費利浦·麥克莫蘭銅金 (FCX) 2007 Q3 法說會逐字稿

Welcome to the Freeport-McMoRan Copper & Gold Third Quarter 2007 Earnings Conference Call.

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

Afterwards we will conduct a question and answer session.

(OPERATOR INSTRUCTIONS) .

I would now like to turn the conference over to Kathleen Quirk, Chief Financial Officer, please go ahead

Thank you and good morning everyone.

Welcome to the Freeport-McMoRan Copper & Gold third 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.

And as usual we will have several slides to supplement our comments this morning.

Slides are accessible using the web cast link on our FCX.com web site home page.

In addition to analysts and investors the financial press has been invited to listen to today's call and a replay of the call will be available by accessing the web cast link on our home page later today.

Before we begin today's comments and presentation I would like to remind everyone that today's press release and certain of our comments on the call include forward-looking statements.

Please refer to the cautionary language included in our press release and slide presentation and 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 of FCX and Mark Johnson, Senior Vice President of our Indonesian Operations.

I will start by briefly summarizing our financial results and then turn the call over to Richard who will discuss our operations and outlook and will be referring to the slide presentation on our web site.

We will they be open the call for questions.

Today FCX reported third quarter 2007 income from continuing operations applicable to common stock of $763 million, that's $1.85 per share compared with $351 million $1.67 per share for the third quarter of 2006.

For the nine month period ended September 30, 2007, FCX reported income from continuing operations applicable to common stock of $2.3 billion, that was $6.46 per share compared with $970 million, $4.64 per share in the 9 month 2006 period.

Our 9 month 2007 financial and operating results include our wholly-owned subsidiary, Phelps Dodge's results beginning with the acquisition by FCX on March 19, 2007.

We had a number of special items in the third quarter.

Third quarter net income from continuing operations included net charges totaling $299 million that was $0.67 per share during the period, that included $184 million or $0.41 a share for purchase accounting impacts on production costs related to inventories, $97 million or $0.22 per share for purchase accounting impacts on depreciation and amortization related to the step up in PP&E following the acquisition; $31 million or $0.07 per share for the early extinguishment of debt.

We also had a charge of $26 million or $0.06 per share to mark-to-market the Heritage Phelps Dodge copper price protection program and that was all net of a gain of $29 million or $0.06 a share on the sale of marketable equity securities during the quarter.

Our consolidated sales from our mines total 949 million pounds of copper, 269,000 ounces of gold and 16 million pounds of molybdenum during the third quarter.

These sales were higher than our previous estimates for copper of 900 million pounds, the substantially higher for gold.

Our previous estimate was 125,000 ounces.

And molybdenum sales were consistent with our previous estimates.

Our realized copper prices average $3.53 per pound during the quarter, that was 3% higher than the third quarter of 2006.

The 2007 period included a $0.04 per pound reduction related to the copper price protection program.

We have strong, very strong operating cash flows during the quarter totaling 2.2 billion.

Our capital expenditures approximated 466 million during the third quarter.

We made additional progress toward our objectives of reducing debt.

We reduced debt during the period to 8.7 billion and had consolidated cash of 2.4 billion.

That compared with total debt of 9.8 billion at the end of June and consolidated cash of 2.1.

I'll remind you and Richard will have some slides on it, the debt, total debt at the time of our acquisition was about 17.6 billion.

During the quarter we made an additional payment on our term loan.

This is a term loan that was originally $10 billion.

It's now been paid down to $1.55 billion as of the end of September.

We entered into an agreement during the quarter to sell our international wire and cable business, PDIC, for 735 million, including the acquisition of minority interest.

We expect to receive net proceeds net of taxes and other transaction expenses approximating 620 million.

We expect to close this transaction during the fourth quarter and would use the proceeds to repay debt.

I would now like to turn the call over to Richard who will be referring to our presentation on the web site.

Good morning everyone.

It's really a great quarter for us to be reporting to you on today.

I'll start on Slide 3 by looking at our actual numbers.

Just a couple comments about that.

Of course actual numbers in '07 include Phelps Dodge legacy properties that weren't there in '06.

Sort of interesting to think about the comparison for Grasberg from '06 to '07, because we are in a low grade section of the Grasberg mine.

On a stand alone basis Grasberg produced about a 100 million pounds less copper this year than it did last year.

And, and about 200,000 ounces less, although our gold production was substantially above our expectations, more than twice that.

But by having Phelps Dodge we end up with these great financial results this year with over 5 billion in revenues, over $2 billion of operating cash flows with less than $500 million of CapEx.

If you flip the page we can look at the purchase accounting issues that are flowing through and affecting our earnings.

Now, these are purchase price allocations as of the date of the acquisition, March 19.

Under the accounting rules today, you have to go through detailed analysis valuations in making this and we are engaged outside consultants and our accountants are involved in that process.

And these results in charges that Kathleen talk about that flow through our net income that really aren't cash charges that require current cash, but they do have significant impact.

One of the impacts that we have that we are continuing to study is the substantial amount of copper we have in inventories.

And with these FXCW inventories that are long-term inventories it's a large amount, 3.5 billion pounds of copper are contained in those inventories and we have been analyzing the valuations of that and at this current status of where we are we have assigned a higher evaluation this quarter than we had in previous quarters.

But we hope to complete this processor we're targeting completing the process by the end of the year under the accounting rules we actually have through the first quarter of next year..

These are the details about that and looking our earnings you just need to understand those, of what accounting requires.

But then if you turn to our actual results for this year compared with pro forma results for last year, and this is including a combination of the legacy Phelps Dodge and the Historical Freeport results you can see what a strong quarter we actually had, as shown on Page 5, where we had more copper volumes as I mentioned our gold volumes are lower, consistent molybdenum volumes with very strong prices on a yearly basis we have about a third of our sales from North America, South America and Indonesia, this quarter; it was lower amounts from Indonesia because of the sequencing at Grasberg.

Our unit production costs are presented on Page 6.

As I've said to investors we have the lowest cost mines in the world and some of the highest cost, but in today's world with the strong product prices we have we're in a very substantial margins from our, from our highest cost mines and if we run this business we're trying to find volumes to produce from all of our mines.

We benefit from the strong by product credits with the high molybdenum price, our significant by product molybdenum production as well as the higher goal price.

Our average cost was just over a dollar for the third quarter.

That includes $1.30 from Indonesia, we had credit cost where our by product credits exceeded our operating cost at Grasberg during the first half of the year.

