minimum wage structure that will now be part of the broader labor negotiations that we have, have just started and is scheduled to be dealt with this year.

So we did increase, we did agree to increase the minimum wage structure, it is not a hugely significant element of the cost.

It's important to the workers and it does add some cost to the structure, but is not anything that significantly alters the overall cost structure of the business.

But that will all be determined on the basis of the overall labor negotiations.

Okay.

Thank you.

Thank you very much.

Our next question comes from the line of Mark Liinamaa of Morgan Stanley.

Please go ahead with your question.

Thanks.

To go along with increased cost disclosures, would you be able to give any idea of expected cash costs at Morenci and Safford?

Well, at this point, we've disclosed the cost for the overall North American operations and that, of course, takes in some by-product credits.

But the -- since Morenci doesn't have by-product credits, the costs would be on the higher end of the range of Sierrita because it has such a significant Molybdenum component.

It may well be the world's lowest net cash costs mine in the world today.

But, so it is a range around those numbers.

We have not given that mine by mine.

But just logically, you could anticipate that where --

I'm kind of curious with the concentrate leach when it starts up in 3Q '07 in Safford rather than Sierrita.

Excuse me now?

Safford rather than Sierrita.

Once it starts up, what you would expect for cash costs from that operation?

We would expect cash costs for operation to be consistent with -- roughly consistent -- actually, it would be slightly lower than the average for North America.

Okay.

And you commented that you expect the supply side to continue to struggle to meet production expectations.

Would you have any observations about the scrap market?

The higher the price, the more economic scrap becomes.

So scrap is going to be -- to be an element, there's a limit to where scrap can come from.

They're stealing copper off the above-ground graves here if you want them, so at higher prices, it's going to be more of a factor.

And I think that's all you can say about it.

It is the most, to me, the most difficult element in the copper market to get your arms around because of the variants and the opportunities that it has that are available.

Thank you.

Thank you very much.

Our next question comes from the line of [Bashu Mullic] of Neuberger.

Please go ahead with your question.

Yes, I have a quick question on page nine and page 20, these two slides.

One is for the first quarter of production cost and the second one is for the annual.

Any difference to lower gold production in the second half of the year?

Yes.

That's really what drives the major difference there, Bashu, because -- and it's also copper because we had such strong copper volumes at Grasberg during the first quarter.

And because of this sequencing, which, as I said, is something that we pointed out in last quarter's release, we just have significantly lower volumes in the second half of the year than we do the first half, and that drives your unit cost.

One--

At the end of the day, it will also be affected by gold prices because of -- because from a gold standpoint, for copper it is strictly a volume component to the unit cost.

For gold, it's both a volume component and a gold price component.

Right.

But the copper production for the whole year on a pro forma basis doesn't change.

It is the second half's less credits, by-product credits going from $0.81 to $0.53, which seems to be a reflection of the volume of gold that you're going to sell in the second half of the year.

Yes.

There is is slight difference in the copper because you going to have lower copper out of Grasberg.

Got you, got you.

Which has higher credits.

Copper out of the Phelps Dodge assets, and they have relatively different cost structures.

So that will have some impact.

But you're exactly right, Bashu, it's principally the gold components.

The other question I have, given some pro forma first quarter operating highlights, what would be the pro forma first quarter EBIDTA?

Hang on just one second.

I tell you what, we'll come back with the answer while we look it up.

Okay.

Thanks.

Do you have any other questions, Bashu?

No.

Thank you.

Okay.

Thank you very much.

We'll go to the next question, and then we'll answer that one.

Certainly.

Our next question comes from the line of Victor Flores of HSBC.

Please go ahead with your question.

Thanks.

Good morning.

Just a couple simple questions.

First a housekeeping question.

I just want to make sure that in the production table, you were giving us production from Morenci and Grasberg net of the minority interest, but you're giving us Candelaria, Cerro Verde, and El Abra on a consolidated basis.

Well, that's a --

They're all consolidated except for Morenci.

We proportionately consolidate, and that's at 85%.

But all of the volumes that you see are consolidated.

Morenci is the only one that's proportionately consolidated.

Let me just add one thing onto that, at Grasberg, we have a joint venture with [Rio Tinto], and that is proportionately consolidated and never in any of our numbers.

The consolidated numbers include the government of Indonesia's 9.36% interest in that, Victor.

So we proportionately consolidated real tenth of shares out of it, the government's included, and because of the structure of Morenci, (inaudible) 15% interest is not included in the numbers.

Okay, great.