So that's distorted by that.

But we have committed to providing you detailed cost information by region and this is here for your understanding of what it is to run our business.

We have benefited, it goes without saying, just how much we have benefited by the strong markets for our commodities that we have had since we completed the merger in March.

Copper markets continue to be, continue to be tight, supplies constrained from existing mines, new projects which are relatively few in terms of large scale projects, and a context of the much larger copper market we have today continue to be challenged in terms of timing of bringing them on stream, in terms of cost pressures, resource pressures, environmental pressures and political issues.

And with that, that environment absent some significant downturn in the global economy or some issue in China, the conditions that we have had in recent years for copper markets are likely to persist and we feel very good about the outlook for our markets particularly good about where our company is situated to provide increasing volumes to a world that needs, that needs copper, molybdenum, and gold.

For the year we're continuing to project $3.9 billion of copper sales.

We were able to advance some sales from the fourth quarter into the third quarter through an aggressive inventory management, we're going to try to do that every quarter to try to advance cash to our company as quickly as we can.

We have increased our goal sales because of the performance of the Grasberg and we continue to project molybdenum sales of just under 70 million pounds.

Looking at a modeled results for that with 350 copper and 750 gold and spot molybdenum prices of $30 a pound, we project operating cash flows now of $6.2 billion, including $1.3 billion for the fourth quarter.

We have increased our capital and we will talk about that more a little later.

But we are looking for ways to invest in our businesses considering our positive outlook, our opportunities.

Like everyone else we are also affected by input cost pressures that go along with these high commodity prices that we have.

But what that would do for our year-end debt would reduce our gross debt to $7.3 billion, $5.8 billion net of cash and that reflects the closing of the Wire and Cable Company sale that will occur in the fourth quarter.

And at $7.3 billion it's interesting that that's almost exactly the target that we were shooting for in terms of our gross debt at the time we were doing our financing with the merger.

At that point we financed the acquisition with $10 billion of term debt, $6 billion of high yield bonds, long-term bonds, and we had existing debt of just over a $1 billion.

What this projection shows is the complete repayment of our term debt by the end of this year and that was our target originally as many of you heard us say on our financial road shows, we were hoping to do that within three or four years.

But with our equity offering that we had following the completion of the merger and with the strong performance of our business and high commodity prices we reached that three or four year goal we expect to reach it or be close to it by the end of this year.

Really positive and that's illustrated on the chart on Page 9, which shows what our market cap was at the time of the March closing of the PD merger, when our market cap was $22 billion.

Our net debt was $14.2 billion a year ago with stand alone Freeport we had a market cap of about $12 billion and virtually no debt.

Today our market cap is just under $50 billion, our net debt at September 30, was $6.3 billion, so great performance by any measure.

This is a great depiction of that.

To give you an update on where we stand with the development projects, one of the very positive things about our combination with Phelps Dodge is we stepped into the projects that the Phelps Dodge organization's had developed that resulted in very high return, rate of return type projects to expand production at the flagship Morenci mine here in Arizona.

We have restarted milling, an old milling complex to develop concentrate.

The mill has been restarted mid-year and it operated at just under 40,000 tons per day in the third quarter ramping up to capacity of 54,000 tons a day.

We're commissioning the new technology of using concentrate leaching so we are not having to send concentrates from this mill to smelters.

Phelps Dodge organization had developed this technology, tested it with a large scale project, demonstration project at the Baghdad mine, and now this is an exciting new technology for the industry and for our company, whereas we see a lot of expansion in the future being in sulfide ores which will require concentrating, and by doing this, using electro winning extraction directly from the concentrates we're able to to do that in a very efficient way.

So this is an important project in terms of what it does for Morenci now, in terms of volumes and cost structure, but the real exciting thing is what it holds for us as we go forward in the future with our expansion opportunities.

Nearby first new copper mine in the United States in 30 years is on on the verge of being open.

The mine in Safford is nearing completion..

The original target date was mid-2008, but we have advanced that now to where we will be ramping up during the first half.

We expect to have startup with some copper volumes here in the fourth quarter.

This is a project that will provide 240 million pounds of copper a year.

Our cost looks like they will come in at about $625 million, but it's a very straightforward efficient modern operation and located at a site where we have significant future development opportunities because of the significant large areas of mineralized material that we're evaluating for future expansion.

We are, we also have feasibility study that we are completing now that our board will be considering shortly that looks, is looking at the restart of the Climax molybdenum mine near Leadville, Colorado.

The market for molybdenum is very strong and this is the world's most attractive development project.

It is restarting operations that began in the early 1900s, this was the world's flagship molybdenum mine for many years.

And as that market weakened it was, it has been commissioned down and restarted on occasion, but our current project looks at reopening this mine with an open pit operation and a new mill.

That's about a $500 million investment.

Because it is a restart you don't face the types of permitting issues that you have in developing a new mine.

We have been operating this facility consistently in terms of managing the water issues that relate to historical mining.

The project that we're looking at has the capacity of producing approximately 30 million pounds of molybdenum at a cash cost, very attractive cash cost of $3.50 a pound.

We have ordered long lead time equipment.

It's obviously very financially attractive when you have a 350 operating cost in a product that's currently selling over $30 a pound.

It is very large.

We are estimated reserves are 180 million tons of high grade molybdenum.

That's using a 650 price at that reserve determination level and substantially up side if we were to looking at $15 molybdenum of 1.1 billion tons, and these facilities have the ability to be expanded.

In fact, we could see economic attractive expansion to actually double the production, which would place this at a very large amount of 60 million tons-- 60 million pounds.

We're also evaluating expansion opportunities for by-product molybdenum development at our existing mines that currently have by-products and that's in North American, and the Cerro Verde and the South America and we're also assessing molybdenum resource at the Grasberg.

So this is a product where we are the world's leading producer, we have the world's best development opportunities in the capital and the structure to go forward and continue our position as a leader in this marketplace.

At Cerro Verde in Peru our expansion, which was completed late last year, it operated at full capacity during the third quarter, roughly tripled the output there and is operating very well where we're using these high pressure grinding rolls as our concentrator mills for that operation.

It's a great mine and we're looking at expansion opportunities there.

In Chile the El Abra mine, which we have been operating as a large scale SXEW operation to process oxide ore has a significant sulfide mineral deposit that we are in the process of taking steps to develop.

We filed environmental impact statements, it would extend the mine life at substantial production volumes.