Thank you.

And then just, if you could address some of the start-up issues that at Cerro Verde and what the outlook is for the rest of the year?

Tim, let me ask you to address that.

Yes, you bet.

We essentially completed construction by the end of the year last year, we began the ramp-up, and then this is a big concentrator, a very-well-designed, really, very nice plant.

But with all plants like that, we run into some things that couldn't have been anticipated.

For example, the freshwater that we were reclaiming from the river, partially because of seasonal effects had more contamination of solids and so forth than we anticipated, so that caused us to make some modifications and some changes.

And then, of course, a variety of other control issues and that type of thing that are typical of start-ups.

But what I can tell you is that we've operated every segment of the plant, found it to be just exactly what we expected it to be.

And so longer term, we don't anticipate any major issues in achieving full production rate.

Okay.

Could you give us a sense as to what level of rated capacity you've operated the plant at?

And how is that improved over the first three months and now into the fourth month of the year?

As we go through various periods of time, we've operated at or above the design capacity, but of course, it's just getting the extended runs that is the part of start-up that is necessary to get it fully complete and up to design capacity.

So we certainly have operated it at design rate.

As we've said, we're taking the first half of this year to ramp-up to design rate, and we expect to be at design rate in the second half.

Okay.

Great.

Thank you very much.

Thank you.

Our next question comes from the line of John Redstone of Desjardins.

Please go ahead with your question.

Good morning, gentlemen.

Most of my questions have been answered as I'm sure you can imagine.

So very quickly, two issues on timing.

First and foremost, coming back to the Molybdenum operations, could you give us your best estimate of timing of the potential start-up at Climax, if everything falls into place?

If everything falls into place, it could start up in 2009.

Tim, can you confirm that?

That's what I --

Yes.

Absolutely.

We would be doing design and construction work in 2008, should we decide to go forward.

And that would be sort of second half of '09, or -- ?

We haven't really tied down a specific date.

We're still doing feasibility study work, but it would be in 2009.

Okay.

John, considering the status of that, that's too precise a timeframe for us to be able to respond to.

Fair enough.

The other point is, you have Tenke Fungurume coming on at roughly, let's call it 120,000 tons a year.

Now obviously that deposit could support something a little bit bigger.

And again as far as you can at this stage, I wondered if you could give us some idea of what factors you would be evaluating, what you'd be looking at and indeed the timeframe needed to decide whether or not you actually go for higher production at Tenke?

Well, John, it's more than a little bit bigger.

It has a chance of growing substantially.

We, at this point, don't know how substantially it could grow.

The initial project is going to be focused on infrastructure development.

With infrastructure development, further understanding the ore bodies and the development opportunities, that's what would drive the next step.

Now, obviously, we have to be comfortable in committing capital in the Congo, and that's going to be part of the ongoing process as we develop infrastructure.

But with infrastructure and with comfort and confidence about committing capital, we would be prepared to move very aggressively to maximize the opportunities this district provides.

And just how long do you think you might need to get comfortable?

How long do you think you would need to operate in the Congo to get some degree of comfort?

That, -- that is going to be a -- something that will be a continual process as we go forward.

It's just not something you can answer in a straight forward way.

Okay.

All right.

Thanks.

We are very encouraged by -- very encouraged by the progress that's -- that was made with the Presidential elections, the other governmental elections.

There's a very strong commitment by the western world to support the political system, the economic system, and the security system there.

And we're, obviously, encouraged by that.

But the future will be what the future will be.

And we will be making prudent judgments about going forward, but we're very excited about the opportunity.

Thank you very much, indeed.

Thanks.

We're going to come back before the next question and come back with the EBIDTA for the first quarter on a pro forma basis, if we adjust for the noncash impact of the purchase accounting on the production costs, it would be between 2.4 and 2.5 billion for the quarter.

Next question, operator.

Thank you.

And our last question for today will be from Bruce Klein of Credit Suisse.

Please go ahead with your question.

Mr.

Klein, your line is open for your question.

Seems we've lost Mr.

Klein, Tommy.

Mr.

Klein, please verify your mute button?

Okay.

Listen, everyone, we appreciate your participation on the call.

If you have follow-up questions, as always, please contact us.

Next quarter will be a full quarter that we'll report as a combined Company, and we look forward to reporting our progress for the second quarter.

Thanks, everyone.

Thank you very much.

Ladies and gentlemen, that does conclude the conference call for today.

We thank you for your participation, and ask you please disconnect your lines.

Have a great day, everyone.