It's a $450 million project and will allow El Abra to continue as a world class mine for an extended period of time going forward.

In Indonesia, our DOZ mine continues it operate extraordinarily well.

We completed our 50,000 ton per day expansion in mid '07, this has doubled the rate that this mine was originally designed to produce and we averaged actually during the third quarter 56,000 tons per day.

On a day we set a record when we hit 80,000 tons per day and that is a level that we're now working to further expand the DOZ mine to have a maintain production at 80,000 tons per day.

That's an enormous production level for block cave underground mine and a great indication of what we're going to be able to do long-term at Grasberg as we complete the mining of the Grasberg pit currently projected to be done in 2015.

And we are substantially progressing the development of the underground at-it system that will allow us to reach the Grasberg block cave and begin development activities so that it will be prepared to produce when the pit does depleat and we will begin the underground development activities early in the first half of '08.

We are also developing a smaller high-grade mine called the Big Gossan mine and we're progressing with that.

We have done work on our mill to make it more efficient at the Grasberg, this is the world's largest milling complex and we are taking steps to prepare ourselves for efficient long live operations there.

On Page 14, we have a picture of the view of the development work that we're now underway with in the democratic republic of Congo, at our large Tenke Fungurume project.

We have done substantial amounts of engineering, buying equipment, we are 15% into construction and are moving forward.

We have reviewed our capital cost for this project.

The original AFE that was approved by Phelps Dodge Board just slightly less than a year ago was at $650 million.

We have adjusted the scope of this project, we have taken into account the impact of cost escalation of doing projects generally and particularly in Central Africa and our new cost estimate is $900 million.

But this is a very high rate of return project and we're very excited about it.

We're targeting initial production at 2009, that is a project that would be the first step as we anticipate of a series of development projects that would lead this to be a world class mining operation.

But the initial project is targeting 250 million pounds of copper annually, 18 million pounds of cobalt during the first ten years.

Very high grades of both commodities.

We're continuing to do exploration drilling and delineation drilling of the ore bodies that are on this large concession, 600 square mile concession, and to understand where we will be going long-term with this.

We had the honor of hosting the President of the Democratic Republic of Congo here in Phoenix, Monday and Tuesday of this week.

He and a group of his senior ministers toured the Morenci mine.

We had very productive meetings, we share a common view of trying to develop this project as quickly as we can and the challenges that we will work with cooperatively have to do with developing the infrastructure, power, transportation routes for this.

The mine development, process developing side of this is less complicated than some of the projects we have to deal with, but the challenges of operating in central Africa are significant, but we share with the government there a common view of how we want to go about doing this as quickly as possible.

As we put the companies together, and I'll just say that the integration of our businesses has gone very positively.

We have completed what I'll call the transition stage of integration.

Our operating teams are working together very well.

We have established our financial administrative group and we're going forward and that has been very positive, very straightforward for a combination the size of ours.

As we did this we wanted to continue our focus on our operations of producing volumes, being safe for most, and focusing on our current expansion projects.

And we have successfully done this as our, as our financial results show.

We begin shortly after we completed the merger to start looking then at what would be our long-term future in terms of expanding this business.

And we are focused on our current set of assets and we have a great opportunity because today beyond our substantial proved and probable reserves, which were developed using very conservative prices of copper, $1.05 for Phelps Dodge properties, a $1 for Grasberg, we had 10 million -- 10 billion tons of mineralized materials which was based on current drilling information.

And what we are doing is doing further drilling to understand the ore bodies and starting to do engineering analysis to see how we can qualify this mineralized material reserves with a more optimistic view of copper markets, then how we can transfer those resources and reserves into cash flow assets.

Tim Snyder is here and I'm going to ask him to make a couple comments about the process we have in place to look at these opportunities.

Yes, thanks, Richard.

Of course the mineralized material that is outlined on Page 15 is we all know is not in our reserve estimate.

We just most of that material is we don't have enough information to call it reserves.

But we know that particularly around the Heritage Phelps Dodge operations where we have these large low-grade core for copper deposits that the ore bodies are very sensitive to metal prices.

And if metal price assumptions are higher of course the size of that potential resource out there gross and you can see this on the chart.

Our job is of course to define that further.

Step one is to get more drilling information.

And we have about our exploration teams have about 60 drill rigs worldwide going right now in exploration and more than half of those are focused right in our own backyard at our existing operations to further define some of this mineralized material that we believe is there.

And our process is to examine every possibility that we can think of in terms of how do we turn that material into value when we take into account our view of the market, some of the technology advances that have been made recently for example with HBGR which lowers energy costs, concentrate leach process which is just now coming up, and of course a lot of the leaching technology that we and the Heritage Phelps Dodge have been working on for many years.

All of that coming together we believe gives us some potential opportunities for expanding our existing operations to somewhat higher level.

And it's an involved process, but one that we are very actively pursuing at this time.

We obviously don't have details about any of those results yet, but rest assured that we are moving forward on that quickly.

It's a real exciting process for us and we're going to look forward to talking more about it as we go forward later this year and into next year.

Beyond this expansion of our existing ore bodies we also have exploration that has really exciting possibilities, too.

In Papua we have the right to 2.2 million acres.

We're conducting exploration both around the Grasberg and outside of the Grasberg's productive area, mentioned it in Tenke Fungurme the large concession and the need for us to further understand opportunities there.

And then we have other Brown field and Green field opportunities from an exploration standpoint around the world.

Page 17 shows where we're spending exploration dollars.

This year we expect to spend $135 million and we assess our opportunities, we always are looking for ways to spend money on exploration that makes sense and we will continue to do that.

Our sales profile on Page 18 shows the impact of our expansion projects.

Looking at an expansion from 2006 pro forma of roughly a quarter going forward as we look forward over the period through 2009.

We have adjusted our mine plans at Grasberg, that's presented as supplemental slides for you to look at, but that's just an ongoing process of trying to maximize the value of that grade ore body.

On Page 19, you see our quarterly sales.

This second half of the year reflects mine sequencing.

For copper you can see that in the gold slides where Grasberg provides vast, vast majority of our gold sales.

And we have offset the lower copper sales at Grasberg with increased volumes from Cerro Verde and our other operations.

Again, we will try to maximize the numbers in the fourth quarter as we did in the third.

The Slide 20 shows on a pro forma basis the spread of our production from North American mine, South American mines and from Grasberg and Indonesia.

Our overall cost situation, we're looking for the year at consolidated net unit cost of $0.75 a pound.

And you can see how that's broken out by region.

Page 21 shows the modeled cash flow generating capacity of our business, EBITDA numbers are at the top, operating cash flow numbers at the bottom.

You can see $3 copper and that we would have roughly $6 billion annual average cash flows over the next two years at $7 billion at the current copper price, even if copper prices drop from these levels the ability to generate very substantial amount of cash.

Our sensitivity to commodities are shown on Page 22, $0.20 change in copper price is roughly $575 million of cash flow variations.

The capital expenditures update on presented on Page 23.

And this does represent an increase in capital, which we have been looking at.

Some of this increase reflects the higher capital number with our scope changes and other factors at Tenke Fungurume..

We are spending money to prepare ourselves to improve our mine rates, to set ourselves up for these potential expansion projects.

And then of course we are affected by input costs from capital, which you're seeing going around the industry today.

Page 24 shows our debt maturities and just how strong our financial situation is.

At September 30, where we have made huge progress in paying off our term debt and we have obviously a great deal of financial flexibility in our credit continuation improves.

Page 25 is a slide that we have traditionally used Freeport is the first time we have shown it on a combined basis because we were so focused on debt reductions after we did the merger.

But since we will in effect have achieved our debt reduction targets by the end of the year it's now appropriate to think about what our board will be considering for our financial policy going forward.

What this shows is our operating cash flows, and this is after cash tax and cash interest.

After capital expenditures and minority distribution, the requirements for our current dividend of $1.25 a share and our preferred dividends which is roughly $750 million, and what available cash we would have on a projected basis at different prices.

Now, we will have going into the first quarter of next year some cash payments to make.

We will make the final payment on the Phelps Dodge hedging program.

It will be completed at the end of '07 and at current prices we think we will have to write a check for $600 million or so in the first quarter.

As we earn all these profits we're going to have to pay taxes on the first quarter, so we will have a, we will have a cash requirements early in 2008 and we're going to look for ways of investing in our business.

We're going to look at Star Climax, other expansion opportunities.

But beyond that we have ample cash to do those sort of things and the start to consider how do we reward shareholders for investing in our company.

And on a model basis at current prices for the next two years we're showing excess cash beyond current capital expenditures and beyond current dividend requirements of over $18 per share.

And we're not projecting prices, we're showing you variations at different prices, but we have a positive outlook for our commodities as I said our company's well situated in that environment.

In summary, we're committed to maintaining a strong financial position.

We're there, we're going to continue that.

These good copper markets and good molybdenum market and gold markets are going to provide us cash that's going to allow us to invest in our business and provide shareholder returns.

Our board's going to be reviewing our financial policy and we will have good opportunities to consider how to reward shareholders as we go forward.

With that Jim Bob's on the line and we're available to answer your questions.

Thank you.

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

Our first question coming from the line of John Hill from City Investment Research, please proceed with your question.

Yes, good morning everyone and congratulations on the strong result and the strategic transformation of the company.

Thanks John.

Yes, just I guess two questions.

The first, it looks like we're pulling more 8 south in Grasberg into the pit in 2009 and 2010, is that routine or is that something that's new and different just comparing the details from this quarter to the last.

Mark Johnson here and I'll let him respond to that.

John, that's our plan, our current plan for the 5 years is very similar to the previous one.

As you know 6 north was where we got our high grade at the beginning of the year.

We were able to mine a bit more tons down interest in the third quarter which was resulted in our higher gold volumes, 7 south is our primary ore push back for the next 2 years.

And then 8 east and 8 south join into one push back and that will be our ore area for the following two years.

It's very similar to the last 5 year plan that we presented in the last quarter.

Got it.

Then also taking a look at, it appears that the earnings sense activities that you're reporting on higher.

They're higher in terms of copper, $0.20 worth 850 million EBITDA higher on moly as well.

Does this reflect productivities or cost controls or just a better understanding of the numbers.

What we have done on the sense activities John, is shown the impacts for '08 and '09.

Our product sensitivities were based on '07 through '09 and included the effect of the price protection program.

So what we have done is given you sensitivity kind of more forward looking as to what '08 and '09 looks like.

And also take into account for moly the contracts that we have for moly some which as you know have certain price arrangements.

So we have reflected all that in these numbers and now showing '08 and '09 rather than the three year period.

Just as a reminder for everyone Phelps Dodge entered into price protection contracts for just under 500 million pounds of copper for '07, which limited the price for those almost 500 million pounds to $2 a pound.

And so now with that terminating as we go forward all of our volumes will be fully exposed to the marketplace.

Great, thanks.

It's good to see those sensitivities headed in the right direction.

Yes.

Thank you.

Our next question coming from the line of Tony Rizzuto from Bear Stearns, please proceed with your question.

Thank you very much.

Congratulations on all the progress, I'm losing my voice, I think it's puberty setting in.

Finally.

Finally, right.

It's looking like we're going to finally get some changes to the mining law and I was wondering what you guys envision as the key parameters and how you see this taking shape.

Maybe you can just talk about royalties and,, environmentally and do you think this will have any impact Richard on your development of the Climax in terms of the potential restart there.

No, no, no Tony, it's not something that we anticipate having impact.

We are working cooperatively through the mining association and with the legislators that are taking the lead and dealing with these issues.

There's of course significantly different views about the direction this should go in and that's been the history as you know of these mining law debates in the U.S.

for a number of years.

The current process is underway, legislation is being marked up, but there's going to be a continuing issue.

We are hopeful that we can work to receive -- work with the congress in having a resolution of this so there gets to be some clarity as we go forward.

Climax is not a new mine operation.

We're updating a permit for our existing project.

In fact, we have been continuing operation there in terms of managing the longer term environmental impacts.

And so it's not a question of being a new mine, which appears to be the ones that would be, that would be most affected by that.

Tim recently testified before a congressional committee on the mining law, Tim do you have anything to add.

Yes, of course the new mining law would mainly affect those operations operating on public lands.

All of our operations in the United States are on, we're operating on patented mining claims, so the ownership has transferred to us.

So the impact on our existing operations is minimal.

Excellent.

I've got a more strategic question on molybdenum and the outlook.

Richard and team, I know that your thoughts have changed somewhat as to how you see moly, but what really has developed here that has given you confidence for longer term in the moly prospects.

Well, one of the things we were doing at the time we an announced the merger Tony, was talking with the market about how we could manage the acquisition debt.

Obviously we can't predict copper prices.

And we wanted to give investors assurance that if copper prices would have turned down, which they thankfully did not, that we had assets within our portfolio that we could manage to deal with that debt while retaining the strategic copper assets, which was the basis for doing the merger.

And the stand alone molybdenum business was one of those assets.

At this time last year, at the time we an announced the merger there was a significant concern in the marketplace about molybdenum volumes coming into the international market from China.

As it turns out that has not happened for a number of reasons.

The Chinese have by policy opted to keep their product in their country and their mines there have operating issues and so forth that have just not made that happen.

The market for molybdenum has improved, it's improved with the strong nickle price we had this year.

And as we look forward into the uses of the product both metallic and from a chemical marketplace it's encouraging, because of the need for these high alloy steals as we go forward.

It's a good business for us.

We're the world's leader, the Henderson mine is a great operation that is good cost structure, it operates safely.

What we have, you step back and you look at what is the key to being successful in the natural resource business and you always come back to assets.

Companies who have great assets are successful and companies that don't have great assets have to struggle to be successful.

And what we have in our molybdenum business is great assets.

The presented assessor companies, Cyprus did a great job in operating Henderson, Phelps Dodge did a great job in developing the downstream marketplace for this business.

And now we have assets in the stand alone business and in the by product business that allows us to continue that leadership position and we're very positive about it.

I wish you much success there.

One final question, Kathleen, peeked my interest there.

I must admit I'm not 100% familiar with the kind of contracts that PD had in place on moly, I was wondering if you could refresh my memory on the structure there.

We have certain contracts that are sold based on the metal (inaudible) price that are just indexed to the price.

Right.

Then certain contracts that we have had fixed price arrangements and some had floors and caps.

And so as we go forward some of those contracts that were below market will be moving more toward market.

So that was the point there in 2007, 65% was indexed to the metal suite dealer oxide price and that moves up to 75% in '08.

Okay.

And if I heard you correctly, it sounded like you had maybe some more or less fixed price.

What about the other, 25% or so, should that be closer to or certainly moving higher as well.

Well, the other 25%, yes.

What we're working toward is moving more towards a market model.

Okay.

For our moly contracts.

Great.

Thank you very much, appreciate it.

Tony, these aren't, these are contracts that are one year, two year, three year contract.

It's not like it's fixed for five to ten years.

So as thought contracts come up for renegotiations, the renegotiation reflect the current market situation.

And an we are as Kathleen says strategically looking at restructuring them, but in any it's a timing question of getting market prices into ourselves.

Understood, thank you.

Thanks Tony.

Thank you.

Our next question coming from the line of Michael Gambardella from JPMorgan.

Please proceed with your question.

Yes, good morning Richard and Jim Bob and congratulations on all the hard work and bringing some transparency to the PD situation for us.

I have a question on the Climax project.

It seems like an incredibly, positive project, just kind of back of the envelope it looks like you could even take a third off the moly price today and still have a one year pay back on this project that you have slated here on Page 11.

What would the capital cost be for, I think you mentioned you could double this project the size, what would that capital cost be on the doubling part.

Well, it's not double, it's not double, and it would depend on exactly how we would do it.

There would be two ways of approaching it.

One would be building just a larger initial mill or then coming back in in second stage for the second mill.

The resource is clearly there.

There are substantial open pit reserves that are economic at today's prices and there is also a very large underground resource that gives us significant mine life for this project.

So, Tony something less than a double, but it would be substantially additional amounts of capital.

Okay.

And then just going over Tenke project, undercurrent cobalt pricing can you give us any feel for what the operating cost would be there on the copper side.

Yes, Mike, and I apologize for calling you Tony.

You always do that.

I'm going to start calling you Jim Bob for now on.

I would be honored.

I call all my Italian friends Tony.

The operating cost at Tenke is what you would expect.

This is a very high grade deposit and the cobalt market, while the moly market is small, the cobalt market is smaller.

With all the cobalt resources in Central Africa the real issue there is where's that market going to be, is the industry going to work to try to find uses for the product and so forth.

But if you were to take the current cobalt price and cut it in half you would still have cobalt revenues after the costs in this project.

So it's one of these negative operating costs situations as we go forward and it's just what you would want as a mining company, a high grade large long life project.

Okay.

Great.

Then very last question, on Tenke could you just briefly talk about some of the logistic issues, particularly on transportation and how you're looking to get over those challenges.

Well, you can talk about it all day, I mean it's beyond brief to talk about the challenges there.

And we don't underestimate those challenges.

But we benefit from the fact that we would be using SXEW processing, so we would be transporting a finished copper product and cobalt products out of there.

The region is developing rail capabilities that longer term should be helpful to us.

And their alternative routes for transporting by truck the products out of there.

But the challenges start within the Congo itself, and then they continue with trying to deal with the current congestion that's faced and trying to get across the border.

And then you have to go either east, west or to the southwest, southeast, to get to ports, which all are more than 2500 kilometers away.

So it's the challenges and the reason this project has never been developed even though it's been known about for a hundred years has to do with political considerations and there's been such a significant improvement for that.

The president was very optimistic in my discussions with him about the political progress that's been made, they are very anxious to see cash revenues for this country coming out of projects like ours and we're going to work together to solve these problems.

Thanks a lot Richard.

Okay, Mike.

Thank you.

Our next question coming from the line of Horhay [Varadane] from Deutsche Bank, please proceed with your question.

Yes, good morning gentlemen.

Just to go back to that chart on page 25 about the excess free cash flow that you may have in the next two years, I just wanted to understand if the current annual dividend of 125 and the preferred dividend was subtracted from that free cash flow amount or the 7.9 does not include that.

The 7.9 number here, that is the excess over the dividends.

Okay.

So it's net of already your base dividend commitment.

That's correct.

That is roughly $750 million of common and preferred dividends.

Net of capital expenditures, net of minority , which, occur as we transfer cash from operations that have minority interests in

Sure.

I just wasn't sure because the dividends weren't expressly highlighted in the foot note.

But roughly speaking at $18 a share, if we assume 3.50 copper for two years out, that would be about $9 of incremental dividends per year on top of your current base dividend of $1.25 if I was to interpret that correctly.

Well, it's available cash.

Now, our board will be looking at the possibility of stock buy backs in addition to dividends and we're going to be looking for incremental investment opportunities as well.

But your analysis is right.

Even though our stock has perform so well it still trades at such attractive multiples that buying stock back in this environment looks very attractive.

Sure.

And then my follow on question from that would be what about M&A, because obviously there's this dichotomy continue to be happening between the diversified majors where we see strong double-digit PE evaluation being paid and you guys still demonstrate a single-digit PE.

Do you believe that further structural transformation, in other words some kind of a bolt-on M&A could also be another way to maximize your equity value or would you just martial that excess cash or your first order of priority would be take the excess cash and pay dividends, buyback stock and grow your organic copper and moly assets.

Well, I think it's clear that the industry's going to continue to go through consolidation.

You just have an environment where companies are earning such strong amounts of cash and they have such limited amounts of investment opportunities that inherently that's going to lead companies to look to consolidation.

In our situation we are really focused on internal growth opportunities.

We will live in the world of where there will be transactions and we will always be alert to opportunities, but strategically we are really going to be focused on building up these assets and we think that will position our company and our shareholders well for whatever happens in the industry going forward.

Some companies start out with a strategy of growing through acquisitions, that's a very competitive marketplace.

And some companies have been very successful with it.

We believe we can be successful by looking internally within our set of assets and building those going forward.

We like being a copper company.

We like the fact that as an investment vehicle we're unique.

We're the world's largest producer, we have a very liquid stock being headquartered here in the U.S.

and with a global set of assets we think we're very well positioned from that standpoint and we think this opportunity that you mentioned about having our multiple trading where it is is that is an opportunity for us.

We have always, we faced out Freeport for a number of years and our shareholders benefited as we worked to establish a basis for higher evaluation of our assets and that's what we're going to be about.

Thank you, just lastly, one question, why were your 2008 copper volumes in your presentation not updated if the Safford and Morenci about the projects were coming on line sooner than previous guidance.

Well, the Morenci project is really on line for our guidance.

We have said all along that it would be ramping up here in the second half.

It's strictly owned project.

The Safford project, I use the words will have some volumes by the end of the year.

We think that's significant, but it will be ramping up in the first half of the year.

The volumes themselves are not large and if we have them they will be upside to our numbers.

Okay.

We don't --

Okay, thank you.

Let me make one comment about the M&A conversation we just had.

The more we look at the potential to turn the mineralized materials into reserves we think we have such a great opportunity to better define the value of our company.

(inaudible - background noise) --those kind of low hanging fruit things for us to do before we would get involved in trying to look at an M&A opportunity we want to make sure that we had, that we and our shareholders got value for the mineralized material that is really in the vicinity of all of our existing deposits and can be quickly brought into proven and probable reserves.

So that's why we keep talking about this organic growth.

Okay, thank you very much.

Thank you.

Our next question coming from the line of Oscar Cabrera from Goldman Sachs, please proceed with your question.

Good morning everyone, congratulations on the strong results.

Just have a couple of questions to deal with production cost to start with.

With the change in mine sequence at Grasberg and I can appreciate that, the changes are similar from the previous plan, but if you look at the cash cost this quarter at 176, delivery, how should we think about the next couple years.

Are cash cost going to stay about the same level because of the development of the underground and follow on to that would be in terms of the treatment charges it's been well reported across the industry that treatment charges are going lower.

Can you comment on that, just in the level of magnitude and the fact that we don't have any price participation so your treatment charge line for next year, assuming copper prices are maintained at the same level should be better.

Well, you point out a couple of good things Oscar.

The cost structure at Grasberg is essentially fixed in terms of that we have a set of equipment, employees, infrastructure and it varies depending on how input costs change, for example fuel costs, we burn a hundred million gallons of diesel a year in running our big truck fleet there.

So obviously we will be affected as world energy costs change and other input costs change.

And our unit cost number then would be driven by how input cost change and the volumes that we have in the gold price.

And so, where we had as you mentioned $1.30 plus this quarter for the first half of the year we were negative, for the full year we expect to be $0.36 unit cost basis.

And then as we go forward in the next year you can see in the supplemental slides what our volumes will be and our costs will fluctuate around, around that range.

While we will be expanding the DOZ mine as we go forward it's a very efficient mine and our unit cost basis there are not in orders of magnitude different than what we have in the pit.

So in 2008, we're looking to have approximately the same copper volumes, maybe a 100 million pounds more, but our gold volumes are going to be down substantially from over 2 million ounces to 1.4 million ounces.

So you're going to see depending on the gold price our unit cost being higher than this $0.36 that we have there.

We manage the cost in terms of the aggregate costs, we're fighting them every day.

And these unit costs numbers are just going to move around depending on the volumes.

As you can see on the supplemental slide of Page 30, particularly for gold that's going to vary year-by-year.

But the cost structure itself is what's important, it's really increased dramatically over the past five years, essentially doubling.

But the rate of increase in recent years, the last two years, has not been as great as it was in the years from 2002 to 3, 3 to 4, 4 to 5.

So we're going to be managing these overall costs, some of them are out of our control, but as I said it's something we're going to be fighting every day.

Okay.

Thanks Richard.

Could you comment on the treatment charge.

On the treatment charges, now one thing to remember in our treatment charges, what you're seeing in these mining unit cost numbers is the effect on the mining operation.

We also have smelting operations which, in large part offset in our total results.

Which means that we're not hurt as much as we otherwise would be if TC and RCs go up and we don't benefit as much on a consolidated basis as if they go down.

We're right now in the process of negotiating treatment costs, the industry has charges moved away from price participation feature and that's built into the current rounds of negotiations.

And so with the oversupply of capacity in the smelting business, the absence of concentrates as the miners have trouble producing volumes which are supportive of copper price, it's going to tend to drive TC, RC rates lower.

And we will see that impact ago we go forward.

I will mention about 25%, a little bit more than that, of our volumes at PT FI go to the Crystic smelter in Indonesia where there's a floor TC and RC rate of roughly $0.21 a pound.

So that was out of play for a period of time, now it will come back into play and you will see that reflect in our average numbers.

Okay.

Thanks for the detail there Richard.

And just one more thing, in terms of the inventory that you mentioned at the beginning of the call, that was, was the number 3.5 billion pounds and is that in your leach pads or is that actual physical concentrate inventory.

That's in the leach pads.

It includes, we don't carry much in concentrate inventories.

We work very hard, the only time we have any real inventories is when we have shipping delays sometimes at the end of the quarter.

But we try to manage those to very low levels.

So these are somewhere in that never, never land between reserves and inventories.

Because they are in leach pads and, and, and the copper's recovered over long periods of time and that's why we have this adjustment, our evaluation experts and our accountants are dealing with the complex advertise, this is a complex evaluation issue as you can appreciate, how much would those be worth.

There's not a marketplace for these things, but it's 3 billion, 3.5 billion pounds of copper is over $10 billion of gross revenues going forward and that's what's reflected in these adjustments.

Part of the operation rather than part of available product available for sale.

Yes.

No, that's it.

Thanks very much guys, congratulations again.

Thanks Oscar, appreciate your questions.

Thank you.

Our next question coming from the line of Victor Flores from HSBC, please proceed with your question.

Yes, thank you.

Good morning.

I have just a couple brief questions.

First is could you just describe to us what the scope changes are that have been made for Tenke?

It primarily has to do with an expanded asset plant to facilitate operations.

We have been assessing since the merger the infrastructure there, the housing, medical facilities.

We are drawing on our experiences in Indonesia for developing a mine in a remote location.

It's different in a lot of ways, ore body's different, the physical setting is different, but there are some similarities in terms of how do you build a project that's safe, that's productive and that set up for future expansion.

We're looking at opportunities for future increases in output.

What's the right cobalt facility to have there.

So all of these things Victor, are things that are coming into play and we're developing all of this with a view not of just doing this project.

And our project is different somewhat than other projects in the Congo a lot, because it is a new mine development where other projects there are refurbishing historical mines.

As we approach this we're bringing a view towards how do you do that in a sway that facilitates future expansion.

You have to look at our history of the Grasberg, where we took the Ertsberg from less than 20,000 tons a day in a series of up to 220, 240,000 tons a day over a 10 year period.

We are really taking a view about how to build this in an expandable way because we're not just focusing on this first project.

That makes good sense, thanks.

And just a second question on the situation in the Congo.

You met recently as you said with the president and his officials, have you been given any sense as to where Tenke is in this process of reviewing the mining licenses or have they already told you you're good to go?

They have not completed the process.

They are nearing completion we understand.

We can appreciate the need to review these contracts considering the history of the country and we have been working cooperatively with the government.

Our contract is one which by international standards provides fair participation by the government in terms of taxes and royalties and ownership interest.

And so we're confident that our contract is going to be cared forward, but we have to wait to officially have the process completed.

What we did, what was so encouraging and this is understandable, but still encouraging was to hear the government officials including the president just talk so how much they want us to advance.

They had democratic elections for the first time since 1960 in their country late last year.

And when a country goes through things like this and the population feels they have elected democratic leaders they quickly want to see the result, the improvements in the country as a result of that process.

It takes time and that's the pressure that the government is feeling is to advance projects with our company, with our desire to increase production we are right in the same boat with them in terms of wanting to move forward quickly.

We just got to meet the challenges together.

That's great.

One final question, at what point in time in 2009 do you think you will begin to ramp the project up?

Well, we had hoped to start in 2008, and then ramping up in 2009, but I think I've been very candid with people in saying that that's a challenging schedule.

And it's not, in today's mining industry getting contractors to do projects anywhere in the world is a challenge just because of the call on resources and the lack of people.

But it's particularly challenging in the Congo.

So we are, we're going to work hard to get it done, but I want to be real clear with people that that is a real challenge to meet that time target.

And we're going to do it as quickly as we can.

If we don't get it in 2009, we're going to get it as quickly after that as we can, but that's what our target is.

Let me just comment one thing on the scoping.

I think your comments about the look that we've done at the project and the overall development of the project, Victor it's important to know that the different between Tenke and the Grasberg, in Grasberg with's an ore body (inaudible) we had to drill deeper to see actually how big it was going to be as we went with depth both in terms of vertical column and in terms of horizontal plan view.

In the case of Tenke what we have is a situation where we can actually see much of the ore that we will use to expand this project beyond its current size is exposed in an outcrop, you can literally see it on satellite imagery and because of that we know that there is a substantial amount of ore that we have got to go prove up to get feasibility on.

That ore is clearly visible.

It doesn't make any sense since we can see it at the surface for us not to put into our plan as we build this project to spend more money on the front end anticipating these additional projects.

If we don't do it now it will just cost us a lot more money.

This Tenke mine will be bigger than the original feasibility study, you can count on that.

Excellent, thank you very much.

Thank you.

Our next question coming from the line of John Tumazos, Independent, please proceed with your question.

Congratulations on all the great progress.

I have two questions.

First, the unit cost per pound in South America rose about $0.18 when the output rose about 11% with better grades implying that costs per ton must have gone up something like 25%.

Well,

If you could explain that.

And second question, underground infrastructure progress at Grasberg is very, very impressive.

Could you tell us how many tons per day you expect to mine underground in '08 and '09.

I know you're not going to close the pit till June 15, but it sounds like you're going to get a little more from underground as you go along because your guys are just making records every month.

Yes.

John, there are some special items that go through the South American cost this year.

We and others in the industry have dealt in Peru with some what's been called voluntary payments.

And that has to do with the fact that contractual relationships there had, have tax rates and royalty rates that had been established and, and those have been supplemented by the industry with some special payments and some including some infrastructure projects and some of that had been uncertain as to how the infrastructure projects for local communities would tie into the payments.

And there was adjustment this quarter that added some additional cost that went in there.

Energy cost in South America as you know have been, have been rising and so there are, there are some, there's been some wage adjustments as well.

So there are some special items that have gone through that structure that affected this third quarter numbers that beyond just normal cost analysis numbers.

So the mining didn't really change.

Well, the mining cost changed by the factors that affected the industry, the higher energy cost, the higher input cost for certain aspects, but there wasn't that kind of dramatic change in the mining cost.

We actually had a debate about whether some of these costs should be included in this analysis or not, and we're going to err on the side of being inclusive as well as trying to exclude certain types of costs.

If I may, I think everybody in your shareholder and creditor and constituency base wants you to be a good citizen.

And it's certainly all right in addition to the water system for the second largest city in the country you donate fire truck or university, whatever it was, I think it should be commended.

All right, thanks John.

Then you're right on the underground situation that's remarkable, I mean, in the future of the mining industry in large part is going to be underground, as the traditional open pit mines complete and not only will the Grasberg depleat within site now we're going to maximize this pit through its life which we're estimating to go to 2015, but it's a real exciting thing for us just to see how successful the DOZ mine is.

And we expect to operate above the design capacity of 50,000 tons per day.

And then Mark, we expect 80,000 ton better day project to come on when?

We're ramping up as Richard said in Kucing Liar will be at 70,000 tons by the end of 2008.

Then by the end of 2009 we will be up to the 80,000 ton rate.

At the same time we're developing the Big Gossan.

It will be up to its 7,000 tons per day rate by the end of 2010.

So at the end of 2010 we will be up near 90,000 tons a day from those two operations.

At the same time we will be, as the slide states we get in and start developing the Grasberg block cave-in earnest.

That doesn't begin ramping up until the pit is complete.

We will also be starting the development of the Mill Level Zone, which is the ore body, the extension of the DOZ.

And that begins in 2009 and 10.

Also scheduling to start up as the dozen starts to ramp down.

So we have got a lot of opportunities, there's been a lot of growth in the reserve and the DOZ, ESZ area.

As we're ramping up the 80,000 tons per day target we will be looking at the development of the ore body as it extends deeper to the MLZ and deep MLZ.

And we have got some interesting drilling to be done off our common infrastructure project as we now have access, this is 400 meters below our existing added system and that will give us a chance to drill in areas that we haven't drilled before and it's very interesting areas geologically, because it's the gap between the Grasberg Kucing Liar ore bodies and the Ertsberg and DOZ and related ore bodies.

Thank you.

Thanks John.

Thank you.

Our next question coming from the line of Terrance [Orsland] from TSR Associates, please proceed with your question.

Thanks.

Come back to the moly market, I think in the last month alone I seen about four or five big deals or intentions to bring into production.

Obviously some of them are very expensive and things we can look at in the past.

But just wonder from your market point of view how much volume expansion do you see this market can take if some of them are really ambitiously coming into production.

Obviously prices today in the market conditions are very prolific, but in terms of volumes, notwithstanding what you said about the Chinese, which I understand, how much of a market expansion do you foresee, Richard?

Well, Terry, I mean that is the issue that we face.

It's 420 million pound market globally.

And when you talk about Climax coming on with 30 million pounds, which is, roughly equivalent to our current stand alone Henderson mine and the capacity to double that, those are very large numbers in this marketplace.

So I think the lower grade deposits will be challenged in terms of this marketplace, but we feel very good about our project.

Richard, one of the things that Phelps Dodge looked at before the merger or the acquisition was the possibility of monetizing or getting more volume for its moly.

I'm debating myself looking at the moly component of Freeport and correct me if I'm wrong, but I don't think that you are getting full volume for your moly exposure.

Do you have any comments on that?

Well, Terry, I'd say we're not in today's market price getting full value for any of our assets.

We're going to work as I said to get our valuations up.

There are opportunities that might be available for the stand alone molybdenum business.

We have low tax basis in those assets, so that's a strategic consideration.

But we believe it's a great component to what we're doing.

It adds cash flow to our industry leaders and we believe in the long run it will help us get an appropriate evaluation for our shares.

Okay.

Fair enough, thanks.

All right, thanks Terry.

Thank you.

Our next question coming from the line of Justine Fisher from Goldman Sachs, please proceed with your question.

Good morning.

Morning.

I was wondering if you guys could first comment on the regulatory environment in Indonesia.

We have seen a few articles and I guess commentary about how the government might change the royalty structure there.

Can you comment on what's going on and what you think the outcome might be for you guys.

Well, Justine, what you have been reading about is considerations that have been going on for some time now and Indonesia is developing new mining laws.

And that process has been discussed for I think a couple of years now and it's continued under discussion.

They're working hard to get a new mining law in place.

About you that new mining law would only apply to new projects.

Our tax rates and royalty rates are set by our contracts.

They have the status of law, they have been formally adopted by the Indonesia parliament, signed by their president, so our situation would not be affected by the new mining law.

Would it affect any of your expansion projects?

Well, all of our expansion projects have existing contracts that again establish the financial parameters of those projects.

Okay, good to hear.

And then just for Kathleen, I have to ask you this about the ratings again.

There was a recent report that came out of Moody's talking about the potential for an upgrade to a BAA 3 and I know you guys are BAA 2 now with possible outlook.

They mentioned specifically the high level debt of the company that you guys have said would be a quote/unquote permanent level of debt because it would consist of the bonds (inaudible) that you issued to finance the transaction.

If this is a view of the agency do you guys have intentions of trying to repay some of that debt to get an investment grade rating or do you say we can probably finance at investment grade level so we will leave it at that.

Well, we're very comfortable as we have talked about with the level of long-term debt in the company approximating the 6 to $7 billion range.

We looked at scenarios of various commodity prices and very comfortable with that level of leverage.

We're going to as we go forward we're going to continue to look for opportunities to repay debt where it makes sense economically.

But we're now in a position once we get the term debt repaid and as we mentioned it will be substantially repaid by year-end to consider, it won't be our primary objective.

We will be looking first at organic opportunities, additional investments in our business, and then beyond that looking to return cash to shareholders.

We will have a balance like we have had in the past, but we're very comfortable with that level of long-term debt and our capital structure and we will continue to talk to rating agencies about it.

As you said we are on outlook, positive outlook by both agencies.

Okay, thanks a lot.

Go ahead, sorry.

Justine, as we have seen this year, there's been an increasingly positive view about the copper markets by analysts in general.

For years now there's been an expectation of the market coming into surplus and prices declining and there's growing recognition of the challenge the industry has from a supply standpoint going forward.

There's risk of course on global economic situations and consumption in general in China, but we also believe that that over time will have an impact as the clarity of this market gets in place on the rating agency's view of the industry and of our situation.

Yes, I guess it seems as though the relative level of debt to things like EBITDA and GAAP would be pretty pertinent.

But if it's an absolute level and you guys have other uses for cash beyond the absolute level of permanent debt then, you have to meet minds later on I guess, thank you very much.

Thank you.

Thank you.

Our last question coming from the line of Kate Jacket from SCM Advisors, please proceed with your question.

Just a follow up on Justine's question.

The RP basket in your 2015 and '17 bonds is currently what?

We are flipping pages to get that answer.

It's significant because the way it builds up is as you know is 50% of net income, but also that we got credit for the, for the equity offerings that we did earlier this year.

I don't know if I have that number.

But it's very large, it was 5.7 billion of equity offering, so it's not a constraining number on our financial policy.

Okay.

Thank you very much.

Okay, indicate, thank you.

We appreciate everybody's interest.

Look forward to reporting our further progress as we go for the year and thank you for joining our call this morning.

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

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

Have an I great day.